Hyundai on the Fast Track (CBS News)

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Hyundai on the Fast Track (CBS News)

Is Korean Tech Losing Its Mojo?

How Korea, a onetime digital trendsetter, became a laggard in an era of smartphones—and amazing apps
By Moon Ihlwan

Seoul—For more than a year, Bae Jae Hyun wondered why her friends were so excited about the iPhone. She was happy with her Korean-made handset and puzzled by the desire for a phone that wasn't even available in the country. But when the iPhone arrived in Korea in November, it didn't take long for Bae to change her mind and buy one. "I now understand why they were so obsessed with it," says the 22-year-old student.

In December, Koreans bought some 200,000 iPhones—the best month ever in Korea for any handset model. In a country where domestic giants Samsung (005930:KS) and LG (066570:KS) together control 80% of the cell-phone market, that's quite a coup for Apple (AAPL). "The iPhone is so much better than any Korean phone I've ever seen," says Kim Ho Heok, a schoolmate of Bae.

The iPhone's popularity is a sign that Korea may be losing its edge in the international market, despite its reputation as the epicenter of digital cool. The country still rules in hardware, but it is stumbling in software. Samsung and LG, the No. 2 and No. 3 global handset makers, together manufactured nearly a third of the world's mobile phones last year, but their share of the smartphone market was just 4%. That's important because smartphones offer greater profits than traditional handsets, and they are increasingly popular with customers. The Koreans have rolled out models featuring touchscreens, high-resolution cameras, and TV. But they're often clunkier to use than rivals from Apple and Research in Motion (RIMM), maker of the BlackBerry.

Korea's software shortcomings are of growing concern to the country's political and business leadership. On Feb. 4, President Lee Myung Bak convened a special Cabinet meeting to address the issue. Ministers were told the country accounts for only 1.8% of the world market for software of all kinds, even though it dominates sales of memory chips, liquid-crystal displays, and flat-screen TVs. While Samsung sold 227 million handsets last year—10 times as many as Apple—its earnings were lower because its profit margins are much slimmer. "The government had been preparing to shift our focus to software from hardware for about a year, but the iPhone sensation provided a wake-up call," says Lee Sang Jin, who oversees the software division at the Ministry of Knowledge Economy, known until two years ago as the Ministry of Commerce, Industry & Energy.

"The Policy Backfired"
Seoul, which has long played a big role in guiding important industries, has launched a state-funded program to nurture software startups. The Ministry of Knowledge Economy is budgeting some $880 million to back software companies over the next three years. It aims to double the number of Korean software engineers to 300,000 in 2013 from 2008 and triple software exports to $15 billion.

A previous government attempt to boost the software industry was something of a dud. Seoul in 2005 required handset makers and content providers offering products or services in the country to use a Korean technology for Internet access instead of the programs used in most other countries. The rule was rescinded last year, but it clearly slowed the foreigners: The iPhone hit Korea more than two years after its U.S. debut. The downside is that Korean software writers were left with programs that worked only in their home market. As a result, they received scant exposure to the rigors of the global marketplace. "The policy backfired for Korea by stopping competition for innovation," says Chung Tai Myoung, an engineering professor at Sungkyunkwan University.

Software Successes
Samsung and LG say they intend to expand their smartphone lineups and offer more applications to run on them. "We have tremendously strengthened our software, which has been our weak spot," says J.K. Shin, president of Samsung's handset business. On Feb. 14, Samsung unveiled a software platform called bada ("sea" in Korean) to let outside developers create programs for its devices. And LG last December set up a unit with more than 800 programmers focused only on smartphones. This year the company expects to introduce about a dozen models using Google's (GOOG) Android operating system. "We are trying to offer more than the iPhone," says Skott Ahn, LG's mobile phone chief.

Despite the government's software worries, Korea has had some notable successes. Lineage, an online fantasy game made by Seoul-based NCsoft, has a cult-like following across Asia. Social networking service Cyworld, which was launched earlier than Facebook, is dominant in Korea. After eight years of offering Korean-language search, Google has just 2% of the market, compared with 64% held by Naver, headquartered in a Seoul suburb. And Qualcomm (QCOM) on Feb. 1 announced plans for a research center in Seoul to work on multimedia applications. "We see great potential in Korea," Qualcomm Chairman Paul E. Jacobs said at the time.

