[Editorial] Welcome SME support restructuring, but saved funds must not be shifted to subsidies for selected firms

Relevant ministries, including the Ministry of SMEs and Startups, announced on August 27 that, out of 671 SME support programs across 22 ministries worth about KRW 31 trillion, they would review 472, restructure 232, and save about KRW 4 trillion. The direction of eliminating similar, overlapping, and underperforming programs is positive. However, if the saved resources are again concentrated on government-selected new growth industries and business support, this may amount not to fiscal reform but merely to a reallocation of subsidies.

It is worth recognizing that the government itself has acknowledged the problems of small-scale, fragmented handout-style support and routine programs and has moved to restructure them. Continuing to maintain low-performing programs can increase dependence on government support rather than strengthen business competitiveness. In a reality where it is difficult to abolish support programs once they are created, the decision to reduce KRW 4 trillion through consolidation, integration, and budget cuts is a meaningful change.

The problem is the policy direction after the savings are secured. Rather than using the saved resources to reduce fiscal spending, the government plans to reinvest them in programs with proven performance and new strategic projects, while identifying around 300 innovative firms each year, mainly in new growth sectors, for long-term 집중 support.

However, the structure in which the government selects industries and firms still remains. There is no guarantee that the government can identify future growth industries and successful firms more accurately than the market can. In principle, a firm’s growth potential should be verified through the market’s judgment—by investors, consumers, and competing firms—rather than through government evaluation.

Moreover, if whether or not a firm receives government support affects its competitive conditions, firms may respond more sensitively to project selection criteria and evaluation items than to consumers and the market. The cost of failure by selected firms will ultimately be borne by taxpayers as well. Under the banner of fostering innovative firms, the government must not replace the market’s function of selection.

Therefore, this restructuring should become an opportunity to shift the direction of SME policy from direct support to regulatory reform and improvement of the business environment. Part of the saved resources should be used to reduce fiscal spending and improve fiscal soundness, while policy capacity should be concentrated on reducing regulations that hinder firms’ location decisions, workforce recruitment, entry into new industries, and financing.

As support programs are reduced, the administrative burden on firms—including applications, supporting documents, evaluation, and settlement procedures—should also be reduced. This is because the very structure in which SMEs spend manpower and time searching for government support programs and preparing for selection evaluations can itself hinder productive business activity.

The government’s restructuring of 232 programs and KRW 4 trillion in savings is a good starting point. Now the standard for judging the success of SME policy should also shift from “how much was provided” to “how much firms were enabled to compete and grow without support.” The government should use this restructuring not as a reshuffling of subsidies, but as an opportunity for a policy shift that strengthens fiscal soundness and market competition.

2026. 8. 28.

Center for Free Enterprise (CFE)

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Original title: [논평] 중소기업 지원 구조조정 환영하나, 절감재원, 선별기업 보조금 전환 안돼

Author: Center for Free Enterprise (CFE)

Date: 2026-08-28

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=comment&pn=1&idx=29466