Support for mom-and-pop stores hurts globalization
Posted : 2013-03-28 21:00
Updated : 2013-03-28 21:00
By Park Si-soo
The government's move to thwart rapid expansion of big companies to protect the livelihood of small businesses has gone too far, undermining the former's international competitiveness, business analysts said.
Food companies were hit hard by the measure, they said, adding the policy, if it persist, will end up killing the country's dream of having a global food company such as McDonald's, Pizza Hut and KFC. They warned that the restriction will also derail the government's ambitious project of globalizing the country's signature dishes to the same footing as hamburger, sushi and pizza.
"There is no company that does its business well in overseas markets with poor performances on the home turf," an analyst said asking not to be identified. "The government has pledged to make full support for the globalization of Korean foods and their manufacturers. But what it does now is hampering this."
The restriction was employed by former President Lee Myung-bak who was afraid of what critics said was a "reckless" expansion of major conglomerates into businesses that were once dominated by mom-and-pop stores. President Park Geun-hye has extended the policy under the slogan "economic democratization," slapping a strict cap on annual growth on major food companies.
In February, the National Commission for Corporate Partnership banned big bakery franchises from opening new stores within 500 meters of an existing outlet of the same brand. The commission also limited their annual growth in terms of the number of outlets at a maximum 2 percent of their existing outlets. It plans to announce an annual growth limit on major franchise restaurants by the end of the month.
In this adverse climate, experts said, it's hard to expect that any of domestic food companies will be able to grow strong enough to compete with America's McDonald's and Yum! brands in global markets. Yum! operates or licenses Taco Bell, KFC and Pizza Hut restaurants worldwide.
"We still have a long way to go," said an official at a food company that has vigorously sought overseas expansion. "Our globalization plan faces the risk of perishing."
The official stressed that McDonald's and Yum! Brands wouldn't have built the international clout they have, if there was any growth limit in place in the U.S.
The combined annual sales of the two American food giants reached 39 trillion won ($35.1 billion) in 2010, which was nearly two third of the combined sales of all restaurants and bars in Korea that year, 67.5 trillion won, according to the Statistics Korea.
Experts are also having doubts about the rule's fairness. Several restaurant franchises owned by foreign investors, including Nolbu whose biggest stakeholder is Morgan Stanley, are free from the limit despite their rapid growth.
"The existing policy has many loopholes," an analyst said. "It should be redesigned or it will jeopardize our own interests."