Tuesday, April 29, 2008

Women in South Korea - Cracks in the Glass Ceiling

South Koreans are a bit conflicted about career women. Gender wasn't much of an issue in the selection of a female astronaut to fly this month on the country's first space mission. But when women are seeking workaday corporate jobs, some South Korean men still resist change. Outer space is one thing, but a woman in the next cubicle is something else.

For years, most educated women in South Korea who wanted to work could follow but one career path, which began and ended with teaching. The situation started to change after the 1998 Asian financial crisis. Thousands of men lost their jobs or took salary cuts, and their wives had to pick up the slack by starting businesses in their homes or seeking part-time work. A couple of years later, the government banned gender discrimination in the workplace and required businesses with more than 500 employees to set up child-care facilities. It also created a Gender Equality Ministry.

These days the government hires thousands of women (42% of its new employees last year), many for senior positions in the judiciary, international trade administration, and foreign service. Startups and foreign companies also employ (and promote) increasing numbers of Korean women.

But at the top 400 companies, many of which are family-run conglomerates, it's hard for women to reach the upper ranks. In all, about 8% of working women hold managerial positions. (In the U.S. nearly 51% do.) "We have a long way to go," says Cho Jin Woo, director of the Gender Equality Ministry.

South Koreans are grappling with traditional attitudes about women, a hierarchical business culture, and the need to open up the workplace to compete globally. A senior manager at SK Holdings, which controls the giant mobile phone carrier SK Telecom (SKM), says he avoids hiring women because he believes they lack tenacity. When deadlines are tight, he says, "you need people prepared to put in long hours at the office." Park Myung Soon, a 39-year-old woman who is in charge of business development at the carrier, says, "Many men are preoccupied with the notion that women are a different species." To get ahead, Park says she had to achieve 120% of what her male colleagues did—as well as play basketball and drink with them after work. "Luckily, I like sports, and I like to drink," she says.

When Choi Dong Hee joined SK's research arm in 2005, she was the only woman there and had no major assignment until she created one. After conducting a yearlong study, Choi, 30, proposed changing the company's policy to allow subscribers to use any wireless portal. Her managers ignored her. She persisted. Finally, they agreed to let her brief the division head, who agreed to let her make her case to the company chairman. Choi worked on the presentation for three weeks straight, sometimes alone in the office overnight (to her boss's horror). In the end, the company did adopt the open policy she advocated. Now her managers are quick to say that women's perspectives can help SK better serve its customers.

Sonia Kim, who is in charge of TV marketing at Samsung Electronics, says her male colleagues rarely argue with the boss, even if they think he's wrong. Kim, though, persuaded her manager to let her develop a promotional campaign rather than rely on an ad agency she thought had lost its creative edge. Kim also says some of the men used to overturn decisions made during the day while out drinking after hours. Since she and other women at Samsung complained, Kim says, the practice has mostly stopped.


Sunday, April 27, 2008

Elite Korean Schools, Forging Ivy League Skills

It is 10:30 p.m. and students at the elite Daewon prep school here are cramming in a study hall that ends a 15-hour school day. A window is propped open so the evening chill can keep them awake. One teenager studies standing upright at his desk to keep from dozing.

Kim Hyun-kyung, who has accumulated nearly perfect scores on her SATs, is multitasking to prepare for physics, chemistry and history exams.

“I can’t let myself waste even a second,” said Ms. Kim, who dreams of attending Harvard, Yale or another brand-name American college. And she has a good shot. This spring, as in previous years, all but a few of the 133 graduates from Daewon Foreign Language High School who applied to selective American universities won admission.

It is a success rate that American parents may well envy, especially now, as many students are swallowing rejection from favorite universities at the close of an insanely selective college application season.

“Going to U.S. universities has become like a huge fad in Korean society, and the Ivy League names — Harvard, Yale, Princeton — have really struck a nerve,” said Victoria Kim, who attended Daewon and graduated from Harvard last June.

Daewon has one major Korean rival, the Minjok Leadership Academy, three hours’ drive east of Seoul, which also has a spectacular record of admission to Ivy League colleges.

How do they do it? Their formula is relatively simple. They take South Korea’s top-scoring middle school students, put those who aspire to an American university in English-language classes, taught by Korean and highly paid American and other foreign teachers, emphasize composition and other skills crucial to success on the SATs and college admissions essays, and — especially this — urge them on to unceasing study.

Both schools seem to be rethinking their grueling regimen, at least a bit. Minjok, a boarding school, has turned off dormitory surveillance cameras previously used to ensure that students did not doze in late-night study sessions. Daewon is ending its school day earlier for freshmen. Its founder, Lee Won-hee, worried in an interview that while Daewon was turning out high-scoring students, it might be falling short in educating them as responsible citizens.

“American schools may do a better job at that,” Dr. Lee said.

Still, the schools are highly rigorous. Both supplement South Korea’s required, lecture-based national curriculum with Western-style discussion classes. Their academic year is more than a month longer than at American high schools. Daewon, which costs about $5,000 per year to attend, requires two foreign languages besides English. Minjok, where tuition, board and other expenses top $15,000, offers Advanced Placement courses and research projects.

And, oh yes. Both schools suppress teenage romance as a waste of time.

“What are you doing holding hands?” a Daewon administrator scolded an adolescent couple recently, according to his aides. “You should be studying!”

