[2022 National Audit] 'Win-win' on the Spotlight at the Ministry of SMEs and Startups Audit

On the 6th, the Ministry of SMEs and Startups' audit addressed the linkage system for payment of delivered goods and other SME win-win measures as key issues

Minister Lee Young reporting for duty (Photo by Yonhap News)

[Asia Economy Reporter Kim Cheol-hyun] During the National Assembly audit targeting the Ministry of SMEs and Startups (MSS), the government's 'win-win' policy came under scrutiny. In particular, questions were raised regarding the legislation of the delivery price linkage system, and there were also debates about policies supporting small business owners such as loss compensation, local currency, and Onnuri gift certificates. Inquiries were made about win-win measures between platform companies and small business owners. In the startup sector, criticism continued over the reduction of the Mother Fund budget.

At the MSS audit held on the 6th by the National Assembly’s Industry, Trade, Energy, SMEs and Startups Committee, the legislation of the delivery price linkage system was first addressed as a key issue. The linkage system reflects the increase in raw material prices in delivery prices and has been discussed since 2008. The MSS has been conducting a pilot operation of the linkage system since last month with companies that expressed interest.

However, on this day, Kim Kyung-man, a member of the Democratic Party of Korea, pointed out, "There is a reasonable suspicion that the government is deliberately delaying the legislation of the delivery price linkage system," and criticized, "The large companies participating in the pilot project operated by the MSS are aware of the subcontractors’ costs and operating profits, which raises suspicions of violating the Subcontracting Act." In response, Minister Lee Young said, "We have been in constant discussions with related ministries and recently reached an agreement on wording that resolved constitutional concerns. After further review of that part, we may consult with lawmakers on related matters as early as late October or early November."

Criticism was also raised regarding the effectiveness of local currency in supporting small business owners. Local currency has been evaluated as effective in revitalizing the local economy and increasing sales for small business owners, but as it is considered a flagship policy of Lee Jae-myung, leader of the Democratic Party, questions about its effectiveness have been continuously raised. Eom Tae-young, a member of the People Power Party, argued, "Local currency brings no real benefit on the ground," adding, "It is nothing more than 'cash conversion,' and the need for local currency seems to have ended in this era." Yang Geum-hee, also from the same party, pointed out, "Only certain operators are fattening their pockets with taxpayers’ money."

There was also a call for a thorough inspection of the actual conditions of Onnuri gift certificates used in traditional markets. Shin Young-dae, a member of the Democratic Party of Korea, stated, "Only 61.6% of traditional markets are affiliated with Onnuri gift certificates," and urged, "The government should establish a system to manage actual affiliated stores by taking measures such as canceling affiliations due to business closures or deregistration." Minister Lee responded, "It would be meaningful to flexibly review the changing trends regarding Onnuri gift certificates and local currency."

Regarding startup policies, President Yoon Suk-yeol’s visit to the United States came under criticism. Opposition lawmakers raised issues over President Yoon’s sudden notification of non-attendance on the day of Korean economic events such as the Korea-US Startup Summit and the K-Brand Expo, which he was scheduled to attend during his visit to the US last month.

The reduction of the Mother Fund budget also became a contentious issue. The MSS’s budget proposal for next year allocates 313.5 billion KRW for the Mother Fund, which is nearly a 40% decrease compared to this year’s 520 billion KRW. Opposition lawmakers criticized that reducing the Mother Fund budget, which played a role as a catalyst for investment amid a shrinking venture investment market, contradicts the Yoon Suk-yeol administration’s policy emphasizing startup growth. Minister Lee explained, "The Mother Fund has been operated for 17 years since 2005, and 66% of the investment amount was injected during the previous administration. Since it takes time to exhaust the budget, the available Mother Fund budget will exceed 8 trillion KRW next year. The investment capacity next year is better than this year."