South Korea's Economy: Half Finished

South Korea's story to date has in big part been the story of what is sometimes called a “developmental state”—that is, one that uses formidable powers to direct and regulate the economy to achieve growth above all else.

The first “Miracle on the Han” worked because the developmental state, after 1961, mostly got things right. Or, rather, it got them right until it got them very wrong, resulting in the 1997 financial crisis. By then, the economy and the way it was financed had become far too complex for traditional guidance, and the state’s sense of omnipotence had blinded it to the need for structural reform. The recovery from crisis accomplished only half the structural reforms South Korea needs. There will be no second miracle unless Mr Lee accomplishes the other half.

Now that he has recovered his poise after the beef fiasco, his supporters argue that Mr Lee is just the man for the job. Under him, says Sakong Il, chairman of the president’s National Competitiveness Council, restrictions will be lifted to augment the country’s low stock of foreign investment. Small businesses will be boosted when the government cuts through red tape and lowers the minimum capital requirement for start-ups to just 100 won, from 50m won now. And rules for investment will be eased in the Seoul metropolitan area, which businesses much prefer to the investment zones in the middle of nowhere promoted by Roh Moo-hyun, the previous president. The council plans to submit 147 laws to the National Assembly this autumn, with the aim, Mr Sakong says, of raising South Korea’s standing in the World Bank’s comparisons of national competitiveness from 30th to 15th.

All this is welcome, but it is not enough. Mr Lee, as a former chaebol executive, will need to prove that he is friendly to markets, not simply to business. “When critics say the chaebol are too big, I don’t know what they mean,” says Mr Sakong. “Bigness itself is not badness; what matters more is whether the actions companies take are legitimate or not.” That is fine as far as it goes. One test for Mr Lee will be whether he and the courts continue to treat the misdemeanours of chaebol bosses lightly. An even more telling one will be whether minority shareholders will be able to seek redress against chaebol trampling on their rights.

Old habits die hard
Traces of the developmental state persist. Although Kang Man-soo, the finance minister, blames heavy taxes, subsidies and regulation for a decline in South Korea’s investment rate, he also promises “a very ambitious plan” of subsidies and incentives for boosting internet businesses such as computer gaming. Known as “e-sports”, this has emerged out of nowhere and become a huge spectator sport, employing 25,000 people in Seoul and spawning nearly 100 game-engineering “academies”.

It is an example of Korean entrepreneurial energies let loose. The government’s proposals seem to represent an old-fashioned instinct to back winners.

Both the country’s patterns of energy use and its attitude towards the environment point more towards the past than the future. Randall Jones, an economist at the OECD, notes that South Korea uses 1.5 times as much energy for every unit of GDP as does Japan. For a country that imports all its hydrocarbons, energy efficiency will, the government says, be pushed to the top of the agenda. As well as promoting a more efficient industry, that will mean weaning Koreans off their gas-guzzlers and improving mass transit.

Seoul’s air, once famously noxious, is much improved, but South Korea lags at conservation. The developmental state is also a construction state, and too often the government seems to feel that nature untrammelled is a chance wasted. Two-fifths of the country’s rich mudflats, or about 1,600 square kilometres, mainly on the peninsula’s west coast, have been “reclaimed”. That has dire consequences not only for fishermen but for seabirds and rare waders too. Almost invariably the government and the construction companies trump environmental interests.

Just as South Korea’s economy is something of a half-way house, so is its democracy. The beef protests seemed to reflect this. Only a short time after Mr Lee had been voted into office, the protesters bringing downtown Seoul to a halt argued that theirs was a more representative kind of politics. That was clearly nonsense. Yet the nation’s political establishment hardly helped its case when the National Assembly was incapable of convening.

South Korea’s labour disputes can also be ascribed to an immature democracy. Workers’ rights were suppressed during years of military dictatorship. Unions have since made up for lost time, and even illegal strikes are tolerated at some of the big chaebol. Yet the strikes do not reflect an unbridgeable divide between capital and labour: rather, nearly all South Koreans are capitalists, and many of the strikers had voted for Mr Lee. Clear leadership from him could do much to put the country’s labour relations on a more stable footing.

The sense of something half-finished colours South Korea’s diplomacy too. Mr Lee has reiterated that foreign policy rests on his country’s military alliance with the United States, which he now calls a “strategic alliance”.

South Korea has already sent troops to Iraq and Afghanistan in support of American-led reconstruction, and Mr Lee says that in future it will spend more on aid and contribute more to peacekeeping and antiterrorism operations. This reinvigorated alliance, the president’s foreign-policy advisers explain, will not only boost South Korea’s global standing but also provide leverage with tricky neighbours, notably Japan and China, where relations are bedevilled by land and history.

That is probably wishful thinking. For no matter what efforts South Korea makes on the global stage, it is still a shrimp among whales in its own region, and even there the power of its American godfather may decline in relative terms. Only the unification of a divided peninsula might bring South Korea the standing it craves. And given the fearsome problems North Korea would carry with it, even that is far from guaranteed.

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South Korea's Economy: Half Finished

South Korea's Chaebol (conglomerates): Companies OK; Leaders Behaving Badly

The rapid international rise of companies such as Samsung Electronics and LGE underlines a sea change in South Korea’s chaebol in just a decade. Before the Asian financial crisis the leading 50-odd chaebol were heavily indebted. With the help of cheap credit they had been able to get into any business that took their—or the government’s—fancy. After the crisis, about half the chaebol went to the wall; at the time, Daewoo’s collapse was the biggest corporate bankruptcy in history. The remainder were forced to shed hundreds of businesses or divisions in order to keep afloat and concentrate on what they did best. Those that learned the lesson have done very, very well.

Many of the changes have gone deep. After the crisis, foreign investors were welcomed, and now around half of the shares of Samsung Electronics and LGE are foreign-owned. South Korea made a vigorous attempt to improve corporate governance, increasing the rights of minority shareholders, boosting the role of outside directors, punishing improper disclosure and requiring the chaebol to publish consolidated financial statements. Shareholders may now, at least in theory, pursue class-action suits against the country’s biggest companies.

The previous two progressive administrations, less enamoured of big business than the current one, also took aim at the dominance of the biggest chaebol and their controlling families. By putting a ceiling on shareholdings in other companies held by chaebol-related firms, the Korea Fair Trade Commission (KFTC) hoped to cut through the rat’s nest of cross-shareholdings through which the founding families typically exercise control. The KFTC argued that the complex structures discouraged transparency, disadvantaged minority shareholders and raised the risk that bankruptcy in an affiliate might bring down the whole group.

In practice the new rules were hardly draconian. Exemptions were made for chaebol that had good internal monitoring systems or that formed a holding-company structure. Moreover, no South Korean government appears able to resist the temptation to use the chaebol for policy ends. Some of the biggest ones were exempted from the ceilings on outside shareholdings because they were giving support to Roh Moo-hyun’s favourite initiatives, such as investing in sectors designated as “growth engines”, promising to help build the “enterprise cities” that Mr Roh hoped would spread growth to the regions, or even attempting to do business with North Korea. As a result, the founding families of large business groups, using circular chains of shareholdings, continue to exercise control even though, says the OECD, they hold an average of only 6% of their group’s shares.

In almost any other OECD country this would be a scandal. In South Korea such foibles are too easily tolerated. Moreover, the chaebol’s ruling class displays an extraordinary degree of delinquent behaviour, and only rarely does it suffer the consequences, as it did in the case of Kim Woo-choong and Daewoo’s collapse.

A roster of recent misdemeanours illustrates the point. Last year Kim Seung-youn, the chairman of Hanwha, an explosives, construction and insurance group, confessed to going to a bar and, helped by his goons, beating up the staff. He said it was in retaliation for his own son having been hurt in a scuffle. Last year, too, the chairman of Hyundai Motor (and son of Hyundai’s founder), the world’s fifth-biggest carmaker, was convicted of embezzling $90m from his company. In 2003 the head of SK Group, a telecoms, oil-refining and construction conglomerate, was convicted of illegal share swaps designed to keep the group in family control. All three men were pardoned by President Lee Myung-bak on South Korea’s national day in August. Only Mr Kim served any time in jail.

The biggest case concerns the Samsung Group, South Korea’s largest, and its recent chairman, 66-year-old Lee Gun-hee. Samsung has long been accused of corrupt practices: Mr Lee was convicted of political bribery in the 1990s, though escaped without penalties. In April he was charged with tax evasion and breach of trust. But more serious allegations of bribery were dropped—even though he had been fingered by Samsung’s former chief lawyer, who spoke of a huge slush fund.

Mr Lee has also been charged with transferring control to his 40-year-old son and heir, Jay Y. Lee, by arranging for Samsung affiliates to sell shares to the younger Mr Lee at artificially low prices. After the charges he resigned, on live television, “to take legal and moral responsibility”. Yet though Mr Lee technically faces a life sentence, few believe he will spend much, if any, time in jail. Nine other Samsung officials have been charged, but none has been detained—partly, the government says, out of concern that the economy might be harmed. Although Mr Lee is no longer chairman, Samsung executives in private talk as though he were still running the group.

