[2023 National Audit] Controversies Over Sexual Misconduct, Waste of Public Funds, and Moral Hazard in Small and Medium Business Administration Affiliates

On the 20th, National Assembly Holds Audit of KOSME, SBSME, and KIBO
R&D Budget Cuts Expected to Spark Ruling and Opposition Clash

During the National Assembly’s audit of agencies under the Ministry of SMEs and Startups, there is expected to be intense criticism regarding sexual misconduct, waste of public funds, and corruption.

The National Assembly’s Industry, Trade, and SMEs Committee will conduct an audit of the Ministry of SMEs and Startups’ affiliated agencies on the 20th. The targets include the Small and Medium Business Corporation, the Small Enterprise and Market Service, the Korea Technology Finance Corporation, the Korea Institute of Startup & Entrepreneurship Development, Korea Venture Investment Corp., the Korea Institute for Advancement of Technology, Public Home Shopping, the Small and Medium Business Distribution Center, and the Korea Institute for Small and Medium Business Innovation.

Lee Young, Minister of SMEs and Startups, is reporting on business at the National Assembly's Industry, Trade, Energy, SMEs and Startups Committee's audit held on the 12th.
[Photo by Yonhap News]

One of the places expected to receive the harshest criticism is Public Home Shopping. On the 12th, Kwon Myung-ho, a member of the People Power Party, pointed out during the Ministry of SMEs and Startups audit that moral hazard is rampant at Public Home Shopping. According to data submitted by Public Home Shopping to Rep. Kwon, among about 20 executives and employees disciplined in December 2018 for “stock trading related to unfair equity investment,” 10 were promoted. Public Home Shopping employees were disciplined for making unfair profits by purchasing stocks based on internal information that the TV home shopping sales of Baeksuo products would resume. However, 4 were promoted in June 2020, one and a half years after the disciplinary action, and 3 more were promoted in December 2021. In March of this year, 3 employees were promoted to department head and manager positions.

Another controversy involves CEO Cho Sung-ho of Public Home Shopping mobilizing a large number of employees for his father’s funeral and then paying a total of 5.1 million KRW in travel expenses using company funds. Additionally, some Hanwoo beef products sold by Public Home Shopping were found to contain “dairy cow-type DNA,” which is expected to draw criticism.

The Small and Medium Business Corporation was found to have given preferential treatment to retired employees who were disciplined for bribery charges. They were assigned to prepare corporate diagnosis reports used for policy fund loan applications. Mr. A, who was dismissed after receiving non-public stocks as bribes from a lending company, received over 50 million KRW under the name of external expert activity fees.

The Korea Institute for Startup & Entrepreneurship Development is facing issues related to sexual misconduct and fraudulent receipt of overtime pay. One employee was penalized with a three-month salary reduction for sexual harassment and workplace bullying against a subordinate. Some employees received over 4 million KRW in overtime pay while attending graduate school.

The ruling and opposition parties are expected to fiercely clash over cuts to the research and development (R&D) budget. Next year’s R&D budget for SMEs is 1.3208 trillion KRW, down 449.3 billion KRW (25.4%) from this year’s 1.7701 trillion KRW. The problem is that out of the 1.3208 trillion KRW, 1.2648 trillion KRW is allocated to “contract-type continuous projects” carried out over two or more years in partnership with the Korea Institute of Startup & Entrepreneurship Development. To complete these projects, SMEs will have to contribute more as much as the government’s cuts, raising concerns in the field. During the Ministry of SMEs and Startups audit on the 12th, opposition lawmakers criticized the excessive budget cuts for increasing the burden on SMEs, while ruling party lawmakers claimed it was a move to “reform the R&D cartel.”

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