Table of Contents
- Korea Focus - May 2013 - TOC - Politics 1. President Park’s Challenges after Washington Visit 2. Issues of Korea-U.S. Atomic Energy Negotiations 3. Kaesong Industrial Complex Racing against the Clock 4. Will China Change its North Korea Policy? 5. Abe’s Neo-Cold War Diplomacy and Seoul-Tokyo Ties 6. Politics for Another ‘Miracle on Han River’
- Economy 1. Korea Trails behind Japan into Protracted Economic Slump 2. Advantages of FTA Hub 3. Advancement of Foreign Exchange Sector 4. Winners and Losers in Currency War 5. Welfare without Tax Hikes
- Society 1. Backwardness of an IT Powerhouse 2. Failures are the Engine of Growth 3. Educational Policy to Outdo the ‘Daechi-dong Moms’ 4. Honesty Determines National Competitiveness
- Culture 1. Psy’s K-pop Success a Role Model for Creative Economy 2. A Break Hardens Kim Yu-na’s Mentality 3. The Korean Wave Creeps into Cultural Heritage 4. Traditional Korean Gardens Await Global Promotion 5. The Scent of an Artist
- Essay 1. North Korean Economy in the Kim Jong-un Era: Current Situation and Challenges 2. First Year of the Korea-U.S. FTA: Review and Prospects 3. Happiness of Koreans by Age Group: Background and Implications 4. What YouTube Can Teach Us about K-pop
- Feature 1. ‘Yes, I Must be a Freak!’
- Book Reviews 1. The Old Seoul Still Around with Many Ancient Roads 2. Life Story of a Towering Figure in Korean Progressive Politics 3. Reading Joseon History Anew ― Goryeo Elites Remained as Powerful as Ever
- Interview 1. Han Jae-kwon: “54,000 North Korean Workers make a living from Kaesong Industrial Complex.”
- COPYRIGHT
- President Park’s Challenges after Washington Visit - Issues of Korea-U.S. Atomic Energy Negotiations - Kaesong Industrial Complex Racing against the Clock - Will China Change its North Korea Policy? - Abe’s Neo-Cold War Diplomacy and Seoul-Tokyo Ties - Politics for Another ‘Miracle on Han River’
President Park’s Challenges after Washington Visit
Editorial The JoongAng Ilbo
President Park Geun-hye is returning home from her U.S. visit today. Her first overseas trip to the United States as South Korea`s head of state drew keen attention amid escalating tensions on the Korean peninsula. Her Washington visit seemed all the more significant as the South Korean-U.S. military alliance marks the 60th anniversary this year.
As South Korea`s first female president, Park seems to have planted her strong yet graceful image in the hearts of Americans. Her gracious posture and dignified behavior helped to raise the nation`s prestige as well. But her talks with U.S. President Barack Obama fell short of paving the way for an improvement in inter-Korean relations and a solution to North Korea`s nuclear armament. In other words, she made a successful debut in summit diplomacy and yet her performance fell short of expectations.
Nonetheless, her address at a joint session of the U.S. Congress was impressive. She was gentle but persuasive when she called for the peaceful use of atomic power and a revision to the South KoreanU.S. nuclear accord while referring to President Obama`s vision for a world without nuclear weapons. Also appropriate was her call for an increase in the visa quota for South Korean professionals, which she said was needed to maximize the benefits of the Korea-U.S. free trade agreement. There should be some tangible results since she made the proposal before congressmen and senators who handle
immigration legislation.
The president made a good presentation on her initiative for improving inter-Korean relations by building trust on the Korean peninsula. Few would have disagreed with her when she said she would deal sternly with any provocation from North Korea, but provide humanitarian assistance for the North, regardless of political circumstances, and build trust by gradually expanding exchanges and cooperation, thereby laying the foundation for sustainable peace and peaceful reunification.
She also extended the vision of South Korean-U.S. alliance to peace and prosperity of Northeast Asia and the world, beyond the Korean peninsula, which should contribute to enhancing Korea`s global status. She apparently did so out of her pride and sense of responsibility as the leader of South Korea, which has turned itself from one of the world`s poorest countries benefiting from U.S. aid to an aid provider in the span of 60 years.
During her address, Park received applause 40 times, including six standing ovations. But she should not forget that the applause was for the Korean people who elected her president, rather than for her alone. She needs to resist becoming complacent about her responsibilities or deluded by the praise that was heaped upon her.
There are few countries in the world where no South Koreans reside. But not a single South Korean remains in North Korea after the industrial complex for South Korean companies in the border town of Kaesong temporarily shut down. President Park has to explain in concrete terms before the people what action she will take to reopen the industrial complex and how she will kick off her trust-building process amid the current deadlock in inter-Korean relations.
She must also prepare her talks with President Xi Jinping ahead of her visit to Beijing, where she will take up such issues as North Korea`s nuclear armament and other problems concerning the Korean peninsula. At the same time, she has to set up a detailed action plan for South Korea to play a leading role in achieving peace and prosperity on the Korean peninsula and adding to the groundwork for peaceful reunification. These are among the challenges President Park will have to take up upon returning home from her visit to the United States.
[ May 10, 2013 ]
www.koreafocus.or.kr
Issues of Korea-U.S. Atomic Energy Negotiations
Chang Soon-heung Professor of Nuclear and Quantum Engineering Dean, KUSTAR-KAIST Institute Korea Advanced Institute of Science and Technology
South Korea and the United States have agreed to extend their civil nuclear cooperation agreement for two years until 2016 and conduct negotiations on its revision on a quarterly basis, beginning in June. Although the outcome of the latest talks in Washington, D.C. has triggered critical debates, there are more aspects to an extension of the bilateral pact than its apparent negative implications.
Among various points subject to revision, the key part is whether Korea will be allowed to pursue technologies and rights to reprocess spent fuel and enrich uranium. In order for Korea to secure the rights that have been denied under the existing agreement, several issues should be seriously considered.
Korea needs Washington`s consent to employ pyro-processing technology in recycling used nuclear fuel. This technology has been researched and developed for many years as an efficient proliferationresistant way to ensure a smooth supply of nuclear material and disposal of spent fuel. Unlike conventional reprocessing techniques, pyro-processing leaves separated plutonium mixed with other materials, a compound that is reusable in reactors but unfit for nuclear weapons.
U.S. consent to pyro-processing is all the more necessary because, compared to other reprocessing
methods, it reduces by one-fourth the volume and heat generation of spent fuel in the first stage of separation process. Korea`s rights to reprocessing and enrichment activities should also be respected as part of a 10-year joint study by experts of the two countries. The study was initiated to research further application of the new technology as well as its proliferation risks.
