[2023 National Audit] Ministry of SMEs and Startups Audit Today... Key Issues: Alley Market Infringement and R&D Budget Cuts

October 12 and 27 Ministry of SMEs and Startups National Audit
Interest in Minister Lee Young's Possible Run in General Election

Lee Young, Minister of SMEs and Startups.

The Ministry of SMEs and Startups will undergo a parliamentary audit by the National Assembly’s Industry, Trade, Energy, SMEs and Startups Committee on the 12th. This audit is expected to focus on recurring issues such as large platform companies’ infringement on local businesses, technology theft from SMEs, recovery of disaster relief funds, and cuts to research and development (R&D) budgets. Attention is also likely to be drawn to whether Minister Lee Young will run in next year’s general election.

The Industry, Trade, Energy, SMEs and Startups Committee has summoned nine witnesses for the Ministry of SMEs and Startups audit, including Moon Tae-sik, CEO of KakaoVX. Moon is expected to face questions from lawmakers regarding allegations of technology theft and idea plagiarism. KakaoVX is currently involved in a technology theft dispute with the golf platform company 'SmartScore.' In February, SmartScore filed an injunction lawsuit claiming that KakaoVX copied its service and engaged in unfair customer solicitation by supporting golf course cancellation fees. Although the Seoul Central District Court dismissed the case earlier last month, criminal and civil lawsuits are still ongoing. It was revealed that a KakaoVX employee accessed the SmartStore administrator page 577 times without authorization over two years starting from March 2021, prompting lawmakers from both ruling and opposition parties to question Moon about whether there were instructions from higher-ups.

The issue of large platforms infringing on local businesses is also expected to be scrutinized. In this regard, Ham Yoon-sik, Vice President of Woowa Brothers, has been summoned as a witness. Democratic Party lawmaker Kim Seong-hwan plans to question Vice President Ham about damages to small business owners caused by excessive commission rates. Another Democratic Party lawmaker, Kim Hoe-jae, intends to inquire about infringements on small business data sovereignty and interference with startup operations through data monopolization. Jo Yoon-hee, CEO of SMJ Company, has also been summoned as a witness. Jo is expected to face intense criticism from lawmakers for abusing her position as a building owner to evict original small business owners from their premises and for trademark theft. Kim Ho-yeon, chairman of Binggrae, has also been requested to appear. He is expected to be questioned about win-win cooperation with Binggrae’s partner companies and small business owners, as well as communication and collaboration with local residents and local governments near business sites.

The recovery of COVID-19 disaster relief funds paid to small business owners is also expected to be a heated topic. Minister Lee Young announced in August that plans are underway to recover the Sae Hope Fund and the Buttress Fund. Given the economic downturn and rising prices and labor costs increasing the burden on self-employed individuals, questions about the side effects of fund recovery are expected to continue.

Reductions in the SME R&D budget are also anticipated to be discussed during the audit. According to data submitted to Democratic Party lawmaker Kim Kyung-man by the Ministry of SMEs and Startups, the government’s SME R&D budget proposal for next year is 1.3208 trillion won, a 25.4% decrease from this year’s 1.7701 trillion won. The budget for the 'performance-sharing type R&D support project' has been cut to one-third. Lawmaker Kim pointed out, "SME R&D projects are usually funded by the government and companies at a 7 to 3 ratio. The government’s budget cuts will ultimately force SMEs to bear the burden or reduce project costs, causing negative effects."

Interest also surrounds whether Minister Lee will run in the general election in April next year. Minister Lee served as a proportional representative for the People Power Party for two years starting in 2020 and was appointed as the first Minister of SMEs and Startups under the Yoon Seok-yeol administration in May last year. Having grown his stature as a businessperson-turned-politician with administrative experience, there is speculation that he may challenge a constituency seat in next year’s election.

The Industry, Trade, Energy, SMEs and Startups Committee will conduct audits of Ministry-affiliated organizations such as the Small and Medium Business Corporation, Korea Technology Finance Corporation, Small Enterprise and Market Service, Korea Venture Investment Corp., and Korea Institute for Startup & Entrepreneurship Development on the 20th. A comprehensive audit of the Ministry of SMEs and Startups and the Korean Intellectual Property Office will be held on the 27th.

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