Students do not seem to complain. Park Yeshong, one of Kim Hyun-kyung’s classmates, said attractions tended to fade during hundreds of hours of close-quarters study. “We know each other too well to fall in love,” she said. Many American educators would kill to have such disciplined pupils.

Both schools reserve admission for highly motivated students; the application process resembles that at many American colleges, where students are judged on their grade-point averages, as well as their performance on special tests and in interviews.

“Even my worst students are great,” said Joseph Foster, a Williams College graduate who teaches writing at Daewon. “They’re professionals; if I teach them, they’ll learn it. I get e-mails at 2 a.m. I’ll respond and go to bed. When I get up, I’ll find a follow-up question mailed at 5 a.m.”

South Korea is not the only country sending more students to the United States, but it seems to be a special case. Some 103,000 Korean students study at American schools of all levels, more than from any other country, according to American government statistics. In higher education, only India and China, with populations more than 20 times that of South Korea’s, send more students.

“Preparing to get to the best American universities has become something of a national obsession in Korea,” said Alexander Vershbow, the American ambassador to South Korea.

Korean applications to Harvard alone have tripled, to 213 this spring, up from 66 in 2003, said William R. Fitzsimmons, Harvard’s dean of admissions. Harvard has 37 Korean undergraduates, more than from any foreign country except Canada and Britain. Harvard, Yale and Princeton have a total of 103 Korean undergraduates; 34 graduated from Daewon or Minjok.

This year, Daewon and Minjok graduates are heading to universities like Stanford, Chicago, Duke and seven of the eight Ivy League universities — but not to Harvard. Instead, Harvard accepted four Korean students from three other prep schools.

“That was certainly not any statement” about the Daewon and Minjok schools, Mr. Fitzsimmons said. “We’re alert to getting kids from schools where we haven’t had them before, but we’d never reject an applicant simply because he or she came from a school with a history of sending students to Harvard.”

South Korea’s academic year starts in March, so the 2008 class of Daewon’s Global Leadership Program, which prepares students for study at foreign universities, graduated in February.

One graduate was Kim Soo-yeon, 19, who was accepted by Princeton this month. Daewon parents tend to be wealthy doctors, lawyers or university professors. Ms. Kim’s father is a top official in the Korean Olympic Committee.

Ms. Kim developed fierce study habits early, watching her mother scold her older sister for receiving any score less than 100 on tests. Even a 98 or a 99 brought a tongue-lashing.

“Most Korean mothers want their children to get 100 on all the tests in all the subjects,” Ms. Kim’s mother said.

Ms. Kim’s highest aspiration was to attend a top Korean university, until she read a book by a Korean student at Harvard about American universities. Immediately she put up a sign in her bedroom: “I’m going to an Ivy League!”

Even while at Daewon, Ms. Kim, like thousands of Korean students, took weekend classes in English, physics and other subjects at private academies, raising her SAT scores by hundreds of points. “I just love to do well on the tests,” she said.

As bright as she is, she was just one great student among many, said Eric Cho, Daewon’s college counselor. Sitting at his computer terminal at the school, perched on a craggy eastern hilltop overlooking the Seoul skyline, Mr. Cho scrolled through the class of 2008’s academic records.
Their average combined SAT score was 2203 out of 2400. By comparison, the average combined score at Phillips Exeter, the New Hampshire boarding school, is 2085. Sixty-seven Daewon graduates had perfect 800 math scores.

Kim Hyun-kyung, 17, scored perfect 800s on the SAT verbal and math tests, and 790 in writing. She is scheduled to take nine Advanced Placement tests next month, in calculus, physics, chemistry, European history and five other subjects. One challenge: she has taken none of these courses. Instead, she is teaching herself in between classes at Daewon, buying and devouring textbooks.

So she is busy. She rises at 6 a.m. and heads for her school bus at 6:50. Arriving at Daewon, she grabs a broom to help classmates clean her classroom. Between 8 and noon, she hears Korean instructors teach supply and demand in economics, Korean soils in geography and classical poets in Korean literature.

At lunch she joins other raucous students, all, like her, wearing blue blazers, in a chow line serving beans and rice, fried dumpling and pickled turnip, which she eats with girlfriends. Boys, who sit elsewhere, wolf their food and race to a dirt lot for a 10-minute pickup soccer game before afternoon classes.

Kim Hyun-kyung joins other girls at a hallway sink to brush her teeth before reporting to French literature, French culture and English grammar classes, taught by Korean instructors. At 3:20, her English language classes begin. This day, they include English literature, taught by Mani Tadayon, a polyglot graduate of the University of California at Berkeley who was born in Iran, and government and politics, taught by Hugh Quigley, a former Wall Street lawyer.

Evening study hall begins at 7:45. She piles up textbooks on an adjoining desk, where they glare at her like a to-do list. Classmates sling backpacks over seats, prop a window open and start cramming. Three hours later, the floor is littered with empty juice cartons and water bottles.

One girl has nodded out, head on desk. At 10:50 a tone sounds, and Ms. Kim heads for a bus that will wend its way through Seoul’s towering high-rise canyons to her home, south of the Han River.

“I feel proud that I’ve endured another day,” she said.

The schedule at the Minjok academy, on a rural campus of tile-roofed buildings in forested hills, appears even more daunting. Students rise at 6 for martial arts, and thereafter, wearing full-sleeved, gray-and-black robes, plunge into a day of relentless study that ends just before midnight, when they may sleep.

