KOREA FOCUS - September 2012

Table of Contents

Korea Focus - September 2012 - TOC - Politics 1. Is North Korea Headed for Economy-First Policy?

2. Truth about Ri Yong-ho’s Demise 3. Tours to Mt. Kumgang Should be Resumed 4. Truths and Untruths about Japan's Militarist Ambition 5. Is Democracy a Prerequisite for People's Happiness?

- Economy 1.Distress Call from House Poor 2. China Risk in Korean Economy 3. Reasons to Speed Up Korea-China FTA 4. Korea’s Rise as Northeast Asian Oil Hub 5. Importance of Basic Research - Society 1. Korea Needs Integrated Foreign Aid System 2. ‘HR 121’ and Japan’s Mistake 3. Anxieties and Hopes of 40-Somethings 4. Struggle of Senior Citizens - Culture 1. Nam June Paik: How the First Video Artist was Born 2. Rewriting the History of Farming on the Korean Peninsula 3. Dedication is Park Ji-sung’s Middle Name 4. MICE Industry Doing its Best to Promote Korea 5. Confucian Academies and Humanistic Education - Essay 1. North Korea’s Food and Agricultural Situation in the Kim Jong-un Era

2. Effects of Population Aging on Economy and Car Market 3. Rain and the Economy 4. 10 Million Inbound Visitors: New Trends in Korea’s Tourist Industry - Feature 1. Young Korean Artists Design London Olympics Victory Podium - BookReview 1. Taste of Humanism in the 107-Year-Old Memories of Gwangjang Market 2. Choi Sun-woo, Guide in Art History and Pioneer of Cultural Heritage - Interview 1. Didier t`Serstevens: “You should not do things for them, but with them.”

2. Kim Jung-sun: “Digital books would prevent people from taking time to pause for thoughts.”

- COPYRIGHT

- Is North Korea Headed for Economy-First Policy?

- Truth about Ri Yong-ho’s Demise - Tours to Mt. Kumgang Should be Resumed - Truths and Untruths about Japan's Militarist Ambition - Is Democracy a Prerequisite for People's Happiness?

Is North Korea Headed for Economy-First Policy?

Kim Young-hie Editor-at-Large The JoongAng Ilbo

Kim Jong-un, North Korea’s new leader, is distancing himself in many ways from the conventional leadership pattern of his family dynasty. TV footage resembling a surrealistic fantasy showed Kim and his wife beaming and clapping at a stage performance of the Moranbong Band backed up by Mickey Mouse and Winnie the Pooh, iconic Disney cartoon figures from the communist state’s long-standing foe, the United States. On the other hand, relentless yet surprising and even amusing was the abrupt liquidation of his hawkish patron Ri Yong-ho, a vice marshal and chief of the North Korean army’s general staff.

These developments touched off conflicting observations among foreign governments and North Korea specialists as to whether the youthful leader’s exceptional actions and blitz replacement of military leaders presage a major

policy change by Pyongyang. Some divine them as a harbinger of strategic shift from military-first policy to pragmatic economic preferences, while others dismiss them as no more than a “theater politics” aimed at boosting Kim Jong-un’s popularity and reinforcing his grip of power.

Different interpretations can be made of the latest North Korean phenomenon depending on ideological inclinations and perceptions. What we vitally need is an unbiased, neutral and empirical approach to evaluating Kim Jong-un and North Korea under his leadership. Basic elements for the assessment can be divided into three categories – his remarks, his actions and North Korea’s diplomatic activities. The following are brief accounts of each.

On April 15 Kim Jong-un delivered a speech at a military review commemorating the centennial of his grandfather Kim Il-sung, founding father of North Korea. The young leader said, “The (ruling Workers’) Party is firmly determined to have the people no longer compelled to tighten their belts··· We now have to enter the path of building an economically powerful country in all aspects.” The Rodong Sinmun, the party organ, published a commentary in its June 29 issue in support of the leader’s pledge, noting that North Korea “should now leap to the ranks of economic powers (of the world), based on its national strength that has been built on military-first politics.” In his talks with cadres of the party central committee, Kim also stressed, “We must now make a decisive turn to improve the people’s livelihood and build an economically strong state.”

The television footage showing Kim Jong-un and his wife apparently enjoying the Moranbong’s Western-style songs and dances created a stir around the world. It was unimaginable in the days of his forefathers, Kim Il-sung and Jong-il, for a host of mini-skirted young musicians to dance with Mickey Mouse and other Disney characters in the presence of the top leader.

Pyongyang used to detest and condemn the Disney entertainment icons as symbols of decadent American culture and capitalism.

The main reason why the North has hesitated to open and reform itself, while recognizing the vital need for such changes, is the fear that the import of foreign capital and technology, especially those of the United States, would contaminate its people with capitalism. But Kim Jong-un appears to be ready to take the lead in accommodating the long-stigmatized “decadent culture.” A crevice seems to be in the making in the iron gate that has locked North Korea into economic, social and cultural isolation for so many decades.

Also noteworthy are the North’s diplomatic activities to pave the way for building a strong economy. Kim Yong-nam, the ceremonial head of state in his capacity as chairman of the Presidium of the Supreme People’s Assembly, recently made two trips to Southeast Asia ― Indonesia and Singapore in May and Vietnam and Laos in August. For the May journey, he was accompanied by the chairman of the joint venture investment committee and the minister of light industry, suggesting the obvious purpose of the tour. In Jakarta, he handed Kim Jong-un’s invitation to Indonesian President Susilo Bambang Yudhoyono for a visit to North Korea.

At about the same time, Kim Yong-il, the party’s secretary in charge of international relations, visited Laos, Vietnam and Myanmar. In July, Foreign Minister Pak Ui-chun attended the ASEAN Regional Forum’s ministerial session held in Phnom Penh, Cambodia. On the sidelines, Pak had a series of bilateral meetings with his counterparts from countries either rich with natural resources or offering potential models of economic development. It seems that Pyongyang is making intensive efforts to secure food supplies from Indonesia and Myanmar and to benchmark the economic development experience of Singapore and Vietnam. Diversification of external economic relations could

also help North Korea lessen its excessive dependence on China.

These diplomatic activities raise hope that Kim Jong-un’s remarks vowing to relieve the North Korean people from poverty may not be empty rhetoric designed to mask his eagerness to solidify power. Kim spent his sensitive teen years studying in Switzerland, one of the wealthiest and most democratic countries in the world. It should not be surprising that the young leader has now recovered “Swiss genes” stored deep in his psyche and tries to introduce economy-first policies to his reclusive country. In his efforts as such, the hardcore military led by Ri Yong-ho must have posed the biggest stumbling block. Thus, Ri’s liquidation was inevitable ― and something to be welcomed.

North Korean athletes’ performances at the London Olympic Games, who fared much better than expected, must also be encouraging for the new leader in his scheme to make debut in the international arena. He is expected to make his first official foreign tour to China at an appropriate time, and then seek to improve relations with the United States. A U.S. tour by the Pyongyang Philharmonic Orchestra in return for the 2008 New York Philharmonic’s concert in the North Korean capital may signal the resumption of deals to ameliorate bilateral relations.

With regard to its posture toward Seoul, Pyongyang is likely to leave crossborder contacts in limbo until after South Korea’s presidential election in December. Yet, Pyongyang’s consent given to a group of Hyundai Asan officials to visit Mount Kumgang (Geumgang), the site of a major tourism project in dispute, is deemed meaningful because it marked the first affirmative signal beamed since Kim Jong-un’s ascent to power.

By February next year, the power transition processes will be over not only in the two Koreas but also in four major powers having stakes in the Korean

peninsula. Should changes smoothly proceed in North Korea under Kim Jongun’s leadership, without being interrupted by sudden provocative attempts such as a nuclear test, we may as well expect a historical turning point in the Korean peninsula by spring next year.

[August 3, 2012]

www.koreafocus.or.kr

Truth about Ri Yong-ho’s Demise

Han Ki-bum Adjunct Professor of North Korean Studies Korea University

Speculation is rife about the sudden dismissal of Ri Yong-ho from the powerful post as chief of the General Staff of the North Korean People’s Army (KPA) in mid-July. The prevailing conclusion is that the vice marshal was ousted in a policy clash with his rivals ― Jang Song-thaek, uncle and a mentor of the country’s new supreme leader Kim Jong-un, and Choe Ryong-hae, another vice marshal and Kim’s patron ― a feud that allegedly erupted when Ri objected to transferring the military’s function of earning foreign hard currency to the state cabinet.

At issue in this regard is a tendency to hastily interpret friction over policy matters and privileges within the inner power circle as a power struggle and dispute in promoting the country’s reform and opening-up. Kim Jong-un, like

any new leaders, is bound to get rid of obstacles while seizing power, but such customary conduct is overly construed as a momentous shakeup in the North Korean situation and, even worse, popped in a converse direction. Discrepancy of the kind stems from limits in information available.

Ri’s removal was conducted swiftly, like a blitz, but still unclear is the decisive reason and momentum behind the purge. It is extremely difficult, if not entirely impossible, to instantly acquire full information from a “black box” set up in the inner circle of the North Korean hierarchy. Normally available is fragmentary information after a certain time lag. In the case of Ri, some specialists appeared to inflate their analyses based on scraps of information.

First, let’s have a look into the assumption on power struggle. After Choe’s promotion to the influential post as head of the KPA General Political Bureau last April, the possibility of his confrontation with Ri, who had been appointed chief of the KPA General Staff in 2009 by the late Kim Jong-il, the new leader’s father, surged forward. The question was who would hold real power over the armed forces. But, in view of the peculiar characteristics of North Korean politics, their conflict had to be confined. Their competition could not but be categorized as mere rivalry or friction between ranks and seniority. It is premature to assume that any political forces have been formed outside of the official power group.

Kim Il-sung conducted a series of purges to remove “anti-party elements” or dissidents and his son, Kim Jong-il, exerted huge efforts to establish a “unitary governing system” or a family dynasty to fortify his power base. They were both extremely tactical not to delegate too much power to any subordinates.

Power was meted out in pieces so their aides remained dependent on the favor of the supreme leader and his successor. Given these traditions, it is improbable that Ri could muster sufficient factional forces of his own in three

years after his appointment as the KPA chief of staff. He was a tough-minded expert in military strategy but not dexterous in politicking. What’s more, since his ascension to power last December, Kim Jong-un has often reshuffled the army lineup and stepped up surveillances.

The next checkpoint concerns the alleged relevance of Ri’s ouster to North Korea’s reform and opening. It has been more or less confirmed that Pyongyang began this year to work on a sort of “capitalist experiment.” On June 28, the North adopted a pilot project dubbed a “new innovative economic management system,” while Kim Jong-un reportedly instructed the cabinet to play the central role in economic management and work out means to reinvigorate the country’s economy, be it capitalistic or whatever.

The regime is obviously allowing more of a market role and incentives for factory enterprises and families engaged in collective farming. In this connection, a group of cadres of the Workers’ Party visited China in June to observe agricultural reforms at work. Reports on these moves prompted speculation that Kim Jong-un has launched a drive for economic reform and that Ri had to be eliminated because he was a major stumbling block.

These interpretations are prone to engender misconceptions on two points: the North’s new economic management measures are part of an economic reform initiative, and Kim Jong-un, together with Jang Song-thaek and Choe Ryonghae, favor a modest and pragmatic line. For North Korean leaders, advocating an economic renovation is not a rare but repetitive practice. However, if ideological control among the populace became difficult as an aftermath of partial introduction of reform, the party cadres who implemented the change were liquidated.

When Kim Jong-il visited Shanghai in 2001, he lavished praise on the

development of China’s largest metropolis as “cataclysmic changes.” Kim Jong-un, after watching Western songs and dances presented by the Morangbong Band recently, told his aides to “bring in good things of foreign countries.” However, what they meant to import are outward aspects of things they observed, such as high-rise modern buildings and gorgeous display of Western culture, not their software contents like market economy and unfettered liberty.

It is quite possible that Ri Yong-ho was dismissed because his presence was prickly for the new generation of Pyongyang’s power elite. Kim Jong-un must have felt uncomfortable in dealing with his one-time mentor as a subordinate and so did Jang Song-thaek and Choe Ryong-hae, who found him to be an obstinate senior. Amid these circumstances, Ri’s slip of tongue or abuse of power might have provided an excuse. Therefore, the latest incident involving the military chief was neither a power struggle nor a shift to a moderate and pragmatic line of reform. For a really significant shakeup of North Korea’s policy and power structure, there need to be far more signals of extensive turmoil.

[Chosun Ilbo, July 24, 2012]

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Tours to Mt. Kumgang Should be Resumed

Rhee Bong-jo Professor of Liberal Arts Far East University; Former Vice Minister of Unification

It has been four years as of today since tours to Mt. Kumgang were suspended in July 2008 after a North Korean soldier shot and killed a South Korean female tourist who wandered into a restricted zone. The tour project was launched amid much higher expectations than other inter-Korean economic projects. It was initiated by the late Hyundai Group founder and honorary chairman Chung Ju-yung who was born in Tongchon, now in the Northern part of Gangwon Province.

But it was South Korean people’s ardent desire to revisit the mountain that helped the project get off to a flying start and keep it afloat for a while. And we still remember the arduous process in which the tour project was

established as a typical form of inter-Korean economic cooperation after 10odd years of difficult negotiations. Whenever we crossed the military demarcation line and set our feet on North Korean soil under the tour project, we felt as if reunification was approaching little by little.

It is totally illogical if anybody hastily proposes improving inter-Korean relations and discussing preparations for reunification at a time when tours to Mt. Kumgang remain dormant. The suspension of the cross-border tour project is a “scar” that should be healed as soon as possible. In view of the volatile geopolitical situation surrounding the Korean peninsula and the two Koreas remaining at loggerheads in mutual distrust, the four-year hiatus is not a simple halt to visits but a threat to the entire framework of the inter-Korean cooperative project itself.

In 2010, after working-level talks on the resumption of the Mt. Kumgang tour project broke down in February and the North Korean military sank the South Korean Navy corvette Cheonan in March, the North Korean government seized and froze South Korean assets in the Mt. Kumgang tourism area. In April 2011, Pyongyang notified Hyundai Asan, the tour operator, of its unilateral decision to cancel Hyundai’s exclusive right to operate the tour project under the premise that there was no possibility of resuming it.

And finally, a month later, the North introduced a “law on the special zone for international tour of Mt. Kumgang” to replace the existing “law on Mt. Kumgang tourist zone.” Pyongyang urged South Korean companies to register themselves anew and resume business, or dispose of their assets in the tourist zone in accordance with the new law.

Under these circumstances, it seems realistically impossible to resume tours by reviving the law and system of four years ago. But Mt. Kumgang is still there

and the North has started luring tourists as well as foreign direct investment from the international community, including the United States, China, and Russia, in an apparent bid to make up for the loss of hard currency it has suffered in the wake of the suspension of tours by South Koreans.

Through the state-run Korean Central News Agency on April 1 this year, North Korea said, “Many tourists and travel agencies around the world are inquiring about how to apply for tours, enter into tourism contracts, operate tourist facilities, and make investments, while expressing intentions to participate in international tours of Mt. Kumgang.”

Originally, the North had planned to launch tours to Mt. Kumgang for Chinese in April. But the program was delayed until after late June in the wake of the North’s launch of the Kwangmyongsong-3 long-range rocket. Pyongyang then formally opened a route allowing Chinese tourists to travel overland from Hunchun, China to the North’s Rason Port, where they can go on a city tour and then take a cruise ship to Mt. Kumgang resort. While we had been left out in the cold for such a long time, North Korean authorities gave the Chinese wide access to the mountain resort that had been developed by South Korea after years of painstaking efforts and with huge amounts of money.

After the new leader Kim Jong-un took power, North Korea pledged to make sure that “people will no longer have to tighten their belts.” This implies that the North will do anything, as long as it can earn hard currency, whether it has to let foreign countries exploit its underground and tourism resources, export labor to foreign countries, or open itself up. China is taking over everything from the North, including underground and tourism resources, and labor. If the joint development projects continue at the current pace, the North will end up becoming more heavily dependent on China’s economy.

The three major inter-Korean economic cooperation projects ― the connecting of railways and roads between the two Koreas, the Kaesong (Gaeseong) Industrial Complex and the Mt. Kumgang tour project ― have served as benchmark examples for Pyongyang-Beijing economic cooperation. Similar projects have been developed and expanded under China’s initiative.

The South Korean government should no longer let any “preconditions” hamper efforts to resume the Mt. Kumgang tour project. Nothing is more realistic and effective in preparing for, and educating the young generation about, reunification than resuming the inter-Korean tour project. The government should take the initiative to pave the way for Hyundai Asan to meet with North Korean officials, putting foremost priority on reopening tours.

Otherwise, we may soon have to visit Mt. Kumgang through Chinese travel agencies. Under any circumstances, the current administration should find a solution to this issue before its term expires.

[Hankook Ilbo, July 12, 2012]

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Truths and Untruths about Japan’s Militarist Ambition

Park Cheol-hee Professor of Political Science Graduate school of International Studies Seoul National University

South Korean media outlets are currently abuzz with heated debate over Japan’s militarist ambition. It has already been 67 years since the country was liberated from Japan’s colonial rule. But Japan still is a hot potato to us. The latest discourse shows that South Koreans still want to see Japan through their own prism and to solve a “picture puzzle” entitled “Japan” by trying to find in it hidden objects that even the Japanese themselves don’t know about.

Foreign media speculated that Japan has cleared the way for its nuclear armament by inserting the term “national security,” instead of “safety,” in its revised Atomic Energy Basic Act. Japan clearly erred by using the term “national security,” which carries military implications and hence causes

misunderstanding about its use of nuclear energy. But it would be hasty and unrealistic if we conclude that Japan will arm itself with nuclear weapons anytime soon. More than 70 percent of the Japanese people oppose nuclear armament. Japan’s revision of the Atomic Energy Basic Act and its launch of the Nuclear Regulatory Commission were steps taken to ensure the peaceful use of nuclear energy.

As long as the United States is providing nuclear deterrence, Japan has no reason to pursue its own nuclear armament, which would clash with the Nuclear Non-proliferation Treaty. It is true that Japan has the capability to make nuclear weapons. But both its political will and public sentiment are very weak, while nuclear armament would exact high diplomatic and military costs.

When a report on Japan’s right to exercise collective self-defense, or the right to use armed forces against a country that is attacking its ally or close neighbor, was submitted to the prime minister, many people reacted as if Japan attempted to secure the right to attack a third country anytime soon. The report, which most Japanese didn’t even know of, made headlines in South Korea. It was true that some Japanese defense experts floated a trial balloon.

But a single report on self-defense won’t necessarily bring a change in Japan’s policy.

In 2007, the Abe administration had extensive discussions on collective selfdefense, but decided not to pursue it. The current Noda administration is in no position to pursue the issue that wouldn’t give realistic benefit to the Japanese public, considering that his cabinet has already caused disunity in the ruling Democratic Party of Japan over raising the consumption tax rate. There still is no consensus even among the Japanese themselves whether Japan, a country with a peace constitution, can exercise the right to collective self-defense.

Under these circumstances, the Japanese government has maintained its official position that Japan cannot exercise the right, even though it is a sovereign one.

Seoul deserves reproach for having been negligent in briefing the National Assembly and the people on its pursuit of an intelligence protection agreement with Tokyo and making it public. But it is a leap of logic if you say that such an agreement is a prelude to an attempt to establish a Seoul-Washington-Tokyo trilateral alliance. South Korea needs intelligence about North Korea more than any other country. It benefits neither Tokyo nor Washington if South Korea strengthens its security through intelligence exchange with Japan, a country renowned for its piles of intelligence files on the North, including satellite images, eavesdropped data and documentary materials.

It is an overreaction if you respond too sensitively only to Japan at a time when South Korea has concluded similar agreements with 24 countries, including Russia. The government meant to lay the framework for intelligence exchange with Japan, far from attempting to unilaterally give everything away to Japan. On the contrary, it would be rational to pursue another agreement with Beijing, which must have a wealth of intelligence about North Korea, rather than snubbing a bid to strike a deal with Tokyo.

It is true that since the 1990s, Japan’s right-wing nationalists have gained more strength. But not everyone in Japan leans to the right. As seen in the rising popularity of Korean pop culture, Japanese people’s perception of South Korea has improved steadily. The current DPJ administration has a stronger intention to seek strategic cooperation with Seoul than its predecessors. Japan doesn’t seem to try to gain hegemony in East Asia by becoming a military power and establishing a trilateral alliance with Seoul and Washington. On the contrary, Japan is losing the capacity to becoming a military power on its own due to the

drawn-out economic recession and chronic budget deficits. This is evident from the fact that Japan’s defense spending has dwindled since 2002.

The island country is now seeking to strengthen multilateral cooperation with Pacific Rim nations, including South Korea and Australia, amid the possibility of the United States curtailing its involvement in East Asia due to lowered military spending. Japan wants to ensure its security by setting up a multilateral cooperation network, instead of standing on its own or seeking bilateral alliances with individual nations. Japan, in fact, never is a military pygmy. It has the qualifications to be a military power. But Japan won’t pose a military threat to South Korea as long as it maintains the peace constitution and alliance with Washington.

