Lacking support, SMEs struggle with exports

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Lacking support, SMEs struggle with exports

Most small companies that start exporting stop within three years due to a lack of government support, said a report published by the state-run Korea Institute for Industrial Economics and Trade (KIET) on Wednesday.

According to the report, which followed the business activities of 22,160 small and midsize enterprises (SMEs) exporting from 2009-12, only 35 percent of the companies continued to export beyond three years.

Nearly half of new export-focused SMEs - 11,270 companies - stopped doing business overseas after their first year. After two years, just 9,000 companies, or 41 percent of those surveyed, survived.

But sales often stabilize after five or more years in business, which makes it important for the government to enact measures to support the long-term sustainability of SMEs.

Of the 74,318 SMEs exporting in 2011, only 39 percent had been doing so for longer than five years. These companies, however, accounted for 79 percent, or $65 billion, of total exports made by SMEs.

The KIET report called for stronger policies to boost the survival rate of export SMEs, improvements to the trade environment and more financial support for product R&D.

“Small and midsize companies export a wider variety of products to a higher number of countries than large manufacturing conglomerates,” said Jang Yoon-jong, a senior research fellow at KIET’s international industrial cooperation division.

“So the government’s SME support policies should be customized for each product category, and should focus on better financing for SMEs so that they can spend more money on R&D.”

Jang identified parts, materials and consumer goods as the most promising export areas for SMEs and said the government’s upcoming export revitalization policy - scheduled to be announced this month - should be centered around strengthening the SMEs that produce these products.

“The government needs to provide solutions so companies can really upgrade their brands,” Jang said.

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