Companies Angry at Government Mask Policy Declare Production Halt "Cannot Bear Losses"

On the 6th, citizens lined up at a pharmacy near Jongno 5-ga, Seoul, to purchase masks. From this day onward, a duplicate purchase verification system has been established at pharmacies nationwide, requiring customers to present identification to buy masks. The purchase limit per person has been reduced from 5 masks to 2 masks per person. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Kwangho Lee] As the government takes full responsibility for the production, distribution, and allocation of masks to stabilize supply amid shortages caused by the spread of the novel coronavirus infection (COVID-19), cracks are emerging everywhere. This is because controlling prices and quantities is disrupting the market economy functions. Some companies, unable to endure this, are halting production. Although the government has belatedly stated that it will ensure companies do not incur losses, the controversy is expected to continue for the time being.

According to the government and related industries on the 6th, Edent, a manufacturer of dental masks, declared on the 5th that it would stop mask production following the government's announcement of mask measures.

Shin Seon-sook, CEO of Edent, announced on the company’s homepage that "we received notification that the government decided to purchase 80% of the production volume from mask manufacturers in bulk," and "we inform you that production of Edent masks, which we have proudly produced until now, will be suspended." CEO Shin revealed that the Public Procurement Service notified them that only about 50% of the production cost would be recognized and demanded a production volume contract ten times the daily output, exposing that the reason for halting mask production is being forced to produce excessive quantities at excessively low prices.

The government announced a mask supply stabilization plan, stating that contracts for masks supplied to public sales outlets would be unified and handled by the Public Procurement Service rather than private distributors. In other words, the government intends to manage the entire process of mask production, distribution, and allocation.

CEO Shin emphasized, "Since the outbreak of COVID-19, we increased daily production from 200 boxes (10,000 sheets) to 240 boxes (14,400 sheets) by hiring one more person, and despite paying various allowances for two hours of overtime daily and weekend work on Saturdays and Sundays, we did not raise the mask price by even 1 won. We did not sell a single mask to China, which offered to pay whatever price we asked." Nevertheless, she lamented, "We have completely lost both the justification and motivation to continue producing masks while bearing losses."

Regarding this controversy, the Public Procurement Service, at the center of the debate, is avoiding specific responses. The Ministry of Strategy and Finance sent a press release stating, "Regarding cases reported by some media involving specific companies, we will work closely with those companies to ensure they do not suffer losses by securing appropriate prices and resolve issues amicably," but refrained from further comment.

They also announced, "Contracts to secure public mask quantities with manufacturers are proceeding smoothly," and "Out of a total of 131 contracted manufacturers, contracts with 125 companies have been completed."

Contrary to the government's self-praise, some mask manufacturing and production companies are expressing frustration with the government's push-through administrative approach and are showing signs of halting production.

An official from a mask manufacturing company, who requested anonymity, said, "The government prioritized securing public quantities but did not provide guidance on compensation measures," adding, "Manufacturers are left to find ways to claim damages themselves. What are we supposed to do if we suffer losses due to government measures?"

Another official criticized, "The government's measures are extremely haphazard," and pointed out, "To meet the required quantities, existing contracts must be canceled, but the government's mask cost calculation is absurd."