SME’s exports squeezed by weak yen, strong won

Due to the recent appreciation of the won and the weakening yen, some small and medium enterprises (SMEs) are suffering from plummeting profitability of exports and are planning to give up exporting.

According to a study on exports of SMEs released by the Small and Medium Business Corporation (SBC) yesterday, 60 percent of 300 surveyed SMEs said the strengthening won has affected their exports.

Of the 60 percent, 27.8 percent are still continuing to export while 10.6 percent have abandoned already signed contracts. Another 21.1 percent are raising export unit prices.

In particular, small and medium garment companies that are dependent on the Japanese market are suffering.

The SMEs said an overseas market development fund is needed if the government wants to help guard against changes in exchange rates.

In addition, 38.8 percent of the companies said reducing their cost of production is necessary, while 27.8 percent said they should diversify their exports to other markets like emerging markets and 11.7 percent said they will adjust payment deadlines.

In addition, they proposed the government help by supporting SMEs with increased insurance for foreign exchange risk.

Apparently, 25.6 percent of the SMEs surveyed are putting up with increasing losses without any countermeasures. Among the 300 companies, only 9 percent said they are managing the risk of exchange rate fluctuations.

The reasons they don’t manage the risk of exchange rate changes vary. Of the companies surveyed, 36.4 percent said there was a lack of professionals who knew how to manage the risks and 16.9 percent said they do not have methods of how to manage them. 10.7 percent said the cost of managing the exchange rate risk is too much.

“While large corporations can flexibly respond to exchange rate fluctuations because they have deep pockets, SMEs may be at the crossroads of life and death due to the yen depreciation as they continue exporting even at a loss in order to maintain business clients,” said a spokesperson for the SBC.

By Kim Jung-yoon [kjy@joongang.co.kr]