KRW 22 Trillion-Scale 'Competition Products Among SMEs' System to Be Strictly Reformed

Ministry of SMEs and Startups Announces 2022-2024 Competitive Product Designation Results
Reflecting COVID-19 Impact... "Excluding Items with Concentration and Collusion"
Improving Procedures Such as Submission of Investigation Reports, Strengthening Management
Enhancing Objectivity and Fairness... "Contributing to Manufacturing Competitiveness Development"

[Asia Economy Reporter Kim Bo-kyung] The government has disclosed the results of designating 213 competitive products among small and medium-sized enterprises (SMEs) to be applied over three years starting from 2022. It also plans to thoroughly review the validity of the designated competitive products and strengthen management and supervision for fair competitive bidding.

On the 6th, Kwon Chil-seung, Minister of SMEs and Startups, held a briefing at the Government Seoul Office and announced the designation results for 213 competitive products (632 detailed items) among SMEs to be applied for three years starting next year.

The SME competitive product system is a policy that mandates the purchase of products directly produced by SMEs for certain items in the public procurement market to protect and foster small manufacturing businesses. Last year, the purchase performance of competitive products recorded 22.1 trillion KRW, playing a role in supporting SME sales channels.

The competitive products were decided on the 30th of last month through a resolution by the steering committee composed of related ministries and private experts, after recommendations from the Korea Federation of SMEs and consultations with relevant ministries.

The competitive products consist of 632 detailed items used in actual competitive bidding. Compared to the currently designated 614 items, 33 items were excluded, and 51 new items were designated, resulting in a total increase of 18 items.

The newly designated items included eight information and communication technology-related products such as remote automatic metering systems and traffic control systems, which were the most numerous.

Items such as droplet-blocking masks, health masks, chemical protective clothing, which saw increased demand due to COVID-19, as well as tourism transportation and exhibition/international conference-related items designated as special employment support industries due to deteriorating employment conditions, were included.

Minister Kwon stated, "Items where benefits were concentrated on a few companies or collusion occurred were excluded from competitive products or had their scope partially reduced even if designated." He also added, "In cases where only a few SMEs directly produce the products or there are concerns about monopolies, some exceptions were allowed for mid-sized and large companies to participate in the public procurement market."

The competitive products decided this time will be administratively announced on the Ministry of SMEs and Startups website by the 27th, and the established designation details will be implemented from January 1 of next year.

Additionally, the Ministry of SMEs and Startups announced a reform plan to supplement the shortcomings of the system pointed out so far and to ensure that SMEs directly producing competitive products can receive substantial benefits.

First, from next year, the competitive product designation procedure will be improved and management strengthened. When recommending competitive products to the Ministry of SMEs and Startups, recommending organizations must attach an investigation report reviewed by a professional institution that examines the substitutability of large companies and imported products along with the applicant organization's requests.

If the content of the competitive product recommendation is insufficient and it is difficult to verify the competitive product requirements and reasons for recommendation, there will be grounds to reject the application.

Furthermore, to ensure objective confirmation of direct production of competitive products, the method will be improved by utilizing private experts for on-site investigations by item.

For companies confirmed to directly produce, post-verification will be expanded annually. Management and supervision will be strengthened to prevent sound SMEs from suffering due to companies unfairly participating in competitive bidding.

Sanctions will also be strengthened, such as doubling the current restriction period for companies participating in the competitive product market through fraudulent means.

The priority purchase system for technology development products will also be reorganized. Due to criticisms about similarity and duplication among certifications distinguishing priority purchase technology development products, the current 18 types of certifications have been simplified to 13.

To operate the priority purchase system for technology development products reflecting rapidly changing business environments, a sunset clause will be introduced, with effectiveness verification and adjustments to the targets conducted every three years.

Minister Kwon said, "The purchase performance of competitive products among SMEs was 22 trillion KRW last year, accounting for 19% of the total public purchase amount of SME products, playing a significant role in supporting sales channels for manufacturing and other SMEs."

He added, "By operating the competitive system more objectively and transparently, we will strive to establish a foundation for SMEs actually producing these products to grow soundly and contribute to the development of manufacturing competitiveness."

This content was produced with the assistance of AI translation services.