More than 2,500 Korean exporters close over 3 years on sluggish demand

[Photo by Yonhap]

More than 2,500 South Korean export companies have shut down business over the past three years as overall trade shrinks amid a weak global economy, raising concerns that the export-driven economy will lose its steam in the long run.

According to an analysis conducted by Maeil Business Newspaper on data provided by the Korea International Trade Association on Wednesday, the number of export companies of all sizes in Korea stood at 95,989 in 2022, down from 98,584 in 2019. The number of Korean export companies reached its peak in 2019 at 98,584, up from 82,509 in 2010 before going downhill.

Industry insiders noted that the decline comes as Korean companies are no longer able to survive in the global market as they lack competitiveness. Small exporters, in particular, are more vulnerable to the external environment.

The number of small- and mid-size exporters shrank by 2,680 to 92,549 in 2022 from 95,229 in 2019. This is in contrast to how the number of mid-size and large export companies rose slightly during the same period.

Export markets have also changed.

The number of Korean companies exporting to China shrank 5,151 over the last three years while those shipping goods to the U.S. rose by 1,898.

The number of companies shipping to Vietnam, a market that emerged as an alternative to China, also declined by 1,428.

Market insiders noted that it is difficult for companies once liquidated in the export market to re-enter as the overseas sales structure is much more complex than the domestic scene. They also need to re-invest in the same knowhow and cost and repeat the export procedure from the start.

The number of Korean importers, in the meantime, is growing.

According to Statistics Korea, the number of import companies rose to 209,639 in 2021, up from 192,791 in 2019.

The number of companies importing goods from the U.S. fell 301 while those from China rose 18,826.

In general, export companies are more competitive than domestic companies as they are able to generate profit in spite of all the fixed costs for exports.

Local companies tend to be established first when the economy flourishes to meet domestic demand. Of them, those with outstanding competitiveness advance into overseas markets and contribute to the national economy and growth.

When the economy contracts and companies lose their competitiveness, however, exporters return. They compete with other local companies in the domestic market and some of them are liquidated.

There are concerns that Korea will lose its steam as it is losing its export vibe.

The government expected exports to recover once the economy improves, saying that the sluggish outbound shipment is mainly due to the weak chip demand and global economy.

However, critics noted that Korean export companies are disappearing and there will be no drivers once the global economy and demand recover.