South Korea is taking steps to address and prevent illicit brokerage and undue influence in the allocation of support for small and medium-sized enterprises (SMEs) and small business owners. A task force led by the Ministry of SMEs and Startups (MSS) convened its third meeting on , outlining plans for increased collaboration between government, public institutions, and private platforms to curb these practices.
The initiative stems from concerns that the complexity of application processes and limited access to information for government support programs create opportunities for unauthorized brokers – often referred to as ‘illegal brokers’ – to exploit businesses. These brokers charge fees for services that should be readily available through official channels, effectively adding a hidden cost to accessing crucial funding and resources.
According to the MSS, the problem is particularly acute during periods of high demand for policy funding. Instances of individuals falsely representing government agencies or guaranteeing successful applications in exchange for fees have been reported. This underscores a structural issue where businesses, facing complicated procedures, are driven to seek external assistance, creating a market for both legitimate consulting services and illicit brokerage.
The task force’s approach centers on three key pillars: proactive prevention, enforcement, and improved accessibility. The immediate focus is on bolstering preventative measures through collaboration with private platforms. The MSS, along with participating public institutions, intends to implement several initiatives, including prominently displaying warnings about illegal brokers on these platforms, strengthening monitoring of government support-related postings, and establishing direct communication channels – “hotlines” – between public agencies and platform operators for rapid information sharing and coordinated responses.
Beyond immediate preventative steps, the government recognizes the need for systemic reforms. A core issue identified is the structural problem of complex application procedures and limited information access. The MSS plans to streamline the application process for policy funding and research and development (R&D) support. This includes exploring ways to automate the submission of administrative documents through inter-agency cooperation and transitioning signature processes online, with the goal of reducing the required paperwork by 50%.
A significant long-term project is the development of a “Unified Support Platform for SMEs,” designed to consolidate information about all available government support programs into a single, easily accessible resource. The MSS is considering the introduction of artificial intelligence (AI) powered tools to assist businesses in drafting business plans, potentially launching this feature in the second half of .
The task force is also addressing the distinction between legitimate consulting services and illegal brokerage. While acknowledging the demand for professional assistance, the government aims to clearly define and regulate the consulting market. Strengthened enforcement will target fraudulent activities such as impersonating government officials, demanding conditional fees, or offering to submit false applications. Simultaneously, the MSS is exploring the feasibility of a consulting registration system to provide a framework for legitimate service providers.
The reforms extend to the R&D and startup support sectors, where concerns about external interference have also been raised. Specific measures under consideration include expanding the TIPS (Tech Incubation Program for Startups) R&D program, establishing a Korean version of the Small Business Technology Transfer (STTR) program, introducing a stage to verify the capabilities of pre-startup entrepreneurs, and strengthening the accountability of evaluation committee members.
The government’s efforts also aim to address the issue of undue influence in the evaluation and selection processes for support programs. Strengthening the responsibility of evaluation committee members is a key component of this effort, suggesting a focus on transparency and impartiality in decision-making.
“We will push ahead with the anti-undue influence policies, including real-name reporting, exemption systems, and so on, without fail and swiftly,” stated First Vice Minister of SMEs and Startups, Noh Yong-seok. He further emphasized the commitment to strengthening preventative measures through collaboration with private platforms and improving the accessibility of support programs for SMEs and small business owners.
The MSS’s initiative represents a broader effort to improve the efficiency and transparency of government support programs, ensuring that resources reach the intended beneficiaries without being siphoned off by intermediaries. The success of these reforms will depend on effective implementation, ongoing monitoring, and continued collaboration between government, public institutions, and the private sector. The planned integration of AI and the development of a unified platform signal a commitment to leveraging technology to streamline processes and enhance accessibility, potentially setting a new standard for SME support in South Korea.
