Public Procurement Market Also in Recession... Public Purchase Amount of SME Products Decreases for the First Time in 8 Years

2022 Public Institution Purchase Performance Announcement
First Decrease Since 2014 Compared to Previous Year
Number of SMEs Participating in Public Procurement Increased by 18%

The impact of the recession has also hit the public procurement market. The public purchase amount of small and medium-sized enterprise (SME) products has turned to a decline for the first time in eight years. This is the first time since 2014 that the annual public purchase amount has decreased.

On the 18th, the Ministry of SMEs and Startups announced that after the ‘2023 SME Products Public Procurement Plan (draft)’ was reviewed and approved at the Cabinet meeting, the public purchase amount of SME products by 856 institutions including national agencies, local governments, and public enterprises last year was 118.9 trillion won. This is about 600 billion won less compared to 2021 (119.5 trillion won).

The government introduced the SME purchase target system in 2006. It is a system that mandates public institutions to purchase at least 50% of their total procurement amount from SME products. The public institution purchase performance, which recorded 58.4 trillion won in the first year of the system’s introduction, has decreased compared to the previous year twice: in 2010 (66.9 trillion won) and 2014 (78 trillion won). It dropped 16.1% from 79.7 trillion won in 2009 to 66.9 trillion won in 2010, a period still affected by the ‘global financial crisis.’ In 2014 (78 trillion won), it slightly decreased compared to 2013 (78.7 trillion won).

Since then, the public purchase amount has shown an upward trend every year, surpassing 100 trillion won for the first time in history in 2019 (104.9 trillion won) and exceeding 100 trillion won for three consecutive years. Last year, it is interpreted that the amount slightly decreased due to reasons such as the contraction of domestic market demand. The purchase target amount submitted by public institutions to the Ministry of SMEs and Startups one year ago was 121.1 trillion won. This means it fell short by 1.6 trillion won compared to the target. This year’s purchase target amount is 118.4 trillion won.

The number of SMEs participating in public procurement last year was 117,577, an 18.1% increase from the previous year (99,518). Purchases of technology development products and products from women-owned and disabled-owned enterprises slightly increased compared to 2021. In addition, excellent purchasing institutions that met the Ministry’s criteria (SME product purchase rate of 85% or more and purchase amount of 300 billion won or more) included Daegu Metropolitan Office of Education, Korea Fisheries Infrastructure Public Corporation, and Seoul Metro. In particular, the SME product purchase ratio of Daegu Metropolitan Office of Education and Seoul Metro increased by more than 10% compared to one year ago. Minister Lee Young of the Ministry of SMEs and Startups said, “We ask for continued support this year to expand public procurement of SME products.”