Mandatory Purchase of 'Startup Company Products' by Public Institutions

Park Young-sun, Minister of SMEs and Startups

[Asia Economy Reporter Kim Daeseop] The Ministry of SMEs and Startups announced on the 31st that a new "Priority Purchase System for Startup Company Products by Public Institutions" has been established to make it easier for early-stage startup companies to access the public procurement sector.

The priority purchase system for startup company products by public institutions sets a certain purchase target ratio for products directly produced by startups, services provided, and construction performed, requiring purchases to meet or exceed this target. On the same day, the amendment to the Small and Medium Enterprise Startup Support Act (hereinafter referred to as the Startup Support Act) was approved at the Cabinet meeting, providing a legal basis for the system.

The Ministry of SMEs and Startups plans to set the minimum purchase ratio in the enforcement decree of the Startup Support Act by September this year. Through this, public institutions will be able to set purchase targets for startup company products starting from January next year and actively purchase these products.

Until now, startups have faced difficulties entering the public sector due to a lack of delivery performance records with public institutions, which are evaluation criteria in public procurement bids, and lower market competitiveness compared to general SMEs. According to the Ministry of SMEs and Startups, the average performance of startups in public procurement purchases made by public institutions through the Public Procurement Service over the past three years is approximately 6 trillion KRW.

The Ministry of SMEs and Startups plans to make policy efforts to expand the purchase performance of startups to 9 to 10 trillion KRW through this priority purchase system for startup company products by public institutions.

Park Young-sun, Minister of SMEs and Startups, said, "The newly introduced priority purchase system for startup company products by public institutions is expected to be a very welcome system that will provide relief to startups struggling with funding and sales channels due to the impact of COVID-19," adding, "The Ministry of SMEs and Startups will thoroughly prepare in advance to ensure the smooth implementation of this system, including revising the enforcement decree of the Startup Support Act to designate minimum purchase target ratios and establishing an electronic system for verifying startups."