Abstract

A Study on support policies for Korean SME’s entry into chinese environmental protection market

Name : WI KANG SOON
Department : Department of Energy and Environment
Thesis Advisor : Cho Yongsung

The global environmental protection market is expected to grow at an annual average rate of more than three percent until 2020, when the total market size looks set to reach USD1.865 trillion. It is expected that Chinese environmental clean-up market, for one, will record explosive growth in the period 2016-2020 in the midst of the government’s effort to reduce the three main types of industrial waste.
Needless to say, Korea needs to make a positive foray into the Chinese environmental protection market to help invigorate the operation of environmental SMEs, which make up the bulk of the environmental industry of Korea, not to mention the advantages enjoyed by the country including bright market prospects, and geographic proximity to and cultural similarity with the Chinese market. The matter requires the government’s positive policy-based support in view of the difficult conditions faced by environmental SMEs trying to penetrate the Chinese environmental protection market, such as the personalized networks of influence known as China''s quanxi (relationship) culture, the adoption of the BOT (build-operate-transfer) method, which requires huge capital and a long capital recovery period, and the increasingly high non-tariff barriers resulting from the Korea-China FTA.
Under such circumstances, this study analyzes the Korean government’s policies on the provision of support for the environmental industry of Korea seeking to make forays into overseas markets, particularly China, and proposes ways of improving those policies with the focus on environmental SMEs. Efforts have been made to enhance the study’s reliability and objectivity by conducting qualitative and quantitative analyses
such as onsite surveys, a questionnaire survey of the relevant businesses, case studies, the AHP (Analytic Hierarchy Process) and the expert Delphi .This study raises three points and presents the results, which are summarized as follows.
The first point raised by this study was as follows: “Do the government policies designed to aid the environmental industry of Korea making forays into overseas markets, particularly China, adequately reflect the real situation?” The environmental industry of Korea consists of a large number of environmental SMEs. As such, the government policies aimed at supporting their overseas advance offer diverse support. However, this study has ascertained that the supporting organizations and their roles have yet to be streamlined, as similar support is provided redundantly by the government; and that other areas are in need of improvement including the supply of field-oriented information, the provision of support customized to companies and fields, and the establishment of a systematic network at the government level. It also transpires that urgent improvements need to be made in other areas such as the payment of the SME initial overseas advance support funds, the expansion of resources for the support funds, the enhanced functions of the overseas environmental centers, and customized mid- to long-term customized cultivation program of individual companies.
The second point raised was: “What government policies and programs are desired by SMEs to support their efforts to make forays into China, the world’s largest environmental protection market?” Concerning this point, the study came up with five areas (i.e. support organizations and functions, information on how to make forays into overseas market, required funds, networking, and business capability) that urgently require improvement, and 15 programs that need to be executed based on the results of the analysis.
The last point raised was: “Is it not necessary to objectify the priority of options offered for the provision of support for such businesses and ascertain their efficacy?” As a result of the analysis based on the AHP and the expert Delphi, it turned out that such factors as the possibility of policy execution and the setting of objectives for policy achievements were the most important ones, while ‘networking’ and ‘information on how to make forays’ were selected as those most required by businesses among the aforesaid five categories. The results of execution programs indicate that top priority must be placed on the direct sharing of information with clients, establishing China-specific implementation organizations, creating the environmental fund, building direct networks with potential clients, and delivering customized cultivation of individual companies; while the lowest priority was accorded to the establishment of a precautionary management supervision apparatus. This study proposes how to execute options for improvement whose adequacy has been proved as a result of the AHP analysis by dividing them into special and general policies support for environmental SMEs based on the results of the status survey, a comparative analysis of the policies, and the expert Delphi results.
This study proposes the following as policies for special support for environmental SMEs making forays into the Chinese environmental protection market: effectuation of direct government support for businesses to win orders through cooperation withdirect networks with potential clients, development of opportunities designed to meet customizedcultivation of individual companies, establishment of the basis for making forays with onsite situations taken into account, raising of environmental funds, provision of support funds with the focus on having beneficiaries repay the support received by them, etc. The aforementioned effectuation of direct government support for businesses to win orders through their cooperation with direct networks with potential clients includes the establishment of a cooperative network between the central and local governments, relevant institutions and businesses of Korea and the relevant local governments of China, the proposal of a platform for pilot projects to be carried out by large and small businesses engaging in the effort to reduce the three main types of industrial waste in China, and the diversification of channels of cooperation with Chinese environmental NGOs.
With regard to the development of opportunities to meet customized needs and the establishment of the basis for making forays into overseas markets with onsite situations taken into account, this study also proposes a three-year project for the development of customized individual packages in conjunction with a diagnosis of the relevant businesses, while pointing to the need for localization of the multi-functions of the Overseas Environmental Cooperation Center. In addition, this study proposes the following measures: adoption of the principle that business entities that cause pollution and environmental damage must pay the related costs; the raising of environmental funds by requiring the beneficiaries to repay the support received by them; the formation of a private fund associated with the effort to reduce thethree main types of industrial waste; the establishment of a bank dedicated to providing support for the environmental industry; and the securing of funds through international bodies.
As regards the policies on general support for businesses, this study proposes the launch of an organization specializing in horizontal collaboration and a system for the differentiation of information and the provision of information appropriate to different levels of the environmental industry, the designation of a single institution responsible for providing support for businesses making forays into foreign markets, an open-door personnel policy, bilateral communication, and the composition of a support task force providing hotline services, etc. This study also proposes improvements to the functions of the technology trading center so as to promote the exchange of environmental technologies with China, and the establishment of a system for working-level cooperation on policy execution. Concerning information on how to make forays into overseas markets, this study highlights the need to concentrate on the collection of information on undisclosed sources of giving orders, division of the system of provision into two parts depending on the characteristics of information and the grade of information, and the establishment of a system for sharing reliable information, such as a technological database, with local governments and businesses of China.
This study is particularly meaningful in that it has sought to avoid the situation whereby the government''s support policies run in a different direction to that taken by businesses'' industrial sites, and presents realistic support policies measures that match the industry''s actual demands.
This study is differentiated from existing studies in that it attempts to enhance the applicability of the results of its research by coming up with detailed feasible policy options rather than making broad-brush policy suggestions, and by enhancing the reliability of the research through the application of diverse research methods including a status survey, questionnaires, case studies, and use of the AHP and the expert Delphi. This study was carried out based on an objective and comprehensive appraisal of the relevant situation with the focus on the provision of support for domestic SMEs making forays into the Chinese environmental protection market. Such a study is expected to have additional significance, as it offers examples for those charged with formulating policies concerned with Korean businesses’ forays into the next-generation environmental markets of China or other emerging countries.

Key Words: Environmental industry of Korea, Environmental SMEs, Chinese environmental protection market, National policies on the provision of support for businesses making forays into the Chinese market, AHP analysis, The expert Delphi , Policies on special support for SMEs