Saturday, June 26, 2010

Video: Why is South Korea so Wired?

South Korean Business Giant Explains Why His Country is One of the Most Wired in the World

Juju Chang sat down for an interview with Yongmann Park, chairman of Doosan Corporation, Korea's giant conglomerate. He's a big-time businessman and also full-time gadget guru. Juju went to his office, embarked on a gadget tour and discussed why Korea is so wired.

Emptying a box full of Park's old cell phones onto his desk, Juju jokingly said to him, "I'm embarrassed for you."

Park, a self-proclaimed "gadget addict," can't bear to part with these past phones. Among his collection is the first version of Samsung's BlackJack, which came out in 2007. The three-year-old phone is among at least 10 others he's recently retired.

In his office, Park has four computers, multiple cell phones he currently uses, and even a portable personal router that allows him to get wide-area broadband access and connect to Wi-Fi.

While Park said he has a "crazy curiosity" for new things, he's not alone. A full 95 percent of households in South Korea have broadband internet access the highest in the world. Singapore is second to South Korea, with broadband connection in 88 percent of homes. The U.S. ranks 20th, with broadband connection in 60 percent of homes.

Chairman Park said one reason South Korea is so wired is due to the country's housing structure, especially in Seoul.

"If you look out the window, Korea has a forest of high-rise apartments, which is the densely-populated residential area. It will make (it) easier (for) broadband to get connected into those areas. Because you pull one line, then you instantly hook up to a thousand household(s)," Park said.

Park explained the high-rise apartments are much easier to penetrate with broadband service than a typical U.S. neighborhood of suburban homes.

He also suggested Korean society itself is hard-wired for technological advances.

"Korea has been going through a lot of changes in 20th century and 21st century," Park said. "It makes Korean people curious about new things. Because unless you know about what's coming, then, you know& you should know what's coming to make yourself successful."

When asked if he could survive in a world without Wi-Fi, Park was silent for a moment, apparently thinking hard. His final answer? A resounding, "No!" ◦

Thursday, June 24, 2010

New Korean Drama - Road No. 1

Wednesday, June 23, 2010

Bouncing Back: How South Korea Is Taking the World by Surprise

Published in Knowledge@Wharton

When Chung Un-Chan speaks of a nation once "paralyzed by anxiety and uncertainty," it's hard to imagine that the prime minister of South Korea is indeed referring to his own country. Exuding pride and confidence today, Korea -- as Chung is also quick to note -- is among the world's largest economies. It's also at the forefront of today's global economic recovery, making one of the strongest rebounds registered by any member of the Organisation of Economic Co-operation and Development (OECD). Growth bounced back in the third quarter of last year while this year, GDP is predicted to grow 5.8% followed by 4.7% in 2011, says the OECD. It's a far cry from the Korea of the 1950s and 1960s, which had one of the lowest per capita GDPs in the world.

But for many Koreans, it's been a journey "that carries deep emotions," Prime Minister Chung acknowledged in his keynote address at Wharton's Global Alumni Forum in late May. The primary focus of the forum -- held in the Korean capital Seoul and titled, "A Whole New World: Where Do We Go from Here?" -- was to take stock of the global economic recovery. But it also served as a poignant reminder of the host country's particularly remarkable resiliency: The last time a similar Wharton gathering was held in Seoul was 1999, as the country reeled from the Asian currency meltdown and was negotiating a humiliating bailout plan with the International Monetary Fund. Yet back then as today, Chung recalled, Korea "surprised the world" and recovered far faster than expected.

While the challenges Korea faces today might not be as formidable as they were some 10 years ago, the country can't stand still. "The Korea of yesterday isn't the one of today, or tomorrow," conceded Chung. In the months ahead, can Korea prove that -- as in the late 1990s -- it can come out of this current crisis stronger than before with an economy that's more shock-resistant than ever?

Tense Times

It won't be easy, for both new and old reasons. As the prime minister spoke, relations between South and North Korea were faltering yet again following the sinking in March of the South Korean naval ship Cheonan in the Korean peninsula, which killed 46 South Korean sailors. Though still denied by Pyongyang, an investigation found evidence that a North Korean submarine had fired a torpedo at the Cheonan. Under the stress and strain of the renewed military and political tension, a dark cloud hovers over both countries.

