[Exclusive] "BSI Has Limits"... Small Enterprise and Market Service Begins Developing New Small Business Economic Indicator "SGDP"

Preliminary research launched late last year
Subjective limits of the Small Enterprise BSI
Rising need for quantitative and objective indicators

The Small Enterprise and Market Service has begun developing a new economic indicator for small business owners. By introducing the concept of Gross Domestic Product (GDP), a representative indicator used to understand the overall size of a national economy, the agency aims to supplement the limitations of the existing “Business Survey Index (BSI) for Small Enterprise and Traditional Markets,” which reflects small business owners’ subjective perception and outlook on economic conditions.

According to coverage compiled by The Asia Business Daily on the 13th, the Small Enterprise Policy Research Institute, the policy research organization under the Small Enterprise and Market Service, launched preliminary research in December last year to develop a new economic indicator for small business owners tentatively named the “Small Enterprise Gross Domestic Product (SGDP).”

The existing BSI is a statistical index that the Ministry of SMEs and Startups and the Small Enterprise and Market Service compile and release every month under the Statistics Act by surveying on-site business sentiment among 3700 small enterprises and traditional market businesses nationwide. It is effectively the only economic indicator related to small enterprises and traditional markets for which the Small Enterprise and Market Service conducts research.

The BSI survey, first conducted in August 2001, comprehensively analyzes sales, financial conditions, and other aspects of business sentiment and outlook for small enterprises and traditional market businesses through telephone interviews. When the index is at or above the baseline of 100, it indicates an improvement in business conditions; when it is below 100, it indicates a deterioration. The government uses the BSI as basic data to understand the business conditions and management difficulties that merchants actually feel and to formulate corresponding policy responses.

The problem is that, because the BSI heavily depends on merchants’ psychological state and expectations, there is considerable room for subjective judgment or bias to be reflected. This has led to the recognition that the BSI alone is insufficient to grasp the real situation of the small business economy. On this basis, a consensus has formed on the need for a new, more objective and quantitative economic indicator. The recent emphasis on a “data-driven” approach across policy areas has also played a role.

The SGDP is being discussed as an indicator that, instead of focusing on sentiment, will rely on quantitative data such as sales revenue to identify, compare, and analyze the economic conditions of small business owners, and to show their actual difficulties or growth trends in a more detailed and intuitive way. It is described as a statistical concept that draws on the idea of GDP, which measures economic size and growth by adding up the market value of final goods and services produced domestically over a given period.

In Taeyeon, Chairperson of the Small Enterprise and Market Service, visited Jungang Market in Dong-gu, Daejeon on the morning of the 30th of last month to encourage market vendors. Small Enterprise and Market Service

For example, one option under consideration is to organize the sales scale of a given traditional market over a specific period on a monthly basis, and then directly compare each month using pie charts and other visual tools. To this end, the Small Enterprise and Market Service is said to have recently conducted a preliminary research project to review the design direction of the SGDP, the necessary data items, policy demand, and similar cases in Korea and abroad.

The concrete calculation method and composition of the SGDP indicator have not yet been finalized. An official at the Small Enterprise and Market Service said, “There will be various factors, and we need to gather references,” adding, “We are at the stage of broadly reviewing the existing GDP and GRDP frameworks, as well as data and opinions from Statistics Korea, the Bank of Korea, the Korea Federation of SMEs, relevant ministries, and experts.”