Monday, November 04, 2013

Seoul’s Tech Startups Look Overseas

South Korea’s dominant chaebols—giant family-run conglomerates that include Samsung (005930:KS), LG (066570:KS), and Hyundai (005380:KS)—generate more than 80 percent of the country’s exports and hire four in five of its graduating college seniors. Chaebols helped to drive South Korea’s transformation quickly and efficiently from agrarian poverty to the world’s 15th-largest economy in a few short decades. Now, though, a growing sense in Seoul is that the old model has lost its sheen. GDP growth slowed to 2 percent in 2012, and unemployment is now rising, especially among recent college graduates.

No one is suggesting that the chaebols’ influence will be eclipsed soon, but “policy leaders realize there needs to be a more diverse economy,” as Tom Coyner, of Soft Landing Consulting in Seoul, puts it. Shortly after taking office in February, South Korean President Park Geun-hye launched the new Ministry of Science, Information-Communication Technology, and Future Planning, which is charged with jumpstarting creative industries and assisting small businesses.

As home to the world’s fastest Internet download speeds, South Korea might seem a natural place for tech startups to thrive. Indeed, Seoul has a nascent startup scene, which benefits from exposure to the country’s tastemaking media and entertainment industries. Korean soap operas play on TV sets inside Chinese apartment blocks and Mongolian yurts, and satirical K-Pop star Psy’s Gangnam Style video became an international YouTube (GOOG) sensation last year.

“Korea is big enough for a local market, but its size also forces you to think beyond,” says David Lee, the 33-year-old founder of Seoul’s Shakr Media, which runs video site He says that many Korean startups, like the country’s media companies, cater first to a domestic market. But because South Korea has just 50 million people, startups concerned about long-term growth need to think internationally from the get-go.

On, developers can upload video templates for everything from weddings and children’s birthdays to real-estate sales. A user can insert personal photos into the template and download a low-res video for free or pay about $40 for an HD version. Since the website was launched on May 1, about 40 percent have chosen to pay for the higher-quality version. To date, Shakr has received about $2.4 million in seed funding from domestic and international investors, including Silicon Valley venture firm 500 Startups. Much of Lee’s growth plan centers around real-estate video templates for the U.S. market.

“It’s probably the best strategy to go international as soon as possible, without becoming dependent on the domestic market and inevitably bumping up against, or being subsumed by, the chaebols,” says Coyner, the consultant. He has seen many promising Korean startups sign lucrative but demanding contracts with chaebols, overextend themselves and lose focus, then have to cut back or go bankrupt. “There are plenty of good engineers and ideas in Korea. The problem is how to scale up without being absorbed.” ◦

Monday, October 28, 2013

Parallel Worlds: North and South Korea

The 38th parallel, separating north and south, is Korea’s most important dividing line. But it is only one of many, says Simon Cox

ON A RESTLESS night in April 1970, Lee Jae-geun, one of 27 South Korean fishermen aboard a trawler in the Yellow Sea, awoke from a nightmare. He had dreamt that Korea was struck by three titanic waves, each stronger than the last. The final wave swept aside mountains, deluged the country and left the land divided. It was, he thought, a bad omen.

And so it proved. A few nights later a North Korean patrol intercepted his trawler about 50 miles south of the Northern Limit Line, a disputed maritime border between the two Koreas. Armed patrolmen boarded the trawler and abducted its crew. Most of them were repatriated later that year, but the North Koreans had grander designs for Mr Lee, hoping to train him as a spy. It was three decades before he escaped.

The division between north and south remains Korea’s enduring tragedy. It was imposed in 1945 by the Allied powers that liberated the country from 35 years of cruel Japanese rule. In 1950 it was almost erased by a wave of North Korean troops that swept down the peninsula under the command of Kim Il Sung, a Soviet-backed ruler who outlasted the Soviet Union itself. Another wave of troops, mostly American but fighting under the United Nations banner, then reversed the North Korean tide. Eventually the UN forces succumbed to a third wave of Chinese troops which drove them back to the 38th parallel, a latitudinal reference line that still divides the two Koreas. Everybody ended up roughly where they had started.

On land the dividing line is painstakingly demarcated and heavily fortified. But at sea the border is both physically and legally indistinct, dogged by disputes, incursions and abductions. The South Korean government knows of over 500 of its citizens abducted since 1955 who are still missing.
Mr Lee is no longer one of them, but the country to which he escaped is not the one he left behind decades ago. Its economy, politics and culture have all changed beyond recognition. As a teenager Mr Lee had served as an errand boy for Seoul’s police and knew every nook and cranny of the city.

But in the vast metropolis he returned to 30 years later, he “couldn’t tell left from right”, he says.
When he was abducted, South Korea’s income per person was about $2,000 a year (at purchasing-power parity), roughly equal to North Korea’s at the time. As a fisherman, Mr Lee counted as comfortably middle-class. By the time he returned in 2000, South Korea’s income per person had grown almost tenfold (see chart). In 2010 the country became one of only 15 in the world with a GDP of over $1 trillion.

Two years after Mr Lee’s capture, Hyundai began work on a shipyard in Ulsan, Mr Lee’s southern home town. The yard is now the biggest in the world. Its red Goliath cranes hoist walls of steel measuring 20m by 40m in nine dry docks, making vast container ships and sophisticated drilling vessels for customers from 48 countries. Internationally competitive industries like these have helped make South Korea the world’s seventh-biggest exporter of goods.

And not only goods. Instead of the waves that haunted Mr Lee’s dreams, a Korean wave of films, music and soap operas has inundated Asia and begun to spread beyond. South Korea, so long subject to foreign influence, is now influencing others. One of its diplomats heads the United Nations. Lady Gaga wears its fashions. The South Korean rapper Psy created the most-watched YouTube clip ever. Even in Pyongyang, North Korea’s capital, South Korean music and drama circulates widely, if furtively, on memory sticks and DVDs. Youngsters are wearing their hair styled like their Southern cousins.

Back in 1970 South Korea was ruled by Park Chung-hee, whose daughter, Park Geun-hye, now holds the presidency. But in the intervening years the polity she heads has travelled almost as far as the economy. Her father came to power in a coup in 1961, then in 1972 dissolved the National Assembly and introduced a newly authoritarian constitution. His daughter, by contrast, won the presidency last December in a free and fair election, South Korea’s sixth since 1987. She racked up the highest share of the vote since her father’s victory in 1971.
Poignant reminder
If South Koreans want to remind themselves of the progress they have enjoyed, they need only look north, where men on average measure up to 8cm less and die 12 years sooner. North Korea’s Kim dynasty is now in its third generation, with power passing in 2011 to Kim Jong Un, who may not yet be 30 (no one is quite sure) but models his gestures and embraces on those of his grandfather, Kim Il Sung. The country’s output of cereals, which collapsed in the mid-1990s, has only just regained the level it reached in 1982. A visiting NGO hoping to improve yields on a collective farm had to dust off agricultural techniques that had not been used in the south for decades. To help its electrical equipment cope with the north’s wild swings in current, it had to order a voltage stabiliser not seen in the south since the 1980s.

In escaping to the south, Mr Lee achieved a personal reunification that still eludes his country as a whole. But he did not find it easy. In the north he had been a mechanic, making ships’ engines, but when he looked for similar work in the south he found that it was now done by machines. Still, his predicament is shared by many older South Koreans who have not managed to keep up with a now much more sophisticated economy.