It's against this geopolitically charged backdrop that the conservative government of South Korea President Lee Myung Bak must keep Korea Inc. focused on sustaining the economic recovery. Severed relations with the North are unlikely to harm South Korea's recovery directly -- annual trade with the North accounts for only $286 million, or about 0.3%, of South Korea's GDP. And thus far, other economic fallout from the Cheonan incident has been minor: Since the investigation's findings were made public in May, the benchmark Kospi stock market index fell only slightly and the won began some seesawing against the U.S. dollar. But nerves could fray further if South Korea fails to get the international support it wants to reprimand the North. Indeed, the psychological importance of peaceful relations with the North can't be underestimated

Lee -- a former CEO of Hyundai Engineering & Construction and former mayor of Seoul -- started 2010 basking in international praise and admiration for his administration's swift response to the downturn. In November 2008 -- faster than many other governments -- Lee announced 14 trillion won ($11 billion) of spending and tax cuts as part of the country's stimulus plan to address unemployment fears and the staggering drop in export demand. Meanwhile, the Bank of Korea, the country's central bank, began a series of interest rate cuts, eventually bringing the base rate to a record-low 2%, where it remains today. With only one quarter of negative growth during the downturn (a 5.1% contraction in the last three months of 2008), such measures seem to be achieving what they needed to.

But, as panelists and presenters at the Wharton forum agreed, the current administration wouldn't have been able to achieve what it did had it not been for the painful reforms undertaken after the crisis in the 1990s. Up to then, Korea's development model relied precariously on huge amounts of short-term foreign borrowing, shockingly high corporate debt levels to fuel industrial growth, and far too cozy ties between government and local business aimed at keeping foreign investors at bay, according to Alex Park, managing director of Standard Chartered Bank First Bank in Seoul and one of the participants in a forum panel titled, "The Future of Finance." But then Korea Inc. unraveled. Starting with Daewoo Motor in 2000, dozens of other subsidiaries and divisions of the country's once powerful chaebol -- the industrial conglomerates involved in everything from shipbuilding to television manufacturing -- went bust.

Outlook: Sunnier

Contrast that to recent months. Having cleaned up their balance sheets -- and their governance -- the chaebol took advantage of government incentives and the tumbling won (which had lost 17% of its value against the U.S. dollar over the past year) to grab more overseas sales. Samsung Electronics almost doubled its operating profit in 2009 from 2008 to 10.9 trillion won, while profit for the year at LG Electronics reached a record 2.9 trillion won. At Hyundai Motor, 2009 profit also soared to 2.9 trillion won. Like other parts of Korea Inc., all three are upbeat about their 2010 prospects.

Korea's achievements haven't gone unnoticed. In mid-April, ratings agency Moody's Investors Service upgraded its sovereign rating to A1 from A2, ranking the country with China and Israel in terms of international creditworthiness, notes the latest country analysis published by the Economist Intelligence Unit (EIU). "The rating move returns South Korea to its position before the 1997-98 Asian financial crisis," says the report. Thanks to economic resilience, the government's well-timed measures, and the soundness of both the public finances and the private financial sector, "the rating upgrade also functions as an assurance that the persistent geopolitical risks posed by North Korea have not dampened growing economic optimism in South Korea."

But while support for the Lee administration at home might be relatively strong, it's not unquestioning. "Lee campaigned in 2008 saying he was going to run the country like a business," says Philip Nichols, Wharton professor of legal studies and business ethics and one of the moderators at the Seoul forum. After more than a decade under a center-left government, "some Koreans love [Lee's pro-business approach to governing the country]; others are put off. I tend to think he's a capable administrator." But it appears his foreign policies toward North Korea -- ending the previous government's conciliatory "Sunshine Policy" of economic cooperation -- have been even more divisive.

South Koreans used local elections in early June to show the president what they think of his hard-line policies severing ties with the North in the wake of the Cheonan sinking. Lee's Grand National Party (GNP) clinched only six out of 16 mayoral and gubernatorial races across the country, half the total of four years ago. The opposition Democratic Party said "the Lee government's arrogance and self-righteousness" are to blame for its party's dismal election results, widely considered a mid-term referendum for the president.

