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Study on the designating suitable industries for SMEs

  • Public Land Law Review
  • Abbr : KPLLR
  • 2014, 67(), pp.243-268
  • Publisher : Korean Public Land Law Association
  • Research Area : Social Science > Law

KANG, HYUN HO 1,  이제희 1

1성균관대학교

Accredited

ABSTRACT

Since the financial crisis in 2008, the economic gap has fast grown between large businesses and small and medium enterprises(SMEs). The Korea government has responded to this economic and also social issue by implementing a policy of designating suitable industries only for SMEs in an effort to mediate complaints of unfair or unequal competition between large and small businesses. “The process of selecting suitable industries only for SMEs would be controlled under fully autonomous decisions of stakeholders,” said the Chairman of National Commission on Corporate Partnership(NCCP), composed of civil experts, implementing assigned duties under the ‘Act on the promotion of collaborative cooperation between large enterprises and small–medium enterprises’. He also added that designating suitable industries for SMEs is consistent with obligations under the Korea-U.S. Trade Agreement(KORUS FTA). The United States Trade Representative(USTR) however asserts that ‘designating suitable industries for SMEs’ is one of the trade barriers in Korea, citing that the NCCP is a partially government-funded organization created by the Korean National Assembly. USTR contends that ‘designating suitable industries for SMEs’ performed by NCCP is inconsistent with KORUS FTA rules. The main purpose of designating suitable industries for SMEs is increasing SMEs’ competitiveness by limitations on market access. NCCP performs assinged duies in accordance with the law. NCCP is examined by the Board of Audit and Inspection as the budget support of government. As a result, NCCP is a official-trustee private individual. In case of firms and individual executives who fail to comply with the decision of designating suitable industries for SMEs, Small and Medium Business Administration (SMBA) may recommend or order business coordination to interested parties. Designating suitable industries for SMEs is a measure adopted and maintained by central government and an administrative disposition. It is not a direct expropriation but a regulatory one that interferes with the use of property and frustrates foreign investors’ reasonable economic expectations. Also it may cause severe economic damage to investors to outweigh the public interest with balancing test. Therefore, designating suitable industries for SMEs constitutes an indirect expropriation. In the field of cross-border trade in services, government shall not adopt regulations imposing limitations on market access to service suppliers. For the avoidance and settlement of trade disputes caused by ‘designating suitable industries for SMEs’, elements of administrative acts have to be eliminated. First, it is necessary given in trust to NCCP is abolished with revising ‘Act on the promotion of collaborative cooperation between large enterprises and small – medium enterprises’. Second, NCCP shall be run from the government. Third, the law shall deprive NCCP of the right to apply to SMBA for business coordination. Finally, a ‘in-win scorecard’ on how large businesses co-exit with SMEs and designating suitable industries for SMEs shall be implemented by separate organizations.

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