South Korea does not make best use of these older workers, who constitute a growing proportion of the country’s population. It forces many of them to retire prematurely instead of retraining and re-educating them. By contrast, it overeducates its young, who toil away in expensive crammers and devote years to preparing for the university entrance exam. Families compete with each other in an educational arms race that is almost as ruinous as the military competition with the north. Extra qualifications are a ticket to the best jobs, and the best jobs are still concentrated in the government, the banks and the chaebol (the big family-owned conglomerates).

South Korea’s working-age generation faces a triple burden. It must take care of older people, who are growing in number, younger people, who are expensive to educate, and perhaps eventually North Koreans, who will have to be integrated into the economy if the two Koreas are ever reunified. Daunted by these burdens, many South Korean women are delaying childbirth and having fewer children. The country’s fertility rate has fallen further and faster than in almost any other country. Its population, which surpassed 50m last year, is projected to fall below that number again by 2045.
Young South Koreans feel little connection with those on the other side

Many young South Koreans are trying to forget their ties to the north. Their grandfathers and great-grandfathers were preoccupied with the communist enemy, their fear and loathing kept alive by heavy propaganda during the years of dictatorship. The generation born in the 1960s, known as the 386 generation in homage to the Intel 386 microchip, was equally focused on the north, arguing that anti-communist fervour was making reconciliation and reunification impossible. Today’s southern youngsters, by contrast, feel little connection with the people on the other side of the 38th parallel. They are secretly relieved that for now reunification seems only a distant possibility. They do not burn with hatred for the north, nor do they romanticise it, as some older leftists used to do. They simply want to ignore it. But the north does not allow itself to be ignored. ◦

Monday, October 14, 2013

Google Jousts With Wired South Korea Over Quirky Internet Rules

SEOUL, South Korea — South Korea is one of the world’s most digitally advanced countries. It has ubiquitous broadband, running at speeds that many Americans can only envy. Its Internet is also one of the most quirky in the world.
A curfew restricts school-age children from playing online games at night; adults wanting to do so need to provide their resident registration numbers to prove that they are of age.
Until last year, commenters on the Web were legally required to use their real names. A simple Web search in Korean can be a fruitless experience, because the operators of many sites, including some government ministries, bar search engines from indexing their pages.
Travelers who want to go from Gimpo International Airport to the Gangnam neighborhood of Seoul cannot rely on Google Maps. Google Maps can provide directions only for public transport, not for driving, to any place in Korea. Anyone crazy enough to try the journey on bicycle or on foot, directions for which Google Maps provides elsewhere, will be similarly stymied.
The highly regulated Internet comes as a surprise to many people, Koreans included, because South Korea is a strong democracy with a vibrant economy seemingly ready for the digital information age.
South Koreans were early adopters of Internet games and smartphones. It has world-beating electronics companies like Samsung and LG. But here the Internet is just different.
The Korean government has its reasons, most of them well-intentioned. The curfew, for example, was put in place to deal with concerns over game addiction among teenagers.
South Korean security restrictions that were put in place after the Korean War limit Google’s maps, the company says. The export of map data is barred, ostensibly to prevent it from falling into the hands of South Korea’s foe to the north, across the world’s most heavily fortified border. Google and other foreign Internet companies say the rule also prevents them from providing online mapping services, like navigation, that travelers have come to rely on in much of the rest of the world.
The Korea Communications Standards Commission, a regulatory panel, blocks material on the Web that it deems objectionable. This can include pornography, the production of which is technically illegal in South Korea.
“It’s ironic, in a country that is widely recognized for its advanced digital infrastructure, that there are so many restrictions on the Internet in Korea,” said Kim Keechang, a law professor at Korea University who is writing a book on Internet regulation in South Korea.
Foreign Internet companies say the country’s rules prevent them from competing against domestic rivals because they cannot provide the same services they do elsewhere. South Korea is one of the few major markets where Google is not the leading search engine. A South Korean rival, Naver, has the most users.
But domestic criticism of the Korean approach to Internet regulation is growing. Civil liberties advocates successfully challenged the rule requiring users of Internet discussion groups to provide their real names, verified by a national identity registration system. A court last year struck down the measure, which was introduced in 2007 to try to curb online bullying after a rash of suicides.
Now the government of President Park Geun-hye is moving to ease some of the Internet regulations.
Ms. Park wants to encourage creativity in the South Korean high-technology industry, which is very good at developing hardware like smartphones and television sets but not as good at exporting software and services. Critics say the different rules that South Korean companies have to play by limit their ability to think in a worldly fashion.
In September, the government promised to ease the restrictions on online mapping services. The National Geographic Information Institute, part of the Ministry of Land, Infrastructure and Transport, said it would make an official English-language digital map available to Internet companies, beginning this month for companies based in South Korea. The ministry said the policy would help foreign Internet companies and to clear up uncertainties over Korean place names.
The move comes amid a new flare-up in a longstanding dispute over a group of islets between South Korea and Japan known variously as the Dokdo in Korea, the Takeshima in Japan and the Liancourt Rocks in some other places. (The islands are either in the Sea of Japan or the East Sea, another naming dispute.)
For Google and other foreign companies, there is a hitch. They will be permitted to use the map as of next year, on a case-by-case basis. Now, Google adapts its English-language maps of South Korea from the government’s Korean-language maps. Google is permitted to provide directions using public transit systems like the Seoul subway, because train and bus routes and schedules are available through public records.
But Google says other map enhancements, like driving directions, traffic information,and indoor floor plans of airports, require the company to process the data at its servers outside South Korea. This would constitute an export of the map data, which has been forbidden until now.
Google says the policy change announced by the Ministry of Land does not go far enough. That is because the scale of the new official, English-language map is limited to 1:25,000, which Google says is insufficient to provide details that its Maps users take for granted elsewhere.
“Maps at the lower resolution don’t have accurate enough information to guide people and cars through intersections, sidewalks, bike lanes, pedestrian overpasses and many points of interest,” the company said in a statement.
Google maintains that the rules are unfair because domestic Internet companies like Naver are able to provide online navigation and other mapping services, even to users outside the country. That is because Naver’s servers are housed in South Korea. For many foreign visitors, though, Naver’s maps are of limited use: they are only in Korean.
“We just think any services should be carried out within the framework of the law,” Naver said. “The same laws should apply to all providers of Web map services, domestic or foreign.”


Perfecting the Face-Lift, Gangnam Style

Kylie Vu holds up her iPhone to display a photo of her favorite South Korean actress. “I want a chin like hers,” she tells a beauty consultant at the BK Plastic Surgery clinic in Seoul. Vu, 30, budgeted $10,000 for a chin implant and face-lift and traveled more than 1,600 miles from Vietnam, where she manages five kindergartens.

The number of tourists visiting South Korea for cosmetic surgery has increased more than fivefold since 2009, to 15,428 last year, according to the country’s health ministry. Like Vu, many make a beeline for the so-called beauty belt—hundreds of clinics clustered around subway stations in Gangnam, the upscale Seoul neighborhood made famous by Korean pop singer Psy, whose Gangnam Style music video has garnered more than 1.78 billion views on YouTube.

“I’ve had patients from China and Japan since the late 1990s,” says Kim Byung Gun, whose BK Plastic Surgery employs six surgeons, along with 30 interpreters speaking Japanese, Mandarin, Cantonese, Vietnamese, English, and other languages. “It’s grown more rapidly since, because of the staggering demand for plastic surgery among Koreans.” In a 2011 poll carried out by the Seoul city government, 32 percent of respondents said they’d be willing to go under the knife to improve their looks, up from 21.5 percent in 2009. A total of 649,938 cosmetic procedures were performed in South Korea in 2011, according to the International Society of Aesthetic Plastic Surgery, more than 13 procedures for every 1,000 people—the highest rate of any country in the world.

