U.S. financial woes forecast to hurt S. Korean exports

SEOUL, Sept. 17 (Yonhap) -- The U.S. financial crisis triggered by the Lehman Brother's debacle is casting a shadow on the future of South Korean exports, private analysts and government officials said Wednesday.

Experts say the fallout from the investment bank's decision to file for
bankruptcy protection could further hurt the U.S. market, which accounts for
roughly 10 percent of South Korean exports.

A sluggish U.S. market and growing uncertainty in the global economy could also
cause exports to new emerging markets like China to fall off. A large number of
South Korean companies ship parts to China, where they are assembled into
finished goods and resold abroad.

"Initially the weak Korean won and drop in international crude oil prices
were expected to help South Korea post a trade surplus this month, but as of last
Wednesday that balance remained in the red," an official at the Knowledge
Economy Ministry said. The ministry in charge of commerce had hoped for a trade
surplus in the second half of the year.

In the first eight months of this year South Korea's trade deficit reached
US$12.3 billion, compared to a surplus of $8.44 billion for the same period in
2007. In August the trade deficit of the world's 11th largest trading nation
reached $3.8 billion, due mainly to high global energy prices.

The official, who declined to be identified, added that partial strikes by
unionists at South Korea's Hyundai Motor Co. and Kia Motor Corp. are contributing
to the slowdown in export growth.

"The disruption to production has resulted in an export loss of $700 million
last month that may carry over into September," he said.

Another source of concern is the sharp decline in export growth in the
information technology (IT) sector, which edged up a mere 0.02 percent in August,
the lowest in 11 months.

The state-run Korea Trade-Investment Promotion Agency and Korea International
Trade Association said IT products, including mobile phones, could be hit by the
financial crisis.

South Korean companies had hoped for a surge in demand leading up to the
Christmas holiday season in the United States.

Experts also predicted limited benefits from the effects of the weak won and the
drop in crude oil prices, which have been adversely affecting the country's
balance of trade since late last year.

The Dubai brand fell to US$86 per barrel on the spot market, while the won ended
trading at 1,160 won to the greenback on Tuesday, the lowest in 49 months.

"Latest statistics showed that exports are determined by general global
economic conditions and less by foreign exchange rates," said Chang
Jae-chul, a leading analyst at Samsung Economic Research Institute (SERI).

A 10 percent drop in the value of the Korean won, which would make local goods
cheaper abroad, has been found to bolster exports only by around 0.3 percent
annually.

Chang added that while the country spends less on purchasing oil, its exports to
resource rich countries will also be hit.

Exports to 30 leading resource exporting countries in the Middle East, South
America and Africa rose to 39.6 percent in 2007, and 43.4 percent in the first
half of this year.

Higher costs for natural resources have allowed these countries to place orders
for industrial plants and large infrastructure facilities.

Overall, economists said they would watch to see how the Lehman brothers fallout
develops to get a clearer picture of how it will effect South Korean exports,
which have continued to grow by double digits in recent months despite soaring
resource costs and unfavorable exchange rates.

yonngong@yna.co.kr

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