Companies must cut costs to stay globally competitive: official

SEOUL, May 18 (Yonhap) -- South Korean companies must take concrete steps to cut
costs in order to remain globally competitive in the face of rising energy prices
and unfavorable exchange rates, a senior government official said Monday.
Knowledge Economy Minister Lee Youn-ho said at a meeting of business umbrella
groups, financial institutions and state-run trade promotion agencies that the
appreciation of the Korean won and rising global energy prices is expected to
hurt the overall competitiveness of many local companies.
The Korean currency, which fell to 1,500 won against the U.S. dollar earlier in
the year, has since appreciated to the 1,250 won range at the close of trading
last week. The price of the benchmark Dubai crude shot up to US$56 per barrel in
the first 15 days of this month from an average of $45 for March.
"There are some positive signs that the economy is making a comeback, but monthly
figures for production, facility investment, consumption and employment have yet
to show any real improvements," the policymaker said, emphasizing the need for
companies to tighten their belts.
The remarks come as the steady rise in local stock prices and a record high trade
surplus tallied for April has fueled optimism in the market that the economy has
hit bottom and is making a recovery.
Business umbrella groups and state-run financial agencies, meanwhile, said they
will take active steps to help promote exports and improve liquidity flow to
small and medium enterprises (SMEs) that have been hard hit by the worldwide
economic downturn and stand to be hurt the most if external trade conditions
deteriorate.
Small Business Corp. said it will spend 70 percent of its allocated 4.3 trillion
won (US$3.4 billion) in support funds in the first half of this year, with the
Small and Medium Business Administration to provide close to 5.0 trillion won in
repayment guarantee coverage to SMEs that cannot easily receive loans from banks.
The Korea Trade-Investment Promotion Agency said it will host trade fairs and
expos to help local companies meet overseas buyers, with banks to expand export
insurance coverage, while the Korea Export Insurance Corp. said it has increase
coverage by 37 percent to 56 trillion won in the first four months of this year.
Support of SMEs is deemed critical as they make up 99 percent of all companies in
the country and hire roughly 88 percent of all workers. These smaller-sized
companies also help boost exports in the machinery, parts and components sectors.
yonngong@yna.co.kr
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