South Korea’s medical tourism industry logged revenue of 487 billion won ($453 million) in 2012, according to estimates from the Korea Tourism Organization. That’s triple the amount in 2009. The government promotes the industry abroad and has set a target of adding about 20,000 jobs over the next four years.

South Korean clinics provide an array of special services for visitors, such as hotel accommodations, airport pickups, and multilingual websites, e-mail, and video consultations. Plastic surgery trips cost an average of $14,000, including air fare and accommodations, according to Lee Joon, marketing director at Seoul TouchUp, a travel agency that books all-inclusive packages.

Growing interest in Korean pop culture is a major factor drawing medical tourists from Asia, even though surgeries often cost more than they do at home, says Kim of BK Plastic Surgery. Koreans typically request operations to Westernize their appearance; patients from other Asian countries want the features of Korean celebrities.

Gangnam, the destination for more than 20 percent of all medical tourists to South Korea, opened a visitor center in July to help visitors choose accredited hospitals. To improve safety and safeguard the industry’s reputation, the government has begun cracking down on hospitals that work with unregistered tourism agencies. The state-run Human Resources Development Service of Korea offers a qualification exam for medical tour operators. (Risks of traveling too soon after surgery include pulmonary embolisms and blood clots, according to the American Society of Plastic Surgeons.)

As she prepared for a makeover modeled on Kim Tae Hee, the South Korean actress who plays the lead in the popular TV drama Love Story in Harvard, Vu was already plotting a return trip to Seoul.

“South Korea’s plastic surgery is known to be the best in the world,” says the Vietnamese visitor, clutching an Hermès handbag. “I’ll probably be back in Korea in six months to get another face-lift.” ◦

Wednesday, April 17, 2013

Beyond Korean style: Shaping a new economic growth formula

McKinsey Global Institute

Download the whole report here:

Beginning in the 1960s, South Korea has set economic-development records with a growth formula that focused on heavy-industry and manufactured exports. GDP has tripled in just the past 20 years, and South Korea became the first nation to go from being a recipient of aid from the Organisation for Economic Co-operation and Development to being a member of its donor committee. South Korea is the leading supplier of LCD screens, memory chips, and mobile phones and is the world’s number-five automaker.

Yet the nation’s GDP growth is increasingly decoupled from the lives of its middle- income citizens. The number of middle-income households—earning 50 to 150 percent of median income—has fallen from 75.4 percent of the population to 67.5 percent since 1990, and more than half of middle-income households are cashflow constrained when the full costs of housing payments are counted. The squeeze contributes to trends that could affect future growth, including a plummeting personal-saving rate and one of the world’s lowest fertility rates. Beyond Korean style: Shaping a new growth formula, a new report from the McKinsey Global Institute (MGI), explores the causes of these economic challenges and makes specific recommendations for combatting them. Among the report’s findings:
  • South Korea’s largest industrial corporations have continued to grow rapidly, but mostly in new global markets; their domestic employment has fallen by 2 percent annually for 15 years, leaving job creation to small and medium-sized enterprises (SMEs) and Korea’s underdeveloped service sector, where wages are just 55 percent of manufacturing pay.
  • Spending on housing and education have soared (exhibit). The median price for a home in South Korea is 7.7 times the median annual income—more than twice the US multiple. South Koreans also pay much more to finance their home purchases because low loan-to-value limits often force homebuyers to seek supplemental, high-interest loans. Spending on private education is extremely high as well (around 9 percent of GDP) because South Koreans believe admission to a top university is the only path to success for their children.

Beyond Korean Style - exhibit

But South Korea can take specific steps to strengthen its middle-income households, increase domestic demand, and build a more balanced economy. Namely:
  • Reduce housing payments. By switching to mortgages with looser loan-to-value limits, MGI estimates that South Korean homeowners could save $8 billion annually in payments. South Korea can also encourage more investment in rental housing and can consider shared ownership programs.
  • End the education “arms race.” Even though Koreans continue to sacrifice to prepare their children for university, unemployment rates are higher for South Korean college graduates than for graduates of vocational high schools. And when costs are factored in, the net present value of the lifetime earnings of a privately educated college graduate is lower than those for a graduate of vocational high school. To help parents consider alternatives to a university education, MGI suggests higher investment in vocational education and expansion of the Meister school program, in which employers collaborate with schools to create job-relevant curricula. A dual-track system would enable students to continue on to college degrees as they progress in their careers.
  • Build up services and SMEs. South Korean services are dominated by low value-added enterprises, particularly local services (for example, restaurants, real-estate sales, transportation). South Korea can build on the success of sectors that are already globally competitive, such as construction engineering, and help expand sectors such as health care, tourism, and financial services.
  • Create an entrepreneurial SME sector. Most SMEs are very small, and few mid-sized enterprises become large companies. Structural problems are partly to blame, but South Korea also lacks an entrepreneurial tradition and offers limited support for innovative risk-takers. South Korea can work to expand access to capital, increase intellectual-property protections, teach entrepreneurism, and update bankruptcy regulations. These initiatives will take a concerted effort by policy makers, business leaders, and South Korean citizens. But the result could be a new growth formula that complements the current model, reverses the erosion of middle-income households, and builds a sustainable future for all South Koreans.


Monday, April 01, 2013

How Samsung Became the World's No. 1 Smartphone Maker
By Sam Grobart

I’m in a black Mercedes-Benz (DAI) van with three Samsung Electronics PR people heading toward Yongin, a city about 45 minutes south of Seoul. Yongin is South Korea’s Orlando: a nondescript, fast-growing city known for its tourist attractions, especially Everland Resort, the country’s largest theme park. But the van isn’t going to Everland. We’re headed to a far more profitable theme park: the Samsung Human Resources Development Center, where the theme just happens to be Samsung.

The complex’s formal name is Changjo Kwan, which translates as Creativity Institute. It’s a massive structure with a traditional Korean roof, set in parklike surroundings. In a breezeway, a map carved in stone tiles divides the earth into two categories: countries where Samsung conducts business, indicated by blue lights; and countries where Samsung will conduct business, indicated by red. The map is mostly blue. In the lobby, an engraving in Korean and English proclaims: “We will devote our human resources and technology to create superior products and services, thereby contributing to a better global society.” Another sign says in English: “Go! Go! Go!”

More than 50,000 employees pass through Changjo Kwan and its sister facilities in a given year. In sessions that last anywhere from a few days to several months, they are inculcated in all things Samsung: They learn about the three P’s (products, process, and people); they learn about “global management” so that Samsung can expand into new markets; some employees go through the exercise of making kimchi together, to learn about teamwork and Korean culture.

They will stay in single or shared rooms, depending on seniority, on floors named and themed after artists. The Magritte floor has clouds on the carpet and upside-down table lamps on the ceiling. In a hallway, the recorded voice of a man speaking Korean comes over the loudspeakers. “Those are some remarks the chairman made some years ago,” a Samsung employee explains.

She’s referring to Lee Kun Hee, the 71-year-old chairman of Samsung Electronics, who declined to be interviewed for this article. Despite making headlines in 2008, when he was convicted of tax evasion, and 2009, when he was pardoned by South Korea’s president, he maintains a low profile.

Except within Samsung, that is, where he’s omnipresent. It’s not just the slogans over the sound system; Samsung’s internal practices and external strategies—from how TVs are designed to the company’s philosophy of “perpetual crisis”—all spring from the codified teachings of the chairman.