How do the chaebol families get away with it? Many of them grew from black markets, smuggling and other rackets that thrived after the Korean war in the early 1950s, thanks to vast amounts of American aid and military spending, and to the policies of import substitution favoured by South Korea’s strongman, Syngman Rhee. When Park Chung-hee seized power in 1961, the junta marched many of the racketeers through Seoul wearing dunce caps and placards with slogans such as “I am a corrupt swine”. As Mr Cumings recounts, it was Lee Gun-hee’s father, Lee Byung-chol, who proposed to Park that the swine seek foreign capital and equipment to launch the South Korean economy. Park called in ten of the leading businessmen and agreed not to jail them if they invested their “fines” in new industries that would sell to foreign markets.
The rest is history. To this day chaebol families are more admired for their economic contribution than reviled for their criminal propensities, which are often viewed as the foibles of a ruling aristocracy. The chaebol families are the closest thing South Koreans have to royalty. The clans intermarry and their shenanigans fill the gossip pages, as well as providing much of the inspiration for the television soap operas of the “Korean wave”—yet another South Korean export hit.

http://www.economist.com/surveys/displaystory.cfm?story_id=12237177
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South Korea's Chaebol (conglomerates): Companies OK; Leaders Behaving Badly

South's Korea's Export Juggernaut

JUST as South Korea, in historical terms, sees itself as a little thing among overbearing powers, so many of its businessmen and policymakers now feel that the country’s export machine, the thumping heart of the economy, is being squeezed by two giants. On one side is Japan, whose high technology and sophisticated production give it an edge in exports. On the other is China, whose low wages allow it to compete ruthlessly on cost, even as it learns to make ever more complex products. What, South Koreans wonder, is their economy’s place in Asia’s future?

They may be overreacting. Certainly, China’s rise up the production chain has been swift and, in some cases, ferocious; and the South Korean won has been the strongest of the region’s currencies since Asian growth took off earlier this decade, even if it has softened somewhat this year. Yet South Korea has responded admirably to increased competition and a stronger currency, notching up double-digit export growth for the past five years. It is now the world’s tenth-biggest exporter, and apart from a cyclical slump in Asian export growth that appears to be caused by America’s and Europe’s sharply slowing economies, there is plenty of reason to think that its success can continue for a while.

To date, China has proved a boon for South Korea’s exports. Having overtaken America in 2003 to become South Korea’s largest trade partner, it runs a bilateral trade deficit thanks to large imports of capital equipment and parts from South Korea. This growing bilateral trade reflects the knitting-together of production networks all over Asia, centred on China. China’s share of South Korea’s total exports of unfinished goods—that is, parts—rose from just 1% in 1992 to 27% in 2004, according to the IMF. Now China’s bilateral deficit is narrowing as South Korea imports more intermediate goods from there. Yet much of this is the result of South Korean investment in China.

South Korean manufacturers are still improving their own competitiveness. Partly thanks to modest wage growth, labour productivity in manufacturing has grown by an average of 10% a year since 2002. Indeed, the stronger won appears merely to be the flip side of that productivity growth. Currency strength, certainly, is squeezing profits in some areas, notably for small- and medium-sized businesses that are less efficient than larger firms, as well as for the big carmakers.

South Korean exports have not only grown but become more sophisticated as production has shifted out of low-value-added goods such as textiles that rely mainly on cheap labour. Korea’s spending on research and development is equivalent to nearly 3% of GDP a year, one of the highest rates among developed economies. According to the IMF, high-value-added products—things like cars, consumer electronics and top-of-the-range ships—now make up half of Korea’s exports, up from a quarter in 1990.

South Korea today is more of a whale than a shrimp in several global industries. In memory chips it is home to the world’s biggest maker of flash memory (Samsung Electronics) and the two biggest makers of DRAM chips (Samsung and Hynix). It has the third-largest steelmaker (POSCO), the fifth-largest carmaker (Hyundai Motor), and the world’s three biggest shipbuilders (Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, or DSME). It is a leading producer of mobile handsets and of LCD screens for televisions, computers and much more.

Heavy industry, as Shaun Cochran of CLSA, a brokerage, puts it, is the country’s “sweet spot”. Take shipbuilding. As Hyundai’s founder, Chong Ju-yung, was boasting posthumously in those television advertisements this summer, there was no shipbuilding industry in South Korea until the 1960s. When the country’s dictator, Park Chung-hee, summoned Chong and told him to produce oil tankers, for which there was a sudden demand, Chong went straight to Greece and scooped up two contracts to build 260,000-tonne tankers, promising his customers delivery within two years, sooner than anyone else. He had neglected to mention that at that moment he lacked even a shipyard. He then waved the order in front of Barclays Bank, which lent him enough money to build a modern yard. No one in South Korea knew how to do that, so Chong dispatched 60 engineers to Scotland to learn. The ships were delivered before the deadline. This famous story, concedes Bruce Cumings of the University of Chicago in a refreshingly revisionist modern history, “Korea’s Place in the Sun”, may be apocryphal in its details, yet it has a strong whiff of truth about it.

Korea’s three big shipbuilders are thriving. Competing fiercely against each other, though by unwritten agreement not for staff, their order books are nearly full up to 2013. South Korea has two-fifths of the world market in new ships (which account for 8% of its exports), whereas China and Japan have to make do with a quarter-share each.

Seen from a helicopter, the vast DSME yard at Okpo Kojé island, near the south-eastern industrial port of Busan, looks impressive: great walls of steel rise up from the dry docks as enormous gantries offer up bows and other hull sections to assemble the world’s biggest container ships, liquefied natural gas (LNG) carriers and giant floating depots for storing and processing offshore oil and gas. On the ground, all notions of human scale are lost.

DSME’s chief executive, Nam Sang-tae, says that China is not a chief competitor, despite the state aid from which its shipbuilding industry has benefited. It cannot match South Korea for prompt delivery, and although Chinese shipyards offer low costs, they turn out relatively low-tech vessels, such as bulk carriers and run-of-the-mill oil tankers. South Korean yards are more interested in building, say, high-tech LNG carriers, which keep their cargo at -163ºC.

A new type which Daewoo Shipbuilding was the first to build regasifies the methane before it is piped ashore. The design and manufacture of deep-sea rigs, much in demand now that many oil and gasfields on the world’s continental shelves have been exploited, is even more challenging than building advanced ships, and offers higher profit margins; indeed DSME wants to operate as well as build specialised offshore oil rigs because oil companies pay such lucrative fees.

All the South Korean shipbuilders throw a lot of money at research and development. Each has a large design institute, and they generously support university engineering faculties.

Mr Nam is also sanguine about the effect of shipping’s notorious boom-and-bust cycles on his business. Patterns of global logistics are changing, he says, spurred by a growth in world trade and a China-led hunger for resources, so more ships are needed overall, not just new kinds. Climate change, Mr Nam says, offers further opportunities. The potential viability of Arctic sea routes in future is prompting a demand for vessels strengthened to withstand ice. Another growth area is “winterising” oil rigs to cope with drilling in cold climates. Pressure for cleaner transport also helps (bunker fuel used by most of the world’s shipping is filthy).

Okpo is a company town where DSME has its own hospital, cinemas and international school for the families of overseas clients who come to keep an eye on their ships under construction. There are dormitories for single young men and women respectively, one on each side of the bay. Internet forums host thriving dating and matchmaking services, and newly married couples get to move out of the dormitories into their own flats. The town has an income per person of over $30,000, the second-highest in the country.

Iron constitution
Daewoo Shipbuilding was nationalised when the Daewoo chaebol of which it formed a part continued to pile up debts even when the financial crisis was over, entering new businesses with what turned out to be criminal insouciance. Kim Woo-choong, the chaebol’s founder, eventually admitted to accounting fraud and embezzlement worth over $30 billion, and in 2006 was sentenced to ten years in jail before being pardoned. Yet the company’s shipbuilding arm has thrived.

The government has floated a minority of DSME’s shares on the stockmarket. Later this year it is due to sell the controlling stake to one of four prospective buyers. Among the bidders is POSCO, the shipbuilder’s main steel supplier, which itself was started from scratch by the state in the late 1960s, using $120m of war reparations paid after Japan and South Korea normalised their relations. Foreign investors and development experts in Washington, DC, had given warning that a dirt-poor country like South Korea should not aim for self-sufficiency in steel. Yet the company, which was privatised after the 1997 financial crisis, has become a symbol of national pride. POSCO fed the country’s industrial beast and is now, by several measures, the world’s most efficient steel producer.

South Korea’s industrial structure is unusual, says POSCO’s boss, Lee Ku-taek. Its steel consumption per person is the fourth-highest in the world, yet most of the steel eventually goes overseas: nearly 100% in the case of POSCO’s shipbuilding clients, and 60% in the case of Korean carmakers. The steelmaker also serves South Korean construction companies abroad, for example in Dubai. Its customers’ eagerness to conquer fiercely competitive markets overseas may have kept POSCO lean. “Steel’s competitiveness here has made South Korea what it is,” says Mr Lee, “and I’m hugely proud of that.”

Now that he is hoping to buy DSME he sees the chance to double the shipbuilder’s value, which the stockmarket currently puts at $6 billion, by concentrating on complex products such as oil rigs. In shipbuilding, Mr Lee points out, the less you need to weld, the more you save. POSCO, he says, can tailor plates to specific ships, making the product much cheaper.

After two decades of building up its domestic market, says Mr Lee, POSCO will spend the next two decades establishing a powerful presence overseas, through greenfield sites and acquisitions, including in mines that can secure the company’s supply of ore. It will be following the example of South Korea’s consumer-electronics companies, which sometimes used almost military methods for their push overseas. At LG Electronics (LGE) they tell a story of a country manager who was dropped into Algeria during the civil war when other multinationals kept away, put off by the risk. When he emerged several years later, he had built up a multimillion dollar franchise.

