COVID-19 Takes Its Toll on Korea's Exports
The number of countries prohibiting or restricting the entry of South Koreans topped 100. They include nine out of the 10 major export destinations of South Korean enterprises and their exports are likely to take a direct hit this year.
The number of such countries increased by two to 106 on March 9. The nine countries account for about half of South Korea’s total exports and their prohibition or restriction is driving South Korean enterprises’ global value chains to collapse. The 10 destinations are China, the United States, Vietnam, Hong Kong, Japan, Taiwan, India, Singapore, Mexico and Malaysia and the United States is currently the only exception.
Japan suspended visa-free entry for South Koreans on March 9. The measure will remain effective until the end of this month and already issued visas have been nullified as well. Japan is the fifth-largest export destination for South Korean companies. Every person with a new visa can enter Japan but must stand by for 14 days in a designated place.
The concept of global value chain can be defined as international division of labor for saving costs by distributing production processes. As of 2017, South Korea’s participation in the chain was 55 percent, sixth-highest in the world, with the global average at 53 percent.
According to the UNCTAD, COVID-19 is likely to reduce South Korea’s annual exports by US$3.8 billion and the global total exports by US$50 billion by halting the Chinese economy, which represents 20 percent of the global total intermediate goods trade. Last month, China’s purchasing managers index hit the lowest level since 2004.