Yet when it comes to smartphones—perhaps the most important new sector in the technology business—young Koreans don't expect much from homegrown alternatives to Apple or BlackBerry. "I don't think I'll want a Korean phone in the next few years," says Yoon Ju Hwan, a 30-year-old fund manager who bought an iPhone in December. "We simply don't have the capabilities to create the kinds of things Apple does."

http://www.businessweek.com/magazine/content/10_09/b4168024781121.htm

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Is Korean Tech Losing Its Mojo?

2010 Korea-America Student Conference

For more information, check out:
http://iscdc.org/index.php?option=com_content&task=view&id=42&Itemid=70

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2010 Korea-America Student Conference

Move to halt South Korea's education arms race

In a good many Korean schools it is perfectly acceptable for students to fall asleep at their desks and snooze through an entire morning of lessons. In some, it is actively encouraged.

This latitude is born not of negligence but of concern. For the state-school teachers know exactly where the children’s chronic fatigue was nurtured: in the madness of a parental arms race that has made a fetish of private cramming schools and pushed mainstream education close to dysfunction.

What the country needs — urgently, say some — is essay questions.

South Korean education is what happens when meritocracies and one-upmanship go berserk. Two monsters loom over the exhausted children of Seoul and the country’s other big cities.

On one side is a country straining to compete at a national level with the Asian titans of China and Japan: it is an economy where good jobs are getting more scarce and where educational accomplishment translates closely to social heft and long-term financial success.

On the other is an army of parents and grandparents with the cash and ambition to buy their descendants any small advantage in the great educational struggle. Children’s evenings and weekends are viewed as a resource to be tapped to breaking point; sleep is viewed — in the most extreme quarters — as weakness.

The undoubted beneficiaries of this arms race are the hagwons – private education institutes that prepare all ages of Korean children for the cavalry charge of exams that thunder down on them from the day they enter elementary school to the time they sit university entrance tests. South Korean parents spend fortunes sending their children to these schools, which has created a separate arms race. Parents send children to good hagwons to improve their chances of getting into even better hagwons that will in turn improve their chances of getting into better private schools and colleges.

Britain engaged in passionate national debate over whether to extend licensing laws to keep pubs open beyond 11pm. In Korea, a similar swell of emotion surrounded the question of whether hagwons should be allowed to stay open beyond 10pm. The late-opening proponents won; defenders of sleep lost.

Revolution may be around the corner, however, and it is starting to terrify parents everywhere. Beyond the punishing demands on children, one of the perceived flaws with Korean education is the rigid nature of the examinations: almost every subject is tested via questions that demand prodigious memorising and binary right/wrong answers.

The Seoul Metropolitan Office of Education has announced that it plans to make essay-style questions mandatory. It has two reasons for switching to this policy. The first is the belief that essays questions will prod Korean education out of its emphasis on rote learning. Essays, said a senior official, are needed to “create innovative minds” and test students’ ability to formulate arguments.

For a country eager to secure its future as a cutting-edge producer of electronics, biotechnology and engineering, that argument reflects national concerns that the country must do something to preserve its technological cushion.

The second, more tantalising, theory is that essays could break the spell of the hagwons. Essays are intrinsically harder to train for, definitely harder for hagwon teachers to predict and specifically outside the current teaching expertise of the cram schools. If the theory is correct, essays could be the secret of a good night’s sleep.

http://www.timesonline.co.uk/tol/news/world/world_agenda/article7002822.ece#cid=OTC-RSS&attr=797093 ◦

Move to halt South Korea's education arms race

Korean Food and Culture in New York City

Located on 32nd Street between Fifth Avenue and Broadway, New York`s "Korea Way" is the center for Korean cuisine, shopping and culture.

Though only one block long, the street adjacent to such tourist attractions as Madison Square Center, Herald Square and the Empire State Building features almost every aspect of modern-day Korean life, from Korean banks to "noraebang."

Until about 10 years ago, the street at the center of midtown Manhattan was not even as globalized as Seoul`s Itaewon area, as this bustling street didn`t attract many non-Korean New Yorkers. Recently, though, the street has been changing as an increasing number of ethnic non-Koreans are frequenting due to heightened interest in Korean culture, especially the food.

