Exporting SMEs "Contract Delays Due to Martial Law, Suffered from High Exchange Rates"

Emergency Survey by Korea Federation of SMEs
3 out of 10 Companies Suffer 'Contract Delays, Reductions, and Cancellations'

It has been revealed that 3 out of 10 export small and medium-sized enterprises (SMEs) suffered direct or indirect damage due to the ‘12·3 Emergency Martial Law Incident’.

The Korea Federation of SMEs recently announced the results of an urgent survey on December 18 to assess the damage status of export SMEs in relation to the unstable domestic economic situation.

As a result of surveying 513 export SMEs, 26.3% of them experienced direct or indirect damage due to the uncertainty of the domestic political situation. Major damage cases included ‘contract delays, reductions, and cancellations’ (47.4%), ‘increase in overseas buyer inquiry calls’ (23.7%), ‘delays, reductions, and cancellations of orders and shipments’ (23.0%), and ‘problems caused by high exchange rates’ (22.2%).

Among the export SMEs, 63.5% responded that although they have not yet suffered damage, they might experience it in the future, while 36.5% said they would not.

A manufacturing representative from Cheongju stated, "Since December 3, overseas buyers have been delaying contracts under discussion, and due to the unstable domestic situation, overseas buyers are reluctant to pay advance payments upon contract signing, which has made the company’s management situation very difficult."

There was also damage caused by the rise in exchange rates. A manufacturing representative from Gyeonggi-do said, "I received an invoice the day before the martial law and was about to make a payment, but the exchange rate suddenly rose within a day, causing losses. Overseas clients are expected to move up payment deadlines due to concerns about delayed payments."

Regarding the expected duration of the current domestic economic uncertainty, ‘within 6 months’ was the highest at 49.3%, followed by ‘lasting 1 to 2 years’ (32.2%), ‘long-term over 2 years’ (8.2%), and ‘lasting only until the end of this year’ (7.4%).

When asked about damage response measures, ‘actively clarifying that there is no problem with the domestic situation’ was the highest at 51.7%, followed by ‘efforts to discover new buyers’ (13.3%), ‘proposing contract alternatives while bearing damage’ (8.8%), but ‘no appropriate response measures’ also accounted for 25.5%.

As for policies that the government should focus on to overcome the current situation, ‘establishing measures to restore national external credibility’ (74.7%), ‘formulating exchange rate stabilization policies’ (55.2%), ‘support for expanding overseas sales channels’, and ‘reducing import tariffs on major raw materials’ (each 34.9%) were surveyed in that order.

Choo Moon-gap, Head of the Economic Policy Division at the Korea Federation of SMEs, emphasized, “Due to the decline in national trust and image and the impact of the sharp rise in exchange rates, export SMEs are facing difficulties. Above all, restoring external credibility and stabilizing exchange rates are crucial,” adding, “To overcome the crisis caused by rapid economic uncertainty, the National Assembly, government, and SME sector must cooperate with one heart to prepare countermeasures.”