Gov’t unveils plans to vitalize nation’s sluggish exports
The key part of the policy is the expansion of support for products like organic light-emitting diodes (OLED), cosmetics, medicine and system semiconductors. These products constitute a small portion of total export volume, but they show the fastest growth with plenty of potential.
Increasing discounts on trade insurance for small and midsize companies is also central to the plan.
“Korean exports have kept shrinking this year due to overall reductions in global trade and cheap oil prices, but we forecast that exports are unlikely to get better next year due to the continuation of low oil prices and slow recovery of the global economy,” said Minister of Trade, Industry and Energy Yoon Sang-jick at an emergency meeting held Wednesday morning with 10 other ministers, organized to discuss possible solutions to boost exports.
The emergency meeting came after the government revealed last month that exports were shrinking at an ever-faster rate, which was met with widespread public criticism.
Korea’s October exports plummeted by 15.6 percent year on year, the largest drop since the 2009 global financial meltdown.
Right after the global financial crisis in August 2009, Korean exports plunged 20.9 percent year on year.
The government’s concern deepened as the sheer volume of overseas shipments also shrank by 9.4 percent year on year in October, which was also the largest drop this year. In addition, most of the shrinkage came from flagship export products like ships, oil products and memory chips.
The contribution that exports make to Korea’s economic growth also keeps getting smaller, dragging down the overall growth speed.
Of the Bank of Korea’s 2.7 percent growth forecast for this year, the domestic economy has been estimated to contribute 2.5 percentage points, while exports only mark 0.2 percentage point, according to a recent study by the BOK. In 2013, exports contributed 1.5 percent of annual growth, while the domestic economy accounted for 1.4 percent.
To counter the trend, the government decided to eliminate tariffs on imported OLED production machineries for local manufacturers, which are currently paying import taxes of 5 to 8 percent, to help them invest in R&D and reduce production costs.
The Korea Trade Insurance Corporation extended trade insurance fee discounts from the current 30 percent to 50 percent, specifically for small and midsize exporters.
The 20 percent tax reduction benefit on corporate R&D spending, which was initially going to end this year, has been extended to 2018.
The license granting process for new cosmetics and medicine has also shortened, and the government is building a separate platform for e-commerce companies to complete their export customs procedures by the end of this month.
The rest of the solutions rolled out involved each ministry expanding budgets for marketing activities and business consulting sessions.
But many of the policies discussed there were not new, and most have already been implemented earlier this year, when exports fell as much as 11 percent year on year in May.
Experts say offline exhibitions and business consulting sessions are helpful for small exporters, but the government should focus on expanding in new markets like Vietnam and India with long-term plans.
BY KIM JI-YOON [email@example.com]
More in Economy
Central bank holds rates steady, adjusts up GDP forecast
Restaurant coupons to make a comeback as an app
[INTERVIEW] Korea Forest Service head sees huge opportunity in Indonesia
Tapped out and hunkered down, Korea stares recession in the face
Property owners get big tax shock