In fact, quite a few of Wall Street`s young financiers have their hangouts in "K-town." Walking along the street in the evening, it is easy to spot all sorts of folks in Korean restaurants chatting with their friends over glasses of Korean liquor.

"About half of our customers are non-Koreans. Although Chinese and Japanese customers account for much of the foreign customers still, I see more and more Americans come here recently," said Cho Min-chul, the manager of Gahm Mi Ok Korean restaurant at the entrance of the Korea Way.

Cho, who has been working for the well-known "seolleongtang" place for the past four years, said such changes are thanks to the continuous efforts by the Korean community in the Big Apple to make the country`s culture better known in the world`s hub for business, fashion, and the arts.

Every year, the association of Korean residents in New York City hosts the "Korean Parade and Festival," featuring floats, marching bands, Korean traditional dances and costume parades.

Cho said that there are other reasons. "Korean restaurants are known for quick service and good food. And they open until very late," he said.

Sometimes, quick service leaves customers with an impression that Korean food is slightly overpriced. "The food was great but I wish it was cheaper," said an American customer who introduced herself as Elizabeth, after finishing a bowl of bibimbap at the restaurant.

Though Gahm Mi Ok is best-known for seolleongtang among the city`s Koreans, Westerners rarely order the Korean delicacy. "It seems like they (Westerners) don`t like the idea of pouring a bowl of rice into the soup at all, with an exception of Russians who have similar recipes," Cho said.

Instead, a dish like bibimbap is much more popular among Americans who come to the restaurant. "I love it. It is yummy with good nutritional balance," said Elizabeth, a professional model who lives in New York`s Chinatown.

If Korean pop culture has contributed much to the increased popularity of Korean cuisine in Japan, it was Korean companies and business figures that have been behind the rapidly enhanced interest in Korean restaurants in Manhattan.

"There are almost no global companies based in New York that have no connection with a Korean company," said David Oh, general manager of Bann Korean restaurant, which is on the West 50th Street, near Broadway`s theater district.

At first sight, the restaurant looked different from other restaurants on the Korean street. With somewhat artful, vintage-style decor, it looks as if it was the kind of place where diners want to ask for a menu to see if it was within their lunch budget.

Inside, the hall is fairly open, tall and generally spacious. Each dining table is equipped with a grill, but, unlike that of many Korean barbeque places in Seoul, it is designed not to produce smoke while preparing "bulgogi" and other barbeque dishes, offering a more pleasant environment to eat and unwind.

"Many Americans are not accustomed to the self-preparing concept of Korean grills, so we ask beforehand if they want us to cook meat or if they want to do it themselves in the Korean style," Oh said.

Choi Young-sook, the owner of the restaurant, also runs three "Woo Lae Oak" Korean restaurants in the United States.

Opened first in the Los Angeles Korea town in the late `80s, Woo Lae Oak has taken the lead in enhancing the image of Korean restaurants by purusing a more refined atmosphere and service.

Among the customers of Woo Lae Oak`s New York branch located in SoHo, the stylish lower Manhattan neighborhood, are Hollywood celebrities including Tom Cruise and Keanu Reeves, as well as Rupert Murdoch, President and Chairman of News Corporation, who used to live near the restaurant.

When opening Bann, Choi intended to make Korean cuisine more accessible to New Yorkers, and thus came up with the name meaning "steamed rice," which is easy to pronounce and remember.

"I was shocked to hear a loyal customer of Woo Lae Oak in L.A. pronounce the name wrong," Choi told reporters when she visited Seoul last October.

Despite the comparatively short history, Bann is not far behind Woo Lae Oak restaurants in popularity. Although the former targets more of ethnic Korean customers, about 70 percent of its customers are non-Koreans.

Oh said that a large portion of the customers at the five-year-old Bann are either those who have reservations at nearby Broadway theaters for evening shows or high-salaried professionals from law firms and financial institutes around it.

"Pop stars such as Mariah Carey and Beyonce once came to have dinner here. But whoever comes here, we treat them the same as our famous customers," said Oh, who was also involved in Woo Lae Oak `s SoHo project as manager.

Oh left Seoul to settle in New York in 1976. He said that he was disappointed to see there were no Korean restaurant in SoHo, a thriving magnet for young expats, tourists and locals in search of a good party and the latest fashion trend. "There were Thai restaurants and sushi bars but no Korean restaurants, and as a food enthusiast, I took it serious enough to join the project," he said.

