S Korean Govt Expands Exchange Risk Insurance Coverage For Smes

The Ministry of Commerce, Industry and Energy said Thursday that it will expand foreign exchange risk insurance coverage for small- and medium- size enterprises (SMEs) to support the country's export drive.

The measure will reduce the risk associated with the won's appreciation against the dollar that could adversely affect trading conditions for smaller companies, the ministry said.

The foreign exchange insurance is taken out by exporters who usually do not receive payment for their products for several months after delivery, but could find their actual profits slashed if the U.S. dollar slides against the South Korean won. The policies are sold by the state-run Korea Export Insurance Corp.

The ministry said exchange risk insurance premiums will be cut in half to make them more accessible, while the inclusion of a provision allowing companies to unilaterally get out of the policy will permit exporters to make money if the exchange rate moves in their favor.

The Commerce Ministry said it will increase the funds that can be used to support exchange risk insurance from 6 trillion won (US$5.6 billion) this year to 8 trillion won in 2005.

It said a broad government effort will be made "discover" at least 100 globally competitive products every year for support, while increasing assistance for promising research and development projects in the new year.