But most keep cramming until 2 a.m., when dorm lights are switched off, said Gang Min-ho, a senior. Even then some students turn on lanterns and keep going, Mr. Gang said. “Basically we lead very tired lives,” he said.

Students sometimes report for classes so exhausted that Alexander Ganse, a German who teaches European history, said he asked, “Did you go to bed at all last night?”

“But we’re not only nerds!” interrupted Choi Jung-yun, who grew up in San Diego. Minjok students play sports, take part in many clubs and even have a rock band, she said. Ambassador Vershbow, who plays the drums, confirmed that with photographs that showed him jamming with Minjok’s rockers during a visit to the school last year.

There are other hints of slackening. A banner once hung on a Minjok building. “This school is a paradise for those who want to study and a hell for those who do not,” it read. But it was taken down after faculty members deemed it too harsh, said Son Eun-ju, director of counseling.


Friday, April 25, 2008

Shelving the free-trade pact with South Korea would be a mistake

Opponents of a U.S.-South Korean free-trade agreement should be careful what they ask for. They've been demanding that South Korea first re-open its market to U.S. beef.

Last week officials from the two countries reached a deal that would do just that. Now, the naysayers have run out of plausible excuses to block the agreement.

With its rapidly developing economy and increasingly prosperous 48 million consumers, South Korea has become a lucrative market for exporters and investors. Its free-trade agreement with the United States would give U.S. firms and farmers the same kind of open access to that market that their South Korean counterparts already enjoy in the U.S. market, but the pact requires congressional approval to take effect.

Florida sent $328 million in exports to South Korea in 2006, with computers and electronics, machinery and transportation equipment the top categories. History shows a free-trade agreement would raise the totals, creating more jobs for Floridians. The state's exports to Canada, Mexico, Chile and Jordan all shot up after agreements with those countries.

This month's deal on beef would fully open South Korea's market to American producers for the first time since 2003, when a case of mad-cow disease was found in the United States. Before the closure, South Korea was the third-biggest export market for U.S. beef.

Now that the beef argument has been slaughtered, some opponents of the trade agreement are citing South Korea's limits on imports of U.S. autos. But that's a good reason to back, not buck, the agreement; it commits South Korea to lowering barriers to U.S. cars and trucks.

More general contentions about the agreement's threat to U.S. manufacturing also don't hold up. One in five U.S. jobs in that sector is linked to exports. Opening more markets abroad would help, not hurt, especially when a lower dollar makes U.S. goods more competitive. The first U.S. trade pact with a major Asian economy also would let U.S. companies better compete with Chinese, Japanese and European rivals doing business in the region.

Nearly a year ago, the Bush administration made a deal with Democratic leaders in Congress to ease the way for passing the South Korea agreement and three others by incorporating stronger labor and environmental protections. Just one of the agreements, with Peru, has been approved since.

This month House Speaker Nancy Pelosi pulled a parliamentary maneuver to shelve a free-trade agreement with Colombia. Now critics of the South Korea pact are moving the goal posts for its approval. This might seem like good politics in an election year -- Republican presidential candidate John McCain is a free-trade advocate -- but it's truly bad policy.


Thursday, April 24, 2008

South Korea trains cloned drug-sniffing dogs

The country that created the world's first cloned canine plans to put duplicated dogs on patrol to sniff out drugs and explosives.

The Korean Customs Service unveiled Thursday seven cloned Labrador retrievers being trained near Incheon International Airport, west of Seoul. The dogs were born five to six months ago after being separately cloned from a skilled drug-sniffing canine in active service.

Due to the difficulties in finding dogs who are up to snuff for the critical jobs, officials said using clones could help reduce costs.

The cloning work was conducted by a team of Seoul National University scientists who in 2005 successfully created the world's first known dog clone, an Afghan hound named Snuppy.

The team is led by Professor Lee Byeong-chun, who was a key aide to disgraced scientist Hwang Woo-suk. Hwang's purported breakthroughs in stem cell research were revealed as false, but independent tests proved the team's dog cloning was genuine.

The seven new cloned male dogs are all healthy, though one was sent to a university laboratory a few days ago for a minor foot injury it received during training, according to training center head Lim Jae-ryoung. For now, the dogs all share the same name: "Toppy" — a combination of the words "tomorrow" and "puppy."

"They have a superior nature. They are active and excel in accepting the training," said Kim Nak-seung, a trainer at the Customs Service-affiliated dog training center.

In February, all seven dogs passed a behavior test aimed at finding whether they are genetically qualified to work as sniffing dogs. Only 10 percent to 15 percent of naturally born dogs typically pass the test.

If the cloned dogs succeed in other tests for physical strength, concentration and sniffing ability, they will be put to work by July next year at airports and harbors across South Korea, according to the training center.

The agency says the cloned dogs could also save money.

"We came up with the idea of dog cloning after thinking about how we can possess a superior breed at a cheaper cost," said agency head Hur Yong-suk.

Normally, only about three out every 10 naturally born dogs it trains — at a cost of about $40,140 each — ends up qualifying for the job.

Lee of Seoul National University said it cost approximately $100,000 to $150,000 to clone each of the seven golden Labrador retrievers.

He said the seven are the world's first cloned drug-sniffing dogs.