Korea needs to secure the rights for enrichment from a long-term perspective. Over the past three decades, it has faithfully abided by the Nuclear Nonproliferation Treaty (NPT) to be recognized as a model country committed to the cause of nonproliferation. Korea is seeking the rights not for immediate development or use of enrichment technology but for future application. Seoul should at least try to participate in a multinational enrichment facility abroad under the global nonproliferation regime or lay the groundwork to host a multilateral enrichment facility in Korea.
Three major reasons can be cited for the two-year extension of the Korea-U.S. nuclear cooperation agreement. First, the nuclear sharing agreement has yet to readjust several detailed provisions on technicalities. Pending issues include not only Korea`s rights for nuclear material enrichment and fuel reprocessing but a broad range of complex problems deriving from bilateral civil nuclear cooperation, such as scientific, technological, industrial and nonproliferation aspects of nuclear energy. Of those issues, Washington has recently hinted at the possibility of consenting, through sufficient scrutiny, the first stage of separation in pyro-processing. However, the two sides have yet to agree on detailed matters.
Second, a certain time frame is needed for a revised or new agreement to take effect after it is signed because the legislature of each country must ratify it. If negotiations for revision take too much time, an enforcement vacuum may be created between the current agreement and the revised version.
Taking into consideration the various factors, it is desirable that the two countries reach an overall conclusion by coming May. The two-year extension is thus not necessarily disadvantageous to Korea; it would be another two-year period of preparations.
Third, a revision of the civil nuclear cooperation pact requires careful consideration about its political implications, both internal and international. The issues may not be put on the open agenda of negotiations. But, for one thing, the revision will directly influence relations between North and South Korea. For the United States, the revision could affect its nuclear sharing deals with Taiwan, Saudi Arabia and other countries, forcing it to be circumspect about its stances.
The Park Geun-hye administration is very committed to reaching a future-oriented amendment of the atomic energy agreement with the United States. What is most worrisome is a retrogressive change of key provisions for whatever reasons. Even while a revision of the agreement may have an impact on inter-Korean relations, South Korea and the United States need to expedite negotiations with a view to promoting their civil nuclear industries and mutual alliance.
[ Munhwa Ilbo, April 25, 2013 ]
www.koreafocus.or.kr
Kaesong Industrial Complex Racing against the Clock
Editorial The Maeil Business Newspaper
The last group of 50 South Korean factory managers is set to withdraw from the industrial complex in North Korea`s border town of Kaesong (Gaeseong) and return home today. Thus, the last remaining bastion of inter-Korean exchanges will be lost 10 years after construction began on the joint industrial park. [Editor`s Note: Forty-three South Korean factory managers returned to the South late at night on April 29 while seven others remained in Kaesong to finish discussions with the North on paying off wages, taxes and utility bills.]
Since June 2003, the South Korean government and 123 corporations have invested some 1 trillion won in the Kaesong complex, including 360 billion won to supply power, communications and water, and 370 billion won to build production facilities. Now, the complex will be left in the hands of the North Koreans.
When South Korean tour groups to Mount Kumgang (Geumgang) were halted in July 2008, North Korea confiscated the resort facilities of Hyundai Asan, South Korea`s tour organizer, and used them intermittently for Chinese tourists. But the North failed to operate the resort successfully. Similarly, even if the South does not turn off power and water, North Korea will find it impossible to operate the complex. It will be unable to obtain the production materials or secure sales outlets. As a consequence, some 53,000 North Koreans who worked at Kaesong will lose their jobs.
On April 27, North Korea severely denounced the South Korean decision to withdraw all the factory managers, but did not say whether or not it would close the industrial complex permanently. By doing so, it retreated from its earlier threat. Turning down a South Korean offer for talks the previous day, it said that it might “take a grave measure” with regard to the complex before the South did. The North showed its telltale desire to maintain the complex when it said later, “We are watching whether or not (South Korea) will go ahead with its intention of sacrificing the Kaesong Industrial Complex, the only remaining joint project for the Korean nation.”
Some predict there will be a breakthrough after the ongoing South Korea-U.S. joint military exercise ends tomorrow (April 30) and South Korean-U.S. summit talks are held on May 7. What North Korea needs to keep in mind is that time is critical. If it wants the industrial complex to continue operating, it will have to reopen it as soon as possible. It cannot afford to waste even an hour. Operation of the complex will become impossible if buyers cancel their purchase agreements and production facilities are not properly maintained.
The North should bear in mind that an Indian buyer already has canceled its purchase agreement with a South Korean enterprise operating in Kaesong. Furthermore, not a few South Korean companies will say they will not go back to Kaesong, because they believe they would no longer be assured of running their factory under market economy principles.
For its part, our government would do well to persuade China to link its participation in the development of special economic zones in Rajin, Sonbong, Hwanggumpyong and Sinuiju to restarting the Kaesong complex. China is urged to declare that it will not invest a penny in any of the exclusive economic zones unless the North resolves the impasse over Kaesong.
[ April 29, 2013 ]
www.koreafocus.or.kr
Will China Change its North Korea Policy?
Ji Hae-bum Editorial Writer The Chosun Ilbo
A seminar hosted by a university last weekend debated whether China is revising its North Korea policy. Some of the participating experts argued that a change is under way, given that some Chinese people are demanding their government give up on North Korea. But others said only a small group of people have such an opinion and there will be no change in Beijing`s position. Prudent opinion leaders said, “A swallow doesn't make a spring,” while others retorted, “Even a single swallow means spring isn't far away.”
All of this debate started as anti-North Korean sentiment began to erupt in China. There were demonstrations across China denouncing North Korea`s third nuclear test, conducted on February 12. Some protesters even asserted, “North Korea`s nuclear weapons could turn on China” or “North Korea isn't a strategic asset of China."
After meeting with China's then premier-in-waiting Li Keqiang in mid-February, Ed Royce, chairman of the U.S. House Committee on Foreign Affairs, said that China was “increasingly irritated” by North Korea`s young leader. Royce suggested that anti-North Korean sentiment has spread to top leaders. China`s secretive nature makes it difficult to determine how much purported displeasure will be actually reflected in its foreign policy. But some positive signs of change are visible.
In a column in the official English daily Global Times on March 12, Major General Luo Yuan of the People's Liberation Army, who speaks for the Chinese military, warned, “Did North Korea harm China`s interests? Sure... There will be disastrous consequences if nuclear technology or equipment falls into the hands of terrorists [in Xinjiang Uyghur or Tibet].” Unlike in the past when they appeared to be blasé about North Korea`s nuclear capabilities, the Chinese now seem to have a different view. The anti-North Korean sentiment among its people has given the Chinese government cover to pressure North Korea.