Labor Pains

It's the longer-term issues that could prove more vexing for Korea. One such issue having a far-reaching impact on national productivity and employment has to do with the country's low birthrate and aging population. At 48 million currently, Korea's population grew 0.5% on average between 2005 and 2009. The OECD predicts that it will fall by 0.02% in 2020. According to Statistics Korea, the national statistics office, Korean households without children and one-person households will exceed households with children in 2030. Among other things, that will severely strain public services, noted Kee Taig Jung, a professor of health services management at Kyung Hee University in Seoul and a participant in the forum's panel titled, "New Healthcare in an Ageing Society."

What's more, a declining workforce has important implications for a country that until now has largely relied on manufacturing as its economic engine. "Considering Korea's stage of economic development and its changing demographic structure, including the aging of the population, little is to be gained by continuing to follow a growth strategy relying on the expansion of inputs of capital and labor," said Kim Choong Soo, the Bank of Korea's new governor, in a speech at the forum.

Technological innovation is one way to produce more with less; shifting the economy's emphasis from manufacturing to services is another, say experts. That means Korea has a lot of work ahead. Only four of its 30 largest enterprises are part of the service industry and account for 58% of GDP, compared with 12 of the top 30 in the U.S. accounting for 80% of GDP, according to Richard Dobbs and Roland Villinger, two Seoul-based directors at McKinsey. What's more, the productivity (output per labor hour) of Korea's private sector services "is only 56% of manufacturing productivity, in stark contrast to other developed nations where the two are about the same," write Dobbs and Villinger in Korea 2020, a new book by the consulting firm.

To sustain GDP growth, the two McKinsey consultants say overall labor productivity will need to increase 26% more over the next two decades than over the previous two. The first step in addressing the imbalance, they advise, is for both business leaders and the government to increase the proportion of R&D budgets spent on services. The process could also require scrapping fiscal and financial policies that have favored manufacturing, a prospect that might not sit well with Korea's business community over the short term.

But not everyone agrees with Dobbs and Villinger. "I am not sure whether we can or we should start developing a services sector now," said Chelsoo Kim, an economics professor at Sookmyung Women's University in Seoul and a participant in "The Future of Finance" panel. "Korea's comparative advantage is in the manufacturing sector, not in the service sector. Although diversifying into services may be useful, I think Korea should try to concentrate on what [it] does best right now." He also pointed out that not only is Korea's macroeconomic house now in order, but its exporters are more diversified geographically than they have been in the past, "and hence less vulnerable to a particular country's downturn than before."

Home and Away

As Kim observed, there is more to the sustainability of Korea's economic recovery than internal reforms and politics. That much was made clear when the United Nations Development Program (UNDP) office in Seoul recently closed. Opened more than 40 years ago, the office was a reminder of Korea's impoverished past and its need for international aid to spur development. That changed in November when Korea was recognized as a full-fledged donor nation by the OECD Development Assistance Committee. As Chung noted in his forum keynote, the new status as a donor country is a source of pride for Koreans.

It also brings Korea to a crossroads, said Diana Robertson, Wharton professor of legal studies and business ethics and moderator of the forum panel titled, "New Economic Leadership of Asia." As the panel's participants said, Korea's hope is to take a long-overdue regional and international leadership role. According to them, Korea should become a sort of "honest broker" on the world stage, given its enviable growth trajectory and current size -- neither too large economically to pose a threat to China and advanced countries, nor too small to not wield clout or respect among developing countries.

That role is being cemented this year as it chairs the G20, the group of 20 major industrialized and developing nations, whose leaders will be convening in Seoul in November. Korea's chairmanship comes with mixed blessings, however, said Wharton finance professor Richard Herring in his introductory remarks as moderator of "The Future of Finance" panel. "With Korea as the first non-G7 country to host the G20, it's a more accurate reflection of today's economic balance of power. That's the good news. The bad news is that it will be a lot harder to reach agreements now that the group has expanded from seven to 20. But it's going to be an historic occasion."

It goes without saying that Korea will use its agenda-setting power as chair to get G20 countries to coordinate an orderly exit from their recent expansionary monetary and fiscal policies. But trade politics will be another big area on which Korea will focus G20 members' attention. "It doesn't surprise me that [Korea] wants to chair the summit. It plays to their strengths and gives them a sense of being able to show that they've made it," said Simon Evenett in an interview at the University of St. Gallen in Switzerland where he is professor of international trade and economic development. "Korea is known as a tough negotiator, and its pro-market openness underlies its reputation."