The university team did not ask for payment from the customs authorities because it created the clones for academic purposes with government funds, Lee said.

He said his team has so far cloned 20 dogs and five wolves.

On Thursday the dogs frolicked with trainer Kim, running together and chasing a red rubber ball he threw across a playground — a part of training aimed at bolstering their stamina.

"If I look at them very carefully, there are now some small differences in their facial features," said Kim, who has been training the dogs since they were born. "But it's still hard to tell."


Monday, April 21, 2008

South Korea's First Astronaut Returns

South Korea's first astronaut Yi So-yeon looks on during a news conference in Star City, outside Moscow,Monday, April 21, 2008. A Russian space capsule touched down in Kazakhstan on Saturday after hurtling through Earth's atmosphere in a steeper-than-normal descent, subjecting the three-nation-crew to severe G-forces and landing hundreds of kilometers (miles) off target. Saturday's mission saw the return to Earth of South Korea's first astronaut, Yi So-yeon. She spent 10 days in space before joining U.S. astronaut Peggy Whitson and Russian flight engineer Yuri Malenchenko in the 3 1/2-hour, bone-jarring descent from the international space station.


Saturday, April 19, 2008

Bush hosts South Korean president at Camp David

President Bush and South Korean President Lee Myung-bak opened two days of talks on Friday focusing on North Korea's unfulfilled pledge to disclose its nuclear activities and a U.S. free-trade deal with South Korea that faces an uphill battle in Congress.

Bush hopes to strengthen sometimes-shaky U.S.-South Korea ties under Lee, a pro-American conservative who took office in late February and made the United States his first overseas trip. Their get-to-know-you meeting took on renewed importance when South Korea announced Friday that it would lift its ban on U.S. beef imports.

The dinner menu at the secluded presidential retreat in Maryland? Texas black Angus beef tenderloin.

South Korea was the third largest foreign market for U.S. beef before it banned imports in December 2003 over the possibility of mad cow disease. Its decision to end the ban removed a major roadblock to getting Congress to pass the free-trade pact, which Bush wants lawmakers to ratify before he leaves office. But even with the beef spat resolved, opposition from Democrats and automakers and a narrowing legislative calendar could push the issue into the next administration.

On North Korea, Bush is embracing Lee's get-tough rhetoric against its communist neighbor. But the talks between North Korea and the U.S., China, Russia, South Korea and Japan are at an impasse over how the North should make good on its pledge to declare its nuclear and proliferation activities.

Lee is the first South Korean president to be invited to Camp David, and the visit, under picture-perfect blue skies, was evidence of Bush's hope that U.S.-Korean relations will get even stronger under the new leader. Bush and first lady Laura Bush greeted Lee and his wife, Kim Yoon-ok, as they got off a helicopter that ferried them from Washington to the compound.

Bush started to climb into the driver's seat of one of the golf carts that are used to get around Camp David, then asked Lee if he wanted to drive.

"Yeah. Can I drive?" Lee asked, then moved quickly to the driver's side.

"I drive," Lee exclaimed, grabbing the steering wheel with one hand and waving with the other.

As the two drove past the media, Bush joked: "He's afraid of my driving."

The two leaders were to have talks Friday night and then more meetings on Saturday along with a brief press conference. They are expected to herald the beef deal, the culmination of lengthy negotiations.

The South Korean Agriculture Ministry said it will allow U.S. beef imports from cattle younger than 30 months. Younger cows are believed to be less at risk for mad cow disease. South Korea said it would allow beef from older cattle after the U.S. strengthens controls on feed to reduce chances of infection.

But even with that progress, the trade deal could face trouble as U.S. lawmakers, including Democratic presidential candidates Hillary Rodham Clinton and Barack Obama, voice increasingly anti-free trade sentiments.

On Friday, Lee met with Secretary of State Condoleezza Rice and with U.S. trade envoy Susan Schwab, who said the resumption of beef sales means that "safe, affordable, high-quality American beef will soon be back on Korean tables."

But Sen. Max Baucus, D-Mont., chairman the Senate Finance Committee, said he will block consideration of the trade agreement until all cuts of U.S. beef from cattle of all ages are on Korean store shelves.

"Korea must provide full market access for all U.S. beef, and I believe this deal can get us there if the Korean government follows through," Baucus said. "I will closely monitor the implementation of this new import protocol, and I expect great results."

Lee, a former construction chief executive nicknamed "The Bulldozer" for his determination to get things done, has ended a decade of liberal rule in which South Korea sought to embrace the North and refrained from criticism. The relief in Washington has been evident in the Bush administration's praise of Lee's insistence that the North follow through on nuclear pledges before receiving aid from its southern rival.

Bush's meetings with Lee's predecessor, Roh Moo-hyun — elected on an anti-America platform — were often notable for their awkwardness, fueling the perception that the leaders did not like each other. Roh favored a "sunshine" policy that provided aid without demanding concessions from North Korea.

Lee's position on North Korea may turn out to be even tougher than Bush's because the United States is pressing hard for an agreement. Nuclear talks are stalled over whether the North will hand over a promised full declaration of its nuclear programs in return for concessions. The Bush administration apparently has decided that the declaration's exact contents are less important than an assurance that the nuclear negotiators can check up on Kim Jong Il's government to make sure it has told the truth.


