Korea Federation of SMEs "Slight Improvement in Fairness of Subcontracting Transactions for SMEs"

'2024 Survey on Fairness Levels in Subcontracting Transactions of Small and Medium Enterprises'

The level of fairness in subcontracting transactions for small and medium-sized enterprises (SMEs) has slightly increased this year.

The Korea Federation of SMEs announced the results of the "2024 Survey on the Fairness Level of SME Subcontracting Transactions" on the 19th. This survey was conducted on 400 SMEs, focusing on industries with a high proportion of manufacturing subcontracting SMEs.

The Transaction Fairness Index, calculated based on this survey, is an index developed by the Korea Federation of SMEs in 2021 to quantitatively measure and analyze the perceived fairness level experienced by SMEs in subcontracting transactions. The index is derived by quantifying responses to survey questions on contract and price negotiation, delivery conditions, payment, and technology protection, then applying a specific formula.

However, since the survey targeted subcontracting transactions in 2023, the effects of the delivery payment linkage system, which was fully implemented from October 2023, were not fully reflected.

According to the survey results, the overall Transaction Fairness Index for all industries in 2024 was 77.92, showing an increase of 0.68 points compared to the previous year.

By industry, the index rose in ▲‘Metal and Steel’ (76.25→78.72, up 2.47 points) and ▲‘Other Machinery Equipment and Transportation Equipment’ (76.24→77.98, up 1.74 points). Conversely, the index declined in ▲‘Automobile’ (77.09→76.79, down 0.3 points) and ▲‘Rubber, Plastics, and Non-metallic’ (78.36→77.35, down 1.01 points).

'2024 Survey on the Fairness Level of Subcontract Transactions for Small and Medium Enterprises' Transaction Fairness Index (Contract and Unit Price Agreement) Results.

When analyzing the Transaction Fairness Index by contract stage within industries, the ‘Metal and Steel’ sector showed improvements in ▲‘Contract and Price Negotiation’ (71.24→76.24, up 5.0 points), ▲‘Delivery Conditions’ (79.64→82.73, up 3.09 points), and ▲‘Payment’ (74.65→78.7, up 4.05 points).

On the other hand, the ‘Rubber, Plastics, and Non-metallic’ sector experienced a decline in fairness levels in ▲‘Delivery Conditions’ (84.12→82.76, down 1.36 points) and ▲‘Payment’ (79.2→76.5, down 2.7 points).

Yang Chan-hoe, Head of the Innovation Growth Division at the Korea Federation of SMEs, stated, “The survey results show that fairness in contract and price negotiation, delivery conditions, and payment in the Metal and Steel sector has improved. This is likely due to the stabilization of iron ore prices since the second half of 2022 and the fact that steel accounted for 49.9% of the major raw materials linked in the pilot project of the delivery payment linkage system, which began in September 2022.”

He added, “The Korea Federation of SMEs will continue to monitor improvement trends by industry and contract stage through the Transaction Fairness Index to foster a fair subcontracting transaction environment. In particular, active inspections by the Fair Trade Commission and related agencies are necessary for industries where the fairness index has deteriorated.”

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