Whenever the nation faltered in exports, the head of the Korea Trade-Investment Promotion Agency emerged as one of the country’s busiest people, working on bridging Korean exporters with overseas buyers.
Kim Jae-hong, who took office as the new president of the 53-year-old KOTRA early this year, was no exception.
“I visited China five times in the past eight months to find out what was really going on in the nation’s largest export market and how to cope with falling demand for Korea goods there,” he said in a recent interview with The Korea Herald.
The export facilitator faces bigger challenges this year, with the Chinese economy showing signs of a slowdown. The Chinese market currently takes in around 25 percent of Korea’s total exports.
The sudden devaluation of China’s currency last month sent Korea’s shipments on its biggest fall since 2009.
The nation’s exports plunged 14.7 percent last month on-year ― its eighth straight monthly decline ― due to the fall of Korea’s shipments to its top two major markets, China and the U.S.
“KOTRA is working hard to put the nation’s falling exports back on track,” Kim said, raising doubts about the nation’s $1 trillion goal in trade volume by year-end.
Korea has achieved $1 trillion in trade for four consecutive years from 2011, boosted by record-breaking exports.
Growth opportunities in China
In an effort to offset falling demand for Korean goods in major overseas markets, KOTRA will step up exploring new markets around the world, including inland cities in China and key cities of Iran ― which will open up to foreign businesses in the wake of the recent nuclear deal with the U.S.
Despite the negative impact China’s recent economic slump is having on Korean exports of industrial goods, the KOTRA chief also noted the brighter prospects in the world’s most populous nation.
“Regardless of the recent economic slowdown, China is expected to shift to the world’s biggest market from its production base, which will offer Korean companies new business opportunities,” he said.
“Many of the Korean companies that I engaged with during my visits to China this year forecast that Chinese demand for quality Korean consumer goods was still taking shape, and so will continue to rise, while Korean industrial goods like cars, steel and petrochemical products will further lose ground in China, challenged by local rivals and rising costs.”
In an effort to tap the Chinese demand for Korean consumer goods ranging from cosmetics to fashion items, the quasi-governmental trade promotion agency has turned its eyes to e-commerce.
“It is critical to secure retail channels to reach out to Chinese living in less developed inland cities,” Kim said.
KOTRA’s Chinese offices have built relationships with online retail giants in China like Alibaba, and linked them to Korean small and medium-sized consumer goods manufacturers.
Global platform for SMEs
The nation’s export promoter has transformed into a global business platform for SMEs seeking to go global in line with the economic development.
“Leveraging our extensive global network, we will link globally competitive hidden champions to business partners overseas,” Kim said. Currently, KOTRA runs 126 offices in 86 countries.
Kim, a former vice trade minister, has repeatedly stressed the importance of SMEs to bring innovation into the Korean economy, which has heavily depended on industrial conglomerates for growth.
The new KOTRA head set a goal of increasing the number of export-driven SMEs to 100,000 from 90,000 during his term.
According to data from KOTRA, only around 3 percent of SMEs are export-oriented.
“The robust growth of the German economy, regardless of fluctuations in the global economy, is rooted in a strong pool of globally competitive small and medium-sized enterprises,” he said.
To offer SMEs integrated sales and marketing support in an efficient way, under Kim’s leadership, KOTRA has formed partnership with export related-organizations, including Korea Trade Insurance Corp. and leading business associations like the Korea Chamber of Commerce and Industry.
Rebooting Korea’s manufacturing
As well as the incubation of small but competitive exporters, the KOTRA CEO underlined the need for structural reform of Korea’s leading manufacturing industries for the country’s sustainable growth.
“It is necessary to have manufacturing businesses for an economy to pursue stability in growth and job supply,” Kim said.
“Korean big businesses, which face growing competition from rivals in emerging markets, have to gear up for high-value-added areas in their business value chains, like planning, R&D and design, in order to maintain their global competitiveness,” he said.
“At the same time, it is important to find new growth engines in technology-convergent businesses where Korea has competitive edge or less developed service sectors.”
The nation’s industrial conglomerates have called for deregulations to bring changes in their business portfolio.
“The problem is that Korea’s key manufacturing industries like shipbuilding, steel and automobiles are squeezed by quickly growing Chinese rivals and so don’t have enough time to prepare for the transition,” Kim said, urging policymakers and lawmakers to work together to develop strategies and action plans for changes.
Bridging role for foreign investors
KOTRA’s other role to attract foreign investment has gone through changes in line with the market demand. The company has led investment promotion activities through Invest Korea, a KOTRA affiliate, established in 1998 to overcome the 1997 Asian financial crisis.
In contrast with falling exports, foreign direct investments in Korea hit a record high of $19 billion last year. The upward trend continued in the first half of this year, KOTRA officials said.
“Foreign investment from China and the Middle East region through M&A deals are on the rise,” Kim said.
“In an era of globalization, what matters in FDI attraction is its contribution to the economy rather than investment types or origin of investors.”
KOTRA has adopted a proactive approach to FDI attraction by offering matching services to help international and Korean companies link together to discuss joint partnerships.
Communication and collaboration
For the past eight months, the new KOTRA head has sought to bring changes into the organization as well by stressing communication and collaboration internally and externally.
“I hope to build a working environment to make employees feel driven by trust and self-motivation,” Kim said.
“I believe employee satisfaction is important for a platform business where customer satisfaction is a key factor for success.”
By Seo Jee-yeon