Friday, April 18, 2008

Beef deal buoys US-SK April summit

Buoyed by Seoul's decision to resume US beef imports, President George W. Bush and South Korea's leader Lee Myung-bak hold talks Friday on pushing ahead with a huge free trade deal and fortifying their half-century security alliance.

The meeting will also focus on a multilateral bid to end North Korea's nuclear weapons drive, as the Bush administration appears to be bending backwards to forge an agreement with the hardline communist state.

Eager to have the free trade and nuclear deals implemented before he leaves the White House in January 2009, Bush will welcome Lee at Camp David for the two-day talks, that are to include their economic and defense teams.

Lee is the first South Korean leader to be invited to the rustic presidential retreat.
Although the two have not met before, they share a business background, conservative free market principles and strong Christian values.

Ties between the allies have warmed since Lee took over the helm of the world's 10th biggest economy hardly two months ago.

Relations had deteriorated under Lee's predecessors Roh Moo-Hyun and Kim Dae-jung, both of whose unconditional support for North Korea had raised suspicions in the United States, which has 28,000 troops stationed in South Korea.

On the eve of the Bush-Lee talks, South Korea announced it has agreed to give US beef greater access to its market, giving a fillip to a free trade agreement signed about a year ago but unratified by their legislatures.

Washington wanted full access to the beef market for any ratification.

South Korea banned import of US beef in 2003 due to mad cow fears. It eased the ban in 2006 but effectively halted all imports last October.

"Both sides reached an agreement on gradual expansion of US beef imports," South Korea's Assistant Agriculture Minister Min Dong-Seok said in Seoul.

But US Trade Representative Susan Schwab said in Washington the agreement represented reopening the Korean market "to all US beef and beef products, from cattle of all ages."

She said "the major obstacle" to Congressional consideration of the FTA "is removed.

"The Administration will now work in earnest with Congress and the US agriculture, manufacturing, and services sectors to pass the FTA," Schwab said.

The agreement is the most commercially significant US trade deal in 15 years. The Democratic-led US Congress has been wary of trade deals negotiated by the Bush administration.

At a dinner late Thursday with business leaders, Lee was served US beef from farm-rich Montana.

"The ratification of the South Korea-US free trade agreement constitutes an essential part" of transnational community building, he said.

It would usher in a new era in bilateral security relations, "anchoring the military alliance on a firm social and economic basis," he said.

If ratified, the FTA will add about 20 billion dollars a year to trade between the two nations, said Dennis Wilder, the White House national security director for Asian affairs.

In a bid to mend fences with North Korea, Lee proposed Thursday the creation of the first liaison offices in the capitals of the two Koreas, which are still technically in a state of war after their 1950-1953 bloody clashes.

The offices in Seoul and Pyongyang would act as a permanent communication link, he told The Washington Post newspaper in an interview.

Lee has promised a firmer line on North Korea, linking aid to nuclear disarmament in a move that has angered the hardline communist state.

A furious Pyongyang has threatened to turn its neighbor into "ashes" after kicking South Korean officials out of a joint industrial complex in the North's border city of Kaesong.

Bush and Lee would discuss the latest efforts being made to prod North Korea to disband its nuclear weapons program under an aid-for-denuclearization pact adopted by the United States, China, the two Koreas, Japan and Russia.

In a turnaround Thursday, US Secretary of State Condoleezza Rice hinted that US sanctions against North Korea could be removed even before its nuclear programs or proliferation activities were verified independently.

"Verification can take some time," she told reporters.

North Korea has been pushing the United States to remove it from the blacklist of state sponsors of terrorism.


Thursday, April 17, 2008

President Lee at the United Nations

Lee Myung bak, left, President of the Republic of Korea, meets Ban Ki-moon, United Nations Secretary-General, at the United Nations in New York, Wednesday April 16, 2008.


Wednesday, April 16, 2008

Predident Lee rings the opening bell at the NYSE

South Korean President Lee Myung-bak is joined by New York Stock Exchange CEO Duncan Niederauer as he rings the opening bell at the New York Stock Exchange, Wednesday, April 16, 2008 in New York.


Tuesday, April 15, 2008

Rocketman vs. the Bulldozer

JUST a few weeks ago, when the New York Philharmonic performed in Pyongyang, Kim Jong Il's North Korea seemed to want to present a friendly face to the world. Its scowl is back, with a vengeance. On March 27th it expelled all South Korean officials from an inter-Korean industrial complex just north of the shared border. The next day its navy fired elderly ship-based missiles into the sea. This week the government said it needs its “nuclear deterrent” to ensure its survival, and labelled South Korea's president, Lee Myung-bak, a “traitor”, not to mention an “anti-North confrontation advocator”. North-South relations seem in a tailspin.

North Korea has been working itself up to this hissy fit since the inauguration of the conservative Mr Lee, nicknamed “the Bulldozer”, in February. Mr Lee has linked further economic co-operation with North Korea to its keeping its promise to declare all its nuclear programmes to America's satisfaction. North Korea bristles at this.

South Korea's Chosun newspaper has reported that North Korea's MiG fighters have on at least ten occasions since February crossed South Korea's “tactical action line”, some 20km (12 miles) north of the border, after which they can be over Seoul in minutes. Chosun also reported that mechanised North Korean army units have been moving towards the border.

