The Korean government is working on policy measures to minimize the impact of the ongoing currency battle on exporters, officials said Tuesday.
Led by the Finance Ministry and other agencies, the work focuses on feasible policy measures that can be imposed to widen the share of exports by smaller companies. It includes sector-by-sector analysis of the effects of volatile currency movements, which its aims to addressed by diversifying buyers and improving conlomerate-subsidiaries relations.
“The international battle for cheaper currencies is turning into a major concern of exporters here. Relevant ministries have been ordered to find out how exactly exporters are suffering and develop long-term remedies for the volatilities,” a high-level govenment official said.
“Exports is the very engine of our growth facing long-term uncertainties with the currency disputes. Our aim is to unearth new sources of exports from small and medium enterprises,” he said.
The coordination of currency policies is set to dominate the G20 Seoul summit on Nov. 11-12 where the outcome of this week’s G20 finance ministers and central bank governors meeting will be taken to. The overriding view is that leaders will only be able to share the severity of the problem and not reach an agreement on coordinating of the policies.
Leaders have been speaking loudly of their trade deficit problems ahead of the G20 meeting this weekend in Gyeongju. Japan, left with little room for further intervention, asked Korea and China to act “responsibily” on the control of the renminbi and the won. The U.S. delayed again branding China as a currency manuipulator but remained vocal in its opposition to the renminbi’s peg against the U.S. dollar.
Mindful of the disputes’ long-term implications, Korean policymakers are rushing to diversify the country’s source of wealth.
The volatile movement of the won against the dollar brought the currency to the 1,100 won-level, lowering the profit of automakers and electronics in recent weeks.
The government plans to provide financial support for those SMEs with credible export materials or the potential to become one.
“Korea’s economic recovery next year will be hampered by the currency volatilties as well as the slow down of the economic rebound abroad. If we don’t set countersteps against the risks early enough, we may fall short of the 5 percent gross domestic product target,” the official said.
By Cynthia J. Kim (email@example.com)