KITA - Half of Export Companies Predict Worsening of Business Conditions for This Year

An analysis has been released reporting that about half of Korean export companies predict that business conditions for this year shall worsen. On January 19, a researcher of international trade and commerce at the Korea International Trade Association’s revealed that results of a survey of 1,327 companies with annual export performance of at least USD 500,000 showed that 26.9% of respondents predict worsening of business conditions this year, which was 3 times as much as those who responded that conditions would improve (16.9%).

At least half of responding companies in the areas of chemical industry products (58.7%), plastic and rubber products (56.0%), steel and non-ferrous metal products (52.0%) gave a negative outlook. In the case of semiconductors, which are a number one export product, as much as 45.2% predicted a deterioration of the business environment.

80% of exporting companies are known to be planning on maintaining domestic/overseas investments at the same level as last year or reducing them to a lower level. 43% of large enterprises responded that they planned on reducing both domestic and overseas investments.

In terms of product, respondents who said that they would reduce domestic/overseas investments were the most (45%) for semiconductors, which revealed that tax assistance for promotion of investment in semiconductors was in urgent need. It was also observed that the recent strengthening of the downward trend in the won-dollar currency rate, as it dropped below the mid KRW 1,200s per dollar, will have an impact on the decreased profitability of export companies. 39.5% predicted that the downward trend in exports to China will continue this year.

Based on product, respondents who predicted that exports to China would drop the most were the highest for semiconductors at 53.7%, while companies in the chemical industry (47.1%) and plastic/rubber products (46.8%) also expressed concern. Export companies picked the global economic slowdown, bottlenecks in the supply network, and fluctuations in the currency rate and interest rates as the three major risks for this year. Many replied that in order to increase exports, the corporate income tax must be reduced (18.1%) and the 52 hour week system must be revised (17.7%).

The response that a drop in the corporate income tax is necessary was the most prevalent for the plastic and steel industries in which profitability is showing a trend of decline. The electrical/electronic and semiconductor areas in which R&D competitiveness is essential was shown to be in urgent need of tax deductions regarding investments. Automobiles/components and machinery industries that require production adjustment pursuant to demand emphasized the need for revising the 52 hour week system, while the agro-fishery industry that needs timely transportation demanded the revision of the minimum fare system required to secure safety.

[Provided by Yonhap News]