[Column] Government's Currency Response Measures Out of Order

[Asia Economy Reporter Moon Chaeseok] "We set a bidding condition of 1,050 KRW per dollar for electric vehicle air conditioning parts targeting Mexican companies, but for the first time, we were outbid by a Chinese company. The sharp depreciation of the exchange rate dealt a direct blow. The important thing is not to reduce the insurance premiums for trade insurance products, but to have policies that can prepare for variables such as bid failures."

When reports emerged that the government decided to reduce the insurance premiums of Korea Trade Insurance Corporation's (K-sure) forward exchange fluctuation insurance product by 45% as part of the 'Support Plan for SMEs' Foreign Exchange Risk Management,' Mr. A, who runs a small and medium-sized auto parts company, expressed frustration. This company, which trades with firms from France, the United States, China, and others, invests 5-7% of its operating profit in overseas bids, but as the Korean won's value rises, bid failures have become frequent. Since the company is likely to lose in bidding competition, Mr. A questions the usefulness of premium reductions that apply only after maturity.

On the 22nd, the government announced a foreign exchange fluctuation management support plan, stating that it would distribute a 'Standard Guideline for Foreign Exchange Risk Management' to enable companies to hedge foreign exchange risks themselves (fixing export/import transaction amounts at the current exchange rate), and that K-sure would provide foreign exchange hedging consulting to CEOs of SMEs.

However, the industry argues that such measures are insufficient to cope with the current strong won. In a situation where high exchange rates threaten the profitability of export products, the government's measures seem to focus only on the possibility of exchange rate volatility. Even during the briefing on the support plan, government officials avoided answering questions about measures against the current won strength. They said, "We did not prepare countermeasures assuming a decline in the exchange rate at a specific point," and rather urged companies to develop experts themselves and enhance decision-making capabilities related to foreign exchange hedging. This response disregards the immediate crisis.

Industries suffering immediate damage from the strong won are predominantly SMEs rather than large corporations. In a situation where SMEs are already struggling due to sluggishness in key industries such as automobiles, if the government fails to respond promptly to exchange rate issues, the damage will inevitably increase.

Given that the won's value has risen by 13.6% over the past nine months since March, it is insufficient to merely urge 'risk management.'

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