Gov’t promotes ‘benefit sharing’ among businesses

The government is stepping up efforts to promote cooperation between major conglomerates and small- and medium-sized businesses.

The move comes after a standoff between the Presidential Commission on Shared Growth for Large and Small Companies, which was established last year, and the chaebol, which resist the government’s directives.

The Ministry of Knowledge Economy said yesterday that starting next month it will adopt an evaluation measurement for its “benefit sharing” system, which aims to increase mutual growth from the beginning of manufacturing processes.

The new system focuses more on the joint development of components and technology as well as the expansion of trade partnerships.

The move is considered a step back from the previous profit-sharing program that was promoted by the Shared Growth Commission led by former Prime Minister Chung Un-chan.

According to the ministry, the government will incentivize various joint developments with SMEs by subsidizing overseas ventures and favoring these companies when applying for government projects.

“This system will enhance the competitiveness among local businesses and will set the way for fair growth,” said Hong Suk-woo, minister of knowledge economy.

The ministry noted that a similar program was first adopted by Japan’s Toyota Motor Corporation in 1959 and proved to be a successful model.

It also said Posco, Korea’s leading steel manufacturer, implemented the joint cooperative system in 2004 and succeeded in lowering production costs by 500 million won ($443,000) a year after its midsize partner Dae Won In Mul succeeded in developing steel-cutting knives.

The steelmaker had previously relied on imports.

Dae Won In Mul’s revenue added an additional 1.5 billion won via the joint cooperation system. Now there are 801 SMEs under Posco’s performance-sharing system as of 2011. Under the program, the SMEs earned a combined 42.4 billion won last year.

In 2006, the government promoted the benefit-sharing system between major businesses and SMEs. Although major companies including Posco and KT have participated, this program failed to gain widespread popularity with only 28 companies taking part.

The ministry noted that the previous benefit-sharing system was focused on the financial angle - largely cost reduction.

“The benefit-sharing system will not only stimulate the businesses’ investment into SMEs but also lead enterprises to work towards innovation,” the Federation of Korean Industries said in a statement.

By Lee Sun-min [summerlee@joongang.co.kr]