KITA Held a Trade Talk by Inviting
The Minister of Trade, Industry and Energy
Recommendations for Trade
1. Upgrading Manufacturing Industry and
Fostering New Promising Export Industries
industrial activity in the manufacturing industry has been shrinking and
exports have been concentrated around specific items. Those are creating
ㅇ The industrial production and production capacity index have
declined and the economic indicators have been dropping for six consecutive
ㅇ Exports remained upward trend of 6.4% until October, but if
semiconductor exports are excluded, the growth rate is shifted to -16.3%, which
means that the export dependence on single item is serious.
Portion of semiconductor in total exports: ‘12.6% in 2016’ → ‘17.1% in 2017’→ ’21.2% in January ~ October, 2018’
ㅇ Moreover, while the competitiveness of the existing major
export items such as automobiles and displays has been clearly declining, new
export products to replace them are not visible. Therefore, we are
concerned about the future of Korea’s exports.
ㅇ In addition, as the export-oriented industries are struggling,
the management of part suppliers is getting harder, and even the damages to the
healthy ecosystem of Korea’s export industry are concerned.
ㅇ Please tell us what you are working on to overcome the current
2. Measures to Support Damaged Enterprises
Due to Restored Iranian Sanctions
ㅇ On May 8 this year, US President Trump ordered to exit
the Joint Comprehensive Plan of Action (JCPOA) and to re-impose sanctions on
Iran. As a result, the sanctions were restored on major industries such as
steel and automobiles on August 6th and on crude oil and
finance on November 5th.
Fortunately, Korea has been
designated as one of the eight countries exempted and we can maintain a 180-day
supply of crude oil and settlement accounts in KRW.
ㅇ However, it is anticipated that the exports to Iran of automobiles,
refined oil products, petrochemical products, shipbuilding and other products
subject to sanctions will be halted or reduced. Moreover, further decrease is
expected as the US government has additionally banned trading with Iranian
state-run or energy companies.
ㅇ Therefore, please tell us about the support measures for the
companies that are expected to be affected.
3. Requests for Simplification of
Korea-India CEPA Criteria of the Determination of Origin and Expansion of
Tariff Reduction Items
ㅇ India is one of the largest and the most promising markets as
well as one of the crucial markets for Korean companies as a hub of the Korean
government’s new southern policy
ㅇ To mark the eighth anniversary of the Korea-India CEPA, the
Ministry of Trade, Industry, and Energy is working on to increase the
utilization rate of the agreement by opening the "CEPA Utilization Support
Center" in New Delhi in May of this year.
However, the export utilization rate of the Korea-India CEPA Agreement is about
67.5%, which is lower than the total export utilization rate of FTA (70%). This
is considered mainly due to the fact that the criteria of the determination of origin is stricter * than other FTA agreements.
* Need to satisfy both subheading change rule and 35% value-added rule of origin
ㅇ In addition, automobile parts and steel, that are Korea’s major
export items to India, are excluded from the schedule of concession, and the
effect of tariff reduction is insignificant.
ㅇ Therefore, we would like to ask for your efforts to improve those
issues in the ongoing negotiations for the improvement of Korea-India CEPA.
4. Recommendations on
Amendment of ‘U-Turn Enterprise Supporting Act’ to Strengthen Supports for
order to create jobs by attracting the Korean companies that went to overseas
to return to Korea, ‘Act on Supporting the Korean Companies Returned from
Overseas (U-Turn Enterprise Support Act)’ was established in 2013.
Despite the enactment of this law, the number of companies that were selected
as the returned companies were only ‘22 in 2014’, ‘4 in 2015’, ’12 in 2016’,
and ‘4 in 2017’.
Since youth unemployment and job-related issues are becoming the biggest
challenges in this time, we think that we need to haste to increase the number
of U-Turn companies by strengthening the supports in the law.
ㅇ First of all, we think that it is necessary
to enhance the incentives for U-turn companies by including the national
capital region in the U-Turn support area, or to include not only manufacturing
industries but also the service industries with high employment inducement
effect in the list of the industries of the U-Turn companies.
also recommend improving the support details considering the situation of the
companies in reality such as extending the benefit duration of the employment
subsidy from the existing one year to two years.
5. Expanded Application of Interest Calculation
Standard and Expansion of Uses When Transferring Industrial Land
transferring industrial land such as industrial facility areas, the interest
shall be determined based on Article 52 of the‘Industrial Cluster Development
and Factory Establishment Act’.
According to the above, the interest* is calculated by multiplying the acquired
price by the total producer price index during the period from the acquisition
date to the transfer date,
* Acquired Price × Producer Price Index
[(Price Index in the Month of Transfer -
Price Index in the Month of Acquisition) / Price Index in the Month of
the total producer price index on the date acquisition is higher than the index
at the time of transfer, there will be no interest and the transfer price will
be lowered. Then, it will result in the loss of tenant companies. Therefore, we
would like to recommend improving the Enforcement Decree of the Industrial
Cluster Development and Factory Establishment Act so that other reasonable
price variables such as consumer price index could be reflected instead of the
total producer price index.
addition, in accordance with Article 2, Subparagraph 18 of the ‘Industrial
Cluster Development and Factory Establishment Act’, and Article
6, Paragraph 5, Subparagraph 3 of the Enforcement Decree of the same Act, the
logistics facilities that purchase and sell goods directly are not allowed to
move into the industrial complexes.
we recommend resolving the related regulations by comprehensively applying the
meaning of the business of establishment and operation of logistic facilities
in the Enforcement Decree of the same Act to the direct logistics activities
utilizing their own products.
6. Improvement of
system related to reducing workweek (flexible working hours, discretionary
working hour system, etc.)
production environment and working conditions vary depending on the
characteristics of industry and business of the company. In addition, small and
medium-sized companies that supply to large corporations are bound to
experience a great deal of production volume differences depending on the
the case of our company that manufacture the semiconductor-related equipments
also experiences the fluctuation in orders due to the high variability of the
market itself. Therefore, our working hours are very flexible.
particular, equipment maintenance and R & D jobs have the characteristics
that their work is concentrated during the periods of initial stage of
development and post-delivery evaluation, as there are many requests from the
company who placed the order. At this time, not only researchers but also
service engineers have intensive workload.
Shortening the working hours without taking into consideration the
characteristics of each industry will bring great difficulties in the
management of small and medium-sized companies.
light of this, we would like to propose the introduction of the annual workweek
system and the expansion of jobs that are subject to discretionary work under
the Labor Standards Act.
Specifically, please allow to operate the flexible working system every
six-month or one-year basis, changing from the current unit of two-week or
propose to extend the jobs that are subject to the discretionary working hours
to the emergency responding jobs to the company who made orders and the
managing jobs and research assistants from the some limited R&D jobs.
7. Supports for
Utilization of Financing for Development
company is working on to obtain business rights of overseas infrastructure
projects in many countries in Asia and Africa, and most of the contracting
governments request the business operator to be responsible for funding.
Korean companies are experiencing difficulties in winning project orders as the
competitors from the developed countries and China advertising extremely
low-interest fund and long-term redemption financing conditions.
recent years, the Korean government has been actively supporting Korean
companies' entry into the overseas infrastructure market by establishing
‘Financing for Development’, which is a combination of the export financing and
Economic Development Cooperation Fund.
the fund provides financial support only for the companies selected through
international competitive bidding and it is difficult to ensure that Korean
companies will be beneficiaries.
it would be a great help for Korean companies to win overseas infrastructure
projects if you could relax the requirements for the Financing for Development
so that the fund could be utilized for the projects developed exclusively by
Korean companies without going through international competitive bidding.