Saturday, May 21, 2011

South Korea needs fewer wage slaves and more entrepreneurs

Earlier this year Humax, a maker of digital set-top boxes based in Seoul, announced that its annual revenues had exceeded 1 trillion won ($865m) for the first time. For South Korea, this is something of a milestone. Humax is a classic start-up, founded in 1989 after a chat between engineering students in a bar. Alas, scandalously few Korean start-ups grow this big.

The Korean economy is dominated by the chaebol, huge conglomerates with tentacles in every stew. The biggest, Samsung, accounts for around a fifth of the country’s exports. Although the chaebol have played a vital role in South Korea’s development, they also suck up credit and obstruct the rise of start-ups. “Everyone knows you don’t compete with the chaebol” is a commonly heard refrain.

Parents of bright young Koreans typically steer them into steady careers in the chaebol, the government or the professions. As in Japan, being a salaryman (or woman) is far more respectable than running one’s own firm. “In Korea, stability is everything,” says one such parent.

Widespread youth unemployment is changing that calculation, however. An impressive 58% of Koreans aged 25-34 have attended university, but 346,000 graduates are currently out of work, up from 268,000 two years ago. Some become entrepreneurs out of necessity: almost 30,000 young South Koreans say they want to launch their own companies, one survey found. And according to the government, the number of “one-man creative enterprises” in the country has risen by 15% in the past year, to 235,000.

Young entrepreneurs often favour tech fields such as social media or gaming, where the only barrier to entry is the power of your imagination. Challenging the chaebol at, say, shipbuilding, might be trickier. The previous wave of young entrepreneurs—a result of the first internet boom, and the unemployment that followed the 1997-98 Asian financial crisis—threw up fizzy firms such as NHN, the operator of Naver (the “Korean Google”), and NCsoft, a maker of multiplayer online role-playing games. Each was once tiny but now belongs to the trillion-won club.

These new entrepreneurs are being joined by a growing band of foreigners, including ethnic Koreans from Western countries. Californian Koreans see no stigma in starting your own business. And they see South Korea, where the economy grew by 6.2% last year, as a land of opportunity compared with sluggish America. The country issues about 35,000 investor visas a year, mostly to small-scale entrepreneurs. The Seoul Metropolitan Government’s Global Centre has recently been swamped by expats seeking to attend its classes on Korean business procedures and regulations.

The city has also launched a “Youth 1,000 CEO Project”, to provide young entrepreneurs with free office space and grants of up to 1m won per month. South Korea’s President Lee Myung-bak grumbles that Korea has no Mark Zuckerberg (the baby-faced founder of Facebook).

The problem, though, is not young Koreans, who are both bright and energetic. Nor is it business-throttling regulations: South Korea does better on that score than Japan or Taiwan, says the World Bank. The real obstacle to enterprise is a society that urges its best young minds to aim low. ◦

Hunger in North Korea: Let them eat maize husks

It is the time of year when the previous harvest has been nearly eaten and the next one has just been planted. Time, in other words, to worry about North Korea’s perennially hungry masses.

North Korea had long grown dependent on food handouts from its estranged brother, South Korea, and from the United States. But the South’s current president, Lee Myung-bak, has taken a tougher line, tying assistance to less provocative behaviour by Kim Jong Il’s nuclear-tipped regime. So Mr Kim’s envoys have travelled further afield of late, reportedly doing the rounds of Europe.

The UN’s World Food Programme (WFP) is now preparing to distribute emergency aid to 3.5m North Koreans suffering from “severe malnutrition”. Programme officials are concerned about the possibility of a famine on the scale of the one in the mid-1990s, in which over 1m died. They blame a series of shocks, including the coldest winter in years, widespread flooding and an outbreak of foot-and-mouth disease among livestock. Some 297,000 tonnes of cereal and 137,000 tonnes of fortified blended food must reach the most vulnerable.

With murky data, and diplomats and foreign-aid staff restricted in where they may travel, not everyone agrees with the WFP’s assessment. Certainly, estimating North Korea’s food needs has long been a politicised business. A member of South Korea’s ruling Grand National Party, Yoon Sang-hyun, says that the North is hoarding 1m tonnes of rice, playing up a shortfall in order to get aid on the cheap. Some say Mr Kim wants the aid in order to announce a bumper harvest in 2012. That year is the 100th anniversary of North Korea’s founder, Mr Kim’s father, Kim Il Sung. Something approaching paradise has long been promised to North Koreans for 2012.

The South’s unification minister, Hyun In-taek, also suspects North Korea of exaggerating its troubles for political gain. Certainly, he says, starvation has begun to overshadow other topics that the South would rather discuss, namely denuclearisation and the North’s refusal to apologise for last year’s shelling of Yeonpyeong island and the presumed sinking in March 2010 of a naval corvette. This is apparently a view shared by Daily NK, an activist network and news source which says that the price of rice in the black market has actually fallen by around half in recent months.

Others, such as Good Friends, a South Korean Buddhist charity long working in the North, insist the situation is very bad—and that tuberculosis is on the rise owing to malnutrition. Rimjingang, a magazine with reporters secretly stationed in North Korea, says that in North Pyongan province by the Chinese border even the army is going hungry.

Stephan Haggard and Marcus Noland, both at the Peterson Institute for International Economics in Washington, DC, say that even though the WFP has overstated the case, “all indicators point to a deteriorating food-security situation”. What is more, they take issue with Mr Lee’s belief that withholding aid will temper the North’s behaviour. Rather, they argue, the response will merely be for the hermit kingdom to “hunker down and tighten repression”. The regime has been consistent chiefly in showing complete disregard for its people.

But arguing is pointless. Widespread malnutrition and starvation in at least some parts of the country is a reality in North Korea. For Jimmy Carter, the former American president, who visited Pyongyang recently, the fault lies mainly with South Korea and the United States. That is presumably tonic to the real culprit for the hunger, the chubby Dear Leader, Kim Jong Il. ◦

Conscription in South Korea: Elvis and the draft-dodger

Every South Korean man of sound mind and body is obliged to complete 21 months of compulsory military service. For those with enough money or influence though, the temptation to cheat one’s way out of early mornings, crew cuts and square bashing is often too much to resist. Sons of politicians and business leaders are notorious for this, as are the likes of pop star MC Mong, who spent his youthful years on more enjoyable pursuits, e.g., Mr Mong, or rather Shin Dong-hyun, as he is known to the army and the courts, was given a six-month suspended sentence last month ( , plus probation and 120 hours of community service, for “delaying” his enlistment. Judges however could not decide on whether or not he deliberately had healthy teeth extracted by a compliant dentist in order to disqualify him from service—hence their relative leniency.

Not everyone in his position is so recalcitrant. Hyun Bin, a hugely popular hallyu ( TV actor, last week embarked on the toughest assignment of all: a posting with the marines, to Baengnyeong Island ( —close to the Northern Limit Line and Yeonpyeong, where last November’s lethal North Korean bombardment ( took place. The army’s original plan was to put him on “public relations duty”—appearing in promotional videos, and the like—but highly vocal criticism and Mr Hyun’s reported desire to serve as a marine have seen him sent to the front line.

In a country increasingly preoccupied with the issue of fairness—“Justice”, an academic book on ethics written by Harvard’s Michael Sandel’s sold 1m copies in its Korean edition last year—Hyun Bin’s preference for the Elvis Presley route ( to service is likely to go down well. MC Mong, having been seen as trying to sidestep his national duty, will have a harder time turning his service into a virtue. A quick march towards career oblivion seems more likely. ◦