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(News Focus) Park to boost smaller firms for S. Korea's economic revival
By Kim Kwang-tae
SEOUL, Jan. 10 (Yonhap) -- Small businesses have long been left out in the cold in South Korea where family-controlled conglomerates have dominated the economy for decades.

   Known as "chaebol" here, conglomerates have been credited with driving the country's economic growth through exports such as cars, mobile phones, ships and semiconductors. The export-driven policy, put in place by late President Park Chung-hee, helped transform South Korea into Asia's fourth-largest economy from the ashes of the 1950-53 Korean War.

   In the process, chaebol have become more powerful in South Korea as their businesses span electronics, construction, insurance, clothing and amusement parks as well as food and retail sectors. Small companies have often been left to the mercy of chaebol, which are frequently accused of abusing their dominant power to maximize profits.

   Now, the tables are likely to be turned in favor of small businesses by none other than Park's daughter, President-elect Park Geun-hye.

   In a symbolic gesture, she has renewed her pledge to become a president of small and medium enterprises (SMEs) and held a cordial meeting with their representatives in late December. The meeting was followed by what officials described as tense talks with the heads of chaebol.

   She has also vowed to shift the economy from one that relies heavily on the exports of large conglomerates to one in which both big and small firms coexist.

   "I will make sure that from now on, SMEs are no longer the supporting actors in the economy but confident leading actors," she said as she expressed hope to make small businesses the next growth engine in the economy.

   For decades, South Korea's exports have been led by conglomerates. Exports of goods and services amounted to 538.5 trillion won (US$507 billion) in the first nine months of last year, or 57.3 percent of the country's gross domestic product, according to the Bank of Korea.

   Smaller companies account for 99 percent of all enterprises and 88 percent of all employees in South Korea, though chaebol dominate net profits and market capitalization.

   The combined net profit of 80 listed companies affiliated with the country's top 10 business groups reached 36.9 trillion won in the first nine months of last year, accounting for 78.1 percent of total net profits of all 1,345 listed local companies, according to FnGuide Inc., an online financial information provider.

   Park's comment raised hope for many South Korean small business owners like Hong Eu-taek that things would get better.

   Hong, head of Dongsan Bearing Corp., a small bearing manufacturer in the western port city of Incheon, said he expects that Park's focus on small businesses will make a difference and result in substantial assistance.

   He said the government should overhaul the Korea Trade-Investment Promotion Agency in a way that provides necessary assistance to small businesses in making inroads into foreign markets.

   He claimed that the state-run trade promotion agency's office in Germany has served almost as a servant for Samsung Electronics and Hyundai Motor.

   "They didn't care about small businesses," Hong said by phone from Incheon. He claimed he did not get any help from KOTRA, even though he paid about 7 million won in fees three years ago to try to break into the German market.

   Hong also said he did not supply parts to chaebol out of fear that he could be forced by large businesses to lower prices of bearings.

   Hong's concern is widespread among small subcontractors who rely on big businesses for survival.

   Park's transition committee has said it is considering introducing stricter punishments for conglomerates that abuse their smaller subcontractors. The move comes as Park has pledged to address what small businesses call "a thorn stuck under their fingernail."

   Small businesses will have Park's ear again on how to level the playing field and boost small businesses.

   Park is scheduled to receive her first policy briefing from the Small and Medium Business Administration (SMBA), which speaks for small businesses, on Friday along with the defense ministry.

   Park has promised to provide customized support to small companies to help them to grow into mid-sized firms. Currently, small businesses with up to 8 billion won in owned capital are entitled to various financial and tax benefits from the government, but once they grow larger, all of the benefits are immediately cut off.

   Park has also asked big business leaders to protect the business rights of mom-and-pop stores by staying away from local commercial areas.

   "Big businesses should compete with global foreign companies," she said in the tense meeting with the heads of chaebol in December.

   The comment could give a boost to efforts to make legislation that would designate business sectors into which only small and medium enterprises could enter.

   In recent years, chaebol have encroached on the domestic food market such as tofu and bakeries as they opened their large discount stores and supermarkets in local commercial areas, threatening the livelihood of mom-and-pop stores in traditional markets.

   Park has chided heads of chaebol for expanding into businesses that working people and small companies usually do for a living.

   Amid public backlash, Hotel Shilla Co., an affiliate of Samsung Group, has sold its stake in its bakery business, and Hyundai Department has announced its plan to sell off its bakery brand.

   SK Networks Co., a unit of SK Group that runs gas stations, convenience stores as well as oversees resources development projects, has also dropped its businesses for school uniforms and wine distribution.

   On Wednesday, Park told business representatives at the Korea Chamber of Commerce and Industry that she would improve the business environment and review business regulations so as to help firms overcome the economic crisis.

   "The new (incoming) government considers 'warm growth' to be a key aim that allows the warmth of growth to spread evenly across our society," Park said.