Policy Issues for Promoting and Facilitating International Trade by SMEs: the Case of Korean e-Trade

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Policy Issues for Promoting and Facilitating
International Trade by SMEs the Case of Korean
e-Trade
November 24, 2004
Yoo Soo Hong Chaired Research Fellow Korea
Institute for International Economic Policy
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• Introduction
• E-Trade in Korea
• Strategy for e-Trade Development
• Policies for e-Trade Development
• V. Implications

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I. Introduction
? Definition of e-Trade

• The trade activity that performs international
  trade of
• goods and services by electronic and
  information-intensive
• method with IT including the Internet
• E-Trade is a process combining IT
  infrastructure, related
• industries, supporting laws and institutions,
  enterprises, trade-related organizations, etc.

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? Importance of e-Trade

• A core Strategy for enhancing national
  competitiveness
• through structural innovation of trade which is
  the
• backbone of the Korean economy

? Vision of the e-Trade in Korea

• Achieving a leading e-trade nation in 21c
  through
• e-Trade Korea by offering the environment and
  services
• for all enterprises to trade by efficient and
  effective
• methods using the Internet any time any where

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? Expected Results

• o Become one of world e-trade leaders within a
  few
• years
• Establish the national brand value of a good
  trade
• partner through active promotion of e-trade
• o Industrial innovation and improvement of trade
• environment and competitiveness
• Improve enterprises, organizations and the
  economy
• for productive and efficient structure and
  process

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• - Enhance the productivity of trade-related
  industries and
• their performance
• - Strengthen international competitiveness of
  enterprises
• o Targets
• Establish an Internal trade system for 24
  hour-365 days
• Complete a global e-Trade network
• Increase SMEs e-Trade participation up to 50
• Increase e-Trade up to 40 of the total of
  Korean trade

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II. E-Trade in Korea
? Programs and Systems

• o Market survey and exploring trade partners
• E-General Trading Companies (EC21, ECPlaza,
  Tpage)
• Trade information portal (KOTIS)
• o Consulting
• Electronic mail
• Credit survey portal (DB)

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• o Contract
• Electronic contract
• Electronic certification
• o Business and foreign exchange
• E-C/O
• Trade network (L/C, I/P)
• o Logistics
• Shipping and port transport network (KLNET)
• Goods tracing system (E-logistrame frame, MFCS)
• E-L/G, e-B/L

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• o Custom process
• Custom process network (KTNET)
• E-Customs
• o Payment
• TradCard
• Bolero
• VISA
• CTB, MPT

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Evaluation of Korean e-Trade Progress by Process
(I)
Note Progress assessment in regard to the
target set by the e-Trade Korea strategy as of
2004. Source Korea International Trade
Association

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Evaluation of Korean e-Trade Progress by Process
(II)
Laws/ institutions
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• ? Programs in e-Trade in Korea
• In the last 10 years, the e-Trade base has been
• established by the coordinated efforts of the
  government,
• related public organizations, and enterprises.
• Trade digitization network has been established
  through
• the efforts in commercial business, foreign
  exchange
• management, custom process, logistics, etc.
  since 1992.
• (E.g. KTNET, Korea-Japan/PAA network)

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• Internet marketing and Trade information search
  system
• have been well developed. (Silk road 21,
  KOTIS).
• However, previous efforts concentrated on trade
  digitization
• rather than the development of the entire
  e-Trade system
• at the national level.
• The low level of e-business of SMEs and weak
  inter-firm
• cooperation are problems (E.g. 80 of SMEs do
  not
• actively use e-Trade).

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III. Strategy for e-Trade Development

• ? Benefits of e-Trade
• Improvement of high-cost trade structure by
  substantially
• reducing transaction costs through innovation
  of trade
• process

? Enhancing Export Competitiveness

• Through creation of new markets and new
  products,
• e-Trade enhances export competitiveness and
  expands
• export bases.

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• Especially it plays the core role in expansion
  of digital
• goods and knowledge services.

• ? Enhancing National Competitiveness
• Combining e-business efforts of enterprises and
  the
• government, e-Trade increases exports, and
  achieves
• high value-added trade structure.

