Posted on : Dec.23,2005 02:46 KST Modified on : Dec.23,2005 02:46 KST

On Friday representatives of the country's conglomerates and mid-sized companies were invited for a meeting with president Roh Moo Hyun at Cheong Wa Dae to discuss ways to better cooperate. All the main jaebeol tycoons were in attendance at what was the second meeting of its kind, the other having been in May. The Ministry of Commerce, Industry, and Energy says that "mutual prosperity management" investments are up 29.8 percent over last year, and several conglomerates were given medals by the president.

Various examples of support of mid-sized companies by conglomerates in the area of technology, personnel, and management were discussed, but something was missing. What mid-sized companies need most urgently is something that is more critical. The Korea Institute for Industrial Economics and Trade did a survey of 297 mid-sized companies, and 81.3 percent said their biggest problem is excessive demands that they lower the prices of the products they supply. 55.4 percent said conglomerates pass on to them the burden of fluctuations in exchange rates and material costs.

If you look at wages and earnings you see that mid-sized companies are not exaggerating. According to a Korea Employers Association study, if you say wages at mid-sized companies is 100, in 1990 wages at conglomerates was 128.6 and last year it was 157. Sales/profit ratio for conglomerates was 6 percent in 2001 and then 9.4 percent last year, but for mid-sized companies it shrank over that time period from 4.5 to 4.1 percent. In 2003, the wholesale prices were lowered more than labor productivity increased.

They say that nothing is as encouraging as praise, so getting a prize from the president can be one way to help. However, it does not really mean anything if it just ends up being a way for jaebeol tycoons to look good. What is more important is that CEO's have a change in thinking. The social atmosphere needs to be made to encourage that, and if necessary the government should facilitate the same through legislation. Unless there is an improvement in a climate where mid-sized companies are squeezed to achieve short-term profit, there will be no true "mutual cooperation" and it will be hard to expect sustainable international competitiveness.


The Hankyoreh, 23 December 2005.

[Translations by Seoul Selection]

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