Since Lee took control of Samsung in 1987, sales have surged to $179 billion last year, making it the world’s largest electronics company by revenue. That makes Samsung Electronics the world’s largest electronics company by revenue. For all its global reach, though, the company remains opaque. We all know the story of Steve Jobs and Apple (AAPL), Akio Morita and Sony (SNE). But Samsung and Lee Kun Hee? People may bring up the South Korean government’s support of local champions and access to easy capital, but within the company it all goes back to Chairman Lee and the Frankfurt Room.

It doesn’t look like much: early 1990s vintage décor and a large table with a fake flower centerpiece. But the Frankfurt Room is to Changjo Kwan as the Clementine Chapel is to St. Peter’s Basilica: an extra-special place inside an already special place. Photography is forbidden; people whisper when inside. It’s a meticulous recreation of the drab conference room in the German hotel where, in 1993, Chairman Lee gathered his lieutenants and laid out a plan to transform Samsung, then a second-tier TV manufacturer, into the biggest, most powerful electronics manufacturer on earth. It would require going from a high-volume, low-quality manufacturer to a high-quality one, even if that meant sacrificing sales. It would mean looking past the borders of South Korea and taking on the world.

Samsung is having a moment. It’s dominant in TVs and sells a lot of washing machines, but it’s smartphones that made Samsung as recognizable a presence around the world as Walt Disney (DIS) and Toyota Motor (TM). If Samsung isn’t yet as lustrous a brand as Apple, it’s finding success as the anti-Apple—Galaxy smartphones outsell iPhones. And Samsung is probably the only other company that can throw a product introduction and have people line up around a city block, as they did in New York City on March 14 for the launch of the Galaxy S 4. That never used to happen when Samsung unveiled a refrigerator—although the kimchi-specific models made for the Korean market are really quite impressive.

Samsung Electronics is the largest part of Samsung, a conglomerate that accounts for 17 percent of South Korea’s gross domestic product. It employs 370,000 people in more than 80 countries, but nowhere can its presence be felt more acutely than in its native country, where it’s so dominant it may as well be a second government.

A Seoul resident may have been born at the Samsung Medical Center and brought home to an apartment complex built by Samsung’s construction division (which also built the Petronas Twin Towers and the Burj Khalifa). Her crib may have come from overseas, which means it could have been aboard a cargo ship built by Samsung Heavy Industries. When she gets older, she’ll probably see an ad for Samsung Life Insurance that was created by Cheil Worldwide, a Samsung-owned ad agency, while wearing clothes made by Bean Pole, a brand of Samsung’s textile division. When relatives come to visit, they can stay at The Shilla hotel or shop at The Shilla Duty Free, which are also owned by Samsung.

Conglomerates have been out of favor in most of the industrialized world for decades. What separates Samsung from Gulf + Western, Sunbeam, and other extinct examples is focus and opportunism taken to the extreme. “Samsung is like a militaristic organization,” says Chang Sea Jin, a professor at the National University of Singapore and the author of Sony vs. Samsung. “The CEO decides which direction to move in, and there’s no discussion—they carry out the order.”

“Samsung’s like clockwork,” says Mark Newman, an analyst at Sanford C. Bernstein (AB) who worked at Samsung from 2004 to 2010, for a time in its business strategy department. “You have to fall in line. If you don’t, the peer pressure’s unbearable. If you can’t follow a specific directive, you can’t stay at the firm.”

Consider the disciplined way Samsung Electronics moves into new product categories. Like other Korean conglomerates—LG and Hyundai come to mind—the first step is to start small: make a key component for that industry. Ideally the component will be something that costs a lot of money to manufacture, since costly barriers to entry help limit competition. Microprocessors and memory chips are perfect. “A semiconductor fab costs $2 billion to $3 billion a pop, and you can’t build half a fab,” says Lee Keon Hyok, Samsung’s global head of communications (and no relation to Chairman Lee). “You either have one or you don’t.”

Once the infrastructure is in place, Samsung begins selling its components to other companies. This gives the company insight into how the industry works. When Samsung decides to expand operations and start competing with the companies it has been supplying, it makes massive investments in plants and technologies, leveraging its foothold into a position that other companies have little chance of matching. Last year, Samsung Electronics devoted $21.5 billion to capital expenditures, more than twice what Apple spent in the same period. “Samsung makes big bets on technologies,” says Newman. “They study the hell out of the problem, and then they bet the farm on it.”

In 1991, Samsung started making LCD panels it sold to other television brands. In 1994 it started making flash memory for devices such as the iPod and smartphones. Samsung is now the No. 1 maker of LCD televisions and sells more flash memory and RAM chips than any other company in the world. And in 2012 it passed Nokia (NOK) to become the world’s largest mobile-phone manufacturer.

As Samsung has risen, others have failed, often in spectacular fashion: Motorola was split up and its handset business sold to Google (GOOG). Nokia watched its long-standing No. 1 position erode when it got blindsided by smartphones. The Sony-Ericsson (ERIC) partnership dissolved. Palm disappeared into Hewlett-Packard (HPQ). BlackBerry (BBRY) continues to be on a 24-hour watch and has had its belt and shoelaces confiscated. When it comes to mobile hardware, today there’s only Apple, Samsung, and a desperate crowd of brands that can’t seem to rise above being called “the rest.”

Lee’s father, Lee Byung Chull, founded Samsung in 1938. The name means “three stars,” which was the company’s logo for decades. Lee took over as chairman following his father’s death in 1987. (Lee Kun Hee’s son, Lee Jae Yong, is vice chairman and heir apparent.) The company immediately prospered under Lee Kun Hee’s leadership. “Between 1988 and 1993, the company had grown two and a half times,” says Shin Tae Gyun, Samsung’s president of the Human Resources Development Center, “so executives thought things were working.” Lee, however, didn’t just want Samsung to be a successful Korean company. He wanted it to be a world player, something on the level of General Electric (GE), Procter & Gamble (PG), and IBM (IBM). He even set a deadline: the year 2000. “2000 was not that far away,” says Shin. “At that growth rate, could we become a world-class company in time? The answer was no.”

To see how his company was faring internationally, Lee embarked on a world tour in 1993. His findings were not encouraging: A visit in February to a Southern California electronics store revealed Sony and Panasonic (PC) TVs in the front window and Samsung TVs gathering dust on a low shelf in the back. Lee was not happy.

By June, he’d made it to Germany and was staying at the Falkenstein Grand Kempinski Hotel in Frankfurt. He summoned all of Samsung’s executives—who numbered in the hundreds—to meet him there. “He did this at the drop of a hat, and they all gathered,” says communications chief Lee. On June 7 the chairman delivered a speech that lasted three days (they adjourned in the evenings). The most famous quote to emerge from the address was, “Change everything but your wife and children,” which has “Ask not what your country can do for you” levels of recognition at Samsung.

The event became known, formally, as the Frankfurt Declaration of 1993, with all the United Nations import the name suggests. The content of the Frankfurt Declaration is called New Management, its principles distilled into a 200-page book that’s distributed to all Samsung employees. A stand-alone glossary was later published to define the terms laid out in the first book. Workers who weren’t fully literate were given a cartoon version. Lee went around the globe, evangelizing his gospel to all corners of the Samsung empire. “He conducted a lot of lectures,” recalls Shin. “It comes to 350 hours. We transcribed those events; it took 8,500 pages.”

