75% of SMEs in Pilot Project on Delivery and Subcontract Payment Linkage 'Satisfied'... Government Says "Will Prevent Unfair Transactions" (Comprehensive)

Announcement of Survey Results for 160 Companies in Pilot Operation on the 25th
Ministry of SMEs and Startups Establishes Anonymous Reporting Center

More than 70% of the 10 companies participating in the pilot project for the linkage system of delivery payments and subcontract payments expressed satisfaction.

On the 25th, the Ministry of SMEs and Startups held a 'Field Meeting with the SME Sector for the Stabilization of the Linkage System' at the Foundation for Large and Small Enterprises and Agriculture and Fisheries Cooperation in Jung-gu, Seoul, and announced the results of a survey conducted on 160 companies that participated in the pilot operation of the linkage system from September last year to February this year. The survey period was from June 23 to August 17.

The On-Site Implementation Meeting for Small and Medium Enterprises regarding the Linked System, hosted by the Ministry of SMEs and Startups and the Fair Trade Commission, was held on the 25th at the Foundation for Cooperation between Large, Small, and Medium Enterprises and Agriculture and Fisheries. Lee Young, Minister of SMEs and Startups, is delivering a greeting. Photo by Heo Younghan younghan@

High Satisfaction with the Linkage System Pilot Operation

About 75.2% of the entrusted companies responded that they were 'satisfied' with the overall process of concluding linkage contracts. Only about 0.8% expressed 'dissatisfaction.' Additionally, about 76% said the risk burden of raw material price fluctuations decreased, and about 72.8% stated it helped stabilize transactions.

Furthermore, about 89.6% of the entrusted companies responded that 'sufficient consultations were held,' while about 1.6% said otherwise. Regarding contract fulfillment, approximately 77.6% and 82.4% of entrusted companies considered the reflection of raw material price fluctuations and the use of benchmark indicators, respectively, to be appropriate.

When asked if they intended to re-sign the linkage agreement, about 85.6% answered 'yes,' and about 1.6% said 'no.'

From a financial benefit perspective, about 65% of the entrusted companies said their situation was similar to before the implementation of the linkage system, but about 30% experienced reduced raw material purchasing burdens, improved productivity and quality, increased sales, and higher operating profit margins.

Jeong Ki-hwan, Director of the Win-Win Cooperation Policy at the Ministry of SMEs and Startups, said, "It is highly likely that the linkage system will be operated through sincere consultations between consignors and consignees in the future, and it is expected that entrusted companies will feel the effects of the linkage system more strongly."

A regression analysis of the raw material price change rate and delivery price adjustment rate showed a regression coefficient of 0.62. This means that if the raw material price rises by 1 percentage point, the delivery price increases by 0.62 percentage points.

In addition, in-depth interviews with consignor companies participating in the pilot operation revealed responses such as, "For certain raw materials, prices have risen by up to 45% since October 2021, and if the linkage method for delivery payments had not been established, price negotiations would have been delayed, potentially disrupting timely parts supply," and "We order several hundred new items every month, but since the linked prices are set, having fixed and disclosed unit prices benefits our company and makes practical work easier."

The On-Site Implementation Meeting for Small and Medium Enterprises regarding the Interlocking System, hosted by the Ministry of SMEs and Startups and the Korea Fair Trade Commission, was held on the 25th at the Foundation for Large and Small Enterprises and Agricultural and Fishery Cooperation. Minister Lee Young of the Ministry of SMEs and Startups, Chairman Han Ki-jung of the Korea Fair Trade Commission, and representatives of attending companies are applauding while taking a commemorative photo. Photo by Heo Younghan younghan@

Government to Prevent Unfair Transactions by Establishing Sanctions

The meeting was attended by Minister Lee Young of the Ministry of SMEs and Startups, Chairman Han Ki-jung of the Fair Trade Commission, representatives of nationwide small and medium enterprises, and SME association groups. Minister Lee said, "The number of partner companies has nearly doubled from 4,208 last month on the 11th to 8,120 within a month, and the linkage system is rapidly settling in the field following the enforcement of the law," adding, "We plan to recruit more than 10,000 partner companies by the end of the year so that more companies participating in the linkage system can experience benefits such as reduced raw material price fluctuation risks."

Minister Lee continued, "Many people seem to think that a fair trade culture between large and small enterprises is taking root in Korea, but in reality, concerns remain about blind spots where the law might be abused to avoid signing linkage agreements, forced non-linkage agreements, or damages caused by split contracts," adding, "We have prepared sanction measures such as a one-strike-out system and fines, and established an anonymous reporting center to prevent suffering from unfair transactions."

He also said, "Although we are carefully monitoring the field, there may be areas where the system does not work well, and we are preparing to improve those parts."

Chairman Han emphasized, "Since the linkage obligation for sharing raw material price fluctuation risks between large and small enterprises has been legislated, we will ensure the rapid establishment of the system and block all attempts to evade it by employing all possible means to spread the linkage culture," adding, "Through the Korea Fair Trade Mediation Agency, designated as the linkage expansion support headquarters under the Subcontracting Act, we will provide close support on-site for individual companies' difficulties in concluding linkage contracts, setting linkage conditions, and conflicts and disputes between parties during implementation."

Chairman Han urged the SME sector, "As the main parties holding information such as raw material details and supply costs used in subcontracting transactions, please review in advance the presence of major raw materials subject to linkage obligations, price fluctuation indicators and cycles of major raw materials, and the degree of burden sharing to prepare for concluding linkage contracts."

He also said, "Creating a vast foundation where large and small enterprises coexist is the economic ecosystem pursued by the Yoon Seok-yeol administration," adding, "I will pay special attention and make efforts to ensure that this is well realized through the linkage system."

SME representatives attending the meeting expressed opinions that support such as education is needed to smoothly operate linkage contracts and help management, and requested thorough monitoring of the linkage system operation process to ensure that no SMEs miss out on the benefits of the linkage system due to diverse transaction conditions and practices across industries.

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