In an editorial dated March 8, the Global Times said that China's support of the latest U.N. resolution reflected the universal opinion of Chinese society. The most conspicuous change is that it is becoming more and more difficult for the Chinese government to ignore rational public discourse based universal standards of common sense. Rational comments can change the Chinese society by wielding enormous power in the cyber world. For example, the Chinese government had no other choice but to dispatch a fact-finding team to a northeastern region after Netizens brought up the possibility of radioactive contamination there.
Seoul too can find here a niche for its diplomacy towards Beijing. At the closing meeting of the first session of the 12th National People`s Congress on March 17, President Xi Jinping pledged to fulfill China's international responsibility and duties in order to realize the “Chinese dream” of raising the diplomatic banner of peace, development, cooperation and co-prosperity. The Korean peninsula can`t be exempt from this principle and pledge, considering that it would not be easy to realize the “Chinese dream” if the North Korean nuclear arms issue is left unresolved.
When Hu Jintao was still president, Beijing made separate approaches to the North Korean nuclear problem and the North Korea question behind the facade of having a special relationship with Pyongyang. It was done to keep the Washington-Tokyo alliance in check. Beijing weakened the effect of U.N. sanctions on the North by giving economic support to its impoverished ally, while giving priority to prevention of war and stabilization of the North over its denuclearization. Furthermore, Beijing went so far as to urge Seoul to exercise restraint after the North sank the South`s Navy corvette, the Cheonan, and shelled Yeonpyeong Island in 2010.
North Korea`s third nuclear test proved that Beijing`s two-track approach not only jeopardizes peace in Northeast Asia but also undermines China`s national interest. Now Beijing is in dire need of handling the North Korean nuclear problem and the North Korea question as a single issue. If so, Seoul, Washington and Beijing should set aside minor differences and discuss a concrete process to
prevent the Korean peninsula from becoming a “nuclear powder keg.” Above all else, the Park Geunhye administration needs to persuade the Chinese people and government to recognize the “common sense” that a peaceful, democratic and market-oriented Korean peninsula is beneficial to China`s well-being. To this end, we expect Park to extend her hand first to Xi.
[ March 19, 2013 ]
www.koreafocus.or.kr
Abe’s Neo-Cold War Diplomacy and Seoul-Tokyo Ties
Lee Jong-won Professor, Graduate School of Asia-Pacific Studies Waseda University
The Park Geun-hye administration has finally begun to take shape. When we think of the urgent situation on and around the Korean peninsula, we cannot but feel frustrated about all the delays. With her foreign policy team now in place, Park decided to visit Washington in early May. It is high time that she should hurry up to implement her ambitious North Korea and China policies that she presented during her election campaign.
With a Seoul-Beijing-Tokyo trilateral summit scheduled to be held in Seoul in late May, it remains to be seen how Park will go on to apply her approaches toward China, Japan and Russia. Her government needs to be proactive in preventing the precarious situation on the Korean peninsula from sinking into a deeper quagmire.
The Shinzo Abe administration of Japan, which was inaugurated weeks before Park`s, has been nimble in foreign affairs, though focused on economic revival ahead of the upper house election in July. Abe has tended to put aside ideological and foreign policy issues, but has steadily laid the groundwork for neo-Cold War diplomacy with a view to containing China while avoiding direct confrontation with it.
Abe had hoped to visit Washington or Seoul as the first destination of his foreign travel after his
inauguration, but he was forced to pivot toward Southeast Asia instead. He did not bother to conceal that his primary purpose was to contain China. He visited Vietnam, which is in dispute with China over maritime territory, and Thailand and Indonesia. Although he had no chance to deliver it due to a hostage incident in Algeria, his speech in Indonesia was to advocate a five-point diplomatic principle vis-à-vis the Association of Southeast Asian Nations (ASEAN). The principle, including a “maritime order maintained not by force, but by law,” clarified Abe`s intention to establish a strategic link with ASEAN, which has territorial disputes with China over land and islands.
Abe`s interim goal was to use containment of China as a stepping stone to his visit to Washington, where he could show off a “complete revival” of the Washington-Tokyo alliance. After China directed fire-control radar at a Japanese Self-Defense Force vessel in the East China Sea in late January, Abe opted to pressure China by making the incident known. In a sense, he gave priority to seeking success in a Washington-Tokyo summit over restoring his country`s relations with China.
In an interview with the Washington Post on February 21 before a summit with U.S. President Barack Obama, Abe strongly criticized China for posing the threat. During their bilateral summit, Abe asked Obama to support stronger defense capabilities for Japan, a sturdier Washington-Tokyo alliance by allowing Japan to engage in collective self-defense, and Tokyo`s position in the dispute over the Senkaku Islands (Diaoyu Islands as the Chinese call them), while emphasizing mounting threats from China.
But contrary to his expectations, Washington`s reaction was very cold. Neither a formal dinner nor any event to display amity between the two heads of state was held, and even an official document that was released as a joint statement was extremely simple, only carrying three paragraphs about an agreement on the Trans-Pacific Strategic Economic Partnership. It is no exaggeration to say that in diplomatic terms it was an unusually inhospitable treatment for a foreign head of government. This reflects the Obama administration`s attempt to keep its distance from, and put the brakes on, Abe`s neo-Cold War diplomacy that is worsening the Sino-Japanese conflict. Washington`s policy towards Beijing is never simplistic.
The Park administration's ideas regarding its policies towards North Korea and China, as revealed in her campaign promises, show more of a post-Cold War tendency than of a new-Cold War approach. This is probably because, from the standpoint of South Korea`s national interest, strengthening relations with China is essential not only for the economy, but also for finding a solution to the North Korea question. Besides historical disagreements and the Dokdo issue, Seoul and Tokyo could clash
over how to reshape regional order in Northeast Asia. This never is an easy task, but it poses a challenge, as well as an opportunity, for creative diplomacy that can bring Washington, Tokyo, Beijing and Moscow together.
[ The Hankyoreh, March 20, 2013 ]
www.koreafocus.or.kr
Politics for Another ‘Miracle on Han River’
Lee Hong-koo Former Prime Minister Advisor, The JoongAng Ilbo
President Park Geun-hye aroused high expectations with her inaugural speech last month, when she promised an era of new hope to those troubled by the global economic slowdown and mounting nuclear threats by North Korea. She called on everyone to unite and transform today`s challenges into a second “Miracle on the Han River,” echoing the first miracle in which strong commitment and concerted efforts by the whole nation propelled industrialization and democratization.
In order to attain a second miracle, however, we need to conduct an objective appraisal of the nature of the changes in the past half century. The road to the first miracle was paved by public consensus on a singular target ― industrialization ― and a broad range of projects, starting in the early 1960s. Democratization was accomplished a quarter century later. Still, it must be noted that socioeconomic conditions and processes at the time were much different than those of today.