The country’s biggest successes in consumer electronics are LGE and Samsung Electronics. Only a decade ago consumers abroad hardly knew them, and if they did it was as makers of cheap knock-offs of classier brands, notably Sony. Today they have annual sales of $43 billion and $92 billion respectively, along with a reputation for making hip and sophisticated mobile handsets, MP3 players, televisions, digital cameras and more. LGE, for instance, is the world’s largest maker of plasma televisions; Samsung has recently overtaken Motorola to become the second-biggest maker of mobile phones. Samsung’s stockmarket capitalisation, at over $80 billion, has raced past Sony’s and is second only to Apple among consumer-electronics companies. Samsung Electronics now makes the televisions on which Sony sticks its name badge.

All we need is love
Dermot Boden, LGE’s new chief marketing officer, explains that much still needs to be done to realise the company’s global ambitions, but his appointment, as a non-Korean, indicates the direction in which the best South Korean companies are going. South Korean companies, like Japanese ones, tend to recruit managers internally, rewarding length of service and often putting generalists into positions calling for special expertise. Exceptionally, LGE this year brought five overseas specialists to form part of the 20-strong top team of executives, among them Mr Boden, an Irishman who had earned a reputation for building consumer-goods brands.

Branding, says Mr Boden, is what LGE needs now. The company has superb products and offers excellent service. (It needs to in South Korea, where impatient customers put down the phone if it is not answered within ten seconds.) Yet emotional attachment to LGE’s products, Mr Boden points out, remains low. Products come and go: a new mobile-phone model, for instance, is typically on sale for only about six months. It is a brand that encourages the customer to keep coming back—and if he likes LG mobile phones, he might consider buying, say, an LG television. Samsung has already gone down this road, raising its profile by sponsoring the Olympics and Chelsea football team.

http://www.economist.com/specialreports/displaystory.cfm?story_id=12237117 ◦

South's Korea's Export Juggernaut

North and South Korea: The Odd Couple

AT THE heart of North-East Asia sits a failed state with the worst human-rights record on Earth. The regime maintains its grip by putting one in 20 of its population in military uniform. One in 40 has spent time in the gulag. Mobile phones and the internet are forbidden, except for the elite, and radio and television sets are made to tune only to government stations.

Unauthorised travel within the country is banned, at least in principle. Food shortages are chronic, and a decade ago the regime’s malign neglect created a famine that killed between 600,000 and 1m people. The famine still casts a long shadow, and not just through malnutrition and stunted growth; recent studies of refugees have pieced together a picture of a population that, in wide swathes, remains traumatised—and there are fears that famine conditions might be returning.

Now fresh uncertainties have arisen with reports that North Korea’s dictator, Kim Jong Il, may be seriously ill. That has underlined how little the outside world knows about North Korea. What to do about this failed state, which happens also to possess the material for nuclear bombs, is likely to be the region’s single biggest challenge over the coming years.

Slap next to all this sits the epitome of globalisation’s success, whose men on average are three inches (7cm) taller than their poorer neighbours. Half a century ago South Korea’s economy was on a par with Upper Volta’s. Today its citizens have an average income per person of $20,000. They enjoy the highest penetration of broadband internet on Earth, along with a popular culture of television shows and music that has become a highly bankable Asian export known as the “Korean wave”.

South Korea’s success is often called the “miracle on the Han”, after the river that runs through the 23m-strong capital, Seoul. Yet a more obvious explanation is the sweat and the tears of a people with a passion for work and self-improvement, coupled with generally enlightened economic policies since the 1960s—often in the face of what is now known as the “Washington consensus”. As well as a modern economy, this impassioned people has also fashioned a constitutional democracy out of a military dictatorship, again with sweat and tears and not a little blood.

The regime in the north tries hard to keep its citizens in the dark about the south’s success, and in South Korea six decades of separation have done much to weaken the blood ties which, in both states’ official rhetoric, are supposedly unbreakable. Reunification of the peninsula remains a hallowed goal on either side. Yet for most people in the south, North Korea is not just another country but another planet. Some 10,000 North Korean defectors now live in the south, but despite efforts by the government and others they live mostly on the fringes, despised by many South Koreans and ill-qualified for decent jobs. “The Crossing”, a film with a star cast released in Seoul this summer, authentically recreates everyday life in the north and explores why its citizens are driven to leave their homeland. Yet it was quickly eased out at the box office. South Korea is ill-prepared, psychologically, politically and economically, for the unification presumed to follow the eventual collapse of the north.

The cost of such a collapse scarcely bears thinking about—and South Koreans for the most part are trying their best not to do so. The task would make West Germany’s absorption of East Germany look like a doddle. South Korea is merely a middle-income country, with only a minimal social safety net to offer its own people, let alone abject North Koreans, who are perhaps 15 times poorer than their southern counterparts (whereas East Germans were two or three times poorer than West Germans at the time of unification).

So unification, if and when it comes, will require South Korea to field huge resources, however much help it might get from international institutions. That is a good reason to start building them up now. Yet there are also plenty of pressing home-grown reasons for more economic growth. The most important of these is a dramatic plunge in fertility. Today’s birth rate is extraordinarily low, and heading lower. This is an Asia-wide trend, but South Korea’s has fallen more than most. The total fertility rate of South Korean women (ie, the average number of births they can expect) has dropped to just 1.26 (see chart 1), down from 4.5 in 1970 and 1.5 in 2000. That is roughly half the rate at which a population replaces itself. In other words, the child-bearing generation 25 years from now will be roughly half the size of the current one. Even Japan, famous for its dearth of children, has a higher fertility rate, at 1.3.

For South Korean women, as for those elsewhere in Asia, this appears to be a good thing, offering them greater security and more autonomy than ever before within a Confucian family structure that has historically been hierarchical and male-dominated. Even better, South Korea’s mortality rate has also fallen steeply, and people can now expect to live 30 years longer than they did at the start of the country’s modernisation in 1960.

Yet the fall in the fertility rate may reflect dissatisfactions too: notably, over the difficulties faced by women who want both to work and to raise a family. Almost everyone still gets married in South Korea. In other words, the fertility rate is falling because more women are postponing marriage to nearer the end of their reproductive lives. That is partly because the burden of raising children still falls heavily on women, whereas men are consumed with work, which in South Korea, as in Japan, entails long hours and drinking sessions late into the night.

Also as in Japan, companies, despite some improvement, still discriminate heavily against women, especially those with children. Just one-third of South Korean women go back to work after having children, half the OECD average. The World Economic Forum’s ranking of sex equality puts South Korea 97th out of 128 countries. This represents a huge economic and social waste, and not only because South Korean women are better educated, on average, than their men.

Either way, the profound consequences for the economy, the government’s finances and the nation’s social structure have barely begun to sink in; nor has the impact on families. Nicholas Eberstadt, a demographer at the American Enterprise Institute, puts it with only mild exaggeration: changing fertility patterns mean that “2,500 years of East Asian family tradition stand to come to an end with the region’s rising generation.” What will it do to people if many, perhaps most, of them will no longer have brothers, sisters, uncles, aunts or even cousins? As Mr Eberstadt points out, when family structures atrophy—even in a country such as South Korea where children are treated as fondly as they are in Italy—sturdy institutional alternatives will quickly need to be found to take on the role now played by family networks.

As the South Korean population ages, the country’s high savings rate is almost bound to decline, which will have an effect on both what the economy can invest and what the government can raise in taxes. As it is, the country’s national pension scheme and a long-term-care scheme for the old are only two decades old, and their funding structure is not geared to South Korea’s expected demographic transformation over the coming quarter-century, which will involve a rapidly ageing society, a shrinking workforce and a population in absolute decline.

http://www.economist.com/specialreports/displaystory.cfm?story_id=12237163
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North and South Korea: The Odd Couple

Korean Star's Suicide Reignites Debate on Web Regulation

SEOUL — Choi Jin-sil, a movie star, was the closest thing South Korea had to a national sweetheart.

So when Ms. Choi, 39, was found dead in her apartment on Oct. 2 in what the police concluded was a suicide, her grief-stricken homeland sought an answer to why the actress had chosen to end her life.

The police, the media and members of Parliament immediately pointed fingers at the Internet. Malicious online rumors led to Ms. Choi's suicide, the police said, after studying memos found at her home and interviewing friends and relatives.

Those online accusations claimed that Ms. Choi, who once won a government medal for her savings habits, was a loan shark. They asserted that a fellow actor, Ahn Jae-hwan, was driven to suicide because Ms. Choi had relentlessly pressed him to repay a $2 million debt.

Public outrage over Ms. Choi's suicide gave ammunition to the government of President Lee Myung-bak, which has long sought to regulate cyberspace, a major avenue for antigovernment protests in South Korea.

Earlier this year, the Lee government was reeling after weeks of protests against beef imports from the United States. Vicious antigovernment postings and online rumors on the dangers of lifting the ban on American beef fueled the political upheaval, which forced the entire cabinet to resign.

In a monthlong crackdown on online defamation, 900 agents from the government's Cyber Terror Response Center are scouring blogs and online discussion boards to identify and arrest those who "habitually post slander and instigate cyber bullying."

Hong Joon-pyo, floor leader of the governing Grand National Party, commented, "Internet space in our country has become the wall of a public toilet."

In the National Assembly, Ms. Choi's suicide set the country's rival parties on a collision course over how to regulate the Web. The governing party is promoting a law to punish online insults; the opposition parties accuse the government of trying to "rule cyberspace with martial law."

