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  • Business Law: Social Co-Op Law (South Korea) – 5 Things to Know

    December 6th, 2012  by  Asia-Pacific Global Research Group - Jasper Kim

    1) Can you explain what this new law that aims to help Korea’s social co-operatives is all about?
    Korea’s new social co-operative law allows certain non-profit organizations to register as social co-ops. Under Korean law, 2 types of cooperatives exist: general and social. Social co-ops operate as non-profits, in which 40% of the social co-ops business must be for the “public good.” Korea’s new law took effect on December 1, 2012.
    2) How does the system of operating social co-operatives work in Korea? How large of a system is it?
    Social co-ops is a business structure in which the entity’s employees (workers) are also its owners (as opposed to outside shareholders for public stock corporations in South Korea). The Korean government expects up to 10,000 of such new co-ops to be formed in the next 5 years, resulting in 40,000-50,000 new jobs.
    3) Do you believe that this law that supports social co-operatives will gradually resolve Korea’s mounting unemployment?
    The rise of social co-ops could only help, not hurt, the Korean economy. Social co-ops will particularly help at the bottom-up level, since most social co-ops in terms of employees and capital will be small and medium-sized firms. One socio-cultural and economic factor that represents a policy challenge is that the majority of Koreans still much prefer to work at Korea’s mega-comglomerates (chaebol), at times even forgoing employment opportunities with smaller firms in a country that still has the mindset of “bigger is better.”
    4) What do you think is behind government efforts to protect small and medium-sized businesses? Do you think that the government is favoring small merchants because of increased concerns created by wholesale monopoly?
    The current socio-political buzzword in South Korea today is “economic democratization.” One interpretation of this is redistribution of profits more towards smaller firms. This is where social co-ops and Korea’s new social co-op law can play a role. The social co-op law also provides the following for recognized social co-ops: 1) possible receipt of government benefits (subsidies) 2) can participate in government projects; and 3) avoids regulation of Korea’s fair trade law (although as small economic entities, this issue would arguably not be highly problematic). In essence, the social co-op law is one (of many) legislative efforts by the government to “flatten the economic playing field.”
    5) Can you give us a comparison with co-operatives in other countries? What is their agenda and how do they work? And do you think their system can be applied to Korea?
    The concept of co-ops has existed for years. The large US hotel chain, Best Western, and ACE Hardware are examples of certain types of existing co-ops that also represent highly recognized brands worldwide. South Korea also has existing co-ops involving a wide variety of goods and services such as chauffeur-drivers and foundations offering discounted/free lunch programs.
    The author is book editor of: Korean Business Law: The Legal Landscape and Beyond

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