Korea in the 1960s was a poverty-stricken society with an agrarian economy, a destitute condition that prompted the power elite and people as well to strive for industrialization under the banner of modernization. It was an era in which there were few competitors in the world but a few allies who offered assistance to rebuild the nation. President Park`s father, the late Park Chung-hee, displayed authoritarian leadership in shepherding the drive to accomplish a Korean version of the “Miracle on the Rhine,” West Germany`s economic recovery after World War II.
The Korean miracle was a successful experiment of state-guided capitalism, presenting a growth model for developing countries. But due to its inherent reliance on state authorities, the miracle had serious flaws and limitations as it failed to join the democratization movement blooming around the world. Therefore, Koreans did not feel comfortable until they attained full democracy in 1987, after decades of pro-democracy struggles.
South Korea joined the ranks of advanced economies at the outset of the 21st century, but it has had to face acute problems shared by developed countries, such as intense international competition, a rapidly aging population, low birth rate and job losses due to technology development. Especially burdensome is how to resolve complex problems stemming from wealth polarization through public consensus and democratic procedures, as they carry delicate political implications due to growing grassroots participation. These issues were amply reflected in the last presidential election, compelling major candidates of both the ruling and opposition parties to conjure up substantive election pledges. In her inauguration speech, President Park envisioned a “creative economy” and economic democratization by merging science, technology and culture with industry. She said resources in the creative power of the Korean people would be a priority in government investments. The approach, she contended, would dismantle barriers between industries and open shortcuts in creating jobs and taking the lead in international competition.
The president also pledged to create a society that ensures greater justice and happiness, raising expectations even further. All in all, President Park`s inaugural address was precise, eloquent and persuasive, covering economic, social and cultural issues. But, strangely, she made no mention of political factors that could derail the formidable tasks that she has set forth.
She noted that capitalism is at a critical juncture in the wake of financial crises around the world. Equally disturbing is a phenomenon in which representative democracy is in jeopardy in many parts of the world. Aside from the bumpy democratic transitions that have followed the “Arab spring” in the Middle East and North Africa, political instability is recurring in Greece and other traditional democratic countries in southern Europe. Even the United States, long a model of democracy, is entangled in extreme political polarization.
The performance of Korea`s democratic institutions and political actors are grossly disappointing to
the public and remedies are helplessly inadequate. If such a critical state of democracy is left unattended, one can hardly count on a second miracle. No matter how competent and efficient bureaucrats and the administration may be, nothing can replace politics in a democracy. However superb the blueprints for nurturing a creative economy and a second Miracle on the Han may be, administrative efforts alone cannot achieve the goal when poor politics mars legislation. These points are essential elements that urgently need extensive reform.
President Park Chung-hee made the first Miracle on the Han possible through industrialization. I hope that his daughter, President Park Geun-hye, will become the standard-bearer of a second miracle by putting industrialization and democratization on an equal footing to suit the 21st century.
[ JoongAng Ilbo, March 11, 2013 ]
www.koreafocus.or.kr
- Korea Trails behind Japan into Protracted Economic Slump - Advantages of FTA Hub - Advancement of Foreign Exchange Sector - Winners and Losers in Currency War - Welfare without Tax Hikes
Korea Trails behind Japan into Protracted Economic Slump
Pyo Hak-kil Professor of Economics Seoul National University
What is the biggest economic issue confronting the Park Geun-hye administration? It surely is important to create jobs and push for a creative economy, as she promised. But the ultimate challenge is generating enough growth to avoid a slump like Japan`s long-term swoon.
From 1975 to 1991, when Japan`s economy enjoyed high growth, its private sector had a savings rate of 27 to 32 percent, which was 3 to 5 percentage points above of its investment rate. When Japan began its protracted slump in 1993, the savings rate continued to hover around 30 percent but the investment rate plunged to the 20 percent level. Amid chronic deflation during the slump, private savings have remained well above the optimal level.
Holding on to its Keynesian approach to the long-term slump, the Japanese government has expanded its spending and investment. But private sector spending and investments, which are sorely needed for recovery, have stalled. The outcome has been “two lost decades.�
The Shinzo Abe administration, forced to mobilize any means possible for recovery, closely watched the U.S. government cope with its economic slump and concluded the only solution was quantitative easing by the central bank to weaken the yen, Japan`s version of the U.S. dollar being depreciated. The European Central Bank is also engaged in its euro quantitative easing. It has decided to buy
virtually unlimited amounts of treasuries from some southern European countries that are in fiscal crises.
During the past 10 years, the Korean economy has been following the footsteps of the Japanese economy. Thus, before trying to fulfill its election promises such as more welfare spending and job creation, the Park Geun-hye administration must first steer the Korean economy away from a looming Japanese-style slump.
The Korean currency is strengthening rapidly as the central banks of advanced countries pursue quantitative easing simultaneously. Unlike the U.S. dollar, the Japanese yen and the euro, the Korean won is not a currency of settlement in international trade. As such, it is not possible for Korea to print as much money as it pleases. If it did, it would have little impact on its trading partners.
As the yen strengthened rapidly in the wake of the 1985 Plaza Accord, the Japanese economy began to form a bubble. It is worthwhile to refresh our memory about the slump that started to set in at the time, as Japanese corporations began to lose their competitive edge. The Korean economy, which depends on exports for growth to a great extent, could enter a long-term slump if a high level of the won`s appreciation causes mid- to long-term imbalances in currency exchange rates.
The private sector savings rate in Korea was 28 percent in 1994 and 1998. The personal savings rate in 1998 was 19.9 percent but fell to around 5 percent in 2003 and has continued to erode. It is now between 2 percent and 3 percent. On the other hand, the corporate savings rate, which plummeted to 8.7 percent shortly after the 1997-98 Asian financial meltdown, has been around 15 percent since 2003. The ratio of gross capital formation to gross national product shot up to as high as 39 percent in 1996 and then receded. It has been around 30 percent since 2000.
As the figures show, investments in Korea have eclipsed the optimal level, the opposite of the savings stress seen in Japan. In this respect, Korea is not taking the same path as Japan. However, the won`s steep appreciation would make Korean exports less competitive, push down investments, increase household debt and cut down on the private-sector spending.
The cause of Japan`s slump is found in the rapid decline in return on capital. Japan`s ratio of real capital to real GDP rose from 2 in 1975 to 2.7 in 1997 and 3.5 in 2005. But the rate of return on capital, which dropped from 18 percent in 1974 to 12 percent shortly after the Plaza Accord, remained at that level until 2005. According to my own calculations, Korea`s ratio of real capital to real GDP
rose from 1.3 in 1980 to 3.05 in 2011. But return on capital fell sharply from 43 percent to 13 percent. Korea`s ratio of real capital to real GDP and return on capital are showing patterns of change similar to those of Japan.