The opposition says that cyberspace violence is already dealt with under existing laws against slander and public insults. But the government says that a tougher, separate law is necessary to punish online abuse, which inflicts quicker and wider damage on victims.

To battle online harassment, the government's Communications Commission last year ordered Web portals with more than 300,000 visitors a day to require its users to submit their names and matching Social Security numbers before posting comments.

The police reported 10,028 cases of online libel last year, up from 3,667 reported in 2004.
Harassment in cyberspace has been blamed for a string of highly publicized suicides. Ms. Choi made headlines when she married a baseball player, Cho Sung Min, in 2000. But tabloids and Web bloggers were relentless in criticizing her when the marriage soured and she fought for custody of her two children.

TV producers and commercial sponsors dropped her. The general sentiment was that her career was over.

But in 2005, she made a comeback with a hugely popular soap opera called "My Rosy Life." In it, she dropped her cute-girl image and played a jilted wife who throws a kick at her errant husband, but reconciles with him when she learns she has terminal cancer.

This year, she broke another taboo by successfully petitioning a court to change the surname of her two children to her own.

But in an interview with MBC-TV in July, which was broadcast after her death, she said she "dreaded" the Internet, where posters had insulted her for being a single, divorced mother. The police said she had been taking antidepressants since her divorce.

In South Korea, volunteer counselors troll the Internet to discourage people from using the Web to trade tips on how to commit suicide and, in some cases, how to form suicide pacts.
"We have seen a sudden rise in copycat suicides following a celebrity death," said Jeon Jun-hee, an official at the Seoul Metropolitan Mental Health Center, which runs a suicide prevention hot line. Mr. Jeon said the hot line had received 60 calls a day, or twice the usual number, since Ms. Choi's suicide.

http://www.nytimes.com/2008/10/13/technology/internet/13suicide.html?ei=5070&emc=eta1&pagewanted=print ◦

Korean Star's Suicide Reignites Debate on Web Regulation

Kim Jong Ill or Kim Jong Well?

THIS week rumours swirled that Kim Jong Il, North Korea’s dictator, was gravely ill. The 66-year-old, officials said in Seoul, had suffered a “collapse”. South Korea’s president, Lee Myung-bak, was worried enough to call an emergency meeting with senior aides. An anonymous American intelligence official in Washington might have been at the bedside: Mr Kim, she told reporters, was probably half-paralysed following a stroke. (Mysteriously, South Korean spooks later reported he was recovering from surgery.) A North Korean diplomat denied the claims as “nefarious machinations”, noting that the Western press had a habit of telling lies (unlike the snow-pure Pyongyang Times).

He is half-right. The Western press has recently shown lurid interest in the theory of a Japanese professor that a double has been standing in for Mr Kim, who has in fact been the Dear Departed since 2003. For years rumours have erupted about Mr Kim’s health following prolonged public absences. Each time, he has eventually waddled back into view. The last scare was in May 2007, when he stopped appearing in public, and diabetes or heart problems were blamed. A team of German heart surgeons, sworn to secrecy, was flown to Pyongyang. Yet they may have operated on any member of the elite, not specifically on Mr Kim. At any rate, by the time of an October summit with South Korea’s then president, Roh Moo-hyun, Mr Kim looked hale enough—by the standards of a man with a podgy, grey demeanour.

Perhaps something is up this time. Neither hide nor tousled hair of Mr Kim has been seen since August 14th. His absence was conspicuous at the huge celebrations marking the 60th anniversary of North Korea’s founding. They included a vast militia parade on September 9th.

Mr Kim became head of the armed forces in 1991, three years before the death of his father, Kim Il Sung, and the world’s first communist dynastic succession. Until now, Mr Kim appears not to have missed a single military parade. A foreign medical team, this time Chinese, is now back in the capital.

Some analysts have blamed Mr Kim’s health for recent setbacks in the “six-party process” meant to wean the regime off its nuclear weapons in return for aid and security guarantees. The current phase of the talks has to do with a proper accounting of the North’s nuclear programmes, in return for which America will drop North Korea from its blacklist of state sponsors of terrorism. Yet the information that North Korea has so far produced is underwhelming: it fails to cover details of existing plutonium weapons, a possible programme for enriching uranium, and proliferation activities in the Middle East.

North Korea is indignant at demands for intrusive inspections: it insists that America drop it from the blacklist before agreeing to a verification protocol. In August it stopped disabling its main nuclear facility at Yongbyon and even threatens to undo the dismantling. North Korea has also suddenly put on hold a recent agreement to launch an official investigation into the fate of Japanese citizens kidnapped during the 1970s and 1980s and taken to the North. One Western diplomat, present at a weekend meeting in Beijing between envoys from America, Japan, China and South Korea, says these four parties are “at a loss over where to go next”.

Yet for North Korea, intransigence is the norm. Its negotiating style is marked by bluster, foot-dragging, blackmail and brinkmanship. Indeed, the same diplomat notes that the North’s recent actions have been “tactically cautious”: for instance, there is no sign that Yongbyon’s dismantlement is about to be fully reversed. In their talks over abductions, the Japanese think their counterparts acted entirely rationally—from a North Korean perspective. One senior Japanese official with long dealings says that North Korean diplomats do nothing without directions from the highest level. The Dear Leader, then, if he is ill, appears to be making clear decisions.

Still, speculation turns naturally to Mr Kim’s succession plan, for if he has one, he has not disclosed it. His possible heirs are little known, and include three sons and his brother-in-law. None has devoted the years spent by Mr Kim in preparing to take over. His eldest son was caught trying to enter Japan in 2001 on his way to Tokyo Disneyland; he subsequently lived and gambled in Macau. Of the other sons, both in their 20s, one is known only for his obsession with Eric Clapton, a rock star. Perhaps Mr Kim, a family man, intends that none of his relatives should be around on the day when international prosecutors come calling on the leaders of a regime that has starved, tortured or worked to death in prison camps many hundreds of thousands of its own people.

http://www4.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=1530567&story_id=12209623
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Kim Jong Ill or Kim Jong Well?

FTSE promotes South Korea to developed market

South Korea will be promoted to developed-market status from advanced emerging, global index provider FTSE Group said late Wednesday, in a move that will likely attract more fund flows into the Asian country.

The upgrade comes after FTSE surprised global fund managers last September by choosing to upgrade Israel to developed-market status instead of South Korea.

South Korea's promotion should lead to increased funds flows into its stock market, said Jerry Moskowitz, president of FTSE Americas, in an interview with MarketWatch.

"We estimate that just with the FTSE indices alone, it could be high as $10 billion, but we believe other index companies will follow," Moskowitz said. "The net could be as high as $25 billion of new funds flowing into the Korean stock market."

FTSE also said Wednesday that red-chip stocks, which are currently included in Hong Kong, a developed market, will be moved to China, a secondary emerging market. Red chips are Chinese companies trading on the Hong Kong exchange, but that have at least 50% of their revenues generated from business in mainland China.

The changes announced Wednesday will be implemented in the FTSE Global Equity Index Series in September 2009.

FTSE currently classifies countries as developed, advanced emerging, secondary emerging, and frontier.

Taiwan, which is being considered for promotion to developed market status from advanced emerging, will remain on FTSE's so-called watch list. The list includes countries that FTSE is actively monitoring for possible promotion or demotion.

While FTSE praised Taiwan for its progress on implementing market reforms over the past 12 months, the index provider said that no change in Taiwan's status will be made at this time.

Pakistan has been removed from the FTSE's watch list and will no longer be considered for possible demotion to frontier market status from secondary emerging.

What does the upgrade mean for South Korea?

The market reaction to South Korea's upgrade was muted Thursday, as global markets continue to be dominated by unprecedented turbulence.

In Seoul, the Kospi index fell 2.3%. It is down 27% this year.

Still, analysts say FTSE's upgrade of the market will likely be a major positive in the long term.

"Given the current deep undervaluation due to the ongoing global financial market turbulence, concerns over a local forex crisis and capital concerns, even a small positive, such as the potential upgrade, could trigger a rally," said Clemens Kang, a strategist at Woori Investment and Securities, in a research note.

Also, funds benchmarking advanced markets are ten times larger than those benchmarked against emerging markets, indicating that substantial capital inflows are possible for the Korean equity market, Kang said.

However, Kang cautioned: "We believe the upgrade will have only a limited near-term impact on the Korean market, as any net increase in foreign capital will likely begin after" the first quarter of 2009.

Analysts at Hyundai Research said that, judging from Israel's experience, Korea can expect a re-rating of market valuations as well as reduced market volatility when it's included in the developed market index.

"We believe large caps should benefit relatively more when Korea is classified as a developed market, given the attributes -- conservative, long-term based investment -- of global investment funds that will likely flow in," Hyundai Research said.

http://www.marketwatch.com/news/story/ftse-promotes-south-korea-developed/story.aspx?guid=%7b0AB719B6-7CFF-49B7-8BA6-4405F9A04BC6%7d&siteid=yahoomy&print=true&dist=printMidSection

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FTSE promotes South Korea to developed market

Kim Yong-Il's consort: a key player in North Korea?

SEOUL, South Korea - Kim Jong Il's companion and former secretary is emerging as a key player in the communist nation after the autocratic leader's stroke.

South Korean officials are keeping a close eye on Kim Ok amid some intelligence reports that she's not only nursing the ailing leader but also is signing official documents on his behalf.

Experts believe the communist leader is retaining a firm grip on power, running the nation from his bed with the help of military and communist party chiefs in line with the nation's "songun," or military first, policy. But they are not discounting the role of the woman who is seen by some as the de-facto first lady.

