Sunday, October 31, 2010

The Global Surge in Currency Reserves


Wednesday, October 27, 2010

Gangnam, South Korea

Gangnam is an administerial district in southern Seoul but actually involves a much more complex social connotation here in Korea.

Gangnam, as opposed to Gangbuk, or north of the Han River, usually refers to three relatively affluent districts: Gangnam-gu, Seocho-gu and Songpa-gu.

The area may mostly be represented by two major keywords: wealth (especially in the real estate section) and education.

The northern districts in Seoul, such as Jongno, had traditionally been the key area of the 600-year-old capital city. The now-prestigious Gangnam land was largely neglected as an agricultural outskirt area until the mid-1960s.

However, since the Busan-Seoul highway and the Gangnam Boulevard were built in the 1960s, the former suburban wasteland became an icon of real estate speculation.

Also, Tehran Boulevard, the major eight-lane road linking Seocho-dong and Samsung-dong, rose as a symbol of business success in the 1980s.

As of the end of 2009, the average market price of Gangnam real estate has multiplied by 500,000 times over the past 50 years, according to Seoul City data.

Its ever-soaring price flinched last year, for the first time since the financial crisis back of 1997, according to Seoul City statistics.

The sudden influx of money also gave birth to the first generation of real estate goldminers, who later bequeathed their wealth to their children, creating a new upper class.

Gangnam’s social connotation as the city’s prestigious core was further reinforced in 2000 when the multipurpose residential building Tower Palace was built in Dogok-dong, Gangnam-gu.

“The initial sense of prestige may have diminished over the years but its residents still usually specify their address instead of describing it as just Gangnam,” said a real estate agent in the area.

“Though its social significance has diminished over the years, Tower Palace still stands as an icon of the so-called Gangnam wealth, often referred to as the Korean Manhattan.”

These economic connotations also led to political influence in the corresponding districts.

In the June local elections, the re-elected Seoul Mayor Oh Se-hoon, who fought a hard battle against his liberal rival Han Myeong-sook, caught up as votes from the Gangnam districts were disclosed late in the night.

His opponents criticized Oh as the “Gangnam mayor,” alluding to his siding with the affluent citizens of the city.

The people of Gangnam are also renowned for their education fever.

Among the 713 Seoul high school students who made it to Seoul National University this year, 292 or 41 percent were from the three Gangnam districts.

Also, the top school districts are there, together with the busiest hagwon streets.

Mothers quite often give up on their career despite their high level of education in order to become a full-time parent, dedicating themselves to the academic management of their children.
Such mothers have been nicknamed “Gangnam ajummas,” largely associated with real estate speculation and overeagerness for their children’s education.

Despite the government’s efforts to curb private education, the education rush persists, much of it taking place at great cost.

With the Gangnam area, especially Gangnam-gu, in spotlight in connection with the G20 summit, many once again reflect on the social and economic significance of “Gangnam” in Korean society.

“Gangnam is very often censured for its exclusive wealth and the resulting prejudices but now hopes to acquire a new reputation as a hot spot representing Seoul,” said an official of the Gangnam District Office. ◦

Saturday, October 02, 2010

U.S. car industry seeking inroads in South Korea

By Howard Schneider
Washington Post Staff Writer
Saturday, October 2, 2010

In the best of all worlds, a U.S. free-trade agreement with South Korea would fling open the doors of that country's million-vehicle-a-year auto market to U.S. models like the Ford Focus or Fiesta, the type of fuel-efficient small cars that Koreans prefer and are central to Ford's corporate strategy.

But in practice, there's no guarantee those extra vehicles would be made at U.S. plants by U.S. workers, rather than at Ford facilities in places such as Chennai, India, or Chongqing, China, where the automaker's footprint is growing.

Debate over the proposed trade treaty, which could be resolved this fall, has boiled down to a battle over automobiles - an industry that South Korea has nurtured into an export powerhouse and the United States is trying to rebuild after a traumatic restructuring and government bailouts. That fight is being waged with graphs and sales statistics - the skimpy penetration of imports into South Korea offered by U.S. companies as proof the country is protectionist, data showing a steady rise in sales of European luxury autos offered by South Korea as proof that it is not.

But there is a deeper reality that is rarely captured in the data, and it could blunt the impact on jobs of any deal the Obama administration is able to strike: the globalized nature of auto production.

Not only has Ford, like other major auto companies, stationed its factories strategically around the world, but the largest U.S. car company, General Motors, has bowed out of the South Korea-U.S. trade debate altogether because it already has access to the market through its ownership of the South Korean automaker Daewoo. GM makes and sells more than 100,000 cars a year through Daewoo and exports hundreds of thousands more to Europe and elsewhere.