In the 1980s, the Japanese central and provincial governments heavily invested in social infrastructure and such entertainment facilities as ski slopes and golf courses. The projects mostly had negative rates of return. Those that did produce profits had long investment gestation periods ― a major cause of a delay in recovery.
During the run-up to the December presidential election, the rival political parties tried to beat each other in making welfare and local development promises, which differed little from the path that had led to a long-term slump in Japan. If it wishes to be successful in its economic policy, the Park Geunhye administration will have to launch a strategy that forestalls such a slump and generates sustainable growth.
[ Seoul Shinmun, March 1, 2013 ]
www.koreafocus.or.kr
Advantages of FTA Hub
Cheong In-kyo Professor of Economics Inha University
Korea and the United States celebrated the one-year anniversary of their free trade agreement on March 15 amid mixed reviews. Trade officials put a positive spin on the Korea-U.S. Free Trade Agreement, or KORUS FTA, citing trade and investment volume. In contrast, critics accused the officials of exaggerating the benefits, claimed the deal brought no substantial gains and called for its abolition.
It is difficult to pass judgment on a free trade agreement after just one year. Tangible effects tend to materialize from an FTA only after many years. As for the KORUS FTA, the opposing sides widely differ in their interpretation of facts. Moreover, anti-FTA activists are basing their opinions only on trade statistics. Regrettably, they are not considering the impact of the global economic environment on international trade and investment. Similar problems occurred last year when Korea and the European Union marked the first anniversary of their FTA. Critics ignored the fiscal debt crises and recessions among EU members and only used trade figures to make their case.
While an objective evaluation of the first year of the KORUS FTA may not be possible for several more months, its effectiveness can be judged by examining the data on products that received preferential tariff treatment.
Exports of products that had eliminated or reduced tariffs increased 6.4 percent. Those outside the preferential treatment saw a 2.4 percent decline in exports. Korea`s small and medium-sized enterprises (SMEs) in particular enjoyed improvements in their export competitiveness. Thirty-eight out of their top 50 exports increased in 2012. Notably, 28 of the 38 products were beneficiaries of the KORUS FTA.
It is not desirable to provoke unnecessary controversy over trade agreements. What is important is to establish and implement policies aimed at creating far bigger economic returns. The remaining pending issues in the KORUS FTA include possible renegotiation of investor-state dispute settlement clauses, recognition of products manufactured in North Korea`s Kaesong Industrial Complex as South Korean-made goods, and mutual recognition of professional certificates, such as that of an architect.
These issues will be handled by the newly expanded Ministry of Trade, Industry and Energy, which has taken back trade policy functions from the foreign ministry, ending a 15-year separation. The new administration transferred the responsibility in an attempt to more closely coordinate its trade and industrial policies.
From an industrial and trade perspective, however, the most urgent task is to draw up strategies to take advantage of the nation`s FTAs. So far, Korea`s FTA policy has been largely quantitative-driven. By securing deals with as many countries as possible, Korea has become the world`s first country to seal free trade deals with the United States, the European Union, India and the Association of Southeast Asian Nations. FTA negotiations are currently under way with six other countries, including China. Considering its current and prospective roster of FTAs, Korea may be said to have built the world`s best FTA hub network. The KORUS FTA represents a core part of the network.
Companies that invest in FTA hub states can take advantage of wider networks of bilateral free trade deals to import raw materials and components tariff-free. In addition, their manufactured products can be exported to FTA partner countries without the burden of tariffs. Accordingly, multinational companies tend to increase investments in FTA hub states. The fact that foreigners` investments in Korea surged about 110 percent last year seems to be related with such a tendency.
Although it has become an FTA hub state, Korea has yet to devise concrete measures to capitalize on the advantages accompanying its status. Even worse, it won`t be easy for the Ministry of Trade, Industry and Energy to recover and normalize its foreign trade capabilities after a hiatus of 15 years. Going forward, business, investment and trade policies should be integrated to maximize economic
gains. Policies should be based on openness and activeness. There is no room for protectionism stemming from business considerations.
Hong Seok-woo, who resigned as the minister of knowledge economy on March 11, reportedly told ministry officials to work for the nation and people, not for the ministry. There should be a clear policy principle, as openness in an FTA hub state is a magnet for investment from multinational companies and provides the locomotive of economic growth.
[ Korea Economic Daily, March 19, 2013 ]
www.koreafocus.or.kr
Advancement of Foreign Exchange Sector
Kim Kyung-soo Professor of Economics Sungkyunkwan University
There is a growing debate about the so-called Tobin tax, a low tax levy on speculative foreign currency transactions. The Tobin tax can be much more effective when all capital trading partners simultaneously impose the levy.
Many foreign exchange investments are made on a very short-term basis, and the Tobin tax is intended to cushion exchange rate fluctuations and dissuade speculators. If the tax is imposed on each speculative transaction, it will greatly help reduce excessive short-term capital flows that disturb the foreign exchange market. In this sense, the Tobin tax can act as a foreign exchange safety net during a crisis.
If there are sudden inflows of a large amount of foreign money, the monetary authorities would intervene in the market. Tax levies would lead to an increase in foreign currency reserves, which act as a buffer against external shocks. Data on the nation`s international balance of payments over the past 12 years clearly display the correlation between capital inflows and foreign currency holdings. Some people say that foreign currency holdings are the result of the currency authorities` effort to attain a balance of payments surplus. But the viewpoint is mistaken.
Korea`s current foreign exchange system is not satisfactory. An asymmetrical structure, under which
the currency authorities occupy external assets and banks and other sectors occupy external debts, has led to an asymmetrical profit structure, as foreigners invest in risk assets like stocks and locals invest in risk-free assets. As a result, external debts have increased at a faster pace than external assets and net external liabilities have gradually increased despite the sustained current account surplus.
Korean nationals` external asset increases over the past 12 years are the result of a current account surplus worth US$274.1 billion and evaluation income worth $377.8 billion. In case of external debts, foreigners` net investments only totaled $25.4 billion but their market value amounted to $694.7 billion. The increase in net external debts came as non-transactional factors overwhelmed transactional factors. The nation has to further increase its foreign currency holdings as long as it is saddled with loads of external debts and the upward trend in debt is not reversed. In addition, demand for foreign currency will further rise when foreigners withdraw their investments from Korea.
But foreign currency reserves cannot be increased indefinitely. The government has instead introduced regulations on the market`s health in the wake of the global financial crisis. Before the global crisis in 2008, the nation's foreign debts had surged as export companies hedged against foreign exchange risks and banks maintained a square position during the boom years. Currency hedging by exporters and foreign exchange position changes by banks are rational business activities. But an increase in foreign debt caused by such activities has heightened risks for the Korean economy and created other negative fallouts.