And so, just across from New Management Hall at the HRDC in Yongin, is the hallowed Frankfurt Room. A tour guide proudly notes that everything in the room—including the chairs, drab pink tablecloth, and a painting of Venice—are the originals from the room in the Kempinski when Lee delivered his declaration. Samsung had all the furnishings shipped back to Korea and recreated the room precisely.

New Management is centered around a number of central slogans: “Fostering the individual” and “change begins with me” are commonly heard phrases. Perhaps most important, it deals in quality control, or “quality management,” as it’s called within the company. All of that is vividly on display at another Samsung holy site, the Gumi complex, located about 150 miles south of Seoul. Gumi, Samsung’s flagship smartphone manufacturing facility, is where Samsung built its first mobile phone: the SH-100, a Brobdingnagian handset that rivaled Gordon Gekko’s Motorola DynaTac 8000 in tonnage.

The first thing you notice about Gumi is the K-pop. Korean pop music seems to be everywhere outside, usually coming from outdoor speakers disguised as rocks. The music has an easy, mid-tempo style, as if you were listening to a mellow Swing Out Sister track in 1988. The music, a Samsung spokeswoman explains, is selected by a team of psychologists to help reduce stress among employees.

There are more than 10,000 workers at Gumi. The vast majority are women in their early 20s. Like most twentysomethings, they move in groups, often with their heads down as they look at their phones. Workers wear pink jackets, some wear blue—which color is a matter of personal preference. Many of the unmarried employees also live at Gumi in dorms that have dining rooms, fitness centers, libraries, and coffee bars. Coffee’s big in Korea; the coffee shop on the Gumi campus has its own roaster.

Inside, Gumi is surprisingly warm and humid. The factory is part of a global network of Samsung facilities that, in 2012, produced a total of 400 million phones, or 12 phones every second. Workers at Gumi are not on an assembly line; production is done on a cellular basis, with each employee standing within a three-sided workbench that has all the necessary tools and supplies an arm’s reach away. The employee is then responsible for the overall assembly of the phone. Computer stations located throughout the assembly facility can call up real-time manufacturing data from any Samsung facility in the world.

Banks of quality-testing equipment fill one room. Small plastic propellers spin above the air vents of many of the machines. “It was an employee’s idea,” a tour guide explains. “It was difficult to determine if a machine was functioning from far away. The employee suggested that propellers would be a good indication if the machine was on.” Samsung employees are given incentives to come up with ideas like these. A cost savings is calculated, and a portion of that is returned to the employee as a bonus.

Such striving for efficiency and excellence wasn’t always a priority. In 1995, Chairman Lee was dismayed to learn that cell phones he gave as New Year’s gifts were found to be inoperable. He directed underlings to assemble a pile of 150,000 devices in a field outside the Gumi factory. More than 2,000 staff members gathered around the pile. Then it was set on fire. When the flames died down, bulldozers razed whatever was remaining. “If you continue to make poor-quality products like these,” Lee Keon Hyok recalls the chairman saying, “I’ll come back and do the same thing.”

The lesson stuck. In May 2012, three weeks before the new Galaxy S III was to be shipped, a Samsung customer told the company that the back covers for the smartphone looked cheaper than the demo models shown to clients earlier. “He was right,” says DJ Lee, the marketing chief of Samsung Mobile. “The grain wasn’t as fine on the later models.” There were 100,000 covers in the warehouse with the inferior design, as well as shipments of the assembled devices waiting at airports. This time, there would be no bonfire—all 100,000 covers, as well as those on the units at the airports, were scrapped and replaced.

Besides the Great Phone Incineration of 1995, two other signal acts helped propel Samsung’s rise in smartphones. The first was in 2009, when it bet big on Android, Google’s operating system for mobile. Samsung’s first Android device was called the Galaxy. “We were not successful with our first Android phone,” says DJ Lee. “The app store was limited.” Android was still in its infancy, greatly outclassed by the iPhone’s operating system, iOS. But Android was open-source, which meant that it was available free of charge to any manufacturer that wanted it.

In 2010, Samsung introduced the Galaxy S line, exemplifying its second momentous decision: using bigger screens. The Galaxy S’s screen was significantly larger than the original Galaxy and other Android models. “We settled on a 4-inch screen, which people thought was too big,” says DJ Lee. “There was a lot of argument about that.” But the bigger screens proved to be a major selling point; they grew larger still on the Galaxy S II and S III. Now, Samsung smartphones come in sizes ranging from 2.8 inches to 5 inches (to say nothing of the company’s “phablets,” which go up to 5.5). “Nobody had any idea what the right screen size was, so Samsung made all of them and saw which one worked,” says Benedict Evans, a researcher at Enders Analysis.

Producing a range of similar devices in various sizes to see which sells best is one of those high-cost undertakings most companies shy away from. But Samsung’s ability to produce display, memory, processors, and other high-tech parts gives it a flexibility competitors can’t touch. “There was this orthodoxy 10 years ago that vertical integration was passé,” says Tero Kuittinen, an analyst at Alekstra, a mobile-phone consultancy. “Then it turned out that the only two companies that took it seriously [Samsung and Apple] took over the whole handset industry.”

Apple’s approach is fewer models, each of them exquisitely designed. Samsung’s is try everything, and fast. “When we released the Galaxy S III, our research showed that, for some people in some markets, the handset was too big,” says DJ Lee. “So we were able to create the same phone with a 4-inch screen, and we called it the Galaxy S III mini.” Getting the smaller device into production took about four to six months, says DJ Lee. “We watch the market, and we immediately respond,” he says.

The new Galaxy S 4 is coming out only nine months after the GS3. “Samsung has taken differentiation to a new art,” says Michael Gartenberg, an analyst at Gartner (IT). “If I want something in between an iPad and an iPad mini, I can’t get that from Apple.”

Apple’s vertical integration has one thing Samsung’s doesn’t, though: control over the software. Only Apple smartphones and tablets run iOS, and one of the hallmarks of the iPhone and iPad is how smoothly the software and hardware work together. That’s fostered an industry of app makers, and the company gets a cut of every app sold.

Samsung is making efforts to strengthen its position by opening a software development center in Silicon Valley. It may never have the kind of operating system control that Apple has. Samsung does, however, use its production depth and flexibility in ways that are arguably as powerful. It makes the processors, memory chips, and cameras that are in not only their own smartphones but also in many others—including the microprocessor in the iPhone 5. The express policy of the company is that the components business is walled off from the “set” business (its own finished products, like the Galaxy S 4), and that the one side doesn’t know what the other is doing. But few people who watch the company think Samsung keeps itself in the dark. New technologies take time to develop, particularly if that technology is needed in large quantities. “Having that early-stage insight into the supply chain has been one of the key factors to give them an edge,” says Neil Mawston of Strategy Analytics. “They can see three years ahead.”

This is an extremely sore subject with some of Samsung’s customers. Apple sued Samsung in the U.S. and elsewhere for patent infringement, from the basic shape of the phone to how a screen bounces back when users scroll to the bottom; Samsung denies the accusations, and has countersued. The legal war shows no sign of ending. Apple won a round in August, when a federal jury awarded Apple $1 billion in damages. That case is now on appeal, and the judge recently reduced the award by about half.

However the many court cases play out, Samsung wouldn’t have to break the law to use its position as a supplier to its advantage. If a manufacturing customer merely approaches Samsung with a request for a new kind of processor, that information is valuable. “Having a road map of, say, Apple and knowing what competitors are doing is pretty useful,” says Bernstein’s Newman. “It’s not copying, and it’s not illegal. You just know that in 2013, Apple’s going to need a quad-core processor.”

