{"id":2205972,"date":"2024-07-30T19:36:24","date_gmt":"2024-07-30T10:36:24","guid":{"rendered":"https:\/\/koreapro.org\/?p=2205972"},"modified":"2024-07-31T16:23:26","modified_gmt":"2024-07-31T07:23:26","slug":"liquidity-crisis-prompts-404-million-in-government-aid-for-south-korean-smes","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/07\/liquidity-crisis-prompts-404-million-in-government-aid-for-south-korean-smes\/","title":{"rendered":"Liquidity crisis prompts $404 million in government aid for South Korean SMEs"},"content":{"rendered":"
South Korea\u2019s finance ministry <\/span>announced<\/span><\/a> a $404 million (560 billion won) aid package on Monday to support small and medium-sized enterprises (SMEs) impacted by unpaid sales proceeds from e-commerce platforms Wemakeprice and TMON.<\/span><\/p>\n While this intervention aims to address immediate liquidity issues that have affected around 60,000 sellers, it also carries risks, including inadequate regulatory oversight, long-term financial instability of the affected companies and erosion of consumer trust in the e-commerce sector.<\/span><\/p>\n COST OF AGGRESSIVE EXPANSION<\/b><\/p>\n Wemakeprice<\/span><\/a> and <\/span>TMON<\/span><\/a>, two South Korean e-commerce platforms, are central to the recent liquidity crisis. Singapore-based Qoo10 acquired a majority stake in Wemakeprice in 2023, which was followed by its purchase of TMON in 2022.<\/span><\/p>\n Qoo10\u2019s strategy did not stop with these acquisitions. The company also acquired <\/span>Interpark Commerce<\/span><\/a>, a South Korean mobile shopping and book-selling platform, in March 2023 for approximately $114.9 million. It then expanded its portfolio once again in Feb. 2024 by purchasing the North America-based e-commerce platform <\/span>Wish<\/span><\/a> for $173 million.<\/span><\/p>\n These moves were part of Qoo10\u2019s broader goal to create a global e-commerce ecosystem by connecting its newly acquired platforms with its existing operations in Southeast Asia, including Indonesia, China, Hong Kong and Malaysia.<\/span><\/p>\n The financial strain from these aggressive acquisitions soon became apparent. By May 2024, Wemakeprice and TMON were <\/span>unable to pay their sellers<\/span><\/a>, leading to a liquidity crisis. The unpaid bills amounted to approximately $151.6 million (210 billion won), severely impacting about 60,000 sellers.<\/span><\/p>\n These sellers are primarily individual merchants, self-employed businesses and SMEs who depend on timely payments to sustain their operations.<\/span><\/p>\n The broader economic impact of these disruptions could be substantial. SMEs comprise the core of the South Korean economy, accounting for <\/span>81% of employment<\/span><\/a>.<\/span><\/p>\n If a significant number of these businesses fail, the ripple effects could extend beyond the immediate e-commerce sector. Suppliers, logistics companies and service providers that depend on these SMEs may also experience financial strain.<\/span><\/p>\n