"Raw Material Prices for Electric Wires Doubled but Payment Not Reflected... Urgent Need for System Improvement"

Korea Federation of SMEs Holds Forum on 'What Needs to Change for SMEs to Get Fair Prices'
"45% of SMEs Unable to Reflect Raw Material Price Increases in Payment"
Discussion on Delivery Price Adjustment Negotiations and Price Index Linkage System

A factory of a small and medium-sized manufacturing company located in Gimpo, Gyeonggi.
Photo by Lee Jun-hyung

[Asia Economy Reporter Junhyung Lee] "The prices of copper, polyvinyl chloride (PVC), and ethylene, which are raw materials for electric wires, have doubled compared to last year. However, large corporations, the demand side, do not properly reflect the increase in raw material costs in the delivery prices."

On the 12th, Hong Seong-gyu, Chairman of the Korea Electric Wire Industry Cooperative, stated this at the discussion forum titled 'Getting Fair Prices for SMEs, What Needs to Change' held at the Korea Federation of SMEs in Yeouido, Seoul.

The Korea Federation of SMEs organized this forum to seek effective policy alternatives for ensuring fair payment for SMEs' delivery prices. Attendees included Kim Kyung-man, Special Committee Chair for SMEs of the Democratic Party of Korea; Han Mu-kyung, Chair of the SME Committee of the People Power Party; Jang Ji-sang, President of the Korea Institute for Industrial Economics and Trade; and Park Jong-chan, Policy Officer for Win-Win Cooperation at the Ministry of SMEs and Startups.

Seo Seung-won, Executive Vice President of the Korea Federation of SMEs, said in his opening remarks, "Although business activities, which were stagnant due to COVID-19, are showing signs of recovery, 45% of SMEs have not been able to reflect the increase in raw material prices in their delivery prices," adding, "Getting fair prices for SMEs is a very important task for economic recovery and resolving polarization."

Researcher Ji Min-woong of the Korea Institute for Industrial Economics and Trade pointed out problems in exclusive transactions in the automotive parts industry in his presentation titled 'The Reality of Exclusive Transactions and Policy Implications.' According to Ji, the ecosystem has been formed as a demand-monopolistic structure where subcontractors must accept delivery prices set primarily by the contracting companies to survive. Ji emphasized, "Fundamentally, comprehensive institutional improvements are needed to change the demand-monopolistic market structure and enhance the bargaining power of subcontractors," and added, "Urgent measures include consistent and continuous sanctions against unfair trade and ways to increase the effectiveness of delivery price adjustment negotiations."

During the comprehensive discussion led by Na Kyung-hwan, Vice President for Industry-Academia Cooperation at Dankook University, various policy alternatives were discussed. Chairman Hong said, "Large corporations producing raw materials unilaterally notify SMEs of the increased prices," and added, "Even when large corporations on the demand side reflect the increase in raw material prices in delivery prices, they often delay or only partially apply the increase, so SMEs do not feel the impact."

In response, Lawyer Kim Nam-joo of Dodam Law Firm emphasized the necessity of linking delivery prices to price indices. Kim argued, "Getting fair prices is the most important issue from the perspective of SMEs," and stated, "It is necessary to enhance the effectiveness of systems that adjust contract amounts according to price fluctuations in procurement and expand these systems to the private sector."

In his closing remarks, Executive Vice President Seo said, "Getting fair prices for SMEs requires discussion among all economic actors, including the government," and added, "Continuous interest and efforts from the National Assembly and government are needed to resolve disparities and inequalities caused by COVID-19."

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