Middle East War Threatens 30% of Korean Exporters; SMEs Hit Hardest

Hankyoreh reports on the severe impact of the Middle East conflict on South Korea's export sector, revealing that nearly a third of businesses are in crisis. A survey by the Export-Import Bank of Korea highlights that 10.5% of companies deem the situation 'very serious,' facing risks of operational suspension and significant financial losses, while another 19% describe it as 'serious,' with visible revenue declines and contract cancellations.

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The impact of the Middle East war on corporate management is 'very serious' for 10.5% and 'serious' for 19.0%.

The burden is particularly heavy on small and medium-sized enterprises (SMEs), with 30.6% reporting serious or very serious impacts, compared to 19.6% for large corporations. This disparity underscores the vulnerability of smaller businesses to external shocks. The primary concerns cited by exporters are volatile raw material prices (69.6%), logistics and transportation disruptions (57.4%), and unfavorable exchange rate fluctuations impacting profitability (32.8%).

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The proportion of 'serious or more' responses was 19.6% for large corporations, but 30.6% for small and medium-sized enterprises, indicating that the negative impact of the war is greater on SMEs.

Companies directly exporting to the Middle East are facing acute difficulties, with 86.7% reporting logistics and transportation problems and 56.7% experiencing payment delays. Similarly, exporters to Central and South America are grappling with significant transport issues, exacerbated by increased traffic through the Panama Canal due to shifts in oil imports. This situation highlights the interconnectedness of global supply chains and the far-reaching consequences of geopolitical instability.

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The most cited difficulties due to the war were 'fluctuations in raw material prices' (69.6%), followed by 'logistics and transportation disruptions' (57.4%).

While the geopolitical tensions cast a shadow, the Korean economy shows resilience, particularly in the semiconductor sector. The Export-Import Bank projects a robust 30% increase in second-quarter exports, reaching approximately $230 billion, largely propelled by the semiconductor industry's strong performance. However, the bank acknowledges the growing uncertainty and emphasizes the need for support measures, such as logistics subsidies and emergency funding for SMEs, to navigate these challenging times.

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Companies exporting to the Middle East most frequently cited 'logistics and transportation disruptions' (86.7%) and 'payment delays' (56.7%).