Koreas Export Support System How to support export

Korea’s Export Support System How to support export SMEs in KOREA December 26 th 2016, UAE Introduce Export Support System - By Focusing on export financing - K. S YANG Chief of Marketing Support Department Korea Federation of Small and Medium Business

C o n t e n t s I. III. Introduction Supporting Field Support system by stage of SMES development IV. Trade Insurance support system

Part I 3 Introduction

Introduction Why to support Export SMEs ▶Export charge of economic growth in Korea - Korea has Poor Resources and Internal Market - Export first Policy from 1970 s. “Do our best to increase export “ said minister of Moite (3 rd Public-private joint meeting Export and Investment, July 2016) ▶ Export SMEs have various difficulties (KITA, 2014) Internal Factors - Lack of specialized man power (68. 9%) External Factors - Lack of Information about overseas - Lack of export operation fund(67. 9%) - Lack of knowledge about export support markets(63. 5%) - Unprepared to Foreign specifications system(65. 7%) and Quality certification(61. 3%) 4

Introduction ▶ The world's major SMEs try to export aggressively to overcome the limitations of the domestic market and lasting businesses expand sales The world’s major SMEs (HIS Global Insight, 2012) USA UK Russia Mexico Japan Italy India Germany France China Canada Brasil 5

Part II 6 Supporting Fields

Supporting Fields Support to Various Sector From Export Planning to Run Ø Education, Consulting, Market Survey - educate and consult SMEs that are unfamiliar to export about basic skill and export know-how - support the oversea market research Ø Searching and Match-making to Buyer - find a buyer interested in their products and help to meet buyer Ø Support to Obtain Certification abroad - support the certification required for export abroad Ø Support to Participate Exhibition - support participate exhibition, booths install , interpreter etc Ø Support to Finance - financing to technology development for export , Trade insurance Ø Support the Patent Dispute - advise and consult to prepare patent dispute Ø Others 7

Part III Support system by stage of SMEs development 8

Support system by stage of SMEs development A. First step SMEs to Export ▶ Education, Consulting, Market Survey - Export Capability Strengthening Program(SBC) - Strengthening links with Overseas Koreans and Fostering Next Generation(OKTA) - Visiting Consultation(KOTRA) ▶ Searching and Match-making to Buyer - Support Program to Startup Partnering(KOTRA) - Global Startup Frontier Project(KOTRA) - Changing Non-exporting SMEs to Export Company(KOTRA) - Make Network of Overseas Korean Traders(OKTA) ▶ Others - K-Startup Summit(KOTRA) - Support Startup to link-up Global Enterprise Demand(KOTRA) - Expansion Project of Global Startup (KOTRA) 9

Support system by stage of SMEs development B. Second Step to Export SMEs ▶ Education, Consulting, Market Survey - Programs that enhance the Response Capabilities of FTA(SMBA) - Educational Programs Linked to Global Demand(KOTRA) - Projects that Utilize Private Networks Located Overseas(SBC) - Consulting on FTA Export(SBC) - Programs to Utilize Overseas Civilian Ambassadors(KBIZ) ▶ Searching and Match-making to Buyer(a) - Program to Support Entry into Overseas Large Distribution Network(SMBA) - Programs That Help Large Company and SMEs Enter Overseas Together(SMBA) - Overseas Marketing Support Program Tailored to Individual Company Demand(Future Dpt) - IT Support Center Established Oversea(Future Dpt, KOTRA) - Delegation to Expand Trade(KOTRA) 10

Support system by stage of SMEs development B. Second Step to Export SMEs ▶Searching and Match-making to Buyer(b) - Global Partnering Program(KOTRA) - Programs that Introduces Global Buyers to Purchases(SBA) - Support to On-line Export(SBA) - Programs that Enable Sale to Overseas Distributors(SBA) - Export Support Program for Local SMEs(SBA) - Dispatch of Trade Facilitation Team(KBIZ) ▶Participate Exhibition - Support To Advancement of The Information Protection Industry Overseas(Future Dpt) - Seoul International Food Industry Exhibition(KOTRA) - Support to Participate Overseas Exhibition(KITA) ▶Support to Patent Dispute - Trade Dispute Relief Support System(KBIZ) 11

