"High Exchange Rates Present Opportunities for Exporting SMEs... Need for Overseas Market Development and Linked Supply Price System"

Korea Federation of SMEs and Korea SMEs Research Institute Publish Issue Report
"Possible Contribution to Profitability Improvement and Price Competitiveness Enhancement"
"Time for Cooperation Among Companies, Government, and Political Circles"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] There have been calls for public and private sectors to cooperate and turn the recent trend of rapid exchange rate increases into an opportunity to expand exports for our small and medium-sized enterprises (SMEs).

The Korea Federation of SMEs and the Korea Institute for Small and Medium Enterprises and Startups Research announced this in an issue report titled "The Impact of Exchange Rate Increases on SME Exports and Policy Tasks" on the 28th.

In the first half of this year, South Korea's export volume hit a record high. However, the trade deficit has been accumulating recently, and the won-dollar exchange rate surpassed 1,346 won intraday for the first time in over 13 years since the global financial crisis, continuing the upward trend.

The report stated, "Excessive anxiety about a high exchange rate does not help stabilize the foreign exchange market nor support export SMEs that lack coping capabilities," adding, "Although there may be some limitations, the rise in exchange rates can contribute to improving profitability and enhancing price competitiveness for export SMEs."

For example, K-beauty products such as cosmetics, which are popular in major countries including the United States, can see increased price competitiveness due to the rise in the won-dollar exchange rate, presenting an opportunity to expand the market.

According to a logistics difficulty survey conducted in June by the Korea Federation of SMEs targeting 508 export-import SMEs, 69.5% of companies reported either profits from the exchange rate surge or no impact (19.1% profit + 50.4% no impact), significantly exceeding the 30.5% of companies that reported damages.

The Korea Federation of SMEs and the Korea Institute for Small and Medium Enterprises and Startups Research emphasized that to overcome the current complex economic crisis of high exchange rates, high inflation, and high interest rates, companies, the government, and ruling and opposition political parties must come together to share wisdom and cooperate.

They stressed that SMEs, which heavily depend on domestic demand, should boldly venture into overseas markets. There is a need to target the premium consumer goods markets in advanced countries such as the United States, and to strengthen self-driven efforts to build competitiveness in various aspects including price, quality, design, and marketing.

The government was urged to accelerate regulatory reforms that constrain companies and to expand support for participation in overseas exhibitions and logistics costs to develop export markets.

Additionally, they stated, "Support for exchange rate risk management for SMEs that find it difficult to respond to exchange rate fluctuations is necessary, and the market should be closely monitored to minimize the negative impact of a strong dollar on our economy, providing clear policy signals."

The National Assembly was urged to alleviate the cost burden on SMEs that produce intermediate goods using imported raw materials and supply them to large corporations by promptly legislating the linkage system for delivery prices.

Choo Moon-gap, head of the Economic Policy Headquarters at the Korea Federation of SMEs, emphasized, "The recent rapid rise in exchange rates should not be seen as a crisis but as an opportunity to increase exports and improve profitability and competitiveness. Companies, the government, and the National Assembly must strengthen communication and promptly prepare policies that meet the needs of the field."

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