Monday, December 31, 2007

South Korea and Japan to resume FTA talks

Optimism is in the air that the stalled and deadlocked free trade talks with Japan will see a fresh breakthrough under the economic stewardship of President-elect Lee Myung-bak.

Rosy speculations abound, as the 66-year-old former Hyundai CEO has been stressing improved relations with Japan, while underscoring the importance of "practical diplomacy'' and economic cooperation.Recent remarks by the country's president-in-waiting and Japanese Prime Minister Yasuo Fukuda prioritizing the advancement of pan-Asian ties, will combine to create an even cozier atmosphere for a renewed start of trade talks between the neighboring countries.

Seoul and Japan have so far held six rounds of free trade agreement (FTA) negotiations, but the talks have been at a standstill since November 2004 due to difficulties in bridging the gap over the level of market opening. Korea has called for a high-level opening in the agricultural and fisheries industries, while Japan has demanded only a 50 percent "let-in'' for Korean agricultural imports with a quota on fishery goods.

As the bilateral talks between the world's second and 13th-largest economies continued to go sour, both have been blaming each other for the stalemated.With this Seoul-Tokyo status and further FTA possibilities in mind, Lee, who promised to be an "economy president,'' fronted the free trade agenda as one of his primary campaign pledges.

"The ongoing talks with the European Union will be finalized soon, followed by evaluations and opening of new FTA talks with China, Japan, Russia and other countries,'' Lee said on his campaign trail.

Professor Jeong In-gyo of Inha University, who worked as an advisor for Lee's FTA policies, Tuesday said, "Japan's position regarding an FTA with Korea is showing signs of change,'' according to Yonhap News.

He added that Lee's administration may prioritize finishing off the deal with Tokyo first, before moving onto new accords.

Many factors seem to be driving these efforts, but economic experts and the business circle, which have been strong backers of Lee, were said to have voiced the necessity of the bilateral deal.

The Federation of Korean Industries and the Japan Business Federation jointly agreed last month in Tokyo to push for the conclusion of the Korea-Japan FTA.

And Japan's largest business daily, the Nihon Keizai Shimbun, reported last week that high expectations have been placed on the resumption of the stalled talks, contributing to the optimism.

http://www.investkorea.org/InvestKoreaWar/work/ik/eng/nr/nr_01_read.jsp?no=608300001&l_unit=90202&bno=712280002&page=1&sort_num=3709
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North Korea set to miss nuclear deadline




North Korea appeared set Monday to miss a year-end deadline to disable a key nuclear reactor and declare all its nuclear programs, key elements of its disarmament as agreed to in an international accord.

The U.S., Japan and South Korea expressed disappointment. But there was no indication that North Korea would immediately face any sanction — suggesting countries involved in negotiating the agreement were reluctant to raise tensions after a year of progress in the long-standing dispute.

The communist country promised in October to disable its main nuclear reactor at Yongbyon, north of Pyongyang, and give a full accounting of its nuclear programs by Dec. 31 in return for energy aid and political concessions.

The North shut down the plutonium-producing facility in July and disablement work is under way in cooperation with U.S. experts.

But diplomats have said the North is likely to miss the year-end deadline for disablement because a key step — removing fuel rods from the reactor — could take several months. South Korean Foreign Minister Song Min-soon has said there would also be problems in meeting the deadline for disclosure.

There was no immediate comment from North Korea on Monday. Last week, a North Korean official complained of delays in the delivery of economic aid and said the country would have no choice but to slow disablement.

Song, however, downplayed the remarks and said the disablement work was going well.

The United States, which has said it was not aware of delays in delivering aid to the North, criticized the country's failure to disclose its nuclear programs.

"It is unfortunate that North Korea has not yet met its commitments by providing a complete and correct declaration of its nuclear programs and slowing down the process of disablement," State Department deputy spokesman Tom Casey said Sunday.

"We urge North Korea to deliver a complete and correct declaration of all its nuclear weapons programs and proliferation activities and complete the agreed disablement," he said.
South Korea's Foreign Ministry pressed the North as well.

"Our government urges North Korea to faithfully declare all nuclear programs at an early date and complete disablement steps without delay," the ministry said in a statement.

Japan also expressed regret that the North appeared set to miss the deadline, and urged the regime to declare its nuclear programs immediately.

"North Korea must provide a complete and accurate declaration of all its nuclear programs at the earliest possible date, and make swift and solid progress in disabling its three nuclear facilities at Yongbyon," Japan's Foreign Ministry said in a statement released Monday.

The nuclear standoff began in late 2002 when the U.S. accused the North of seeking to secretly enrich uranium in violation of a 1994 disarmament deal.

In late 2003, the North began negotiations over its nuclear program with the U.S., China, Japan, Russia and South Korea. As talks stalled, North Korea conducted its first nuclear test, an underground blast, in October 2006.

Renewed talks led to a disarmament deal in February.

Reasons for the delay in declaring the nuclear programs appear related in part to the country's suspected uranium enrichment program. Song has said that more consultation was required on the alleged program. ◦
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Thursday, December 27, 2007

Korea's reading and math performance



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Wednesday, December 26, 2007

A landslide in South Korea - does a new era beckon?



AS VOTING ended in South Korea’s presidential election, exit polls indicated what most in the country had anyway expected: the opposition Grand National Party’s Lee Myung-bak was to be the country’s president. Mr Lee won a thumping endorsement, securing close to 50% of the vote in a 12-man presidential field. Mr Lee’s victory brightens the conservative GNP's prospects of also winning control of the legislature in elections next April.

So ends a decade of liberal rule by Kim Dae-jung and his successor Roh Moo-hyun. South Koreans are disillusioned with Mr Roh, who talked about improving their lot but failed to deliver robust economic growth. His divisive rhetoric angered many. “A president has to bring the country together,” Hyundai's chairman and a legislator, Chung Mong-joon, suggested. “Roh Moo-hyun divided the country.”

Many South Koreans believe that Kim Dae-jung’s “Sunshine Policy’’ of being friendly towards North Korea, which continued under Mr Roh, brought them little in the way of security. Kim Jong Il’s dictatorship developed and tested nuclear bombs despite it. South Koreans suspect that vast amounts of money have been paid to the north in return for summits with the dictator. Mr Lee wants an end to aid if North Korea does not give up its nuclear-weapons programme. He intends to use six-party talks (with China, America, Japan, Russia and North Korea) to put pressure on the north.

Raised in poverty, like many of his 49m countrymen, Mr Lee has an appealing chutzpah. Voters evidently liked the 66-year-old's strong personal story: he overcame malnutrition, paid his own way through university by working as a rubbish collector, and eventually rose to become the boss of ten Hyundai affiliates. His pragmatism helped, too. He is not an old-guard conservative. He was arrested and jailed during his university days. As mayor of Seoul, the capital, he sought to beautify the city. He planted trees, widened pavements, created green public spaces and improved public transport.

Mr Lee’s last election rally was in the centre of Seoul beside the Cheonggyecheon stream. The revival and beautification of the 5.8km waterway through the city became a symbol of his success as mayor. For many voters his ability to graft a consensus among Seoul’s diverse interest groups, to complete the project, augurs well for his time in higher office.

As president Mr Lee says he will slash taxes and ease regulations in order to boost consumer spending. At a news conference the day before the poll he promised a “new era” of economic growth once he takes office in February. He even made specific predictions, suggesting that South Korea’s main stock index will rise to 3,000 one year into his presidency and will be at 5,000 when his five-year term ends. The Kospi closed at 1,861.47 on the day before the election.

If there is a cloud already on the horizon it concerns corruption. Mr Lee sees South Korea’s chaebol (conglomerates) as important allies in reviving the economy. Thus many suspect he will not press prosecutors to investigate alleged bribery and influence peddling at Samsung. Mr Lee, too, is under investigation for his role in an investment scheme that defrauded thousands. He protests that he “has never been involved in scandal as a CEO or as Seoul mayor” and blames his opponents for spreading propaganda against him. By the time Mr Lee is scheduled to take office, he promises, his name will be cleared.


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Monday, December 24, 2007

Baby girls now welcome in South Korea

When Park He-ran was a young mother, other women would approach her to ask what her secret was. She had given birth to three boys in a row at a time when South Korean women considered it their paramount duty to bear a son.

Park, a 61-year-old executive, now gets a different reaction. "When I tell people I have three sons and no daughter, they say they are sorry for my misfortune," she said. "Within a generation, I have turned from the luckiest woman possible to a pitiful mother.

"In South Korea, once one of Asia's most patriarchal societies, a preference for baby boys is receding. And that has led to what seems to be a decrease in the number of abortions performed after ultrasounds that reveal the gender of a fetus.

According to a study released by the World Bank in October, South Korea is the first of several Asian countries with large gender imbalances at birth to reverse the trend, moving toward greater parity between the sexes.

Last year, the ratio was 107.4 boys born for every 100 girls, still above what is considered normal, but down from a peak of 116.5 boys born for every 100 girls in 1990. The most important factor in changing attitudes toward girls was the radical shift in the country's economy that opened the doors to women in the work force as never before and dismantled long-held traditions.

