First Step in SME Policy... Presidential Commission for Coexistence Tackles 'New Economy 3 Bul' Issues

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The Presidential Transition Committee's consideration of establishing a Win-Win Committee aims to address the increasingly deepening polarization between large corporations and small and medium-sized enterprises (SMEs). If a presidentially-affiliated Win-Win Committee is established under the new government, it is expected to serve as a control tower that deliberates and decides policies, including collaboration on SME-related tasks scattered across various ministries.

The SME sector proposed the creation of a Win-Win Committee to President-elect Yoon Seok-yeol, who was a presidential candidate earlier this year, to resolve the polarization between large corporations and SMEs. President-elect Yoon also agreed and promised to establish the committee. Since then, the transition committee's review of the Win-Win Committee's establishment is seen as the new government's first step in SME policy. According to a survey by the Korea Federation of SMEs, 43.8% of SMEs responded that the polarization between large corporations and SMEs worsened due to the spread of COVID-19. If this polarization continues, there are concerns that SMEs' ability to pay wages, invest, and innovate will weaken, and job mismatches will intensify.

◆ Win-Win Committee Likely to Address the New Economy's "Three No's" = The Win-Win Committee to be newly established under the new government is expected to focus on solving the "Three No's" of the new economy, which SMEs cite as their biggest difficulties. The "Three No's" refer to unfair transactions, market imbalances, and institutional irrationalities. Unfair transactions arise from the inability to reflect raw material price increases in delivery prices, causing serious harm. Recently, due to logistics crises, high oil prices, and rising raw material costs, SMEs' cost burdens have increased, but they have not been able to properly reflect these in delivery prices, worsening profitability. Among small manufacturing companies, 42.1% are subcontractors, and subcontractors depend on the sales of their contractors by 83.3%.

President-elect Yoon Suk-yeol / Reporter Yoon Dong-ju doso7@

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Market imbalance refers to issues such as large retailers or online platform companies shifting excessive costs and responsibilities onto SMEs and small business owners. Last year, online shopping transaction volume nearly reached 200 trillion won, indicating the expansion of the online distribution market. The Win-Win Committee is expected to support the digital transformation of SMEs and small business owners while devising measures to prevent unfair transactions such as excessive platform fees and advertising costs.

Institutional irrationalities refer to discriminatory and disadvantageous systems or practices against SMEs and small business owners. The public procurement market plays an important role in securing sales channels for SMEs, but there have been criticisms that the practice of encouraging lowest-price bidding makes it difficult for companies to realize fair profits. Choo Moon-gap, head of the Economic Policy Division at the Korea Federation of SMEs, stated, "The monopolization of profits by large corporations is a major cause of the decline in SMEs' operating profits and the entrenchment of low growth in the Korean economy," emphasizing, "Strong leadership and administrative power must be demonstrated from the start of the new government."

◆ People Power Party Proposes SME Support-Related Bills = Since the Win-Win Committee stems from the power imbalance between large corporations and SMEs, it is expected to address various issues scattered across ministries that SMEs cannot solve alone. The industry proposed to the transition committee to establish expert-led subcommittees by field and set up a secretariat as a working organization to support operations. They also suggested the main functions of the Win-Win Committee include △ discovering policies and improving systems to resolve polarization △ coordinating major policies across ministries △ listening to industry difficulties.

In line with the movement to strengthen SME policies through the establishment of the Win-Win Committee, lawmakers from the People Power Party are also laying groundwork by submitting related bills one after another. On the 1st, Representative Han Mu-kyung submitted a revision bill to the "Act on Promotion of Mutual Cooperation between Large and Small Enterprises" to reflect changes in labor costs due to raw material price increases and minimum wage hikes in delivery prices. Representative Kim Jeong-jae has proposed a bill to reorganize the Win-Win Growth Committee. The Win-Win Growth Committee is a private organization formed to spread a culture of mutual growth between large corporations and SMEs, and its scope of work may significantly overlap with that of the Win-Win Committee in the future. Accordingly, Representative Kim argues that the Win-Win Growth Committee should be incorporated as an independent legal entity to allow private economic actors to resolve issues through voluntary agreements.

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