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

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


1
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
2
  • Introduction
  • E-Trade in Korea
  • Strategy for e-Trade Development
  • Policies for e-Trade Development
  • V. Implications

3
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.

4
? 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

5
? 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

6
  • - 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

7
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)

8
  • 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

9
  • o Custom process
  • Custom process network (KTNET)
  • E-Customs
  • o Payment
  • TradCard
  • Bolero
  • VISA
  • CTB, MPT

10
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

11
Evaluation of Korean e-Trade Progress by Process
(II)
Laws/ institutions
12
  • ? 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)

13
  • 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).

14
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.

15
  • 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.

16
? 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

17
  • 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

18
  • 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

19
  • ? 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.

20
  • 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

21
  • 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

22
  • 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

23
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.

24
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.
25
  • ? 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.

26
  • 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.

27
  • 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.

28
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)
29
  • ? 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.

30
  • 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.

31
  • ? 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.

32
  • 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.

33
  • The Electronic Commerce Resource Center promotes
  • e-commerce and builds national capacity. Around
    40
  • 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.

34
  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
35
Informatization Projects of Ministry of
Commerce, Industry and Energy
Source MOCIE
36
Projects of the Small and Medium Business
Administration
Source SMBA
37
  • ? 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.

38
  • 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.

39
  • 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.

40
  • 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.

41
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