Domestic SMEs Suffer Increasing Damages as Middle East Tensions Escalate

997 Cases of SME Difficulties Reported Amid Middle East Conflict

As tensions surrounding the Middle East situation are rising once again, it has been found that damages suffered by domestic small and medium-sized enterprises (SMEs) continue to accumulate.

According to the Ministry of SMEs and Startups on July 10, as of 12 p.m. on this day, a total of 997 cases related to Middle East situation damages or difficulties (including concerns) for SMEs have been reported. This is an increase of 17 cases compared to the previous week. Since February 28, the Ministry has been accepting online reports through its website and receiving phone and in-person submissions of damages and difficulties through 15 regional export support centers.

Of the reported cases, 774 were damages or difficulties, and 153 were concerns. By type (with multiple responses possible), 'other' accounted for 331 cases (42.8%), the largest share. This was followed by transportation disruptions with 296 cases (38.2%), increased logistics costs with 296 cases (38.2%), contract cancellations or postponements with 242 cases (31.3%), business trip disruptions with 125 cases (16.1%), and non-payment of receivables with 99 cases (12.8%). In the category of concerns (also allowing multiple responses), transportation disruptions were the most frequent with 99 cases (64.7%), followed by 'other' with 59 cases (38.6%), and loss of contact with 10 cases (6.5%).

By country, the largest number of reported damages and difficulties—531 cases—came from Middle Eastern countries other than Iran and Israel, such as the United Arab Emirates (UAE) and Saudi Arabia. There were 106 cases from Iran and 98 from Israel. Additionally, there were 361 cases reported from countries outside the Middle East, and this number continues to rise.

Looking at major cases, one exporting SME experienced a 60% increase in raw material prices in the first half of the year due to supply disruptions. The company continues to struggle with the burden of high raw material costs caused by the effects of a strong exchange rate and high inflation.

Another company exporting directly to countries neighboring Iran and Israel suffered significant overall business losses due to order cancellations and difficulties securing shipping space as a result of the Middle East conflict, with logistics costs soaring by 30–50%.

There is also a company whose orders from a major Iraqi buyer have been suspended since the Middle East conflict. Although communication with the buyer is ongoing, the company is waiting for business to resume, and its export sales to Iraq have dropped by more than 70% compared to before the conflict.

Additionally, another company is facing delayed payment or rescheduled payment timelines from local buyers, resulting in prolonged export receivable collection periods. This has weakened cash flow for operations and significantly increased the company's financial burden.

This content was produced with the assistance of AI translation services.