Besides Bann and Woo Lae Oak, more and more Korean restaurants have opened up in Manhattan, outside Korea town yet the future does not seem to be very optimistic.

"Running a Korean restaurant outside Korea town is not easy because one has to satisfy two very conflicting tastes at the same time. While Americans prefer Korean dishes with a mild taste and smell, Koreans like to have Korean food with maximum authenticity," he said.

Considering Korea`s overall position in the global business scene, Korean food is not very well-positioned in North America yet. According to a recent survey by Accenture, an Ireland-based global management consulting firm, Korean food ranked eighth in popularity among the food of 11 different countries (in China, on the other hand, Korean food was the most favored foreign cuisine in the same survey).

"Korean restaurants need to focus more on promoting the healthiness of Korean cuisine, giving up on the value for money approach," Oh said. "There are also things Korean restaurants in New York should work together for, such as unifying the spelling of the names of Korean foods on each of their menus."

(danlee@heraldm.com)
By Lee Yong-sung/Korea Herald correspondent



http://www.koreaherald.co.kr/NEWKHSITE/data/html_dir/2010/01/19/201001190047.asp
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Korean Food and Culture in New York City

Can South Korea become a respected global power?

Selling South Korea
Lee Myung-bak wants to move his country to the center of the world.
By B. J. Lee NEWSWEEK

Published Jan 16, 2010

From the magazine issue dated Jan 25, 2010

For the first time in modern history, South Korea is laying claim to lead the club of rich nations. South Korea became the first member of the Organization for Economic Cooperation and Development—the group of 30 wealthy nations—to emerge from the global recession when it recorded 0.4 percent growth in the third quarter of last year. This year the OECD expects South Korea's GDP to expand by 4.4 percent, the highest growth rate of any of its members.

Now President Lee Myung-bak wants to turn the end of the economic crisis into an opportunity. He knows the crash has accelerated the decline of American might, as well as the rise of China and other emerging powers, and he aims to exploit the gap between them. His goal is to transform South Korea from a successful but self-involved economic power into a respected global soft power with the clout to mediate between rich and poor nations on global issues such as climate change and financial regulation. In particular, Lee is pushing to revive momentum on a global free-trade deal—stalled in large part due to hostility from poor nations—while defending the poor by pushing for more international supervision of the global financial system. At the same time, he is trying to establish South Korea as a leader in the fight against global warming by agreeing that the country will cut emissions by 30 percent by 2020—one of the most aggressive targets in the world—even though it is not obligated to do so because it is still considered a developing nation under the Kyoto Protocol. To many in South Korea, the selection of Seoul as the site of the November 2010 summit of the G20—the group of 20 leading economic powers—was an acknowledgment of how well it has managed the current economic and environmental crises. "The old order is being dismantled and replaced by the new order," Lee said from the Blue House in a televised New Year's speech. "We have to make our vision the world's vision."

Lee is one of only two former CEOs to lead a major trading power—Italy's Silvio Berlusconi is the other—and he runs South Korea like the just-do-it boss he was at Hyundai, where staff called him "the Bulldozer." At Hyundai he led a company known for fearless forays into foreign markets, whether it was building huge bridges in Malaysia or selling cars with stunning success in the crowded U.S. market. Now he is trying to make South Korean culture—still on the defensive after a long history of colonial occupations—as cosmopolitan as Hyundai's culture. He's pushing for greater use of English and generally trying to open up South Korea to the world. In his first big political job, as mayor of Seoul, he created a huge ruckus when he ripped up the downtown to expose a boarded-up stream—but it is now a major draw for commerce and tourism. Lee's grand domestic ambition as president is a multibillion-dollar plan to refurbish South Korea's four major rivers despite protests from environmentalists and opposition members. Lee believes the project will boost local economies by creating jobs and promoting tourism and commerce. Lee's popularity ratings, after an early plummet driven by a decision to allow U.S. imports of beef, are now at more than 50 percent as voters warm to his vision of newly developed South Korea as a model nation to be emulated by many developing countries.