At the moment, there is room for further cooperation between Seoul and Tokyo, both of which advocate democracy and market economy. Instead of excessively heightening vigilance on Tokyo, Seoul needs to jointly seek ways to correct Japan’s perception of threat from Beijing and its overly negative views of Pyongyang. This is why there is an increasing need for Seoul and Tokyo to open strategic talks. There is more to lose than gain for both countries if a neo-cold war system is established in East Asia. They should take the initiative to build a multi-polar network to manage the future order in this region based on neighborhood partnerships for regional cooperation.

[Chosun Ilbo, July 20, 2012]

www.koreafocus.or.kr

Is Democracy a Prerequisite for People’s Happiness?

Kim Jong-chul Publisher Green Review

When she announced her candidacy for president, a ruling party leader pledged to build a “country whose citizens are happy.” This may be a meaningless phrase not worth our attention if we dismiss it just as another campaign slogan. But however nonsensical they may sound, the words politicians choose and use surely reflect their own views of the world, or of reality, to some extent.

In this sense, it is good to see a leading presidential hopeful talk about “people’s happiness,” because it is proof that she isn’t blind to the dire reality that Korea has the highest suicide rate in the world and 80 percent of its citizens feel unhappy. But on second thought, her remarks are absurd, considering that if she is truly concerned about the people’s happiness, she

would not simply promise to act in the future, but instead vow to try to solve a lot of issues before the election.

A ruling party leader enjoying a steady approval rating over 30 percent already is a powerful politician. Nonetheless, this leader had until recently made a peculiar set of political gestures, while remaining silent about important issues concerning “people’s happiness” or doing nothing except sometimes making indistinct or neutral remarks, such as “It’s regrettable.” Then, out of the blue, she talked about the people’s happiness, which may sound comical depending upon the situation.

What is even more important is what kind of philosophy about democracy the leader has. This isn’t only the story about the “dictator’s daughter” we are talking about, a reference to the ruling Saenuri Party’s presidential hopeful Park Geun-hye whose father was the late president Park Chung-hee. Although political leaders across party lines are unanimously advocating “economic democracy,” it is very questionable how much faith they have in democracy. It is of course natural to give priority to distribution over growth, stress job creation and welfare as major policies to overcome bipolarization, combat widespread poverty, and resolve unemployment. But they seem to have forgotten that the root of all such problems lies in “democracy” itself.

Indeed, economic democracy is more about the issue of how successfully pragmatic democracy is practiced in politics and society than in the economy.

The knotted economic problems of today boil down to extreme economic inequality. To overcome this phenomenon, we must above all else remove plutocracy and realize social justice so that the “grassroots” can recover their right to have a say in matters that will determine their own fate. What is important is not patronizing the people. In short, right-minded politicians should only try to secure and expand space for the grassroots to govern

themselves.

There is nothing complicated and difficult about democracy. It means selfgovernance at the grassroots. From this point of view, representative democracy always has its own pitfalls. Furthermore, today’s parliamentary politics swayed by elections is based on serious injustice or irrationality, because it is very difficult to elect right-minded representatives as long as elections are games determined by money and power. Besides, under representative democracy, grassroots voters have extremely narrow leeway whereby they can have their views reflected in state policies.

It may be no exaggeration to say that all crises currently facing the world have been caused basically by the pitfalls of representative democracy. What is interesting here is that each country’s democracy has a different level of quality. This shows that despite its fundamental flaws, democracy can be of high or low quality, depending upon what supportive devices it has. Why is democracy important? In a word, it is because every man has a basic desire to live as a free man, not as a slave.

Denmark or Switzerland always tops the “happiness indices” compiled by various international organizations every year. Many people tend to believe that these countries are the happiest in the world because they are stable welfare states. But Danes or Swiss think otherwise. They believe their own nations are the happiest, not because of their high gross national income or beautiful landscapes, but because of the “democracy” they enjoy.

This is true with Denmark, not to mention Switzerland, which has a political system that is nearly close to direct democracy. Denmark became prosperous based on grassroots self-management. The tradition is still alive. What is particularly interesting nowadays is a system dubbed the “Citizen Consensus

Council.” The council, which was introduced for the first time in the world in 1985, was designed to invite citizens to voluntarily participate in discussions on whether to accept new science and technologies. What is important here is the idea that ordinary citizens ― not experts, businessmen, or government agencies ― have the final say in matters related to the acceptance of up-todate science and technology.

First, the “Technology Board” founded by Folketinget, the Danish parliament, recruits volunteers through nationwide media outlets, among whom it selects 15 citizens randomly. They are mostly ordinary citizens, such as housewives, factory employees, street sweepers, and office workers. They have several weekend sessions among themselves before inviting experts to hear their opinions, gather survey opinions, and then write a report. And on the last day, they meet in the parliament to explain their report to lawmakers and the public, and answer questions.

The Citizen Consensus Council has so far discussed a variety of topics, such as genetically modified food, food irradiation, a human genome project, electronic ID cards, and gene sequencing treatment. The conclusions reached by the council are not legally binding. But the Danish government generally formulates policies in a way that respects the council’s conclusions.

Originally, the council was the product of fierce public debates the Danes had in the early 1980s over the construction of a nuclear power plant. Denmark is the home country of nuclear physicist Niels Bohr, who discovered the mechanism of nuclear fission through experiments. Nonetheless, the Danish citizens said no to the construction of a nuclear power plant after heated debates in the wake of an oil crisis in the 1970s, and the parliament respected their decision. Instead, Denmark concentrated on developing natural energies and thus became the world’s largest exporter of wind power plants. It is now clear that an intense form of democracy is needed for the people, even if it is simply to “keep the pot boiling.”

[Kyunghyang Shinmun, July 12, 2012]

www.koreafocus.or.kr

- Distress Call from House Poor - China Risk in Korean Economy - Reasons to Speed Up Korea-China FTA - Korea’s Rise as Northeast Asian Oil Hub - Importance of Basic Research

Distress Call from House Poor

Kim Heung-soo President Construction and Economy Research Institute of Korea

The term “house poor” was unfamiliar to most of us not so long ago. But today everybody understands it, with frequent newspaper stories recounting what has become a very serious national problem. Their blaring headlines say, “Half of salaried people with a house are house poor,” “Monthly interest burdens for the house poor are hellish,” “Real estate bettors reduced to poverty,” and so on.

The house poor in Korea refer to those who eke out a living under heavy interest and debt burdens after taking out excessive loans to buy a house in the Seoul metropolitan area, in particular. House poor individuals have to apportion much of their income to mortgage payments and end up short of cash for discretionary items. Consequently, a considerable number of house

poor people have had to take out additional loans to pay for daily living expenses.

Most of the house poor’s wealth is tied up in real estate and some households lack a stable income source. With virtually no assets except their own homes, the house poor are unable to escape the debt trap unless housing prices rise.

But according to the Construction and Economy Research Institute of Korea, home prices in the Seoul metropolitan area are expected to fall another 2 percent in the second half of this year. Moreover, the upward momentum of the real estate market outside of metropolitan Seoul will likely weaken faster than expected.

The situation will not likely improve soon. The real estate slump is expected to drag on, with the number of houses put on the auction block already rising and the demand for rental housing increasing faster than the demand for home ownership. Against such a backdrop, the trend of price sluggishness is unlikely to be reversed in the near future. Real estate assets on the auction block are mostly housing for ordinary working people, such as row houses, multiplex houses, single-family homes and multi-household dwellings, meaning that vulnerable social groups are the first to fall into a dire dilemma.

The latest data shows that the prices for jeonse (rental security deposits) in apartment units nationwide have risen for 40 consecutive months. This marks the longest period of month-to-month increases in jeonse prices since 1986 when relevant statistics began to be compiled. Jeonse refers to a unique Korean system in which renters give landlords a large returnable deposit instead of paying monthly rent, called “weolse.� During the cited period, jeonse prices for apartment units soared nearly 40 percent, which was about 3.5 times the increase in consumer prices.

The prices of jeonse are expected to rise further this fall, because the number of newly built apartments across the nation will decline by approximately 25 percent in the second half. Due to the rising jeonse prices, an increasing migration to monthly rent arrangements and decline in the value of collateral, there is a growing possibility of renters failing to get back their jeonse deposits. In other words, renters are highly vulnerable to becoming “rent poor.�

Countermeasures are urgently needed to help support the house and rent poor.

In the short run, direct benefits should be expanded. In the mid to long term, measures should be taken to help normalize the market. The short-term measures may include an exit strategy for the house poor by stimulating transactions and direct assistance to help relieve their debt burden.

Measures to minimize the debt servicing burden would include interest rate readjustments and extension of debt maturities. It is necessary to revitalize property transactions by extending acquisition tax exemptions and expanding beneficiaries of state housing assistance for working people and low-income families. The government should also help lighten the burden of home ownership by easing conditions for tax deductions for interest paid on home mortgages.

As part of the mid- and long-term countermeasures, the government should begin preparations for an overhaul of the market structure, including swift revamp of excessive regulations, review of the overall real estate taxation system and reform of the housing subscription deposits system. In addition, the government should immediately scrap the sale-price ceiling system of apartment units, abolish heavy taxes on real estate transfers for multiple home owners, ease rules on the restitution of excess reconstruction profits, and stimulate corporate participation in rental housing business. Reduction of

property acquisition taxes, a revamping of the comprehensive real estate holding tax, adjustment of taxation standards and reform of the apartment subscription system should also be implemented as soon as possible.

The above-mentioned measures for market normalization have already been announced by the government but are still pending in the National Assembly.

The government will be able to send a clearer signal to the market only by implementing all the necessary countermeasures through close consultations with parliament. What is now needed is a big bang, not baby steps.

[Maeil Business Newspaper, July 20, 2012]

www.koreafocus.or.kr

China Risk in Korean Economy

Kwon Soon-woo Vice President Samsung Economic Research Institute

In the second quarter this year, China’s growth rate fell below 8 percent, the worst quarterly decline since 2003, excluding extraordinary circumstances such as the global financial crisis. The decline signaled an end to double-digit growth era in China. This cannot be taken lightly in Korea, where the economy has become increasingly dependent on China’s economic performance.

The explosive growth of the Chinese economy since the 1990s has fueled a rapid increase of Korean exports to China. Korea’s annual exports to China, which hovered around US$10 billion in the late 1990s, have now ballooned beyond $130 billion. China now accounts for 24 percent of Korea’s exports, helping turn Korea into the world’s seventh largest exporter. Besides the export increase, trade with China has greatly helped Korea improve its balance

sheets. Korea’s cumulative trade surplus with China since 1998 amounts to $280 billion. Korea’s aggregate trade surplus in the same period totals around $300 billion.

An economic hard landing in China would undoubtedly deal a major blow to the Korean economy. Despite the benefits from China’s robust economic growth, Korea’s annual economic growth rate has stagnated in the 3 percent range. What would happen to the Korean economy if China’s economy falls into serious trouble? Suffice to say the shock would eclipse the impact caused by the European debt crisis.

Korea can no longer afford to remain addicted to the sweetness of China’s economic vitality. Going forward, Korea should diligently look for ways to reduce its possible pain. First, it is necessary to fundamentally reduce Korean exporters’ dependence on the Chinese market. It is true that China is still an attractive trading partner and thus Sino-Korean trade should continue to be expanded. But Korea needs to further increase exports to countries other than China. In particular, there is considerable room for more trade with India, Brazil and other newly emerging economies. The combined economies of India and Brazil account for nearly 60 percent of the Chinese economy, but Korea’s exports to the Indian and Brazilian markets stand at less than 20 percent of its China-bound shipments. In addition, Korea also needs to map out strategies to intensively exploit other fast-growing emerging markets where the middle class is expanding rapidly.

The structure of Korea’s China-bound exports should also be changed.

Currently, more than 70 percent of Korean exports to China are intermediary goods, a substantial portion of which is processed and re-exported worldwide.

Accordingly, Korea’s export to the Chinese market will largely depend on China’s export environment. The problem is that a slowdown in China’s

exports seems inevitable. China has emerged as one of the world’s largest economies with annual exports worth $2 trillion, but persistent low growth in other parts of the world is weighing on demand.

The Chinese government last year approved the “12th Five-Year Plan” in a bid to boost domestic consumption, amid forecasts that the country’s export-led growth strategy will soon reach its limits. Beijing is expected to step up efforts to create an environment for greater domestic consumption. Private consumption in China accounts for only 35 percent of its gross domestic product, so there is ample room to foster domestic spending. China should now be seen as a promising consumption market as well as a forward base for processing trade. Thus, new export strategies are needed to exploit China’s domestic consumption market.

Korea should also scale back its dependence on China to achieve trade surpluses. To put Korea’s trade structure simply, the nation buys crude and raw materials and manufactures complete products with capital goods imported from Japan before selling them in the global markets. Therefore, Korea is running massive trade deficits with oil-producing countries and Japan, while posting surpluses in trade with China and other export markets. In order to fundamentally strengthen its trade surplus structure, Korea needs to make greater policy efforts to improve efficiency in the use of energy and raw materials and upgrade the localization of capital goods.

The launch of the euro in 1999 was initially beneficial to the European member countries, thanks to the stimulation of regional trade and improved access to financial services. But the sweet fruit has been found to contain a deadly poison called fiscal overspending. In the end, the enjoyment of the sweet fruit didn’t last 10 years. We should remain on high alert to ensure that the Korean economy would not fall prey to fluctuations of the Chinese economy.

[Chosun Ilbo, July 19, 2012]

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Reasons to Speed up Korea-China FTA

Lee Jay-min Professor of Economics Yonsei University

About 100 years ago, some intellectuals in Europe contended that continued cross-border economic integration would end severe political conflicts. But the outbreak of World War I dispelled the idea. What is the current situation in Europe? Contrary to expectations, economic integration has given rise to conflicts.

Nevertheless, the chance of past patterns repeating themselves is very low. An ultra-right regime has been inaugurated in France. But the issue of “nationalism,� a fundamental cause of international conflicts, appears to have disappeared at least among western European countries, particularly after two world wars in the 20th century. This is similar to the disappearance of Wars of Religion in the wake of the Thirty Years War of the 17th century.

What are the circumstances of East Asia? The confrontation between communism and capitalism, which can be called the “wars of religion of the 20th century,” has ended in a victory for capitalism. In the process, the economies of East Asian countries have been closely integrated through trade and investment. But such an economic integration has nothing do to with nationalism.

Let’s take a look at China. China’s communist revolution was cloaked in nationalism. Announcing the establishment of the People’s Republic of China in Beijing’s Tiananmen Square on October 1, 1949, Mao Zedong declared, “China will never again be an insulted nation.” What has been left in China after the fall of communism is nationalism. The Chinese people’s underlying resentment toward their national insult of the past seems to resemble German nationalism which started two world wars in the 20th century.

Probably for that reason, China is acting tough these days. China’s distortions of history under the so-called “Northeast Project” are quite different from its past efforts to culturally embrace neighboring countries. After all, Premier Zhou Enlai’s famed leadership as a great strategist in the early days of national foundation was probably nothing but a gesture to cover up weak national strength.

What about Japan? The Japanese people are well aware that they are the primary target of China’s resentment for insults sustained in the past. But Japan doesn’t seem to have a real intention to repent and apologize for its past atrocities. Japan has instead sought to arm itself with nuclear weapons and transform the Self-Defense Forces into regular military forces. Here is another relevant factor ㅡ North Korea. Incidents like the North Korean attack on

Yeonpyeong Island occurred as the North sought to take advantage of the Chinese people’s perception that South Korea, the United States and Japan would join forces to “besiege” China.

There are two conditions that have enabled South Korea to make a “giant leap forward” over the past six decades. One is that capitalist economies have enjoyed an unprecedented boom and Korea has adequately taken advantage of the upward momentum. The other is that the worldwide decolonization trend has helped South Korea grow into a nation-state on a par with China or Japan.

Peace has been maintained in East Asia on the basis of balanced growth.

The ongoing political and economic incidents worldwide lead us to question the sustainability of the two conditions. Considering the political and economic slowdown in Europe and the United States, the global economy can hardly be expected to repeat the boom of the past 60 years in the future.

Surely, conflict among East Asian countries is entering into a new phase.

What should we do under these complicated circumstances? There is not much that Korea can do about the global economy. As far as the East Asian regional conflict is concerned, however, Korea seems to have some tasks to carry out.

Of course, the top priority is to demonstrate its capability in the fields of diplomacy and security. In that sense, Korea should never again repeat mistakes like the one recently committed in the process of preparing to sign a military intelligence protection agreement with Japan.

Then, what can we do in economic relations? We’d better deepen regional economic integration. Above all, it is desirable to speed up our efforts to conclude a free trade agreement (FTA) with China. There were some political motivations behind the Korea-U.S. free trade deal. Likewise, we can hardly deny the political nature of the proposed Korea-China FTA. Of course, our

economic benefits should not be sacrificed for political purposes.

Economic integration will certainly have limited effect in resolving political conflict. But we cannot say that economic integration is not helpful in reducing political feud. Word War I broke out regardless of close economic integration among European countries, not because of such integration.

[Korea Economic Daily, July 11, 2012]

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Korea’s Rise as Northeast Asian Oil Hub

Cheong In-kyo Professor of Economics Inha University

With its exports rebounding slightly in the second half, Korea is once again expected to achieve US$1 trillion in annual trade this year, according to the latest forecast by the Korea Trade-Investment Promotion Agency. Overall, however, exports of key industrial products including petroleum products, the top export last year and the first half of this year, are expected to slow down.

Petroleum product exports are certain to be Korea’s No. 1 shipment again but underperform in the second half amid lower international oil prices. Petroleum products have failed to capitalize on the nation’s industrial capabilities and geo-economic advantages, thereby strategically coping with changes in global business environment.

Korea has world-class oil refining facilities in Yeosu and Ulsan, while oil

consumption has been on the rise in Northeast Asia. But in contrast to Singapore, where the city-state’s oil logistics hub strategy of the 1980s spearheaded its remarkable economic development, Korea has engaged in simple shipments of surplus petroleum products derived from its full-scale industrial operations. Korea could have grown into an international oil logistics hub, or a stronghold for petroleum logistics-related activities including production, supply, arrival, shipment, storage, brokerage and transactions of petroleum products.

It has been long since experts raised the need to build large-scale petroleum trading facilities in Northeast Asia, pointing to a surge in China’s oil demand.

In 2008, the Korean government decided, though belatedly, to make the construction of a Northeast Asian oil hub a key state project. Korea National Oil Corp. and domestic and foreign petroleum companies are jointly building an 8.2-million-barrel oil storage terminal in Yeosu, southern Korea, in the first phase of the project.

The Yeosu terminal project initially made slow progress due to the outbreak of a global financial crisis. But developers recently secured the necessary financing through corporate bond issuance to begin construction early next year. They are also set to construct another tank terminal in Ulsan in the future, with the long-term aim of raising the total storage capacity to 36.6 million barrels. Despite the expansion of oil storage capacity, Korea may simply serve as a storage terminal and fail to function as a Singapore-style oil hub.

Oil traders worldwide don’t prefer the simple storage function. They increasingly demand that petroleum products at home and abroad be mixed, processed and shipped in accordance with importers’ requirements and circumstances. But Korea’s current law hinders the manufacturing and processing of petroleum products. Korea has maintained relatively high

standards for environmental protection, which means that petroleum products made and distributed in Korea boast top-level quality.

Global oil traders generally order medium sulfur oil, which is made by blending Korea’s high-quality low sulfur oil with low-priced high sulfur oil from third-party countries. This process tends to generate considerable added value. An oil logistics hub in Rotterdam of the Netherlands is known to create added value worth the equivalent of 7.3 percent of the nation’s gross domestic product (GDP), while 11.5 percent of Singapore’s GDP is derived from its oil hub business.

According to data released by the Korea Development Institute in 2009, while the nation’s oil industry mainly centered on crude refining and sales of petroleum products, the industry can create enormous new revenues if petroleum logistics businesses comprising storage, transactions and brokerage are developed. Thus transformed, the industry is expected to generate 4.46 trillion won (US$3.95 billion) in additional output as well as 22,000 new jobs.

However, Korea’s current regulations virtually ban blending of domestically refined petroleum products. Under Korean laws, transactions between local oil refiners and offshore oil traders are only recognized as exports. In addition, the bonded-area products cleared for export cannot undergo blending prior to shipment. In other words, there is no legal problem if petroleum products are loaded on a ship after simple storage, while it is impossible to conduct blending of petroleum products to meet the quality and standards desired by international oil traders. Due to such legal barriers, foreign oil traders are reluctant to use Korea’s oil terminals.

The construction of large-scale oil storage facilities for use as a simple warehouse doesn’t conform to the vision of Northeast Asian oil logistics hub.

We urge the newly elected parliament to revise the customs refund clauses so that blending will be allowed for petroleum products brought into a foreign trade zone. Such a legal revision will pave the ground for Korea’s rise as a regional oil logistics hub.

[Maeil Business Newspaper, July 10, 2012]

www.koreafocus.or.kr

Importance of Basic Research

Kim Seung-hwan Professor of Physics Pohang University of Science and Technology

Korea recently became the seventh country in the world to join the so-called “20-50 Club,” which refers to the group of nations with a population of 50 million and US$20,000 in per capita income. Korea’s population topped the landmark 50 million on June 23. The event sparked a festive mood now that the nation has risen to the ranks of “premier league states,” including the United States, Japan and European countries.