Last year, Evenett was part of a team at the Centre for Economic Policy Research, a London-based think tank, which launched the Global Trade Alert (GTA), a regularly updated database of state measures from around the world that can affect foreign commerce. Currently, there are 960 measures in the database, of which Evenett says 240 adversely affect Korea. Those measures are largely in the form of bailouts and state aid, but export taxes and restrictions as well as tariffs are among the others.

According to the GTA, since the first G20 crisis-related summit in 2008, its members -- despite their "no-protectionism" pledge -- imposed 316 of what it calls "beggar-thy-neighbor" policies. Some countries -- notably Korea -- have issued very few. In contrast, among the worst offending nations worldwide is China, Korea's biggest trading partner, accounting for 17% of all imports into Korea and 24% of all its exports.

"What is imperative is to find a new way forward. Without a sense of urgency, the G20 will lose its focus," said Evenett. Judging from previous summits, however, "don't be surprised if [the November summit] becomes a talking shop. But that won't be Korea's fault."

Korea also wants to manage expectations. History has taught veterans of Korea Inc. that celebrating its recent achievements too soon would be "dangerous," said James Joo-Jin Kim, executive chairman of Amkor Technology, a semiconductor outsourcer he founded in 1968, and the forum's co-chair. "We survived, we persevered and then we prospered," he said. "There's no question Korea is great. But everything is relative.... China and Japan are right next to us. We have to respect that." Korea also needs to "provide substance" in its newfound role in global leadership. As he put it, "This is only the beginning." ◦

Nation Branding: Shaking Off the Korea Discount

Published in Knowledge@Wharton

What does France have that South Korea doesn't? The Eiffel Tower, for one thing. It's the type of national icon that public relations and marketing experts in the East Asian country dream of having. But this is a nation more known for angry street demonstrations and the nerve-rattling conflicts with North Korea than any countrywide icon. While Korea is unlikely to whip up its equivalent of an Eiffel Tower -- or a Sphinx or Golden Gate Bridge -- any time soon, it is trying hard to raise the country's profile around the world. It's a goal that could take years to achieve, as Yoon Dae Euh, the inaugural head of the country's Presidential Council on Nation Branding (PCNB), conceded at May's Wharton Global Alumni Forum in Seoul.

But the presidential council is undaunted. With an annual branding budget of around 100 billion won ($81 million) to share among various regional and national bodies, the coordinating agency has recruited 47 advisers since last year, including eight government ministers, academics and private-sector executives, and intends to succeed despite a similar initiative having failed to gain traction a few years earlier. The mission now: To think big, with projects ranging from new campaigns to woo tourists to stepping up the work of Korea's version of the Peace Corps, Euh said during a speech about the PCNB at the forum.

Many observers have said that if anyone can get a project like this up and running, it's Euh. A professor of international business and finance, he was widely credited with raising the profile of Korea University while serving as its president between 2003 and 2006. Even so, Euh acknowledged that Korea has its work cut out, noting that few people outside Korea associate the country with being a dynamic emerging-market powerhouse and world-class innovator. A recent Nation Brands Index compiled by Anhold-GFK Roper, a branding consultancy and research firm, scored 50 individual countries based on various branding-related factors, including cultural appeal and demand for their exports. Korea came in 39th, behind Mexico (26th), India (27th), China (28th) and Egypt (31st).

What the World Sees

Euh said there's a sense of urgency in the country to change survey results such as those. One reason is emotional: The greater sense of pride that the 48 million Koreans should feel about their country's economic transformation since civil war tore North and South Korea apart in the 1950s and left them in extreme poverty. Now, not only is Korea among the largest economies in the world, the country outflanks many other countries in terms of innovation and technological know-how, ranking fourth among 138 countries in the number of patent applications filed with the World Intellectual Property Organization and fifth in the export of high-tech products among 55 countries, according to the Samsung Economic Research Institute, a think tank.

But there's also an economic motivation behind the PCNB. As Euh maintained in his speech, countries with a positive global brand image are more likely than others to attract foreign direct investment. Moreover, companies from countries with positive branding are treated favorably in international business transactions and need to invest less in marketing their products abroad.

In that vein, a survey by the PCNB found that consumers place different values on goods and services from particular countries. In the survey, consumers in Japan, Germany and the United States marked down the value of identical products 30% or more when they were told they came from Korea. That is a call to action for Euh. "Now it's time of brand competitiveness," he said. "It's highly crucial for individuals, corporations, and cities and nations as well."

