U.S retaliation hurts exports

As the US launched attacks on Afghanistan on October 8, it will inevitably hurt Korean exports, said a Korean state-run agency.

The Korea Trade-Investment Promotion Agency (KOTRA) revealed in a report, "Effects of retaliatory attacks on the Korean economy and export", that the global economy may tumble again under the influence of US attacks, and that the Korean economy will also suffer.

The report predicted that the extent to which the economy is affected will vary with how extensive attacks are and how long tension between the US and Muslim/Arab countries lasts. "If the attacks are short-lived, the impact on the economy should be trivial. However, if the attacks are prolonged, fall-out on the economy may well skyrocket," said the report.

"Due to growing uncertainty in the future, global investment and purchasing will shrink and our exports will certainly suffer," the agency anticipated.

War-risk insurance rates and oil price hikes could worsen exporting companies' profitability.

The report revealed that if the attacks are stretched out and develop into a US vs. Muslim/Arab country confrontation, it might trigger a long-term global depression. Any recovery period for the Korean economy would stretch into at least the second quarter or perhaps the latter half of 2002. Especially, exports to Middle Eastern countries will be particularly affected.

Car exports through Dubai in the United Arab Emirates have already decreased by half. "Cargoes during Ramadan, starting from the middle of next month and lasting for one month, will fall drastically if vessels through the Indian Ocean are interrupted," predicted KOTRA.

As exports through vessels were wholly prohibited during the Gulf War in 1990, the US attacks will determine just how severe the damage is, the state-run agency said.
Vessel cargoes bound for the Middle East amounted to 25% of total exports or 130 million tons. If retaliation lasts a month, the damage to exports will probably surpass the 10 million dollar mark," said the report.

At present, construction projects currently underway or under negotiation will also be interrupted.