South Korea's successful management of the economic crisis surely helps. Early on, the country was battered like the rest of the world. The South Korean won dropped 30 percent in the first three months of the crisis, the stock market dropped by half, and foreign investors left in droves. But unlike most other rich nations, South Korea had recent experience with a major financial meltdown. Many of its current leaders are veterans of the Asian crisis that crippled the country's economy in 1998, and they knew how to manage a free fall. Lee's team immediately moved to save threatened banks and companies by setting up $200 billion in various funds to guarantee payment of their debts and for other forms of emergency aid. They struck currency-swap deals with major economies like the U.S. to secure dwindling reserves of foreign currency and front-loaded public spending so that 65 percent of the country's $250 billion budget was spent during the first half of 2009, ensuring that the money got into the economy rapidly—but without adding new debts. A government focus on protecting jobs kept consumer sentiment relatively high, and the Bank of Korea cut interest rates by 3.25 percentage points to 2 percent, a historic low.

All the while, Lee worked relentlessly to quiet calls for protectionism at home and abroad, at a time when many other leaders, including Barack Obama and Hu Jintao, were beginning to succumb. Lee's administration is pushing for a slew of free-trade agreements with the U.S., the European Union, Peru, Colombia, Canada, Australia, and even China and Japan, if possible, says Abraham Kim, a Korea analyst at the political-risk consultancy Eurasia Group. Lee also lobbied hard at the Pittsburgh meeting of the G20 last year to have Seoul selected as the site of the next summit this autumn, an event he hopes to organize as a coming-out party. "He is trying to use the crisis to enhance the reputation of South Korea and help it to be widely recognized as a developed-world state," says Kim. "This is partly a nationalism thing, but more importantly, they are trying to get out from under Japan's and China's shadow. South Korea needs to find its niche for its long-term competitive survival."

South Korea was further protected from the crisis because its economy was built on pillars other than the collapsing financial-services industry. Decades of government efforts to nurture globally competitive conglomerates through massive infusion of capital had helped build export machines like Samsung, Hyundai, and LG. As the crisis unfolded, the weakening currency allowed these companies to expand global market share, especially against key Japanese and other rich-world competitors. As a result, South Korea registered a record trade surplus of $41 billion last year, surpassing that of Japan for the first time. South Korean companies and banks were also ready to compete because the crisis of the 1990s had forced them to improve corporate governance, get their finances in order, and invest heavily in new technology. "We just had to dust off the old measures we used a decade ago and use them again," says Vice Finance Minister Hur Kyung-wook.

In short, the South Korean model is a more mature cousin of China's—a hybrid economy, part free market, part state-controlled—but with more freedom for the market and for political dissent. Now Lee is positioning South Korea within Asia as a dynamic alternative to both China's mighty command economy and Japan's no-growth economy. In Southeast Asia, South Korea has long been admired for completing an economic miracle in just one generation, moving its 48 million people out of poverty and entering the ranks of fully industrialized nations, with average per capita income that surpassed $20,000 in 2007. And, unlike China, South Korea has achieved economic and political growth at the same time, with an increasingly well-established multiparty democracy that respects free speech and election results. South Korea, says U.S. Ambassador Kathleen Stephens, is "the best example in the post–World War II era of a country that has overcome enormous obstacles to achieve this kind of success."

Many Southeast Asian nations, alarmed by the harsh sides of the China model, look to South Korea as an alternative. Vietnam is sending civil servants there, studying how in the 1970s and '80s Seoul used massive government support, such as cheap loans, to develop strategic industries like steel and petrochemicals as the backbone of its export economy. As part of Vietnam's effort to develop capital markets, it also now runs a stock exchange in Hanoi, built with the help of the Korea Exchange. Officials from Vietnam, Cambodia, Indonesia, and Uzbekistan regularly visit South Korea to join training programs that teach economic and business management. "Developing countries are eager to learn South Korea's economic model because of its relevance to them," says Euh Yoon-dae, a Korea University economist currently heading a presidential committee to promote the national brand. "Our open economic system is more appealing to them than, say, that of China."

