33% of SMEs in Gyeonggi Region "Cannot Reflect Raw Material Price Increases in Supply Prices"

[Asia Economy (Suwon) = Reporter Lee Young-gyu] One out of three small and medium-sized manufacturing companies in Gyeonggi Province has been unable to reflect the increase in raw material prices in their delivery prices.

On the 20th, Gyeonggi Province conducted a survey of 233 small and medium-sized manufacturing companies in the province from the 28th of last month to the 7th of this month. The average increase rate of raw material prices from 2020 to 2021 was 42.4%, but the increase rate of delivery prices received from the original contractors was only 10.1%.

Only 7.9% of the companies fully reflected the increase in raw material prices in their delivery prices, while 33.6% did not raise their delivery prices at all. 41.2% of the surveyed companies responded that they were unable to take any action such as requesting an increase in delivery prices.

The average operating profit margin fell by 1.2 percentage points from 10.4% to 9.2%, and for companies mainly engaged in delivery rather than direct sales, it dropped by 1.6 percentage points from 8.8% to 7.2%.

Accordingly, companies expressed management burdens to the extent that they implemented or considered measures such as ▲ workforce reduction (32.3%) ▲ reduction of new investments (30.8%) ▲ sale of idle assets (8.3%) ▲ temporary closure or business shutdown (6.8%).

When asked about effective methods to reflect the increase in raw material prices in delivery prices, the delivery price linkage system (61.6%) was the most supported. This was followed by voluntary consultations between companies (24.1%), delivery price adjustment consultation system (13.4%), and reporting to the Fair Trade Commission (0.9%).

The delivery price linkage system automatically reflects the increase in raw material prices in the delivery prices, which differs from the delivery price adjustment consultation system where companies directly or through associations request adjustments.

A provincial official said, "Recently, the increase in raw material prices has not been properly reflected in delivery prices, worsening the difficulties of small and medium-sized manufacturing companies in the province," and added, "We will proactively find and promote measures that the province can take to realize delivery prices and urge the central government and the National Assembly to promptly introduce the delivery price linkage system."

Earlier, Governor Kim Dong-yeon announced that he would urge the introduction of the delivery price linkage system as one of the 'Five Emergency Measures for Economic Crisis Response and Livelihood Stabilization' announced upon his inauguration.

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