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Conglomerates nervous about what will come next
Writer : Sender
Jul 30, 2010
Korea's big businesses are holding their breath, putting out feelers and checking tools at their disposal in the face of repeated "threats" issued by President Lee Myung-bak.
During an emergency economic meeting Thursday, President Lee said: "Big firms should change their practices in dealing with subcontractors."
Although he added that administrative efforts should be made to encourage conglomerates to voluntarily change their practices, the message was clear as he sympathized with difficulties facing suppliers in securing contracts from big firms. During the meeting, Lee received the results of a survey showing only half of subcontractors here believe they are treated better by big firms now than before.
"We are extensively reviewing what more we can do to address the concerns expressed by President Lee," a corporate executive said on condition of anonymity.
The situation is similar in other big businesses, as they scramble to determine how to improve what some argue is a "predator-victim" relationship.
Some executives argue they are doing the best they can to address the grievances.
"We have already approached the issue from a systemic standpoint," an executive said on condition of anonymity. "We don't think there will be a one-off deal such as setting up a fund for suppliers."
Other executives also professed bewilderment, saying that they were caught off guard.
"We can't scoop up the profits we make and be generous to the suppliers," one executive said, adding that it will cut out investment and compromise product competitiveness.
If that reflected the general feeling of the corporate community toward what they see as an anti-conglomerate approach by Lee, a former CEO, they have tried their best not to show it.
As a matter of fact, the Federation of Korean Industries (FKI) Thursday retracted its strong-worded statement telling the government to get its act together before telling big business what to do.
"Our statement was prepared two months ago and didnt reflect our current stance," the FKI statement said, referring to the opening address for its summer camp on Jeju Island issued Wednesday.
The short-lived standoff between the government and the business community began after it was reported that President Lee criticized chaebol for failing to make social contributions in proportion to the enormous profits they make.
"The country exists not just for Samsung or LG," Lee was quoted as saying. Interestingly enough, Hyundai Motor, the second largest conglomerate, was not included in his remarks. Lee worked as CEO of Hyundai Engineering and Construction, the mother firm of Hyundai Group, before it was divided into three big business clusters.
Cheong Wa Dae softened the report by saying that Lee doesnt hold any animosity toward chaebol. But Lee followed it up with another jab.
Other senior government officials followed suit.
Choi See-joong, chairman of the Korea Communications Commission (KCC), who is a close friend of President Lee, said, "I feel an acute pain in my heart to see Samsung Electronics make billions of dollars in profit" while small- and medium-sized businesses languish.
Some analysts believe that Lee's offensive is aimed at keeping the business community on its toes as his five-year term in office is entering its second half with signs of him becoming a lame duck. Lee didn't go after chaebol during the first stage of his presidency, a ritual with the previous administrations.
Meanwhile, the business community is also bracing for the possibility that Lee's remarks may lead to investigations into their dirty laundry through prosecutors, the Fair Trade Commission and the National Tax Service.
Tax officials issued a statement denying any plans to investigate chaebol. "We are conducting routine, scheduled tax audits," an NTS spokesman said.
(Source: The Korea Times)
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