South Korea's response to the military provocations has been muted. The foreign ministry described the missile tests as “routine military exercises”. Some in Seoul link North Korea's belligerence to parliamentary elections in the South on April 9th. The North may hope voters will reject Mr Lee's Grand National Party (GNP). It also hopes that by stoking security fears in South Korea it can drive a wedge between it and its American ally. Those fears might encourage Mr Lee to soften his stance in order to avoid worsening tension and risk damaging South Korea's investment climate. Mr Lee was elected on the promise of revitalising the economy.

Mr Lee's critics believe a South Korean government has no option but to co-operate with the North, especially on humanitarian matters such as family reunions or food supplies for malnourished North Koreans. They say Mr Lee is in thrall to GNP hardliners. These are mostly older politicians who scorn the “sunshine policy” towards the North of former presidents Kim Dae-jung and Roh Moo-hyun. A decade of sunshine, they grumble, has cost a fortune in economic assistance to an evil neighbour, without enhancing national security: witness North Korea's successful nuclear test in October 2006.

Still, every South Korean president has to profess support for closer integration and eventual reunification with North Korea. Mr Lee has promised massive economic assistance and investment if the North gives up its nuclear programme.

That does not seem very likely in the near term. Progress on the six-party deal supposed to lead to the North's denuclearisation has stalled. Few in Seoul hold out hope that North Korea will make a proper declaration of its nuclear programmes, including its secret uranium-enrichment activities. It was supposed to deliver this by the end of 2007. On April 2nd Christopher Hill, the American negotiator on the issue, said in Seoul that he was “very concerned” by the lack of progress.

The opening of diplomatic relations between America and the North looks increasingly unlikely. Nor does the Bush administration seem willing to remove the North from the list of nations that sponsor terrorism. For its part, Kim Jong Il's regime seems to be biding its time until it can deal with a new American president.

As inter-Korean relations deteriorate, so do prospects for investment by South Korean firms in the North. Optimists had hoped that this might help open the country and hasten political change. But South Korean shipbuilders, for example, who had been exploring setting up shipyards in the North, have shelved such plans.

In the meantime many in South Korea expect mounting tension on the border. North Korea is expected to conduct further provocative military exercises near the demilitarised zone and the maritime “northern limit line”, which it wants moved further south. Some in Seoul predict naval clashes. One gloomy North Korea expert who has Mr Lee's ear expects North Korea to restart its nuclear-weapons programme and perhaps conduct another test this year. Even if he is wrong about that, few dispute his view that “a very tough time” looms on the peninsula.


Monday, April 07, 2008

10 Major Trends in Korea for 2008

Samsung Economic Research Institute
Han Chang-Soo

In 2008, under a change in national leadership, Korea is expected to embark on major transitions in almost every sector, from politics to the economy and society. The victory of the conservative Grand National Party (GNP) in the December presidential election means a more pro-business administration for the first time in ten years. The overarching economic principle of the new administration will be "growth" rather than "equality and income distribution" as witnessed in recent years.

The administration hopes to maximize the economy's growth potential and job creation by stimulating corporate investment and market competition. However, political resistance to policy changes on top of ongoing social needs and demands will present a challenge in navigating a change in course.

Trend #1: Shifts in Economic Policy Line: Pro-Growth

Stressing pragmatism, President-elect Lee Myung-Bak wants to shift the economic focus back to growth. It is his goal to advance Korea to leading country status by building on the results of industrialization (in the 1970s) and democratization (in the late 1990s), and fortifying growth engines. "It is now time for Korea to become an advanced nation following its establishment (in 1948), industrialization and democratization. ...I am determined to create new development engines based on creativity," said Lee said in his victory speech.

Lee's administration will break away with the equality- and distribution-centered policy line of the last ten years under the liberal governments and try to "realize welfare through growth." Previous administrations attempted to enhance economic efficiency by implementing structural reforms and by introducing global standards over the past decade, but ended up undermining the Korean economy's vitality and native strengths: brisk corporate investment coupled with diligence a challenging spirit, all of which had driven national economic growth. As a result, the average annual economic growth rate fell from 7.7 percent in the 1980s to 6.3 percent in the 1990s and to 4.4 percent between 1997 and 2007.

The new administration plans to implement a market-orientated policy line to achieve its top economic priorities: higher growth and more jobs. Lee's "747 Public Pledge" during his election campaign calls for an annual average of 7.0 percent economic growth, US$40,000 of per-capita income, and Korea becoming one of the world's top seven economies. Along the way, it is envisioned that three million new jobs will be created during his five-year term.

To this end, his administration will choose pragmatic policy designed to invigorate market functions. It is highly likely that it will strive to recognize certain companies as core growth engines and improve corporate investment through deregulation. Prime targets for deregulation are the limits on the shareholdings of large conglomerates in their subsidiary companies, rules governing merger and acquisition (M&A) and the separation between the financial sector and non-financial actors (i.e., the regulation prohibiting an industrial company from owning a commercial bank).

Trend #2: Job Creation through Support for SMEs

Stronger competitiveness through supporting small and medium-sized enterprises (SMEs) and job creation will be the new administration's bywords. It aims to generate 500,000 jobs by fostering 50,000 innovative SMEs over the next five years. According to the government, innovative SMEs are:

* Venture companies

* The so-called "Innobiz" type of company, that is, government-designated SMEs that have operated for over three years, demonstrated technological prowess and growth potential

* SMEs that have proven themselves to be managerially innovative

Their potential of these two latter types of company to hire workers is estimated to be 2.6 times greater than ordinary SMEs.

