Small and medium enterprises must take the lead in promoting balanced growth between large companies and their subcontractors, the commerce minister said Monday.
In a meeting with heads of smaller companies, Knowledge Economy Minister Choi Joong-kyung said that in order for Korea’s economy to make the next leap forward, SMEs that largely act as subcontractors to conglomerates must become more globally competitive.
“Korea can only become a economically advanced nation if SMEs are able to compete on a global level,” he said, adding that smaller companies need to do more to upgrade their products and services.
Balanced growth has emerged as a hot issue as government policymakers and private sector experts have made clear that without strong SMEs to provide high-quality components and materials to large conglomerates, the country will not be able to maintain growth.
Fueling growth of smaller companies is also important because such companies hire the bulk of the country’s workforce.
Choi, however, said earlier in the month that giving excess profits made by conglomerates to subcontractors may not be a viable solution to helping SMEs.
Knowledge Economy Minister Choi Joong-kyung (second from right) speaks during a meeting with chiefs of small- and medium-sized enterprises in Seoul on Monday. (Yonhap News)
This view has been shared by some economists and entrepreneurs who have pointed out that there is no way to clearly define excess profits since conditions vary between companies and that sharing of gains should be limited to shareholders, management and workers.
They have, in addition, said that giving profits generated by large companies to subcontractors may conflict with free market principles.
Concerning the issue, Chung Un-chan, chairman of the Commission of Shared Growth for Large and Small Companies, who proposed a voluntary system for profit sharing, said Sunday that he may consider stepping down from office.
Public objections raised by Choi, who is in charge of SME policies, could be construed as a sign of the government’s little interest in shared growth, the former prime minister said.
The presidential office, however, said earlier in the day that Chung should remain at the helm of the shared growth commission and set up a foundation that can allow smaller companies to benefit from economic gains.