Regulation of currency hedging and square position, aimed at deterring an indiscriminate increase in foreign debt, has been inevitable. Due to the regulation, however, businesses are hampered in their financing. In the end, there seems to be a clear limit to both expansion of foreign currency reserves and soundness regulation. In fact, foreign exchange risk management can be made possible only when Korean companies that issue bonds denominated in foreign currencies are able to conduct swap transactions with foreign companies that issue won-denominated bonds. The nation`s foreign exchange sector should be further developed to allow such transactions.
China, which began to open its capital market later than Korea, has recently taken aggressive liberalization measures. It allowed a handful of domestic enterprises to use the Chinese yuan in international trade settlement in 2009. The following year, China implemented the yuan`s globalization by allowing Hong Kong-based banks to invest in yuan-denominated bonds. Beijing eased restrictions on the issuance of yuan bonds, which had been allowed for a limited number of Hong Kong banks. McDonald`s Corporation`s issuance of dim sum bonds was a famous episode.
Beijing allowed foreigners to invest in China`s stock market via offshore yuan accounts, though with limits. Hong Kong banks recently began to extend offshore yuan-denominated loans to Chinese companies.
Strengthening its foreign exchange safety net is critical to the survival of Korea`s economy. The importance cannot be overstated. Without the advancement of the foreign exchange sector, finance can hardly move forward, which will hinder business development. Unless its foreign exchange infrastructure is improved further, the Korean economy may end up struggling on the fringe of the global economy. In the wake of the global financial crisis, the Korean government did well in creating a foreign exchange safety net. Now is the time to enhance the foreign exchange system as well.
[ Maeil Business Newspaper, March 20, 2013 ]
www.koreafocus.or.kr
Winners and Losers in Currency War
Kwon Soon-woo Vice President Samsung Economic Research Institute
Historically, the fates of winners and losers in foreign exchange wars have been extremely divided. Japan is the most dramatic currency war loser during recent several decades. In 1985, the finance ministers of five advanced countries ― the United States, Britain, France, (West) Germany and Japan ― met at the Plaza Hotel in New York and agreed to depreciate the U.S. dollar in relation to the Japanese yen and the German Deutsche Mark by intervening in currency markets. Since then, the value of the yen has surged from 240 yen to 70 yen per U.S. dollar.
Weighed down by the yen`s appreciation as well as population aging and implosion of a real estate bubble, the Japanese economy sank into a swamp of low growth and deflation to experience the “two lost decades.” Now, Shinzo Abe, Japan`s new prime minister, has unleashed stimulus spending and pushed the Bank of Japan into a super-loose monetary policy. Under the so-called “Abenomics,” the yen has steadily weakened and is approaching 100 yen against the U.S. dollar.
While Japan became a victim of the global currency war, China became the undisputed winner. In a large currency devaluation carried out in January 1994, China depreciated the yuan by more than 30 percent. From the Chinese perspective, it proved to be a far-sighted and future-oriented move.
China proceeded to enjoy robust export-based economic growth for nearly 20 years to become the
world`s second-largest economy. In a bigger accomplishment, China compiled a current account surplus totaling over $2 trillion during the expansion. On the back of its undervalued currency and massive current account surplus, the nation`s foreign exchange reserves soared to about $3 trillion.
The launch of the euro also produced winners and losers in relation to foreign exchange, though the common European currency was born out of voluntary agreement, not a currency war. The winners are Germany and other Eurozone countries with strong industrial competitiveness. The euro`s notable effect on them was currency undervaluation, giving their goods and services a pricing advantage in the global economy. The losers are Greece and other southern European member countries with weak industrial competitiveness. They have seen what amounts to currency overvaluation. Consequently, a significant and persistent imbalance ensued among the Eurozone member nations, which finally resulted in the debt and economic crises in southern Europe.
Germany, the biggest winner, overcame the aftereffects of reunification by implementing sweeping economic restructuring and taking full advantage of the benefits of the euro system. It is now praised worldwide as an economic role model. After the Plaza Accord, currency appreciation also pressured Germany, but the euro system kept it from becoming a loser. Germany eventually achieved a dramatic reversal by emerging victorious in the currency war.
The history of global currency wars has shown that those who actively move to depreciate their currencies become the winners while those who fail to stem currency appreciation become the losers. In most cases, the reason for the failure to halt a rise in currency value is that they miscalculated the consequences of currency appreciation.
Japan adopted a conservative monetary policy stance. Indeed, Japan allowed appreciation of the yen by not resisting the momentum. The inaction apparently stemmed from Japan`s overconfidence in domestic demand. There was a general expectation that the rise in the value of the yen would adversely affect the country`s exports but would help boost local consumption. However, the anticipated spike was not realized. Instead, persistent deflation materialized, constricting domestic spending.
As for Greece, it was assumed that currency overvaluation caused by its entry into the euro club would pose little problem if the country could strengthen its competitiveness by taking full advantage of low-cost international capital available to Eurozone members and the opportunity to stimulate regional trade. But the calculation proved to be erroneous. International capital flowed into Greece`s
non-productive sectors, instead of being utilized to enhance its industrial competitiveness. Thus, Greece failed to take advantage of the opportunities arising from increased intra-European Union trade.
Likewise, Korea misjudged in the mid-1990s when a rapid liberalization of capital movements lifted the value of the Korean won and steeply widened the current account deficit, thereby thrusting Korea into a foreign exchange crisis. At that time, Korea permitted the won to appreciate without particular resistance, reflecting a widespread sense of overconfidence apparently caused by its entry into the Organization for Economic Cooperation and Development, a club of rich and industrialized nations, and attainment of $10,000 in per capita income. The nation was overconfident in its economic capabilities.
We should learn valuable lessons from the history of global currency wars and guard against overconfidence and self-conceit. Korea has a ballooning current account surplus but this should not be used as an excuse for complacency about currency appreciation. The world is now in the midst of currency wars.
[ Chosun Ilbo, March 21, 2013 ]
www.koreafocus.or.kr
Welfare without Tax Hikes
Kim Dae-hwan Professor of Economics Inha University
“Free welfare without tax hikes” promised by the government of President Park Geun-hye is a very attractive, though misleading, idea. Who dares not to be dazzled by the possibility, even if it “messes up” other state affairs, as one skeptic muses?
The promise seems like a dream and if it transpires, the Park administration will receive everlasting praise. There is a saying that one man`s dream is just a dream but everybody`s dream becomes a reality. If that is true, “free welfare without tax hikes” is an exception. To fulfill its promise, the Park government has identified alternative ways to raise revenue. They include reducing the government budget, restructuring public spending, reining in tax reductions and exemptions, and regulating the underground economy, or shadow businesses that are not in official statistics.