Korea got its start as a developing country with limited resources but caught up with advanced countries in a short period of time by investing intensively in applied research and development projects on the basis of its abundant human resources. It took the United States, Japan and other industrial countries at least four to over 10 years to lift their per capita income from

$20,000 to $30,000. Their strategy for success called for “creative investment,” in which the public sector promoted and increased the portion of basic research, instead of development research.

We should also embark on this journey of creation. So far, our government’s research and development (R&D) strategy has focused on catching up with advanced countries. In other words, Korea has intensively invested in applied research and development projects in order to attain rapid economic growth and quickly match advanced countries in technological and industrial standards.

Over the past five years, the Korean government has increased its R&D investment by an average annual rate of 9.7 percent. As a result of the sustained expansion of R&D investment, Korea ranks fifth in the 34-nation Organization for Economic Cooperation and Development in terms of the absolute volume of R&D investment, and ranks second in terms of the ratio of R&D investment to the gross domestic product. But a strategic paradigm shift is necessary if we wish to overcome a sustained slowdown in economic growth amid the global economic crisis and attain a per capita income of $30,000.

Recently, a fierce debate has erupted over whether to pursue “stand-alone R&D” or “catch-up R&D,” as the nation’s R&D resources are limited amid a campaign to promote fiscal soundness. We cannot overlook the fact that the government’s R&D investments have boosted the development of our nation’s state-of-the-art industries, such as semiconductors, displays and wireless handsets. But we should now abandon the short-term catch-up strategy as well as the model of quantitative economic growth.

In order to cope with the ever-intensifying global competition and challenges

from emerging economies and to remain competitive in the world markets, the Korean government should map out a new policy paradigm for creative R&D and clearly set the direction of its mid- and long-term R&D investments. In other words, the government’s R&D paradigm should be shifted to creative R&D to emphasize basic research, which will pave the ground for the creation of original technologies and high added value and the mid- to long-term economic growth.

The share of basic research investment in the government’s 2012 R&D budget, excluding defense expenses, reaches 35.2 percent, which is significantly low compared with the corresponding U.S. rate of 54 percent (as of 2009). Despite the growing calls for creative R&D investment in recent years, its concept still remains ambiguous. Amid the ongoing global economic crisis, some critics even argue that the catch-up R&D strategy should be maintained depending on the technological levels of individual industries.

In fact, the government, rather than the private sector, should take responsibility for basic research, due to high investment risks and the nature of research results as public property. As far as basic research is concerned, sustained long-term investment is needed, because the cumulative effect in terms of return on investment, as well as long-term ripple effect, is crystal clear. The United States established the National Science Foundation in 1950, and Germany set up the Max Planck Foundation in 1948. Compared with the advanced countries, Korea’s cumulative investment in basic research remains far inferior.

Countries worldwide increasingly tend to protect their knowledge of basic research as their own national resources. Thus international competition to secure more intellectual property on basic research is getting much fiercer. In the United States, 70 percent of research papers cited in industrial patents are

the results of the government’s basic research support projects, while a 10 percent rise in British universities’ basic research expenses has led to an increase of 1 to 4 percent in the number of industrial patents.

There is a growing possibility that basic research is utilized in applied research and leads to greater academic discovery and research accomplishments. Unlike in the past, basic research is freshly recognized as a public property that cannot be acquired without a cost. This is the reason the United States and other advanced countries are increasingly expanding investment in basic research based on creative thinking.

Korea recently set up the Institute for Basic Science (IBS) within the International Science Business Belt, stepping up its bid to boost investment in basic research. Established under the core principle of excellence, the IBS aims to secure creative knowledge and fundamental technology for the future through world-class basic science research and foster next-generation leaders in basic scientific research. The institute also envisages 50 research centers by 2017. Considering the limited financial resources and other circumstances, however, the roles of the IBS and other existing basic research projects should be redefined and mutually complemented.

In the knowledge-based society, science and technology is a key to national competitiveness and a locomotive of economic growth that also strengthens industrial competitiveness and creates jobs. In particular, basic research is a source of science and technology that creates new knowledge and fosters creative human resources. It has been proven that basic science can generate various socio-economic ripple effects. Clearly, basic research is a strong locomotive that can lead our nation into a creative paradigm amid the global economic crisis and the ever-intensifying international competition. We should now accept the fact that basic research is no longer a “freebie.”

[Chosun Ilbo, July 12, 2012]

www.koreafocus.or.kr

- Korea Needs Integrated Foreign Aid System - ‘HR 121’ and Japan’s Mistake - Anxieties and Hopes of 40-Somethings - Struggle of Senior Citizens

Korea Needs Integrated Foreign Aid System

Choi Joong-kyung Director of Dongguk Politics & Economics Research Center Former Minister of Knowledge Economy

Korea’s economic growth is a model of independent development that stands out prominently in world history. Koreans didn’t simply follow economic development formulas preached by Western intellectuals. In certain cases they even moved in the opposite direction to achieve great success. This is why I wrote a book about Korea’s economic development, “The Success Story of a Green Frog.” Korea, the only country that transformed itself from an aid receiver to an aid giver in a single generation, is a coveted role model of many developing countries who aspire to learn from its experience. Now, our nation is in a position to teach these countries.

Are we ready to guide them as a warmhearted friend and kind neighbor?

Unfortunately, the answer is “no.” We don’t even have proper manuals or an

overseas aid management system befitting the increasing volume of aid funds.

If you want to help someone, you should first know what the person needs.

Most countries wishing to learn from Korea’s development experience are interested

in

its

know-how

of

industrial

development,

especially

manufacturing. However, our industry-related government agencies, including the Ministry of Knowledge Economy, have been pushed aside in foreign aid programs.

This is mainly because Korea’s foreign aid primarily stresses macroeconomic policies or humanitarian support such as education and sanitation rather than industrial cooperation. Adding further to the inefficiency, the Ministry of Strategy and Finance and the Ministry of Foreign Affairs and Trade are locked in a turf war over foreign aid policy. Currently, the Ministry of Strategy and Finance is in charge of credit assistance, or aid in the form of loans, while the Ministry of Foreign Affairs and Trade handles grants. This is nothing but a power-sharing structure that resulted from the fight for control.

Moreover, aid programs are divided among several ministries, each focusing on different recipient countries and areas of interest. In short, there is very little room to pursue greater efficiency and hence the urgent need to set up an integrated system for administering foreign assistance. Drawing up countryspecific projects to increase the efficiency of aid for each beneficiary, allocating funds to individual projects, and selecting and managing project practitioners ― there are numerous government-wide tasks that require expert knowledge and systematic coordination.

The aid-giving function should be integrated into a single entity. Korea Exim Bank’s department responsible for management of external cooperation fund and the Korea Overseas Cooperation Agency (KOICA) should also be merged.

If a new government agency is created to take full control of foreign aid,

officials from industry-related agencies, including the Ministry of Knowledge Economy, should participate as core members. Such an agency is necessary for proper management of the ever-growing foreign aid funds.

Japan already has revamped its foreign aid system by integrating the agencies handling credit assistance and grants. Most advanced countries, including Britain, Australia and New Zealand, also have a full-fledged foreign aid administration agency.

Foreign aid doesn’t benefit the recipient countries only. It is a new type of service industry that can create jobs such as development consultants. For instance, the Ministry of Knowledge Economy is promoting the “60+20� project to dispatch overseas a team of one retiree in his 60s and two young men in their 20s so they can together search for blue ocean enterprises such as coal development.

By improving the efficiency of its foreign aid programs Korea will also be able to enhance its prestige in the international community. For Korea today, it is far more significant and realistically beneficial to firmly secure its position as a knowledge-based country in the global community, rather than increasing its physical might through further economic growth. The first step in moving toward a knowledge-based country is to play the role of a good teacher to countries who eagerly want to learn from its experience of economic development. For Korea to become a partner for economic development as well as a good teacher of other nations, it is prerequisite to drastically renovate its foreign assistance administration system.

[Dong-a Ilbo, July 9, 2012]

www.koreafocus.or.kr

‘HR 121’ and Japan’s Mistake

Lee Ha-won Assistant Political Editor The Chosun Ilbo

July 30, 2007, when the U.S. House of Representatives passed HR (House Resolution) 121, is an important day in Korean diplomatic history. Proposed

by Rep. Mike Honda of the Democratic Party, the resolution on imperial Japan’s “military sex slaves” during World War II caused a huge stir by calling for the Japanese government to formally acknowledge and apologize for their crimes. It was even more shocking because the United States had traditionally avoided being involved in matters related to historical friction between Japan and Korea.

Up until early 2007, few people expected the U.S. Congress would adopt the resolution, which had been promoted several times since the 1990s. Japan’s lobbying networks in U.S. political circles, often compared to “nerve cells,”

looked insurmountable. However, one decisive mistake by Japanese politicians accelerated the resolution’s adoption.

On June 14, 2007, a group of 63 leading Japanese figures, including 45 lawmakers, appeared in a full-page ad in the Washington Post. In the ad, titled “The Facts,” they insisted that there was no coercion in mobilizing “comfort women” by the Japanese government and military during World War II. The ad refuted an earlier ad, titled “Truth,” in the same newspaper, which had been sponsored by Korean-American organizations in the United States.

Particularly, the Japanese even claimed that the United States asked Japan to set up “comfort stations” after occupying Japan in 1945.

The ad brought about a strong backlash in the United States. Many American opinion leaders turned their backs on Japan. Vice President Dick Cheney, who had visited Japan shortly before the dispute erupted, expressed displeasure and instructed an investigation into the ad’s background. Nancy Pelosi, speaker of the House, also made up her mind to get the resolution pass through at this time.

The Korean-American community, which had campaigned for the resolution’s passage by organizing the HR 121 Coalition, increased their lobbying activities to convince the members of the House of Representatives who were outraged by the Japanese ad. Thus, what had looked impossible only a month and a half earlier was recorded as a historical fact.

Japan has recently aroused the anger of Americans again by repeating a similar mistake. Earlier this year, the Japanese Foreign Ministry requested the removal of a memorial dedicated to “comfort women,” set up in New Jersey by local Korean-Americans with U.S. citizenship, drawing criticism from American society. There is a convincing view that Secretary of State Hillary Clinton’s

recent remark that the Japanese euphemism ianfu, meaning “comfort women,” should be replaced with “sex slaves,” derived from her displeasure with the Japanese action.

In a media interview, Kathleen Stephens, former U.S. ambassador to Korea, also said, “The women who were forced into sexual slavery by Japan suffered a grievous harm and horrendous violation of their human rights.” Stephens, who is still serving as a high-ranking official at the U.S. State Department, said that this was not only her own view but also the view of the U.S. government.

All this indicates that if Japan continues to deny military sexual slavery and try to cover up its wartime crimes, the backlash in the United States will only escalate. Now, the Korean government and civic organizations should think seriously on how to lead this rare situation to serve our national interests.

[Chosun Ilbo, July 23, 2012]

www.koreafocus.or.kr

Anxieties and Hopes of 40-Somethings

Kim Yong-ha Professor of Economics Soonchunhyang University

In Korea, the baby-boom generation commonly refers to a group of 7.16 million people who were born between 1955 and 1963. Those born between 1964 and 1974 total 9.34 million, comprising an even larger generational segment, although their presence has been forgotten. The 40-somethings, or those aged 39 to 49, have demonstrated their formidable power in the April general elections this year, drawing attention as future leaders of Korean society.

Generation F (those in their forties) is identified as a sandwich generation caught between those in their 20s to 30s and those in their 50s to 60s.

Conversely, they bore the brunt of Korea’s rapid changes. They grew up while Korea was undergoing economic advancement, political democratization,

social liberalization, and globalization. Nevertheless, their generation has almost been forgotten amid a compressed development process.

Indeed, those in their forties are the generation who are burdened with duties to care for their elderly parents and support their young children at home, and lead their organizations as mid-level managers, if not top executives, at workplaces. Also, as the highest income earners, they are the greatest contributors to national revenue. Therefore, the thoughts and actions of 40somethings will determine the future direction of our nation. It may be said they are the pillars of our nation and society; they should stand upright and straight, if our nation is to remain strong. However, there are signs here and there that these pillars are shaken.

The anxieties of 40-somethings seem to stem mostly from their real estate investment. While the first-generation baby boomers were able to buy their homes at relatively lower prices during the real estate boom, a considerable number of 40-somethings took out loans to belatedly join the real estate boom during the Roh Moo-hyun administration when property prices skyrocketed. In the past four years or so, they have degenerated into the epicenter of household debt crisis under the painful burden of honoring their monthly mortgage payment because property prices have plummeted and transactions have stagnated.

Although they have advanced into the central segment of society, the 40somethings are suffering from the accumulated stress over class barriers as the 50-somethings maintain their power as the dominant generation. From the standpoint of 40-somethings, the first-generation baby boomers benefited from the massive corporate restructuring triggered by the financial crisis at the end of the 1990s. In contrast, they are stifled under dual yokes as they are unable to break through the class barriers with 50-somethings while struggling in the

most densely populated competitive structure within their own age group.

Moreover, they are worried about their post-retirement livelihoods due to high expenditures, including the cost of private tutoring for their children. Even though their spouses also are working to meet the hefty expenditures, the future seems extremely uncertain.

In view of their inherent nature, the problems faced by the 40-somethings are hard to resolve. It is difficult to rein in the skyrocketing property prices, but as seen in the real estate bubble burst in Japan two decades ago, there seems to be no cure for a structurally depressed market like one in Korea these days. The property market shows no sign of recovery in spite of various government measures. But a market crash coupled with recession should be prevented at all cost.

It is the time interest rates should be drastically lowered without wasting more time. The real estate deregulation, which has been postponed out of concern for negative side effects, should also be boldly carried out. The overdue intergenerational power transition is a tougher issue engulfed in the conflicting interests between generations and population aging. At present, there is no other choice for the 40-somethings but to wait while honing their capabilities, but an opportunity for massive changes is certainly on its way with the firstgeneration baby boomers beginning to retire.

In this respect, the government would need to make diverse approaches in extending the mandatory retirement age to cope with an era of aging population. The 40-somethings are a generation who continuously dream about changes to free themselves from the stifling reality. The Kim Dae-jung and Roh Moo-hyun administrations betrayed their expectations to shed the mantle of low growth, so the 40-somethings boldly voted for Lee Myung-bak,

who was considered an icon of economic growth.

The 40-somethings, at the moment, are desperately searching for a new alternative to resolve all their problems in one stroke, as the incumbent government has also failed to overcome low growth. They are agonizing over whether the high-speed growth of the past is no longer tenable, and whether their problems will be solved if the politicians’ promises for welfare and economic democratization are realized.

The agony and pain of 40-somethings is certainly understandable, but it is also clear that they must overcome their problems on their own. In terms of age, they are in no position to look for protection. Rather, they are obliged to embrace the previous and succeeding generations to lead the nation.

No leader can solve all problems in one stroke, nor should the people choose a leader claiming that he can do so. If the baby boomers have brought Korea to the threshold to an advanced society, it is the 40-somethings that should build a sustainable, happy future for the nation. When they bravely take up the historic task and accomplish it, the 40-somethings will emerge as a trustworthy generation to play the key role in the Republic of Korea.

[Dong-a Ilbo, July 6, 2012]

www.koreafocus.or.kr

Struggle of Senior Citizens

Lee Sang-yi Joint Representative of Welfare State Society; Professor of Preventive Medicine Jeju National University

Whenever I give a lecture on welfare state, I never skip saying, “I want to tell you, everyone, that our nation has the highest suicide rate among all the OECD [Organization for Economic Cooperation and Development] member countries.” But this hardly surprises anyone and they display little reaction. It should not be surprising, actually, because Korea ranks at the top in other things on the bad side.

Hence I raise my pitch a notch, saying, “Our country’s suicide rate is as high as three times the OECD average.” Only then do they pay a little attention, looking somewhat shocked. It’s about this time that I add, “Korea’s suicide rate in 2010 was 13.6 per 100,000 people and it rose to 31.2 in 2012, up 2.3

times in a decade.” Then I go a step further. “Look, Korea’s suicide rate for the elderly is as high as five times that of the OECD average. This means while one European grandfather commits suicide, five Korean grandfathers take their own lives.” At this point they assume serious looks and listen more carefully.

Korea is transforming into a social ecosystem unfit for people to lead happy lives. Anxiety, misery and despair are some of the opposite conditions to happiness, which are often the causes of suicide. In 2000 when the OECD’s average suicide rate was 12.9, Korea recorded 13.6. Over the past decade, OECD’s rate has decreased to 11.3, but Korea’s figure has jumped 2.3 times.

The widening gap is mostly due to the suicide rate among elderly Koreans, who are setting world highs annually.

It may be said that our society is collectively driving the elderly into chronic anxiety and misery, and then finally to suicide. This is noting but a modern version of goryeojang, an ancient Korean custom of leaving an elderly parent in the mountains to die alone. There are reasons why I believe so.

First of all, elderly Koreans are the poorest among their peers in all OECD member countries. Yet their nation is the world’s seventh largest exporter and 12th largest economy as well as home to such world-renowned multinational conglomerates as Samsung and Hyundai. The elderly poverty rate is 6 percent in Sweden and less than 10 percent in all other European welfare states, and 13.5 percent on average in OECD member countries, but 45 percent in Korea.

Elderly Koreans are more than three times poorer than their peers in other OECD member countries. This is primarily because only 31.8 percent of elderly citizens aged 65 or older benefit from the public pension system.

Secondly, the pattern of elderly households has significantly changed over the past decade. The percentage of elderly parents who live with their adult

children has dropped to 27 percent from 55 percent, while the households of a single elderly person or couple have risen to 70 percent from 40 percent. This means the possibility of the elderly to be seized by loneliness and depression has grown that much. After poverty and loneliness, depression is the most frequent reason for the rapidly increasing suicide rate among the elderly. Now, our society should concentrate on the following two tasks.

First, old-age income should be ensured through public means. While removing the blind spots in the national pension scheme and paying livable wages are the prerequisites for supporting the generations of the elderly from a long-term view, the most urgent task is to raise their subsistence allowance from the current maximum of 94,000 won to 200,000 won.

Secondly, more jobs should be created for elderly people who want to work.

Any normal government should consider this an obligation to the public and a human rights issue of elderly citizens. The government would violate the Constitution which stipulates the protection of the basic rights of citizens by leaving the elderly people committing suicide unattended. Therefore, politicians should unite across party lines to resolve this problem together.

A group of senior citizens have made a timely move to resolve the problem on their own. They launched the “Senior-Junior Labor Alliance for Welfare Era” in a rally held on July 17 in Seoul. With a plan to organize a labor union of elderly workers, the alliance has vowed to organize senior citizens’ political and social voice on welfare and job creation for the elderly. In looking forward to Korea’s successful transformation into a dynamic welfare state where the human rights of senior citizens are properly protected, I give my full support to their struggle.

[Hankook Ilbo, July 20, 2012]

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- Nam June Paik: How the First Video Artist was Born - Rewriting the History of Farming on the Korean Peninsula - Dedication is Park Ji-sung’s Middle Name - MICE Industry Doing its Best to Promote Korea - Confucian Academies and Humanistic Education

Nam June Paik: How the First Video Artist was Born

Hong Sung-wook Professor of Biological Science Seoul National University

My experimental TV is not always interesting, nor is it always uninteresting.

It’s like nature that is beautiful not because it changes beautifully, but simply because it changes.

Nam June Paik (Paik Nam-june) composed the above poem after his first exhibition in a small German city named Wuppertal in 1963. At the show, held after Paik had immersed himself in electronics and physics, introduced halfbroken pianos and 13 TV sets, their circuits modified to beam distorted images.

It is widely known that Paik was born to a well-to-do family and received an excellent education, which was unthinkable for most ordinary Koreans under

the Japanese colonial rule. However, a good family background does not make everyone a world-class artist. Paik studied music while young, and went to Japan to study philosophy and aesthetics. Then he went to Germany where he participated in the Neo-Dada art movement as a member of the Fluxus group.

There he was influenced by fellow members and famous composers Karlheinz Stockhausen and John Cage.

As the only Asian in the influential avant-garde art group, Paik began exploring a unique artistic world of his own. Around that time he was amazed by the electronic equipment in a radio station and immediately paid attention to TV, which led him to study electronic engineering.

Paik put TV sets at the center of his exhibition, but this alone did not earn him the title of “the first video artist.” While engaging in artistic activities in the United States in the 1960s, Paik was keen on justifying his new art projects. In other words, he needed to create the philosophy of art to explain his unconventional creative activities. In the process, Paik faced a slew of skeptical and critical reviews saying that his work was not fine art but a mediocre technology. Some complained that he had beautified the new technology to conceal the harmful effects of new media. They reflected the conventional pessimistic view of technology in the American mainstream intellectual community of the 1960s.

Paik had to overcome many obstacles before his work utilizing TV sets and videos was recognized as fine art. But he did not sit still and wait for sympathetic comments from critics. Instead, he adopted two concepts: Norbert Wiener’s “cybernetics” and Marshall McLuhan’s “hot media.” The combination led to “Participation TV.” Paik believed video art could help TV watchers overcome problems associated with passive viewing. He also tackled the criticism that media art was overly optimistic about technology.