Demographers say the rapid change in South Koreans' feelings about female babies gives them hope that gender imbalances will begin to shrink in other rapidly developing Asian countries -- notably China and India -- where the same combination of a preference for boys and new technology has led to the widespread practice of aborting female fetuses.

orlandosentinel.com/services/newspaper/printedition/sunday/orl-skorea2307dec23,0,390019.story
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Wednesday, December 19, 2007

Ex-Hyundai CEO wins South Korean Presidency



A former Hyundai CEO known as "The Bulldozer" for his determination to get things done rolled over all opposition and financial fraud allegations to win South Korea's presidency Wednesday, ending a decade of liberal rule.

A day after his landslide victory, Lee Myung-bak pledged to work for a nuclear-free Korean peninsula and strengthen Seoul's alliance with the United States.

"The most important thing is for North Korea to get rid of its nuclear weapons," he told a news conference Thursday.

Lee, who turned 66 on election day Wednesday and has also served as the mayor of Seoul, earned his win on a wave of discontent with incumbent President Roh Moo-hyun, whom many believe bungled the economy and dragged down the country's rapid growth.

The National Election Commission said Lee had 48.7 percent of the vote after all ballots were counted. Liberal Chung Dong-young was a distant second with 26.1 percent.

It was the biggest margin of victory in any South Korean presidential election. The candidate with the most votes wins and there are no run-offs. Turnout was a record low 63 percent of 37.7 million eligible voters.

South Koreans apparently wanted change so badly that they were willing to overlook accusations of ethical lapses that dogged Lee throughout his campaign.

Just days before the election, parliament approved an independent counsel investigation into allegations that Lee manipulated stock. The investigation is to be completed before the Feb. 25 inauguration, and Lee has said he will step down if found at fault.

"After all, the people chose the economy over morality," the Maeil Business Newspaper wrote in an editorial for its Thursday editions.

Lee's conservative Grand National Party asked for a veto of the independent counsel bill. "What I'm asking for President Roh to do is veto such legislation before he leaves office for the sake of the national unity," Kang Jae-sup, chairman of the Grand National Party, told KBS radio Thursday.

Presidential spokesman Oh Young-jin responded by saying Roh had earlier expressed his intention to sign the investigation bill.

Lee emphasized the economy in his campaign with a "747" pledge — promising to raise annual growth to 7 percent, double the country's per capita income to $40,000 and lift South Korea to among the world's top seven economies. He also proposed a "Grand Canal" linking Seoul to the southern port city of Busan that would improve transport and be a tourist attraction.

"Today, the people gave me absolute support. I'm well aware of the people's wishes," Lee told supporters at his party's headquarters. "I will serve the people in a very humble way. According to the people's wishes, I will save the nation's economy that faces a crisis."

Lee heads to office amid progress in the long-running standoff over North Korea's nuclear weapons program, fostered by U.S. political and economic concessions to Pyongyang.

The president-elect is expected to tie aid to continued compliance with international demands in the atomic dispute in line with Washington's wishes, but was not expected to make any dramatic change in assistance while the North remains on the path to disarmament.

"The North's abandonment of its nuclear programs is the way for the North to develop" its economy, Lee said in his comments to reporters Thursday.

Lee said he would not shy away from raising the North's shortcomings. "I think unconditionally avoiding criticism toward North Korea would not be appropriate."

On relations with Seoul's key Washington ally, Lee said he would "renew the common values and peace based on trust."

The Bush administration congratulated Lee on his victory, saying it expected close cooperation with his government over the North Korean nuclear dispute.

"We have a long history of cooperation and friendship with South Korea and fully expect that'll continue with this new government," said State Department spokesman Tom Casey.

Hundreds of supporters watching the results on a giant TV in front of the Grand National Party's headquarters burst into song Wednesday evening as Lee's victory became clear.
"I am very happy and it is like retaking democracy after a decade" of liberal rule, said Park Mi-won, a housewife in her 50s.

Lee rose from the poverty that gripped the peninsula after the 1950-53 Korean War and worked as a janitor to put himself through college.

He first gained prominence as head of Hyundai's construction unit, which symbolized South Korea's meteoric economic rise in the 1960-70s. As Seoul's mayor from 2002-2006, he undertook beautification projects in the city that earned him environmental credibility and were viewed as redemption for earlier eyesores he built with Hyundai in the country's haste to develop.

It was during his three decades with the Hyundai Group that Lee earned the nickname "Bulldozer" for his drive to push through challenges. In one instance, he completely took apart a bulldozer to study its mechanism and figure out why it kept breaking down.

"I feel good that the right person was elected. I voted for him because he is an economic president," said Lee Myung-ja, 60, a housewife who was among crowds gathered to watch vote results near a restored stream in central Seoul that was Lee's landmark project as mayor. "I hope President Lee Myung-bak will focus on economic growth so as to make the people better-off."

Taking the luster off Lee's victory were lingering allegations of involvement in a stock manipulation case in which a former business associate faces criminal charges for illegal gains of millions of dollars. A video released Sunday by his liberal rivals showed Lee saying in 2000 that he founded the firm at the center of the case.

Lee has said the taped comments were taken out of context and denied the allegations, but consented to the independent counsel to clear his name. He is the country's first president-elect to face a criminal probe.

By South Korean law, a president-elect can be prosecuted but he would receive immunity from most criminal lawsuits after inauguration.

http://news.yahoo.com/s/ap/20071220/ap_on_re_as/skorea_presidential_election_40


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Sunday, December 16, 2007

Daewoo in deal with Paramount for theme park

Daewoo Auto Sales and Paramount Pictures of the United States signed a contract yesterday to build a 1.5 trillion won ($1.6 billion) theme park in Songdo by 2010.

The attraction will be in an area where the Korean government has been building an economic zone to attract foreign investors and companies. The deal comes as a number of Korean companies and provincial governments are scrambling to make deals with foreign entertainment groups to revive the fortunes of the regional economy and lure more foreign tourists.

Daewoo Auto Sales said in a statement yesterday that the two companies would kick off construction of the project in July 2008. It is expected to create 13,000 jobs and spur new economic activities worth about 1 trillion won by the time it is completed in late 2010, the company said.

Daewoo Auto Sales, established in 1993 by the now-defunct Daewoo Group, has recently expanded its business portfolio from car sales and parts production to car rental and construction.

“We estimate the new movie theme park will attract about five million people or more annually and post annual sales of 1.1 trillion won,” Daewoo Auto Sales said in a statement.

The movie theme park, to be erected on a 50-hectare site, will feature a 3D simulation studio to allow visitors to experience movies produced by Paramount Pictures like “Transformers.” There will be a water park, a kids’ studio featuring animated film characters like SpongeBob SquarePants and a hotel, according to Daewoo.

Attracting theme parks has become something of a fad here. In November, Gyeonggi Province signed a memorandum of understanding with Universal Studios for a 2.9 trillion won attraction in Hwaseong, 25 miles south of Seoul, by 2012. The city government of Siheung, Gyeonggi, is also negotiating with Disney and MGM Studios for a park.

http://www.investkorea.org/InvestKoreaWar/work/ik/eng/nr/nr_01_read.jsp?no=608300001&l_unit=90202&bno=712140018&page=1&sort_num=3703
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Friday, December 14, 2007

Elections in South Korea - 19 Dec 2007





NOT many people can realistically hope to be elected president on their birthday. But December 19th is not only election day in South Korea but also the 66th birthday and 37th wedding anniversary of the runaway favourite, Lee Myung-bak. Mr Lee is a former mayor of Seoul who has led the opinion polls throughout the year by a country mile. This month prosecutors absolved him of involvement in an investment fraud, seemingly clearing away his last hurdle before the vote.

Yet few seem to muster much enthusiasm for the birthday boy. At his campaign rallies supporters clad in blue sweatshirts bearing his likeness try to galvanise onlookers with chants, dance routines and a throbbing, disco-like campaign song. The crowds remain desultory. In one stop outside Seoul earlier this month, the biggest cheer was for a group of children who waved at the candidate from the open windows of their school.

This is odd. Presidential elections used to arouse paroxysms of emotion in South Korea. If Mr Lee were to win, he would bring an end to a decade of rule by two presidents, Kim Dae-jung and Roh Moo-hyun, who were liberal in the Korean sense (that is, slightly less pro-business and pro-American). His party represents the conservative old guard, though he himself is not a member of the traditional elite, nor does he hold their hardline views about North Korea. Whoever becomes president, moreover, will take over at a time when relations between the hermit kingdom and the rest of the world have reached a delicate point, with the rest still unsure about whether the North will give up its nuclear weapons.

Why then has the 2007 campaign ignited so little passion? Perhaps because Mr Lee has enjoyed a lead in the opinion polls for so long (in the week before the vote, he was over 20 points ahead of his main rivals, who seem almost to have given up). Perhaps because no one else has caught the public's imagination either. The main challengers include a disaffected former leader of Mr Lee's Grand National Party, Lee Hoi-chang, who has twice failed to win the presidency. The leading liberal candidate, Chung Dong-young, is a former television anchorman who has turned off voters with his personal attacks on Mr Lee.

And perhaps because of the man himself. Raspy-voiced, with a reputation for being aloof and prickly, Mr Lee is not a natural politician. He refuses to appear on South Korea's main commercial broadcaster, MBC, because he accuses it of bias. Every day ranks of police officers guard the main entrance of MBC as Mr Lee's supporters denounce its journalists. But like the presidential campaign itself, the protests lack numbers and fire.

