Policy Funds Neglect Small and Medium Construction Companies... "Need to Expand Target and Scope"

On the afternoon of January 27, the first day of the Serious Accidents Punishment Act enforcement, workers were working at a construction site in Goyang-si, Gyeonggi-do.

Amid increasing difficulties for construction companies due to rising raw material costs and interest rate hikes, small and medium-sized construction enterprises are being excluded from utilizing policy funds, highlighting the need for improvement.

On the 5th, the Korea Construction Industry Research Institute stated in a recently published report, "It is necessary to expand the beneficiaries of policy funds to protect small and medium-sized construction companies and establish a stable management environment."

According to the institute, currently, government agencies such as the Ministry of SMEs and Startups (including the Small and Medium Business Corporation), the Ministry of Trade, Industry and Energy, and local governments operate various financial support programs utilizing policy funds created from budgets and funds to achieve policy goals such as strengthening SME competitiveness and promoting startups.

In the construction industry, based on the 2020 Construction Industry Knowledge Information System, 98.0% of all construction companies are classified as small and medium-sized enterprises under the "Framework Act on Small and Medium Enterprises." However, except for certain specific sectors, most are excluded from the beneficiaries of SME policy funds provided by government ministries such as the Ministry of SMEs and Startups.

Currently, the selection criteria for excluded industries under the Ministry of SMEs and Startups' "Policy Fund Loan Exclusion Industry Operation Standards" are broadly: ① industries inappropriate for support due to public sentiment (gambling, luxury, entertainment, health hazards, real estate speculation, etc.), ② industries directly or indirectly operated or supported by the public sector (railways, transportation, road and related facility operations, etc.), and ③ high-income or relatively easy-to-finance industries (legal, tax, health professional services, finance, and insurance, etc.). The construction industry is excluded on the grounds of falling under category '②.'

The institute pointed out, "Considering that public construction accounts for significantly less than half of the total construction orders (22.7% based on 2019 order value) and that many construction companies do not perform public construction projects, this exclusion is inappropriate."

It was also criticized that despite SMEs accounting for an overwhelming majority (98.0%) of the entire construction industry regardless of detailed construction sectors, policy fund loans for SMEs are only allowed for some sectors (8+6 sectors). This is seen as a de facto rights-violating regulation causing inequality within the industry.

Therefore, there are calls to fully include the construction industry as a target for SME policy fund loans and for the Ministry of Land, Infrastructure and Transport to explore additional financial support measures.

The institute stated, "To improve the inequality faced by small and medium-sized construction companies, if specific sub-projects of the existing SME policy fund loan programs operated by the central government are not specialized in other industries such as manufacturing, construction should be included as a loan-eligible industry for all projects."

Furthermore, "Considering that the majority of construction companies are SMEs, to foster the construction industry and strengthen industrial competitiveness, the Ministry of Land, Infrastructure and Transport, as the main ministry of the construction industry, should take the lead in implementing SME policy fund loan projects for the construction industry in the mid to long term," it emphasized.

Additionally, it added, "To protect and foster small and medium-sized construction companies, beyond financial support using policy funds, additional financial benefits such as interest rate reductions, tax incentives, and reductions in various guarantees and mutual aid fees can also be explored to induce stable growth of SMEs scattered regionally and strengthen industrial competitiveness."

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