Gov't to cut W4tr from SME support programs, redirect funds to high-growth firms

The government is launching a sweeping restructuring of its small and medium-sized enterprise support programs, consolidating or cutting roughly half of them.

The Ministry of SMEs and Startups and related ministries announced Thursday the "Cross-Ministry SME Support Program Efficiency Plan" and the "New-Growth Sector Innovative Enterprise Development Plan" at a fiscal management strategy council meeting.

The restructuring is expected to save 4 trillion won ($2.89 billion), which the government plans to reinvest in high-performing and core SME support programs. In addition, the government will identify 300 innovative companies in new-growth sectors each year, providing up to 10 billion won or more per company for up to five years.

The initiative traces back to President Lee Jae Myung, who said at a dialogue with small business owners in March that SME support programs are "like tangled hair that needs to be combed out."

This year, the government operates 671 SME support programs worth 31 trillion won across 22 ministries. Of these, 472 programs worth 25.5 trillion won across 17 ministries were designated for restructuring. Roughly half — 232 programs — will be overhauled to generate 4 trillion won in savings: 88 programs will be merged or abolished, and 144 will have their budgets reduced.

Merging overlapping and duplicative programs will cut the number of projects by 19 and save 2.4 trillion won. For example, the Ministry of SMEs and Startups will consolidate pre-startup programs — including Challenge K-Startup and the Pre-Startup Package — into a single "Everyone's Startup Support Program," trimming 76.4 billion won. Programs run by the Ministry of Trade, Industry and Energy that overlap with those of other ministries will also be eliminated.

Small-scale and broadly distributed programs are also being targeted. Of 196 programs with budgets under 5 billion won, 53 will be cut, saving 130.9 billion won. Among 106 programs providing less than 50 million won per company, 12 will be abolished and 32 reduced, saving 276 billion won.

Low-performing and routinely maintained programs will be trimmed as well. Of 83 programs rated inadequate in SME support performance evaluations covering 2023 to 2026, 13 will be abolished and 31 reduced, saving 481.9 billion won. Programs that have met their objectives or become less relevant due to changing economic conditions will yield an additional 845.2 billion won in savings.

However, the government said it will not apply uniform cuts based solely on grant size or program scale, recognizing that small-scale support can serve as a lifeline for micro-enterprises. "We are not cutting all programs providing less than 50 million won per company or with budgets under 5 billion won," said Park Yong-sun, director general for SME policy at the Ministry of SMEs and Startups. "We took multiple factors into account, including low performance and duplication."

The 4 trillion won in savings will be reinvested in high-performing and core SME support programs. "The essence of this restructuring is not to reduce support for small businesses, but to cut unnecessary spending and reinvest it where it is truly needed," Park said. In practice, the ministry will expand its Jump-Up Program — which supports promising SMEs — to three tiers, raising its budget from 59.5 billion won this year to 164.2 billion won next year, an increase of more than 100 billion won.

The government plans to overhaul its SME support framework around growth performance and outcomes. When selecting companies, evaluators will first assess growth potential based on metrics such as sales and employment growth rates, as well as AI-driven assessments of future potential, directing support toward companies with the strongest prospects.

Support will be focused on companies that have posted average annual sales or employment growth of at least 5 percent over the past three years, or that rank in the top 30 percent in AI-based corporate assessments. The approach will be applied across the Ministry of SMEs and Startups' programs for SMEs, startups and small merchants next year, then gradually extended to cross-ministry programs.

Another pillar of the government's targeted spending is new-growth sectors, including new security industries, pharmaceutical biotech, climate technology and K-consumer goods. Starting next year, the Ministry of SMEs and Startups and related ministries will identify 300 innovative companies in these sectors annually. Each selected company will receive a bundled package of professional consulting, commercialization support, financing, export assistance, workforce development and R&D support worth more than 10 billion won over up to five years.

Support will initially run for two years, after which companies will be evaluated on whether they have met phased targets — including sales and employment growth rates, market share and investment raised — to determine eligibility for an additional three years. Through this process, each company can receive up to 10 billion won or more over a maximum of five years. The total number of supported companies will eventually be capped at 1,000.

The government's budget proposal for next year allocates 238.8 billion won from the Ministry of SMEs and Startups for the development of innovative companies in new-growth sectors — 217.3 billion won for 10 ongoing programs and 21.5 billion won for five new ones.

Following the "Future New Security Innovative Enterprise Development Direction" announced in June, the ministry and related agencies plan to release sector-specific measures for pharmaceutical biotech, climate technology and K-consumer goods in sequence by October.

"We will ensure that the SME support budget, funded by taxpayers, is used efficiently where it is most needed," said Noh Yong-seok, first vice minister of SMEs and Startups. "We will shift the policy paradigm for small businesses in new-growth sectors and deliver tangible results that lead global markets."