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? Strategy 1 Construction of e-Trade
Infrastructure on the
Basis of the Internet

• Any time, any where, trading enterprises can use
  the
• Internet system for the whole trade process
• Establish a system for single window, an
  integrated
• e-Trade Platform
• All the government administrative services for
  trade
• business will be done on line
• - Establish e-payment and e-banking systems

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• Establish the EIPP (Electronic Invoice
  Presentation
• Payment) system
• ? Strategy 2 Establish the Base for SMEs
• e-Trade Utilization
• Promote e-general trading companies for
  assisting
• searching and matching trade partners,
  consulting,
• contracting, transactions, etc. on behalf of
  SMEs
• Strengthen SMEs international marketing by
  combi-
• ning on- and off- line activities

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• Develop Silkroad 21 as the Koreas
  representative
• national trade site
• Support SMEs trade digitization
• Support the development of new export items for
• global markets such as digital products (game,
• animation, etc.), S/W, DB, knowledge-based
  services

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• ? Strategy 3 Establish Global e-Trade Network
• Complete the Korea-Japan/East Asia e-Trade
  Network
• (Pan Asia ec Alliance PAA). KNET will be the
  center
• of Korea.
• Apply the result and experience of the
  Korea-Japan
• e-Trade Network to PAA, which is expected to
  operate
• from the end of 2005
• PAA was formed in 2000 and consists of Korea,
  Japan,
• China, Chinese Taipei (Taiwan), Hong Kong,
  Singapore
• and Malaysia.

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• Participate in paperless trade project of APEC
  and
• ASEM
• ? Strategy 4 Reform of Laws and Institutions
• for e-Trade Friendly Business Environment
• Create an effective e-Trade process through a
  com-
• prehensive BPR (Business Process Reengineering)
• Establish a system for electronic circulation of
• securities such as B/L and insurance securities

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• Remove legal and institutional bottlenecks in
• e-documents circulation
• - Reform the law on trade digitization
• ? Strategy 5 Establishing Efficient Organiza-
• tional System for the Implementation of
• e-Trade Strategy
• Establish e-Trade Committee under the Prime
  Minister
• as a public-private joint coordinating
  organization

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• The committee consists of related ministers,
• representatives of related industrial
  associations and
• private organizations
• Under the committee, e-Trade Working Group is
• formed in order to implement projects by
  industry and
• by functional process

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IV. Policies for e-Trade Development

• ? SMEs in Korea have many constraints for
  participating
• in e-Trade. Some of these are as follows
• Since SMEs do not have sufficient internal
  digital
• capability in terms of manpower, they should
  depend upon outsourcing when they make and
  investment in information system.
• 2) SMEs tend to passively implement B-to-B, or
  e-commerce by the guide of large customer
  companies. This may constrain SMEs business
  opportunities with other large firms.

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3) Many managers or CEOs of SMEs do not
understand digital-based management and
technologies. 4) Korean SMEs are lacking in
experience of electronic transactions and
international trade.
Bottlenecks in e-Commerce of SMEs
Source SMBA, May, 2002.
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• ? The policy aimed at informatization of
  businesses is
• being implemented in accordance with the
  Industry
• Informatization Promotion Plan.
• The Ministry of commerce, Industry and Energy
  (MOCIE)
• is at the center of the Industry
  Informatization Promotion
• Plan, in cooperation with the Ministry of
  Information and
• Communication and the Small and Medium Business
  
• Administration.

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• MOCIEs industry Informatization Subcommittee
• coordinates the policies in e-commerce,
  informatization
• through sectoral plans, international trade and
  national
• resource management, and tries to maximize the
  synergy
• effects of the policies.

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• Among the organizations, the SMBA plays a
  central role
• in SME informatization in Korea. The SMBA is
  now
• leading several projects to spread IT to Korean
  SMES.

• ? Organizational Structure for the
  Informatization of SMEs
• SMBA prepares and implements strategies for SME
• informatization, overseeing the SME
  Informatization Promotion
• Committee, which sets up comprehensive plans to
  support
• informatization of SMEs, coordinates roles of
  relevant
• organizations and evaluates their performances.