Each of the measures can be a policy goal on its own. However, they are far short of providing the revenue needed. Even worse, they partially clash with each other. The government needs an additional 135 trillion won (US$120 billion) during Park`s five-year term for promised welfare programs. On an annual basis, 27 trillion won is needed, or approximately 2 percent of the nation`s gross domestic product (GDP). And many experts say that the sum is grossly underestimated.
One state-run think tank estimated that the government actually needs to generate additional funding
that is equivalent to 6 percent of GDP annually to keep its welfare promises. That would mean the state revenue must increase at least 10 percent over the current level, a difficult challenge without increasing taxes. The non-tax measures, if vigorously implemented, may cause adverse side effects, which would largely offset the positive effects of extra fiscal revenue. Even if the non-tax measures are applied properly, they will actually add up to tax increases. Even the additional funds will not be enough to meet welfare demand, which will increase geometrically in the long term.
The reality is that tax hikes are inevitable under any circumstances in order to finance the diverse welfare programs. We need to awake from the dream of expanding welfare benefits without tax increases. Cruel though it may sound, we must frankly acknowledge that the dream of welfare without tax hikes will never be realized. The sooner we wake up from this charming but wrong dream, the better.
Thereafter, the first thing we have to do is to closely connect expansion of welfare benefits and tax increases and keep them in balance. Short-term countermeasures are meaningless. A long-term blueprint for at least the next decade should be devised in order to eliminate any possible hurdles. Welfare demand will certainly continue to rise.
As long as we are bent on maintaining the status quo due to fundraising difficulties, social conflict will further escalate over welfare services. The realistic solution to the conflict should eventually be found in fundamental tax reform. In fact, a number of public surveys have shown that our people are ready to shoulder heavier tax burdens to finance welfare benefits if tax reform is conducted fairly.
This does not simply mean that more taxes should be collected to increase welfare benefits. Tax reform is essential for achieving dynamic balance between welfare expansion and tax hikes. If the government suggests issuing state bonds or increasing taxes on the wealthy to immediately keep its welfare promises, its desire for fundamental tax reform will be questioned. If we want to maintain a dynamic balance between welfare expansion and tax increases, welfare justice, as well as tax justice, needs to be considered.
Therefore, it will be inevitable to readjust welfare priorities before tax reform is completed. Politicians need the courage to shelve all the populist campaign promises made in the name of welfare in order to woo voters last year and seek the public`s understanding of policy needs. Any debate on universal welfare or selective welfare is merely a luxury for latecomers like us. We are confronted with a series of strategic choices along our realistic path towards universal welfare.
[ Korea Economic Daily, March 25, 2013 ]
www.koreafocus.or.kr
- Backwardness of an IT Powerhouse - Failures are the Engine of Growth - Educational Policy to Outdo the ‘Daechi-dong Moms’ - Honesty Determines National Competitiveness
Backwardness of an IT Powerhouse
Chae Jin-seok Professor, Department of Computer Science and Engineering Incheon National University
Computer security is comparable to the ancient Chinese allegory about a shield so strong that nothing can pierce it and a spear so sharp that it can penetrate anything. The latest breach of computer security, which paralyzed a news broadcaster and financial institutions, was hardly different from a spear piercing through a shield. It demonstrated our nation`s backwardness, though it is considered to be one of the global powerhouses in information technology.
News reports about the incident were fraught with speculation about who the culprit was. North Korea was immediately mentioned. This cannot be ruled out but investigators will need time to look carefully into the case and track down the origin of the cyber attack.
Whether or not North Korea was involved in the case, it is undeniable that the offense was committed by hackers possessing the highest level of computer expertise in the world. Assuming that broadcasting corporations and financial institutions would never be relaxed about their computer systems, no ordinary hacker could breach their firewalls and paralyze their servers.
Just as a highly skilled burglar erases all traces of a break-in, the hackers removed signs of their penetration so thoroughly from the servers before exiting that it will be difficult to identify them.
One thing is apparent, though. The world learned that our highly rated information industry is vulnerable. Skilled hackers are sharpening their spears while they are in search for chinks or soft spots on the façade of what appears to be the impenetrable shields of computer security. Broadcasting companies and financial institutions will not be able to defend their computer systems from such hackers if cracks are found on the surface of their shields.
In fact, computer security in our nation has many complicated problems. For instance, to use Internet banking services, now a daily routine for many, one needs to download and install tens of securityrelated files. But ordinary people find it difficult to tell genuine files from fake ones and, as such, they just push the “yes� button each time a message on the computer screen asks if they want to download a file. A fake file made by a malicious hacker, if downloaded and installed on a computer, could be a Trojan horse capable of paralyzing a financial institution`s server if its owner gets access to the server for an Internet banking service.
Frequently, I wonder if our government has a strong will to boost the software industry, including the computer security sector. I had the same question when government agencies were recently reorganized. The Ministry of Science, ICT and Future Planning is now responsible for policymaking and the Ministry of Security and Public Administration applies the policy. Work on ethics is retained by the Korea Communications Commission. Will this division of work help enhance computer security? I doubt it.
It is the same with software. The administration retreated from its original plan to put the entire software sector under the Ministry of Science, ICT and Future Planning and allowed the Ministry of Trade, Industry and Energy to retain work on imbedded software. Simply put, the government has no agency similar to the now defunct Ministry of Information and Communication, whose supervision covered all sectors of information and communication technology.
The maintenance of computer security can be surprisingly simple. All the government has to do is help train people to the highest level of computer security expertise in the world. Cyber terror will disappear if such experts are employed to keep guard on servers and computer networks.
[ Kyunghyang Shinmun, March 22, 2013 ]
www.koreafocus.or.kr
Failures are the Engine of Growth
Kim Hoi-pyung Editorial Writer The Munhwa Ilbo
Elementary school teacher, medical doctor and government employee ― those were the top job choices of students in the seventh to the 11th grades who participated in a 2012 survey. Scientist, which ranked at the ninth among the seventh-grade respondents, plummeted to the 55th place among those in the 11th grade. The top three ranked the same in a survey of parents.
It is not pleasing to find stable jobs are most favored by youths who should be determined to pursue challenges when they go out into the world. Their preferences mirror those of university undergraduates and those fresh out of school. Many of them are working single-mindedly on passing employment tests of big companies or civil service tests for mid-level government jobs. For them, it is either these or unemployment. They lack the spirit of challenge and ambition. For them, getting jobs only means “employment.� And reputable jobs are provided by large corporations. The new administration promises to expand employment, though corporate investments have stalled. There is a limit to what the government can do. In the United States, the increase in employment during 1980-2000 was led by startups less than five years old. A Korea Development Institute report released on March 21 also shows that the younger a business and its owner are, the more employment opportunities the business provides.