Ordinarily, his opponents might have been able to exploit Mr Lee's stilted manner. Instead it has become an advantage. Koreans care mainly about the economy. They want a competent manager and Mr Lee seems to fit the bill. As a child, he helped his mother sell popsicles and seaweed rolls. He put himself through university by working as a rubbish collector. He rose through the ranks of Hyundai to become chief executive of ten different affiliates. Lingering suspicion that his business dealings may not have been pristine has been overlooked. South Korea is going through a period of relative economic malaise and voters want faster growth than the 5% achieved last year under President Roh, the best showing of his presidency.

Rising property prices have pushed workers in Seoul, home to half the population, far away from the capital, causing endless commutes to 12-hour-a-day jobs. Parents who pay for private classes so their children can keep up in pressure-cooker schools want changes to the education system. Many Koreans demand a comprehensive social-security system, as befits the world's 13th largest economy. The next president will also have to ensure it is not business as usual between his office, the Blue House, and the country's conglomerates. The biggest, Samsung, stands accused by a former executive of widespread bribery, including of politicians.

Mr Lee is responding to these varied demands with a comprehensive—even grandiose—list of promises. He says he can get growth up to 7% a year, bring average incomes up to $40,000 a year and make South Korea the world's seventh-largest economy by 2017. All this is to be achieved by cutting taxes, trimming public spending by 10%, easing the burden of regulation, improving the efficiency of medical spending and building a giant canal system through the middle of the country to create jobs and cut pollution. He is not promising to make pigs fly.

If he wins, Mr Lee will face divisions in both country and party. Since the end of the Korean War, South Korea has been split along regional lines. The eastern part, Gyeongsang, has traditionally produced the country's leaders (Mr Lee grew up there, though he was born in Japan). They have tended to favour their hometowns at the expense of the south-west Jeolla region.

The Grand National Party is also beset by internal rifts, notably between Mr Lee and Park Geun-hye, the daughter of a former military dictator, Park Chung-hee. Ms Park wants to run for president in five years' time. She also wants a hand in picking the party's candidates for parliamentary elections due in April 2008. If they cannot work together, Mr Lee's proposals may face an icy reception in parliament.

Mr Lee has few specific ideas about getting North Korea to give up its nuclear weapons, beyond making aid and investment conditional on disarmament. “North Korea must take steps to demonstrate it wants peace before there is widespread economic assistance or investment by South Korea,” says one of his closest foreign-policy advisers. In Mr Lee's view, the last two presidents have weakened South Korea's military alliance with America, and he promises to reinvigorate it. He also plans a range of co-operative economic agreements with Asian neighbours—and with Russia, in the hope of securing long-term oil and gas contracts in eastern Siberia. In short, all things to all countries.

Many South Koreans have been disappointed by the decade-long rule of liberal presidents who promised much but failed to deliver either strong growth or uncorrupt leadership. They were also put off by President Roh's inability to create more jobs and reduce social inequality. In contrast Mr Lee's record as mayor of Seoul suggests he can get things done. But if he does win, he will do so partly because he has raised expectations—and will suffer all the more if he cannot live up to them. ◦
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Tuesday, December 11, 2007

Cargo trains begin service between the two Koreas

The first cargo train providing regular service across the border between the two Koreas in more than a half-century left Tuesday for the North. The 12-car train carrying construction materials will cross through the heavily fortified Demilitarized Zone dividing the peninsula on its journey to the North Korean border city of Kaesong, where the two Koreas operate a joint industrial zone. It was to cross back later Tuesday.

The service is one of the tangible results of an October summit between North Korean leader Kim Jong Il and South Korean President Roh Moo-hyun that outlined a series of joint projects. It comes months after the two sides conducted a one-time test run of passenger trains on two reconnected tracks on the western and eastern sides of the peninsula.

The cargo train will make a 10-mile round trip every weekday to North Korea.

It remains unclear whether regular passenger train service will start anytime soon, but one of the train's engineers was hopeful Tuesday.

"I expect a day will come when South Koreans visit North Korean tourist attractions freely by train," Shin Jang-chul, whose parents are from what is now North Korea, told reporters before departing.

South Korea hopes the inter-Korean railway will ultimately be linked through North Korea to Russia's Trans-Siberian railroad and allow an overland route connecting the peninsula to Europe — significantly cutting delivery times for freight that now requires sea transport.

The cargo rail service is likely to give a further boost to the sprawling Kaesong complex, which marries South Korean technology and management expertise with North Korea's cheap labor.
Currently, 64 South Korean companies operate factories there, employing about 21,600 North Korean workers and producing a range of goods including watches, clothing and shoes.

South Korea hopes the Kaesong project will encourage isolated North Korea to reform its centrally controlled economy and eventually open up to the outside world.

The rail lines between the Koreas were severed shortly after the outbreak of the 1950 Korean War. The conflict ended in a 1953 cease-fire that has never been replaced by a peace treaty, leaving the sides technically at war.

Already, dozens of cars, trucks and buses regularly cross the border between the two Koreas via reconnected roads both to the Kaesong complex and also to a tourism resort at North Korea's Diamond Mountain.

The transport links between North and South were reconnected after the first-ever summit between leaders of the divided nation in 2000.

http://news.yahoo.com/s/ap/20071211/ap_on_re_as/koreas_trains_6
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Monday, November 26, 2007

Universal Studios picks site for South Korean theme park




Universal Studios picks site for $3.1 billion South Korean theme park

Universal Parks & Resorts and South Korea's Gyeonggi province said they have agreed on plans for a $3.1 billion theme park to be built south of Seoul.

The park, to be built in the city of Hwaseong, is set to open in 2012 and will lead to the creation of over 58,000 new jobs, said a press release provided by Universal Parks & Resorts, the operator of Universal Studios theme parks, and Gyeonggi province. The release said the two sides would sign a formal agreement later.

Universal Parks & Resorts, a division of General Electric Co.'s NBC Universal, operates parks in Orlando, Florida, and Hollywood, California, in the United States, as well as in Osaka, Japan.

The parks include attractions based on Universal films including "E.T. The Extra-Terrestrial" and "King Kong," as well as movies made by other studios such as "Spiderman" and "Shrek."

Universal, which first announced plans for a park in South Korea in May, is cooperating with South Korean partners including Posco Engineering & Construction Co., a unit of steelmaker Posco.

Universal Parks & Resorts is also developing Universal Studios parks in Singapore and Dubai.

The location, about 19 miles south of Seoul and also close to its main international airport in Incheon, will be conducive to attracting both South Korean visitors as well as those from nearby China, the release said.Plans are for the facility to also include a convention center, hotels golf courses and an outlet mall, the release said. ◦
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Friday, November 23, 2007

North Korea: Capitalist sprouts in unfertile soil

SOME members of North Korea's elite have long drunk the world's most expensive cognac and nibbled caviar. Others in Pyongyang, capital of the world's last Stalinist regime, drive luxury imported cars. Fairness and equality are proudly touted as the hallmarks of North Korea's self-reliant brand of socialism. But with more cash circulating under the country's economic reforms and goods more plentiful, Pyongyang residents are fast becoming consumers. Remarkably, some are also becoming investors in the property market—despite the government's theoretical monopoly on the allocation of housing.

Inspired by neighbouring China, North Korea initiated economic reforms in 2002. Most wage and price controls were dropped and the market was opened to some private commerce. After five years of reform, the new wealth has gravitated mainly to the city's privileged class.
One recent trend is for residents to trade up to bigger, newly built apartments. Under the country's Land Law, passed in 1977, all land belongs to the country and co-operatives, and cannot be bought, sold or even occupied. Yet a North Korean student who studied in China says businessmen are satisfying the demand for up-market housing by obtaining land rights from the local authorities and financing construction with capital from their customers. Chinese experts on North Korea say that the government itself has actually played an active role. Some of its agencies have financed the redevelopment of their properties with capital from their staff. They have then turned a profit by selling the new apartments through the government's housing department.

The student says each apartment covers about 150 square metres (1,600 square feet) and costs as much as $40,000 in the popular Moranbong and Central districts of Pyongyang. Construction is now under way at six or seven sites in the capital's residential areas. The building methods used are outdated, dominated by handmade concrete bricks. A five-storey building can take six months to complete. Because the construction is illegal there are fears that some of the newly built blocks might lose their permits or be confiscated even if they have already been paid for.
Officially, each citizen is entitled to receive 14 square metres of living space. But occupation, rank and “contribution” to the country can make a big difference. A “hero mother” who gives birth to triplets would receive a 200-square-metre home. One 28-year-old woman, who works as a tour guide, boasts of living in the Moranbong district in a 170-square-metre apartment with four bedrooms and two bathrooms, thanks to her father's senior government position. Only married couples are eligible for an apartment from the government, but the guide, who says she is single, claims to be wangling one for herself.