SME competitiveness was also a key concern of previous administrations since they account for 88.1 percent (as of 2005) of total employment, according to the Korea Federation of Small and Medium Business.

The "People's Government" under the Kim Dae-Jung administration focused on nurturing venture companies in order to overcome the 1997 financial crisis, while the outgoing "Participatory Government" under President Roh Moo-Hyun introduced its "Comprehensive Measures [relating to technology, workforce, capital and markets] to Strengthen the Competitiveness of SMEs" in 2004, which contrasted with traditional protective policies toward the sector.

The new administration will promote a more advanced "growth stage-based strategy for fostering SMEs" than that of the Participatory government, which tried to nurture such companies simply by providing financial support. Specifically, the new administration will pursue concrete measures tailored to each type of innovative SME. Venture companies will be fostered with a focus on foundation; Innobiz SMEs will be nurtured in such a way to achieve higher growth; and the progress of managerially innovative SMEs will be bolstered through marketing and organizational innovation.

Trend #3: Prolonged Volatility in Financial Markets

The United States and Korean housing markets will weigh heavily on financial markets. In the U.S., the turmoil triggered by the subprime mortgage debacle will last through 2008 as a record number of homeowners face the end of their low introductory lending-rate period and a reset to a higher rate.

This could create a giant wave of foreclosures and crimp vital consumer spending in the U.S. economy. On a bigger scale, banks, forced into huge write-downs because of toxic securitized mortgages, are limiting commercial lending and non-financial concerns are feeling the effects of the housing industry recession on their own earnings.

The turbulence will raise one of the major questions of 2008: will the slowing U.S. economy fall into a recession and, if so, how will the global economy be affected? Jittery investors have been quick to exit stock markets, fearing a global slowdown. Therefore, the volatility of the U.S. stock market (and consequently the Korean stock market) is expected to continue at least several more months.

For example, following the second round of subprime mortgage woes in August 2007, foreigners sold securities on Korean bourses worth 21.9 trillion won in net terms, i.e., 80.5 percent of the securities that were net sold on an annual average in 2007. If the housing slump in Korea continues with an increasing number of unsold new houses and the recent liquidity squeeze persists, more and more nonperforming loans related to real estate are likely. Project financing (PF) loans offered by saving banks may be a case in point. The proportion of saving banks-issued PF loans jumped from 5.7 percent in June 2006 to 14.0 percent in March 2007 and has since remained at the same high level. Should interest rates keep rising and the housing market stays weak, even home-equity loans (largely with adjustable interest rates) are feared to go sour. The value of home-equity loans stood at 283.6 trillion won as of the end of September 2007, 94 percent of which were of the adjustable-rate variety. A one-percentage point increase in interest rates on home-equity loans is anticipated to add 550,000 won annually to the amount each borrower must repay.

Trend #4: Start of a "Big Bang" in the Financial Industry

The introduction of the Capital Market Consolidation Law (due to take effect in February 2009) promises to bring fundamental changes to the financial industry. Securities firms will be permitted to deal with all financial businesses except for banking and insurance businesses. An assortment of financial products will be based on the principle of "negative-listing" (meaning everything will be allowed unless prohibited specifically in the law), bringing down barriers between financial businesses and ushering in unlimited competition across virtually all types of institution within the sector.

Therefore, securities firms looking to expand the scope of their opportunities will likely seek to bulk their capital size through merger and acquisition or by acquiring asset management companies. In terms of the total assets, Korea's top three securities firms currently account for only one one-hundredth of the top three global investment banks. However, after the anticipated wave of such M&As, the domestic securities business will likely augment its weight relative to the financial industry as a whole.

Banks and insurance providers, as well, will make every effort to improve their competitiveness in the run up to the Capital Market Consolidation Law taking effect. It is envisioned that financial holding companies, mostly set up by commercial banks, will acquire or establish securities firms. Those already in possession of securities firms will enlarge departments related to investment banking and recruit more professionals.

Through the Ministry of Finance and Economy (MOFE), the government is also exploring ways to encourage M&A among financial institutions so that they can grow in size and cover operations of a broader scope. For instance, the ministry will provide tax incentives by, say, reducing the tax burden associated with M&As, lift regulations on private equity funds and allow hedge funds to merge with and acquire domestic or foreign financial institutions.

Trend #5: Full-Blown Convergence between Broadcasting and Communications and between Wired and Wireless Communications

SK Telecom's acquisition of Hanaro Telecom (wired telecom provider) from the AIG/Newbridge consortium announced in December 2007 is leading the Korean telecommunication market into a new competitive phase. KT (wired telecom provider) is considering merging with its wireless telecom subsidiary KTF while LG Dacom (wired telecom provider) plans to list its subsidiary LG Powercomm (and Internet service provider) on the Korea Stock Exchange and subsequently merge with it. The government has also developed policy measures to facilitate convergence between broadcasting and communications and between wired and wireless communications by consolidating the number of designated business lines and streamlining regulatory organizations.

For example, the number of business lines was reduced in December 2007 from the previous eight, which included local/long-distance/international calls, Internet access, VoIP (voice over Internet protocol) and telex, down to three, namely transmission, frequency provision and the leasing service of telecommunications circuit facilities

Meanwhile, separate regulatory organizations responsible for communications and broadcasting were integrated into the Committee to Promote Broadcasting/Communications Convergence under the Office of Prime Minister in July 2006. An integrated regulatory organization to govern this matter is expected to emerge later.

