| Abstract | Over last two decades' research of the urban informal sector(UIS) has led to the
recognition of its role in providing income and employment opportunities to about 40-65 percent
of urban working labor of developing countries. However, when the issue is the growth potential
of the sector, it is not good enough to simply contend that the sector has a promising future
because of its current contribution to income and employment. Though inf01mal-formal sector
subcontracting linkage has been seen as a possible contiibutor for the evolutionary growth and
expansion of the sector, the empirical knowledge and insight on the linkage are far from
sufficient to reach an agreement upon which efficient planning policies could be drawn. Largely
due to individual researcher's intellectual inclination, informal sector subcontracting studies have
not been conducted in a very objective way. This is reflected in the preoccupation of one set of
studies with the theory of capital accumulation and another set's with that of positive aspects of
subcontracting. Furthe1more, most of the existing studies tended to cover a few aspects of the
linkage, and thus failed to provide a comprehensive picture on the mechanism and the impact of
the linkage. With this in view, this study aims to explore and assess the structure and role of
subcontracting linkage with a case study of the ga1ment and the fabricated metal industry in
Seoul, Korea.
In order to examine nature of the subcontracting relationship, terms and conditions of the
transaction were analyzed. Here, a pa1ticular emphasis was placed on the significance of the
contractors' subcontracting motivation, subcontracting market structure, and subcontracting
stability as factors influencing the nature of informal small-scale subcontracting. It is seen that
the metal subcontractors, overall, are in a better position in negotiating terms and conditions of
the transaction with contractors than the garment subcontractors. A comparative analysis of the
working process, the related issues including the relationship among workers, and the level of
production facility suggests small subcontractor firms' potential for technical and skill
improvement. As major factors underlying locational pattern of the ga1ment and the fabricated
metal subcontracting chain, the significance of production immediacy, access to consumer market
and the government's industrial location policy were highlighted. In the analysis of inter-film
cooperation, it is found that the small subcontractors pursue smooth and efficient production
through the different types of cooperation with the related shops. In pa1ticular, advantage of
saving on overhead cost, risk alleviation and innovation are observed from the newly emerging
trend of joint production and joint utilization of advanced machine/tool in the metal
subcontracting and this is considered as an important impact of subcontracting production in the
study area. Through the assessment of both the contractors' assistance to the subcontractor films,
positive role of the contractors is partially discernible, particularly in the metal subcontracting.
In the analysis of technical and economic impact of subcontracting, it is found that, compared
to the garment subcontractors, the metal subcontractors have more frequently experienced
expansion or modernization of production facility, change of raw material and production method.
In the analysis of macro-level factors affecting growth of the subcontracting production in Korea,
the impact of the government's small/medium industry (SMD policy and labor market changes
was highlighted by relying on the related secondary data. On the whole, two major conclusions
are drawn. Firstly, the nature of subcontracting relationship is neither exclusively exploitative
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nor totally beneficial to small subcontractors. Rather, both exploitative and beneficial elements
mark the linkage pattern at the same time. Secondly, the potential for the evolutionary growth
and expansion of the small subcontractor firms is clearly greater in the metal than in the ga1ment
subcontracting. With regard to policy implication, an emphasis is placed on the necessity of the
government intervention in the info1mal-formal sector subcontracting transaction in order to
correct the unfavorable terms and conditions of the transaction such as excessive unit price
discounting and delayed payments, especially in the ga1ment subcontracting. In the metal
subcontracting, an important policy direction is development of concrete programs such as
establishment of a district center for technology and market information and a district fund for
the small metal subcontractors by which their potential for evolutionary growth can be financially
assisted and technically reinforced. |