[Asia Exclusive] "Co-Growth of Large and Medium Enterprises, Economic Democratization in the Post-Corona Era"

by Moon Hyewon

Published 31 Aug.2020 11:00(KST)

Interview with Kwon Ki-hong, Chairman of the Commission for Shared Growth
Post-COVID, Companies with Cooperative Foundations Have Higher Survival Rates
Cracks in Global Industrial Division of Labor... Conflicts Over National Priority Will Increase
The Role of the Commission for Shared Growth Will Grow... Wage Gap Reduction Efforts Continue

Chairman Kwon Ki-hong of the Win-Win Growth Committee is being interviewed at the Win-Win Growth Committee in Guro-gu, Seoul, on the 30th of last month. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Moon Hyewon] "In the post-COVID-19 era, cracks will appear in global chains of each country, causing them to malfunction, and the importance of local value chains is expected to grow even more. The domestic corporate ecosystem will also see strengthened cooperation between large and small-to-medium enterprises (SMEs), and win-win growth has now become a national survival strategy."

Kwon Ki-hong, Chairman of the Win-Win Growth Committee, stated that amid the rapidly changing industrial environment following the COVID-19 pandemic, the democratization of corporate culture is taking place, which will increase the role of the Committee. Ultimately, he believes that win-win growth represents the 'economic democratization' of new corporate relationships required in the post-COVID-19 era.

Chairman Kwon expects that within companies, flexible work hours and telecommuting cultures will spread, transforming vertical work systems into horizontal ones. Outside companies, the desire to build social safety nets will grow, and the relationship between large and small-to-medium enterprises in negotiation processes will also take a more horizontal position.

The Win-Win Growth Committee has steadily pursued tasks for win-win growth, such as designating appropriate industries, campaigns to reduce wage gaps, and announcing win-win growth indices. Chairman Kwon says these tasks are small parts of achieving overall win-win growth in practice. Ultimately, he emphasizes the need to spread the culture of win-win growth.

Chairman Kwon said, "Some companies might say, 'No cars or semiconductors are selling right now, so why should we take care of our partners? That's an idle talk.' However, companies that build cooperative foundations despite difficulties during such times have a higher chance of surviving in the post-COVID corporate ecosystem in the long term. Ultimately, the national economy will succeed if the country succeeds in creating a win-win growth atmosphere."

We heard Chairman Kwon's thoughts on the necessity and role of win-win cooperation between large and small-to-medium enterprises in the post-COVID-19 era at the Win-Win Growth Committee office located in Kicox Venture Center, Guro-gu, Seoul.

-Rapid social and economic changes are occurring due to COVID-19.

▲The trade dispute between the two major powers, the United States and China, has become more intense surrounding the COVID-19 situation. The well-established global industrial division of labor will now experience significant cracks. Ideally, countries should help each other and coexist, but realistically, as free trade shifts to protectionism, conflicts due to prioritizing one's own country and survival of the fittest will intensify. The damage South Korea suffered from Japan's export restrictions before COVID-19 was defended by domestic localization of materials, parts, and equipment industries, and this phenomenon will now generalize across all industries.

-Has the role of the Win-Win Growth Committee changed before and after COVID-19?

▲The statement that cooperation between large and small-to-medium enterprises must be strengthened means that win-win growth must be reinforced. The Committee is considering how to incorporate this social demand into its work. Of course, it has implemented policies such as designating appropriate industries, announcing win-win growth indices, and campaigns to reduce wage gaps, but evaluations of large corporations' social contribution projects also need to be more widely spread. When new industries such as Coupang, Baedal Minjok, Kakao Taxi, and Tada emerge, conflicts with old industries inevitably arise, and the Committee is also considering its role in mediating conflicts between industries. It is now time to create an atmosphere and environment for the legitimacy of this. In that sense, the Committee's role will become even more important in the future.

Chairman Kwon Ki-hong of the Win-Win Growth Committee is giving an interview at the Win-Win Growth Committee in Guro-gu, Seoul, on the 30th of last month. Photo by Kang Jin-hyung aymsdream@

-What would you say is the Committee's greatest achievement?