The government probably tolerates privately financed buildings because it is strapped for cash and cannot afford to build housing for its citizens. Many uncompleted, suspended building projects dot Pyongyang's skyline. Cranes gather rust, still perched on top of the buildings. North Koreans hope that foreign capital will help finish the buildings. According to Tigereye62.com, a website covering business in North Korea that is based in China's border city of Dandong, the government is soliciting $50m-60m for Pyongyang's historic Taedong-gang Hotel. The building, where “Dear Leader” Kim Jong Il spent many years with his father, Kim Il Sung, burned down four years ago. The government is also hoping foreign investors will stump up $30m-45m for the partly completed Ryugong Hotel, which was designed to be Asia's tallest, with 105 floors. Construction has been stalled since 1992 because of a lack of funds.

The building mini-boom is good for the tiny cognac-sipping elite. But its members must worry about how the poverty-stricken majority, reared on promises of equality, will react to the sight of their new homes and growing prosperity. ◦
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Thursday, November 22, 2007

Chinese imports of TVs, videos unveiling world to N. Koreans

By Blaine Harden
The Washington Post

SEOUL, South Korea — Cheap Chinese TV sets and video players, together with pirated videotapes and DVDs, are lifting the lid on information reaching the North Korean people, according to defectors and experts on Kim Jong-Il's dictatorship.

The unsealing process — underway for nearly a decade and accelerating this year — coincides with the crumbling of North Korea's centralized economy and the rise of street markets.
In those markets, doing business daily nearly everywhere in the North, are cut-rate electronics and knockoff videos that have acquainted a sizable number of North Koreans with the wealth and razzmatazz of the capitalist world.

Watching South Korean soap operas and Hollywood movies inside North Korea, defectors say, is scary, exhilarating and depressing.

"We closed the drapes and turned the volume down low whenever we watched the James Bond videos," said a North Korean woman, who two years ago fled her fishing town in a boat with her husband and son. "Those movies were how I started to learn what is going on in the world, how people learned the government of Kim Jong-Il is not really for their own good."

The woman, 40, who now lives in a Seoul suburb and did not want her name published because her parents are still in the North, said Chinese consumer electronics began to trickle into her coastal region in the mid-1990s, when massive crop failures and widespread famine forced the government to tolerate private trading.

By 2002, when Kim officially approved limited market reforms, she said, she and her neighbors could sell fish for cash. She used that cash to buy, among other manufactured goods from China, a color television and a videotape player.

In addition to Bond movies, she said, she learned about the world beyond North Korea from Hong Kong gangster films and from South Korean television, which she could receive on her Chinese-made TV.

Her son, now 17, said his understanding of the United States — where he hopes one day to live — was formed by watching old videos of "Charlie's Angels." ◦
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Tuesday, November 06, 2007

Why Korea has a Bright Future

by Jeremy Siegel, Ph.D.

My 14-hour Korean Air flight on a non-stop Boeing 747 airliner from New York to Seoul took the polar route over Siberia and China right towards the South Korean capital. But when the plane approached North Korea, it turned sharply east to the Yellow Sea and then hugged the coast before veering west to land at Incheon, the sparkling new airport completed in 2001, a year before Korea hosted the World Cup.

The detour is mandated by North Korea which does not allow South Korean aircraft over their airspace, a restriction that adds nearly an hour to the flight. The north-south division has been a central feature of Korea over the past half century, influencing its politics and economics. But the country is now looking forward, seeking its place in Asia’s future amid the growing economic power of China.

I was invited to Seoul by Mr. Park Hyeon-Joo, Founder and Chairman of the Mirae Asset Group, one of Korea’s fastest growing financial companies. The firm was one of the sponsors of a conference honoring the 20th anniversary of the National Pension Service, Korea’s social security system. Korea, in contrast to the US, invests some of its massive $250 billion trust fund in equities and was considering the advantages of an even higher allocation.

An Asian Economic Success
South Korea is enormously successful. Its per capita income is more than 60% of that of the US, up from only 8% in the early 1960s. Seoul is the second most populated metropolitan area in the world (behind Tokyo), with over 22,000,000 residents. It is a modern Asian metropolis with little sign of poverty.

The country has come a long way from the 1998 Asian crisis that spread from South Asia to Korea. At the height of the crisis, the South Korea’s market index, the KOSPI, fell 74% from 1150 to 277. But lately the market has been surging and in October the index surpassed 2000 and Korean stocks now have a market value over $1 trillion.

Despite the recent bull market, the valuation of Korea’s stock market is still quite compelling. The KOSPI index is selling at only 15.5 times this year’s earnings, a valuation that compares favorably with 19 time earnings in Indonesia, 24 in India, and the 50s for the booming Chinese stock market.

Investors looking to invest in the country can buy the iShares MSCI South Korea Index ETF (EWY), which trades on the New York Stock Exchange.

The Korean won is also strong, rising from 2000 to the dollar at the height of the crisis to 900 today, about the same rate it was before the Asian turmoil began. In dollar terms, the Korean stock market has increased more than ten-fold over the past decade.

But despite this recovery, the country is at a crossroads. It is aging more rapidly than the US, and its fertility rate of 1.2 rivals Japan as one of the lowest in the world. Geopolitical risks abound as the division between the North and the South hangs over the country.

Koreans constantly debate the pros and cons of an eventual merger with the North. They are acutely aware of the cost that West Germany incurred in the absorption of East Germany. They rightfully argue that if the South absorbed the North, the cost to South Korea would be greater since North Korea is so much poorer than East Germany was when the Berlin Wall fell. Yet many feel that eventually the two countries will be united.

But there are more immediate challenges. Korea’s manufacturing is being squeezed by cheap labor from China and its electronics giant, Samsung, has been floundering of late. Increased competition is everywhere. For example, the Koreans once dominated the computer game market in China, but are now feeling stiff competition from the Chinese themselves.

Blueprint for the Future
Mr. Park, the far-sighted chairman of Mirae Asset Management, believes that Seoul can make its mark in financial services and become the financial center of East Asia. The financial industry is growing and clearly has an important place in Korea’s future. But to insure future growth Seoul would have to reduce regulation and foster an innovative and dynamic image. Today there are far too many restrictions on short selling, hedge funds, and its financial institutions are small by today’s international standards.

Yet Korea has some decided advantages. Its people are highly educated and the country sends more students to the US than any other Asian nation, including China and India. Recent political trends have turned more conservative and economic growth is being giving top priority. The five year rule of Roh Moo-hyun, a populist who promised to redress the inequalities of wealth and break up monopolies, has not been successful. As a result, Lee Myung-bak, the former Hyundai executive and mayor of Seoul, enjoys a strong lead in the polls for the upcoming presidential election.

A pro-business government is important, but Korea must do more. To achieve economic success, Seoul must retain its foreign-educated students and entice others to make their mark in Korea. Mr. Park’s presentation at the conference emphasized the importance of being a magnet for top talent. His slides showed the vibrant and colorful skyline of Pudong area of Shanghai and compared it to the clean, white, but uninteresting skyline of Seoul.

He is right: Seoul, like other Asian capitals, must compete with Hong Kong, Singapore, Shanghai, and others cities to attract the best people. We Americans should also not become complacent, as many rightfully claim that the world’s financial center is moving from New York to London and the Far East. All cities now compete in the global marketplace.

Korea’s greatest resource is its people as it has a highly educated and motivated workforce. The country rose from poverty to become one of the richest nations in Asia in a few short decades. As long as it stays focused on the future, I see no reasons why Korea cannot continue to be a leader in Asia. ◦
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Status of U.S. Military Bases in Korea



The transfer of U.S. military bases to the South Koreans is on track and going smoothly, U.S. officials said as Defense Secretary Robert Gates and his top military leaders gathered Tuesday for two days of meetings with their Seoul counterparts here.

So far, 23 of the U.S. camps — vestiges of the 1950-53 Korean War — have been transferred as part of a broader plan to have Seoul assume more responsibility for its own defenses and take over its own wartime command by 2012.

While some South Koreans, including a few protesters who met Gates upon his arrival, would like to see the transfer sooner, both sides have agreed that it would take until 2012 to get all of the needed equipment and training in place.

Senior U.S. defense officials traveling with Gates said this week that the South is not yet prepared for the transfer, but is on pace to be ready by 2012.

Still, just 50 kilometers north of here, the guarded, barbed-wire fence — the DMZ — still divides the country from its northern neighbor. Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, visited the border Monday, after he arrived for the defense meetings.
The developments in the North are also a likely topic for the defense officials.

Just this week, north of that DMZ, North Korea began its long-demanded work to disable its nuclear facility at Yongbyon. The move is a result of the six-nation talks, and would be the most significant step the communist country has taken to scale back its nuclear program.
North Korea conducted its first nuclear test in October of last year.

The North has promised to disable the reactor at Yongbyon by the end of the year in exchange for energy aid and other political concessions from the other five nations: the U.S., China, Japan, South Korea and Russia. One of those concessions that has sparked some debate is the possibility that North Korea could eventually be taken off the U.S. list of states that sponsor terrorism.

Removal from the list has long been a goal of Pyongyang, but the North would have to meet requirements stipulated under U.S. law.

Gates said Tuesday that the meetings in Seoul will largely focus on the progress of the military transition here from U.S. to South Korea.

About 29,000 U.S. troops are still deployed in the South as a legacy of the Korean War, which ended in a cease-fire that has never been replaced by a peace treaty. Under the current military arrangements, the U.S. commander, currently U.S. Army Gen. B.B. Bell, would lead all allied forces under a joint command in the event of a renewed conflict.

