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.


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." ◦

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." ◦

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. ◦