Two out of three Export Companies Face "Business Disruptions Due to COVID-19"... Industrial Research Institute Predicts "Darker Q2"

Korea Institute for Industrial Economics Survey... 65.8% of Exporting SMEs, 63.8% of Mid-sized Firms Report "Customs Clearance Disruptions"
More Severe in Q2... "Concerns Over Sales Decline, Operating Rate Deterioration, and Raw Material Procurement Difficulties"
"Government Must Strengthen Support for Resolving Difficulties, Realizing Opportunities Post-COVID-19, and Entering New Businesses"

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[Asia Economy Reporter Moon Chaeseok] A survey revealed that two out of three of our export companies have suffered significant disruptions to their business due to the novel coronavirus infection (COVID-19) pandemic. As the impact is expected to be more severe in the second quarter, there are calls for the government to strengthen tailored support measures in various ways.

According to the report "Analysis of the Impact of COVID-19 on Small and Medium-sized Export Companies and Support Measures" released by the Korea Institute for Industrial Economics and Trade on the 3rd, 65.8% of small enterprises and 63.6% of medium-sized enterprises are facing negative impacts from COVID-19. The institute conducted a survey on the impact of COVID-19 and the status of support measures on March 20 targeting 400 Korean export companies (301 small enterprises and 99 medium-sized enterprises).

Companies cited customs clearance and distribution delays, difficulties in procuring raw and subsidiary materials for export, and cancellation of export marketing events as negative factors. Small enterprises experienced more disruptions in existing export contracts (3 cases), while medium-sized enterprises had relatively more occurrences of cancellations or postponements of new export contracts (4.2 cases) and delays or postponements in collecting export payments (6.1 cases).

The survey results showed a prevailing expectation that the negative impact of COVID-19 on exports will increase as the second quarter progresses. Companies reported difficulties such as decreased sales performance, reduced operating profit margins, and shortages of raw and subsidiary materials.

Small and medium-sized export companies are considering response strategies such as diversifying suppliers of raw and subsidiary materials. They are also anticipating opportunity factors such as an increase in deferred export volumes after COVID-19 and the global commercialization of smart bio and smart health sectors.

The Korea Institute for Industrial Economics and Trade explained that if the global spread of COVID-19 further intensifies the negative impact on small and medium-sized export companies, there is a risk that it could lead not only to deteriorating performance but also to the depletion of export capacity. It urged the urgent strengthening of multifaceted government support measures to resolve this.

It emphasized that support for small and medium-sized export companies should be "tailored," taking into account the intensity of damage, companies' COVID-19 response and transformation strategy demands, and opportunity factors.

The institute pointed out that considering the stance of companies seeking business opportunities after COVID-19, various support measures should also be prepared to realize these opportunities.

In particular, the institute warned that unexpected events like COVID-19 can occur anytime and anywhere on the globe in the future. It also suggested that efforts should be made to organize a policy system that operates according to the transformation or leap-forward demands of small and medium-sized enterprises even in times of crisis.

Senior Research Fellow Lee Youngju of the Korea Institute for Industrial Economics and Trade said, "Considering the possibility that unexpected and crisis situations like COVID-19 may become regular occurrences in the future, we must make every effort to strengthen the policy system to effectively support the innovation and transformation of small and medium-sized enterprises."

This content was produced with the assistance of AI translation services.