Revitalizing Underdeveloped Industrial Complexes with 'Special Support for Local SMEs'

Market Access, Tax Benefits, and Financial Support... Promoting Business Attraction and Revitalizing Resident Companies
Number of Resident Companies in 8 Industrial Complexes Including Gimje Up 7.4%, Production Increased by 5.7%

Photo by Korea Industrial Complex Corporation

[Asia Economy Reporter Kim Daeseop] The 'Special Support Area for Local Small and Medium Enterprises' system, which provides special support such as market access and tax benefits to industrial complexes with underdeveloped industrial production, is helping to revitalize industrial complexes. Through the increase in the number of resident companies and production value, it is preparing for a new leap forward for underdeveloped industrial complexes.

According to the Ministry of SMEs and Startups on the 27th, the number of resident companies in eight industrial complexes, including Jeonbuk's 'Gimje Jipyeongseon General Industrial Complex,' which was re-designated as a Special Support Area for Local SMEs on the same day, increased by 7.4% from 512 in the previous year to 550 last year. Production value increased by 5.7% from 2.3202 trillion KRW to 2.4519 trillion KRW during the same period. The average occupancy rate of the industrial complexes also rose by 6.9 percentage points from 71.1% in 2018 to 78.0% in 2019.

These industrial complexes include ▲ Jeonbuk Gimje Jipyeongseon General Industrial Complex and Jeongeup Advanced Industrial Complex ▲ Jeonnam Naju General Industrial Complex, Jangheung Bio Food Industrial Complex, Naju Innovation Industrial Complex, Gangjin General Industrial Complex ▲ Gangwon Bukpyeong National Industrial Complex and Bukpyeong General Industrial Complex, which were designated as Special Support Areas for Local SMEs in March 2015.

The designation period for Special Support Areas is five years from the date of designation and can be re-designated. In addition to the eight re-designated industrial complexes, two new industrial complexes, Dong Hampyeong General Industrial Complex and Sepung General Industrial Complex in Jeonnam, were newly designated. Including the three existing industrial complexes with valid designation periods remaining, a total of 13 industrial complexes are managed as Special Support Areas. If the business environment of the designated industrial complex improves, it may be excluded from the Special Support Area upon expiration of the validity period.

The Special Support Area system for Local SMEs was introduced in 1995 to promote the attraction of companies and activation of resident companies by providing special support such as market access, tax benefits, and funding to industrial complexes with underdeveloped industrial production. According to the Act on the Promotion of Small and Medium Enterprises, the designated targets are national and general industrial complexes located in metropolitan cities or provinces with relatively lower industrial concentration and production performance compared to the national average, and located outside city areas with a population of 200,000 or more as of the application date.

For example, the newly designated Dong Hampyeong General Industrial Complex in Jeonnam had a total industrial facility area of 490,000 square meters as of the third quarter of last year. Among 66 resident companies, only 34 are operational, about half. The cumulative production value from January to September last year was approximately 28.149 billion KRW.

When designated as a Special Support Area, small and medium enterprises residing in the industrial complex can participate in public bidding through restricted competitive bidding and private contracts for goods they directly produce. They also receive tax reductions (50% for five years) on corporate tax, income tax, and local income tax.

Preferential support is also provided for policy fund loan limits, designation as military service companies, research and development (R&D), and more. Additional necessary support such as easing industrial complex leasing conditions (for prospective resident companies), preferential financial support, logistics costs, and wastewater treatment costs can be provided through local governments. The Act on the Promotion of Small and Medium Enterprises, which mainly expands the scope of Special Support Areas for Local SMEs, is currently being revised in the National Assembly.

Shim Jaeyoon, Director of Regional Enterprise Development at the Ministry of SMEs and Startups, said, "If the amendment passes the National Assembly within this session, not only existing industrial complexes but also areas densely populated with small and medium enterprises and small business owners facing management difficulties are expected to receive benefits such as financial and tax support."