The good news is that the country's leading conglomerates have managed to make progress on their own, initially competing globally as low-cost producers of electronic and industrial goods and eventually moving up the value chain, Euh noted. In the latest annual Best Global Brands ranking produced by consultancy Interbrand, Samsung jumped from 21st place to 19th place, while Hyundai moved up three places to 69th place among several hundred brands. Interbrand cited bold global product development efforts at both companies for their improved status.

The benefits of company and country branding "is a two-way flow," wrote Christopher Graves, CEO of Ogilvy Public Relations Worldwide, in Korea 2020, a collection of essays compiled earlier this year by McKinsey & Company. "A well-regarded country can help the perception of a product; likewise, a product considered to be of high craftsmanship and design can give a country's branding a boost." Graves reckoned that the key for Korea's national branding success is to focus on design. "Great design has the power to elevate an entire corporation; sustained over a long period across many companies, it can lift an entire nation in the world's esteem," he wrote, citing the role of design in the rise of Japan's economy.

The key for Korea, he asserted, is that it "must do more to connect its product design with the country itself," he asserted. Think of Italy and its textile and design companies that make a garment with a "Made in Italy" label to connote high quality and exclusivity.

The Medium Is the Message

Meanwhile, Euh also said that branding isn't just about advertising and promotional campaigns. Providing overseas economic development advice is another. Given that Korea was an official development assistance (ODA) recipient until the late 1990s and now is an ODA donor, Euh said Korea has a big responsibility to "share our know-how and provide customized, sophisticated consulting" to developing countries whose economies are today what Korea's once was. Korea currently has 83 projects investing in 13 countries, ranging from Vietnam to Iraq.

Against that backdrop, Euh commended the state-run Korea International Cooperation Agency (KOICA). Set up in 1990, KOICA is currently the world's third-largest overseas volunteer program, after the U.S.'s Peace Corps and Japanese Overseas Cooperation Volunteers. Every year, KOICA sends 1,000 new volunteers to 43 countries.

Despite his enthusiasm for the work being done by organizations like KOICA, Euh is careful about not letting the country get carried away in hype, proving to be a level-headed critic of which branding messages will and will not go down with the international public. For example, while Korea has put itself at the forefront of reducing greenhouse gas emissions -- being among the countries that have volunteered to cut emissions 30% by 2020 from 2005 levels -- Euh is also aware that a "Green Korea" slogan wouldn't chime with its image as a nation known for its recent industrialization. At the same time, Euh told local newspaper JoongAng Daily that promotional brochures with traditional Korean masks also don't convey the best image for Korea and might "make foreigners wonder if the country is still a developing nation."But he said, even with careful vetting, a recent tourism slogan, "Korea Sparkling," had limited impact.

Now Euh is reaching the end of his two-year term as head of the PCNB. But he's certainly not one to walk away from a challenge. He's currently awaiting approval of his recent appointment as chairman of KB Financial, Korea's largest bank which, following a recent governance scandal among its senior ranks, could benefit from Euh's branding wisdom. ◦

Sunday, June 20, 2010

Return to Daegu

After two years away, I’m back in Daegu for a month teaching international business to KNU ( undergrads. Please follow these adventures at:

Sunday, June 06, 2010

South Korea's 2010 budget as compared to GDP - looking good

B2C Companies in Korea with URLs

Paris Baguette
Tous Les Jous
Dunkin Donuts
Crown Bakery

Korea Bank (KB)
Woori Bank
Shinhan Bank
Hana Bank
KoreaExchange Bank (KEB)

Book Stores
Bandi & Lunis
Yes 24 (online only)
Interpark (online only)
Aladdin (online only)

Coffee Shops
Starbucks Korea
Coffee Bean
Tom n Toms
Twosome Place
Caffe Bene
Seven Monkeys

Convenience Stores
Family Mart
7-Eleven / Buy the Way

Department Stores
AK Plaza

Discount Stores
Lotte Mart
Hanaro Mart

Family Restaurants

Fast Food
Burger King

Gas Stations
SK EnClean
Hyundai Oilbank

Movie Theaters
Lotte Cinema

Mr. Pizza
Pizza Hut

Wireless Service Providers