Surrounded by bigger powers—China, Russia, and Japan—South Korea needs to carve out a global role for itself to "ensure its prosperity and security," says David Straub, a Korea expert at Stanford University. So, in his first year in office, Lee made a point of systematically reaching out to foreign leaders in the United States and other major powers. The following year he headed to Europe. This year, Straub says, Lee is expected to target Africa. At the same time, he is upping South Korea's profile abroad, posting 3,000 volunteers from its version of the Peace Corps to Asia and Africa, where they will focus on public health and childhood education, with plans to increase that number to 20,000 by 2013. Last year South Korea officially became the first former recipient of international aid to graduate to the donor ranks, sending $1 billion to dozens of poor countries, and it plans to triple that sum within five years. Likewise, the number of troops it commits to U.N. peacekeeping operations will jump from 400 in 2009 to 1,000 this year and will work in roughly 10 nations, including Lebanon and Pakistan.

Lee has big plans for Brand South Korea, too. At Hyundai, he turned what had been a small contractor into a global manufacturing powerhouse. He speaks English, unlike his predecessor as president, and he is comfortable playing national pitchman. Just after Christmas, following six rounds of telephone calls with United Arab Emirates President Khalifa bin Zayed Al Nahyan and a last-minute visit to the country, Lee helped South Korea beat out a French and a joint U.S.-Japan consortium to win its biggest foreign contract ever: a $40 billion nuclear-power-plant contract in the U.A.E. While Hyundai and Samsung have overcome the perception abroad that "made in South Korea" still means poorly made, many other South Korean brands have not. According to a survey by Simon Anholt, a British expert on national branding, the country ranks 33rd in global branding power, although its economic size ranks 13th in the world. What's more, more than half of U.S. college students believe Hyundai and Samsung are Japanese brands. "Our job is to narrow the perception gap between the national and corporate brands," says Euh, the head of the branding committee.

Lee plans to build on that success at the G20 summit. He has already distinguished himself from his predecessors by embracing foreign investment and free trade, rather than focusing on rigid ideology, and he intends to use the meeting to showcase the rewards of that strategy. Lee's hope is that he can send a message to smaller, poorer countries, particularly in Asia, that South Korea's less insular, more global approach can be a model they can follow, too. Of course, as his opponents are quick to point out, the fate of his country will not change because the leaders of 20 advanced nations get together for a few days. But Lee says it is part of a larger effort to move his country "away from the periphery of Asia," as he put it recently, "and into the center of the world."

http://www.newsweek.com/id/231129 ◦

Can South Korea become a respected global power?

Seoul was ranked third on the NYT list of 31 places to go

Seoul was ranked third on the New York Times list of 31 places to go this year behind Sri Lanka and Argentina's Patagonia Wine Country.

The nation's capital was the sole East Asian city among the top 10 in the daily's annual picks for travel destinations.

"Forget Tokyo. Design aficionados are now heading to Seoul," the daily said. "They have been drawn by the Korean capital's glammed-up cafes and restaurants, immaculate art galleries and monumental fashion palaces like the sprawling outpost of Milan's 10 Corso Como and the widely noted Ann Demeulemeester store - an avant-garde Chia Pet covered in vegetation."

Seoul has emerged in recent years as a serious player in the design industry.

In 2007, it was appointed World Design Capital of 2010 by the International Council of Societies Design Alliance - a city promotion project that recognizes and awards accomplishments made by cities around the world in the field of design.

Other East Asian cities selected on the list were Shanghai at 12th and Shenzhen at 20th.

서울, NYT 선정 '올해 가봐야 할 명소' 3위
서울이 뉴욕타임즈가 꼽은 올해 가봐야 할 31개의 장소 중 스리랑카와 아르헨티나의 파타고니아 포도밭에 이어 3위를 차지했다. 동아시아 도시 중 10위 안에 여행지로 이름을 올린 것은 서울이 유일하다. 뉴욕타임즈는 또 “도쿄는 잊어라. 디자인 마니아들이 서울로 향하고 있다”고 전하면서, “이들은 한국의 수도에 있는 황홀한 카페와 레스토랑, 흠잡을 데 없는 미술관, 기념비적인 패션 매장에 끌리고 있다"고 보도했다.

http://www.koreaherald.co.kr/NEWKHSITE/data/html_dir/2010/01/12/201001120076.asp ◦

Seoul was ranked third on the NYT list of 31 places to go

Record snowfall blankets Seoul, South Korea

Buildings and houses are covered with snow in Seoul, South Korea, Tuesday, Jan. 5, 2010. Seoul residents slogged through the heaviest snowfall in modern Korean history after a winter storm dumped more than 28 centimeters (11 inches) Monday, forcing airports to cancel flights and paralyzing traffic in South Korea's bustling capital.