▲Most large corporations now have dedicated departments for win-win growth. These departments are managed by executive directors, a structure that did not exist ten years ago. Having such departments means there are staff members solely responsible for this work, and the department heads and staff strive to perform win-win growth tasks well. Their job is to research what actions will be most effective for win-win growth and develop those measures. They know best what will be most effective. This is a very important point and the biggest achievement.

Since June 2018, the Committee has promoted an innovation-driven wage gap reduction campaign, signing wage gap reduction agreements with 54 large corporations and public institutions, leading to cooperation worth 11.3 trillion KRW. All major large corporations have completed agreements, but as the candidate pool moves down to mid-sized companies, the response rate has relatively decreased. This year's goal was to secure 20 additional companies. The spread of COVID-19 has slowed meetings, causing some delay. The Committee's mission is to spread the culture of win-win growth. It also announces win-win growth indices and designates appropriate industries targeting large corporations. However, these are not everything but are understood as part of spreading the culture.

-Please explain the innovation-driven wage gap reduction campaign in detail.

▲It is a tripartite agreement among large corporations, representatives of partner companies, and the Committee. The agreement mainly consists of two parts: 'paying the right price' and 'paying on time.' Large corporations promise to pay partner companies the correct price on time. Although there are no legal penalties for non-compliance, signing that the Committee will monitor creates a sense of responsibility and sufficient silent pressure on companies. Candidate companies are first recruited from the Committee's large corporate member companies and currently focus on companies under continuous evaluation. There is also a mutual competition effect within the industry. For example, after signing an agreement with Home Shopping Company A, Home Shopping Company B contacted the Committee first, asking why they had not been contacted and expressed willingness to cooperate. Rapidly growing companies like Coupang and Woowa Brothers, which have many latent conflicts with small business owners and small-to-medium partner companies, are also strong candidates.

Chairman Kwon Ki-hong of the Win-Win Growth Committee is being interviewed at the Win-Win Growth Committee in Guro-gu, Seoul, on the 30th of last month. Photo by Jin-hyung Kang aymsdream@

-Please praise companies that are diligently implementing win-win growth.

▲Samsung Electronics plays a very significant role in smart factory implementation for SMEs, which is key to the 4th Industrial Revolution and the localization policy of materials, parts, and equipment. They help not only their partner companies but also SMEs with no transactional relationship. By expanding this way, the corporate ecosystem becomes more open. Maintaining cooperation only among companies with existing relationships makes it difficult to sustain innovation. Crossbreeding and circulation among different industries are necessary. Even if there is no current transactional relationship, they believe that by smartifying (raising the level), cooperation may occur someday. This has a long-term foresight effect.

In construction, it was thought that all projects had advance payments, but private projects do not have them until 30% completion. How can they work without money? Advance payments are very helpful if paid first. POSCO created an advance payment system with Shinhan Bank and Seoul Guarantee Insurance. Although this is a form of low-interest loans from banks, it is much more advantageous for partner companies to borrow with the credit of large corporations. Korea Hydro & Nuclear Power operates a similar advance payment system. This is a great help to SMEs.

The shipbuilding industry is struggling. It is said that the power generation and shipbuilding industries have many similarities. If power generation companies coach shipbuilding partner companies a little, they can shift direction. Korea South-East Power is doing this. I think this is a model example of win-win cooperation.

-What direction should companies take amid the trend of economic democratization?

▲Companies that build the foundation for win-win growth despite difficulties in the current challenging situation due to COVID-19 will succeed. On the other hand, companies that are swayed by short-term profits and fail to lead the growth of partner companies or make things harder will eventually fall behind in competition. As individual economic entities, they may say it is idle talk to be asked to take care of partner companies when management is difficult right now. But the clear fact is that the success or failure of companies in the mid-to-long term depends on how hard they strive for win-win growth in such situations. The COVID-19 pandemic has revealed the drawbacks of neoliberalism and the reality of cracks in global chains, proving this.