For the Galaxy S 4 unveiling in mid-March, Samsung rented Radio City Music Hall on a Thursday night. TV trucks were parked outside, and lines of people snaked around the block. The lobby was packed. As a point of comparison, a Motorola event in New York six months earlier was held in a party space that had sold its naming rights to Haier, the Chinese appliance company. Nokia’s event the same day was nearby at a low-profile, generic event facility.

At Radio City, Broadway actor Will Chase mastered the ceremonies in between surreal sketches of actors portraying average consumers using the Galaxy S 4’s features in various situations. Elaborate sets evoking a school, Paris, and Brazil emerged from the stage floor. An orchestra rose up on hydraulic lifts. A little boy tap-danced. The whole show seemed inexplicable—save as a metaphor for Samsung’s try-everything mobile business. “Samsung makes every kind of handset in every market in every size at every price,” says Evans. “They’re not stopping to think. They’re just making more phones.”

The Galaxy S 4 doesn’t come out until late April. It’s fast, has a big, bright screen, and will probably be another huge hit for Samsung, as will the S 4 mini that will go on sale soon after. Yet when discussing Samsung’s immediate future, Lee Keon Hyok betrays zero triumphalism. He’s seen this before and knows that it’s counter to the principles of New Management to derive pleasure from the success of today. “In 2010 it was a banner year for the whole group,” he says, sitting in his 35th-floor office in Seoul. “The chairman’s response? ‘Our major businesses can disappear in 10 years.’ ”

Perhaps Samsung will grow so huge it invites new government scrutiny in Korea. Maybe iPhones 6, 7, and 8 will prove so beautiful and compelling, not even the chairman will have an answer. A likelier scenario is that another company, probably from China, will do to Samsung what it has done to its competitors. “The Chinese look like Samsung did five years ago,” says Horace Dediu, an independent mobile analyst. He identifies Huawei and ZTE as particular threats; other analysts bring up Lenovo (LNVGY). “Samsung makes less profit per smartphone than Apple,” Dediu continues.

“The Chinese make even less. If the smartphone is going to become a commodity, how does Samsung play in that game?”

Lee Keon Hyok predicts that smartphones will indeed become commoditized, just as PCs did in the 1990s. “But you have to remember, we make a lot of parts,” he says. “The shape may change, but phones are still going to require AMOLED displays, memory, and processors. We are well prepared to meet those changes.” AMOLED refers to active-matrix organic light-emitting diodes. It’s the state of the art and possibly the only display technology that has its own K-pop song: Amoled, a catchy 2009 number by Son Dam-bi and After School.

When the mobile business ceases to be profitable, Samsung will have to force its way into some other industry that requires a lot of upfront capital and expertise in mass-manufacturing. The company announced in late 2011 that it would spend $20 billion by 2020 to develop proficiencies in medical devices, solar panels, LED lighting, biotech, and batteries for electric cars. And if Samsung batteries or MRI machines don’t take over the market, maybe the chairman will set a huge pile of them on fire. “The chairman is saying all the time, ‘This is perpetual crisis,’ ” says mobile marketing chief DJ Lee. “We are in danger. We are in jeopardy.”


Saturday, March 30, 2013

Pyongyang Blusters; the U.S. Worries About Quieter Risks


This week, North Korea’s young leader, Kim Jung-un, ordered his underlings to prepare for a missile attack on the United States. He appeared at a command center in front of a wall map with the bold, unlikely title, “Plans to Attack the Mainland U.S.” Earlier in the month, his generals boasted of developing a “Korean-style” nuclear warhead that could be fitted atop a long-range missile.       
Kim Jong-un, the North Korean leader, met with military leaders in Pyongyang on Friday. Some of the photos of military preparedness released by Korea appear to be digitally manipulated.
But the missile systems that figure in Mr. Kim’s blitz of threats and orders do not yet have the range to approach American shores. There is no evidence his nuclear weapons can be shrunk to fit atop a missile. And a prominent photograph showing Mr. Kim’s military making a Normandy-style beach landing appears to have been manufactured, raising questions about whether his forces could possibly repeat the feat his grandfather pulled off in 1950, ordering a ground attack to open the Korean War.
On top of all that, most countries on the verge of a major military assault do not broadcast their battle plans to the world.
“You would expect such a military order to be issued in secret,” said Kim Min-seok, spokesman of the South Korean Defense Ministry. “We believe that by revealing it to the media and publicizing it to the world, North Korea is playing psychology.”
In fact, it is the abilities that Mr. Kim is not showing off that have the Obama administration most worried. The cyberattacks on South Korea’s banking system and television broadcasters two weeks ago were surprisingly successful, as was the torpedo attack three years ago this week on the Cheonan, a naval corvette, that killed 46 South Korean sailors. The North has never acknowledged involvement in either — though the South believes it was responsible for both and so do American experts.
“We’re convinced this is about Kim solidifying his place with his own people and his own military, who still don’t know him,” one senior administration official said Friday. He added, “We’re worried about what he’s going to do next, but we’re not worried about what he seems to be threatening to do next.”
The cyberattacks and torpedo attack have something in common: Unlike the missile attacks and beach landings that Mr. Kim seems to be suggesting are imminent, they are hard to trace to North Korea, at least immediately. As a result, they are hard to retaliate against, and in fact the South never struck back militarily for the sinking of the Cheonan, even after a commission of inquiry, with experts from outside South Korea, concluded it was the work of a submarine-launched torpedo.
To North Korea experts in Washington and Seoul, there is something familiar in the country’s threats to “keep the White House in the cross hairs of our long-range missiles.” Such threat of armed brinkmanship — the catchphrase in the 1990s was that Seoul would become a “sea of fire,” a term recently revived by North Korea’s news agencies — has in the past drawn its adversaries to the bargaining table with economic concessions. But at the same time, the tensions with the outside world provide the government with opportunities to elevate its leader’s status among his people — which might be more important to a young, untested leader than it was to his father and grandfather.
According to the view that North Korea’s propaganda machine pounds into its citizens’ minds, the North is a tiny nation besieged by hostile outside forces, one that survived despite decades of sanctions and can finally stand up to both its longtime Chinese ally and American enemy — all thanks to the strong “military-first” leadership of the Kim family and the country’s nuclear arsenal.
In such a setting, Mr. Kim’s trip to a border island on a wooden boat — it almost seemed designed to create a “Washington crossing the Delaware” motif — is proof of his “daring and pluck,” as the country’s main party newspaper, Rodong, explained. Rodong also declared about North Korea’s nuclear weapons: “Let the American imperialists and their followers know! We are not a pushover like Iraq or Libya.” The first, famously, had no nuclear weapons; the second gave up its nascent nuclear program in late 2003, a move North Korea describes as Col. Muammar el-Qaddafi’s greatest mistake.
In the propaganda world that the three generations of the Kim dynasty has created, Mr. Kim is “a great iron-willed general admired by all of his people, including real generals who have actually served in the military,” said Lee Sung-yoon, North Korea specialist at the Fletcher School of Law and Diplomacy at Tufts University. “For the Kim III, fantasy is reality.”
Keeping the fantasy up has required a lot of work in the past month, with many visits to military units on both of the country’s coasts, and a lot of conferences at midnight with generals.
Yet in each of these scenes, North Korea’s propagandists sometimes made Mr. Kim look as much a clumsy actor as a new leader of one of the world’s most belligerent governments.
For one, North Korean state-run media on March 12 released a photo showing Mr. Kim arriving at an island within the gun range of South Korean marines and quoted him as threatening to “cut the windpipes of the enemies.” But it strained credibility that he traveled to a region he called a powder keg on a small unarmed wooden boat, as shown in the photo.
On Tuesday, North Korea released a photo showing Mr. Kim watching hovercrafts storm a snow-covered beach in eastern North Korea. But it did not take long for journalists and analysts to conclude that the picture was clumsily doctored to add more amphibious landing vehicles and make the drill look far more imposing than it really was.
Then on Friday, photos released by the North’s state media, which also showed signs of digital manipulation, featured Mr. Kim huddling with his top generals during a midnight meeting to approve “plans to strike the mainland U.S.” A military chart behind them showed a series of lines shooting out of North Korea and hitting major cities in the United States, including those on the East Coast. Even if the North Koreans had such missiles — most analysts doubt it does — would they really intend to launch them at the United States in what would be a suicidal action for the Pyongyang government?
“We’re all trying to put him on the couch,” said Jonathan D. Pollack, a North Korea expert at the Brookings Institution. “A year ago the U.S. and the Chinese saw at least the possibility that you could do business with him. But he has steadily reverted to form,” adopting the approach of his father and grandfather in using the perception of an external threat to solidify support at home.
On Saturday those threats were South Korea and “the Americans and their puppets,” a statement from the North said. The two Koreas “were back to a state of war,” it said, and the North’s foes “should know that everything is different under our peerless general and dear Marshal Kim Jong-un.” While many fear that Mr. Kim’s rhetoric is building up toward some action, Mr. Pollack held out the hope that the threats could abate as United States and South Korean military exercises, which infuriate the North, wind up at the end of April.