http://tinyurl.com/y85spk3 ◦

Record snowfall blankets Seoul, South Korea

Video: Invest in Korea 2010

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Video: Invest in Korea 2010

1910-2010: A century of ascendance for South Korea

http://www.koreaherald.co.kr/NEWKHSITE/data/html_dir/2010/01/01/201001010064.asp
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1910-2010: A century of ascendance for South Korea

Wonder Girls Perform "Nobody"

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Wonder Girls Perform "Nobody"

Presentation: Why Invest in Korea

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Presentation: Why Invest in Korea

Do the Chaebol Choke Off Innovation?

South Korea's giant family-based conglomerates are thriving, but they may be crushing small companies

By Moon Ihlwan

Song Kyu Heon harbors no illusions about the strength of the chaebol, the family-controlled conglomerates that dominate South Korea's economy. Nonetheless, as chief executive of tech services company Openbase, Song was confident he could beat chaebol -backed rivals to win a multimillion-dollar deal to upgrade the computer systems at a Korean bank. His client roster, after all, includes Citibank (C), LG, heavy equipment maker Doosan, and dozens of other high-profile companies and government ministries. As a longtime contractor with the bank in question, Openbase knew its systems well, and a team of 20 engineers had been preparing a bid for a year. But in October, Song lost the deal to an affiliate of a top chaebol. "There's no such thing as a level playing field here," Song says in his fifth-floor corner office overlooking Tehran-ro, a street that's sometimes called Korea's Silicon Valley.

Song's tale is typical of small and midsize companies in South Korea. While the chaebol unquestionably have fueled the country's growth in recent decades, they're so powerful that they may be hampering innovation and threatening Korea's continued economic success. "With the chaebol's deepening influence hurting fair competition with suppliers and startups, the country risks losing its economic dynamism," worries economist Kim Sang Jo of the Economic Reform Research Institute, an independent policy group.

A DIVERGING ECONOMY
In spite of the worldwide financial crisis, Samsung, Hyundai, LG, and other chaebol have recently reported impressive jumps in sales and profits. But not much of that prosperity has trickled down. While the big companies expand, "the rest of the Korean economy is still struggling," says Maarten Kelder, head of Asia-Pacific at consulting firm Monitor Group.

Korea's reliance on the chaebol is deepening. The top 10 exporters represented 43% of shipments abroad last year, up from 31% in 2001, according to the Korea Development Institute, a state-funded think tank. And the 50 largest companies—most of them chaebol affiliates—accounted for 38% of the country's total output in 2005, up from 30% a decade and a half earlier, the KDI reports. "The chaebol model has served well as a stepping-stone for growth so far, but it is likely to be a stumbling block in the future," says Lee Kye Ahn, a former CEO at Hyundai Motor and now a prominent member of the opposition Democratic Party.

In tech services, for instance, most big conglomerates have subsidiaries that take care of their sister companies. With guaranteed profits from those contracts, these players can afford to undercut the likes of Openbase when competing for work with outside clients. "If not for the huge advantages and influence of the chaebol, Openbase could be a major player," says Baek Seung Gon, vice-president of eBest, a small tech-services player.

"DANGEROUSLY POWERFUL"
The list of the leading IT services companies in South Korea offers ample evidence of chaebol strength. Among the top 10 players, only No. 5, a subsidiary of state utility Korea Electric Power, isn't affiliated with a chaebol. It's the same story in advertising and logistics, with chaebol affiliates dominating the top 10 in both industries. "The chaebol have become so dangerously powerful that you must put a bridle on them," says Lee Dong Gull, a former financial regulatory official who now teaches economics at South Korea's Hallym University.

The reach of the chaebol is such that smaller rivals often work for them as suppliers, so those companies are afraid to speak up. More than a half-dozen executives declined to talk on the record about their relations with the chaebol. And those who agreed to speak were reluctant to give much detail. Openbase, for instance, works as a subcontractor for chaebol tech-services players, so CEO Song is unwilling to name either the bank with which he was trying to get a contract or the rival that beat him.

Other small Korean companies fret about the power of the chaebol. A supplier of interior parts for Hyundai Motor, for instance, says that while the automaker is reporting record earnings, he is barely breaking even. "During fat years the big guys [hog] all the profits," says the supplier's general manager, who asked that his name not be used for fear of retaliation from Hyundai. "They let us get by but never allow us to have a big enough margin to invest in research." Hyundai counters that it treats its suppliers fairly.

