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Promoting Exports of Domestic Demand-oriented Companies
Interview with Policy Maker
Promoting Exports of Domestic Demand-oriented Companies
  • By Jack H. Park
  • December 29, 2014, 03:04
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Won Dong-jin, director general for International Trade Policy at the Ministry of Trade.
Won Dong-jin, director general for International Trade Policy at the Ministry of Trade.

 

Korea is expected to achieve another triple crown in the size of trade, exports, and trade surplus this year, making it two consecutive years.

Experts are saying that the government's continuous export support policies were effective in increasing the export growth rate of small and medium-sized enterprises (SMEs), which exceeded that of large companies. However, many in the industry are pointing out that there are still many tasks to solve.

Won Dong-jin, director general for International Trade Policy at the Ministry of Trade, Industry and Energy, said, “Exports of SMEs are increasing more than those of large firms, but most of them post less than US$1 million in exports.” Won added, “We are actively working to establish measures to encourage domestic demand-oriented companies to become export-centered ones.” Business Korea asked him more on this subject, reprinted below.

SMEs, which were expected to be severely hit by a weak yen, accounted for 33.7 percent of the total exports in September, which is the highest ever. What is the driving force behind this achievement?

Since the inauguration of the Park Geun-hye administration, the government has set a goal to strengthen the competitiveness of SMEs in exports, pushing forward a plan to expand support for those companies through regular trade and investment promotion meetings. The government has also been working to facilitate exports of domestic demand-oriented companies.

These efforts have produced meaningful results. SME exports are steadily on the rise, and their weight is growing. As a result, their export growth rate has surpassed that of large companies for two years in a row. The average export growth rate was 2.9 percent from January to September, with SMEs growing at 5.7 percent and large firms at 1.6 percent.

Currently, 900,000 SMEs are exporters, but more than 80 percent record less than US$1 million in exports a year. So, there is a lot of work to do.

From next year, we are planning to move forward with measures announced in August to promote exports of domestic demand-oriented companies. We are going to cultivate companies with excellent product competitiveness but heavily dependent on domestic demand owing to a variety of difficulties rising in the export process, and support them appropriately.

The country's main industries overlap with those of Japan, and the gap with China in major industries is narrowing. Moreover, next-generation industries that the government wants to nurture are similar to those of Japan and China, which would heat up competition for exports.

A drastic increase in the won resulting from a weak yen and China's challenges are leading to intense competition among Korea, Japan, and China in the global export market.

As a result, the government is working to make exports high-value-added products, strengthen the competitiveness of the local materials and components industry, and diversify export markets using free-trade deals. The government is also providing customized support and encouraging indirect exports through specialized trading companies to expand the exports of SMEs. In addition, the government is trying to come up with a measure following the Manufacturing Industry Innovation 3.0 Strategy to enhance the competitiveness of the manufacturing industry that is the basis for our exports.

In particular, the growth of China, the largest exporter and importer of our country, is slowing down. If the slowdown accelerates, it would deal a serious blow to our country. What is your outlook and how are you preparing?

Exports to China started to decrease in May of this year, but they are showing an upward trend in September. Thanks to a positive trend in the U.S. economy and a rise in China’s output, our exports to China are also expected to grow.

We are implementing a measure to expand trade with China to prepare against a slowdown in exports there, and to target the Chinese local market, including sectors of consumer goods and end goods. In addition, we are working to establish a measure to implement the Manufacturing Industry Innovation 3.0 Strategy in order to help the local manufacturing sector improve fundamental competitiveness.

To diversify export markets, we are also planning to expand support for local companies' penetration into emerging economies. For that, we are going to create additional trading posts and export incubators, increase logistics networks overseas, expand marketing and trade insurance in emerging markets, and provide support using the Korean wave and corporate social responsibility.