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SME Informatization Promotion System
Informatization Promotion Committee
Local Informatization Council (12 Regions)
Industrial Informatization Council (6 Industries)
Project Performing Organizations (SBC, KIMI, IT
companies, Universities, etc)
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• ? Government Organizations for SME
  Informatization
• - The Ministry of commerce, Industry, and Energy
  (MOCIE)
• sets up basic strategies for industry
  informatization and
• promotes e-commerce.
• MOCIE is undertaking three major projects
  promoting
• e-commerce in industries building e-commerce
  infrastructure
• and globalizing e-commerce.

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• As for the first project, MOCIE promotes
  e-transformation
• of manufacturing businesses and supports SME
• informatization.
• - The second project, Building e-Commerce
  Infrastructure,
• aims at building and implementing national
  strategies for
• e-commerce promotion as well as reforming laws
  and
• regulations, and supporting standardization.
• The third Globalizing e-Commerce project is
  designed
• to establish infrastructure for e-trade and
  expands
• multilateral and bilateral e-business
  cooperation.

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• ? Supporting Organizations
• The Korea Institute for Electronic commerce, the
  Korea
• CALS/EC Association, and the Electronic
  commerce Resource
• Center are sub-organizations of MOCIE.
• The Korea Institute for Electronic Commerce
  supports
• projects for e-commerce promotion, including
  developing
• and distributing e-commerce standards, managing
  the
• e-Commerce Dispute Settlement Committee and
  training
• workforce.

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• The Korea CALS/EC Association promotes
  informatization
• by networking suppliers and consumers of
  e-commerce
• with the Korea E-Trade Association (under
  MOCIE), which
• promotes e-business from consumer perspective,
  and the
• Korea E-Trade/Technical Association (under
  MIC), which
• provides technologies from the supplier
  perspective.
• The association manages the e-CEO Consultative
  Body,
• supports the Golden Card System, which aims to
  attract
• leading e-business workers from overseas. The
  association
• is carrying out projects for B-to-B networks
  and e-catalog.

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• The Electronic Commerce Resource Center promotes
  
• e-commerce and builds national capacity. Around
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• ECRCs were established nationwide by MOCIE.
• The main responsibilities of the center are to
  develop
• human resources through local training tours,
  corporate
• training programs, school for start-ups, spread
  
• technology by developing and distributing
  technologies
• for SME-specific IT systems.

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  ltTablegt The Status of e-Commerce Development in
Six Key Industries
The Status of e-Commerce Development in Six Key
Industries
Source MOCIE
Source MOCIE
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Informatization Projects of Ministry of
Commerce, Industry and Energy
Source MOCIE
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Projects of the Small and Medium Business
Administration
Source SMBA
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• ? Export Promotion
•  
• Exports by SMEs account for 43 of total exports
  and are
• growing at a faster rate than that of large
  corporation.
• However, the recent slowdown in the global
  economy and
• increasing competition are posing challenges
  for SMEs
• to expand exports. SMEs are also facing a
  sluggish
• domestic demand as a result of the slowing
  domestic
• economy.

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• The SMBA is also working toward expanding the
  export
• base for SMEs and providing active assistance
  in their
• overseas marketing. This takes the form of
  expanding
• opportunities for cooperatives and
  organizations to
• attend overseas exhibitions, and dispatching
  talented
• resources from SMEs to overseas countries to
  nurture
• them into trade professionals through on-site
  training
• in the local market.

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• As a step toward consolidating the base for
  cyber trade
• among SMEs, the ASEAN3 SME Network was
  launched
• in March 2003, laying the groundwork for
  stronger
• cooperation among the member countries.

• The Small and Medium Business Administration
  (SMBA)
• and Small Business Corporation (SBC) have
  combined to
• designate 38 overseas assistance centers to
  provide
• comprehensive trade-related services like
  market survey,
• investment guidance, etc. to Koreas venture
  enterprises.

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• The centers are in established markets like
  China (12
• locations), United States (6), Japan (4), and
  Germany and
• Russia (3 each), as well as in newly emerging
  markets like
• Brazil, Kenya and India.

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