Monday, February 11, 2013

Les Miserables ROK Air Force Parody Les Militaribles / 공군 레미제라블 '레밀리터리블'


Monday, February 04, 2013

South Korea's new goverment eyeing tech venture boom

Summary: Administration of president-elect Park Geun-hye is planning to foster tech startups and help them secure funds through angel capitalists, in a bid to revitalize economy and create more jobs.

Headed by president-elect Park Geun-hye, the country's new government will strive to create a business environment where small-sized companies can secure funds through angel capitalists, said a member of the presidential transition team who declined to be named, in a report by Yonhap News Agency on Sunday. The administration came into office on December 19, 2012.

"We have to encourage technology venture firms to create jobs for young people. In addition, they are good for economic growth because expansion boosted by big companies is in the doldrums," the anonymous member said.

The initiative, tentatively named "Venture Again", will be announced in the near future. The transition team also expects the new policy to help achieve Park's promise of a 70-percent employment rate in South Korea.

According to the report, this is not the first time South Korea has tried to encourage the growth of startups to stimulate economic growth. In the late 2000s, previous president Kim Dae-jung and his administration had pursued a similar strategy.

However, it seemed to work to an extent but was responsible for IT bubbles which burst in 2010 and greatly impacted the economy. Many fraudulent people also received government subsidies based on insubstantial technologies after allegedly bribing corrupted bureaucrats.

To prevent such incidents, Park's administration plans to help young entrepreneurs receive funds from the private sector such as angel capitalists, the unnamed member said. Venture firms with a technology edge will also be listed on the Korea Stock Exchange or receive loans from financial institutes.

Park recently said South Korea needed to emulate U.S. Silicon Valley, where angel capitalists proactively competed to invest in startups with high commercial potential without any infusion of state money. ◦

PSY | Wonderful Pistachios Get Crackin' Super Bowl 2013 Ad


Wednesday, January 09, 2013

The rise of South Korea and lessons for Canada
By Thomas Klassen

A Korean wave is sweeping the world. The secretary-general of the United Nations is Korean, the head of the World Bank is a Korean-American. “Gangnam Style,” a song by the Korean rapper Psy, has become the most watched video on YouTube.

In the past decade Korean companies, Samsung, LG, Hyundai and others, have become household names across the globe. The epic battle between Apple and Samsung for dominance in mobile devices is testament that Korean companies stand second to none. In Ontario, Samsung and the Korea Electric Power Corp. are spending more than $3 billion to build wind and solar energy plants.

The success of Korea is particularly astounding since until the 1960s the nation was dirt poor, having suffered a brutal period of Japanese colonization followed by the devastation of the Korean War. Until five years ago, Canada’s GDP was greater than Korea’s. Now Korea outpaces Canada and the gap grows each year.

What are the lessons for Canada from Korea’s rapid rise on the world stage?

First, that post-secondary education is the main driver of success in the global marketplace. Knowledge, both theoretical and applied, is essential in designing and manufacturing cars, supertankers, mobile phones, and making movies and videos. That many Koreans are willing and able to learn English and study overseas, allows them to access the world markets, be it in science, diplomacy or business.

The achievements of Korea are the direct result of a skilled workforce, as the country lacks natural resources and has no sources of energy. Canada, blessed with a land mass 100 times that of South Korea, and abundant natural resources, fails to prioritize education. That Canada has no national post-secondary education department or strategy is incomprehensible to all international observers.
If there was ever an argument for constitutional reform in Canada, it is surely to grant the federal government a role in ensuring that the nation’s universities, colleges and private vocational schools operate in a strategic manner in a knowledge economy.

The second lesson for Canada is that government strategy and support are essential for industries and individuals to compete, and succeed, internationally. A decade ago the Korean government made it a priority to strengthen the entertainment and cultural sector, after concluding that the nation could no longer compete in some manufacturing industries with lower-wage economies.

This decision marshalled government departments, from education to foreign affairs to finance, to increase national capacity in this sector of the economy. The results are only now becoming apparent, as shown by the sensation of “Gangnam Style.” In its successful bid for the for the 2018 Winter Olympics, government, business and other groups worked together for more two decades, and through two failed bids.

The last lesson that Canadians can learn from Korea is that success depends on reacting quickly to developments. Twenty years ago, when China opened its doors to the outside, Korean firms were the first to take advantage from a billion more customers.

Korean manufacturers responded swiftly by sending their staff to China to supervise the newly opened plants. Korean students embraced learning Mandarin, in addition to English. In contrast, Japanese and other firms were hesitant, waiting to see if China would truly adopt a market economy. Not surprisingly, the firms moving first and fast obtained the best market share.

In the past two years, Korea has signed and implemented free trade agreements with the U.S. and the 27 countries of the European Union. Canada, on the other hand, in the past 10 years, managed to implemented free trade agreements with Colombia, Iceland, Jordan, Liechtenstein, Norway, Peru and Switzerland. These countries represent so little of Canada’s annual trade that the total dollar amount is a rounding error.

Canada, after more than a decade of negotiations, is still uncertain if it wishes to sign a trade agreement with the European Union, India, Korea or any major economy. Watching from the sidelines is not a good strategy in the fast-moving moving global economy.

As Canadians become more and more enticed to spend money on Korean goods and services, they might well consider that if a dirt poor country can become rich in 50 years, could not a wealthy country become poor in the next 50?

Thomas Klassen is an associate professor of political science at York University. He has lived, and taught at universities, in Korea and written extensively about the country.