Support system by stage of SMEs development B. Second Step to Export SMEs ▶Support to get Certification abroad - Establish a Support System That Prepare Overseas Standards(SMBA) - Support to Gain AEO Accreditation(Custom s Service) ▶Support to Finance - Support to Develop Technology Related to Overseas Demand (KOTRA) - Trade Adjustment Support Program(SBC) - Export Financing Program(SBC) ▶Others - Global Champ Development Program(KOTRA) – Midsize Company also - Make the Best Products In The World(KOTRA) – Midsize Company also - Export Incubator(KOTRA, SBA) - Support to Return Enterprise(KOTRA) – Midsize Company also 12

Support system by stage of SMEs development C. All Steps Support ▶ Education, Consulting, Market Survey - YES FTA Consulting Program(Customs Service) - Legal Advisory Service of the Korean Embassy(MOFA) - Consult on Export and Investment(KOTRA) - Research on Overseas Markets(KOTRA) - Consult on IT(Information Technology) Export (KOTRA) - Trade & Investment Information Internet Portal (KOTRA) - Internet Economy Portal to the Top Diplomatic (KOTRA) - Korea-China FTA Utilization Support Center(KOTRA) - Information Portal for Overseas Investment(KOTRA) - Support for Export of Information and Communication Broadcasting (NIPA) - Trade SOS (KITA) 13

Support system by stage of SMEs development C. All Steps Support ▶ Searching and Match-making to Buyer - Sporting Goods Overseas Roadshow(MCST) - Support for Export of Internet Game(MCST) - Support for Acquired Oversea Projects Order(KOTRA) - Fostering Leading Companies in Medicine & Medical Devices(KOTRA) - Support for Acquired Oversea Hospital Project(KOTRA) - Support for Overseas Business Trip(KOTRA) - Support for Auto Parts Export(KOTRA) - Invite Overseas Buyers and Hold Export Consultation(KOTRA, KITA) - Cooperation Network Supporting Overseas Entry(KEITI) - Dispatch of Trade Investment Delegation(KITA) - Trade Korea(KITA) - Kmall 24 , Support for Direct Purchase from Overseas(KITA) 14

Support system by stage of SMEs development C. All Steps Support ▶ Searching Support to get Certification abroad - Fostering Halal Food Industry(MAFRA) ▶ Support to Finance - Excellent Aquatic Products Support Business(MOF) - Fostering Global Leading Procurement Company(KOTRA) - Trade Insurance(KSURE) * - Loan, Guarantee, Foreign Exchange(KOREAEXIM) - Provide Funds to Foster Environmental Industry(KEITI) - Trading Fund Loans(KITA) ▶Support to Patent Dispute - Intellectual Property Protection, ‘IP-Desk’(KIPO, KOTRA) - Intellectual Property International Dispute Resolution Support(KIPO) 15

Support system by stage of SMEs development C. All Steps Support ▶ Participate Exhibition - Support To Participate International Sporting Goods Exhibition (MCST) - Supporting Animation Overseas Market Entry(MCST) - Support to Participate International Broadcasting Exhibition(MCST) - Korea Outstanding Products Exhibition(KOTRA) ▶Others - Support to Overseas Expansion of Software Industry(MSIP) - Support to Obtain Overseas Procurement Contract(KOTRA) - Support for Establishment of Overseas Corporation(KOTRA) - Support to On-line International Marketing(KOTRA) - Support to Solve the Problem of Overseas Customs Clearance(Customs Service) - AEO Mutual Recognition Agreement(Customs Service) - Support of FTA Origin Management(KT net) 16

Part IV Trade Insurance Support System 17

Trade Insurance Support System u Short-term Export Credit Insurance (General) This scheme (under which there are several products) is devised to cover an importer or L/C issuing bank (policyholder) from the non-payment risk in those transactions with the payment period of less than two years and is the most frequently used among various export insurance schemes. It helps a healthy growth of exports by promoting export transactions based on trust and is a safe management tool of non-payment risk for exporters. < Risk Covered > ▶ Commercial risks: Importers’ (or L/C issuing banks’) inability to pay, payment delays, refusal to accept shipment, etc. ▶ Political risks: War, FX transfer difficulties, etc. 18

