By Yoon Ja-young
The country's leading conglomerates vowed they would put forth more efforts to share the fruits of their growth with small suppliers. This includes setting up funds to provide the small companies with loans at low interest rates and helping them with R&D.
Fair Trade Commission (FTC) Chairman Kim Sang-jo held a meeting with executives from top conglomerates where they presented their plans.
The former economics professor who had been engaged in a campaign to reform the chaebol-led economic structure said polarization is a serious problem as it restricts economic growth on top of hurting equity. The country's top 10 businesses take 60 percent of the total operating profits of businesses listed on the bourse.
"For sustainable growth, we should overcome the polarization first," Kim said, calling for the willingness of big companies to share the fruits of their growth.
He cited Toyota and Finland's elevator manufacturer Kone as two contrasting cases.
"As the demand on automobiles decreased following the global economic recession, Toyota chose to pay lower prices for components. However, this led to lower quality of some components, and the company fell into a crisis with a massive recall in 2010," the FTC chairman said.
Kone, meanwhile, maintained long-term relations with around 250 suppliers, willingly paying them more in cases where there were rising prices of raw materials. "The suppliers could continue technological innovation as a result, and Kone grew into a global player," he said, stressing that sharing their fruits is necessary for conglomerates' own survival.
Unlike previous administrations which relied on conglomerates as the main pillars of the economy, the Moon Jae-in administration announced that it aims at increasing the income of workers at SMEs, so they can consume more and boost the economy under the "income-led economic growth" strategy. However, SMEs have little room to raise salaries due to low profitability and the steep minimum wage hike also added to their burden.
The polarization between conglomerates and SMEs is also worsening youth unemployment. While young people spend years without jobs, preparing to get relatively stable and well-paying jobs at conglomerates, SMEs have been suffering from a chronic labor shortage.
The conglomerates presented their plans to share growth with small suppliers. Samsung Electronics, for instance, is scheduled to set a 1 trillion won fund to offer loans to suppliers at low interest rates. It also raised payment to suppliers by 70 billion won to share their burden following the minimum wage hike. It set up a 40 billion won fund to help them with R&D.
Hyundai Motor and Kia Motors, which set up 50 billion won fund for suppliers, plan to add 100 billion won to the fund. Suppliers will be offered loans at interest rates around 2 percentage points lower than at banks. It also plans to organize a job fair for suppliers, as well as helping them advance into markets overseas.
LG Group plans to expand a fund for suppliers to 858.1 billion won this year. LG Display announced that it will provide its patents to suppliers and support them with welfare programs for employees.
SK Group also is scheduled to expand a fund for suppliers to 620 billion won next year. SK hynix executives and employees agreed to provide 20 percent of their salary hike to set up a fund, which will be used to help suppliers raise salaries for their workers.
POSCO plans to increase payment to suppliers on top of scrapping the bidding system which selects the lowest bid. Bidders that offer extremely low prices will be excluded in the bidding. By guaranteeing profits for the suppliers, it expects to get quality outcome.
KT focused on joint R&D with suppliers, allocating 10 billion won for that. It will also provide employee training programs for suppliers. CJ CheilJedang said it is supporting suppliers with R&D costs on top of providing consulting services.
The country's leading conglomerates vowed they would put forth more efforts to share the fruits of their growth with small suppliers. This includes setting up funds to provide the small companies with loans at low interest rates and helping them with R&D.
Fair Trade Commission (FTC) Chairman Kim Sang-jo held a meeting with executives from top conglomerates where they presented their plans.
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| FTC Chairman Kim Sang-jo |
The former economics professor who had been engaged in a campaign to reform the chaebol-led economic structure said polarization is a serious problem as it restricts economic growth on top of hurting equity. The country's top 10 businesses take 60 percent of the total operating profits of businesses listed on the bourse.
"For sustainable growth, we should overcome the polarization first," Kim said, calling for the willingness of big companies to share the fruits of their growth.
He cited Toyota and Finland's elevator manufacturer Kone as two contrasting cases.
"As the demand on automobiles decreased following the global economic recession, Toyota chose to pay lower prices for components. However, this led to lower quality of some components, and the company fell into a crisis with a massive recall in 2010," the FTC chairman said.
Kone, meanwhile, maintained long-term relations with around 250 suppliers, willingly paying them more in cases where there were rising prices of raw materials. "The suppliers could continue technological innovation as a result, and Kone grew into a global player," he said, stressing that sharing their fruits is necessary for conglomerates' own survival.
Unlike previous administrations which relied on conglomerates as the main pillars of the economy, the Moon Jae-in administration announced that it aims at increasing the income of workers at SMEs, so they can consume more and boost the economy under the "income-led economic growth" strategy. However, SMEs have little room to raise salaries due to low profitability and the steep minimum wage hike also added to their burden.
The polarization between conglomerates and SMEs is also worsening youth unemployment. While young people spend years without jobs, preparing to get relatively stable and well-paying jobs at conglomerates, SMEs have been suffering from a chronic labor shortage.
The conglomerates presented their plans to share growth with small suppliers. Samsung Electronics, for instance, is scheduled to set a 1 trillion won fund to offer loans to suppliers at low interest rates. It also raised payment to suppliers by 70 billion won to share their burden following the minimum wage hike. It set up a 40 billion won fund to help them with R&D.
Hyundai Motor and Kia Motors, which set up 50 billion won fund for suppliers, plan to add 100 billion won to the fund. Suppliers will be offered loans at interest rates around 2 percentage points lower than at banks. It also plans to organize a job fair for suppliers, as well as helping them advance into markets overseas.
LG Group plans to expand a fund for suppliers to 858.1 billion won this year. LG Display announced that it will provide its patents to suppliers and support them with welfare programs for employees.
SK Group also is scheduled to expand a fund for suppliers to 620 billion won next year. SK hynix executives and employees agreed to provide 20 percent of their salary hike to set up a fund, which will be used to help suppliers raise salaries for their workers.
POSCO plans to increase payment to suppliers on top of scrapping the bidding system which selects the lowest bid. Bidders that offer extremely low prices will be excluded in the bidding. By guaranteeing profits for the suppliers, it expects to get quality outcome.
KT focused on joint R&D with suppliers, allocating 10 billion won for that. It will also provide employee training programs for suppliers. CJ CheilJedang said it is supporting suppliers with R&D costs on top of providing consulting services.
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