Another likely topic for the defense officials is the continued deployment of South Korean troops in Iraq. There is a plan to cut the current number — 1,200 — in half and extend the deployment for another year. South Korean President Roh Moo-hyun has said the extension would boost his country's alliance with the U.S., but others in the country are opposed.


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Sunday, October 28, 2007

A generation of South Koreans ready to abandon their dreams







Like many Koreans of his generation, Lee Dong-sup, who is now in his 50s, grew up as a devastatingly poor country boy in post-war Korea and literally crawled his way to success. “The walk to my elementary school was more like an expedition,” Lee said. “The round trip took four hours because we couldn’t afford the bus ticket.


“My textbooks smelled like kimchi most of the time because we didn’t have Tupperware back then. We carried our kimchi and rice in cheap tins and the juice always leaked. Oh, how I would dream about having a fried egg every night before going to bed,” he said, chuckling.


The country boy, however, dreamed of more than just eggs. He wanted to see the world and make something of himself. He moved to Seoul and enrolled in the economics department of a leading university. He then worked for a conglomerate for some 20 years, while making a comfortable living for his family. Then came the financial crisis and Lee got laid off from his job in 1998 when he was in his mid-40s. He has been starting small businesses ever since, but none of them provided the secure income of his pre-crisis salary.


“It’s O.K. though,” Lee said. “I’m doing well. At least I know that I’ll never be as poor as I was in my childhood.”


For his son, Lee Sun-jae, in his late 20s, the rags-to- riches success story of his father seems like a distant fairy tale. He is not interested in conglomerate riches or entrepreneurial gambles. He thirsts for security, the kind of rock-solid guarantee of employment that his father never attained. Thus, after graduating from university two years ago, he joined thousands of other anxious Koreans in studying for the civil service examination.


“I have to admit I was quite shaken up when my father lost his conglomerate job overnight,” he said.


“He worked so hard for that company. When I was little, I would whine because he was always working. I couldn’t believe how the company, which my father devoted his youth to, could be so cruel as to fire him without a second glance,” he said.


Lee Sun-jae isn’t the only young person in Korea who hungers for the lifelong job security of a civil service position. This year’s data from the National Statistical Office shows that 36.9 percent (196,000) of job-seekers aged 15 to 29, are studying for the seventh or ninth grade civil service examination. This makes government service the preferred career by a huge margin. A distant third, at 16.5 percent, is trying out for a public corporation. Youth unemployment is now at its highest level since the late 1990s. As of last year unemployment among those aged 15 to 29 was 7.6 percent ― double the rate for the rest of the working population. Fighting against these adverse social circumstances, Korea’s youths are being anything but reckless.


“After the monetary crisis, the concept of having a job for life, of devoting yourself to one company, no longer exists,” said Lee Gwang-suk, head of Incruit, a popular employment portal site. “With the country’s shaky economy and youth unemployment, young people want to be civil servants and have the guarantee of a job until they retire.”


Job loyalty has also become less of an issue for job hunters. The days when people committed themselves to a single company, paying their dues and in return, getting a kind of second family are over. It’s hard to believe that Samsung Electronics ran a campaign back in 1991 with the catchline “Coffee break at 3 a.m.” in which employees prided themselves on their long working hours. National Statistical Office numbers show those aged 15 to 29 spent an average of 21 months in their first job. Only 18 percent of them stayed at the same job for over three years. In a book released this August titled “880,000-won Generation,” Park Gwon-il talks about the structural imbalances that have caused this phenomenon. “In Korean society today, the self-made man can’t exist.” he said. “There is an imbalance between different generations. While many of the parents of people who are in their 20s today are self-made men, that generation made a social structure which can’t digest them anymore. As Korean society has stabilized, there are fewer opportunities for someone to recreate their life and become a success on the basis of sheer willpower.”


Not only is there less room for success, but for Jeon Hong-ju, 31, this structural imbalance has made him give up the thought of pursuing his life’s passion. Upon graduating, Jeon began work as a marketing manager for Ales Music, a small independent music label. In his home there are thousands of music CDs. “Although the pay wasn’t very good, I loved working there,” he said. After almost two years at the label, Jeon quit. “The company was struggling to stay afloat. I couldn’t take it anymore. I was anxious about turning 30 and not having a secure job.”


Last year, he took the ninth grade level civil service examination and passed. He now works in a district office in Incheon. “I’m good at adjusting, so this job is fine,” he said with a faint laugh.


“It’s a nine-to-six job. I don’t get paid much but at least I’m not worried about where my next paycheck will come from.”


The situation has been under scrutiny by politicians and the media. Young people who opt for the security of a civil service job are called gongsijok, or members of the public servants’ clan. Presidential candidate Lee Myung-bak made a statement at a forum last month about the disillusioned youth of Korea. “The fact that young Koreans prefer the security of a civil service job proves how generally insecure our economy is. However, I wish they wouldn’t give up their dreams so easily and not be so afraid of risk or change.”


Jeon thinks these kinds of public statements are irresponsible. “For the past decade, the infrastructure has been getting worse and worse,” he said. “Korea before and after the IMF crisis are two different countries. Although we are better fed, we are more worldly and weary. Naturally we are concerned about having a roof over our heads and a decent meal when we are 60 or 70 years old. So what’s wrong with that?”


Jeon’s statement might sound cynical but recent statistics are far from the “dare to dream” scenario which the media, especially the conservative print media, try to create for Korea’s youth. In a recent survey of 1,082 job hunters in their 20s conducted by Job Korea, a large employment portal site, 47.3 percent said that they have contemplated suicide because of the stress of finding a job. Last week, a 25-year-old female, who graduated from a prestigious university in Seoul in 2006, committed suicide after failing the entrance exam for the pharmaceutical department at another university. She left a note saying, “I should have just studied for the civil service examination.” The police officer responsible for the case commented, “She wanted to go to the pharmaceutical department because it was hard for her to get a job after graduating from the humanities department.”


Jeon has also thought about transferring to another department which has a higher percentage of employment among graduates. “I am a social science major so there is a limit to what I can apply for,” he said as he laughed. “I couldn’t apply, for example, to the marketing department at a big conglomerate. I seriously thought of trying to get into the kimchi department of some university, so at least I would have a skill.”


As Lee Dong-sup watches his son study hard for the upcoming civil service examination, he feels guilty. “He used to be very good at art. I feel so guilty that my generation couldn’t provide a better environment for my son and his friends. And here I am, telling stories about my childhood hardships,” he said.


Lee’s son sees it differently, “There is this great quote from ‘Death of a Salesman,’” he said. “Biff Loman addresses Willy, his father, saying that the things he loves in this world, the work, food and the time to sit and smoke are waiting for him the minute he says he knows who he is. And he questions why the hell he is trying to become what he doesn’t want to be. When I was younger and saw my father working till 2 a.m., I wanted to tell my father that. Maybe I’m just as disillusioned as he is but I am not going to go to a company and struggle and just end up getting laid off,” he said.

http://joongangdaily.joins.com/article/view.asp?aid=2881886



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North Korea's Warming Trend





Few countries are more troubled than North Korea. After decades of economic isolation, one-party rule, and natural disasters such as floods this spring, it's little surprise that the economy today is no bigger than it was 20 years ago. In 2006 gross domestic product shrank by 1.1%, and it's likely to remain flat this year.

What may be more surprising is that the North appears to be on the brink of a turnaround. Although any improvement in living standards will certainly be modest, the Oct. 2-4 summit between South Korean President Roh Moo Hyun and the North's "Dear Leader," Kim Jong Il, may lead to better relations with the West. Coupled with an international agreement on Oct. 3 to begin dismantling Pyongyang's nuclear facilities, the talks have accelerated foreign interest in the North's plentiful and inexpensive workers. If North Korea opens up, "it will become one of the best investment destinations in Asia," predicts Jang Hwan Bin, senior vice-president at Hyundai Asan, which runs a resort at Mt. Kumgang in the North.

While it's hard to say whether life is really getting better in remote rural North Korea, Pyongyang and nearby areas appeared relatively prosperous on a recent visit. Despite the spring floods, the harvest seems bountiful, with rooftops in the countryside covered with yellow ears of corn drying in the sun. In the cities, loosely regulated private markets are springing up, offering everything from shoes and shampoo to televisions and DVDs.

The Chinese are a big part of the shift. Trade between the two countries is expected to hit $1.7 billion this year, and mainlanders now make up the majority of foreign businesspeople in North Korea. In recent years they have invested more than $45 million—serious money in the North— in retail, food, manufacturing, mining, and more. "Labor in North Korea is very cheap, so it's attractive to investors," says Han Lixin, a native of Dandong, a Chinese city just across the Yalu River from North Korea. Han runs a Web site promoting investment in the North and has signed up 300 Chinese companies as members.

It's not just Chinese businesses that are discovering the North. Visitors from China make up the bulk of tourists in North Korea, and they're almost everywhere: gawking at the towering monument to "Great Leader" Kim Il Sung, listening to students recite revolutionary paeans at the Children's Palace, and playing the tables at the casino in the basement of Pyongyang's Yanggakdo Hotel. "The economy, of course, is not so good, but this country is very interesting," says a smiling thirtysomething Chinese businessman.

