A business association representing South Korean mid-sized firms made its debut as the Association of High Potential Enterprises of Korea on July 22 following the enforcement of a special law for cultivating mid-sized firms.

“We expect that mid-sized firms, which have long been isolated in the big business-driven Korean economy, will be able to work in an improved business environment to make more aggressive advancements into globally competitive enterprises,’’ AHPEK chairman Kang Ho-gap said at a ceremony last week to mark the launch of the association.

Kang is currently the chairman of automotive parts supplier Shin Young Metal, a mid-sized firm with sales of 800 billion won ($780 million) last year. 

Mid-sized firms here are firms with assets between 150 billion won ($146 million) and 5 trillion won.

Prior to the enforcement of the special law, there had been little protection for these up-and-coming firms that were bigger than start-ups but not as big as conglomerates, meaning they could not survive if subject to the kind of regulations that apply to larger firms.

“The association will help member firms nurture the so-called hidden champions so that they can better contribute to the nation’s sustainable economic growth,’’ Kang said.

Hidden champions are smaller companies that become global hits.

The local community of mid-sized firms has expanded in line with the nation’s economic development, and they were found to account for about 10 percent of Korean firms as of 2012, AHPEK said. However, the number of globally competitive players in that segment is under 50.

The cultivation of export-driven mid-sized firms has thus emerged as a key national agenda.

The increasing reliance on conglomerates has also been fueling the need to foster smaller companies. As of 2013, sales of the nation’s top 10 conglomerates were worth about 80 percent of the gross domestic product, up from 50 percent in 2003, according to corporate researcher Chaebul.com. During the same period, sales of the top two corporate giants, Samsung and Hyundai Motor, accounted for 20 percent of the nation’s GDP.

President Park Geun-hye, who participated in the AHPEK launch event, promised to develop a five-year plan for fostering Korea’s hidden champions.

“The government believes it is important to nurture middle players to build a well-structured ladder so that start-ups may grow to become bigger companies,’’ Park said.

Despite the government’s new vision, it would take considerable time to see an increase in the numbers of globally competitive middle players, industry watchers said.

“In reality, mid-sized firms have faced significant hurdles that include a lack of strategy, R&D investment and a proper talent pool,” said Yoon Sung-chul, an official from AHPEK. “In cooperation with the policymakers, the association will develop practical programs to help mid-sized member firms to cope with their management issues, while supporting small-sized firms that are ready to move up to become mid-sized players.”

By Seo Jee-yeon (jyseo@heraldcorp.com)