Voices are being raised calling for the improvement in the system of Yellow Umbrella’s investment program.
Yellow Umbrella is a mutual-aid association for small and mid-sized business owners under Korea Federation of Small and Medium-sized Businesses (KBIZ). It is operated based on the Small and Medium Enterprise (SME) Cooperatives Act.
Under the Act, the KBIZ is classified as one of the four types of SME cooperatives – along with industrial cooperatives and federations of cooperatives – and therefore is subject to the Act.
Yellow Umbrella is required to report plans and results of its investment program to the Ministry of SMEs and Startups, the competent authority, pursuant to Article 36 of the Enforcement Decree of the Act. And this is the reason for a delay in the announcement of the final results for the institution’s process of selecting external managers initiated two months ago.
Some industry observers are questioning about whether the current system is reasonable enough. They maintain that it is inappropriate to apply the SME Cooperatives Act to Yellow Umbrella, which is a mutual-aid association and far from being a cooperative.
“The SME Cooperatives Act says that small and medium entrepreneurs consolidate and promote collaborative projects through cooperative organizations. Yellow Umbrella is not exactly the same as such organizations because it is a benefit association providing pensions or sick-benefits to individual owners of SMEs,” a private equity manager said.
Some are also raising the need for the system of Yellow Umbrella’s investment program to be improved. Provisions to protect small and medium entrepreneurs should remain untouched, but the relevant Act needs to be amended to guarantee independence of Yellow Umbrella’s investment program, they argued.
“If Yellow Umbrella was a government-backed organization, it would be indisputable that its investment program is subject to the government’s approval. But Yellow Umbrella’s mutual-aid fund is raised from regular dues paid by small and medium entrepreneurs,” an industry insider pointed out.
Voices criticizing the inefficiency in the current approval system are also heard. “Chances are almost nil that the results concluded by Yellow Umbrella are changed during the process of obtaining approval from the Ministry of SMEs and Startups. So, I think the current system needs to be improved to give more power to Yellow Umbrella which actually leads the investment program,” an industry insider said.
“From what I understand, public officials working with Yellow Umbrella also change every two to three years because of the staff rotation system adopted by government departments. This could hamper the continuity of the investment program and increases the need for the independence of Yellow Umbrella,” he added.
“We supervise Yellow Umbrella’s investment program according to the current law,” a representative for the Ministry of SMEs and Startups said. (By Kim Byung-yoon)