Technology, of course, comes with side effects and problems, but what can possibly resolve these issues is not negation of technology but “more technologies,” Paik argued. He dubbed his video art as “humanizing technology,” which was adopted by advocates of “radical software” as a new philosophical stance that went beyond pessimism or optimism over technology.

Can video art, which is presented on one or two TV screens set up in an art museum, play such a revolutionary role? In all fairness, it seemed such a simple setup was not up to the task. What should be done was the delivery of video art to a large group of viewers, as if it were a broadcast program. To that end, images had to be edited and manipulated in accordance with TV broadcasting standards.

Paik worked with Japanese engineer Shuya Abe to produce a video synthesizer that could manipulate visual images for broadcast. On August 1, 1970, Paik’s four-hour broadcast TV show titled “Video Commune” was aired from WGBH, a public television station based in Boston. It was the world’s first broadcast using a video synthesizer. Combining seven images into a single screen, the synthesizer reflected Paik’s longstanding passion for the piano, which beautifully mixes sounds to create new harmonies.

This spring, I interviewed Shuya Abe, Paik’s longtime collaborator. According to Abe, Paik frequently said any would-be artist should pursue a single subject for 10 or 20 years. Paik, a versatile pioneering artist, mixed music, philosophy, media theories, cybernetics and electronic engineering to create video art as well as its theoretical footing, and spread it throughout the world. Paik’s endeavor fused two contrasting elements: his wide-ranging interest in numerous different things and his long-enduring focus on a single topic.

On the occasion of the 80th anniversary of Paik’s birth, which falls on July 20, it would be meaningful to broaden our views to ponder where his creative genius and endless innovation originated from.

[Dong-a Ilbo, July 5, 2012]

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Rewriting the History of Farming on the Korean Peninsula

Choi Young-chang Assistant Culture Editor The Munhwa Ilbo

The Neolithic Age is significant in many ways in human history. According to the classical theory, Neolithic men used polished and ground stone tools, unlike Paleolithic men, who used chipped stone tools, and also made pottery.

They started to grow plants and domesticate animals, settling down to form communities. Considering these events exerted dramatic influence on civilization, Western archaeologists of the 20th century, including V. Gordon Childe, defined them as the “Neolithic Revolution” or “Agricultural Revolution.”

These academic observations or criteria have been gleaned by European archaeologists mainly through their study of the Middle East, including Mesopotamia, and Europe. Hence, they do not necessarily apply worldwide

and the definition of the Neolithic varies from region to region. In Northeast Asia, for example, pottery production rather than the start of agriculture has been the primary demarcation of Neolithic civilization due to the absence of archaeological remains of farms in the region.

Against this backdrop, the recent discovery of underground remains of a farm field at least 5,000 years old from the Middle Neolithic layer near the East Coast in Goseong County, Gangwon Province is drawing considerable attention. The Neolithic agricultural remains are located within the “Munam-ri prehistoric site,� which is designated Historic Site No. 426. The Hemudu Neolithic site in Zhejiang Province attests to rice cultivation on paddies in southern China about 7,000 years ago. But there has been no report about remains of Neolithic farm field ever discovered in Korea, China or Japan.

Archaeologists of the National Research Institute of Cultural Heritage, under the umbrella of the Cultural Heritage Administration, found the Neolithic agricultural remains, which they expect will resolve the long-standing disputes concerning the development of early agriculture. Neolithic sites around the Korean peninsula, including North and South Korea, have yielded a number of farm-related stone implements, including broad-bladed hoes, plowshares, and grinding stones and plates, as well as carbonized grain such as millet and proso millet, and pottery vessels with pressured grain marks, suggesting that Neolithic residents of the peninsula engaged in farming.

Based on these finds, North Korean scholars assert that agriculture began in the early phase of the Neolithic on the Korean peninsula, while South Korean scholars remain divided over the claim. Some scholars in the South maintain that residents of the peninsula began growing grains like millet and proso millet during the latter part of the Early Neolithic or after the Middle Neolithic, while others believe that Neolithic residents did little more than

slash-and-burn or sowing seeds while full-fledged farming began in the Bronze Age. The Neolithic farm field at Munam-ri is expected to have a monumental impact on the early agricultural history on the Korean peninsula. It was only in the 1990s that archaeologists began to excavate pre-modern agricultural sites in South Korea. In other words, the archaeologists are not sufficiently experienced yet in excavating and surveying ancient farm sites; some of the sites reported to be agricultural remains would later cause controversy as to their credibility.

Excavation of the Munam-ri prehistoric site, which began in 2010 as part of a comprehensive refurbishment project of the site, is set to be wrapped up this month. A follow-up investigation plan should be drafted and funding secured immediately so that excavation can be resumed next year. It will be a long journey requiring at least 10 years to complete the excavation and the scientific examination and analysis of all finds, write a report, get it published by a respectable journal, and acquire the approval of the international academic community.

In the meantime, the domestic academic circles hope the latest discovery will stimulate more significant excavations of Neolithic farm sites in the years ahead. The day is not far away when the history of Neolithic agriculture on the Korean peninsula will be rewritten based on far richer evidence.

[July 23, 2012]

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Dedication is Park Ji-sung’s Middle Name

Gang Dong-sam Senior Sports Writer The Seoul Shinmun

The term “water carrier,” informally used in European football to describe devoted players who let the stars shine, was what came to my mind when I reported the first story on Park Ji-sung’s move from Manchester United to QPR on July 10. The news was met with frenzied response in Korea as was expected. Some said, “He doesn’t have much to go before retirement. He should have stayed with Manchester United,” while others argued, “No way.

He was spending too much time on the bench. He should have left a long time ago.” It was as if a beehive has been poked with a stick, and rightfully so.

Surely, we are talking about the Park Ji-sung who played for Europe’s top clubs, partaking in the UEFA Champions League, the Premier League and the FIFA World Cup, and making a name for himself as the most successful Asian

soccer player. And he had said time and again that he wanted to retire as a Manchester United midfielder. Now he gave up the privilege, per se, of belonging to one of the strongest clubs in the UK and took up a challenge.

Very much in line with the title of his book which came out in 2010, “Giving Up Myself for a Greater Self,” Park chose to embark on an adventure at a relatively old age of 31. Supposedly QPR’s attractive vision won him over, but maybe he just wanted that extra minute of playing time when his career has entered into the last 20 minutes of the second half of the game.

In order to survive among the far more expensive players such as Christian Ronaldo and Wayne Rooney, Park had no choice but to run, run more, and yet run some more. For eight years, his play was such that he let his teammates have some time to catch their breath out on the field and made sure that the transition from defense to offense and back was smooth enough by strategically placing himself in empty spots. Gennaro Gattuso, an Italian professional footballer, praised Park as “one of the few football players who really understand the meaning of commitment.”

Possibly it was not Park Ji-sung that Manchester United let go or lost but his sense of commitment that filled the whole football pitch. Likewise, QPR bought his devotion, not Asia’s big star. A team like QPR that avoided relegation by a hair’s margin and remained in the Premiership is in great need of players like Park who can dedicate and devote himself. After all, victory is earned through the players’ sacrifice.

How much ground will Park Ji-sung cover as a QPR player? We have every reason to look forward to the new season where he will play wearing the new blue-striped uniform. I hope we all heed his sense of commitment in playing an “extra minute” for the team.

[July 21, 2012]

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MICE Industry Doing its Best to Promote Korea

Choi Tae-young CEO Intercom Convention Services, Inc.

On June 26, delegations from Zimbabwe and Zambia comprised of tourism ministry officials and journalists arrived in Korea to learn lessons from the success of the 19th UNWTO General Assembly held in Gyeongju. The Gyeongju meeting in October 2011 boasted the largest turnout in the past 10 years, with ministers and vice ministers from 127 nations participating. At the time, the Belgian minister commented that the 19th General Assembly was “perfect and successful” and that he wanted to learn from Korea to help Belgium repeat the success at the 2017 General Assembly in Flanders.

Some of the key success factors include the beauty of Gyeongju, which was the capital city of a millennium-long ancient dynasty, and smooth proceedings of the meeting. And behind all this lies Korea’s competitive MICE industry.

Korea has staged large-scale international events such as the Seoul G20 Summit, accumulating experience that contributed to the success of the global tourism assembly.

As the Belgian minister as well as the Zimbabwe and Zambian delegations earnestly asked for investment and education as well as advice, it should be safe to say that Korea’s MICE industry is ready for overseas exports. MICE stands for meetings, incentives, conferences and exhibitions, a concept that emerged toward the end of the 1990s when Singapore and Hong Kong made an economic leap forward on the back of their convention industry. The “C” in MICE may also refer to conventions, as the convention industry taking up the most dynamic element in the MICE sector has become an umbrella term encompassing various aspects of meetings, tourism and exhibitions.

The MICE industry creates high value added. According to the “MICE Industry Statistical Report” by the Korea Tourism Organization, the production inducement effect of holding MICE events in 2010 amounted to some 17.8 trillion won. The industry is supposed to create 164,000 jobs according to the analysis, having a huge impact on the Korean economy. It deserves to be called a factory without smokestacks or an industry laying golden eggs.

The number of visitors to conventions is much larger and their spending is significantly higher than that of ordinary tourists. Hosting big events has the extra bonus of promoting and marketing the host city and that is the reason why major cities around the world look to foster the MICE industry to pump up their economy.

Seoul has recently served as the venue for the Nuclear Security Summit and the G20 Summit, manifesting to the world the “Korea brand” and its capability. According to the Union of International Associations’ statistics

announced in 2011, Korea ranks 6th in the world in the number of international conferences hosted, following Singapore, the United States and Japan, with the annual total of 469, or two notches up from the world’s 8th in 2010. However, there is more that needs to be done.

In 2009, the Korean government designated the MICE industry as one of the future growth engines. It announced plans to set up a budget and policy support system to create conditions conducive to hosting more MICE events by expanding and clustering relevant facilities. Related associations also took the initiative in bringing more conferences to Korea, with professional convention organizers putting in a lot of effort and hard work on the front line.

Academic research also contributed to improving the MICE industry. The cooperation of the private sector, the government and research institutes provided crucial momentum.

This is only the beginning. The tripartite cooperation needs to be strengthened further to grow the MICE industry, which will enhance Korea’s status in the international community and benefit the national economy. As long as the government continues with its commitment toward MICE industry-friendly policies and the industry and the academia keep up with their cooperative efforts, Korea will be that much better off.

[Maeil Business Newspaper, July 21, 2012]

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Confucian Academies and Humanistic Education

Lee Bae-yong Chairperson Presidential Council on Nation Branding

Our society is gripped with fear of school violence with the parents haunted by concerns for their children’s safety. The bullies must be punished and all the necessary measures need to be taken to restore discipline. However, prevention is the best policy and school education needs to be revisited in this light.

Passion for education has made Korea what it is today by enabling the nation to overcome difficulties and achieve miraculous development. Traditional education taught not only technical knowledge but the virtues needed to become a better person. Education at seowon, the private Confucian academies of the Joseon Dynasty, was responsible for harmonizing and bringing together future-oriented values of communication, solidarity, sharing, consideration, respect for nature, and peace.

Upon entering the seowon grounds, you come into contact with beautiful scenery. Silent as they are, trees bearing witness to hundreds of years of history, clear water running through the valley, and the wooden buildings that stand in perfect harmony with the contours of the mountains in the background mark the beginning of a great learning and awakening.

Harmony between man and nature gets the man thinking deeply about what it is to be human by learning from nature. The Five Elements (wuxing, or ohaeng in Korean), namely, wood, metal, fire, water, and earth are associated with the Five Tenets of Confucius ― benevolence, justice, politeness, wisdom, and fidelity. In other words, people learn to be benevolent through trees, just through metal, and polite through fire. People gain wisdom and humility from water as it runs from high to low places, and they learn to embrace others by watching the water flow into the ocean. Earth provides the ground where all forms of life grow, and as such all personal relationships are built on trust.

In the seowon academy, the scholars sought to learn these rules of nature by heart. They did not gain knowledge only from the teachers and books, but they were enlightened by introspection and befriending nature. They learned consistency by looking at evergreen pine trees, uncompromising integrity from bamboos, patience and tenacity through gingko trees for they don’t bear fruit until two generations later, and nonchalance toward the worldly temptations from the lotuses which keep their purity in the muddied water.

Apricot blossoms, peonies and grape myrtles which bloom and wither and bloom again show the mysterious ways of nature, teaching people to become discerning and ethical. The noted philosopher and teacher Yi Hwang (pen name Toegye) reflected such ideas of man-nature harmony and wisdom in his design for Dosan Seodang. He left gaps in the wall on the left side of the

village school to allow students to get glimpses of nature and learn its grand ways.

The signboards hanging in the academies have special messages on them.

Passing through the doors, studying in the lecture hall or in the library, and paying ritual services to sages, scholars took lessons from the signboards that hung in each space. Nearby academies in each region communicated with one another. The visitor logs kept in the academies are filled with famous Confucian scholars’ names. They stayed in dormitories and naturally learned the virtues of respecting elders and cooperating with one another, which is the beginning of today’s teamwork.

Learning from the old to create something new is a wisdom that we need to be proud of and one that we need to hand down to future generations as a valuable cultural asset. The Presidential Council on Nation Branding is pushing to add the Confucian academies of the Joseon period to the UNESCO World Heritage List because we believe they deserve to be preserved as mankind’s common heritage.

[Seoul Shinmun, July 19, 2012]

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- North Korea’s Food and Agricultural Situation in the Kim Jong-un Era - Effects of Population Aging on Economy and Car Market - Rain and the Economy - 10 Million Inbound Visitors: New Trends in Korea’s Tourist Industry

North Korea’s Food and Agricultural Situation in the Kim Jong-un Era Kim Young-hoon Research Director Korea Rural Economic Institute

I. Introduction The food crisis in North Korea in 1995 exposed the enormous problems facing the country’s agriculture. When Pyongyang published the Agricultural Rehabilitation and Environmental Protection Program (AREP) with the help of the U.N. Development Program in 1998, the outside world was at last able to have closer views on the agriculture and food situation in the North.

North Korean industrial structure and inter-industry population distribution have showed no significant improvement over the decades, as the socialist economic management system provided little impetus for change. The supply of items essential for agricultural production such as fertilizer, seeds, farming machines, insecticides, vinyl sheets and fuel have remained insufficient. Poor infrastructure facilities, including reservoirs, pumping stations and dykes, have made farming seriously affected by even minor climatic adversities. Barren mountains have caused frequent flood disasters.

These diverse factors have combined to keep North Korean agricultural production far below the potential output. Commercial imports to supplement food supply have been restricted by an acute shortage of foreign exchange. As limited resources for the agricultural sector are put heavily into food production, other industrial activities are seriously compromised. Livestock

farming is one of the more disadvantaged areas.

Kim Jong-un inherited power under these circumstances. Securing food for the North Korean people through improved agricultural production is one of his primary tasks. This study intends to look into the North Korean food supply situation and farm policies, focusing on the challenges facing the new leader as he tries to carry on the immense task of feeding his 23 million people.

II. Succession of Past Legacies and Exploration of New Policies 1. Agricultural Policies before Kim Jong-un 1) Strategies to Avert Food Crisis When President Kim Il-sung died in 1994, his son Kim Jong-il inherited an economy in chronic despair and serious food shortages. From the start, Kim Jong-il’s rule was characterized by continuous efforts to avert famine conditions and overall economic adversity. In the middle of the 1990s, North Korea began implementing policies to increase its food supply, develop livestock and improve agricultural infrastructure. These policies required new systems, new capital and opening doors to foreign assistance, a dramatic departure from previous policies in that reforms were employed to achieve economic goals.

2) Major Agricultural Policies North Korea adopted a series of practical policies such as “seed revolution,” “double cropping” and “potato revolution” to fight the acute food shortage of the mid-1990s. For infrastructure improvement, the North rearranged farmland and refurbished waterways. As for livestock, smaller-size animals were emphasized.

The priority task was providing improved seeds. However, few breakthroughs were achieved apart from improving some maize and potato varieties and their distribution system with the help of South Korean and private international organizations.

Tremendous efforts were made to expand double harvesting across the country.

In 1997, Pyongyang set a goal of increasing the amount of double-cropping land to 300,000 hectares from the existing 40,000 hectares. This required a colossal mobilization of manpower and farm machines particularly in June, the season when barley and wheat are harvested and rice is transplanted. But a lack of fertilizer and farm equipment quickly stymied the double-cropping effort.

“Potato revolution” started in 1998 when experimental farming began in Taehungdan County, Ryanggang Province. To modernize potato seed production, the North Korean Academy of Agricultural Science sought foreign cooperation, which led to the establishment of seed potato plants in Pyongyang in 2001 and in Taehungdan, Chongju, Paechon and Hamhung in 2002.

Farmland rearrangement and irrigation improvement were pushed as national projects. A total of 276,000 hectares of land reportedly has been rearranged ― beginning in Kangwon Province in 1998 and then in North Pyongan in 1999, South Hwanghae between 2000 and 2002, and in South Pyongan, Pyongyang and Nampo between 2002 and 2004. Through this project, 2.1 million small plots of farmland turned into 560,000 standardized units, which allow the use of farm machines. A total of 130,000 kilometers of paddy field ridges were reduced to 80,000 kilometers, some 23,000 kilometers of waterways were newly built, and 7,600 hectares of farmland were added, according to announcements by North Korean authorities.

In improving the irrigation system, the energy-consuming pumping system was replaced with the natural-flow system, which is more labor intensive and therefore more suitable to the North’s economic situation.

Since 1996, North Korea has promoted raising goats, rabbits, ducks and geese to increase protein sources for the population. For this purpose, grasslands were built by distributing grass seeds and a joint livestock production system was developed for state livestock farms and people’s collective farms.

Individual homes were encouraged to raise farm animals. Factories, military units and schools also joined in grazing livestock production.

3) Reform Experiments in Agricultural Production Since the mid-1960s, North Korea has operated a sub-unit system at collective farms, dividing a basic work unit into small teams to incite competition and hopefully boost productivity. The sub-unit system was revised in 1996 to increase productivity in response to intensifying food shortages in the mid1990s. What was most notable about the “new sub-unit system” was that any crop surplus was paid back to the responsible sub-unit in kind instead of cash

at government-set prices. Considering that the prevailing crop prices in the black market were as much as 65 to 350 times higher than the government prices, the new system seemed to create a huge incentive to farmers. But there was no evidence that the new system was implemented nationwide or that it had led to much higher agricultural production.

The price of the crops that exceeded the quota should have been very high under the new agriculture management system but the sub-unit system offering in-kind rewards did not seem to actually work well enough to be a significant incentive for higher output.

4) Efforts to Induce Capital from South Korea and International Community With the help of the UNDP, North Korea drafted the Agricultural Rehabilitation and Environmental Protection Program (AREP) in 1998 and solicited aid from the international community. The AREP involved restoration of farmland from natural disaster damage, supply of farm equipment and other inputs, reforestation, and improvement of farm management.

North Korea initially estimated the capital requirement for this program (19982000) at $344 million and later requested another $250 million for an extended period (2000-2002). But the international community did not provide as much aid as requested due to its low interest in the communist country and, more importantly, the overall rigidity of the North’s economic management system.

Pyongyang to a certain extent obtained support from South Korea. Private organizations in the South started with humanitarian aid and expanded to farming and medical assistance to the North. Agricultural aid involved providing farming materials and technologies to North Korean farms and agricultural organizations on an experimental basis, but aid programs by South Korean NGOs remained at small scale with generally inactive response from North Korean recipients, including research organizations. Inter-Korean commercial exchanges included the sale of North Korean farm produce in limited volumes in the South while systemic channels were not established.

On the governmental level, the Inter-Korean Agricultural Cooperation Committee was set up in 2005, followed by the Joint Committee for InterKorean Economic Cooperation in 2007. Some agreements on cooperation for agricultural development were made through these contacts but no practical steps ensued due to political differences between the two Koreas and a lack of preparations.

2. Agricultural Policies and Tasks under the Kim Jong-un Rule 1) Agricultural Policies North Korea’s agricultural policies under Kim Jong-un have not been fully articulated since the young leader assumed power after the death of his father last December. However, official media reports as well as Kim Jong-un’s farmrelated instructions suggest an emphasis on refurbishing the agricultural infrastructure, reforestation and expansion of organic farming, which have been stressed since the Kim Jong-il era.

But it is noteworthy that infrastructure improvement is being given greater attention. Major projects include wetland exploration, tideland reclamation and irrigation improvement. It is reported that more than 30,000 jeongbo (hectares) of wetland was reclaimed across the country this year (Rodong Sinmun, February 7), including 13,000 hectares in South Hwanghae Province and 3,000 hectares in South Hamgyong Province.

Among the coastal tideland reclamation projects, the second-stage work in Gwaksan and the zoning of Taegyedo were completed in March and April this year, respectively. (Rodong Sinmun: March 14, April 8) The completion of Mirubol field waterway was also reported as a major irrigation project. The Rodong Sinmun reported that “10,000 kilometers of natural flow waterways” had been constructed over the past 10 years and that work was underway not

only for big waterways but smaller irrigation systems in South Pyongan, North Pyongan, North Hwanghae and South Hamgyong provinces.

