Large Companies Receive Additional Points for 'Fair Trade Agreements' When Supporting Technology Development of Partner Firms

Chairman Jo Sung-wook of the Korea Fair Trade Commission. (File photo)
[Image source=Yonhap News]

[Asia Economy Reporter Jusangdon] The Fair Trade Commission is pushing to increase the bonus points from the current 3 to a maximum of 6 points in the Fair Trade Agreement evaluation when large corporations support the technological development of their partner companies. This is intended to strengthen incentives to encourage win-win cooperation among companies, which is considered crucial for the early overcoming of the impact of the novel coronavirus infection (COVID-19).

On the 24th, Chairman Joseph Sungwook Cho visited SK Hynix located in Icheon, Gyeonggi Province, and held a meeting with representatives of large and small-to-medium enterprises in the semiconductor sector. At the meeting, Chairman Cho stated, "We will expand the scoring for technology support and protection in the Fair Trade Agreement evaluation," and added, "We will also establish separate criteria to evaluate the localization achievements of materials, parts, and equipment."

The Fair Trade Agreement, which began in 2007, is a system where large corporations and small partner companies pre-agree and implement detailed measures annually in the form of an agreement to prevent unfair practices and strengthen competitiveness, and the Fair Trade Commission evaluates the results. If the evaluation score is 95 points or higher, the company can be exempted from the Fair Trade Commission's ex officio investigations for two years. Additionally, incentives provided by related ministries through the subcontracting policy cooperation network include preferential evaluations for mutual cooperation among construction contractors by the Ministry of Land, Infrastructure and Transport and preferential evaluations in the pre-qualification credibility assessment for participation in Public Procurement Service bids.

Currently, the score for technology support and protection in the Fair Trade Agreement evaluation is 3 points. The Fair Trade Commission plans to raise this to a maximum of 6 points through a revision of the "Fair Trade Agreement Implementation Evaluation Criteria in the Subcontracting Sector" in the second half of this year. Furthermore, localization achievements of materials, parts, and equipment will be included in the "degree of efficiency improvement" category in the Fair Trade Agreement evaluation. Previously, the Fair Trade Commission also decided to recognize support measures for partner companies relocating production sites from overseas to domestic locations as efficiency improvement achievements.

Chairman Cho also urged smooth payment to subcontractors. He said, "To create a sustainable industrial ecosystem, please pay close attention to ensuring that payments are made smoothly not only to first-tier partner companies but also to second-tier and lower partner companies," and added, "We will continuously monitor to prevent any cases of non-payment or delayed payment to subcontractors due to economic downturns or other reasons."

In response, SK Hynix announced on the same day that it would expand patent education and consulting for the protection of partner companies' technologies from first-tier to second-tier and lower partner companies, presenting itself as a model case of a "technology innovation company" that nurtures and supports small and medium enterprises to localize materials, parts, and equipment. Additionally, SK Hynix decided to increase the frequency of payments to partner companies struggling due to the COVID-19 crisis from three to four times a month, enabling early payment of approximately 600 billion KRW monthly. At this time, affected partner companies will be given priority support from the Win-Win Growth Fund, with 50 billion KRW out of the total 130 billion KRW support budget allocated to second-tier and lower partner companies.

Chairman Cho said, "In the semiconductor industry, minimizing external risks such as the COVID-19 crisis and preparing for the reorganization of the global supply chain require building a self-reliant ecosystem across the industry through localization of materials, parts, and equipment," and added, "Please continue efforts for win-win cooperation so that technological development and investment by small and medium partner companies can be sufficiently realized."

This content was produced with the assistance of AI translation services.