Small and mid-sized exporters in Korea are taking a direct hit from the recent fall in the exchange rate. In particular, home appliances manufacturers and automobile companies are taking the brunt of the coincidence of the weak yen and strong won, losing their price competitiveness against Japanese corporations.
The Korea Chamber of Commerce & Industry’s special task force recently conducted a survey as to their loss due to foreign exchange fluctuation and announced on February 5 that 92.7% of the 300 respondents answered they were suffering from the decline in the won-dollar exchange rate. The percentage had stood at 53.1% in the November 2012 survey, signifying that their business loss is skyrocketing due to the strong won trend as of late.
The exchange rate had dipped below 1,100 won per US dollar in November last year. The downward movement has continued this year and the January average has declined to 1,066 won.
All of the automobile companies and consumer electronics manufacturers that participated in the survey answered they were suffering damage. Besides, the same answer was given by more than 90% of the rubber and plastic manufacturers (96.6%), information and telecommunications equipment makers (96.2%), shipbuilders and plant builders (92.6%) and machinery and precision equipment companies (92.3%). 88.5% of the petrochemical and chemical companies and 86.2% of the steel and metal manufacturers answered they were having damage as well, respectively.
67.6% of the respondents reported at least some foreign exchange loss with regard to their export already made, followed by deteriorated profitability and a decrease in the working capital (27.7%), drop in export due to lowered price competitiveness (21.6%) and the necessity of readjustment of their investment and employment plans already set (12.9%).
30.9% of the respondents said they had no specific countermeasure on hand against the foreign exchange decline. 58.3% of the respondents, meanwhile, were found to be resorting to cost reduction only, followed by financial response such as the hedging of currency risks (20.8%), enhancement of overseas marketing (20.8%), change of settlement currency (14.6%) and export market diversification (14.1%).
47.3% of the companies said that they would not reflect the exchange rate decline to their export prices. 91.1% of the other firms answered they would do so only within the scope of 10%, implying that most of the surveyed companies are shouldering the damage by themselves.
In the meantime, 41.4% of the surveyees said they were suffering damage from the weak yen. 54.8% of them reported foreign exchange loss and 43.5% mentioned decreased exports due to some loss in price competitiveness.