South Korea is doing its part, too. Roh agreed to bankroll billions of dollars in infrastructure upgrades in the North. Among the first projects will be a rail link to the North Korean city of Kaesong, a special economic zone where South Koreans now employ 16,000 Northerners making goods ranging from skirts to wristwatches. A second such zone is in the works, and South Korea's Daewoo Shipbuilding & Marine Engineering may invest as much as $150 million in a shipyard in the North. Says Choi Soo Young, an economist at Seoul's Korea Institute for National Unification: "China and South Korea will provide breathing room as Pyongyang tries to dig out of its economic mess." ◦
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Saturday, October 13, 2007

What's Propelling Korea's Growth?






Investors in South Korea's two best-known blue chips have scant reason for cheer these days. The leading icon of Korean corporate success, Samsung Electronics, appears headed for a third straight year of falling profits as a result of the crash in memory-chip prices. And growth at Hyundai Motor Co. has stalled as Korea's surging currency has erased most of the automaker's cost advantage vis-à-vis its Japanese rivals.

Time to bail out of the Korean stock market? Investors don't seem to think so. The Seoul exchange's benchmark KOSPI index has surged 34% so far this year despite the U.S. credit crunch. The chief attraction: Korea's steel mills, shipbuilders, petrochemical operations, and other smokestack industries. Shares of petrochemical producer LG Chem Ltd. and steelmaker Posco have more than doubled. And Hyundai Heavy Industries Co. (the world's largest shipbuilder, which split from Hyundai Motor Co in 2002) has tripled. Samsung's shares, meanwhile, are down by 13% this year and Hyundai Motor's are up just 5%. "Forget about the Digital Era and fancy marketing," says Park Kyung Min, chief executive at Seoul-based fund manager Hangaram Investment Management. "It's all China and emerging markets."

In the late '90s, Korea's old industrial sector seemed like deadweight when compared with the country's booming technology companies. Its foundries and petrochemical operations epitomized the debt-fueled expansion that wounded Korea in the 1997 Asian foreign exchange crisis. No other country poured as much money into production facilities, and many basic industries became hopelessly oversupplied. Korea in 1998 had nearly 50 million tons of steel production capacity, about double domestic demand. Two sprawling new Korean ethylene plants added to a global capacity glut. And all of Korea's major shipyards built new dry docks even as rivals fretted about oversupply.

These days, though, all that investment is looking mighty smart. With emerging economies booming, the gluts have changed into shortages, and Korea has ready capacity to crank out steel, container ships, and the plastics needed for everything from MP3 players to car bumpers. Shipbuilders Hyundai Heavy, Samsung Heavy Industries (SHI), and Daewoo Shipbuilding & Marine Engineering all now have nearly four years of order backlogs as shippers cater to ballooning trade between China and the rest of the world. And in the first eight months of this year, exports of steel leapt by 26%, ships and heavy machinery such as bulldozers by 25%, and petrochemicals by 22%. "China certainly was a factor in freeing us from debt and starting a virtuous circle of profits and growth," says Kim Tae Han, strategy chief at Samsung Total Petrochemicals Co., an affiliate of Samsung Group now half-owned by French oil giant Total (TOT). Its profit in the first half of 2007 climbed 16%, to $250 million, on sales of $1.8 billion, up 3.3% from a year earlier. Since 1999, the company's exports—mostly to China—have jumped by 240%, to $2.3 billion last year.

That's not to say Korea felt no pain in the intervening years. Companies that were leveraged to the hilt folded or were sold. Hyundai Petrochemical Co., which found itself $2.9 billion in debt after building a new ethylene plant, went into receivership in 2001, while Hanbo Steel went bankrupt in 1997 after racking up $4.4 billion in debt. Yet many factories that failed were so high-tech that no one dared scrap them. Hanbo, for instance, was bought by the company now known as Hyundai Steel in 2004 for $750 million—one of three failing mills Hyundai has taken over since 2000. "The financial crisis was a huge opportunity for us to buy modern facilities on the cheap," says Kim Sang Gyu, business strategy chief at Hyundai Steel, an affiliate of the automaker and now Korea's second-largest steel producer. Sales jumped 38% in the first half, to $4 billion, while exports soared 47%, to $950 million.

With China and the Middle East building basic industries like crazy, Koreans know the current boom won't last forever. But for now, they're happy to fall back on their smokestack companies while the erstwhile stars ride out the turmoil in the U.S. and the developed world. Says economist Lim Kyung Mook at Korea Development Institute, a government-funded think tank: "The economy is much more balanced and healthier now." ◦
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Sunday, October 07, 2007

Koreas look down tricky road to peace

By Charles J. Hanley

On a July morning a lifetime ago, two generals, one in American khaki, the other in North Korean drab, strode into a makeshift building in a no-man's-land, took their seats at separate tables and signed the papers put before them. They left after just 12 minutes, without a handshake, without a word.

The papers said it all: The warring armies would cease fire that night "in the interest of stopping the Korean conflict, with its great toil of suffering and bloodshed."

The armistice agreement signed in 1953 at Panmunjom, Korea, did stop the fighting, but it didn't start the peace. Now the last generations to remember the "great toil" may see their war truly come to an end, if the two Koreas achieve the peace settlement proposed last week by their leaders.

The vision of two nations at peace — with normal trade, comings and goings, diplomatic ties — falls short of reunification, Koreans' vision of two nations made one. And ending a 54-year-old war-on-hold will mean negotiating through a diplomatic and political thicket grown denser by the decade, and remaking the face of a fortress peninsula.

But a peace treaty is a necessary step toward finally moving beyond the all-devouring 1950-53 war, a conflict that left the two Koreas a wasteland of bombed-out towns and cities, downed bridges, severed rail lines, flattened factories and schools, with millions of homeless, destitute people. Possibly 4 million people perished in the war, scholars estimate. The U.S. military suffered more than 33,000 battle deaths.

In subsequent decades of dictatorship, and then 20 years of democracy, capitalist South Korea rebuilt itself as an economic powerhouse. The northern Democratic People's Republic, meanwhile, became an ever more tightly controlled, impoverished, at times famine-afflicted one-party state.

Through it all, the armistice has largely held, and held within it the seeds of diplomatic trouble, of unanswered questions.

Does peace demand a separate treaty between North and South Korea, along with a broader agreement incorporating their two main wartime allies, China and the United States? What about the 15 other belligerents, nations from Belgium to the Philippines that sent small fighting units to Korea at U.S. behest?

Add this complication: South Korea never signed the armistice, since its then-President Syngman Rhee had hoped to fight on. The northerners consequently maintained they would make peace only with America. Washington, for its part, long contended it, too, hadn't signed the cease-fire — that its generals represented the U.N. command of 17 fighting nations, not the U.S. government.

Korea scholar Selig S. Harrison said such tricky issues were "kicked down the road for later diplomacy" in last week's vague statements at the Pyongyang meeting between South Korean President Roh Moo-hyun and North Korean leader Kim Jong Il.

"The United States has not ever formally said we would be a signatory to a peace treaty," noted Harrison, of Washington's Center for International Policy. But, he said, "It's clear China has to be a signatory, and it's clear the U.S. has to be a signatory for North Korea to go along with this whole process."

The prospect of peace talks raises other, ground-level questions, on a peninsula weighed down by 2 million troops facing each other across a hair-trigger front line, the 2.5-mile-wide demilitarized zone, or DMZ.

A major reduction and redeployment of armed forces would be expected to accompany a peace treaty, and that would be a costly operation. "With huge armies confronting each other, the logistics of actually ending the armistice are very difficult," said Korean War historian Bruce Cumings, a University of Chicago Asian specialist.

And what about the remaining front-line U.S. force in South Korea, 28,000 troops? The bitter legacy of hot and cold wars suggests the North Koreans would demand a U.S. withdrawal as part of any peace. But Cumings cautions against such assumptions.

"The North Koreans told (former South Korean President) Kim Dae-jung and Noh privately they would live with a situation where U.S. troops remain south of the DMZ," Cumings said. The reason: The U.S. would offer a "balance" to the historic Chinese and Japanese influence over Korea.

What's more certain is that peace won't be possible unless North Korea dismantles its nuclear weapons program. That goal looked closer last week with announcement of a major agreement in six-nation disarmament talks.

Much less certain is when Korea, divided by U.S.-Soviet fiat in 1945, might become one nation again.

Pyongyang's Communist leaders resist relinquishing their repressive power, and China is assumed to prefer keeping the communist buffer on its northeast. In 2000, in his opening to the north, former South Korean President Kim de-emphasized talk of one nation, in favor of "confederation."

And at last week's summit, "it's very significant they didn't play up the issue of reunification," Harrison said.

"Reunification is probably another 20 to 25 years away," added Cumings.

Both veteran analysts focused instead on what Cumings called the "unanticipated" substance of north-south economic deals announced last week: a joint fishing zone; a new joint industrial park in the north; joint shipbuilding; an agreement to ship southern rail freight through North Korea to China.

Those are the deals that build trust and may help change Korea after a half-century of no war, no peace.