Trade Insurance Support System u Short-term Export Insurance (Buyer Credit) This product covers the domestic or foreign financial institution (policyholder) that provides a loan (buyer credit) to an importer, which is used to pay for export proceeds. ▶ Types of Buyer Credit - Direct loan A bank lends export proceeds directly to an importer. - Indirect loan A bank in an exporting country extends a line of credit to a bank in an importing country, which in return lends export proceeds to importers within its country within the line of credit. ▶ Transaction Structure - Policyholder: Lending financial institution Borrower: Importer or a bank in an importing country. - Covered Amount: Loan principal + interest Transaction Structure for Buyer Credit 19

Trade Insurance Support System 60 percent of the annual expected insurance premiums are to be paid within 30 days from the opening date of the insurance period 20

Trade Insurance Support System u Calculation of premiums Premiums are calculated based on the following table, depending on whether the policyholder subscribes to comprehensive insurance or not. 21

Trade Insurance Support System u Short-term Export Insurance (Buyer Credit) This product is designed to help exporters in which exporters can produce K-sure’s guarantee as security toward securing trade financing After signing export contracts, exporters rely on domestic foreign exchange or export-related banks to secure loans (based on export guarantee issued by a foreign financial institution designated by the importer) to purchase raw materials and manufacture goods to be exported, but these banks usually require some type of security from exporters. This scheme is especially helpful to small and medium-sized exporters who have difficulty in receiving trade financing from banks. 22

Trade Insurance Support System u Post-shipment Export Credit Guarantee This product functions as security for exporters receiving export proceeds early from F/X banks that purchase export proceeds from the exporter based on shipment documents including bills of exchange after the shipment of goods. Foreign exchange banks pay exporters early based on K-sure’s guarantee as security, in case importers default on export proceeds. 23

Trade Insurance Support System u Medium and Long-term Export Credit Insurance(pre-shipment) This product covers exporters’ losses when export becomes impossible or when exporters cannot receive export proceeds from importers after concluding export contracts with settlement periods exceeding two years. ▶ Risks Covered - Commercial Risks: Importer’s bankruptcy. - Political Risks: Release or cancellation of export contracts due to wars, revolutions, declaration of moratorium by the importing country, measures delaying money transfer, termination of export contracts by public importers 24

Trade Insurance Support System u Medium and Long-term Export Credit Insurance(Supplier Credit) This product covers exporters from the nonpayment risk of export proceeds by importers for those transactions exceeding two years. Exports in the EPC and shipbuilding industries involve large transactions with a long repayment period and developing countries that may be economically and politically unstable. And this product covers the political and commercial risks that accompany in the export of goods to these developing countries. 25

Trade Insurance Support System 26

Trade Insurance Support System u Medium and Long-term Export Credit Insurance(Buyer Credit) This product covers financial institutions at home or abroad providing buyer credits from the nonpayment risk of export proceeds by importers or importing countries’ financial institutions for those transactions exceeding two years with a deferred payment basis. 27

Trade Insurance Support System Buyer Credit : is offered by a financial institution providing trade financing for export transactions. And in such a case, the institution seeks cover under this product to ensure payment by the importer or a financial institution from the importing country that extended trade financing to the importer. 28

Trade Insurance Support System u Interest Rate Risk Insurance This product covers financial institutions that are covered under K-sure’s medium and longterm export insurance (buyer credit) and have extended or will be extending export financing for those transactions with a payment period exceeding two years. Korean companies enter competitive international biddings to secure orders for medium and long-term export transactions including the engineering, construction and procurement sectors involving petrochemical and power generation facilities. The OECD has set a minimum interest rate scheme called CIRRs (commercial interest reference rates) to prevent over-competition during this bidding process. The problem is that clients prefer these fixed CIRRs over floating rates often extended by commercial banks, but there is limited number of banks that can extend export financing on a CIRRs basis. This product is designed to resolve differences in interests among financial contract parties and allows businesses an easy access to export financing. Under this product, K-sure indemnifies those financial institutions for losses and redeem returns resulting from fluctuating interest rates. Basic Transaction Structure Transactions covered (or expected to be covered by) Medium and Long-Term Export Insurance (Buyer Credit) Applicable to Buyer Credit 29

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Thank you 31