How to Promote SMEs Export Two SMEs at

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 farreaching 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 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 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/KHEMU I 010 M. 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. Ma in. jsp

Links • Vocational Training: http: //www. hrd. go. kr/hrdp/ma/pmmao/in dex. 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/in dex 002

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. jsp ? w 2 x. Path=/SBC/eng/common/index. xml# • KBIZ: http: //www. kbiz. or. kr/home. Index. do? menu. Code=eng • KOSBI: https: //www. kosbi. re. kr/kosbi/main#