"Historically we have built where we sold," said Greg Martin, a GM spokesman. "We sell in Korea and we build in Korea."

Tens of thousands of Chevrolet-branded Aveos come back to the United States each year as imports. It's an odd footnote for GM, considering its largest stockholder - the federal government - is working to temper the country's mammoth trade deficit. GM says its production of Aveos will shift back to the United States soon.

"The net calculation of a Ford or a GM - how they react or expand or alter their production network - it is kind of hard to know," said Matthew J. Slaughter, a professor at the Tuck School of Business at Dartmouth University and a member of President George W. Bush's Council of Economic Advisers. "Free-trade agreements both create and destroy jobs. Exactly in which countries and in which industries is really hard to predict."

Deal made, not ratified

The South Korea agreement was negotiated by Bush but never ratified by Congress. President Obama, who has made its enactment a priority, wants to finalize possible changes with the South Korean government when he visits there in November and then seek congressional approval.

There are issues beyond automobiles on the table, including continued restrictions on U.S. beef exports to South Korea and some trade enforcement matters raised by labor and other groups leery of the trade pacts signed by the United States in the past two decades.

But the debate over cars is considered the key dispute. The agreement would have to clear the House Ways and Means Committee, and its chairman, Rep. Sander M. Levin (D-Mich.), whose district includes northern suburbs of Detroit, insists there be more tangible benefits for U.S. automakers.

South Korea sends more than 400,000 vehicles, mostly Hyundais and Kias, to the United States each year and makes about 200,000 others at U.S. plants. By contrast, the United States exported 5,878 vehicles to South Korea in 2009, according to data from the U.S. Commerce Department.

The U.S. auto market, of course, is roughly 10 times as large as South Korea's. But advocates for the U.S. auto industry say the figures are still disproportionate, and they argue that an array of South Korean policies, including an undervalued currency, give Korean automakers an unfair advantage.

With just seven weeks until Obama is to travel to South Korea, the top trade negotiators from the two countries have yet to meet, and people involved in the discussion say the United States still has not decided what changes it will request of the South Koreans.

Some in the broader business community worry the talks are bogging down over a single industry, putting what they feel are clear gains for the U.S. economy at risk. South Korea is dropping a long list of tariffs under the agreement, including stiff taxes on U.S. agricultural goods. Major U.S. financial, insurance and other firms say the access they expect to gain in South Korea's near-trillion-dollar economy will be a boon.

For the auto industry, the agreement would mean an elimination of tariffs. South Korea has an 8 percent tax on incoming automobiles, compared with the 2.5 percent levy imposed by the United States. The United States would also give up a 25 percent tax on pickup trucks over 10 years - a potential incentive for South Korean automakers to enter a market where Ford in particular has been successful.

Exports vs. imports

Ford officials say the stakes go beyond tariffs. The company says the issue is whether South Korea will meaningfully drop the types of preferential taxes, regulations and other market biases that have created what Ford lobbyist Stephen Biegun calls an "upside down" auto industry. Upward of 70 percent of the cars produced in South Korea are exported, far above the industry norm, he said. Meanwhile, imports account for less than 10 percent of local sales, compared with an average of 40 percent in other developed countries.

While Biegun acknowledged that some of South Korea's more overt forms of market bias have been dropped - owners of imported cars, for example, previously had to declare them on income tax returns, a sign of affluence more likely to trigger an audit - he said the country's meager level of imports proves the market is not truly open.

"We want an opportunity to sell more, and we want it front-loaded," Biegun said. Any benefit they get, we want it leveraged for them to open markets."

But understanding how liberalization by South Korea - and other U.S. trade partners - might translate into American jobs is difficult in an industry where brand names have little connection to country of origin, supply chains crisscross borders and joint international ventures are used to advance research and development.

Just as Chevrolet's Aveo is shipped to the United States from South Korea, Ford's Transit Connect cargo van, for instance, is imported into the United States from Istanbul. (The van is outfitted with passenger seats to skirt the 25 percent tax on trucks that has benefited U.S. truckmakers since the 1960s, and the seats are stripped once the vehicles enter the United States, according to a Wall Street Journal report.)

The North American Free Trade Agreement, meanwhile, has spread automaker supply chains and production throughout the United States, Canada and Mexico, making it difficult to tell how much U.S. content - and how many U.S. jobs - are represented in any given vehicle.

The few thousand cars Ford sells in South Korea - higher-end vehicles such as Tauruses, Mustangs and Explorers - are all manufactured at U.S. plants. In the future, Biegun said, Ford hopes to sell many more of its smaller, mass-market vehicles in South Korea.

It might make sense for Ford to produce the cars next door at the company's facility in Chongqing. But he said that plant is already at capacity.

"I don't know where we would source vehicles over time if it were truly open," he said. ◦