Gyeonggi Province Has Largest Small Manufacturer Scale Nationwide… Profitability and Sustainability Present Challenges

[Suwon Ilbo=Reporter Park Nohun] Gyeonggi Province has concentrated approximately 108,000 'small manufacturer' businesses (29% of the national total), the largest scale nationwide and the foundation of manufacturing competitiveness, but their profitability and sustainability are relatively poor, prompting calls for systematic support and development policies including smartification of work environments and strengthening of cooperation networks.

The Gyeonggi Research Institute announced on the 29th that it has published 'Research on Fostering and Revitalizing Small Manufacturers in Gyeonggi Province,' containing these findings.

Small manufacturers typically refer to 'urban small manufacturers' under the 'Special Act on Urban Small Manufacturers,' defined as manufacturing businesses with fewer than 10 permanent employees that are labor-intensive, based on skilled technology, and concentrated in specific regions.

They contribute to the national and regional economy in various aspects, including stabilizing local employment and industrial ecosystems and passing down knowledge and technology.

The number of urban small manufacturer businesses in the province (as of 2019) is 108,554, accounting for 29.3% of the national total, more than twice that of Seoul (53,276), which ranks second. The number of employees at urban small manufacturers in the province is also 401,301 (33.2% of the national total), the highest in the country.

Despite this considerable scale, these businesses face difficulties in achieving high value-added innovation and responding to crises due to structural limitations including the small scale of enterprises and labor-intensive production systems.

Moreover, they primarily serve as lower-tier vendors for large and mid-sized corporations, creating a high possibility of risk transfer due to poor business conditions.

In particular, small manufacturers in Gyeonggi Province are evaluated as having relatively poor profitability and sustainability compared to their average sales scale and external appearance.

The average sales per employee at urban small manufacturer businesses stands at 140 million won, the second largest after Ulsan City, but the average operating profit margin (operating profit relative to sales) is 10.9%, the lowest among 17 metropolitan local governments.

The average business history is 10.3 years, the second shortest after Sejong City and Ulsan City, indicating a high market entry rate for new businesses, but survival rates fall below the national average, suggesting a disadvantageous environment for business sustainability.

To overcome the crisis facing small manufacturers, the government enacted the 'Special Act on Support for Urban Small Manufacturers' in 2015 and established the 'First Comprehensive Plan for Supporting Urban Small Manufacturers' in 2017, but the policy foundation at the local government level remains inadequate.

In Gyeonggi Province's case, a considerable portion of small business support policies focus on improving the management environment for small business owners, and the benefits of support projects targeting all small and medium manufacturing enterprises are difficult to reach small manufacturers, leaving most small manufacturers in policy blind spots.

Accordingly, the Gyeonggi Research Institute presented the following basic directions for Gyeonggi Province-style small manufacturer support: ▲Smartification of small manufacturer work environments ▲Strengthening cooperation networks among small manufacturers ▲Enhancement of expertise in small manufacturer support. Through these measures, the goal is to fundamentally strengthen small manufacturers' innovation capacity while raising productivity and inducing innovation and growth through cooperation. Additionally, it proposed key projects including ▲Establishment of dedicated organization for Gyeonggi Province small manufacturer support and expertise enhancement ▲Construction of Gyeonggi Province small manufacturer support control tower ▲Introduction of Gyeonggi Province-style small manufacturer master craftsman discovery program ▲Development of customized smart work application for small manufacturers ▲Qualitative improvement of small manufacturer education ▲Enhancement of small manufacturers' mobile usage capability.

Lee Yu-jin, research fellow at the Gyeonggi Research Institute, stated, "The scale of small manufacturers in Gyeonggi Province is the largest in the nation and is evenly distributed across diverse manufacturing sectors, which is positive for regional economic and employment stabilization," adding, "The discovery of leading policies to support small manufacturers is necessary."