"North Korea and South Korea are rapidly moving toward reconciliation," Harrison said. ◦
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Thursday, September 27, 2007

Summit between North and South Korea



GLIDING across the border in a 30-limousine convoy, Roh Moo-hyun, South Korea's president, will on October 2nd visit Pyongyang and meet North Korea's capo, Kim Jong Il, for three days of talks. It is only the second summit between the two sides since their estrangement in a civil war over half a century ago.

The first, seven years ago, was between Mr Kim and Mr Roh's predecessor, Kim Dae-jung, who launched a “sunshine policy” towards the North. The meeting generated euphoria among South Koreans and won their president a Nobel peace prize, but produced little else. Kim Jong Il never came to Seoul, as he promised he would. Relations deteriorated between North Korea and the United States, South Korea's protector. And last year the North tested a nuclear bomb, to the region's dismay. As for the summit itself, it later transpired it was bought with cash passed under the table to the Dear Leader.

Mr Roh knows things have changed. The national mood towards reconciliation is subdued, even sceptical. Lacking Kim Dae-jung's charisma, his own political authority is at rock-bottom, after an ineffective presidency; he stands down at the end of the year. The only constant is that the summit's agenda is whatever Mr Kim decides it will be, and that he is not letting on: so, as one of Mr Roh's advisers delicately puts it, the summit is “open-ended”.

While dampening expectations, Mr Roh clearly hopes for a breakthrough in one or more of three areas: in reducing tensions and furthering peace on the Korean peninsula; deeper economic co-operation with the benighted North; and reconciliation of the many thorny issues—such as the tens of thousands of families separated since the Korean war—that might bring the distant goal of unification a tad closer. Above anything, Mr Roh appears to want to come home waving a scrap of paper with “peace” written on it.

Hawks, particularly in America, say that Mr Roh's ambitions risk running ahead of the “six-party” process in which America, China, Japan, Russia and South Korea are hoping to get North Korea to abandon its nuclear ambitions. Too much offered by the South might lead the North to hope for aid without scrapping its nuclear programmes. It is not certain that Mr Roh will even bring up the nuclear issue with Mr Kim. Meanwhile, say some of Mr Roh's critics, peace with the North is a matter for all the former combatants of the Korean war, China and America included.

Mr Roh's men deny there is any risk. The president's hopes for economic co-operation and reconciliation are being entertained only because of progress on denuclearisation, they say; in July, North Korea closed its Soviet-era reactor at Yongbyon and has since promised to declare and disable all its programmes by the end of the year. They argue that it will do the liberal Mr Roh no favours if he returns with a deal that is unacceptable to his successor as president (the clear favourite is Lee Myung-bak, whose right-wing Grand National Party has a harder line towards North Korea). As for economic co-operation, says a close adviser, it has been far too one-sided to date, with North Korea simply taking South Korean money, fuel-oil and rice, much of which finds its way to the armed forces. From now on, the South expects much more—starting with the chance to invest in the North's rich mineral resources and cheap labour. To press home the point, two-dozen business executives will accompany Mr Roh.

Some expect the North to go surprisingly far. Chung-in Moon of Yonsei University, an architect of the “sunshine policy”, argues that decrepit North Korea is on the brink of opening up just as China did three decades ago, because Kim Jong Il recognises that his legitimacy now rests on future prosperity.

But outside help is hard to imagine without progress on the nuclear issue. The United States classes North Korea as an enemy; it also brands the country as a state sponsor of terrorism. Both hobble North Korea's ability to trade. America offers to lift these curses in return for a real disablement of North Korea's nuclear capabilities.

On September 27th the six-party talks reconvened in Beijing. Their outlook was clouded by a mysterious recent Israeli air strike at a Syrian target that some claimed was a North Korea-assisted nuclear facility. North Korea vigorously denies this and American diplomats say they have seen no intelligence confirming it. Negotiators, wanting nothing to distract North Korea from a timetable for denuclearisation, are inclined to gloss over the matter. For the timetable, as it is, involves some quite devilish details.



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Monday, August 13, 2007

Former ambassadors endorse FTA with South Korea

orlandosentinel.com/services/newspaper/printedition/monday/opinion/orl-korea1307aug13,0,342690.story

Envoys: Approve free trade with S. Korea
Accord signals U.S. commitment to Asia

James R. Lilley, Donald Gregg, James T. Laney, Stephen W. Bosworth and Thomas C. Hubbard

August 13, 2007

On June 30, U.S. and Korean representatives signed the most significant free-trade agreement since NAFTA -- the U.S.-Korea FTA, known as KORUS. As former ambassadors to the Republic of Korea, we know that KORUS will not only bolster bilateral trade and investment ties but also reinforce our countries' important political and security partnership at a time of dramatic change in Asia.

In dollar terms, the scale of this agreement is enormous. With two-way trade totaling $78 billion last year, Korea is our seventh-largest trading partner. KORUS will effectively become the third-largest free trade area in the world -- exceeded only by the European Union and NAFTA -- and set new standards for bilateral trade agreements. Nearly 95 percent of bilateral trade in manufactured products will become duty free in three years as will two-thirds of U.S. agricultural exports.

Whereas the United States has been one of the world's most open markets, Korea has until recently been one of the most closed in the industrialized world. American exporters of industrial and farm products who have long struggled to compete in Korea, therefore, have much to gain from the elimination of Korea's relatively high tariffs and complex non-tariff barriers.

The agreement also gives important new rights and protections to U.S. investors and service industries. KORUS provides U.S. financial service companies the right to full ownership of banks, insurance companies and other financial businesses in Korea and establishes rules that will allow them to compete effectively. It also provides increased access to U.S. express service companies and expands opportunities for U.S. studios to sell television programs and films to Korea.

The political and strategic arguments for this agreement are equally compelling.

Now the world's 12th-largest economy, the Republic of Korea is a vibrant democracy whose standards in the areas of labor and environmental protection are equal to our own. Korea has provided valuable economic and military support in Vietnam, the Middle East and Afghanistan.

The trade agreement will complement our military alliance, which continues to deter North Korean aggression as we seek to deal with its nuclear-weapons program and build a broader peace on the divided Peninsula. More broadly, KORUS will underscore our nation's commitment to preserve our leadership in the Asia-Pacific region, the world's most dynamic center of economic activity.

The economies of East Asia are rapidly integrating, with such countries as China, Japan, Korea and India now trading with each other more than they are with the rest of the world. Moreover, they are actively pursuing bilateral and regional free-trade arrangements that could leave the U.S. on the outside if we do not remain engaged. The agreement with Korea will help ensure that the U.S. remains an insider as Asian economies continue to grow and join forces. U.S. exporters, service providers and investors will have preferential access to Korea's market and an important base for business with the rest of the region. At the same time, Korea's preferential access to the U.S. market could be a powerful incentive for others in the region, such as Japan, to open their markets to the United States with free-trade agreements as comprehensive as KORUS.

For all of these reasons, we urge Congress to act quickly to approve this agreement when it is ready for submission this fall. We are well aware that certain American industries feel they are not getting all that they desire in terms of KORUS benefits.

However, the overall U.S. economy will benefit hugely from KORUS, and we urge all Americans to support this agreement and not let the pursuit of elusive perfection become the enemy of the good.

For more than 50 years, the United States' political and economic commitment to Asia has contributed to the region's stability and prosperity. Nowhere has our engagement been more positive than with the Republic of Korea, which with our help rose from the ruins of the Korean War to become a vibrant democracy and one of the largest economies in the world. The accord with Korea will strengthen America's relationship with a longtime ally and enhance our presence and influence in the region. We are convinced that America, for its own sake, must remain a leader in Asia. Ratification of this agreement is one way of ensuring that our engagement with the world's fastest-growing region will support our fundamental security and economic interests into the future.

James R. Lilley was U.S. ambassador to Korea from 1986-1989. Donald Gregg was ambassador to Korea from 1989-1993. James T. Laney was ambassador to Korea from 1993-1997. Stephen W. Bosworth was ambassador to Korea, from 1997-2001. Thomas C. Hubbard was ambassador to Korea from 2001-2004. They wrote this commentary for the Orlando Sentinel. ◦
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Thursday, August 02, 2007

South Korea's financial markets






For those South Koreans who want to transform their sometimes insular country into an Asian financial hub, July 3rd was a momentous day. South Korea passed its own version of Britain's “big bang”, the 1986 deregulation that enabled London to become a global financial centre. In South Korea the legislation will remove bureaucratic barriers in its securities industry and help brokers, banks and possibly insurers to consolidate.

For those foreign bankers who wonder why anyone bothers to get off a plane in Seoul, a decision by a tax appeals court on July 5th sent just the opposite message. Lone Star Funds, a Texas-based buy-out firm, lost an appeal on a $110m assessment stemming from the lucrative sale of an office block held in what had been thought to be a tax-exempt subsidiary. The ruling refocused attention on what, for both Lone Star and South Korea, has been a public-relations disaster.

Back in 2003, when South Korea was stuck in a protracted slump, Lone Star was something of a hero. It came in when other investors would not and made investments that included taking control of a big bank. It seemed a shrewd bet. In the subsequent recovery, the returns were spectacular—too much so for some South Koreans, who believe that Lone Star got too sweet a deal. Well-publicised prosecutions followed a public outcry. Lone Star is now involved in two big trials and a number of smaller actions, all suggesting it manipulated figures in order to buy companies on the cheap or to avoid paying taxes. It is fighting the charges.