"She is the closest person personally to Kim Jong Il," said Marcus Noland, a North Korea expert at the Peterson Institute for International Economics in Washington. "In some ways, she's the one guarding the bedroom or hospital door. She would be in a position to convey his preferences."

Kim, 66, reportedly suffered a stroke last month and is recuperating following emergency brain surgery — though North Korean officials deny the communist leader, who was last seen in public more than a month ago, is ill.

The notoriously secretive nation bars ordinary citizens from Web access and most cannot make international phone calls. Late founder Kim Il Sung engineered a cult of personality that encompassed himself and his son, and which tolerates no criticism or opposition.

Kim Jong Il was groomed for 20 years to take over as leader, finally assuming the mantle after his father's death in 1994 in the communist world's first hereditary transfer of power. He has three sons — Jong Nam, Jong Chul and Jong Un — but does not appear to have anointed any of them as his heir-apparent.

The longer Kim — known to have diabetes and heart disease — remains bedridden, the greater the likelihood of a power vacuum, analysts say.

"If his health problem prolongs, some internal feuding for power will likely occur," said Kang Sung-yoon, a North Korea expert at Seoul's Dongguk University.

And Kim Ok may be poised to fill any void. Experts speculate the North Korean leader's dependence on her during his illness may further bolster her political clout.

"If Kim Jong Il can't communicate with others, her role will be larger," said Kang Jung-mo, a North Korea expert at Kyung Hee University.

Little is known about her. Kim Jong Il is believed to have had three wives before taking Kim Ok as his consort several years ago. She reportedly accompanied the leader on his secret visit to China in 2006.

She is said to be a pianist in her 40s who has served as the leader's secretary since the 1980s.

Furthering the intrigue, Kim's late wife, Ko Yong Hi, — mother of his two younger sons — hand-picked Kim Ok to replace her when she was dying of cancer, according to South Korea's JoongAng Ilbo newspaper.

It wouldn't be the first time an Asian leader's companion has asserted herself. Mao Zedong's last wife, Jiang Qing — nicknamed "Madame Mao" — wielded considerable power in China until her downfall after Mao's death in 1976. And Chiang Kai-shek's wife, Soong Mei-ling, rose to prominence in Taiwan in her husband's twilight years.

Official information is scarce about North Korea, a country where the regime modifies history — including the year and location of Kim's birth — to suit Kim dynasty lore.

South Korean officials refuse to divulge their intelligence-gathering techniques but are known to rely heavily on so-called "human intelligence" — information gleaned from defectors, visiting dignitaries, aid workers, tourists and others able to get into the world's most-isolated nation. Such information can be fragmentary and difficult to verify, experts say.

One South Korean intelligence officer said agents are keeping a close eye on traffic about Kim Ok, including indications she is signing some official documents on his behalf. He spoke on condition of anonymity, in line with department policy.

He said top military officers are likely carrying out key functions — but that Kim Ok probably wields more power than any particular individual.

South Korea's Unification Ministry said it has some intelligence on Kim Ok but cannot confirm reports on her growing influence. The South's National Intelligence Service also said it could not confirm the reports.

Kim's circle of advisers likely includes military and ruling Workers' Party officials, said Paik Hak-soon, an analyst at Sejong Institute in South Korea.

Paik noted the North's five top government organs — the National Defense Commission, the Korean Workers' Party Central Committee, the Korean Workers' Party Central Military Commission, the Standing Committee of the Supreme People's Assembly and the Cabinet — all have pledged their loyalty.

All five sent messages on the 60th anniversary of North Korea's birth praising Kim as a "matchless patriot and an unparalleled great man who has led our republic along the road to victory and glory."

Top officials typically do not offer such effusive congratulations for the North Korean anniversary, and the gesture appears to be an overt pledge that Kim can count on their backing, experts said.

When Kim Jong Il dies, it may be days, weeks — or even months — before the public knows, Noland said. "Then, figuring out who is running the country could take months if not a year."

On Wednesday, South Korean Prime Minister Han Seung-soo ordered the government to stop leaking intelligence about Kim, saying the rampant speculation could end up provoking Pyongyang.

"But we speculate because the North Korean government makes its living depriving outsiders of information," said Nicholas Eberstadt, a researcher at the Washington-based American Enterprise Institute.

http://news.yahoo.com/s/ap/20080917/ap_on_re_as/as_nkorea_kim_s_consort

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Kim Yong-Il's consort: a key player in North Korea?

LPGA's "bad idea" (Korean)

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LPGA's "bad idea" (Korean)

LPGA backs down on English requirement

Under increasing criticism, the LPGA Tour on Friday backed off plans to suspend players who cannot speak English well enough to be understood at pro-ams, in interviews or in making acceptance speeches at tournaments.

LPGA Tour commissioner Carolyn Bivens said she would have a revised plan by the end of the year that would not include suspensions, although fining non-English speakers remains an option.

Bivens disclosed the tour's original plan in a meeting with South Korean players two weeks ago at the Safeway Classic in Portland, Ore., Golfweek magazine reported. The policy, which had not been written, was widely criticized as discriminatory, particularly against Asian players.

The LPGA membership includes 121 international players from 26 countries, including 45 from South Korea. Asians won three of the four majors this year.

"We have decided to rescind those penalty provisions," Bivens said in a statement. "After hearing the concerns, we believe there are other ways to achieve our shared objective of supporting and enhancing the business opportunities for every tour player."

The reversal was quickly hailed by two California lawmakers who challenged the original policy.

State Sen. Leland Yee, a Democrat from San Francisco, had asked the Legislature's legal office to determine whether the English policy violated state or federal anti-discrimination laws. If it was deemed legal, Yee said he would have pushed for legislation banning such policies in California.

The LPGA Tour plays three events in California, including its first major championship.

"I'm very pleased that the LPGA saw the wisdom of the concerns that we raised," Yee said. "It's a no-brainer for those of us who have been the recipient of these kinds of discriminatory acts."

State Assemblyman Ted Lieu, a Democrat from the Los Angeles area, said he would target corporate sponsors if the LPGA persisted with its English requirement.

"I'm pleased they have come to their senses," he said.

Bivens' announcement came two hours before the Asian Pacific American Legal Center planned a news conference in Los Angeles to demand the LPGA overturn its policy.

"Until they completely retract it, issue an apology to the players and the fans, I think we'll remain very concerned and interested in what happens," said Gerald D. Kim, a senior staff attorney for the center. "The LPGA has gone about this totally the wrong way."

One of the tour's title sponsors, State Farm, already weighed in this week by saying it was "dumbfounded."

"We don't understand this and we don't know why they have done it," State Farm spokesman Kip Diggs told Advertising Age on its Web site. "And we have strongly encouraged them to take another look at this."

Bivens said the tour will continue to help international players through a cultural program that has been in place for three years and offers tutors and translators.

Earlier this week, Bivens sent a 1,200-word memo to the LPGA membership to outline the goal behind the new policy. She said players would never be required to be fluent or even proficient in English, but rather would be asked to get by with the basics of the language.

She argued that international players who could communicate effectively in English would improve the pro-am experience, sponsor relations and could help land endorsements for the players.

"We do not, nor will we ever, demand English fluency, or even proficiency, from our international players," she wrote.

"To the contrary, we are asking that they demonstrate a basic level of communication in English at tournaments in the United States in situations that are essential to their job as a member of the LPGA Tour."

Yee said he understood the tour's goal of boosting financial support, but disagreed with the method.

"In 2008, I didn't think an international group like the LPGA would come up with a policy like that," Yee said. "But at the end of the rainbow, the LPGA did understand the harm that they did."

The lawmaker said he will continue with his request to the Legislative Counsel's Office, as a way to prevent similar policies in the future.

Lieu said the LPGA's explanation made it seems as though the tour felt it more important to socialize with sponsors than to play golf.

"If you're a sports fan, you should be outraged," Lieu said. ◦

LPGA backs down on English requirement

South Korean Preisdent Pardons CEOs

THE leaders of South Korea’s conglomerates or chaebols have long acted as if they were above the law. Kim Seung-youn, chairman of Hanwha, an explosives, construction and insurance group, confessed last year to beating bar workers at a building site with the help of his own goons. He was retaliating after his son was hurt in a scuffle. After a few months in jail, Mr Kim was released on health grounds, and was soon back at his desk running Hanwha. This week, to mark the day South Korea celebrates liberation from Japanese colonialism, the president, Lee Myung-bak, pardoned him and 341,863 others.

They included Chung Mong-koo, the chairman of Hyundai, the world’s sixth-largest carmaker. Last year Mr Chung was convicted of embezzling about $90m from his company, and sentenced to 300 hours of community service. Chey Tae-won, of SK Group, a telecommunications, oil-refining and construction chaebol, was convicted in 2003 of illegal share swaps designed to keep the most lucrative parts of the group in his family’s control. Mr Chey did not serve any time in prison, but was given a suspended sentence. Now Mr Lee has pardoned him, too.

President Lee came to power earlier this year pledging to raise average national income per head to $40,000 a year and to achieve 7% annual economic growth. He has appealed to chaebol leaders to boost investment and jobs. But at his inauguration Mr Lee also promised to back “business leaders who are transparent and put in an honest day’s work”. So the pardons for the three chaebol bosses look a bit odd. Many South Koreans see them as proof that the wealthy are held to different standards from those applied to ordinary citizens.

