SMEs 72.5% Say "Criteria for SME Classification Should Be Raised"

Korea Federation of SMEs Announces Results of 'Survey on Adjusting the Upper Limit Criteria for SMEs' Scope'

More than 70% of domestic small and medium-sized enterprises (SMEs) perceive that the criteria for the SME scope should be raised. The SME scope criteria have remained unchanged for nearly 10 years despite inflation and economic expansion since being unified based on sales revenue in 2015. According to current law, the SME scope criteria vary by industry, with manufacturing SMEs defined as having sales revenue of 150 billion KRW or less.

The Korea Federation of SMEs announced the results of a survey on 'Opinions Regarding the Adjustment of the Upper Limit of SME Scope Criteria' conducted on 1,000 SMEs on the 27th. This survey was conducted on a total of 1,000 companies, including 600 manufacturing companies, 300 service companies, and 100 construction companies, considering the different upper sales revenue limits by industry.

Korea Federation of Small and Medium Business

By industry, 72.8% of manufacturing, 77.0% of construction, and 70.3% of service companies responded that an increase is necessary. Regardless of industry, more than 7 out of 10 SMEs believe that the sales revenue criteria should be raised. Regarding the level of increase, respondents said the sales revenue criteria should be raised by an average of 26.7%, with industry averages of ▲manufacturing (25.2%) ▲construction (22.1%) ▲service (31.5%). Looking in detail, the most common response was a '10% increase' at 46.8%, followed by ▲30% (37.5%) ▲50% (9.1%). Especially, companies with larger sales volumes reported that an increase of more than 30% is necessary across all industries.

The main reasons for needing to raise the scope criteria were 'sales revenue criteria should be raised in line with increased production costs such as raw materials and labor costs,' at 45.0%, followed by 'decline in currency value due to inflation and the rise of the won-dollar exchange rate' (30.3%), and 'considering the expansion of economic scale (GDP)' (24.7%).

Meanwhile, 27.5% of respondents did not agree with raising the scope criteria. The most common reason for opposing the increase was 'if companies with large sales are included as SMEs, competition for SME support programs will intensify,' at 50.2%.

Choo Moon-gap, Head of the Economic Policy Division at the Korea Federation of SMEs, said, “When the SME scope criteria were revised in 2015 to use the 3-year average sales revenue, it was stipulated in the Enforcement Decree of the Framework Act on SMEs to review the criteria every five years considering the sensitivity of the indicator to economic fluctuations. However, it has not been adjusted for nearly 10 years.” He added, “Since 72.5% of SMEs support raising the scope criteria, the sales revenue standards should be urgently increased considering inflation and economic expansion.”