[Column] The 'Supply Payment Linkage System' Boycott by Large and Medium Enterprise Groups Lacking Justification and Practical Benefits

Minister Lee Young of the Ministry of SMEs and Startups (third from the left in the front row) attended the "Delivery Price Linkage System Roadshow Opening Ceremony" held on the 8th at the KT Woomyeon Research Center in Seocho-gu, Seoul.

[Asia Economy Reporter Donghyun Choi] On the 8th, at the 'Delivery Payment Linkage System On-site Stabilization TF' launch ceremony held at the KT Umyeon Research Center in Seocho-gu, Seoul, the expression of Lee Young, Minister of SMEs and Startups, who arrived early and took a seat, was darker than usual. This was because four major and mid-sized enterprise economic organizations, including the Korea Chamber of Commerce and Industry and the Federation of Korean Industries, ultimately did not attend. When the event started and Minister Lee took the microphone, he said resolutely, "We actively requested the participation of major and mid-sized enterprise economic organizations, but they ultimately did not come," adding, "I find this very regrettable."

The event was organized with the purpose of gathering industry opinions to create subordinate legislation and conduct large-scale publicity for the effective establishment of the Delivery Payment Linkage System, which will be implemented from October 4. The linkage system is a mechanism that automatically reflects the increase in raw material prices in delivery payments when transactions occur between primary contractors and subcontractors. When the related bill passed the National Assembly at the end of last year for the first time in 14 years, expectations grew that major and small businesses would finally take the first step toward coexistence and move forward.

However, these expectations turned into concerns from the beginning of the year. Major and mid-sized enterprise economic organizations did not participate in the TF launch ceremony or even the 'Linkage System Roadshow.' These organizations worry that the implementation of the linkage system will cause side effects such as consumer price increases and factory relocations overseas. However, the linkage system is not a law created overnight. It has already undergone more than a decade of deliberation considering various pros and cons. The bill, which was unanimously passed last year through bipartisan agreement, now faces opposition that lacks justification. Moreover, the newly launched TF was established to minimize such side effects. If there are complaints, active participation and discussion would be the proper approach.

The boycott by these organizations may not bring practical benefits to their member companies. The government currently provides various incentives, including additional points in support projects and 16 incentives such as interest rate reduction loans worth 1 trillion won, to 'companion companies' that participate in the linkage system early. Additional support measures are also under discussion. The intention is to thoroughly distinguish between companies that faithfully implement the linkage system and those that do not. There is a risk that major and mid-sized enterprise organizations, by blindly following unilateral claims imposed by their groups, may be neglected by both the government and the industry.

Ironically, core companies of the major and mid-sized enterprise organizations, such as Samsung, Hyundai, LG, and POSCO, have already been implementing the linkage system independently. They also attended this TF, actively listening to industry opinions and expressing their views. Joo Eun-gi, Vice Chairman of Samsung Electronics, whom we met on-site, said, "The competitiveness of large companies cannot be developed by large companies alone," adding, "I hope the linkage system will be well established as a system where large and small businesses can both win." It is time for major and mid-sized enterprise organizations to ask themselves what they are opposing without justification or practical benefits.