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Weak small firms. There is a huge productivity gap between Korea’s export-oriented chaebol and small and medium-sized firms (SMEs) which dominate services. Value added per worker in small firms is less than half that in large ones. SMEs’ operating profits were 4.5% of sales in 2007, compared with about 7% for large firms. Small firms spend about half as much on research and development as large ones per unit of sales and borrow far more relative to assets. Over time, their performance seems to be getting worse. Korea, in short, has first-world manufacturing exporters and third-world services.

Coddled, not coping
There are several reasons for the mismatch. Small firms are crowded out of markets for people and skills by the chaebol. And because chaebol pay scales often rise according to years in service, they squeeze wage bills by firing older workers, with the service sector working as a recycling system for surplus labour. Small firms have also been coddled by the government. Korea maintains various entry barriers to shelter mom-and-pop stores from competition. Government support to SMEs rose from under 6 trillion won in 2008 to 10 trillion in 2009. Public credit guarantees rose from 33 trillion won in the Asian crisis to almost 60 trillion won in 2009. Last year, the government “requested” banks to roll over their loans to small firms. Randall Jones of the OECD argues that all this help has made SMEs less, not more, efficient, and damaged competitiveness. The richest economies are switching into services that in Korea are dominated by small firms which cannot compete.

A. 어휘
productivity 생산성. export-oriented 수출 指向的(지향적).
medium-sized firms 중소기업. dominate 지배하다, 주도하다.
Value added per worker 근로자 1인당 부가가치. operating profits 영업이익.
relative to assets 資産(자산) 對比(대비).
Coddle 응석받이로 기르다. coping 대항하다, 싸우다, 대처하다.
mismatch 어울리지 않는 혼인. crowded out 밀어 내다.
pay scales 임금 지급규모. squeeze 짜내다, 壓搾(압착)하다.
bills 계산서. entry barriers 진입장애. shelter 보호하다.
mom-and-pop stores 부부만으로 경영하는 소매점. trillion 兆(조).
Public credit guarantees 공적 신용대부 보증. crisis 위기.
“requested” 요구하다, 요정하다. loans 貸付(대부), 貸出(대출).
dominate 지배하다.