Lengthy lawsuits are not the only factors discouraging investment in South Korea. Foreign-exchange controls make it hard to repatriate profits. The local currency, the won, is not much use in global markets. Regulatory filings must be done in Korean. No foreign company has so far listed on Seoul's stock exchange. Legal barriers limit, or exclude, foreign law firms and accountants. Foreign hedge funds and private-equity firms have, with few exceptions, passed judgment with their feet and stayed away.

Most of the big financial institutions are present, but labour negotiations can be so wretched that many bankers consider the country toxic. Even lenient banks are not let off. Standard Chartered is viewed by competitors as a particularly accommodating employer in South Korea. But a union has festooned the lobby of its Seoul headquarters with hostile billboards.

And yet South Korea's good intentions should not be written off. Its advocates start by spreading a map. The country lies between Japan and China and has a good airport. Its people are well educated; many study abroad. Communications are excellent. In just a few years, Seoul has lost its gritty-city image and the country's television shows, movies and fashion have become hits throughout Asia. For an expatriate banker, it need not be a backwater. South Korea's stockmarket is hitting records, its banks are healthy, foreign-exchange reserves are strong and savings are growing.

More importantly, attitudes are improving. Restrictions on foreign lawyers and accountants are being relaxed; a free-trade agreement has been struck with America. A non-American banker says he was stunned to read the fine print of the deal and to see how much it helped his own business. At the moment, South Korea's financial ambitions seem quixotic, but no Asian market can boast of superlative disclosure and transparency. An opportunity exists for any country that gets it right.

http://www.economist.com/printedition/index.cfm?d=20070714
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Wednesday, August 01, 2007

Congress: Ratify the free trade agreement with Korea

It seems that almost every discussion about international trade is focused on the U.S. relationship with China. Our enormous and growing trade deficit with China, coupled with recent scares about the safety of products made there, confirms the importance of this relationship.

Getting much less press is the Free Trade Agreement (FTA) between the United States and South Korea, recently signed by both Presidents and awaiting Congressional approval. Perhaps because the U.S.-South Korean trade relationship is so positive for the people in both countries, we read and hear much less about it.

South Korea is no China, but the numbers speak for themselves. South Korea is the world's tenth-largest economy. Bilateral trade between the United States and South Korea reached US$78 billion in 2006. South Korea is the United States' seventh-largest trading partner, seventh-largest export market, and sixth-largest market for agricultural goods. The United States is South Korea's second-largest trading partner and its largest source of foreign direct investment.

And the numbers are going in the right direction. South Korea today is on track to hit US$20,000 in per capita GDP by 2010. It hosted the 1988 Summer Olympic Games and co-hosted the 2002 World Cup. South Korean women dominate the Ladies Professional Golf Association and South Korean men are striking out hitters in Major League Baseball. South Korean firms have built the three tallest skyscrapers in the world, and South Korea can boast of 41 companies in the Forbes 2000. Among the almost 100 countries that became independent following World War II, none of them can come close to this list of achievements. It’s not called the “Korean economic miracle” for nothing.

But what’s in it for us?
The U.S.-South Korea FTA will promote new opportunities for U.S. businesses, investors, farmers, and consumers in the dynamic South Korean market, and further expand and strengthen this important economic relationship. It will also reinforce the strategic security partnership between our two countries and would likely serve to promote further liberalization efforts regionally and globally.

Sound too good to be true? Let’s look at the data. Last year, U.S. agricultural exports to South Korea totaled US$2.85 billion, making it the sixth largest agricultural market for crops grown by American farmers here at home, including Florida. Under this FTA, about two-thirds of the food that South Korea is importing from the United States will become duty-free, lowering the price to South Korean consumers and thus likely increasing demand.

For non-agricultural goods, the United States currently faces an average tariff rate of 7% when trying to compete in South Korea. This FTA will slash these rates and level the playing field for U.S. exporters. According to the U.S. Chamber of Commerce, studies show that U.S. exports to Korea could grow 50% under this FTA.

South Korea now has a US$1 trillion economy and almost 50 million potential consumers willing and able to buy U.S. good and services. That is why the U.S. Chamber of Commerce in Korea supports this FTA and predicts it will:

· expand the already robust trade between the two countries;
· lock in governmental reforms, providing a level playing field in each others markets and increase the competitiveness of industries in both countries;
· further strengthen the relationship between the two countries as we work together to protect peace and prosperity in Northeast Asia;
· ensure that the United States remains an integral part of Asia’s economic integration.

China is the most important country in Asia, and that is unlikely to change anytime soon. The United States knows this. Korea knows this. The Chinese certainly know this. But also unlikely to change anytime soon is Korea’s position as the fourth largest economy in Asia (after China, Japan, and India on a purchasing power parity basis).

The science fiction author Philip K. Dick famously said, “Reality is that which, when you stop believing in it, doesn't go away.” The reality today is America needs to keep all its remaining friends in the world. An FTA with an old friend like South Korea is the right thing for both sides. Hopefully our Congress will agree. ◦
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Monday, July 16, 2007

Pyongyangology



WHAT does the world really know about the regime of Kim Jong Il, which appears ready to yield to foreign pressure and bribes to close down the reactor at Yongbyon that has provided enough material for a handful of nuclear devices? The answer, despite defectors' tales and the best efforts of Western intelligence agencies, diplomats and academics, is still: much less than the known unknowns. That Mr Kim runs a vile regime is not in doubt, with North Korea's 20m-odd people the victims of backwardness, malnutrition and political repression. Yet so secretly does it conduct its affairs that speculation is easier than analysis.

Some known knowns. Since the mid-1990s North Korea's unique brand of Stalinism—even more horrifying than those tried elsewhere—has entered a process of slow disintegration. Famine during the 1990s is reckoned to have killed perhaps a tenth of the population. Only with difficulty can survivors still believe in the long-promised socialist paradise, or find fresh reservoirs of gratitude for Mr Kim.

Foreigners living in Pyongyang report a change in attitudes. Once in awe of authority, people now defy it. They break petty rules: sitting on the moving rail of the escalator; smoking beneath no-smoking signs; and blocking traffic by selling furniture in the streets, to the frustration of the white-gloved traffic ladies. More seditious still, people are breaking the seal on their radios that keeps them tuned only to the state frequency.

Another measure of changing attitudes: in bus queues or at sweet-potato stands, people are readier to chat to foreigners than they were just a few years ago. Signs of petty capitalism and informal markets, once unheard of, are everywhere. Crime is on the rise too, and where there are black markets, mafia-type protection rackets probably follow. Chinese lorry-drivers complain of highway banditry, as gangs jump on to the back of slow-moving lorries and pull off goods.

Despite Stalinism's decay, Andrei Lankov of South Korea's Kookmin University suggests that the regime, which during the famine may have faced collapse or military rebellion, now actually feels more sure of itself. It has restricted the operations of foreign aid organisations. And it has largely recentralised the distribution of food and other essentials, after the system broke down during the famine. So all the rewards in the form of cash and commodities that North Korea expects to reap from its nuclear diplomacy could easily be used to reinforce the command economy, and buy loyalty.

In recent months a crackdown has taken place along the porous border with China. The law is once again being rigorously applied to North Koreans caught crossing illegally. The punishment is five years in prison camp. There is little sign that the gulag is any less brutal: a report by Christian Solidarity Worldwide, a human-rights group, pieced together what is known from defectors' accounts and satellite imagery. It put the prison population at 200,000, with 500,000-1m having died there over the years.

As for the elite, what little is known suggests a regime riven by bickering. It appears to have problems filling government posts: the job of foreign minister has been open for months. In April the prime minister was replaced by Kim Yong Il, who analysts suspect may be more hardline. Political advisers from the army seem again to have growing influence. For a while after the six-nation agreement in February on North Korea's denuclearisation, the usual officials in military uniform suddenly stopped accompanying Mr Kim in public; Mr Kim also visited relatively few military sites compared with civilian ones. The uniforms are now back.
In May Mr Kim himself stopped appearing in public, prompting speculation about his health, with rumours of diabetes and heart problems. His health is perhaps the regime's most closely guarded secret, so all this is pure conjecture. But it is known that he is 66 and was once a heavy smoker and drinker.

If Mr Kim was frail, he has bounced back, appearing this week with China's foreign minister. Still, inevitable gossip has been fanned about succession in this communist dynasty. Mr Kim's two younger sons, in their 20s, have started appearing in public with their father for the first time since their mother died in 2004. Mr Kim's eldest son (by an earlier mistress), Kim Jong Nam, 36, had been written off as a potential successor after the embarrassment of being caught entering Japan with a fake passport to visit Tokyo's Disneyland. He has recently been living in Macau, but this year popped back for his father's birthday. Some of the fuss that North Korea made in the six-party talks about funds frozen in a Macau bank may have been for his benefit.

South Korean analysts, in particular, predict a collective leadership after Mr Kim's death, and the regime's indefinite continuation. But an orderly succession cannot be taken for granted. And if the regime were suddenly to collapse, one cast-iron certainty is that the countries that would have to deal with the mess—chiefly South Korea, the United States and China—are wholly ill-prepared.


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