Better have long

Global Summit of Women 2004
Seoul, Korea

Better have long-term perspectives on financial management

By Ms. Whajoon Cho

In recent years, there have been significant changes in corporate financial management. Huge enterprises such as Enron and Worldcom got into trouble due to improper accounting and financial management. Not only form the U. S., but also from almost everywhere in the world, we have heard collapse of big companies and various accounting scandals and troubles related financial management.

Korea was not an exception. In late 90's, Korea entered into IMF supervision. It had been tough times for anyone who was working on this area. Bad economy had accelerated delinquency of debt. As results, financial institutions set up stricter criteria for credit requests than before. Accordingly, business environment of SMEs became even tougher. Without some sizable collaterals and/or warranty, credit from banks is not easily accessible.

Nevertheless, show must go on.

Then we need to find out what alternatives SMEs do have. Since you visited Korea, let's talk about Korean cases.

Promotion of SMEs and Encouragement of Purchases of Their Product Act has been effective for while. According to the law, lots of entities in the public sector are obligated to accommodate the private contracts or preferential payment plans for SMEs and/or their associations. Besides, there are some funds raised and reserved for SMEs and technology development. These could be good financial sources.

In addition, individual company has funding programs in line with its business plans and needs. For example, KT has been supported game developing companies. These days everybody talks about convergence of internet and broadcasting and that of communications and entertainments. Such a trend leads related industries to focus on contents. As a provider of broadband and portal services, KT sees through potentials of interactive games via existing lines of business.

Nine companies, which passed highly competitive selection process, have been supported from the initial stage of game development for the total amount of 2 billion Korean won in 2003. The support will be increased by 5 billion Won. Such support will be paid to KT in the form of co-ownership of copy right of the game.

In order to tap those resources, of course, serious time and effort are required. In addition, I would recommend that you better have long-term perspectives on financing.

Regardless of size, transparency and accountability of management become more important than ever. For SMEs, independent audit and credit rating may not be required. Such independent evaluation, however, could be an effective tool for telling your state of mind and financial situation in order to appeal for bank and cheaper financing. For the long-term cost saving from cheaper financing will compensate for tax savings you would concern now.

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