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[Asia Economy Reporter Moon Chaeseok] A survey found that half of Korean companies expect the export environment to worsen this year. About half of semiconductor companies indicated they would reduce domestic and overseas investments.

On the 19th, the Korea International Trade Association's International Trade and Commerce Research Institute released a report titled 'Export Companies' 2023 Business Environment Outlook.' It included results from a survey of 1,327 companies with export performance exceeding $500,000 (approximately 620 million KRW).

46.9% of respondent companies answered that the business environment for export companies would deteriorate this year. This is about three times the 16.9% who said it would improve. The 'worsening' response rate for semiconductors, the top export item, was 45.2%. Other sectors such as chemical products (58.7%), plastic and rubber products (56%), and steel and non-ferrous metal products (52%) also reported high uncertainty.

Many companies also said they would reduce investments. 58% of respondents said they would maintain overseas investments at last year's level, and 27.5% said they would reduce them, totaling 85.5%. For domestic investments, 55.3% said they would maintain and 29.5% said they would reduce, making up 84.8% of companies. Among large companies, 43% said they would reduce both domestic and overseas investments.

In particular, the response rate for reducing semiconductor domestic and overseas investments was the highest at 45.2%. Considering it is the top export item, this is expected to have a significant impact on the Korean economy. Companies responded that "there is an urgent need to promptly implement tax support to revitalize semiconductor investments."

Companies identified the top three export risks this year as global economic slowdown, supply chain difficulties, and exchange rate and interest rate fluctuations.

The exchange rate breakeven point was surveyed at 1,250 KRW per USD. Recently, the exchange rate has fallen below the mid-1,200 KRW range, increasing the likelihood of reduced profitability for export companies. Companies emphasized the need to "establish policies for medium-sized and small enterprises that face high exchange rate fluctuation risks."

39.5% of companies predicted that the decline in exports to China, a major market, would continue this year. Concerns were especially high among semiconductor (53.7%), chemical products (47.1%), and plastic and rubber products (46.8%) companies, which have a large proportion of exports to China.

There was also an opinion that Chinese companies' competitiveness is similar to Korea's. When asked about Chinese companies' competitiveness assuming their own competitiveness is 100, steel and non-ferrous metals scored 99.6, wireless communication 99, and semiconductors 94.3. Large companies (97) rated Chinese companies' level higher than medium-sized (95.8) and small companies (96).

Companies cited corporate tax reduction (18.1%) as the most urgent support policy. This was followed by supplementation of the 52-hour workweek system (17.7%), tax credits for research and development (R&D) investments (15.7%), and adjustment of the minimum wage increase speed (13.6%).

Electric and electronics and semiconductor sectors prioritized R&D investment tax credits; plastic and steel sectors prioritized corporate tax reduction; and automobile, parts, and machinery sectors prioritized supplementation of the 52-hour workweek system.

Jo Euyoon, senior researcher at the Korea International Trade Association, said, "It is urgent to prepare policies that respond to corporate demands such as expanding tax support and labor market reform."