Support for Business Conversion Including Industry Change for SMEs... Resolving the 'Blind Spots'

Scope of Business Conversion Recognition Expanded to New Business Fields
Win-Win Cooperation Between Large and Small-Medium Enterprises Through the "Joint Business Conversion" System
"Securing Competitiveness by Eliminating Support Blind Spots"

The current "Special Act on Promotion of Business Transformation for Small and Medium Enterprises (Business Transformation Act)" has faced many criticisms for the difficulties in transitioning to new business areas. For example, a company engaged in lead-acid battery business did not receive benefits even when shifting its main business to lithium-ion batteries. This was because it was treated as the same industry under the industrial classification code "Battery Manufacturing (28202)." In other words, a business transformation within the same industrial classification code was not recognized as a business transformation.

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To resolve these inconveniences, the Ministry of SMEs and Startups announced on the 9th that it had approved an amendment to the Business Transformation Act through a Cabinet meeting. This came after one and a half years of discussions in the National Assembly and approval by the Cabinet. The amendment is expected to promote the pioneering of new business areas to secure the survival and competitiveness of small and medium enterprises. If applied as a support target under the Business Transformation Act, it will provide support such as structural innovation diagnosis, business transformation plan establishment (before approval), and business transformation funds (after approval), and companies will implement the business transformation plan for three years after approval.

The main points of the amendment are as follows. The current scope of business transformation only limitedly recognizes industry additions or transitions based on industrial classification codes. The amendment broadly recognizes transitions within existing industries in terms of products, services, or delivery methods in new business fields, eliminating blind spots. This means support will be provided even if the business is within the same industrial classification code. For example, if an automobile parcel delivery company changes its business to drone or robot delivery, it is a transition within the same "Parcel Delivery (industrial classification code 49401)." The existing Business Transformation Act did not allow support, but under the amended act, it becomes eligible for support.

The amendment also introduced a "joint business transformation" system that allows large enterprises and small and medium enterprises within the supply chain, or two or more small and medium enterprises, to jointly carry out business transformation and have their business transformation plans approved collectively for support. The purpose is to support various forms of business transformation such as win-win cooperation between large and small enterprises and convergence between different industries. Additionally, the amendment includes provisions to establish a "Business Transformation Policy Council" and to select promising companies with innovative and growth potential to nurture them as "Business Transformation Leading Companies."

Lee Young, Minister of SMEs and Startups, stated, "As the global economic environment changes day by day, proactive and preemptive business transformation is essential for small and medium enterprises to enhance competitiveness and secure growth engines. This amendment has laid the foundation for that, and based on this, we expect active entry of small and medium enterprises into future new businesses, contributing to the advancement of the industrial structure."

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