How to Promote SMEs’ Export

Two SMEs at the Beginning SMEs for subsistence: to make a living for their families (ex: shops, restaurants, service shops etc.) SMEs for business: to achieve far-reaching success, or to contribute to national economy (ex: trade, IT services, tech startups etc.) → a more important point: Are they ready to assume ‘risk’ in exchange of ‘potential profit’?

What is Potential Profit? Increased sales volume in more expanded markets Higher price for their final products Cheaper price for inputs which are needed in producing their products: intermediate goods (materials and components), capital goods (machines, equipment), land and labor forces

What is Risk? Failure in making good products Lack of technology Lack of good workers Shortage of capital for running business Failure in finding (export) markets Lack of information (buyers, taste, regulation) Bad partners (buyers) Failure in fighting against competition

What Should Government Do? First Task Finding ‘entrepreneurial zeal’ among many SMEs Even among ‘greedy (dirty) people’, in many cases, among importers Not to be captured by SMEs for subsistence (usually politically more outspoken)

To Increase Potential Profit Securing Markets By diplomatic channels, Participating in the World Trading System (WTO) and multilateral negotiations Making bilateral cooperation (FTAs included): trade dialogues, investment guarantee agreement Exchanging visits by high ranking officials (including leaders)

To Increase Potential Profit Securing Markets (2) By helping SMEs to explore foreign markets Bringing them information on markets (ex: embassies, KOTRA, think-tanks (KIEP, KIET), traders associations (KITA) etc.) Guiding them to exhibition fairs (KOTRA) Inviting foreign buyers (KITA, KOTRA etc.)

To Increase Potential Profit Reducing Costs Through special incentives for exporters Unlimited free access to imported materials and components (usually reimbursing tariff on the proof of exporting of final goods) Tariff exemption for imported machines and equipment

To Increase Potential Profit Reducing Costs (2) By providing essential resources in cheap prices Land: Free Export Zone (Masan, often called as export processing zone), industrial complexes (Guro, and Siwha etc.: KICOX) Labor forces: vocational training centers, engineering high schools

To Minimize Business Risks Technology By helping SMEs to procure foreign technologies By establishing public research think tanks KIST (Korea Institute for Science and Technology 24 more public technology institutes: NST

To Minimize Business Risks Money SME-specific bank: IBK (originally called as SME Bank) Trade-specific bank: EXIM Bank SME-specific financing funds: various purposes (marketing, R&D, consultation, hiring, FTAs, etc.)

To Minimize Business Risks Money (2) Startup Stage Funds to support startups : Provide financial assistance to high-tech startups with insufficient financial resources to promote startups and  create jobs   Investment and Loan Hybrid Financial Assistance : Provide financial assistance at low interest rates for high-tech SMEs with growth potential by combining the merits of investment and loan. Income Sharing Loan :After financing, receive income-related interest(fixed interest+income-related interest) based on the company's sales performance Growth Sharing Loan : acquire convertible bonds(CBs) and offer loans at a low interest rate

To Minimize Business Risks Money (3) Growth Stage Funds to establish the foundation for new growth: Designed to create new growth engine to enhance  the competitiveness of SMEs with innovative technology and management capability Re-Growth Stage Business Restart Funds : Designed to create a virtuous cycle of business ecosystem by providing struggling SMEs with funds necessary for restructuring and by supporting them to restart their business

To Minimize Business Risks Money (4) Throughout the whole business life cycle Funds for commercialization of research outcomes : Nurture high-tech SMEs through commercialization of their research outcomes Business Stabilization Funds : Aimed at building a stable business environment for SMEs affected by natural disasters  or facing difficulties

To Minimize Business Risks Risk on Foreign Markets Trade Insurance: KSURE

To Provide General Supports Government Body: SMBA SME-specific public institution: SBC (which is in charge of many SME-specific funds) Association among SMEs: KBIZ (Korea Federation of SMEs) Special Think Tank: Korea Small Business Institute (KOSBI)

Links KOTRA: http://www.kotra.or.kr/foreign/main/KHEMUI010M.html KIEP: http://www.kiep.go.kr/eng/index.do KIET: http://eng.kiet.re.kr/ KITA: http://global.kita.net/index.do KICOX: http://www.kicox.or.kr/index.do Masan Free Trade Zone: http://www.motie.go.kr/ftz/masan/masanMain.jsp

Links Vocational Training: http://www.hrd.go.kr/hrdp/ma/pmmao/index.do KIST: http://eng.kist.re.kr/ NST: http://www.nst.re.kr/nst/index.jsp IBK: http://eng.ibk.co.kr/lang/en/index.jsp EXIM Bank: https://www.koreaexim.go.kr/site/main/index002

Links Trade insurance: https://www.ksure.or.kr/en/index.do SMBA: http://www.smba.go.kr/site/eng/main.do SBC: http://hp.sbc.or.kr/websquare/websquare.jsp?w2xPath=/SBC/eng/common/index.xml# KBIZ: http://www.kbiz.or.kr/home/homeIndex.do?menuCode=eng KOSBI: https://www.kosbi.re.kr/kosbi/main#