Dongbanwi "Criticism Inappropriate" "Overinterpretation"... Refutes KDI Report and Expresses Regret

KDI "Abolition of SME Suitable Industry System" Report Met with
Dongbanwi's Rebuttal Statement... "Expressing Deep Regret"
"Criticism of System's Lack of Effectiveness Is Inappropriate" Claim

[Asia Economy Reporter Kim Bo-kyung] The Win-Win Growth Committee has directly refuted the criticism from KDI. In response to the KDI report calling for the abolition of the Small and Medium Enterprise (SME) Suitable Industry System, the Win-Win Growth Committee argued that "there is excessive overinterpretation and distortion."

The Korea Development Institute (KDI), a government-funded research institute under the Ministry of Strategy and Finance, released a research report on June 3 evaluating the implementation effects of the SME Suitable Industry System. This system, operated by the Win-Win Growth Committee since 2011, restricts large corporations from entering and expanding in certain product categories (industries).

In the report, KDI stated, "The SME Suitable Industry System played a role in maintaining and protecting businesses but showed limitations in improving SME performance or competitiveness." It also noted, "It appears to have suppressed the production activities of large corporations and did not have a positive impact on the overall industry," and recommended "stopping new applications and gradually abolishing the system by suggesting a timeline for lifting the designation of current industries."

◆ "Suitable Industry System is a Protective Measure to Alleviate Social Conflicts, Not to Enhance Competitiveness" = On June 11, the Win-Win Growth Committee issued a statement categorizing six errors found in the KDI report, including differences in the system’s purpose, issues with selecting comparison groups, identification problems of large corporations, failure to reflect characteristics of suitable industries, and overinterpretation of analysis results, and refuted them point by point.

First, they expressed differing views on the system’s purpose and intent. While KDI viewed it as "aimed at enhancing SME competitiveness by protecting SMEs," the Win-Win Growth Committee explained it as "a business area protection system designed to protect small and medium-sized enterprises and alleviate social conflicts."

The Win-Win Growth Committee stated, "The system originated from the need to protect business areas as the indiscriminate entry of large corporations into SME business areas worsened SMEs’ management conditions," and emphasized, "It should be distinguished from general SME competitiveness enhancement support systems."

They also pointed out that to compare company performance, similar environments or industrial groups must be selected, but the KDI study used the 3-digit Standard Industrial Classification, making accurate comparisons difficult. For example, the "Sundae" (Korean blood sausage) industry designated as a suitable industry in 2011 falls under the 3-digit classification of "slaughtering, meat processing, and storage." Selecting the 3-digit group as a comparison group includes slaughtering, poultry manufacturing, frozen meat manufacturing, and packaged meat manufacturing, which are highly heterogeneous compared to the Sundae manufacturing industry.

Another issue raised was that large corporations participating in suitable industries were not properly reflected in the research. Most large corporations entering suitable industry businesses produce these items as secondary products rather than their main products, causing such errors.

For instance, a large corporation A participating in the Sundae market is classified under the Standard Industrial Classification as "group catering, dining out, food and food material manufacturing and distribution," so it was not included in the KDI study.

At the 'Small Business Owners' Survival Rights Rally,' participants are holding signs urging the enactment of the Small Business Owners Basic Act. Photo by Hyunmin Kim kimhyun81@

◆ "Most Suitable Industries Are in Decline Phase... Businesses with Fewer Than 10 Employees Are Excluded" = The Win-Win Growth Committee argued that the reality that most suitable industry recommendations focus on mature or declining industries must also be considered. They stated, "It is inappropriate to criticize the system’s effectiveness by pointing out the lack of additional investment in declining industries where maintaining the status quo is the goal according to the industrial cycle."

Regarding KDI’s claim that the system should be abolished because it does not help overall industrial growth, the committee countered, "There is excessive overinterpretation and distortion in that conclusion."

The Win-Win Growth Committee criticized, "The study admitted that it used mining and manufacturing statistics excluding businesses with fewer than 10 employees, which account for 84% of all businesses, thus failing to analyze the impact on the majority of businesses, yet it overinterpreted this as not contributing to overall industrial growth."

They added, "The statistical evidence presented to show that the suitable industry system negatively affected industrial competitiveness is weak," and pointed out, "While presenting data showing the system’s positive protective effects, the report paradoxically claims it is difficult for the system to positively impact business competitiveness and protection."

The committee emphasized that the system is "the last social safety net protecting small business owners engaged in mature and declining industries amid deepening polarization between large and small-medium enterprises."

Finally, they stated, "Suitable industry recommendations are used restrictively at the final stage where autonomous win-win growth is difficult," and expressed "deep regret over the claim that even minimal protection cannot be accepted under the pretext of industrial competitiveness."

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