'Reasonable Price' business owners find scheme unreasonable

A customer walks out of a restaurant designated by the government as a "Reasonable Price" business in Seoul, in this July 2022 photo. Newsis

The "Reasonable Price" businesses program, where the government provides tax incentives and subsidizes essential daily items, thereby enabling lower prices, was initiated in 2011 to stabilize costs. This approach was promoted as a win-win policy for both customers and business owners.

However, the number of these businesses has fallen to 7,056 last year, down from 7,334 in 2012. Why is this happening?

Owners of such businesses argue that incentives provided by central or local governments are insufficient to suppress price increases while at the same time, sustaining their operations.

When designated as “Reasonable Price” businesses, the most common benefits they receive are free garbage bags, reduced water and sewage costs, and online promotion by the local government. However, even a minor price increase, such as 500 won ($0.37), can lead to the loss of the designation of being a reasonably priced establishment.

A 55-year-old bakery owner near Ewha Womans University Station in Seoul stated that maintaining food prices is challenging because the "cost of everything, including raw materials, rent and personnel expenses, are continually rising with no sign of stopping." Starting this year, she raised the price of the bread from 200 to 500 won.

"The government's amount of subsidization is absolutely not enough for owners like me who operate a business in crowded, expensive areas like this. So I could not dare to apply for the program," the owner, who requested to be identified only by her surname Oh, told The Korea Times.

The effectiveness of the policy is also in question.

In 2022, the National Assembly Budget Office noted in its report regarding this policy, "the effectiveness of this system has not been empirically verified or measured, and the mechanism through which it impacts prices remains unclear."

Ministry of the Interior and Safety Lee Sang-min, second from left, signs a business agreement with officials from nine domestic credit card companies at the Government Complex in Seoul, to expand the "Reasonable Price” businesses program, Thursday. Yonhap

Yet, the government has revived the decade-old policy to combat inflation. The Ministry of the Interior and Safety recently announced plans to increase the number of such businesses, along with an increased budget of 1.8 billion won for this purpose.

On Thursday, the ministry announced a series of details for the program's expansion. According to the plan, nine domestic credit card companies will offer a 2,000 won discount for customer payments that exceed 10,000 won made with a credit card at these businesses.

Additionally, MG Community Credit Cooperatives will provide financial assistance to 24 affordably priced businesses, offering up to 4 million won each for the replacement and repair of signage, fixtures and furnishings. The Korea Federation of Micro Enterprise contributes by promoting the businesses.

The ministry will seek cooperation from private delivery apps, offering discount coupons to customers who order food from the designated businesses.

"The government is committed to consistently working towards reducing the cost-of-living burden for the public and invigorating the economy," Interior Minister Lee Sang-min said. "We aim to enhance our support for affordably priced businesses, including facility upgrades, and develop a range of support strategies in collaboration with the private sector to ease the burden of dining expenses for our citizens."

Whether small business owners will respond favorably to this policy remains to be seen.

"This policy is certainly better than not having any. However, to encourage active participation from small business owners, there's a need for more substantial and well-structured support measures," an industry official said.