As a result of such convergence, the communications industry will develop a new competitive structure. The industry at present is primarily driven by competition among the top three wireless telecom service providers and the top three wired service providers. However, on the assumption that KT and SKT will maintain the dominant positions in the markets for wired and wireless communication services, respectively, the industry will be led by the top two comprehensive (wired plus wireless) service providers (KT and SKT) followed by one smaller provider (LG).

Trend #6: Hypercompetition Boundary Collapse among Markets and Industries

Competition in the future will not be affected by conventional barriers among industries, technologies, distribution and markets. As consumer needs become more complicated and technological barriers lower, some "gray market" companies will emerge. That is, new types of enterprises that are not illegal, but rather defy conventional competition rules and existing market demarcation.

For example, distributors may vie more intensely to secure new distribution channels. Also, in the electronics market, originally separate markets may overlap with one another as digital convergence products are developed. In fact, this phenomenon is already evident. Designer clothes, which were once only handled by specialty stores, are now sold by discount outlets or overseas purchase agents at reasonable prices. Also, the fast growth of satellite-based automobile navigation has prompted multimedia companies to combine their products with global positioning capabilities in order to gain a beachhead in this burgeoning market.

Trend #7: Multicultural and Globalized Families and Society

Korea is expected to welcome progressively more foreigners and foreign cultures. An increasing inflow of foreign workers and immigrants by international marriage brought the number of foreigners residing in Korea above the one-million mark as of August 2007. Over 50 foreign communities across the country exert multicultural influence on Korean society.

The Internet and cable TV facilitate the inflow of foreign cultural content and members of the younger generation increasingly go abroad and to experience other cultures. U.S. and Japanese dramas claim huge, enthusiastic audiences, resulting in the creation of some 1,400 Internet clubs that further increase the viewership of the shows. Moreover, domestic TV shows help familiarize Koreans with foreign culture by increasingly featuring more foreigners and by covering diverse themes. This has even given birth to a new term, "media nomadism," which refers to the phenomenon whereby the media does not stick to conventional forms or traditions, but rather encompasses a variety of cultures.

Trend #8: Shifts in Education Policy Direction Valuing Excellence over Equality

The incoming government plans to trim the size and power of the Ministry of Education and Human Resource Development and merge it with the science and technology ministry. The current egalitarianism-based education policy will be scrapped. Local governments and universities will be given greater autonomy and parents and students will have more options.

More than one hundred new independent private high schools are to be established to encourage competition for higher quality education and dampen the urge to enroll in after-school private academies. Such private high schools do not depend on state subsidies and therefore operate with full autonomy.

On the contentious issue of university admissions policy, universities will likely have more leeway in deciding on how to use the grading system in scoring the national academic achievement examination for university entrance, and how much high school records should be reflected in the admissions system.

In addition, the new administration will establish college systems that will make domestic colleges or universities internationally competitive in research capability. It will lay the groundwork for global research-centered universities by giving financial support toward research according to the research competitiveness of applicant universities. It will consolidate various and scattered R&D related policies of the Ministry of Science and Technology and the Ministry of Education and Human Resources Development and thus enhance the efficiency of R&D budget execution.

Trend #9: National Assembly Elections and Shifts in the Political Landscape

The 18th elections for the National Assembly scheduled for April 9th 2008 are likely to revolve around two key issues: on the one hand, the need of the GNP, the new ruling party, to secure more than half the seats within the legislature; and on the other hand, the need by the opposition to check the power of the same ruling party. At present, the GNP is expected to win a significant number of seats, but perhaps not as many as party leaders hope if voters think more checks and balances are needed in the National Assembly. Any early errors by the new administration, lackluster GNP candidates or doubts about the Lee administration's ability may result in a more mixed political landscape.

Voters in the Seoul metropolitan area will play a decisive role in the elections and consequently in the rearrangement of regionalism in politics. After the local elections of 2006, economic concerns, not regionalism, became the overriding voter concern, ultimately leading to the return of the conservative GNP to power. Unless major changes occur, a new political landscape may emerge characterized by a huge ruling party supported by voters in the Seoul metropolitan area and the Gyeongsang Provinces, plus several smaller parties that draw support from the Jeolla or Chungcheong provinces.

Trend #10: More Moderate Pace of Improvement in the Inter-Korean Relationship

Given the uncertainty about whether North Korea will proceed with its promised denuclearization, the new administration is very likely to insist on this issue as the top priority for better inter-Korean relations. It will focus on "mutual engagement" rather than "unilateral engagement." Thus, any further assistance to the North will be expected to hinge on the North's dismantling of its nuclear program. However, it will likely adopt a flexible support policy toward the North even before denuclearization occurs should there be concrete signs the country is progressing in this direction.

North Korea is currently in denial about its uranium enrichment program and is expected to declare a plutonium stock of less than the internationally suspected 50 kilograms. Even if the North makes an exact declaration about the state of its nuclear program, it is highly unlikely that negotiations on nuclear dismantlement in the second half of 2008 will proceed smoothly. However, considering that the North needs to leave room for negotiations with the next U.S. administration, which will commence in January 2009, it will likely refrain from extreme action such as a second nuclear test. ◦