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(EDITORIAL from the Korea JoongAng Daily on Nov. 7)

All Headlines 07:16 November 07, 2011

Strengthening small business

The latest decision by the Commission on Shared Growth for Large and Small Companies to restrict 25 items to small business - including tofu, LED lighting and ready-mixed concrete - raises an alarm, as it will only encourage foreign companies to enter the domestic market.

If the measure could strengthen small companies by blocking big companies’ indiscriminate entry into the market or forcing the big companies to withdraw from or cut back on their business, it would be more than welcomed. But the authorities must recall what happened as a result of preferential treatment for small enterprises in the past: Antimarket policies executed in the name of symbiotic growth only resulted in distortion of the market logic.

In the case of the lighting sector, which big local companies were not allowed to enter, three foreign multinational corporations - General Electric, Phillips and Osram - ate up 70 percent of the domestic lighting fixtures market, while 80 percent of our small- and medium-sized lighting companies still employed less than five workers.

The same goes for businesses related to components for MRO (maintenance, repair and operations). Big companies have increasingly been pulling away from the MRO industry as foreign MRO companies fill up the vacuum one by one. Our small- and medium-sized companies are not likely to join forces to take over MRO businesses run by big corporations, either. The Korea Federation of Small and Medium Businesses is instead vigilantly eyeing a more lucrative business: a fourth mobile telecommunications service. As a result, big companies have been forced to assign hundreds of personnel to purchase hundreds of thousands of components from innumerable small MRO peddlers.

You cannot force businesses to work for co-prosperity and shared growth. When overprotected, small- and medium-sized companies will likely perish without the ability to stand on their own feet. Even though the preferential treatment for small companies has continued for decades since the rule of President Chun Doo Hwan in 1980s, it is hard to find a small enterprise which later grew into a big one.

Even the leading small companies have opted to remain small so as not to lose special treatment - a Peter Pan syndrome - which has padded the pockets of foreign conglomerates. We wonder why this type of measure, which only nibbles at our small and medium-sized companies’ capability to survive and prosper, appears in every political season.
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