Saturday, January 05, 2013

South Korea Prepares the Young for a Rapidly Aging Population

At a clean and sunny community center in Seoul, the South Korean capital, senior citizens make clay models of their own faces in an arts class. Some of the faces are vivid and lifelike. Others are expressionless and indistinct. The project is intended to help the seniors remember what they look like.
This is the Gangseo District Center for Dementia. Since 2006, Seoul has opened a dementia center in each of the city's 25 urban districts.
It's one of the novel approaches that South Korea has developed to cope with an epidemic of dementia. Recent data suggest that South Korea is now the fastest-aging country on Earth.
By some estimates, nearly 40 percent of Koreans will be 65 years old or older by midcentury. In a sense, the country is suffering from its rapid development, which has been accompanied by soaring life expectancy and plummeting birth rates.
The Gangseo center provides sports and music classes, with the aim of giving dementia patients a sense of participation and accomplishment, as well as some physical and cognitive exercise.
The centers also help to ease the burden and isolation of family members like Jeon Om-ryul. Her husband was diagnosed with dementia, and she has been bringing him to the center every week for the past two years.
"This is my biggest worry," she says. "For 12 years, I raised my granddaughter, until my husband got sick. Now I take care of him. I've never had the energy to think of myself. Whenever I think of what will happen to me, all I can do is cry. I wonder who will take care of me. I fear that only the government can."
In 2011, Korea passed a dementia management law, establishing the centers and mandating that citizens older than 65 be checked for dementia symptoms.
Social worker Kim Dong-hun says the most fulfilling part of his job at the center is helping the patients to imbue their activities with purpose and meaning. But he says the social stigma associated with dementia makes it hard to reach out to patients.
"We publicize our programs intensively, but one of the biggest challenges we face is that many people still have not changed their attitude toward dementia," Kim says. "Even if you go to their house to find them, they don't want to come out."
Sung Mi-ra, secretary-general of the Seoul Metropolitan Center for Dementia, which coordinates the 25 community-level centers, estimates that South Korea currently has about 530,000 dementia patients, out of a total population of 50 million. This number has risen 27 percent in the past four years. She estimates there will be 1 million patients by 2025.
She says dementia costs South Korea the equivalent of $8 billion a year in hospital fees and lost income, and that figure will double every decade. Sung says South Koreans need to start seeing dementia as a disease.
"In past, whenever someone got dementia, it was treated as a natural occurrence," Sung says. " 'If you get old, you lose your mind,' went a common saying. Nobody treated this condition because people believed that's just the way it is."
Compared with other developed countries, very few elderly South Koreans live in nursing homes. Confucian attitudes about filial piety are still prevalent here, and while they are less common now, many families still have three or more generations living in one home.

Sung says South Korea's approach to aging assumes that family members — not the government — will provide most of the care to the elderly.

"Institutionalizing a demented parent is seen as unfilial," she explains. "For this reason, dementia patients should be living at home with their families. So what is important is that the community creates an environment where this is possible. This is why centers like ours are being established around the country."

Another hallmark of South Korea's approach is to train young people to empathize with the elderly, and prepare for their own senescence.

At a gleaming glass and steel community center called the Seongnam Senior Complex in Seoul's southern suburbs, students giggle as their classmate Kim Dong-hyun plays the role of a bedridden senior who is hoisted from his bed into a chair using a winch and sling.

The students are wearing sandbags to weigh down their limbs, back braces that force them to stoop, and glasses that impair their vision. Kim says he's still mulling over the implications of his training.

"I am worried about the aging of our society," he says. "We need to get ready. I'm not sure what I personally can do to get ready. ... Have a lot of children to take care of me in my old age, I guess."

In another class, the students put on 3-D glasses to mimic the effects of dementia. The class instructor says the training inspires some students to reconsider how they treat their elders. Others, though, say it simply makes them dread the thought of growing old.


Friday, January 04, 2013

South Korea’s new president: Plenty on her plate


PARK GEUN-HYE’S campaign advertising described her as a “prepared female president”. Having narrowly defeated the Democratic United Party (DUP) candidate, Moon Jae-in, on December 19th, two-thirds of her slogan will be realised with her inauguration on February 25th. The “prepared” part, however, is less clear.

South Korean presidents-elect appoint transition teams to help smooth their way into office and many of their members then take up posts in the new government. With her appointments, Ms Park seems to be trying to bridge the political divide. Her transitional team, consisting of nine subcommittees, is headed by Kim Yong-joon, a former head of South Korea’s Constitutional Court.

The rallying cry of the election was “economic democratisation”, a fluffy term that has two main strands, both of which Ms Park seems to be sticking to. The first is to counter the vast (and increasingly unpopular) power of families that run the chaebol, South Korea’s huge conglomerates.

Ms Park’s party is historically pro-chaebol. Her father set up the system that enabled them to flourish with governmental support. But she has promised a tougher line, notably on the system of cross-holdings that permit control of a conglomerate with only a small amount of capital.

At a meeting on December 26th with the Federation of Korean Industries, a chaebol lobby group, Ms Park emphasised jobs over profit maximisation. She has also pledged to be tougher on crooked behaviour. In the past decade three chairmen of the largest five chaebol have received presidential pardons following convictions for offences such as fraud and tax evasion. If she sticks to her word, this will stop.

The second strand is the expansion of the welfare state. Ms Park promises to provide free child care for under-fives, and to subsidise social security contributions and university-tuition fees for the poor.

On January 1st the national assembly approved 2.4 trillion won ($2.3 billion) of extra welfare spending to pay for all this, as part of the “Park Geun-hye budget”. Old conservatives like the outgoing finance minister, Bahk Jae-wan, have long grumbled about the populism of such measures.

A dangerous neighbourhood
Although Ms Park has undoubtedly shifted her party on domestic issues, foreign policy is unlikely to change much from that of outgoing president, Lee Myung-bak. Ms Park speaks some Chinese and will want to overcome the strains caused by China’s insistence on sending North Korean refugees back home rather than to South Korea, as well as the incursion of Chinese fishing boats into South Korean waters. But relations with America are strong and she will not want to risk them merely to please China. On December 24th, the Obama administration offered South Korea four advanced spy drones.

America’s expansion of its missile-defence programme in Asia raises Chinese concerns about containment. Some analysts say this will make Beijing see South Korea’s alliance with America as part of a wider anti-China strategy, rather than one merely directed at North Korea. There could be problems ahead, regardless of the fluency of Ms Park’s Chinese.

American officials hope Ms Park can repair damaged ties with their other main regional partner, Japan. South Koreans remain angry about colonial-era sex slavery, and the ownership dispute over the Dokdo islands (known as Takeshima in Japan), visited by President Lee in August. Ms Park’s father once served in the Japanese imperial army that occupied northeast China, making it politically impossible for her to show too much kindness to Japan.

Shinzo Abe, Japan’s new premier, sent envoys to meet Ms Park on January 4th in an attempt to ease the tension, but the South Korean press has been working itself into a frenzy over Mr Abe’s strident nationalism. His big majority gives him leeway to be diplomatic, but any move to rescind a 1995 apology for wartime suffering his country caused would be disastrous for the bilateral relationship.

Then there is North Korea. Ms Park has based her approach on reciprocity, pitched halfway between the “sunshine” policy of former presidents Kim Dae-jung and Roh Moo-hyun, and the frostiness of Mr Lee. She says she will start with small economic projects and humanitarian aid, and engage further if the North’s leader, Kim Jong Un, chooses diplomacy with the South. She calls it “trustpolitik”.

On January 1st Mr Kim gave the first new year’s speech by a North Korean leader for 19 years, calling for an end to confrontation. But, although the style may mark a change, his demand for the implementation of old sunshine-era agreements is likely to leave Ms Park unmoved. Experience shows that one of the few things North Korea can be trusted to do is to continue developing nuclear weapons. Mr Kim may well test a device soon. Ms Park will need to be prepared.