- President Yoon presides 1st Exports Strategy Meeting 2022-11-28
President Yoon Suk-yeol presided the first Exports Strategy Meeting on November 23, which was held by the Ministry of Trade, Industry and Energy (MOTIE) and the Ministry of Land, Infrastructure and Transport (MOLIT) to announce special exports strategies for each major region and stronger exports assistance measures.
The purpose of the meeting is for the Korean government to give full measure to supporting exports and seeking out new growth engines against the backdrop of persisting trade deficits and slowing exports growth.
The detailed strategies are mainly four-fold.
1) Market-specific strategies:
In terms of size, there are three major markets: ASEAN, the U.S. and China.
These markets are critical as they take up 57 percent of Korea’s exports, but coexisting opportunity and risk factors necessitate a strategic approach.
Vietnam and intermediate goods currently take up 48 percent and 85 percent, respectively, of Korea’s ASEAN exports market and item share. The plan is to spread out to Indonesia, Thailand and other regions for market diversification, while enlarging the scope of items across consumer goods, services and infrastructure.
In the U.S. market, the aim is to increase opportunities for Korean companies to participate in the ongoing mega projects in green and supply chain areas, and to proactively respond to the Inflation Reduction Act (IRA), China-bound chip export controls and other trade issues to protect domestic companies’ interests.
For China, a structural reform is to be implemented by diversifying trade and investment as well as bolstering Korean companies’ competitiveness, which will involve reshoring and MPE (materials, parts, equipment) companies.
China’s consumer trends will also be taken into consideration, namely the “silver”, “angel”, and “single” trends that affect consumer goods demand. “Silver” refers to the trends shaped by China’s elderly generation, as represented in the 9.0 percent rise of medical supplies exports in 2021. “Angel” trends refer to infant-related demand, shown by the 34.2 percent rise in exports of fashion and clothes for toddlers and young children. “Single” trends are indicated by a 26.4 percent climb in daily necessities exports.
The Chinese government policies for eco-friendly market penetration are another factor for Korea to consider in supporting green industries’ entrance into energy, mobility (hydrogen-fueled vehicles, EVs), smart city and smart farm.
Then there are strategic markets: the GCC (Gulf Cooperation Council), Latin America and EU. Despite their relatively smaller share, these export destinations require Korea’s active attention, as main items in demand are defense, nuclear power plant and infrastructure, all of which are closely tied to Korea’s strategic exports program.
For the GCC region, Korea will support its companies’ market entrance into the energy and infrastructure sectors amid surging oil prices and oil producers’ increasing investments, by swiftly implementing the action plan formulated via summit diplomacy. NEOM is a USD 500 billion project carried out under Saudi Vision 2030 for creating a whole city that harnesses smart technology to power its transportation, science complexes, manufacturing, entertainment and residential infrastructure.
Moreover, Korea will increase support and cooperation in promising sectors, particularly in view of the Middle Eastern region’s oil phase-out and growing emphasis on manufacturing as announced by United Arab Emirates (UAE) in its Abu Dhabi Economic Vision 2030.
As for Latin America’s vast and emerging market, Korea intends to upgrade its FTA network by entering new FTAs with the Pacific Alliance (Chile, Colombia, Mexico, Peru), Ecuador and MERCOSUR (Argentina, Brazil, Paraguay, Uruguay), while engaging in minerals cooperation with countries rich in resources like Chile and Brazil to achieve supply chain stabilization.
For the EU market, Korea plans to capitalize on its nuclear cooperation MOU with Poland (Oct. 2022) to expand market presence, and advance its range of arms exports to supply high value-added items like fighter aircrafts and armored vehicles.
An assertive stance will be employed in Korea’s response to CBAM and such nontariff barriers as well by running a Technical Barriers to Trade (TBT) response team for green trade.
2) Sector-specific exports support:
One, customized support programs will be rolled out to strengthen Korea’s core export items and high-tech industries that show great future growth potential. Industrial Strategy Meetings and Exports Investment Support Team are some of the public-private joint platforms that will be activated to power this push.
Two, Government ministries will nurture promising industries’ exports competitiveness
Strategies have been devised so that not only major manufacturing industries but exports of all sectors, classified under specific ministries, will be stimulated. For instance, MOTIE will nurture the nuclear energy exports, while the Ministry of Culture, Sports and Tourism will concentrate on content exports. Other sectors include arms (Ministry of National Defense), overseas construction (Ministry of Land, Infrastructure and Transport), bio (Ministry of Health and Welfare) and ICT (Ministry of Science and ICT). Supporting committees will regularly inspect the implementation progress.
Three, the Government will grant support to exporters not on the assistance list in spite of their compliance with the foreign trade law. These measures will include the amendment of laws and launching a statistics system to allow for easier access to exports data pertaining to exporters that did not go through customs clearance procedures.
Four, exporters will be provided with trade financing to overcome the “three highs”, namely high interest rate, high inflation and high exchange rate, with Korea Trade Insurance Corporation (K-SURE) financing amounting to KRW 260 trillion. Export credit limits will also be raised to mitigate financial pressure, from the current 7 billion won for SMEs to 10 billion won, and from the current 10 billion won for middle-market companies to 20 billion won. In addition, 60 percent of the 2023 exports assistance budget for relevant institutions (app. 810 billion won) will be concentrated in the first half (H1) to boost exports.
3) Pan-ministerial exports assistance:
One, exports support systems will be reinforced across all ministries.
Although 14 exports-related ministries currently operate their own bodies dedicated to exports, weak inter-ministerial synergy prevents a more organized exports support system from emerging.
The Korean government will designate exports assistance departments and utilize independent bodies to create new organizations to fortify exports support capacity per ministry, while the Exports Support Committee functions as a channel through which ministries can collaborate to assess their joint project progress on a regular basis.
An example of a joint project includes the Ministry of Agriculture, Food and Rural Affairs (MAFRA) working with the Ministry of Oceans and Fisheries (MOF) and MOLIT to seek measures to utilize the logistics infrastructure for cold chain transport of agricultural products.
Two, all ministries will strengthen their relevant institutions’ capacity for exports assistance. Korea Trade-Investment Promotion Agency (KOTRA) and K-SURE are some institutions that can help boost exports assistance capability of ministries and their sub-organizations. Information and people-to-people exchange, as well as joint projects, will be more actively pursued to heighten inter-organizational synergy.
4) Energy imports reduction for trade balance improvement:
The Government will push measures to raise nationwide energy efficiency so as to reduce energy imports and improve trade balance.