Joo Byeong-gi: Cooperation Between Large and Small Enterprises is Essential

Joo Byeong-gi, Chairman of the Fair Trade Commission, stated on June 29 that "cooperation between large and small enterprises is essential for South Korea to become a leading technology nation." He emphasized that Samsung's efforts in fostering cooperation will serve as a starting point for a healthy corporate ecosystem, where the achievements of large companies are fairly distributed among their partners, including smaller firms.

Joo made these remarks during the signing ceremony of the 'Samsung-1st, 2nd, and 3rd Tier Supplier Cooperation Agreement' held at Samsung Electronics' Digital City. He noted that while strong institutional reforms are needed to eliminate exploitative practices, the voluntary efforts of leading companies in South Korea to spread new norms of cooperation are crucial for the success of such reforms.

The cooperation agreement aims to promote a culture of collaboration not only among first-tier suppliers but also extending to second- and third-tier suppliers within Samsung's supply chain. The agreement, developed autonomously by Samsung and its partners, includes improvements to payment terms for Samsung and its first- and second-tier suppliers, as well as expanded support for financial and technological cooperation.

The decision to improve payment terms is intended to assist smaller suppliers in managing their liquidity and securing funds. Samsung will pay first-tier suppliers within 10 days after the current legal payment deadline of 60 days. The company will also maintain cash payment principles and early holiday payments.

First- and second-tier suppliers have agreed to operate payment deadlines reasonably, such as within 30 days after the deadline for their lower-tier suppliers. This initiative is expected to lead to improved payment conditions for second- and third-tier suppliers as well. Samsung plans to encourage participation by offering additional points and support for higher ratings during comprehensive evaluations for those suppliers who comply with the improved payment terms.

Additionally, Samsung will expand its existing support for first-tier suppliers and significantly increase financial and technological support for second- and third-tier suppliers. The company is also pursuing a plan to support facility investments, technology development, and ESG transitions through a cooperation fund of 3.5 trillion won and an ESG fund.

Included in the cooperation agreement is Samsung's commitment to support second- and third-tier suppliers and establish an industrial accident fund, part of the 5 trillion won social contribution promise announced in May. Following a distribution controversy over substantial performance bonuses, Samsung pledged to invest a total of 5 trillion won over the next five years to foster a cooperative and healthy ecosystem and nurture future talent, stating that it would strengthen its social responsibility to ensure that its growth and achievements benefit society.

Industry experts anticipate that approximately 6,700 suppliers within Samsung's network will benefit from this cooperation agreement. Samsung plans to incorporate the key elements of this agreement into fair trade agreements with suppliers to be signed early next year.

The Fair Trade Commission will provide incentives, such as additional points in future evaluations of fair trade agreement compliance, to companies that diligently implement this cooperation agreement and recognize exemplary subcontracting practices for small businesses.