Kim Jong-un is also giving considerable emphasis to reforestation. He was quoted as saying while planting a tree on the Arbor Day that “the party is firmly resolved to vigorously lead a nationwide tree planting campaign to turn our fatherland’s mountains and fields into a socialist paradise with thick green forests.” Since then, reforestation efforts are given more emphasis in the North.

Throughout the spring this year, there were reports on local activities for reforestation such as the creation of woodland in and around cities, distribution of economically important and fast-growing tree species, spreading of tree nursery technologies and acquisition of necessary equipment. (Rodong Sinmun: March 12, March 16, March 19) The Ministry of Land and Environmental Protection is spurring the work of the Central Tree Nursery and county-level forest management offices to increase the production of tree saplings. (Rodong Sinmun, February 12) Organic farming is strongly encouraged across North Korea. The production of compost, “hukbosan” fertilizer and organic compound fertilizer has greatly increased, according to estimates by the Ministry of Agriculture. (Rodong Sinmun, February 25) The Rodong Sinmun on March 2 reported that monthly output of more than 6,200 tons of “huminsankali” which is known to be essential in boosting grain production. On April 4, the party organ also reported that in Pyongchon District of Pyongyang, an organic compound fertilizer plant was recently dedicated in April. (Rodong Sinmun, April 4) There also have been reports on the opening of the North’s economic management system to a certain extent. A recent law revision provided the

exemption of business taxes for foreign investment banks operating in the North. The Korean Central News Agency reported that the latest revision of the Foreign Investment Bank Act prescribes a set of preferential measures: Foreign banks operating for more than 10 years in North Korea will be exempt from the corporate income tax in the first year they garner profits and foreign banks that offer advantageous loans to North Korean banks and companies will be exempt from the sales tax charged on interest income. The revision is believed to be a measure to more aggressively attract foreign investment.

North Korea announced in December 2011 that the Economic Zone Act for Hwanggumpyong and Wihwa Islands was adopted in order to facilitate the development of the two islets located in the Amnok (Yalu) River bordering China. It was followed by the Rajin-Sonbong Free Economic and Trade Zone Act, the Law on Registration of Foreign-Invested Enterprises, the Tax Law on Foreign-Invested Enterprises and Foreigners, and several other statutes. These enactments indicate a degree of economic opening under Kim Jong-un’s rule.

There also are reports that up to a thousand technocrats and engineers in the areas of economy and trade were sent to China after Kim Jong-un’s inauguration. They were dispatched to private enterprises and factories in Shenyang, Dalian and Yanji in Northeast China as well as Shanghai.

These may be some signs of the Kim Jong-un regime’s intent to open the North Korean economy. In agriculture, economic opening would mean increased production of food for export, which would require introduction of foreign technology and other forms of external cooperation.

2) Tasks in the Area of Agriculture Problems in agriculture metastasized in North Korea from the late 1980s through the flood disaster of 1995. The collapse of the socialist economic bloc hobbled the North’s economy. As industrial operations declined rapidly, supply

of agricultural materials became difficult and agricultural infrastructure steadily deteriorated. Weak agricultural production caused a food crisis which coincided with the inauguration of Kim Jong-il’s rule. These adversities were exposed to the international community.

Kim Jong-il strongly pushed new agricultural policies to avert the severe food shortages. While previous administrative efforts were mainly ideological campaigns, the new policies from the latter part of the 1990s consisted of practical measures to increase production. Officials emphasized the seed revolution, two-crop farming and innovations in potato farms. Farmland rearrangement and large-scale irrigation projects were prioritized and livestock farmers were instructed to raise small animals.

For the effective implementation of these new policies, North Korea needed systemic introduction and accumulation of foreign capital. In this sense, the new agricultural policies were destined to fail. Food aid from the international community and South Korea helped to alleviate starvation in the North, but the agricultural production structure remained unchanged due to the limited method of foreign aid and the North’s low level of reform and openness.

For more than a decade from 1995, North Korea sought changes in agriculture through fresh policies, improvement of systems and foreign assistance, but it remained trapped by its unwillingness to reform and capital shortages. North Korea regards reforms and external opening as threats to its political stability, while the outside world does not expect satisfactory returns on any investments in the isolated communist state. As long as this situation persists, the economic conditions in the North can hardly be improved, especially in agriculture.

Following the footsteps of the past leadership will prove to be futile. Kim

Jong-un has yet to introduce any new policy initiatives for agricultural advancement. His administration is only continuing the major projects of farmland rearrangement, irrigation improvement and reforestation, which have been passed down from the Kim Jong-il regime. Kim Jong-un needs to explore alternative policies in cooperation with the outside world. A medium- to smallscale pilot project using foreign capital and technologies for production and marketing is one possible option. If such a farm project succeeds, it could ignite strong enough reforms to attract foreign investment.

III. Prospect of Food Supply in North Korea 1. Food Supply Situation in the 2000s North Korea escaped from the worst food shortage of the latter half of the 1990s, thanks to the concentration of domestic resources and massive foreign aid in the 2000s. By 2007, the North had achieved a balance between the minimum level of demand and supply. (Table 4) It was largely the result of international aid rather than innovative agricultural policies at home. South Korea and international humanitarian organizations provided the North with a total of 7,760,000 tons of food, along with fertilizer, between 2000 and 2007.

In the latter part of the 2000s, when cooperation between the two Koreas eroded, the amount of aid to the North declined drastically, renewing the threat of a food crisis. Food production in the North rose to 4,540,000 tons in 2005 but declined again after 2007. Table 4 shows the annual shortfall of over 700,000 tons since 2008, the year when the South cut its food aid to the North.

2. Food Demand and Supply in North Korea in 2012 1) Prospects of Production and Demand/Supply Situation FAO/WFP inspectors who conducted a harvest survey in North Korea in October 2011 predicted no aggravation of food situation in the country in 2012. Their report, released in November 2011, forecast a relatively good harvest of corn and rice.

Average rice harvest in 2011 was 4.34 tons (unpolished) per hectare (2.82 tons of polished rice), or about 2 percent increase from 4.26 tons (2.77 tons polished) in 2010. With the total farming area unchanged, the total output rose 2 percent to 2.48 million tons (16.1 million polished rice). The production growth was attributed to increased use of fertilizer, improved irrigation systems and greater availability of energy for the agricultural sector. Climatic adversity cut the effects of the improved conditions.

Maize output per hectare in 2011 stood at 3.7 tons, or about 10 percent higher than the amount of 2010, despite floods in summer, reduced sunlight and low

moisture due to typhoons. The total maize production reached 1.86 million tons, or 11 percent more than 2010. In contrast, potato production totaled 122,000 tons, 29 percent below the 2010 volume. The report by international inspectors had a grim prediction of potato farming in 2012, citing shortages of seed potatoes across the country. The inspectors said seed potato supply in 2011 met less than 60 percent of demands.

Wheat farming also suffered from seed shortages, which shrank wheatgrowing areas to 60 percent of the target. It was suggested that barley seeds should be imported to make up for shortage. If seeds are fully distributed, wheat and barley production could exceed the annual average. The FAO/WFP report estimated that the total grain production in North Korea in 2011/12 would reach some 4.66 million tons with wheat, barley and potatoes added.

This figure represents an 8.5 percent increase from 2010/2011.

North Korea needs 5.4 million tons of grain a year. To meet this demand, it has to import more than 739,000 tons during 2012. Considering that the North needed 1.08 million tons of delivery from the outside in 2011, it can be said that the food situation in the country was improving, though falling short of meeting demand. North Korean authorities told international inspectors that they would be able to import over 320,000 tons. If that amount is imported, the net shortfall will go down to 410,000 tons.

2) Other Factors Affecting Demand/Supply Prospects Price movement best illustrates the demand and supply situation of food. Rice prices in North Korea showed a steep rise even after the autumn harvest in

2011, which was highly unusual. The prices fell sharply early this year but began to rebound in May. In 2010 and 2011, rice prices continued to fall after harvest until the following May. The unusual price rise in May this year could be reflecting concerns about the possible rupture of the February 29 agreement between the North and the United States ― U.S. food aid in return for Pyongyang’s abstaining from nuclear and missile tests ― as well as the serious spring drought.

Kim Jong-il’s death in December 2011 did not negatively influence the food situation in the North. In fact, the 2011 harvests were relatively good.

Furthermore, the United States committed 240,000 tons of nutritional assistance in the February 29 agreement and China also expressed intent to provide massive food aid to the North. If all these were realized, North Korea’s food situation could have dramatically improved.

Yet, North Korea launched a long-range rocket to celebrate the centennial of Kim Il-sung’s birth, inviting harsh reactions from the international community.

The United States condemned the North’s botched rocket test-firing as an act of provocation denying international law and its own promise, and vowed new sanctions which would included suspension of food aid. The U.N. Security Council issued a president’s statement denouncing the rocket launch and announced additional sanctions on North Korea.

Without any dramatic turn of events, the Western pressure on the North will continue with the United States withholding food shipments. Suspension of aid from the United States and the international community will deal setback to North Korea’s move to declare itself a strong, prosperous nation in 2012.

China may reconsider its aid to the North, but if Beijing provides assistance at

a reasonable level to fulfill its role as the guardian state of the North, Pyongyang may be able to avert serious adversities this year. Still, chronic food shortages will remain a major hurdle for the North’s new leadership.

3. Food Situation in the Kim Jong-un Era According to the annual North Korean crops survey by international agencies, North Korea’s food production has remained far below the optimal level its agricultural labor can yield from the farmland available. The meager productivity has not been improved despite the aggressive policies undertaken by the Kim Jing-il regime since the 1995 food crisis.

When the recent trends of food production, distribution and consumption in the North are examined along with black market prices, there are no conspicuous signs of drastic aggravation. But the dollar-based values of food grain have steadily risen since 2009 to reveal the continued worsening of the food situation. As food aid from the international community has been suspended, rationing will be reduced and the private market economy will grow to accommodate privileged people. Eventually, more and more people will suffer from food shortages, especially the vulnerable class which is excluded from the private sector.

International inspectors estimated in 2011 that the vulnerable class includes 6.1 million people. Some estimate the number has dropped to 3 million thanks to good harvest in 2011. While Kim Jong-un has yet to present any comprehensive measures to resolve the food problems, international humanitarian agencies are calling for delivery of “nutritional assistance” for the weakest people in the North.

The medium- to short-term prospect includes no significant changes to

improve the food production and distribution situation in North Korea, regardless of whether the Kim Jong-un leadership will achieve social and political stability. North Korea cannot increase supply of farming inputs to rural communities nor can it drastically improve its agricultural infrastructure on its own. This means that North Korea remains vulnerable to natural disasters causing disruptions in food production. Some expect ripple effects of the development of Hwanggumpyong and Rajin-Sonbong special economic zones, hitherto the North’s largest economic cooperation projects with China.

Yet, it will be a long time before these projects generate enough income to ameliorate the food situation.

IV. Conclusion Economic development requires continuous improvement of systems and introduction of capital. North Korea has been trapped by the absence of reform and non-availability of capital with the two factors constraining each other, particularly in the agricultural sector.

For the North’s agriculture agricultural sector to make epochal development, internal systemic reforms and massive introduction of foreign capital should be achieved simultaneously. But the international community and North Korea are not in concert about these tasks. The outside world was quite inspired when in the beginning of the 2000s North Korea worked out the AREP program with the help of the UNDP. But in the course of actually implementing some projects, North Korea disappointed international organizations with its reluctance toward reform and economic opening.

Pyongyang intended to set its course of economic opening in accordance with the scope and level of international assistance while the outside world wanted first to confirm the possibility of North Korea’s change before providing aid.

Lack of know-how was another factor deterring agricultural advancement of the North. Its long isolation from the international community resulted in a serious shortage of qualified personnel who can communicate with outside experts. This adds to the negative attitude of North Korean elites toward reform and openness, creating key obstacles to the North’s economic development. Moreover, there is the problem of North Korea’s nuclear development, which has in recent years kept the international community from coming to the aid of the North. As long as the six-party talks remain stalled and inter-Korean relations show no sign of improvement, the United States or any other Western nations would not take positive steps to help the North develop its economy and ease its food situation.

Among the most desirable cooperation projects in the agricultural sector are updating the

infrastructure,

reforestation

and

exchange

of

farming

technologies. Each of these projects requires large-scale foreign investment but North Korea can offer little guarantee of its optimal usage. Under these circumstances, it is recommended that pilot cooperation projects for specific development purposes are launched in specially designated regions. North Korea may demonstrate its intent and capabilities toward reform and openness through strategic and step-by-step approaches to such programs.

Kim Jong-un has not taken any new agricultural policies but is following the course established by his father. Even these steps cannot produce good results without the introduction of foreign capital. The only signs of change under Kim Jong-un have been revisions to some statutes concerning foreign business activities in the North and dispatches of large numbers of technocrats to China for training purposes.

Cooperation programs in the agricultural sector need to be implemented

steadfastly without being content at short-term success in output increases.

What is important is building a foundation for long-term development.

Accordingly, the main priority should be cultivating expert manpower that can communicate with the international community and handle cooperation projects.

[North Korean Economic Report, Summer 2012, published by the Korea Exim Bank]

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Effects of Population Aging on Economy and Car Market Park Sei-won & Lee Seung-won Research Associates Korea Automotive Research Institute

I. Introduction Korea’s population is aging at the fastest tempo among OECD member countries. According to Statistics Korea, there were 5.45 million Koreans aged 65 or older in 2011, or 11 percent of the nation’s total population. The percentage will multiply rapidly in the decades ahead with Korea reaching aged society status at the fastest pace among major economies by U.N. estimates. Around 2050, the nation is expected to have the second most aged society in the world after only Japan.

Korea’s aging process is the product of life expectancy being extended by medical technology and improved living standards and having one of the world’s lowest birthrates (1.23 persons). Koreans’ life expectancy was 77.2 years for men and 84.1 years for women in 2010, the 18th longest among OECD countries, but the nation’s birthrate of 1.23 persons was 217th among 222 countries in the world in 2011.

Population aging exerts negative influence on economic growth; it shrinks the workforce, pulls down the savings rate of households and increases fiscal spending on supporting elderly citizens.

Korea in particular has a very high old-age poverty rate, which will likely magnify the more negative effects of population aging than in other countries.

Korea’s old-age income poverty rate stood at 45.1 percent in 2008, the highest among the OECD countries and far higher than the OECD average of 13.5 percent. As they become cognizant of many senior citizens’ financial difficulties, those in their 30s to 50s, who constitute the core purchasing class, are expected to show more conservative consumption patterns to save for retirement.

This report examines the effects that population aging will have on the economy and the automobile market, and discusses adjustments that automakers will need to make to cope with the changing consumer patterns.

II. Economic Effects of Population Aging 1. Falling Potential Growth Rate Korea’s core economically active population (people aged between 25 and 49 years) began to shrink in 2009, and the scope of reduction is expected to expand. The nation’s economically active population (15-64 years of age) will likely peak in 2016 with 37.04 million and fall to 34.9 million in 2025, while its core economically active population (25-49 years of age) is expected to

decline from 20.43 million (56.8 percent) in 2010 and to 13.76 million (47.7 percent) in 2040. [Statistics Korea] In 2045, Korean workers’ average age is expected to rise to 50, the world’s highest level (as estimated by Royal Bank of Scotland in 2012), and the nation’s projected median age will likely rise to 52.6, exactly the same as Japan’s.

The decline of young and middle-aged workers could create a severe shortage of workers in labor-intensive industries such as manufacturing, construction and transportation. Also, old-age workers are not as proficient as younger generations

in

new

knowledge

and

technology,

inevitably sapping

productivity. A 1 percentage-point rise in the number of employees aged 50 years or older leads to a 0.21-percent drop in labor productivity. [Samsung Economic Research Institute, 2011]

The aged population hinders the vitality of consumption market, as retirees undergo a loss of income, ramp up saving and restrain consumption.

Households with people aged 65 years or older are highly likely to depend on support from children, relatives or the government, which will gradually increase burdens on these supporters and aggravate the government’s fiscal health as its financial support for the aged groups steadily expands.

In 2020, 4.6 economically active people are expected to support one elderly citizen, and in 2030, 2.7 economically active people are expected to support one elderly citizen. [Statistics Korea] The dwindling income of the aged group leaves them with little room for saving and drags down the national savings rate, which will in turn lead to the shortage of investment capital and retard the growth of national economy.

When the household saving rate drops one percentage point, it is estimated to lower the economic growth rate by as much as 0.15 percent. To be sure, Japan has seen its savings rate drop with the retirement of the “tankai generation,� or the Japanese baby boomers born in 1947-1949, who are estimated at 8.06 million. The rapid population aging lowered Japan’s domestic savings rate from 23.2 percent in 1998 to 3.1 percent in 2011. Population aging also lowers innovative activity of the entire society, possibly crimping investment efficiency.

Population aging and the resultant reduction in workforce, consumption expenditure and investment will lead to the fall in potential growth rate in the end. The OECD estimates that Korea’s potential growth rate, which stands at 3.4 percent in 2012, will fall to 2.4 percent in 2016-2026 along with the rapid population aging, and drop further to the 1-percent range in 2031-2050, the lowest level among its 34 member countries.

2. Accelerating Slump of Real Estate Market Koreans aged 60 years or older have more than 80 percent of their household assets tied up in property. There is a possibility that these elderly citizens, with little savings and inadequate social safety nets, will move to quickly dispose of their houses to obtain funds to start a business or to fatten their bank accounts to prepare for retirement. If a sell-off on a wide scale develops, the supply stream will depress home prices in the long term.

3. Increasing Possibility of Souring Household Debts Among total household loans in 2011, those borrowed by people aged 50 years or older accounted for 46.4 percent, up sharply from the comparable ratio of 33.2 percent in 2003. This was due to a steep increase in the number of aged people who took out loans to raise funds to open a business after workplace retirement. Considering that the proportion of people aged 50 years or older increased 8.0 percentage points between 2003 and 2011, the 13.2 percentage point rise in their share of household debt far exceeded the speed of population aging.

The share of those aged 50 years or older among the self-employed also increased from 47.1 percent in 2008 to 53.9 percent in 2011. In view of the high vulnerability of self-employment enterprises to business cycles, there is

an increasing possibility that many bankruptcies could occur. Self-employed people accounted for 50.3 percent of multiple debtors in May 2012, and their loan default rate (1.82 percent) was 1.5 times higher than that of wage earners (1.24 percent). [KCB, a provider of credit information on individuals]

III. Effects on Car Market 1. Curbing Demand for Automobiles People in their 30s to 50s constitute three-fourths of car buyers as they have relatively higher purchasing power and use cars most frequently for commuting and raising children. But this population segment is shrinking just as the share of those aged 60 years or older, who have less and less need for cars, is increasing. The aged population who find their purchasing power sharply decline after retirement, tend to cut down on consumption of expensive durable goods, including automobiles, ahead of all else.

Unless the number of car purchases per 1,000 people increases 50 percent from the present level (13.4 to 20 cars), total demand for cars is expected to turn downward around 2025 when Korea enters into a super-aged society.

More likely, the domestic auto sales growth will contract sharply and the auto industry in Korea will reach maturity.

2. Growing Influence of Aged Population on Market Although the nation’s looming demographic trends will suppress auto sales growth, aged drivers will have greater influence on driving habits and the auto industry. Unlike the current aged population (born between 1935 and 1952), the baby boomer generation (born between 1955 and 1963) has considerable experience in owning cars and regard them as a necessity of life. So, after 2018 when they enter into the silver generation, the boomers will likely have much more influence on the car market than previous generations.

As their driving routine shifts to short trips and their economic power weakens, the aged population will lean toward pragmatic consumption, stressing car price and maintenance cost. A survey of the car uses by the elderly has found the share of commuting and business declines, while that of short distance travel for friendship and other purposes (religious and personal meetings) increases. The weakening physical ability and cognitive function

raises the psychological burden of driving and the need for safety devices.

3. Growing Preference for Lower Class Cars Living in a society that emphasizes face-saving, Koreans have generally tended to go up in size when replacing their cars. People aged 60 years or older show the highest tendency of owning mid- to large-sized cars among all age groups, having bought larger cars as they grew older. The share of those owning mid- to large-sized cars (except for recreation vehicles as of 2010) was higher among those in their 60s or older (47.7 percent) than the average (30.5 percent) of all age groups.

However, the realities of late stages of life such as lower spending power and greater difficulty in driving a big vehicle will erode the motivation to purchase large sedans or sports utility vehicles. Instead, aged drivers will more likely gravitate toward mid- to small-size cars.

Of course, those with sufficient financial means might opt for large cars,

resulting in a possible polarization in car ownership among the aged population. In fact, some well-off elderly people increasingly prefer expensive, mid- to large-size imported vehicles, while others in their age group who find buying new cars burdensome are expected to turn to used car markets.

Preference for environmentally friendly vehicles such as diesel-fueled or electric cars will likely remain relatively low, due to their high price and conservative consumption patterns among the aged population.

IV. Policy Implications The government should cope with workforce shortages by helping to expand participation in labor markets by women and youth, and enhancing labor productivity through reeducation. Also, the government should effectively

manage the post-retirement preparations of senior workers with a long-term perspective, by tightening social safety nets and providing effective support.

Also necessary are policy-makers’ efforts for a soft landing of the household debt crisis, considering high portions of real estate and mortgage loans among the assets the elderly population.

