SMEs create more jobs than big firms

The number of people working at small- and medium-sized enterprises increased by 3.47 million between 1999 and 2009, industry data showed Sunday.

Under local regulations, SMEs are defined as companies with less than 1,000 employees and total assets less than 500 billion won ($458 million), and companies that meet the requirements but are affiliated to large companies are excluded from the category.

According to a report by the Korea Federation of Small and Medium Businesses, the number of those employed by SMEs rose from the 8.28 million recorded in 1999 to 11.75 million in 2009.

In contrast, the number of workers employed by large businesses fell from 2.14 million to about 1.65 million over the same period.

In addition, the number of SMEs and large businesses also changed significantly over the period.

According to the Korea Federation of Small and Medium Businesses’ figures, the number of small and medium sized businesses increased by about 327,000 over the 10-year period to come in at more than 3.06 million at the end of 2009. In 1999, the figure stood at about 2.74 million.

In contrast, the number of large companies fell from 18,844 in 1999 to 2,916 at the end of 2009.

With the changes, SMEs accounted 87.7 percent of all industries in terms of employment, and 99.9 percent in terms of the number of establishments.

Along with the changes in numbers, the value of SMEs’ operations has also grown at a faster rate than that of large businesses, the report showed.

According to the report, the added value created per year by SMEs operating in the manufacturing industry increased by 101 trillion won over the period, while that created by large companies rose by 91 trillion won.

However, despite the advances made by SMEs, the report showed that their profitability improved at a slower rate than large companies. According to the report, SMEs’ net profit ratio before taxes rose from 3.26 percent in 2008 to 3.97 percent in 2009. In comparison, the figure for large companies went from 3.81 percent to 7.12 percent over the same period.

By Choi He-suk  (cheesuk@heraldcorp.com)