Harnessing digitalisation to build resilient SMEs in Korea
Drawing on its digital know-how and OECD best practices, Korea’s support for SMEs helped them overcome the pandemic – and empowered them for the future.
What's the issue?
Digitalisation can be a powerful driver of SMEs’ resilience, enhancing their capacity to anticipate, respond and adapt to large shocks. The severe impact of the COVID-19 crisis on small businesses and entrepreneurs has put SME digitalisation high on the agenda of policy makers across many countries. Accelerating digital uptake by SMEs is viewed as essential for economies to bounce back from the pandemic, and build the foundations for future resilience.
Korea has a well-established digital infrastructure, which creates favourable conditions for digital adoption. High-speed internet is widely accessible and affordable. Similarly, Korea has the highest level of internet availability across OECD members and non-members. It is also one of the first countries to roll out the 5G network.
Despite favourable conditions for digital uptake, SMEs in Korea are not harnessing the full benefits of digitalisation. The use of some key digital technologies by SMEs lags behind the OECD average. For instance, Korean SMEs’ cloud computing uptake was lower than the OECD average before COVID-19. Adoption rates among businesses of all sizes, including large companies, were below the OECD average.
How are we addressing it?
Digitalisation has been a key pillar of the Korean government’s strategy to adapt to the crisis. The mix of existing programmes and new policy measures to support SME digitalisation in response to the pandemic has helped Korean SMEs tackle disruptions. The Ministry of SMEs and Startups of Korea has been swift in introducing policy pilots to meet SMEs’ urgent digital needs during the COVID-19 crisis. The government has underlined the importance of making digital services and equipment more accessible to small businesses, and helping them make rapid transition to digitally enabled business practices. While aimed at helping small businesses become more resilient, the policies were also conceived to address the long-standing challenge of low digital adoption among SMEs. Support for exporting digital sales (e.g. reserving freight space for SMEs to ship goods abroad), measures to enhance cybersecurity, and digitalising public services are some of the novel policies introduced during the pandemic.
The OECD has worked to analyse the Korean experience, proposing policy recommendations based on international practices that have been welcomed by Korean authorities (e.g. expand monitoring of uptake of digital tools by SMEs, enhance access to basic ICT training to the SME Workforce). Results of the analysis were shared in a high-level public webinar on 30 June 2021 – co-organised by the OECD and the Korean government as part of “OECD SME Week” – during which the OECD policy paper on “Enhancing SMEs’ resilience through digitalisation: The case of Korea”.
Korea has also been co-chairing at Ministerial level the OECD Digital for SMEs (D4SME) Global Initiative since its launch in 2019, which is a platform for OECD goverments, large businesses, industry experts and the SMEs themselves to work together to discuss SMEs’ digitalisation. The initiative aims at promoting knowledge sharing and learning on how SMEs of all types can seize the benefits of digitalisation. Korea is playing a pivotal role in shaping and advancing this key policy discussion at the OECD level.
Launch of the OECD Digital for SMEs Initiative (D4SME) with Stuart Nash, Minister of Small Business, New Zealand and Park Young-sun, then Minister of SMEs and Startups, Korea (2019).
What’s the impact?
The flexibility of digital services and online platforms has allowed a large number of SMEs to digitalise (e.g. 1 in 5 small business and more than 1 in 3 medium sized business in Korea make use of cloud computing solutions) some of their business operations without the need for heavy upfront investments. The strong acceleration in uptake of digital technologies was facilitated by several policy programmes introduced by the Korean government, which drew on existing strengths to deliver on their objectives, such as a well-developed digital infrastructure, strong networks between large and small firms, smart factory solutions, and extensive digitalisation of government services.
While most of the measures were conceived as temporary, SMEs’ growing interest and their willingness to embrace digitalisation, in addition to the prolonged pandemic, resulted in the government extending the programmes. Although it is early to conduct evaluation of these policies, the Korean government should continue its efforts in monitoring the measures, adjusting specificities and conditionality of the programmes to meet the evolution of SMEs’ demand and challenges, including through the development of digital skills in SMEs.