Achieving parallel prosperity

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Achieving parallel prosperity

The government has announced a set of action plans to improve the business environment for small and midsize enterprises (SMEs) and help them become formidable challengers to their larger peers.

Officials said they put a huge amount of effort into creating the extensive program, touting it as an important key to the future of Korea’s economy. The government plans to create a 1 trillion won ($876.9 million) industrial promotion fund targeting SMEs, allow small companies to seek government mediation on disputes over pricing contracts with conglomerates and strengthen oversight of large retailers in an effort to help prevent unfair practices.

The government said it has strived to provide all of the support it can for small and midsize companies within the context of a free market framework.

Helping these companies prosper at the same level as their larger counterparts is crucial for the health and future direction of the overall economy. These smaller companies have been victimized by the bullying behavior and unfair practices of large companies, which threaten to dump subcontractors that do not accept their business terms and refuse to change prices for suppliers to reflect market realities and changes.

The widening polarization between small companies and large firms casts a shadow over the country’s economic prospects.

But what is important is how we narrow the gap between the two sides.

We as a nation must do so thoroughly and efficiently. The solution must not undermine the ability of private enterprises to make decisions regarding who they partner with and how they conduct business.

Some of the government’s plans could do just that, creating more harm than good.

Giving cooperatives of small and midsize businesses the right to seek mediation over price disputes with their larger partners could disrupt trade practices in the free market system by allowing a third party to meddle in negotiations.

Other parts of the government’s plan - such as a move to ensure fair retail trading and the establishment of a fund to support small companies - appear to be overprotective.

The government should have learned from past experiences that regulating large companies does little, if anything, to help the economy.

It should instead focus on paving the way for small and midsize companies to strengthen their viability and self-sufficiency, which would prop up the entire business community.

Aiding SMEs in research and development and laying the groundwork for industrial growth is a better solution to helping smaller companies and creating lasting growth.

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