Exporters are in tears over the increasing value of the Won over the U.S. dollar, and people are expressing worry over the shrinking trade surplus. Last week the exchange rate fell to W950. Big business feels it for sure, but you can tell that medium sized companies dealing in exports are in a lot of difficulty.
You sympathize with their hardship, but we still think the time has past when you should make appeals to government officials responsible for foreign currency issues and demand that they enact defensive measures. It is indeed their job to prevent rapid fluctuations in the exchange rate, but anything beyond that should be approached prudently. Defensive measures to protect the Won cost an awful lot, and, given previous experience, are not especially successful. In the end, the only way forward is to increase export competitiveness based on quality. Big developing nations like China are pushing their way up, so even without the exchange rate problems, it would be hard to last very long on competitive prices.
We need to change the automatic idea that when the exchange rate falls the sky is falling as well and that it is something to make a fuss about. According to figures from the Korea Institute of Finance, exports have always continued to increase even when the dollar has fallen, and a current account surplus is not necessarily a good thing. A lower rate serves to absorb the shock of rising materials costs, and it also helps in restoring domestic consumption and the management of the currency supply.
If the current rate is going to be the long term trend, the desirable response would be to use the opportunity to make qualitative improvements in the landscape here at home. After the 'Plaza Agreement' of 1985 the Yen/dollar rate went from 260 to 120, but have not Japanese companies endured? Companies need to exert themselves in maintaining low costs and improving quality, and the government needs to back them up in that effort. Middle-sized companies have a particularly hard time adequately managing currency risk. They are in particular need of government help.
The Hankyoreh, 10 April 2006.
[Translations by Seoul Selection]
[Editorial] Higher Won Could Be Opportunity |
