Promoting Small and Medium Industries: The Korean Experience

Abstract

The promotion of small and medium-scale industries is politically an attractive policy for achieving social equity and justice and economically desirable for attaining balanced growth. However, in practice, the promotion of these industries is an extremely difficult task, and usually the policies are costly for the government without producing the desired results. The reason is that it is generally difficult for governments to find a common denominator for establishing and executing policies for promoting small and medium industries because of their large numbers and diversity in their nature of business. There is, therefore, no simple or universal policy strategy. In general, there are two kinds of promotional policies for the development of small and medium industries. One is to create as many industries as possible and help them to survive, and the other is to create and/or help small-scale industries to grow and become medium-scale industries through import substitution for the domestic market and eventually export promotion for the international market. In the case of the Republic of Korea, the government adopted the second approach for promoting small and medium industries.