The auto industry has to aggressively cope with populating aging, which will likely threaten demand but, at the same time, provide market-expanding opportunities thanks to increased car purchases by the emerging silver generation.

The industry should step up marketing activities as well as development of differentiated products and services based on changes in purchases and use of autos by the new silver generation. In particular, the industry ought to enhance marketing efforts targeting the pre-retirement generation in their 40s and 50s as the core demand class.

Also, in the medium to long run, the auto industry needs to strengthen the quality of cars by focusing on safety options preferred by the silver generation, while encouraging their use of cars by providing vehicle modifications and other special auto-management services.

Considering that the elderly population has lower income while showing higher percentages in the ownership of tangible assets, such as real properties, the industry is advised to supplement their car purchasing power by developing auto-related financial products on installment payment basis and linking them to pensions and real estate assets.

[Economic Analysis Series, 2012-20, Jul 18, 2012, published by the Korea Automotive Research Institute]

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Rain and the Economy Joo Won / Senior Research Fellow Lee Bu-hyoung / Research Fellow Ahn Joong-gi / Researcher Hyundai Research Institute

I. Overview Korea has had an increasingly rainy climate, with its annual precipitation generally on an upward trajectory, if somewhat volatile, since the 1970s.

Korea’s annual precipitation rose from an average 1,177mm in the 1970s to 1,271mm in the 1980s, rising further to 1,308mm in the 1990s and then to 1,375mm in the 2000s.

In particular, rainfall from June to September is on the rise, fanning speculation that Korea will experience more heavy summer rain in the years ahead. Due to seasonal precipitation and typhoons, rainfall between June and September, which accounted for 59.4 percent of the annual total in the 1970s, rose to 67.1 percent during the 1980s, fell slightly to 65.3 percent in the 1990s and then rebounded sharply to 69.9 percent in the 2000s.

The Korea Meteorological Administration forecasts seasonal precipitation will increase 5 to 10 percent in 2020 to 2040, mainly due to East Asia’s surface temperature rising around 1 to 1.5 degrees Celsius during this period. [KMA, “Seasonal Precipitation White Paper 2011”]

Summer torrential downpours are becoming increasingly frequent, and the number of days with precipitation has been rising since 2000. Precipitation of 30mm or more per hour from June to August occurred 60 times in the 1980s,

but the frequency rose to 70 in the 1990s and then to 87 in the 2000s. In the June-September period there were 45 days or so with precipitation from the 1970s to the 1990s, but the average rose to 50 days in the 2000s.

During the past 10 years, damage from natural disasters overwhelmingly occurred during the summer months, 61.8 percent from June through August and 29.3 percent in September.

II. Negative Impact of Summer Rainfalls Damage to social infrastructure, impaired production and price uncertainties are among the primary negative effects of heavy summer precipitation. Such crucial economic factors as logistical networks and production facilities lie at risk of suffering damage and possibly require restoration.

Typhoons and torrential downpours caused an annual average of 1,942.5 billion won worth of damage in 2002 to 2011. This means the nation lost facilities (fixed capital) worth 0.2 percent of its GDP each year. The damage accumulated during this period reached 19,424.5 billion won in terms of 2011 monetary value.

Restoration costs reached 31,766.0 billion won during 2002 to 2011 (annual

average of 3,176.6 billion won equaling 0.3 percent of the nation’s GDP), amounting to 1.6 times of the damage. Restoration efforts following natural disasters could have a positive economic impact as they stoke production and employment. Further, it is noteworthy that the damage and restoration costs incurred in 2002 and 2003 raised the average of the past 10 years.

Restoration costs typically exceed the damage due to intangible costs incurred such as manual labor and requirements for improving the durability of the new infrastructure.

Summer rainfall is seen as a major cause for seasonal disruptions in the country’s third quarter production indices. Compared to the second quarter, indices measuring domestic production typically manifest slower performance in the third quarter in which the summer months are included. Third quarter real GDP (raw data series) is generally similar to the second quarter or slightly lower. This is partially because of a reduction in the number of workdays due to summer vacations, but also the torrential downpours and typhoons that damage facilities and infrastructure.

Mining,

agriculture,

forestry

and

fisheries,

construction,

and

transportation/storage experienced bigger production downturns. The mining industry’s seasonally adjusted quarter-on-quarter production growth rate for the second and third quarters was -3.1 percent points, the biggest drop ever.

Agriculture, forestry and fisheries fell -0.6 percentage points quarter-onquarter, while the construction industry and transportation/storage both shed 0.3 percentage points. In contrast, manufacturing, electricity/gas/water services, and culture/recreation continued to grow.

Concentrated precipitation in the summer is perceived as one of the key

drivers of an upward trend in fresh food prices during this period. Unlike the consumer price index, the fresh food price index climbs at a steeper rate from July to September The June-through-September price indices show fresh food prices growing at 13.4 percent on average during 2000-2011, compared with the 0.6 percent increase in non-fresh foods and the 1.2 percent increase in overall consumer prices. Vegetables, which are most directly affected by the rain, played a major role in pushing up the fresh food price index The month-on-month growth rate of vegetable prices in 2000-2011 stood at 7.8 percent in June, before rising to 8.9 percent in July, and then to around 10 percent in August and September. Fruit prices declined in June, but gained in August month-on-month. Fishery prices also rose through August to September after exhibiting slower growth from June to July.

III. Implications First, the government needs to step up risk management of summertime natural disasters and provide support for the private sector to cope better with them.

As more damage is being inflicted by climate-induced natural disasters, organizations such as the Korea Meteorological Administration and the National Emergency Management Agency should be granted more authority and a wider scope of duties.

Sustained efforts are necessary to improve the durability of infrastructure such as roads and bridges to prepare for more frequent and destructive natural disasters. Related preventive technology also must be developed. To bolster the private sector’s ability to cope with natural disasters, stronger preventive efforts including more climate-related education and stronger support for private weather industries are required.

Second, prices of agricultural products proven to be more sensitive to summer precipitation should be stabilized, with closer scrutiny on crop volatility to prompt anti-inflation measures. At the same time, agricultural products boasting stronger resilience to rain and other natural disasters should be cultivated, while drainage facilities must be reinforced to minimize the disaster damage.

Fresh food storage technology must be developed to better cope with supply disruptions. More overseas suppliers should be secured to enable the government to smoothly adjust import volume in the case of price volatility caused by natural disasters.

Third, the private sector is in need of a systemic business strategy for dispersing risks related to natural disasters, and companies must be able to accurately analyze and utilize weather information.

Recognizing that summer precipitation is a threat beyond control or long-term

prediction, companies must scrutinize the impact of natural disasters per business area and diversify their business portfolio accordingly to limit potential damage. They are urged to seek better insurance coverage for weather and other natural disasters to mitigate the threat of abnormal rainfall.

Companies also need to produce information based on a demand projection model that calibrates the relationship between the weather and demand forces.

The data should be applied to corporate customer relationship management to maximize profit margins.

[Appendix 1] Summer Operations of Agriculture and Construction Industries 1. Agriculture Summer precipitation and torrential rains are not only the direct cause of farmland flooding. The cloudy conditions that accompany persistent precipitation result in less sun exposure on crops, reducing output. Heavy torrential downpours during typhoons and rains cause land loss or flooding, thereby having a direct impact on farmland. Farmland is typically more vulnerable to typhoons accompanied by torrential rains. Farmland damage was apparent in 2002, 2003 and 2006, when typhoons Rusa, Maemi and Ewiniar struck, respectively.

Heavier summer rainfalls compared to the previous year may cause crop volume to decrease on account of less sun exposure. Fruit crops are especially vulnerable to lack of sunshine.

2. Construction The nation’s construction sector shows sluggish employment and industrial production following the rainy season in July and August. Employment grows at a notably slower pace from July through September, suggesting a strong seasonal tendency.

The average month-on-month growth rate in employment based on monthly employment figures during the 2005-2011 period showed that employment in the construction industry recorded a -3.2 percent growth rate in July, which was significantly lower than the industry-wide average of -0.3 percent.

An analysis of the monthly average value of construction completed during 2001-2011 shows that in terms of current market prices, the value of construction completed fell by 1.1 trillion won on average from June to July and remained lackluster in August.

[Appendix 2] Property Damage and Life Losses Caused by Summer Natural Disasters

[ Issues and Tasks, 12-32, July 18, 2012, Hyundai Research Institute ]

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10 Million Inbound Visitors: New Trends in Korea’s Tourist Industry Jo Gyu-rim Researcher

Chang Hu-seok Research Fellow

Hyundai Research Institute

I. Korea`s Tourist Industry in Transition The number of inbound tourists in Korea is expected to eclipse 10 million in 2012, thanks to a surge in visitors from Asian nations. The arrivals nearly doubled from 5.32 million in 2000 to 9.79 million in 2011, rising at an annual average rate of 5.7 percent. In particular, tourists from Japan, China, the Philippines and Thailand have jumped from 4.44 million in 2005 to 7.66 million in 2011, an average annual growth of some 10 percent. Their proportion in total inbound tourists also has increased from 73.7 percent to 79.7 percent during the same period.

Despite the robust growth in tourist arrivals, the economic ripple effects such as the ratio of the nation`s tourist industry to its GDP and the industry`s proportion in total employment have been on a downward slope since 2000.

Direct economic effects as witnessed in accommodation, transportation, and travel businesses also dropped by 0.5 percentage point from 2.3 percent of GDP in 2000 to 1.8 percent in 2011.

The total economic effect, including indirect effect, fell by 1.4 percentage points from 6.6 percent of GDP to 5.2 percent during the same period. The

tourist industry`s proportion in total employment that reflected the industry`s direct and indirect impact on employment has also decreased by 1.1 percentage points from 6.7 percent in 2000 to 5.6 percent in 2011. [Direct effect refers to the gross value-added output of the sectors directly related to the tourist industry such as accommodation, transportation, and travel business, while indirect effect means the impact of direct effect on the added value of the entire industry calculated by inter-industry analysis.]

Compared to major countries, Korea`s tourist industry is less capable of creating value added and employment. Its direct effect on GDP and

employment is somewhat less than that of Japan (2.1 percent of GDP, 2.2 percent of employment), China (2.8 percent of GDP, 2.9 percent of employment), France (3.7 percent of GDP, 4.3 percent of employment), and the United States (2.9 percent of GDP, 4.7 percent of employment). If the total economic effects including indirect effects are considered, the gap with China, France, and the United States is even wider with Korea marking 5.2 percent of GDP and 5.6 percent of employment.

According to the U.N. World Tourism Organization (UNWTO), the total number of international tourists amounted to about 980 million in 2011, and is forecast to exceed 1 billion in 2012. [“One billion tourists key to creating jobs and stimulating the economy,� WTO, March 6, 2012] Global tourists grew at an annual average of about 3.7 percent from 2002 to reach 980 million as of 2011. As of 2010, tourism revenue was US$926 billion.

This study analyzes the characteristics of inbound foreign tourists and examines their implications for improving the competitiveness of Korea`s tourist industry so that it can create more value added and make a leap forward to become an industry leader.

II. Major Changes in the Trend of Inbound Tourists to Korea 1. Region: Increase in Short Distance Tourists from Asia Since 2005, there has been a steady rise in inbound foreign tourists from Japan, China, and Southeast Asia. Tourists from Japan shrank from 2.44 million in 2005 to 2.24 million in 2007, but recovered strongly to 3.29 million in 2011 on the strength of hallyu, the overseas craze for Korean pop culture.

Chinese tourists increased at an annual average rate of 20.9 percent from 710,000 in 2005 to 2.22 million in 2011, and the number of tourist visitors from Southeast Asia is also growing fast at an annual average of 8.7 percent.

Accordingly, the proportion of inbound tourists from China and Southeast Asia increased while that of Japan, Americas, and Europe fell. Thanks to the rapid growth of Chinese tourists, their proportion among Korea`s total inbound tourists jumped from 11.8 percent in 2005 to 22.7 percent in 2011. The proportion of Japanese tourists descended from 40.5 percent in 2005 to 33.6 percent in 2011 but it still remains the highest. The share of American and European tourists slid from 19.1 percent in 2005 to 16.6 percent in 2011.

2. Class: Increase in High-spending Tourists Among inbound tourists in Korea, the proportion of those who spend more than US$1,000 on average per person reached 52.7 percent in 2011, compared to 45.1 percent in 2005. In contrast, those who spend $1,000 or less accounted

for more than a half in 2005, at 54.9 percent, but dropped to 47.3 percent in 2011.

The proportion of Asian tourists who spend more than $1,000 significantly increased from 43.3 percent in 2005 to 54.6 percent in 2011, while that of those spending $1,000 or less fell from 56.7 percent to 45.4 percent during the same period. Notably, the share of those who spend $2,000 or more rose from 16.0 percent in 2005 to 18.3 percent in 2011, reflecting the improving economic conditions among Asian nations.

In particular, there has been a sharp increase of high-spending tourists from China. Among Chinese tourists, the proportion of those who spend $1,000 or less fell from 48.9 percent in 2005 to 31.9 percent in 2011, while that of those spending more than $1,000 jumped from 51.1 percent to 68.1 percent during the same period. Furthermore, the share of Chinese tourists spending $3,000 or

more rose from 14.6 percent in 2005 to 21.9 percent in 2011, and that of those spending $2,000 to $3,000 also rose from 10.2 percent to 14.0 percent during the same period.

In terms of average daily spending, Asian tourists spent far more money than those from the United States, France and the UK. [Based on the average spending per person by country in 2011, the highest was by tourists from the Middle East at $2,030, followed by Russia with $1,973, China with $1,940, and Singapore with $1,872.] Reflecting the tendency of tourists to spend more as they stay longer, the average spending per day was the highest among tourists from China with an average of $254, followed by Thailand ($239), Japan ($234) and Singapore ($232). Tourists from the UK ($136), France ($133), the United States ($121) and Germany ($119) spent less than the aggregated average of $213.

3. Type: Increase in Shopping-oriented Tourists Among inbound tourists in Korea, the number of those visiting primarily for shopping is rising sharply compared to those who visit for sightseeing.

Tourists who come to Korea to see its nature and learn about its humanities

and history or those with the purpose of culture and leisure are tied up at around 25 percent of the entire tourist population, or even shrinking. On the other hand, tourists visiting Korea for shopping, who accounted for merely 12.6 percent in 2007, rapidly swelled about three times to reach 35.5 percent in 2011.

Tourists from China and Japan represented the highest proportion of shoppingoriented tourism in 2011. Shopping, followed by culture and leisure, and sightseeing were the main aims of Japanese tourists, while tourists from China and Southeast Asia came mainly for shopping, followed by sightseeing. The growing number of Asians who visit Korea for shopping purposes implies that Korea probably has relative competitiveness for shopping tourism compared to other Asian countries. Korea thus needs to find ways to maximize its appeal to tourist shoppers.

Despite the increase in average spending per person of inbound tourists, their spending on Korea`s tourism infrastructure, such as accommodation, food and beverage, and culture and entertainment, has declined. Inbound tourists` average spending per person in Korea went up from $1,333 in 2005 to $1,410 in 2011. Expenditure on shopping jumped from an average of $392 in 2005 to $588 in 2011 and its proportion in total expenses also soared from 29.4 percent to 41.7 percent. Inbound tourists` accommodation expense fell from $563 (42.3 percent) to $506 (35.9 percent), and their spending on food/beverage and culture/entertainment also edged down from $180 (13.5 percent) and $47.70 (3.6 percent) to $168 (11.9 percent) and $47.50 (3.4 percent), respectively.

Chinese tourists, whose average daily spending is the highest among foreign tourists in Korea, saw their average spending per person more than double from $500 (32.2 percent) in 2005 to $1,122 (57.8 percent) in 2011. Despite the increase in total spending, however, the amount and proportion of their

spending on accommodation, food and beverage, and culture and entertainment are rather decreasing. The proportion of accommodation expense in total spending by Chinese tourists dropped from 38.8 percent to 21.6 percent. Their spending on culture and entertainment hardly decreased from $69 (3.5 percent as of 2011) but its proportion slid by 0.9 percentage point.

4. Duration: Increase in Long Stay Tourists The average length of stay by foreign inbound tourists to Korea has increased

steadily, from 5.7 nights in 2005 to 6.4 nights in 2008 and to 7 nights in 2010.

[The survey of duration of stay excluded the data of 2011 for the sake of continuity as the basis was changed from “night” in 2010 to “day” in 2011.

Average duration of stay for 2011 is 7.5 days.]

In particular, short-term staying tourists who stay 3 nights or less contracted from 49.6 percent in 2005 to 45.6 percent in 2010, while those who stay 4-6 nights edged up from 29 percent to 29.9 percent and long-term tourists who stay 7 nights or more increased from 21.5 percent to 24.5 percent.

Duration of stay by tourists from Japan and Southeast Asia grew somewhat less while those from China, Americas and Europe stayed much longer.

Japanese tourists stayed 3.3 nights on average in 2010, compared to 3.4 nights in 2005, and the average of tourists from Southeast Asia fell from 5.3 nights to 4.8 nights. In contrast, the average duration of stay by Chinese tourists increased from 7 nights in 2005 to 9.5 nights in 2010, and the average of tourists from Americas and Europe also increased from 8.7 nights to 11.3 nights.

Despite the longer duration of stay, inbound visits are excessively concentrated

on Seoul and nearby areas. Major destinations of inbound tourists within Korea are Seoul (80.3 percent), Gyeonggi Province (30.5 percent), and Incheon (17.6 percent). Outside of the capital area, regional destinations such as Busan (15.7 percent), Jeju (13.1 percent) and Gangwon Province (11.7 percent) have extremely low visits. [Data from 2010 was used.]

In order to extend the foreign tourists` duration of stay and raise tourism revenue, it is necessary to guide the visitors away from metropolitan areas to various regional tourist attractions. Since tourists spend more as they stay longer, an increase in the number of longer-term visitors helps ramp up tourism revenue. Therefore, diverse tourist attractions need to be developed in provincial locales.

III. Implications for Tourist Industry

First, shopping-themed tourist attractions need to be developed for visitors who prefer shopping to sightseeing or history and culture travel. Korea`s major shopping areas are currently limited to Myeong-dong and Dongdaemun (East Gate) areas in Seoul. Making use of shopping outlets, which are recently growing popular, efforts need to be made to build new theme parks for both shopping and leisure activities.

Second, it is necessary to develop customized travel programs suiting the preferences of high-spending visitors from China and other Asian countries, who are rapidly increasing in number and in shopping volume. Customized shopping tours targeting these visitors should be developed. For example, it would be desirable to develop programs that offer high-end travel through luxury shopping destinations that appeal to lavish spenders from China.

Third, it is necessary to induce shopping tourists into sightseeing tours through programs that connect shopping and sightseeing. An increasing number of shopping tourists can positively influence Korea`s tourist industry but it won`t make much difference on improving the industry`s competitiveness if these visitors simply enjoy shopping without being introduced to sightseeing tours.

Thus, shopping tourists need to be coaxed into some sightseeing through programs that efficiently connect shopping with natural recreation sites or modern cultural sites that are tailored for Asian visitors.

Fourth, it is necessary to provide long-term staying tourists with diverse sightseeing opportunities by introducing new programs such as “Hidden Korea,” a possible counterpart of the British government`s “Hidden Britain” program, which introduces unknown landmarks to tourists. Similarly, the Korean government needs to develop programs to discover the nation`s lesser known landmarks and connect them with tourist destinations in the capital area.

Fifth, to secure competitiveness for Korea`s prominent tourist attractions, efforts should be made to improve tourism infrastructure targeting Asian visitors. Since the tourist industry faces the inevitable problem of distance decay, active support for Asian tourists is mandatory to heighten the industry`s competitiveness. It is necessary to lay down a solid foundation on which the tourist industry can create more value added through developing diverse cultural and entertainment programs along with building world-class infrastructure to satisfy Asian tourists. [ VIP Report, 12-07 (No. 508), July 11, 2012, Hyundai Research Institute ]

www.koreafocus.or.kr

- Young Korean Artists Design London Olympics Victory Podium

Young Korean Artists Design London Olympics Victory Podium

Kim Yun-deok Staff Reporter The Chosun Ilbo

A week before the 2012 London Olympics begin, the victory podiums for medal award ceremonies have been revealed, drawing attention to one of the visual attractions of the quadrennial global sporting event. The winning design for the podiums that will be placed in the 22 venues of the London Games came from a team that included two Korean art students.

With the silhouette resembling an elegant gift wrapping, the royal purplecolored podium design has been praised as “the most beautiful podium design in the Olympic history� by the International Olympic Committee as well as the London Organizing Committee of the Olympic and Paralympic Games. Even before the games kick off, renowned British museums, including the Victoria

& Albert Museum, Wimbledon Museum and the Museum of London in Barbican, have requested approval to exhibit the podiums when the Summer Games are over.

Koo Hee-gun, 29, and Eom Hong-yeul, 31, are the two Koreans behind the creation of the podium design. The two Royal College of Art colleagues teamed up with other international students, Gaetano Ling (American) and Yan Lu (Chinese), to win the chance to present their design to sports fans and athletes from around the world.

