Exports are in a state of emergency

Export tumbled 9.3 percent, reaching a 26 month low over the past two months. Although President Kim Dae-Jung met with economic ministers to discuss how to boost plunging exports at Chong Wa Dae on May 3, it was more likely an allopathic remedy.

It is true that the stagnate economics in the US and Japan and the subsequent stagnation in other states, which themselves depend on the US and Japan, can be blamed for the biggest reason for this export slump. For this reason, Korea is not a unique case. However, the government is also responsible for the recent shrinking exports.

For instance, exports have been shrinking despite the huge increase of the exchange rate of Won. This indicates the absence of governmental policy on industry. The reason that the government had allowed for the increase of the exchange rate of Won was mainly to revitalize exports. However, the result shows slump in exports along with the rising inflation. This is one clear example that demonstrates the lack of the comprehensive policy.

Imports are rapidly shrinking as well. Imports decrease by a significant margin of 23.4 percent in April illustrates that companies are not investing. This will eventually leads to further decreases in exports by causing problems in production.

Although the government offered to extend the investment tax deduction period, this was not efficient plan. This is only a grand display by the government. The reason why the companies do not invest is due to the lack of consumer confidence in the market system. There is also psychological reason embedded along with the economical prediction. The excessive government regulation is another reason. The role of the government is to guarantee the free competition by eliminating obstacles. When the government agencies’ involvement is too entrenched by demanding standardized economy, it is most likely that the companies do not actively seek out investment and as a result exports will further shrink. The most urgent role of the government is to encourage the companies to compete under the capitalist market rule.