Mr Lee, a former chief executive of ten different Hyundai group units, has himself been haunted by allegations that his past personal business dealings were less than pristine, particularly with regard to his family’s property sales and the failure of an investment firm he helped found. One of Mr Lee’s prospective ministers and several presidential aides have had to resign after questions were raised over their ethics. The first cousin of the president’s wife was arrested this month after receiving money from a man who wanted to clinch a parliamentary nomination from Mr Lee’s ruling party. The president’s approval rating hovers around 20%. Pardoning business bigwigs will not help it rise.

http://www.economist.com/world/asia/displaystory.cfm?story_id=11921754
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South Korean Preisdent Pardons CEOs

LPGA says players must speak English

Concerned about its appeal to sponsors, the women’s professional golf tour, which in recent years has been dominated by foreign-born players, has warned its members that they must become conversant in English by 2009 or face suspension.

“We live in a sports-entertainment environment,” said Libba Galloway, the deputy commissioner of the tour, the Ladies Professional Golf Association. “For an athlete to be successful today in the sports entertainment world we live in, they need to be great performers on and off the course, and being able to communicate effectively with sponsors and fans is a big part of this.

“Being a U.S.-based tour, and with the majority of our fan base, pro-am contestants, sponsors and participants being English speaking, we think it is important for our players to effectively communicate in English.”

The L.P.G.A. and the other professional golf tours, unlike professional team sports, are dependent on their relationships with corporate sponsors for their financial survival.

Although Galloway insisted that “the vast majority” of the 120 international players on the L.P.G.A. circuit already spoke enough English to get by, she declined to say how many did not. There are 26 countries represented on the L.P.G.A. Tour. South Korea, with 45 golfers, has the largest contingent.

The L.P.G.A.’s new language policy — believed to be the only such policy in a major sport — was first reported by Golfweek magazine on its Web site Monday. According to Golfweek, the L.P.G.A. held a meeting with the tour’s South Korean players last week before the Safeway Classic, at which the L.P.G.A. commissioner, Carolyn Bivens, outlined the policy. Golfweek reported that many in attendance misunderstood the penalty, believing they would lose their tour cards if they did not meet the language requirement.

Even so, the magazine reported, many South Korean players interviewed supported the policy, including the Hall of Famer Se Ri Pak. “We agree we should speak some English,” said Pak, who added that she thought fines seemed a fairer penalty than suspensions. “We play so good over all. When you win, you should give your speech in English.”

She added: “Mostly what comes out is nerves. Totally different language in front of camera. You’re excited and not thinking in English.”

Major League Baseball, which has a high percentage of foreign-born athletes, said it had not seen the need to establish a language guideline. Pat Courtney, a spokesman for M.L.B., said baseball had not considered such a policy because it wanted its players to be comfortable in interviews and wanted to respect their cultures.

“Given the diverse nature of our sport, we don’t require that players speak English,” he said. “It’s all about a comfort level.”

The National Hockey League, which is based in Canada where English and French are the official languages, also places no such requirements on its players, although several clubs provide players with tutors if they express a desire to learn English.

The National Basketball Association, which had 76 international players from 31 countries and territories last season, follows a similar approach to the N.H.L.

“This is not something we have contemplated,” said Maureen Coyle, the N.B.A.’s vice president for basketball communications.

The only N.B.A. players in recent years to have used an interpreter are China’s Yao Ming and Yi Jianlian. Yao, who began playing in the N.B.A. with the Houston Rockets in 2002, no longer needs an interpreter.

In fairness, comparisons between the L.P.G.A., an independent organization not affiliated with the PGA Tour, and other sports bodies are imprecise. The L.P.G.A., much like the PGA Tour, is a group of individual players from diverse backgrounds whose success as an organization depends on its ability to attract sponsorships from companies looking to use the tour for corporate entertainment and advertisement.

Rarely are N.B.A. players called upon to play one-on-one with a corporate executive whose decision to write a sponsorship check is predicated on whether one had a good time shooting free throws with Kobe Bryant.

There is much more to it, but a large part of the economic success of a golf organization is predicated on whether a corporate entity decides to underwrite a tournament and whether a television network decides to broadcast it. All of those decisions are based on the tour’s being able to market its athletes.

The L.P.G.A. started a program in 2006 to help international players learn English and transition into American culture.

“It’s been very successful thus far,” Galloway said.

There are risks to the path on which the L.P.G.A. is about to embark. Legal experts said the new policy could result in legal action. Arthur S. Leonard, a professor of law at New York Law School and an expert on employment issues, said that in some states a potential claim of national origin discrimination could be made if the players were able to show that the rule singled out players of a particular origin.

He added that the L.P.G.A. “would be subject to the New York state human rights law with respect to any tournaments taking place in New York, and it is possible that the public accommodations provisions of that law could apply to this situation.”

Galloway said the policy had been thoroughly vetted by the tour’s lawyers and that it did not single out any one group.

“Absolutely not,” she said. “This applies to all of our membership.”

In South Korea, Yonhap, a news agency, disagreed, saying on its Web site that the decision “raises suspicions that it is targeting Korean players.”

Kwak Sang Il, an official for the Korea Ladies Professional Golf Association, said that the organization’s board of directors expected to meet to discuss the L.P.G.A.’s requirement, although the group had no comment.

Kwak said he was concerned about the impact the requirement would have on Korean players, but he said that to a degree, he could see the motivation behind the L.P.G.A.’s decision.
“When a player wins the championship, you want to expose her to the media, but if she can’t speak English well, it limits the publicity efforts of the organizers,” he said.

“We have a similar problem when a foreign player wins a title in a tournament held in Korea and the player can’t speak Korean at all," he said.

Leonard’s analysis of the L.P.G.A. policy as it related to Title VII of the Civil Rights Act, which prohibits workplace discrimination based on race, color, religion, sex and national origin, seemed to concur, up to a point.

“This is not really an English-only requirement,” he said, noting that players would not be required to speak only English. He added, “If the L.P.G.A. can show that English proficiency is a relevant qualification to competing in a professional golf tournament in the U.S., they would have a defense to any claim that they are discriminating unlawfully.”

http://www.nytimes.com/2008/08/27/sports/golf/27golf.html?hp=&pagewanted=print
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LPGA says players must speak English

South Korea win Olympic gold medal in baseball

Seconds after Chong Tae-hyon's final pitch that secured an Olympic gold medal for the South Korean baseball team, 23 of his teammates stormed the mound in jubilation, with 14 of them no doubt more ecstatic than the others.

Chong induced Cuban second baseman Yuliesky Gourriel to ground into a double-play with the bases loaded in the bottom of the ninth inning, putting the finishing touches on a 3-2 win at Beijing's Wukesong Baseball Field on Saturday.

Korea wasn't considered a medal favourite in the men's tournament, but went unbeaten in all nine of its games to win gold in its first-ever appearance in the Olympic final.

As a result, 14 members of the team won't have to report for two years of military duty.

Earlier Saturday, the United States doubled Japan 8-4 to win bronze after failing to compete for the 2004 Summer Games in Athens.

But it will be the performance by South Korea that will long be remembered as an upset in baseball's last Olympic hurrah for at least eight years. ◦

South Korea win Olympic gold medal in baseball

South Korea to end ban on revealing gender of unborn children

South Korea's Constitutional Court overturned a ban on doctors telling parents the gender of unborn babies, saying Thursday the country has grown out of a preference for sons and that the restriction violates parents' right to know.

South Korea introduced the ban in 1987 to try to prevent abortions of female fetuses in a country that had traditionally favored sons in the widespread Confucian belief that males carry on family lines. Abortion has also been illegal but practiced widely.

On Thursday, the Constitutional Court said it was too restrictive to ban doctors from telling parents the gender of the unborn for the entire pregnancy because there was little chance of aborting fetuses older than six months due to risks for mothers.

"The legislation's purpose is recognized in that it helps resolve the sex-ratio imbalance and protects the fetuses' right to life," the court said in the ruling. "But it overly limits the basic rights of parents and physicians by placing a blanket ban through the latter half of pregnancy."

It also said the preference for sons has lessened to a point where the ratio of newly born boys and girls in the country has almost reached the natural level of 100 girls to 106 boys.

"Considering this, we cannot but question whether the sex-ratio imbalance is a serious social problem and whether the fetus gender notification is serving as a cause for abortion," it said.

The court ordered the law be revised to reflect the ruling by the end of next year, and said the current ban will stand until the revision. Rulings by the Constitutional Court cannot be appealed.
Judge Kim Bok-ki, who serves as the court's spokesman, said the ruling means the law should allow doctors to let parents know their babies' gender in the latter half of pregnancies.

The Korean Medical Association, the country's largest doctors' association, welcomed the ruling.

"It is natural for doctors to give patients information collected during diagnosis," the association said in a statement.

The court case began in late 2004 when a lawyer filed a petition after doctors refused to tell him the gender of his unborn baby. The following year, a doctor filed a similar suit after he was suspended for half a year for violating the ban.

A violation of the current ban is punishable by up to three years in prison and a fine of $9,830.
The ban has been enforced relatively strictly at large hospitals, but not at neighborhood clinics that offered gender information in various ways, including telling parents whether the baby is "cute" or "energetic" — allusions to girls or boys.

http://news.yahoo.com/s/ap/20080731/ap_on_re_as/skorea_baby_gender_2 ◦

South Korea to end ban on revealing gender of unborn children

Seoul World’s 5th Most Expensive City

Seoul ranked as the fifth most expensive city to live in, according to a world-renowned consulting firm, Wednesday.

