Supporting Nepal’s SMEs: Balancing Scale and Equity

South Korea’s economic rise, from $79 GDP per capita in 1960 to $20,579 by 2010, was driven by large conglomerates (chaebols) like Samsung. However, this focus created uneven development, marginalizing small and medium-sized enterprises (SMEs). As a Master’s student researching development, I’m intrigued by this trade-off, as noted in Sung-Hoon Jung’s The Korean Development Strategy (2011). For Nepal, where SMEs dominate, Korea’s experience offers lessons for balancing scale and equity. This post explores Korea’s chaebol model and how Nepal can support its SMEs.

Chaebols vs. SMEs in Korea

Korea’s chaebols led industrialization, supported by state loans and policies (Jung, 2011, p. 456):

• 1960–1979: Hyundai and POSCO drove heavy industries (p. 461).

• 1980–1997: Samsung’s semiconductors boosted high-tech exports (p. 462).

• 1998–2010: Chaebols dominated IT, contributing to 50% of GDP from exports (p. 454).

However, chaebol dominance marginalized SMEs, exacerbating regional and corporate disparities (p. 464), a challenge Nepal must avoid.

Lessons for Nepal

Nepal’s economy relies on SMEs in agriculture, tourism, and handicrafts (World Bank, 2023). Korea’s model suggests:

• Support Large Firms: Fostering large enterprises in hydropower or tourism could drive scale, but not at SMEs’ expense.

• Empower SMEs: Microfinance and training for agro-processing (e.g., tea) and tourism SMEs can boost competitiveness.

• Create SME Hubs: Industrial estates with shared facilities could emulate Korea’s complexes (p. 460).

Challenges: Nepal’s limited capital and chaebol-like corruption risks require transparent policies and SME-focused incentives, unlike Korea’s monopolistic model.

Moving Forward

Nepal could aim to double SME exports by 2030 through a national SME strategy, offering tax breaks and access to India-China markets. Rural cooperatives can ensure inclusivity, learning from Korea’s uneven development (p. 464).

Read more:

• How South Korea Became an Economic Powerhouse for context.

• The Role of Chaebols in Korea’s Miracle for chaebol insights.

• Nepal’s Path to Industrial Growth for a roadmap.

• From Poverty to Powerhouse: Lessons for Nepal for the original post.

How can Nepal empower SMEs? Share your thoughts in the comments!

References:

• Jung, S.-H. (2011). The Korean Development Strategy. Journal of the Economic Geographical Society of Korea, 14(4), 453–466.

• World Bank. (2023). Nepal SME Sector Analysis.

• ILO. (2022). SME Development in Nepal.