What about the 20,000 Used Cars Caught in the Middle East?

Iraqi Special Procurement Demand Turned into Unfavorable Factor-

The Iraqi government announced at the end of last November that starting on January 1, 2005, it would prohibit the import of used cars that were produced before 2000 for environmental protection.

The reason why Korean used cars are getting caught in Jordan is that the import ban was unexpectedly made public just one month before the day the ban enforcement began.

Used cars exported to Iraq are sold to Iraqi buyers in tax-free areas of Jordan, to which it takes one to two months transporting the cars.

Mr. A (37, Seo-gu, Incheon), president of an used car export company, said, “When the measure of the Iraqi government was announced, we couldn’t help leaving our cars in Jordan, as 80 used cars had already been shipped.”

As exports were banned, the company’s exports, which amounted to about 500 cars per month until the end of last year, dropped this year to around 20 per month, and the number of employees is now only three, decreased from 30 employees last year.

Mr. A showed frustration, saying, “As administrative expenses, including the rental of a container yard, cost 5,000 won per day for each car, I cannot expect any profit.”

Mr. B (38, Gwangmyeong, Gyeonggi), an exporter who piled up about 50 cars in Jordan, said, “Five export companies have closed their businesses already,” and, “There are many companies that disassemble used cars to sell their components while taking losses, because they cannot afford the administrative expenses.”

Export companies are also to blame. The industry maintains that many exporters pushed the shipment of used cars along even after the Iraqi government’s announcement of the import ban, with the expectation of Iraq’s lifting of the import ban.

Alternative, New Markets should be Opened-

As the Iraqi war came to an end, 133,000 of used car exports in 2002 increased to 320,000 last year. Seventy-three percent of the increased exports last year were transported to Iraq via Jordan and Syria. Particularly, it is known that small and medium-sized companies, which cover only small markets, focused more than 90 percent of their exports into Iraq.

Most of the cars exported to Iraq are outdated, used cars that were produced before 2000. That is why while the average export price per unit for used cars was about $2,400 last year, that of the Middle East was about $1,700.

The industry thinks that ensuring new markets is the key to revive used car exports. African nations, Chile, Peru, and Russia are mentioned as alternative markets for Iraq.

An official in the used car industry said, “As used car exports imply taking advantage of new car markets, seeking new markets are significant… However, because capacities of small businesses are limited, government-level countermeasures are required.”

Sung-Won Joo Joong-Hyun Park swon@donga.com sanjuck@donga.com