South Korea’s antitrust watchdog said Thursday it planned to give benefits to companies that support small and medium-sized enterprises affected by the coronavirus. Since early February, conglomerates have offered support for their suppliers facing disruptions in production and supply.
Korean SMEs, which rely mostly on manufacturing and exports, are directly hit by production setbacks and drops in demand caused by the coronavirus. In a recent survey of 407 companies by the Korea Federation of Small and Medium Business, 70.1 percent of the respondents said they could not endure more than six months if the situation continues.
To help the struggling firms, large companies, including Samsung, LG, SK and Hyundai Motor, have taken measures to support millions of their suppliers since early February, when the outbreak of the new coronavirus began to impact the nation’s industries.
The nation’s largest company, Samsung Electronics, introduced a 2.6 trillion won ($2 billion) emergency aid package in early February, including an operation fund worth 1 trillion won and an early payment of 1.6 trillion won for affected business partners as coronavirus disrupted productions and parts supply from China.
The same month, Hyundai Motor Group provided 1 trillion won worth of emergency funds to small and medium-sized parts suppliers that suffered from the COVID-19 outbreak. The automaker said it decided to give financial support to the suppliers to minimize the impact of the global auto market slump and to ensure a more stable business environment.
LG Electronics provided interest-free funds to its partners and guaranteed their purchases. The amount of interest-free loans to business partners was expanded to 55 billion won from 40 billion won.
SK Telecom said last month it prepared a comprehensive plan worth 113 billion won for business partners such as distribution and network partners nationwide.
Duty-free companies, such as Lotte, Shilla, and Shinsegae, decied to expand support for small and medium-sized partner companies. The recent spread of the virus has dealt a heavy blow to duty-free sales, which have plunged more than half. Small and medium suppliers who supply goods to duty-free shops were hit hard, to the extent that job security has been shaken.
On Thursday, the Fair Trade Commission said it revised the criteria for evaluating the implementation of fair trade agreements to support companies that have continued to strive for co-prosperity with their partners amid the pandemic.
Additional points will be given to the companies that support business partners suffering from disasters, and firms that support partners that relocate production from abroad to Korea to avoid negative impacts from the coronavirus .
“Companies with excellent results of the evaluation will receive various incentives, such as exemption from a direct investigation by the FTC, designation of model companies in subcontract business and benefits from relevant ministries,” said Sung Kyung-jae, chief of the FTC’s business transaction policy team.
Last month, FTC Chairman Joh Sung-wook said that starting this year, “the government will give evaluation points in fair trade agreements to companies that support business partners suffering from the outbreak of coronavirus infection.”
By Shin Ji-hye (email@example.com)