[Asia Exclusive] Kwon Chil-seung: "Used Car Industry to Be Designated as Livelihood Sector, Large and SMEs Win-Win Plan to Be Finalized Soon"

Kwon Chil-seung, Minister of SMEs and Startups

Government, Used Car Groups, and Automakers in Negotiations for 2nd Year
Seeking Practical Solutions over Enforcement of 52-Hour Workweek
Agree on Purpose of Serious Accident Punishment Act... Important to Supplement After Implementation
‘Jasanghan Company’ Win-Win Payment, Need to Widely Promote Precedent Cases

Asia Exclusive_ Kwon Chil-seung, Minister of SMEs and Startups./Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Heeyoon] "Used cars are fine too." At the personnel hearing last February, when asked why he only drives used cars, Kwon Chil-seung, Minister of SMEs and Startups, replied, "I bought a Pride and an Optima as used cars and drove them for 10 and 12 years until they were scrapped." As the minister of the main ministry engaged in a two-year tug-of-war over the entry of finished car companies into the used car market, Kwon left quite an impressive answer. Since then, he has also focused on finding solutions by supporting the creation of win-win plans regarding the designation of used car businesses as livelihood-type suitable industries.

The Ministry of SMEs and Startups has also been closely monitoring small business owners who have been struggling for over a year due to the impact of COVID-19. Earlier, Minister Kwon set the management stability and commercial district recovery of 6.6 million small business owners as the top priority in his inaugural speech. Valuing close communication with the field, he has been dedicating himself to listening to current issues by visiting the field more than twice a week despite a somewhat tight schedule after taking office.

Now in its fourth year since launch, the Ministry of SMEs and Startups, which is facing the "death valley" (a crisis occurring 3 to 5 years after startup) for venture companies, is led by Minister Kwon, who emphasized, "We will strengthen the foundation as a ministry that solves the practical problems of small and medium enterprises and small business owners through qualitative growth beyond quantitative growth."

- Discussions on large corporations entering the used car market have been ongoing for two years.

▲ I understand that there is a call for large corporations to enter the used car market from the perspective of changes in the outdated used car market and consumer welfare. Of course, concerns from the frontline such as monopoly issues and threats to the livelihood safety net of small business owners when large corporations enter are also fully understood. However, the used car sales market was worth about 12.47 trillion won in 2018, with annual sales volume reaching 2.6 million units. The number of businesses is 6,334 for SMEs and 27 for large corporations. The first livelihood-type suitable industries were tofu and fermented soybean paste manufacturing. There is room to reconsider whether it is appropriate to evaluate a market larger than the finished car market by the same standards as livelihood-type suitable industries. Considering the overall impact on the automobile industry, multifaceted deliberation is necessary. To this end, the Ministry of SMEs and Startups, Ministry of Land, Infrastructure and Transport, Euljiro Committee, used car associations, and finished car industry have all participated in the "Used Car Sales Business Development Council," which is currently conducting discussions. Since long negotiations have already been held, a decision is expected soon.

- From the 1st of this month, the 52-hour workweek system has been applied to workplaces with fewer than 50 employees. The field is complaining about difficulties such as labor shortages and increased costs.

▲ I fully empathize that it is difficult to apply the 52-hour workweek system initially in the field for small businesses. We are examining various aspects that need to be supplemented. Especially for companies with fewer than 50 employees that have no room to consider labor relations, we are supporting labor hour reduction consulting together with the Ministry of Employment and Labor, and until the end of July, we are holding briefing sessions and meetings through 13 local offices of the Ministry of SMEs and Startups to identify difficulties. Also, considering the field situation where securing foreign workers is difficult and labor shortages are experienced, we have taken priority measures such as expanding the countries from which foreign workers are introduced and extending the employment period of foreign workers residing in Korea. Foreign workers are preferentially allocated to root companies and companies with 5 to 49 employees located in provincial areas, and for places where work has been delayed due to entry issues, special extended work of up to 12 hours per week is permitted. Rather than crackdowns or penalties, we are focusing on early settlement with practical solutions.

- While agreeing with the purpose of the Serious Accident Punishment Act, there are many concerns that it will be a heavy burden for small and medium enterprises in practice.

▲ Since I was in the National Assembly when the law was enacted, I am well aware of the problems and concerns about the content being disconnected from the field as some claim. On the other hand, I also agree with the legislative intent to secure the constitutional safety rights of workers and citizens and to prevent serious accidents in advance. Since the purpose is for both employers and workers to make efforts to significantly reduce industrial accidents, I think it is important to quickly supplement problems after the law is implemented to ensure the system takes root properly.

Asia Exclusive_ Kwon Chil-seung, Minister of SMEs and Startups./Photo by Hyunmin Kim kimhyun81@

- The win-win payment system through "Jasanghan Companies" (voluntary win-win companies) is gaining attention.

▲ From the case of LG, which I visited during the last Jasanghan Companies agreement, I found the reason why win-win payments work overwhelmingly well. Usually, due to business confidentiality, win-win payments are only made up to the first-tier suppliers, and from the second-tier suppliers onward, the process does not proceed well. However, at LG Electronics, if the first-tier supplier does not make payments to the second-tier supplier through win-win payments first, they cannot attend supplier meetings. Also, LG Chem, which recently became a Jasanghan Company, issued ESG (Environment, Social, Governance) bonds worth 820 billion won and created a fund of 100 billion won (1.7% of the total) to support SMEs. Of course, the spotlight may go to large corporations. But considering how many SMEs are affected and their scale through such large corporation participation, I think it is something to praise and publicize more.

- With the continued success of the second venture boom, attention is also focused on the Ministry of SMEs and Startups' policies supporting it.

▲ First, we are preparing to improve stock options. We are considering raising the current tax-exempt limit from 30 million won to 100 million won. Especially reflecting the opinions of the venture industry, we have had substantial discussions with the Ministry of Economy and Finance on allowing payment in kind rather than cash when exercising stock options. We are also discussing ways to provide more benefits to long-term employees and to change the portion of stock option exercise income currently treated as earned income to capital gains to reduce tax burdens. Since this involves changing the tax system, collaboration with the Ministry of Economy and Finance is more important than persuading the National Assembly. Additionally, we are promoting various investment systems such as M&A specialized funds. We are focusing on the scale-up process of startups. Recently, with the emergence of large venture companies, the exit market has also grown. Our goal is to create many secondary funds and LP (limited partner) equity securitization funds to revitalize the market. Some of the mother funds have ended with good results. We plan to convert these into M&A funds to further activate the market.

Minister Kwon...

△ Born in 1965 in Yeongcheon, Gyeongbuk △ Kyungbuk High School, Korea University Department of Economics △ Samsung Group Recruitment Class 28 △ Presidential Secretariat Administrative Officer △ 8th and 9th Gyeonggi Provincial Assembly Member △ Democratic Party Special Committee Chair for SMEs △ 20th and 21st National Assembly Member △ Minister of SMEs and Startups

Interview = Kim Minjin, Head of Ministry of SMEs and Startups enter@asiae.co.kr

Compiled by = Reporter Kim Heeyoon film4h@asiae.co.kr