Koo, who graduated from the department of mechanical engineering at Yonsei University, and Eom, who majored in metal art and design at Hongik University, led the Olympic podium project, from design conceptualization and storyboard manufacturing to modeling and prototype production. During a telephone interview on July 19, Koo said excitedly, “The medal award ceremony is among the most glorious moments of the Olympic Games, when people around the world focus their attention to praise the hard work of the winning athletes. I still cannot believe that our work is indeed becoming an important part of those historic moments. Also, I am very proud to be able to boost Korea’s cultural prestige in the world.”

Koo explains that the podium design was inspired by paper folding, his favorite childhood pastime. “When I was small, I used to do a lot of paper folding. I thought that a variety of lines created from paper folding could lead us to create a three-dimensional form. The gold medalist stands at the center of the podium, where beaming lines radiate from the Olympic logo. The concept emphasizes the drama and accomplishment the world’s top athletes proudly demonstrate before us. The purple color and gold rings symbolize the British royalty. Throughout our design work, we wanted to express the majesty of the British royal culture and the historic character of the city of London.”

“Our design also received particular attention among the contest applications since our team consisted of international students,” Koo noted. “The four members had excellent team work. Especially, Hong-yeul’s modeling skills and my engineering sensibility produced great synergies. Even though we did not have an official team head, I would say that I was very involved in the coordination of design ideas, storytelling, the study of various forms and shapes for the podium, and prototype making. Hong-yeul led the processes of physical form design and computer modeling, and he suggested ideas for manufacturing methods. I am confident to tell you that the London Olympic podium is a Korean creation, which reflects much of ideational inputs from Hong-yeul and myself.”

When asked why he had changed his major from mechanical engineering to design, he explained, “In Britain, where design has been developing in tandem with growing industrial productivity since the Industrial Revolution, cooperation between engineers and designers is nothing surprising. The Royal College of Art provides us with excellent education in both industrial design and engineering, which heavily contributed to the team’s success in the podium design contest.

“In interviews with British media, the most frequent question asked to me was ‘who are the athletes you expect to win gold medals in the London Olympics?’

I answered I wanted Korean swimmer Park Tae-hwan win a gold medal, but actually I am rooting for all Korean athletes participating in the London Games. When I imagine the Korean national flag rising before the podium we designed, I already feel so emotional and proud about it. Our team members have been invited to attend the victory ceremony on August 1 at the main stadium and I hope to see Korean athletes stepping onto the podium then.”

[July 21, 2012]

www.koreafocus.or.kr

- Taste of Humanism in the 107-Year-Old Memories of Gwangjang Market - Choi Sun-woo, Guide in Art History and Pioneer of Cultural Heritage

Taste of Humanism in the 107-Year-Old Memories of Gwangjang Market

Choi Won-hyeong Staff Reporter The Hankyoreh

“Tale of Gwangjang Market”

By Kim Jong-gwang, Samtoh, 280 pages, 14,800 won Which name comes to mind when asked which traditional market represents Korea? Many of you are probably thinking of Namdaemun (South Gate) Market, a fact that saddens me as I was hoping to be remembered. My name is Gwangjang, and I have been around for more than a century. This year, I celebrate my 107th birthday.

I recall a few years back when celebrity TV host Kang Ho-dong’s on-air visit rekindled my popularity as a marketplace known for “plentiful Korean food

and generous souls.” It was nice to be reminded of my past glory, but I was also disheartened because the broadcast forced me to ask myself, have I really been forgotten?

Whatever happens, I can proudly say that I still stand as one of our country’s best-known traditional markets. Presidents ― both incumbents and the hopefuls ― come to me, often to meet with the “ordinary people,” and other times to announce their election bid. And now, as good a time as any, novelist Mr. Kim Jong-gwang, 44, has compiled countless novels, essays, theses and newspaper clips about me, combining it with research of his own, to publish the “Tale of Gwangjang Market.”

As I am certain you will become more acquainted with me once you read the episodes in this book, I propose a personal tour of the volume. To begin, I am compelled to emphasize that I am the country’s oldest traditional commercial market. This means I was the first market established by merchants after attaining government permission for my opening.

Following the Gabo Reforms that kicked off in 1894, anyone in Joseon was permitted to conduct commercial activities according to their individual free will. But due to this new law, the Six Licensed Stores (yuguijeon) and the private shops in the metropolitan areas (sijeon) that had enjoyed a monopoly lost their business. Seeing their plight, Emperor Gojong established a warehouse market called Changnaejang in the government office of Seonhyecheong, which handled the collection of taxes in the form of rice, hemp or money. This became the precursor to Namdaemun Market. One drawback was that Japanese merchants strategically approached Changnaejang to support their government’s schemes to control Korean commerce. Song Byeong-jun, a well-known pro-Japan figure, abetted the Japanese and eventually established Joseon Agricultural Corp., which was the company that

operated Namdaemun Market.

I was created in retaliation against this commercial usurpation. Kim Jong-han, a high-ranking Korean bureaucrat, aligned forces with a number of wealthy merchants to create a new commercial area. Together, they established “Gwangjang Corp.” in July 1905.

Baeogae Market served as the backbone for Gwangjang Corp., with the marketing scope centering on the peddlers’ inns (gaekju) that lined the streets of Jongno at the time. The area stretched from Gwanggyo bridge to Janggyo bridge ― hence my name, Gwangjang. Later on, the Chinese characters were changed to mean “vast warehouse.” As the Japanese merchants dominated Namdaemun Market and the so-called “modern boys” strutted their stuff in Myeong-dong where the Japanese had cultivated yet another commercial district, I silently kept my place beside Joseon’s ordinary citizens.

Markets such as Dongdaemun (East Gate) and Gyeongdong all originate from me. During my time, I have witnessed an endless stream of visitors. I particularly have a special place in my heart for the people in the 1950s, who struggled so hard to overcome post-war poverty and destitution. With them, political gangster Lee Jeong-jae comes to mind.

After being ravaged by the Korean War, a restoration project in 1959 turned me into the three-story concrete edifice I am today. Mr. Lee led the restoration.

He may have been criticized for acting as a dictator’s henchman and exploiting the market’s merchants, but he was nevertheless the person responsible for what I am today.

My golden age was definitely the 1960s. The economy was sizzling, and people at the market who traditionally sold only foodstuffs, began to expand

into selling dry goods. It came to the point where people began to say whoever worked at the Gwangjang Market in the 1960s and 70s left with a fortune.

Mr. Manki, a character in my biography, who eventually makes enough money from marriage gift products to open his own factory in the countryside, is a good example of this wealthy merchant. Of course, this does not mean money was in the cards for all. Take people like Jeon Tae-il. When he was 12 or 13 years old, Tae-il worked at Gwangjang to support himself. Despite the hard work, he always had time to read and write, and when Pyeongwha Market opened, he committed self-immolation at the tender age of 22. His cause was for the government and businesses to uphold proper labor laws.

My glory days lasted up to the mid-1980s. As more enterprise-type markets such as Dongdaemun Shopping Complex began to open in my vicinity, my popularity waned. The Asian financial crisis that erupted at the end of the 1990s was the final straw that broke the camel’s back. My annual sales, which usually had been around 4 to 5 trillion won, plunged to 400-500 billion won in the early 2000s. Then department stores, major retailers and little supermarkets arrived, making people even less eager to shop at traditional markets.

Still, I have survived, and many continue to live their lives with me. There are now about 1,500 stores in Gwangjang, with around 15,000 employees.

Considering the record of approximately 1,300 stores in business during the 1959 restoration, I can say that I made it through the years with no dramatic mergers or shutdowns. These days, I am earning new popularity for selling cheap and unique vintage clothing. I’ve seen celebrities wear these clothes onair.

The author of my biography wrote that he hopes his book will give those who know the market well a chance to go down memory lane or feel renewed pride.

For those who know little or nothing about Gwangjang, he hopes the book will help them learn.

My words precisely! I hope you will all remember me, as I am so very near you. I am perfectly aware of how easy it has become to buy anything at all from stores that are closer to your homes, but please remember, there are two things I possess that you won’t find anywhere else. The first is history, and the second, humanism. To celebrate the publication of my biography, I would like to remind you that history and humanism embedded in a place of life can never be replaced or substituted.

[July 21, 2012]

www.koreafocus.or.kr

Choi Sun-woo, Guide in Art History and Pioneer of Cultural Heritage

Ye Jin-su Staff Reporter The Munwha Ilbo

“Hyegok Choi Soon-woo, Pilgrim of Korean Beauty”

By Lee Chung-ryeol, Gimmyoung Publishers, 416 pages, 18,000 won The complete works of Choi Sun-woo and Goh Yu-seop stand as the two most cherished collections in my study. Choi’s collection, in particular, is great for anything, including just flipping through the pages at whim. The books bring a smile to one’s face as one encounters the many aspects of the subdued yet candid sense of Korean beauty.

Choi’s famous essay collection, “Leaning Against an Entasis Pillar of the Hall of Eternal Life at Buseok Temple” has become a Bible for art historians, and

this was the book that introduced the public at large to true Korean aesthetics.

But despite that he was a cultural pioneer who revived the value of Korean cultural heritage ― which had at one time been at risk of being buried underground amid our turbulent modern history ― in-depth accounts on Hyegok’s (Choi’s pen name) life had been nonexistent.

Therefore, a book detailing the art historian’s uniquely captivating life was more than a pleasant find for this particular Choi Sun-woo maniac. The virtue of the volume is that it is a biography penned in the form of a novel. I, for one, was unable to put it down once I got started. As with his previous work, “Kansong Chun Hyung-pil,” a dramatically moving piece on the life of legendary art collector Chun Hyung-pil, I was once more completely awed.

After finishing it at one sitting, I closed the cover and pondered on what exactly is Korean beauty.

“Celadon, long and slender you are, at times proud and at times mournful; a sturdy and trustworthy piece of Joseon’s porcelain; the roof tiles of Goryeo are of a more humorous streak, yet they exude a profound source of attraction···” Choi was the living legend of our museum history and he is the man who introduced the public to the beauty of all things Korean, through different and new frameworks, and with an earthy style of prose. This book sheds much deserved light on Choi’s life and career as he rose through the ranks from an ordinary museum clerk until he ended his life as the head of the National Museum of Korea. His was a life completely dedicated to seeking out the beauty of our cultural assets and treasures to introduce them to the rest of the world.

The writer apparently perused the complete works of Choi ― there were up to 600 pieces that include 280 commentaries, 205 art essays, 41 theses and 86

bibliographical notes ― to accurately track Choi’s state of mind. Lee interviewed anyone who had ties with Choi, including his colleagues and even the students who boarded at his house. Wherever Choi’s breath lingered, Lee made it his business to be there. The author sums up Choi’s life as follows: “He had a lonely life. Today, we take for granted the beauty of our cultural assets and the pride we have for them, but the times he lived in was postcolonial, meaning this man had to battle colonial viewpoints, not to mention a new wave of Western superiority that ensued liberation.”

As the author points out, the end of colonial rule marked the beginning of the Korean War, and punctuated by the crude efforts at development and multiple dictatorships, Korea’s modern history was one far too barren and too poor to instill any pride for our own culture. The roots of Japanese imperialism and blind adoration for Western culture were so deep.

Then, Choi entered the scene. He was a man who unearthed 1,000 years worth of history in an abandoned stone pagoda and glimpsed absolute beauty in a simple porcelain jar. Standing near Buseok Temple’s famous shrine with beautiful pillars, as the rain seeped through the roof, the historian shed countless tears at the beauty of the sight that met his eyes.

There is a famous episode involving a request the National Museum received for touring exhibitions in Europe. When Choi learned that our national treasures were being insured at a lower rate than the international standard, he refused to organize the show unless the insurance rate was properly set, demanding proper treatment. Since then, our national treasures have received world-class treatment whenever they went on overseas tours. When you think about it, the Korean Wave sweeping the globe off its feet today all started with Choi.

[June 29, 2012]

www.koreafocus.or.kr

- Didier t`Serstevens: “You should not do things for them, but with them.”

- Kim Jung-sun: “Digital books would prevent people from taking time to pause for thoughts.”

Didier t`Serstevens: “You should not do things for them, but with them.”

Kim Yun-deok Staff Reporter The Chosun Ilbo

Although he’s confined to a wheelchair, the old priest looks as excited as a child. Through his bushy beard his voice comes out in Jeolla Province dialect.

“When I was young I was as goo~ood looking as an actor! If I hadn’t become a priest I would have been a real lady killer,” he says. He points to the computer screen, which is filled with black and white photos: a birth certificate with the date December 5, 1931; a photo of the priest at the age of seven with his second eldest brother; the passport photo taken when he first came to Korea on a ship that took a month and a half to get here; and photos from the days when he first made cheese in soap containers. As the “Peer Gynt Suite” played quietly in his study, the priest recalled the past with a satisfied smile.

Born in Brussels, Belgium, Didier t`Serstevens, 81, has lived by the Korean name of Chi Chong-hwan for the past half century. It was out of youthful ardor that he chose to be a missionary in Korea right after the war. For him, it seemed more worthwhile to go to a place that might come under an atomic bomb attack any day. Ordained a priest in 1958, he arrived at the Diocese of Jeonju in 1959 and soon took on quite a few big adventures. To secure fields for poor farmers in Buan, he blocked off the ocean and reclaimed an area of land four times the size of Yeouido, the 8.4 square kilometer island in Seoul, and when he was appointed to Imsil he raised mountain goats and started to make cheese.

So, you could say that Didier t`Serstevens is the origin of Imsil cheese. He was once threatened with deportation when he protested the Park Chung-hee regime’s arrest of Bishop Chi Hak-sun. “My (Korean) name means fighting like a madman to shed light on justice,” he says. From the 1980s Father Chi Chong-hwan served as director of the welfare center Rainbow Family, devoting himself to the rehabilitation of the disabled. For this work he was awarded the Ho-Am Prize in 2002. With the prize money of 100 million won, he established the Rainbow Foundation, which is a light in the dark for the disabled who are unable to receive government support.

On July 10, I went to visit Father Chi at his home in Soyang-myeon, Wanju County, North Jeolla Province. His years of making cheese have left him with multiple sclerosis, so he now generally uses a wheelchair and must use a cane when he does walk. “It’s like a bomb. It [this disease] comes to the legs then moves to the eyes. It has a mind of its own. It’s worst when it hits the eyes. I can’t read, or drive, or use the computer. But I’m alright. It’s interesting living this way, doing what my girlfriend [disease] tells me to do,” Father Chi says.

These days he is absorbed in putting together a history of the Catholic Church

in Korea. He is currently restoring handwritten documents left behind by French missionaries in the 1800s. His red brick house bears the nameplate “Byeol Arae,” which means “Under the Stars.”

Under the Stars, Under the Moon Q. Why the name “Under the Stars”?

A. It’s a name I came across when I was going through old documents. There’s a village named Byeol Arae in Icheon, Gangwon Province, which is a part of North Korea now. A village under the stars — what could be prettier? So my house is named Under the Stars, and the next door is named Under the Moon (Dal Arae). In the Japanese colonial period, all the village names were changed to Chinese-character names and all the native Korean names were lost. My neighborhood is called Darimok, which is a Chinese-character name meaning “a village filled with pear trees.”

Q. Your knowledge of Korean is profound.

A. Korean is so difficult and it took me a lot of tears to learn it. But it’s a language that grows more beautiful the more you know about it. I like Chinese characters as well. Korean (Hangeul) and Chinese characters have a completely different feel.

Q. Have you retired now?

A. I resigned from the post of director of Rainbow Family in 2003, and I spend my time now helping make sure the Rainbow Foundation is run properly.

Sometimes I lead mass, when the other priests are busy or for mass at our church’s welfare facilities or for the Rainbow Family. When I do lead mass,

the whole service is conducted sitting down from beginning to end. I tell everyone, whether disabled or not, whether ill or not, that they should not stand up during mass. Otherwise, the disabled who cannot stand up will feel uncomfortable.

Q. Rainbow Family is famous as a facility for those who are severely disabled. I hear that rather than medicine, the focus is on rehabilitation through exercise.

A. No medicine can fix nerves that have been disconnected. Stem cells? It’s what everyone hangs their hopes on but it’s not real yet. Maybe in 100 years’ time? You can’t rely on medicine. Acupuncture, moxibustion — they’re useless too. I’ve tortured myself with moxibustion on the legs for 19 days but it was no use. The only way is exercise, exercise, exercise. You can’t lie in bed all the time. After sitting in the wheelchair, you have to make the effort to get up using a cane.

Oh Seon, 52, who helps Father Chi run the Rainbow Foundation, is a case in point. Oh graduated from the Korea National Sport University and used to be a gymnastics coach. One day she was demonstrating a move on the parallel bars when she fell and became paralyzed. In despair, Oh attempted suicide but her life turned around when she came to the Rainbow Family. Though once unable to move from her bed, she can now sit in a wheelchair and use a computer thanks to rehabilitation through exercise. With the support of Father Chi, she also gained an online degree in welfare for the disabled.

Q. I understand that you design the homes and wheelchairs for the disabled yourself.

A. We get rid of doorsills and lower the height of windows so that people can

look outside even while lying in bed. If you sit in a wheelchair for too long you get bedsores and your heart grows weaker. For those with weak arms we put springs under the armrests so that they can repeat the motions of getting up and sitting down again. The armrests go down even with the slightest pressure.

If they repeat that exercise all day then they can gain some strength in the arms. At least once a day, we put supports under the patients’ armpits, hips, and bottom so they can stand upright. That way, the heart keeps pumping and gets stronger. We have some people who came here with all four limbs disabled but are now able to get up on their own to sit at the table for a meal.

Q. Such exercise could be another form of suffering for the heavily disabled.

A. That’s why we first teach them to use the computer. We receive all the baptism papers from the diocese and hand them out to the patients to use to practice typing. They also get training in bookkeeping and graphic design. Oh Seon, for example, was unable to use all 10 fingers at first but now she types 100 letters per minute using her thumbs.

Q. How did you come up with the idea of making patients get up on their own?

A. When I was a seminary student I used to volunteer to work with the disabled as part of a group that included medical students and nurses. Back then the leader of the disabled group made one specific request — that we should not do things for them that they were capable of doing on their own.

We were not to touch their wheelchairs without permission. She said the wheelchair was like a disabled person’s clothes. Our role was to help the disabled to do things on their own, not to do things for them.

Q. I hear you are an expert in treating bedsores.

A. In Belgium, seminary students spend the first two years studying philosophy and in that time decide whether to continue on this path or not.

After two years of philosophy they spend one year at a hospital. You go around all the departments and see how people are treated, watch surgery, watch women giving birth, and of course see how injections are given. It’s as if seminary students get nursing training instead of doing military duty. The training I received then has been very useful in treating bedsores. The disabled get bedsores day and night. I can treat them while hospitals can’t.

Q. You received the Ho-Am Prize in 2002 for your rehabilitation work with the disabled.

A. One day some professors came down from Seoul and took a look around our center. Then a few days later I received a phone call. It was the Ho-Am Foundation. They told me to come to Seoul to receive the prize. I thought to myself, if they want to give me a prize they should come down here and give it to me, why should I go to Seoul? So I asked them if they could send it to me in the mail. I had no idea the award was 100 million won! (laughs) A Priest Who Lost His Gall Father Chi Chong-hwan was born the youngest child of three boys and two girls to an aristocratic Belgian family that had been granted a knighthood. In his autobiography titled “A Rainbow Made of Cheese” Father Chi says that he decided to become a priest around the age of 11. “In Belgium the population is 18 percent Catholic and many Catholic missionaries were working all over the world. In the vacation season they would return home and hold lectures on their work overseas, and that’s when I started to dream about doing the same

thing. I wanted to help others unconditionally,” he said in the book.

Q. Your parents agreed to you becoming a priest but it is said they strongly objected to your choice of Korea for missionary work.

A. Just after the Korean War, Korea was a country that was poorer and more dangerous than Africa. Everyone thought that when China entered the war it would lead to World War III. My parents advised me to go to Congo, but a lot of missionaries had already gone there, so I stuck to Korea.

Q. Weren’t you afraid?

A. For a moment, when I heard about the deaths of Belgian soldiers who had participated in the Korean War, and when I heard stories about Catholic priests in China and Korea who had been jailed or evicted. Kind of a like a bride having second thoughts before her wedding. (laughs) Q. You must have had a very difficult time at first.

A. At the time the only paved road in Korea was the road between Seoul and Incheon. In summer when it rained the bus drivers would stop and say, “Everybody get off and help push the bus, please.” But the hardest thing to bear was the lack of trees and (classical) music.

Q. Did you learn Korean quickly?

A. When I was working at Buan Cathedral, I was riding the bus one day and all the passengers were staring at me, because I looked so different. One old man asked me, “How old are you?” When I answered “I’m 30,” he then asked what I thought was, “Have you been to Janggae?” [Misunderstanding of the

question “Are you married?” The local dialect means “marriage” by janggae.]

I remembered visiting a village called Janggye in North Jeolla Province, so I said with confidence, “Yes, twice.” The old man suddenly got angry and shouted, “What a low bastard!”

