SEOUL, Feb. 1 (Yonhap) -- A prolonged anti-government protest in Egypt could deal a blow to South Korean exports to the North African state and hamper the recovery of Asia's fourth-largest economy by pushing up commodity costs, watchers said Tuesday.
Thousands of protesters took to the streets of major cities in Egypt last week, demanding their president, Hosni Mubarak, to end his iron-fisted rule of 30-odd years.
Most of the 36 South Korean firms in Egypt have already been forced to shut down their business operations as many of their workers simply could not make it to work on time due to the protests, which are now showing signs of growing violent.
Last year, South Korea shipped US$2.24 billion worth of goods to Egypt, the country's fourth-largest trading partner among Arab nations, including all of the Middle East, according to the Korea International Trade Association (KITA). Imports from Egypt reached $938 million last year, more than doubling the figure from a year earlier.
"South Korean exports to Egypt will certainly be affected if the protests there become prolonged, as Egypt's entire import market will shrink while more and more stores selling goods, including South Korean products, will be forced to shut down," KITA said.
No specific reports of damage have been filed, but the trade association said the prolonged protests in Egypt will inevitably affect the businesses of nearly 1,700 South Korean companies exporting goods to Egypt.
"Customs inspections have been halted as all government offices have been shut down, and communication with buyers in Egypt has also been crippled due to a shutdown of communication channels," KITA said.
Egypt cut off people's access to Twitter accounts on Jan. 25, Facebook accounts on Jan. 26 and then the entire Internet on Jan. 28, according to KITA.
A drop in exports to Egypt may be only a small hurdle for South Korea, which is trying to become the world's ninth nation to reach trade volume of $1 trillion this year by increasing its exports to over $500 billion for the first time in its history.
However, the Egyptian unrest is becoming a large threat to the country's entire economy as it is greatly pushing up global prices of raw materials, such as oil, and thus pushing up the costs for most manufacturers in resource-poor South Korea, which imports nearly 97 percent of its energy from overseas.
The price of crude oil from Britain's North Sea Brent reached over $100 per barrel on Monday, the first time for the price to breach the $100 mark since October 2008, according to earlier reports.
The price of Dubai crude oil shot up to a 29-month high of $94.57 per barrel on Monday, according to the Ministry of Knowledge Economy.
Market observers said the price increase of oil and other raw materials in the global market will soon put upward pressure on prices in South Korea despite the country's government efforts to keep price increases below 3.7 percent in the first half of the year.
Meanwhile, the Egyptian unrest has rattled South Korea's financial markets due to fears that the turmoil may escalate into other oil-producing countries, crimping the recovery of the global economy.
The benchmark Korea Composite Stock Price Index (KOSPI) plunged 1.81 percent to close at 2,069.73 on Monday, hit by massive foreign selling. The local currency fell 0.69 percent to 1,121.5 won against the U.S. dollar.
The news sent the KOSPI sharply lower, after it had sustained a bull run by touching a record high of 2,121.06 during Thursday's trading. But the local stock market rebounded on Tuesday as investor sentiment was underpinned by overnight gains in U.S. markets. Wall Street closed higher Monday as strong corporate earnings outweighed concerns about the Egyptian turmoil.
The KOSPI inched up 0.11 percent to close at 2,072.03 after rising as much as 0.81 percent at one point. The Korean currency ended at 1,116.9 won to the dollar, up 4.6 won from Monday's close.
"The Korean market recovered from the previous day's sharp falls as foreign investors' relentless selling eased," said Kim Hyoung-ryoul, an analyst at NH Investment & Securities Co.
"The Egyptian turmoil is a political issue containing high uncertainty, but the issue is not likely to turn grave enough to hurt the (upward) trend of the financial markets."
The Financial Supervisory Service, the country's financial watchdog, said the Egyptian protests will likely have a limited impact on South Korean financial institutions given their minimal exposure to the North African country.
As of end-September, domestic financial companies' borrowing from Egypt reached a mere $6 million, it said.
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