Mercer's recent Cost of Living Survey, which covered 143 cities, showed Moscow as No. 1, followed by Tokyo, London and Oslo.

The survey took into account the cost of 200 items including housing, transport, food, clothing, household necessities and entertainment.

"The higher cost of living for cities such as Seoul, Singapore and India can be attributed to their highly valued quality of living," said Yvonne Traber, Mercer's principal research manager.

Reflecting the current inflationary pressures and the weakened dollar, the researcher pointed out the risk of higher living costs, especially for expatriate-level housing and other services. The Mercer survey is regarded as the most comprehensive cost of living survey, which helps multinational companies and governments determine compensation allowances for their expatriate employees.

In the survey, Moscow was the world's most expensive city for expats for the third consecutive year, while the Paraguayan capital of Asuncion turned out to be the least expensive for the sixth consecutive year.

Three of the world's top 10 costliest cities for expatriates are in Asia. Besides Tokyo and Seoul, the third entry was Hong Kong.

Among other Asian cities, Shanghai climbed two rungs to 24th, while Beijing remained unchanged at 20th.

In Vietnam, Hanoi dropped 35 places to rank 91st and Ho Chi Minh city fell 40 places to 100th.

An increase in residential property prices has helped Singapore climb one notch to 13th. Jakarta and Bangkok were 55th and 95th, respectively.

"Despite Asian cities dominating the top 10 most expensive places to live, the cost of living in Asia will not deter many companies and their employees as Asia is the current focus for foreign direct investment from multinational bodies for higher growth revenue," Asia Pacific Information Product Solutions chief Neo Siew Khim said.

Analysts say the external economic outlook for emerging East Asia has dimmed amid prospects for slower growth, tighter credit conditions and higher inflation, which is pushing Asian central banks to tighten their monetary policies.

http://www.koreatimes.co.kr/www/news/biz/2008/07/123_28078.html ◦

Seoul World’s 5th Most Expensive City

Wisdom in Crowds in Korea?

Michael B. Han, CFA Portfolio Manager
Matthews International Capital Management, LLC

Last month, South Korea’s decision to resume U.S. beef imports triggered massive protests in Seoul. For more than 40 days the city was moved by rallies that escalated into an outpouring of tens of thousands who took to the streets to oppose a trade deal they feared could expose the public to mad cow disease. The issue has posed a political crisis for South Korean President Lee Myung Bak, who took office following a landslide victory just four months ago.

Until about five years ago when a case of mad cow disease was detected in the U.S., South Korea had been among the top importers of American beef. Though many U.S. officials maintained that there were no statistically significant safety risks to U.S. meat exports, Korea, along with Japan and the European Union, imposed a blanket ban, later resuming conditional imports. Then in April, public outcry ensued when President Lee, a former chairman of Hyundai with a reputation for action that has earned him the nickname "The Bulldozer" agreed to lift the U.S. beef ban. The move was seen as one expected to help clear the way for a broader U.S.–South Korea free trade agreement that has been stalled. But by June, growing public uproar over the issue led Lee’s presidential aides to resign over the flap.

In and of itself, the reopening of the domestic Korean market to U.S. beef may not seem to justify the widespread furor that it unleashed. But what the public backlash really represents is Korea’s fear that its government is not acting in its best interest. The mostly peaceful protests have not been demonstrations against the U.S., or against free trade. Rather, the frustrations have been directed at the leadership’s lack of sensitivity to concerns over health risks, and highlight fears that the government prioritizes business over public safety.

President Lee has since publicly apologized over the situation and modified his earlier trade deal to limit U.S. beef imports to younger cattle, believed to be at less risk of mad cow disease. Despite the moves, however, the beef protests have given rise to sharp criticisms of the administration’s other plans for economic reform, including possible plans to privatize the public health care system and plans to build a grand canal. There have also been criticisms over Lee’s cabinet member selections.

How does a president’s landslide election victory plummet to record low approval ratings just a few months later? To begin with, South Korean voter turnout has been quite low, and many voters in the last election generally felt they were choosing between the “lesser of two evils.” Many protesters also regard President Lee’s beef deal as a rash and reckless act that stood to realize merely $1 billion in beef imports.

It is still unclear what will become of any free trade agreements between the U.S. and South Korea but the wider issue is that of Korea’s distrust of government. That Koreans feel inclined to take to the streets en masse may also indicate the lack of effective legal and political systems for public disputes. Compared to the U.S., Korea’s legal system is less approachable for the average person and the society is generally less litigious. When class-action lawsuits are not an option for protection, it is easier to understand why many may be moved to protest publicly. The danger, however, is that the political distrust is breeding voter apathy and diminishing turnouts at election time.

What is remarkable to note, however, is the ability of protesters to affect public policy. Following public backlash to the beef issue, the U.S. has reportedly looked further into establishing a system to verify the age of its livestock. The U.S. media has also begun to urge tighter regulation on the food inspection system. It seems that the aggregate wisdom of crowds and their voices have carried across the Pacific.

Evolution of Democracy
There are significant differences between the culture of demonstration in Korea now, compared to that of 20 years ago. Pro-democracy movements in South Korea in the 1980s were largely driven by college student leaders and frequently turned violent. Though recently there have been increasingly violent clashes between protesters and police, demonstrations over the beef issue began calmly when the majority of ordinary citizens participated. They have included young parents with children, executives in suits, middle school students, Roman Catholic nuns and Buddhist monks. Another important difference is that unlike the pro-democracy movements of two decades ago, the recent beef protests have involved no single, specific ideology, political leaning or special interest group. The protests involved passionate debate among participants, who remained respectful to each other. Commentators have credited Koreans for protesting peacefully, noting the high level of public participation as evidence of a maturing democracy. South Korea’s high Internet penetration rate, and its use of the Internet to mobilize the public over social issues, are also seen as signs of a highly educated society.

Indeed, Korea places great emphasis on education. It ranks fifth out of 35 developed nations in terms of its percentage of graduates under age 35 with four-year college degrees or higher, according to the Organization for Economic Co-operation and Development. The country also ranks third behind only India and China in terms of the number of students it sends to the U.S. each year to pursue higher education degrees. (In 2007, more than 62,000 Korean students came to the U.S. for school.)

The evolution of democracy in Korea is also evident in the decreasing signs of corruption where business and politics overlap. In the 1980s, two former presidents, Chun Doo Whan and Roh Tae Woo, had received illegal contributions of $1 billion and $500 million, respectively, from businesses. Both former presidents were convicted, and subsequent leaders have been accused of taking far less in kickbacks from business. The most recent offense—involving $10 million in controversial campaign contributions—by former President Roh Moo Hyun indicated there is a large decline in the size of dubious financial contributions to politicians.

Economic Democracy, the Next Evolution
Just as political democracy benefits grassroots movements, economic democracy benefits minority shareholders. Following the 1997 Asian financial crisis, Korean officials improved government transparency by adopting accounting standards similar to those of the U.S. The next step is to improve corporate governance.

In Korea, public participation, not activist hedge funds, paved the way to economic democracy. Non-government organizations (NGOs), which comprise professors and lawyers, have been involved in shareholder activism over the past decade. NGOs such as the People’s Solidarity for Participatory Democracy and Solidarity for Economic Reform, backed by minority shareholders’ voting rights, initiated a proxy battle against majority shareholders of what is known as chaebol, or large family-controlled conglomerates. Chaebols have played a significant role in the exportoriented growth of Korea’s economy. Though many chaebol affiliates have grown to become top-tier players in their fields, many could still benefit from improvements to corporate governance.

Armed with professional volunteers, NGOs have uncovered tax evasion cases or revealed other questionable corporate transactions that have benefited chaebol families at the expense of minority shareholders. NGOs are developing the skill of using litigation and proxy battles to enhance public awareness over complicated corporate governance practices. The organizations have also rallied against bad policy proposals regarding the adoption of poison pills.

Shareholder activism initiated by NGOs has also begun to move institutional shareholders. The National Pension Service (NPS), the country's leading institutional investor and the only national pension fund, voted against two business tycoons (both formerly convicted of fraud) who were seeking re-election to the boards of their respective corporate subsidiaries. The NPS’ first attempt to remove the two board members failed because the two tycoons had large holdings.

The fund currently has $220 billion in assets under management, and its asset allocation in the domestic equity market has been growing rapidly, which indicates that NPS may play a significant role in the future. There also appears to be a stronger likelihood that, going forward, people will be more concerned with corporate governance, which is critical to the performance of their retirement savings. Corporate governance and political transparency deserve more public attention than they currently receive. Fortunately, we continue to see signs of positive change—even if it’s in the form of surprisingly massive beef rallies. We see an evolving sense of democracy among those who are mobilizing to shape public policy. As these trends continue we hope minority shareholder value will be enhanced and a more vibrant sense of entrepreneurship will evolve.

http://www.matthewsfunds.com/about_asia/asia_insight.cfm


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Wisdom in Crowds in Korea?

Video: Bluetooth in Korea

Interested in technology? See my Future of Less blog ◦

Video: Bluetooth in Korea

Progressively Paperless in Korea

I took this picture today in the Jungang subway station in Taegu (aka Daegu), the third largest city in South Korea. You can buy a condensed book (looks like less than 50 pages) for about US$2 in the vending machine. Several of the titles were about Warren Buffet, becoming a CEO, and other business management kinds of things. Many of the books were about learning English, one of Korea's national pastimes. Hillary’s book was for sale too.