Q. You worked with the farmers in Buan to create reclaimed land.

A. Back in 1961, Buan was filled with poor starving people. Most of them did not have the land to drive a stake in let alone farm. Believing that providing them with land would help them escape poverty, I worked with the farmers for over three years to create 100 jeongbo of reclaimed land (approximately 245 acres). We sold some of the 2,000 sacks of flour that came from Belgium as relief goods to pay for labor. As a result we were able to provide 100 farmers with one jeongbo of land each. The feeling was indescribable. But in the end, the project was a failure. When drought hits, reclaimed land by nature becomes salty and this invariably makes the rice crops fail. None of the farmers had the patience to work through these problems. To stave off immediate hunger they put up their land as collateral for loans to buy rice and liquor, and they fell to gambling. The land they had created by the sweat of the brow eventually landed in the hands of loan sharks.

Q. You fell ill then, didn’t you?

A. The work was hard of course, but in addition I was not yet used to Korean food and mostly lived on bread and ramyeon noodles. This gave me gall bladder problems and eventually I had an operation to have it removed. So, I ended up a man with no gall! (laughs) Imsil Cheese Pizza

Father Chi Chong-hwan returned to Belgium for surgery and when he came back to Korea six months later he was transferred to Imsil Cathedral in Buan.

After the failure of the land reclamation project, he resolved not to get too involved in the lives of the locals ever again. But when he saw how the Imsil residents were suffering from hunger and passing poverty on from one generation to the next because of harsh environmental conditions, he started to feel uncomfortable again. Telling himself he would get involved “just a little bit” he started a credit association with the young people of Imsil. It was around this time that he started to make cheese.

Q. How did you come up with the idea of making cheese?

A. I was raising two goats that I had received as a gift from a priest I knew.

Goats cost only a tenth of cattle. If goats were raised on the wide grassy plains of Imsil to sell their milk, I thought it would be possible to turn a good profit.

Of course, not everything worked according to plan. There was little demand for goat’s milk so we ended up throwing a lot away. I was wondering how to deal with the unsold milk when the idea of making cheese struck me. It takes a huge investment in equipment to make processed products such as condensed milk or baby formula, but that’s not the case with cheese. At the time many European people were making cheese at home.

Q. But you experienced a string of failures. I hear your first batch of cheese was set in a plastic soap dish.

A. It was an amateur process. I used an herbal medicine pipkin and a gauze normally used to make anchovy stock. It looked like cheese but the quality was too uneven. It couldn’t be sold, so I decided to set up a factory. With $2,000 from my parents in Belgium, I made a small cheese factory with space for milk fermentation, but I did not have the necessary lactic acid bacteria.

Someone thought adding malted wheat, which is used to make makgeolli [unfiltered rice wine], might do the job, so I tried it, but failed once again. It took three whole years of trial and error, and in that time more and more of the farmers began to give up on the idea.

Q. In the end you left for France to learn how to make cheese. Most people would have given up by then. You’re certainly persistent.

A. Start off with a crazy idea, and you might as well see it through to the end! (laughs) I spent three months visiting cheese factories in France and Belgium, paying close attention to the proportions of the ingredients and the production process. I also learned how to adjust the acidity according to the cheese type, for instance, camembert and cheddar. The breakthrough came when an Italian cheese maker gave me his cheese making notes. They contained the production methods for all kinds of cheeses. You can’t imagine how excited I was carrying those notes back to Imsil.

In 1969, Father Chi succeeded in making Imsil cheese. Having received cheese processing equipment from the Catholic relief services in Belgium, the cheese making began to take off. A sales network was soon established. In the 1970s the only cheese available in Korea was that illegally obtained from U.S. army bases. Emphasizing that Imsil cheese was legally produced and 100 percent hand-made, Father Chi expanded the sales network from shops catering to foreigners to top-class hotels. “I wept with emotion when the Westin Chosun Hotel ordered 70kg of our cheese on the spot after tasting it,” he said. As the goat’s milk was replaced with cow’s milk to successfully produce cheddar cheese, Imsil cheese became more and more famous. It was the first cheese produced in Korea, and the result of hard work on the part of the local farmers.

Q. You seem to have a clear entrepreneurial streak.

A. My great-grandfather started an insurance company back in 1831. It grew into the biggest insurance company in Belgium and later he took over a big Belgian bank, although it collapsed because of the Lehman Brothers bankruptcy. I think I had a bit of the businessman in me.

Q. Imsil cheese seems to be going through some trouble these days. There was a lot of conflict over the patent and rights to Ji Jung-hwan Imsil Cheese Pizza.

A. I was asked to lend my name to the pizza on the argument that selling pizza made with Imsil cheese would boost cheese consumption. I objected at first, but changed my mind, hoping that it would revive sales of Imsil cheese, which had been suffering under the import of cheaper foreign cheeses with the opening of the cheese market. In any case, I thought the business would go no further than 10 or so shops in North Jeolla Province, but in the space of two years more than 100 Ji Jung-hwan pizza stores opened across the country.

Conflicts rose up left right and center over the profits, and every time the people involved would come and harass me, which made me angry. So I called in their lawyer and stipulated that my name and my face could only be used on the condition that 5 percent of the profits go to the Rainbow Foundation.

Thanks to that, the foundation’s funds have grown considerably.

It’s All their Work Q. You were almost deported when you fought for the release of Father Chi Hak-sun in the days of the Yusin reforms of the Park Chung-hee government.

A. When the priests gathered together we would proclaim that we had to get

rid of the three evil “gong”: the Communist Party (gongsandang), pollution (gonghae), and the Republican Party (gonghwadang). So we were a thorn in the side for the police from the beginning. When I put an ad in the newspaper which read “YOU SIN REPENT NO MORE YOU SIN,” I was called in by the immigration authorities of Yeosu. When the police reprimanded me for what they believed to be an anti-government ad, I told them it was warning against sin during Lent. (laughs) Q. You must have been a headache for the diocese.

A. Yes, I was not always in the good books.

Q. Ironically, it was Park Chung-hee who saved you from deportation.

A. A photo of me being arrested after taking part in a demonstration was released by the foreign news agencies so the Belgian authorities, not to mention my parents, saw the picture. When the case was reported by the Belgian government to the Korean foreign affairs ministry, which reported to Cheong Wa Dae [the presidential mansion], President Park apparently said, “Who is this Chi Chong-hwan?” When the immigration officer who had been called in answered, “He’s the person who started a cheese factory with the farmers in Imsil,” the president commanded that my deportation order be immediately withdrawn. Rural development was President Park’s pet project. (laughs) The cheese factory saved me.

Q. How would you evaluate President Park Chung-hee?

A. These days I’m all caught up in reading Lao Tzu. I particularly like the phrase “When your work is done, then withdraw!” If Park Ching-hee had not proclaimed the Yusin reforms, if he had handed over government properly to

the next regime, I believe he would have been a man to be remembered in world history. He would have been remembered as a good leader rather than a terrifying one.

Q. Was there any need to take part in political demonstrations, considering Korea was not your homeland?

A. The police asked me exactly the same thing. But when they asked, “You’re a foreigner, aren’t you?” I answered “No.” I told them I was born in Belgium but was now living in Korea as a priest of the Korean Catholic church. The same still applies today.

Q. Are you still interested in Korean politics?

A. I watch the news every night. When I watch TV sometimes I wonder, “Is there anyone left alive in Korea?” People die every day in traffic accidents, and everyday people are caught for corruption and locked up. (laughs) Democracy is a very difficult thing. We still don’t know what democracy really is. We used to envy European democracy, but it’s in trouble now. After giving the people everything they asked for, the incoming and outgoing numbers don’t match anymore. The foreign news on TV shows one person slapping another in the middle of a discussion, even pulling out a gun. As long as people fail to listen to each other and insist they are right, democracy is still remote. Religion is no exception.

Q. Are you talking about Protestantism?

A. The most closed person is the Pope. (laughs) Then comes Muslim.

Q. Were you ever in love with a woman?

A. There’s a passage written on the wall at the house down the road: “I asked God for a flower and he gave me a garden. I asked God for a tree and he gave me a forest. I asked God for a river and he gave me the ocean. I asked God to send me an angel and he sent me you.” This is my answer.

Q. Would you say love is passion or sacrifice?

A. Love is give and take. Love is dangerous if it is all sacrifice. If you keep giving all the time then at some point you get angry. Don’t work for somebody else. You should not do things “for” your husband but “with” him. I failed in my work with the farmers of Buan because I worked “for” them.

Q. Are you happy?

A. The food in front of me right now is the most delicious food in the world. I like Korea better than Belgium because Korea is the country I am living in.

During this interview, Father Chi Chong-hwan drank makgeolli with his lunch.

“I have to drive on the strength of alcohol, otherwise it’s too frightening,” he jokes, like your typical country guy. Oh Seon, who was also present, added this intriguing comment: “Father Chi has requested No Sa-yeon’s song ‘Mannam’ [Meeting] be sung at his funeral mass.” As to the reason why, he said, “Love, learning, democracy — everything starts with the meeting of people. Shall I quote Lao Tzu again? The phrase ‘When your work is done, then withdraw’ is meant for leaders. It means leaders should reach out and work with the people. Anything achieved should be counted as the achievement of the people. The cheese, the Rainbow Foundation, none of it is my doing. It is all their work.”

[July 21, 2012]

www.koreafocus.or.kr

Kim Jung-sun: “Digital books would prevent people from taking time to pause for thoughts.”

Shin Dong-heun Staff Reporter The Chosun Ilbo

PoChinChai Printing Company Ltd., the first modern printing firm in Korea, celebrates its 100th anniversary this year. It is now located in Paju Book City, in Gyeonggi Province, but the firm was initially set up in Jongno 1-ga, downtown Seoul, with purely Korean capital inputs, on August 15, 1912, when Korea was under the Japanese colonial rule.

During the past century, while many domestic printing firms emerged and disappeared, PoChinChai thrived. It has kept the company name and the family ownership and management, despite the ups and downs in Korea’s tumultuous modern history. It went through national liberation in 1945, the Korean War of 1950-53, the rapid industrialization in the 1970s and 80s, and

the Asian financial crisis in 1997-98. The company is now headed by Kim Jung-sun, 61, the great-grandson of its founder Kim Jin-whan.

Given the extensive printing portfolio in the past century, a collection of all the printed materials produced by PoChinChai would easily make an effective overview of the nation’s modern history. The company has printed school textbooks, various diplomas and certificates, magazines, dictionaries and highway passes, among other printed materials. During the colonial period when the Japanese threatened to abolish the Korean language, the company’s products included Korean language workbooks and the Korean literary magazine “Munjang” (Writing).

In the early 1930s, PoChinChai printed the first Christmas seals in the country, and built up a peerless reputation in high quality color printing for folding screens, modern paintings and world atlas, among others. It printed out government-authorized elementary school textbooks in the 1950s and 60s, and national college exam papers during the 1970s. Almost all middle-aged or older Koreans today must have used PoChinChai-printed materials at least a few times in their lives. The company is especially noted for its expertise in printing the Bible on very thin paper; its global market share in Bible printing once reached 30 percent.

President Kim took over the management of PoChinChai some 20 years ago after working for large conglomerates. “It is not easy to play the role of a bridge linking the centennial corporate history with the newly unfolding digital era,” says Kim. For the past 550 years, since Johannes Gutenberg invented the printing press, the printing industry has mostly involved the technology of “applying ink on paper.” But the printing paradigm is fast evolving with the advent of tablet PCs, smartphones and e-books.

Kim, who majored in computing at the applied mathematics department of Seoul National University, had worked for computer centers at other large companies before assuming his top position. Though a computer expert himself, he seems disgruntled with the recent shifts from paper printing to digital technologies. “We need to keep a cautious stance toward the fast digitization trend. With the belief that the printing industry will never go extinct, I will carry on our family business as we have done over the past 100 years,” he said. ◇ Keeping Records of Modern Korean Life for 100 Years Q. In spite of your long history and numerous print products, the name PoChinChai sounds somewhat unfamiliar.

A. It may be because we are a printing company, not a publisher. Some even think it’s a pharmaceutical company name. There are a few Korean companies whose history dates back more than 100 years, but we are the only one that has maintained its name and family management throughout the past century.

Q. What does the name PoChinChai mean?

A. It is Baojinzhai in Chinese, which means “a library that holds treasures of the Jin Dynasty.” My great-grandfather named his company after the library of Mi Fu, a famous Chinese painter and calligrapher during the Northern Song Dynasty. The company was called PoChinChai Lithographic Printing Co. when it was founded at a small building along an alley near today’s Gwanghwamun Post Office.

Q. Why the lithographic printing?

A. Letterpress printing based on wood or metal type only allows one color printing. Lithographic printing, using stone-carved texts and images, was the only method of color printing at that time.

Q. Japanese colonial rulers clamped down on newspapers and printing and publishing businesses.

A. As our company specialized in color printing, a large amount of our products were book covers and painting collections. In other words, we could survive [the colonial oppression] due to our color printing skills. Thanks to our specialty in color printing, which was the best in the country, we printed out Christmas seals in 1933 for the first time in Korea. And, we also printed “eight-color world atlas� for the Chosun Ilbo in 1938 as freebies for its readers. The eight-color printing at that time was a cutting-edge technology, which may be comparable to today’s 3D TV. It is said the company was very proud of its state-of-the-art technology.

Q. What kind of magazines or paintings did you print mostly?

A. My great-grandfather was determined to make contributions to the promotion of Korean national culture. He rejected printing orders of manuscripts of pro-Japanese content that harmed the Korean national spirit.

Korean Language Dictionary (Joseoneo Sajeon) could almost have been printed at our company.

Q. What do you mean?

A. In 1941, a group of Korean linguistic scholars completed compiling a Korean dictionary and asked us to print it. However, the Japanese authorities cracked down on the Korean Linguistic Society and arrested those who were

involved with the project. The Japanese were desperate to find the manuscript for the dictionary. Our company kept the manuscript safely until national liberation. However, after liberation, the linguists reclaimed the manuscript and had it printed by another company. It was quite disappointing to us. ◇ Printing the Bible for Export around the World PoChinChai currently prints the Bible for use in more than 100 countries around the world. The company started printing the Bible and hymnals in the 1920s. At a section in the company’s printing factory, I found Bible pages printed in Bulgarian, Arabic and Spanish languages waiting to be bound. When it comes to technology for printing on ultra-thin Bible paper, PoChinChai claims the world’s top spot, according to Kim. “Bible and hymnal printing still accounts for 10 percent of our sales, though it has been decreasing recently,” he said.

Q. Why does Bible printing require special skills?

A. Bible paper is very thin so it requires exceptional skills in neatly stacking the printed pages for binding. No matter how good you are at automated printing process, you need skilled artisans who know how to handle the paper.

In the 1960s, the rate of paper loss at our company was about 3 to 4 percent, while other companies suffered some 20 to 30 percent losses. Therefore, Bible printing orders that had been lost to other firms often returned to us.

Q. Who are the major importers of the Bible printed at your company?

A. These days we receive many orders from the African region. In the late 1980s and early 1990s, Bible demand from Eastern European states surged following the collapse of the Soviet block.

Q. It brings to mind the mass production of the Bible following Gutenberg’s invention of printing press, which led to the collapse of the medieval European social system.

A. We received some printing orders for the Bible in Chinese for a while, and for that, I expected to see some changes occur in China. But the orders were abruptly discontinued probably due to intervention by the Chinese government. These days we are receiving steady Bible orders in Arabic and African languages. We are committed to shipping 1 million copies in African languages next month. Even today, in some parts of the world, mass printing is triggering social change as it did after Gutenberg’s invention of printing press, proving that history repeats itself.

Q. The Bible market will probably never disappear.

A. The electronic Bible is already available with reading functions also provided. A revolutionary shift from print Bible to electronic copies would just take place in a most sudden and unexpected way. For instance, when electronic dictionaries first came out with a price tag of some 300,000 won (US$270), we expected that the price would need to fall to 100,000 won to ignite mass consumption. However, demand for electronic dictionaries rose fast regardless of their price as many Koreans bought them for gifts. We used to print many kinds of dictionaries but not anymore. ◇ Family Trade He Wanted to Avoid Born as the second son in a family running a print shop for generations and growing up familiar with the smell of ink from a young age, Kim did not want to inherit his father’s job. He worked for computer centers of Hyundai Motor

and Daewoo Motors, a path he chose to escape his fate. However, at age 40, he took over the management of his family company. “I had made every effort not to succeed my father’s position but I had to accept it as my destiny,” Kim says. These days he is writing the centennial history of his company, updating its history written for the 70th anniversary and asking for counsel from his father and honorary chairman, Kim Joon-ki, 90. The family trade was both a yoke and destiny for him.

Q. You are the second son and you are running the family business.

A. I am the second son with five siblings. I have an elder brother and two younger brothers. Initially, it was planned that my younger brother would take over the management. So, he even studied printing engineering at the Rochester Institute of Technology in the United States, but he immigrated to live abroad.

Q. Why didn’t you want to assume the managerial position?

A. I grew up watching my father having so many sleepless nights to make ends meet and give salaries to employees. Printing business also means that the manager should work to attract customers and receive orders from them. It is tough to be a salesperson, you know. I thought I would never make it.

Q. While working for Hyundai and Daewoo, did you think you were training as a future manager?

A. No, it wasn’t worthy of being called managerial training. And I could not ignore my father’s wishes when he turned 70. I just couldn’t let it happen that none of his sons would want to run the family business. As soon I as joined the company, the printing factory at Dangsan-dong faced a strike. From my

working experience at Daewoo, which had so violent strikes, I had learned how to handle them. Under my management we haven’t had a single labor strike.

Q. What is your biggest worry at the moment?

A. Printing companies in this country are having overly heated competition, which is turning the whole industry into a losing business. With printing fees remaining stagnant for two decades and the communication paradigm shifting rapidly to e-books and smartphones, it’s hard for conventional printing firms to find a breakthrough. Some people already talk about replacing print textbooks with digital textbooks. They are moving forward too fast. Printing requires a lot of manual work and labor inputs. In the end, it would be a struggle against automation.

Q. Aren’t you pressured to change the factory equipment and catch up with the digitized shift?

A. It is not recommendable at all to purchase digital equipment at once in the early phase of technological shifts. Conventional offset printing machines are typically used for decades but digital machines are good only for a couple of years. It is a very dangerous move to make a heavy investment in a new technology in the early phase of rapid technological change.

Q. The fact that your company has existed for a century itself speaks for its enormous strength and resilience, considering that so many printing companies have proven short-lived. What is the key to the longevity?

A. We have been managing our company within our means and have never been overly ambitious. Maybe this is the reason the company has not grown

bigger. Instead, we survived difficult times by maintaining our conservative managing style. We don’t have bank debt. When we have to get a loan, we always keep the equivalent amount deposited. We have built up our credibility through generations for 100 years, which is our greatest asset.

As I followed Kim to take pictures on the first floor of the printing factory, Kim did not forget to turn off the lights in his office. I noticed that wherever there were no employees present, all lights had been turned off without exception ― a testimony to “frugal management” and cost-cutting routines.

Q. What are the examples of your conservative approach to corporate management?

A. I have set up a “5 percent rule,” which means that any single customer should not take up more than 5 percent of our sales. If a customer accounts for more than 20 percent of the firm’s sales, we become enslaved to its demands.

In case this key client terminates contracts with us, the whole firm’s fate is at stake. We do not want this kind of situation to happen.

Q. Have you experienced anything like that?

A. In the 1970s, we worked for the government orders to print test papers for college entrance exams. The job required heavy security control at the printing factory around the clock, preventing us from receiving other regular orders.

The government order, therefore, was priced double the regular rate. However, inspections followed and the high printing rate became an issue. We eventually had to pay back the premium and the company faced a risky situation. We have since decided not to take government orders.

Q. Who is to take over your business?

A. I have just one son and one daughter. My son is studying in Japan, majoring in design.

Q. Do you mean he is preparing to inherit your family trade by familiarizing himself with the Japanese printing market?

A. Japan is a publishing/printing powerhouse. Japan’s printing industry is dominated by three big companies, while Korea’s small market is mired in cutthroat competition among thousands of firms. The Japanese printing market is becoming more attractive due to rising printing rates amid a power shortage since a nuclear power plant explosion.

Q. You are serving as chairman of the business council of Paju Book City.

A. We were the first resident company in the publishing complex. I have learned a lot from interacting with publishers who moved into the complex. I have realized that new printing technology led to a broader distribution of the Bible, which in turn triggered the Protestant Reformation, Industrial Revolution and the advancement of democracy.

Q. Paju Book City celebrates its 10th anniversary this year. What are your plans for the occasion?

A. We will organize the “2012 Paju Booksori Festival” in fall, and we hope to open a street of bookstores jointly operated by various publishers. Paju Book City, which houses the nation’s renowned publishing firms, is something very remarkable and unprecedented. We are planning to set up a street of bookstores, where each of the 100 or more publishers operating in Paju would open a shop to sell their latest releases as well as old publications. The

bookshop street would likely be an interesting place to visit for book lovers.

Q. What do you think would be the future of paper books?

A. When people get increasingly accustomed to reading electronic books on iPad screens, for example, digital publications will gradually gain the upper hand over conventional paper prints. However, widespread use of digital books may also mean that people will increasingly seek instant responses to their intellectual quests and reading experience. They would cut down on the time spent for reflections and contemplation facilitated by slow-speed reading of paper books. I am concerned that digitization may result in the development of publication formats that would prevent people from taking time to pause for thoughts.

[July 21, 2012]

www.koreafocus.or.kr

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