Global food service companies such as Aramark will not be able to provide their services to the public sector in the country. Office Depot, a global provider of office related products, will also be barred from public procurement, including maintenance, repair, and operation (MRO).
According to industry sources on February 10, the Small and Medium Business Administration (SMBA) is enforcing the framework act on small and medium enterprises (SMEs). During the process, SMBA is proceeding with the establishment of regulations to disqualify foreign enterprises that belong to local conglomerates subject to a ban on cross investment as medium companies.
This measure is aimed at prohibiting medium or small and medium-sized subsidiaries of overseas companies from participating in the local public market, if the total assets of their parent companies exceed five trillion won (US$4.7 billion). It will be done by applying the same standards to them as that of large companies. If this content is included in the enforcement decree of the framework act on SMEs, it will be effective by July 21.
Once the enforcement decree is made, the original purposes of the law to eliminate problems of reverse discrimination and to protect medium companies and SMEs are expected to be revived again by providing a fair competition environment.
An official at the SMBA said, “Some of the local companies have experienced reverse discrimination. So, we are pushing ahead with a plan to apply the same standards as that of large local companies to foreign firms with more than five trillion won in assets.” The official added, “We can’t apply all regulations applicable to groups subject to a ban on cross investment to foreign companies. But if the same standard is used in the public market, the major inroads of overseas firms into the local market can be prevented.”
So far, controversial overseas companies such as Aramark and Office Depot have been in an advantageous position in public procurement, without any limit in their participation. It is due to the fact that those foreign firms have been classified as medium companies in the nation, even though their size is almost equal to that of large local firms.