By Kim Do-young
Ask people around the world to name a Korean company, and they won't find it hard. It's testament to the competitiveness of local conglomerates globally. But there is a lesser known, and equally, if not more vital group in Korea: small- and medium-sized enterprises (SMEs).
Naturally, SMEs don't enjoy the same global reputation as the giants, but they carry an enormous responsibility. Together, they make up 99 percent of companies in this country. They hire close to 90 percent of those working for businesses here, compared with an average of just over half of business employees in France, Germany, Japan, the United Kingdom, and the United States.
In other words, tens of millions of people in Korea depend significantly on SMEs. These businesses have been hit hard by the pandemic and this has caused widespread distress.
We've all seen cherished shop fronts shuttered. This newspaper reported last month that over 450,000 Korean businesses have closed during the pandemic, and that more than nine in 10 small business owners say they are going to close within a year if things don't get better. That is staggering.
Yet, there is hope in the form of digitization and globalization. Many SMEs, as we know, have been able to not only survive but thrive through e-commerce. This change was already underway and has been accelerated by COVID-19.
For example, UPS delivered an average of nearly 25 million packages a day globally in 2020, an increase of several million versus the previous year due largely to the rise in e-commerce demand. For UPS Korea in particular, we saw a jump in package deliveries by nearly 27 percent year-on-year.
I am therefore not surprised to see that Korean SMEs have been exporting more than ever before ― government data showed outbound shipments by SMEs grew nearly 22 percent in the first half of the year to reach a record high.
This is also a great time for Korean SMEs to harness the popularity of this country's culture, just as Incheon International Airport continues to grow as a key regional logistics hub. Interest in everything from Korean cosmetics to seaweed products has been soaring. More recently, we have seen an e-commerce boom in all kinds of products related to the hit Netflix show "Squid Game." With agility, SMEs can seize the momentum of K-culture.
But managing exports is no easy task, especially for businesses that may lack the relevant expertise, experience, and resources in the global market. Moreover, the global trade environment has been highly changeable during the pandemic due to the disruption of supply chains.
This was a common concern that came up among SMEs around the world in research UPS commissioned this year, along with cash flow constraints and other challenges like coping with customs, taxes and returns.
So, how do we ease these problems? The government has come up with one supplementary budget after another and that is of course very helpful. But in my experience, SMEs additionally need help negotiating the difficulties that frequently come up in international trade if they are to tap into the full potential of e-commerce.
Take for example, import and export documentation and declarations. This might sound tedious, but it is crucial to get the paperwork right to prevent delays that can otherwise be so costly. SMEs seeking a global reach must not be held back by regulatory obstacles, and we all need to play our role to smooth their path ― from the relevant authorities to logistics companies.
With Korea continuously signing new trade agreements, as well as taking seriously regional partnerships such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, we have the technology to make it much easier for businesses to overcome even complex and moving trade hurdles, and this is another reason why digitalization is important for SMEs ― allowing them to focus on what they do best.
Thankfully, we can see before us the green shoots of recovery. Since February, when UPS delivered Korea's first Pfizer COVID-19 vaccines, the country has raced forward and approaches the milestone of 70 percent of the population fully vaccinated. As a result, there is real hope that SMEs will be able to operate with freedom and that supply chains will be less disrupted.
That said, it is premature to look beyond COVID-19 at this stage, and SMEs still need our help. We can all do something for them, from support at the level of officials and logistics to consuming their products and using their services.
The country's pandemic response fills me with optimism, and I look forward to many more Korean SMEs joining the online marketplace that will only expand from here. With the right help, they could play an even more vital role in the nation's ongoing recovery.
Kim Do-young is the managing director of UPS Korea.
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Naturally, SMEs don't enjoy the same global reputation as the giants, but they carry an enormous responsibility. Together, they make up 99 percent of companies in this country. They hire close to 90 percent of those working for businesses here, compared with an average of just over half of business employees in France, Germany, Japan, the United Kingdom, and the United States.
In other words, tens of millions of people in Korea depend significantly on SMEs. These businesses have been hit hard by the pandemic and this has caused widespread distress.
We've all seen cherished shop fronts shuttered. This newspaper reported last month that over 450,000 Korean businesses have closed during the pandemic, and that more than nine in 10 small business owners say they are going to close within a year if things don't get better. That is staggering.
Yet, there is hope in the form of digitization and globalization. Many SMEs, as we know, have been able to not only survive but thrive through e-commerce. This change was already underway and has been accelerated by COVID-19.
For example, UPS delivered an average of nearly 25 million packages a day globally in 2020, an increase of several million versus the previous year due largely to the rise in e-commerce demand. For UPS Korea in particular, we saw a jump in package deliveries by nearly 27 percent year-on-year.
I am therefore not surprised to see that Korean SMEs have been exporting more than ever before ― government data showed outbound shipments by SMEs grew nearly 22 percent in the first half of the year to reach a record high.
This is also a great time for Korean SMEs to harness the popularity of this country's culture, just as Incheon International Airport continues to grow as a key regional logistics hub. Interest in everything from Korean cosmetics to seaweed products has been soaring. More recently, we have seen an e-commerce boom in all kinds of products related to the hit Netflix show "Squid Game." With agility, SMEs can seize the momentum of K-culture.
But managing exports is no easy task, especially for businesses that may lack the relevant expertise, experience, and resources in the global market. Moreover, the global trade environment has been highly changeable during the pandemic due to the disruption of supply chains.
This was a common concern that came up among SMEs around the world in research UPS commissioned this year, along with cash flow constraints and other challenges like coping with customs, taxes and returns.
So, how do we ease these problems? The government has come up with one supplementary budget after another and that is of course very helpful. But in my experience, SMEs additionally need help negotiating the difficulties that frequently come up in international trade if they are to tap into the full potential of e-commerce.
Take for example, import and export documentation and declarations. This might sound tedious, but it is crucial to get the paperwork right to prevent delays that can otherwise be so costly. SMEs seeking a global reach must not be held back by regulatory obstacles, and we all need to play our role to smooth their path ― from the relevant authorities to logistics companies.
With Korea continuously signing new trade agreements, as well as taking seriously regional partnerships such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, we have the technology to make it much easier for businesses to overcome even complex and moving trade hurdles, and this is another reason why digitalization is important for SMEs ― allowing them to focus on what they do best.
Thankfully, we can see before us the green shoots of recovery. Since February, when UPS delivered Korea's first Pfizer COVID-19 vaccines, the country has raced forward and approaches the milestone of 70 percent of the population fully vaccinated. As a result, there is real hope that SMEs will be able to operate with freedom and that supply chains will be less disrupted.
That said, it is premature to look beyond COVID-19 at this stage, and SMEs still need our help. We can all do something for them, from support at the level of officials and logistics to consuming their products and using their services.
The country's pandemic response fills me with optimism, and I look forward to many more Korean SMEs joining the online marketplace that will only expand from here. With the right help, they could play an even more vital role in the nation's ongoing recovery.
Kim Do-young is the managing director of UPS Korea.