Another problem is that the best and brightest university grads want to work for the chaebol—starving startups of talent. Less than 10% of the 4,000 students who graduated this year from Yonsei University in Seoul, for instance, got jobs at small companies. And officials at Yonsei, one of Korea's top three schools, say most of that 10% would have preferred jobs at the chaebol. "I've never thought of seeking a job elsewhere," says Kang Hye Jeong, a 27-year-old marketer at Samsung's handset unit, who says she has visited more than 20 countries in her four years at the electronics giant. "You couldn't expect such global experience at a smaller company."

Given the difficulty of standing up to the chaebol, financing is tough for startups. Brokerage Korea Investment & Securities recently failed to raise a $90 million fund for tech startups, and the main index of Kosdaq, the South Korean equivalent of Nasdaq, has fallen 84% since its peak in March 2000, while the benchmark Kospi index of larger companies has risen 68%.

Korean policymakers acknowledge the need to help the small fry compete with the giants on a more equal footing. Seoul in August earmarked $7.5 billion to finance joint research between universities and smaller companies in new growth areas such as renewable energy. "The policy focus for future growth will be on encouraging competition by liberalizing markets and helping smaller firms create intellectual property," says Noh Dae Lae, deputy minister at the Ministry of Strategy & Finance.

Ultimately, the chaebol may benefit from such initiatives. If the giants squeeze small suppliers so hard that they can't invest in innovation, the chaebol will hurt their own competitiveness, so programs that strengthen smaller companies will likely help South Korea's conglomerates, says Lim Kyung Mook, a researcher at the Korea Development Institute. "The important task is to begin attracting talent and funds to startups," Lim says. "We need a better balance between the conglomerates and smaller companies, a business environment where startups can grow big enough to compete with the big guys."

http://www.businessweek.com/magazine/content/09_50/b4159058699422.htm ◦

Do the Chaebol Choke Off Innovation?

Innovation Goes Downtown

Seoul's Digital Media City expects 2,000 companies by 2015

http://www.businessweek.com/magazine/content/09_48/b4157050810294.htm

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Innovation Goes Downtown

Thunder Burger in Seoul, near Itaewon

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Thunder Burger in Seoul, near Itaewon

Korean First Lady Promotes Korean Food

South Korea's first lady Kim Yoon-ok promoted her country's traditional cuisine, or "hansik," in a special interview broadcast worldwide Monday by U.S. cable news network CNN.

The interview, recorded at the presidential office of Cheong Wa Dae Friday, was the first part of a special series by CNN, "Eye on South Korea."

During the interview, Kim was seen preparing the popular Korean dish "japchae," seasoned vermicelli served with meat and vegetables.

"The taste of Korean food comes from the effort that goes into it and the flavor created by hand," Kim was quoted as saying by Yonhap News Agency. "We believe affection originates from mother's hands when she's cooking."

The interview was Kim's first appearance on a foreign television network since her husband Lee Myung-bak took office early last year.

Kim said cooking for her husband and promoting Korean food as an international cuisine was part of her efforts to assist the president, who "does a lot of work outside the country."

Her work also includes sending food to countries suffering from shortages, as well as introducing easy-to-make recipes, as a way of repaying the international support her country received when it was poor, she said.

"That is why now I would like to help other countries," she said.

http://www.koreatimes.co.kr/www/news/nation/2009/10/113_53774.html
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Korean First Lady Promotes Korean Food

South Korea #1 in Quality Broadband Service

http://money.cnn.com/2009/10/01/news/economy/broadband_internet_connection/index.htm

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South Korea #1 in Quality Broadband Service

LG Electronics’ second version of its “Chocolate” phone

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LG Electronics’ second version of its “Chocolate” phone

"Thirst" now showing in the United States

Review here: http://tinyurl.com/m65qo4

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"Thirst" now showing in the United States

This blog (www.koreality.com) wins award from KTO

Congratulations, your blog has been selected as one of the Top 100 Blogs in the "Blog Korea! Visit Korea" competition, which was held by the Korea Tourism Organization.

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This blog (www.koreality.com) wins award from KTO