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[VIEWPOINT]Big businesses must pay just for being big

Published: 20 Sep. 2006, 21:24

Fires break out at times in Sequoia National Forest in California in the United States, but the causes are unclear. Denser forests, some with more than 800-year-old giant sequoias, have more frequent fires. Scientists found out that stands of old Sequoias give off volatile substances. As young Sequoias bud and grow in the burned-out places, the cycle of the forest is completed. So, although a forest thick with giant Sequoias looks nice, this is a sign that its lifespan is ending.
A forest where young Sequoias grow among giant trees has a longer lifespan. A balance of big and small trees maintains the health of the forest ― a mystery of the natural ecosystem.
The situation of our businesses after the financial crisis of 1997 reminds us of the tragedy of the old Sequoia forests. Large companies, including Samsung and Hyundai Motor Company, have made smooth inroads into the world market. They look like giant trees in both size and volume of sales. But it is hard to find medium-sized companies, which should naturally be noticeable among the large companies in a healthy eco-system. The probability of small enterprises growing into medium-sized companies with more than 300 employees was a mere 0.13 percent during the past 10 years, according to a survey by the Korea Development Institute. Among the 200 Korean businesses with the largest sales, Woongjin Coway is the only company that has been established since the 1980s. The ecosystem of our businesses is fixed in the shape of an hourglass. It is hard to sustain the system for a long time with the slim-waisted structure of the hourglass.
The cause of this abnormal eco-system may be found in policy failures, above all. Small- and medium-sized enterprises have always been the recipients of support and protection, while large companies have been the target of regulations. Small- and medium-sized businesses with less than 300 employees and 100 billion won ($105 million) in sales have been given all kinds of tax exemptions and tax cuts, and financial institutions have lent them money at low interest rates. Once the companies exceed this size and sales level, many benefits evaporate immediately and countless regulations fetter them. In this situation, well-performing small and medium-sized businesses are reluctant to grow further. They even resort to spinning off their companies purposefully to keep within the criteria of the law supporting small- and medium-sized enterprises. This amounts to a Peter Pan Syndrome ― many enterprises simply refuse to grow up.
Executives of these enterprises are bound to be passive and diffident. Of the companies that have already outgrown the criteria for small- and medium-sized enterprises, 58 percent wished to return to that category, according to a survey by the Korea Chamber of Commerce and Industry.
They are also afraid of conducting public relations. Thirty six percent of companies listed on KOSDAQ responded, “We don’t feel the need for investor relations.” Some companies expressed fear of public relations, even avoiding it. “If there is a rumor that a company does well in its business, large companies undercut them with lower prices right away and it gets visited frequently by the National Tax Service,” the managers of medium-sized companies complain with a sigh.
Fortunately, some efforts have been made recently to treat this Peter Pan Syndrome. More than anything else, the bill on supporting medium-sized enterprises proposed last year by Lee Hye-hoon, a lawmaker of the Grand National Party, catches our attention. This bill aims to pave the way for small enterprises to grow into medium-sized businesses, and for medium-sized businesses to grow into large companies through deregulation. Regrettably, the deliberation on this bill has been put off more than a year since it was proposed. These days, the government is also showing signs of reviewing measures to support small- and medium-sized enterprises. Rather than considering the size of the company alone, the government means to choose and support innovative enterprises that have great potential for growth. Probably noticing this adjustment, the Korea Federation of Cooperative Unions of Small and Medium-sized Business made a timely change to its name, now the Korea Federation of Small and Medium Business ― leaving out the qualifier “cooperative unions.”
We have watched numerous large companies collapse, but it has been a long time since we saw medium-sized businesses grow rapidly into large companies. Major reforms should put an end to excessive protection of small- and medium-sized enterprises and excessive regulation of large companies. The focus should be put on the growth of medium-sized companies to large ones through innovation, which will be far more effective in promoting national competitiveness and creating jobs.
A Sequoia forest dense only with huge trees engenders a tragedy.
The Peter Pan Syndrome is also a disease that must be cured at all costs. Based on these lessons, I hope the eco-system of our businesses will recover its vitality and transform itself like a healthy forest.

* The writer is an editorial writer of the JoongAng Ilbo.

by Lee Chul-ho