Export support upped as global challenges rifeOfficial export support is being increased more than originally planned in 2019 as Korea faces headwinds in selling products overseas. A slew of other relevant measures are being implemented as well.
The government said it will be providing 235 trillion won ($208.6 billion) in trade finance this year, 15.3 trillion won more than the 219 trillion won in 2018. It will, for the first time, be providing export financing based on contracts only.
Korea’s exports have fallen for three consecutive months, and the situation is expected to get worse with growing uncertainties in the global marketplace, including Brexit.
According to the Ministry of Trade, Industry and Energy on Monday, the on-year increase in trade finance is larger than the initial planned increase of 12.3 trillion won.
The trade finance will be provided by six state-owned financial institutions - Export-Import Bank of Korea, Korea Trade Insurance Corporation, Korea Credit Guarantee Fund, Korea Technology Finance Corporation, Small and Medium Business Corporation and Korea Development Bank.
The government is planning to provide special financing. This includes: 100 billion won in support of exports by new growth engine companies; 100 billion won in refund guarantees for small- and medium-sized shipbuilders; 1.6 trillion won for re-lending; and 26.3 trillion won in loans and loan guarantees for managing export-related facilities and working capital.
It has created some new facilities.
“We have decided to create a special guarantee that will provide necessary funding even with only export contracts for promising exporters that are temporarily suffering capital shortages due to worsened credibility,” said Sung Yun-mo, minister of trade, industry and energy.
The government will be allocating 100 billion won for special guarantees for contract-only credits for the second quarter of this year. It will also be providing 6.2 trillion won to help Korean exporters cash bonds early so that they won’t face liquidity problems.
The government will be spending 352.8 billion won on export marketing, including for consulting and the exhibiting of Korean goods overseas, a 5.8 percent increase compared to the same marketing spending in 2018. More than 60 percent of this spending will be front-loaded in the first half.
On export marketing, the government plans to increase the number of small- and medium-sized enterprises (SMEs) receiving support to 42,273.
The ministry said it will create four “global partnering innovation centers,” in Detroit, Frankfurt, Nagoya in Japan and Shanghai, to introduce Korean exporters involved in new industries, including semiconductors, biopharmaceuticals, health, future cars, drones and Internet of Things (IoT).
It will create a Korean booth for more than 50 companies at 10 major global exhibitions and conventions, such as the Hannover Messe in April, Automechanika in Dubai in June and the Hong Kong Cosmoprof Asia in November.
The government will be providing 11.6 billion won to 1,300 companies that work with conglomerates in order to help in expanding the sale of their goods and services overseas. This is a 47 percent increase in the amount of financial support compared with last year’s 7.9 billion won for 1,100 companies.
“Our focus has been enhancing trade finance and export marketing, which many of the exporters said was what they most need,” said Trade Minister Sung.
The ministry said in a statement that the measures were the result of the government recognizing the dangers inherent in the current environment, with trade disputes between the United States and China, Brexit and general uncertainty in global trade.
It added that while it is focused on trade finance, export marketing and support for SMEs and conglomerates, it is also taking measures to strengthen the export structure through innovation so that trade won’t be so easily disrupted by external shocks.
Recent statistics have been discouraging.
Exports last month fell 11.1 percent, the sharpest drop since April 2016. The government cited declining semiconductor sales, which have been the driving force behind Korea’s exports in recent years, and China.
Semiconductor exports fell 24.8 percent. As a result, semiconductors, which have generated 20 percent of Korea’s overall exports, now generate 17 percent. Exports to China dropped 17.4 percent. China is Korea’s largest export market.
The government said it will work on diversifying not only items exported but also target markets.
“We plan on strengthening our supports in six areas - biopharmaceuticals, rechargeable batteries, plants, construction, culture and content, Hallyu [Korean wave] consumer goods, fishery and agricultural products,” said Finance Minister Hong Nam-ki during a meeting on revitalizing the economy on Monday. “Also, as part of diversifying our export market this month, we plan on opening up a new Asean desk and a center supporting the export of plants to central Asia.”
The minister said the government will further expand free trade agreements. This includes the start of a Russia service and investment FTA.
A government task force was assembled in January as Korea’s exports started losing steam.
BY LEE HO-JEONG [firstname.lastname@example.org]
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