Certainly, in a place like Korea, this technology will soon be replaced with machines with thousands of titles that will be transferred directly from the machine to your phone. Paperless doesn’t mean no paper. But digitizing the content means thousands more titles to choose from, lower distribution costs, more revenue, and happier customers. And after that, no machines. It will all be books on demand downloadable over the air.

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Progressively Paperless in Korea

The cell phone turns 20 years old in Korea

Making mobile calls was a privilege of the very rich in 1988 when there were only 784 subscribers who dared to pay 4 million (about US$4,000) for a bulky handset heavy as a dumbbell. Now after two decades, phones have become as light as a cigarette lighter and the industry has become one of Korea's most lucrative businesses with more than 44 million regular customers.

The mobile service industry today celebrates its 20th anniversary here. While the number of subscribers has grown more than 56,000 times, the average phone price has dropped from 4 million to virtually zero when including subsidies, making it an every-day, every-hour item for modern Koreans.

"It is the coming-of-age day for the mobile phone. It is not just a means of communications anymore. It is the center of communication,'' said Kim Shin-bae, CEO of SK Telecom. "It is not exaggerating to say that Korea's IT industry, which accounts for 29 percent of its gross domestic product, started from the spread of mobile phones.''

Korea's mobile phone service took off as a car-mounted system in 1984, known as car phones. Korea Mobile Telecom, which was a subsidiary of Korea's public telephone company, was its lone operator.

It was July 1, 1988 when Korea Mobile Telecom launched a full-swing mobile phone service that used handheld phones made by Motorola and other foreign firms in Seoul and the metropolitan area, in time for the Seoul Olympic Games that fall.

The critical moment came in 1996 when the government adopted a new technology platform called CDMA (code division multiple access) for the first time in the world, while many other countries opted for the GSM (global system for mobile communication) type. The decision has helped local electronics firms such as Samsung and LG use Korea as a test bed for CDMA phones before they export them to the United States and other nations.

Samsung and LG are now the world's second and fourth largest mobile phone sellers. Exports of mobile phones grew from a mere $470,000 in 1996 to $18.6 billion last year.

The network service industry too has seen remarkable growth. Korea Mobile Telecom was privatized in 1994 when SK Group purchased its controlling share. KTF and LG Telecom later joined the race, while others like Shinsegi and Hansol were merged into SK Telecom and KTF, respectively.

Technological advancement and competition among the three firms have continuously lowered the call rate. In 1988, users were charged 1,286 won for a three-minute call from Seoul to Busan. This is now 324 won on average for the same call, which is about 3 percent of the 1988 price when considering inflation.

One victim of mobile phone's rapid success is the pager. It was the dominant communication device in mid and late 1990s, with some 15 million users in its heydays. Now about 40,000 people are using them, many of them medical workers.

http://www.koreatimes.co.kr/www/news/nation/2008/07/133_26769.html
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The cell phone turns 20 years old in Korea

Video trailer: Sympathy for Lady Vengeance

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Video trailer: Sympathy for Lady Vengeance

U.S. beef selling well despite protests

American beef began reaching Koreans' dinner tables despite anti-U.S. beef candlelit vigils and lingering public concern over its safety.

Most big discount stores are still reluctant to deck their shelves with American beef in fear of public backlash. But it seems to be a matter of time before refrigerators of restaurants and households of Koreans are filled with "Made in U.S.'' beef.

Midday Friday, dozens of people were standing in line in front of a five meter square butcher's shop "A-Meat FC'' in Keumchon, southwestern Seoul. Some, seemingly from remote areas, rushed to join the crowd after parking their vehicles in nearby spaces. The shop's inside was bursting at the seams with customers while five workers were busy tapping electronic cash registers and packing ordered meat.

"We have skipped meals for days,'' a cashier said. "Customers gather from opening till closing time.'' This imported-meat-only shop began selling American beef on Tuesday, six days after the government's official notification of U.S. beef imports.

"It's selling like hot cakes,'' said Park Chang-kyu, the shop owner. "Of course, it was not an easy decision to sell American beef amid public sentiment hostile to U.S. beef. But look. It's amazing.''

A male customer, who drove to the shop from Yeoido to buy beef, said "I will buy U.S. beef equivalent to 100,000 won ($100). American beef fits our taste and is much cheaper than Korean beef.''

Prices of U.S. beef vary― sirloin is 2,300 won per 100 grams, and beef for Bulgogi and soup are 900 won and 650 won, respectively.

"The prices are roughly one third of Korean beef,'' Park said. "We purchase 5 tons of U.S. beef per day but it's insufficient to meet customers' demand. We plan to buy more.

''Currently, there are only two beef shops dealing with American beef in Seoul including A-Meat F.C. But a growing number of shops are expected to handle American beef from next week at the earliest as the demand for the imported beef soars.

According to the association of meat importers, 2 tons of U.S. beef have been sold since July 1 through the two butcher shops.

Two other restaurant chains with 50 branches nationwide ― Damiso and Oredrim ― are considering adding U.S. beef to their menu.

Hi-Food, a mass-circulator for imported beef, also said it planned to ask the quarantine office to check 400 tons of U.S. beef they imported from August but recently decided to advance the date to next week to meet customers' demand.

"We have received numerous calls from clients. We cannot help handling American beef again despite outstanding concern over the meat,'' said Park Bong-soo, Hi-Food president.

The meat-importing association, comprised of 130 wholesalers and retailers, will launch a nationwide campaign from July 15 to raise public awareness of safety of U.S. beef and to boost consumption.

The Ministry for Food, Agriculture, Forestry and Fisheries said Friday more than 1,000 tons of American beef have completed quarantine inspection.

http://www.koreatimes.co.kr/www/news/nation/2008/07/117_27045.html
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U.S. beef selling well despite protests

Korean Wives Decide Where the Money Gets Spent

Korea is behind other countries in terms of gender equality, but is not so when it comes to who controls the household budget. Statistics show that women in two out of every three couples are in charge of the money.



The National Statistical Office (NSO) published the Life of Woman in Statistics report to commemorate the week of women, running from July 1 through July 7.

The report showed that wives in 65.3 percent of households determined where money was spent. 29 percent said the husband and the wife jointly decide, and only 5.7 percent left the man in charge.

Women also controlled the education of children ― as to which private institute they should go. Only 3.1 percent had fathers decide children's education while 39.2 percent left it totally to moms. The rest made decisions jointly.

The statistics show that around half of women are economically active. Women in their 40s were the most active, with 65.8 percent participating in economic activities. For those in their 30s, meanwhile, the ratio was 56.3 percent, reflecting the fact that many women of this age quit their jobs to take care of kids, returning to the job market later.

The results showed that an increasing number of women succeeded in getting good jobs. Some 19.3 percent of females were in professional or managerial level positions, up 7.1 percentage points from a decade ago. Among rookie diplomats who passed the difficult government exam last year, two out of three were female. Among lawmakers, 41 out of a total 299, or 13.7 percent, were women. Although this is still low compared with other countries, the ratio has been rising continuously. In 1996, only 3 percent of lawmakers were female.

In some workplaces there are too many women. About 73 percent of teachers at elementary schools were female. In 1990, the figure was only 50.1 percent.

Women are getting married older than before. The average age of a first time bride was 28.1. Grooms, meanwhile, were 31.1 years old on average. In 2000, however, brides were 26.5 years old, and grooms, 29.3 years.

Things have gotten better for baby girls as well. Parents are not preferring boys as much as before. There were 107.4 boys born to every 100 girls in 2006, while a decade ago it was 111.6 boys to every 100 girls.

Korea's female population totaled 24.19 million, or 49.8 percent of the entire population. They can expect to live to 82.36 years on average, 6.62 years more than males whose life expectancy hovered around 75.74 years. The gap has been decreasing since 1985, when women outlived men by 8.37 years.

The biggest death factor for women in 2006 was cancer, followed by cerebro-vascular disease, heart disease, diabetes and suicide.

Last year, 29,140 foreign women married Korean men, and 9,351 married foreign men.

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Korean Wives Decide Where the Money Gets Spent

Speaking a Foreign Language is Sexy in Korea

Tip for men on a blind date: learn some foreign words beforehand. Women are impressed, according to a survey.

"I like men speaking good English. It makes them look sexy, intelligent and very competent,'' said Yang Mi-kyoung, a 24-year-old who works for a fashion goods company.

"They also look very confident and I feel I could proudly introduce him to anyone,'' she added.

"I would like to marry a woman who can teach our future children English by herself. I know it sounds a bit selfish but we can save money and they can learn the language during life,'' Kim, who works at a construction company, said.

Matchmaking company Duo and English educational institute franchise YBMSisa.com conducted a survey of 242 single males and 315 females and found more than 66 percent of males and 82 percent of women have had experience of being attracted to the opposite sex with good foreign language skills.

Most replied that fluent foreign language speaking skills made their date eligible and competent, while some said the quality is important because they themselves do not have it. Both men and women thought being able to speak other languages is a basic attainment for everyone. Some said they want their counterpart to teach their future children English.

Moreover, 31 percent of women said a man's foreign language skill guarantees better income, indicating economics is a key reason for attraction.

However, the respondents themselves had little expectation for themselves in improving their language skills. About 77 percent said they have studied other languages after work. However, they said it was for their own satisfaction and that all they need is to be able to watch movies without having to read the captions below all the time. Instead, they had high hopes for their future spouses. The majority said they want the other to speak other languages in life.

http://www.koreatimes.co.kr/www/news/nation/2008/07/117_26926.html ◦

Speaking a Foreign Language is Sexy in Korea