Simply put, the key to the provision of jobs is an encouragement to actively start-up businesses, with young people playing the leading role here. Startups have to be the engine of growth if an economy is to expand and evolve. A bright future unfolds for a country that produces a large number of young entrepreneurs. The Park Geun-hye administration, which is benchmarking Israel for its “creative economy,” has taken notice of a book, “The Start-up Nation: The Story of Israel`s Economic Miracle.” Although Israel is a small country, one-fifth the size of Korea, it has more corporations listed in the U.S. NASDAQ than the entire Europe, and ranks first in the world when it comes to the number of startup companies per capita.
Korea shares many similarities with Israel. Both countries draft young people into the military in the face of a security threat. Though devoid of natural resources, they have successfully catapulted themselves from being a poor country to an economically strong state in short periods of time.
But one notable difference is that Korea does not have the kind of enthusiasm for startups that is found in Israel. “The Start-up Nation” cites two explanations. One is the fear of losing face and the other is the information technology bubble that burst in 2000. When the two are combined, it is an obsession against failure. Israelis have a unique trait called “chutzpah.” It is audacity and daring, which makes it possible for young people to challenge older people without reservation and push for what they believe in. Israelis put good judgment ahead of discipline and challenges before hierarchy. They believe they cannot reach for genuine innovations if they do not accept failures as part of the process. As such, they are encouraged not to fear “constructive failures” or “intelligent failures.” They regard failures as assets because they can learn lessons from them.
Koreans are second to none when it comes to challenges. Their unique entrepreneurship is behind Korea`s outstanding economic advancement. Chung Ju-yung, Lee Byung-chul, Koo In-hoi and Shin Kyuk-ho, who were among the first generation of Korean entrepreneurs, started up their businesses in their 20s. What were assumed to be innovative ventures at the time have now grown into enterprises of world renown. But Korea, which Peter Drucker counted without hesitation among those with the highest levels of entrepreneurship in the world, has now lost much of its vitality.
True, startups have been on the rise in Korea since the late 2000s. But they are led by services rather
than manufacturers. And most of them are started by those primarily concerned about making a living. The percentage of those starting up businesses in their 20s has dropped below the 20 percent level from the 54 percent in 2000. Retired baby boomers are crowding out young entrepreneurs.
The new Korean administration, which has created the Ministry of Science, ICT and Future Planning, is exploring an uncharted area in which small and medium-sized enterprises are set to take center stage. It will be indispensable to provide financial support for those starting up businesses. But it is more important to create an environment in which failures are accepted as stepping stones to new successful business opportunities.
The likelihood of failure is high among startups. But the chances of success surge for those who make second tries. Failures experienced at a young age thus provide a fertile ground for success. Countries teeming with startups have one thing in common. They have a virtuous circle of rags-to-riches corporations investing in ventures. In those countries, it is not unusual for people fresh out of worldrenowned universities to start-up businesses.
Korea needs to develop an environment in which youth entrepreneurship is encouraged. Its current education system, which nurtures students to remain average persons and give priority to stability, cannot produce a Steve Jobs or a Mark Zuckerberg. If anyone is to be a shipbuilder, it is better to instill a longing for the sea into him before teaching him specific shipbuilding skills, such as how to cut trees. That is what Antoine de Saint-Exupery advises. Youths should be encouraged to make additional chairs to sit, instead of competing against others for one of the existing ones.
[ Munhwa Ilbo, March 22, 2013 ]
www.koreafocus.or.kr
Educational Policy to Outdo the ‘Daechi-dong Moms’
Shin Yeon-soo Editorial Writer The Dong-a Ilbo
Three moms, who were school classmates, met at a café in Daechi-dong, southern Seoul, which is called the “Mecca of private education” in Korea. Two of them are “education experts,” who sent their children to prestigious universities in Korea and abroad, but the other one is a total rookie. Their conversation goes as follows: “My second child is taking the AP now.” “Oh, what`s that?” “The Advanced Program, you know. It helps your child finish American university courses while in high school.” “I know someone whose son went to Seoul National University through the ji-gyun.” “What is that?” “It is the jiyeok gyunhyeong seonbal (regionally balanced selection) system. I think you need some study about college admissions.”
To understand the undecipherable conversation between her two friends, the rookie mom had to perk up her ears. The Daechi-dong moms talked for about three hours about how to select good private institutes for their children and how to help them study certain subjects. And finally they agreed, “Those days were better when we only had to take one national scholastic ability test to enter college.”
These mothers, with high levels of social awareness, also spoke about society in general, saying, “With the college entrance system so complicated, it has now become even harder for children of needy families to enter good universities.” Then, one of them said, “Watching my son write his letter of self-introduction to submit to admissions officers, I thought no ordinary person can write it,” while another retorted, “The admissions officer system was initiated by American universities to accept children of their alumni and big donors, wasn`t it?” As these mothers are well-versed in university admissions practices, their conversation contains some insightful suggestions for the new government`s educational policy.
The Park Geun-hye administration plans to simplify college entrance systems, which currently total nearly 3,000. The admissions officer system, introduced by the Lee Myung-bak administration, is designed to consider diverse experiences of applicants in addition to test scores. The system, created under the pretext of granting greater autonomy to individual schools, has achieved some desired results, but it also has made college admissions too complicated.
Also, a study of this university admissions system released by the Korean Educational Development Institute in 2011 said that the system is ineffective in reducing private tutoring and after-school lessons. Thus, students whose parents have a higher level of education and greater financial ability to pay for private education and facilitate extra-curricular activities still have an advantage, the report said. Given the level of our society`s overall credibility, the admissions officer system needs to be scaled down somewhat.
Autonomous private high schools cannot be considered any more successful. Advocates of those high schools emphasize the excellence and diversity of their educational programs. However, at a time when it is important to cultivate creativity and strengthen discussion-based instructions, you can`t say that academic excellence means the ability to solve more difficult English and math problems. They have hardly enhanced diversity in their education, either. Students at these schools only wrestle with Japanese math problems while those at general high schools are solving math problems on the public broadcaster EBS. This is far from genuine educational diversity.
Seo Nam-soo, the nominee for education minister, said in his confirmation hearing at the National Assembly that horizontal diversity is more necessary among high schools. He is right. Instead of the futile competition in how to make the standardized curriculum more difficult or easier, the education
authorities should diversify the content of education substantially by offering a variety of career choices through meister high schools, specialized high schools, alternative schools, fine arts schools, vocational junior colleges, etc.
Contrary to popular assumptions, privatization does not necessarily guarantee the quality and diversity of services. In most European countries, including the Netherlands, governments and local autonomous entities operate elementary and secondary schools as well as universities, but they offer much more diversified education than Korea to cultivate each individual`s talent.
For example, Koreans start learning English at a young age; many of them have private lessons as preschoolers. However, very few can speak English fluently. In contrast, Europeans generally speak English far more fluently after studying the language in school only. The gap in fluency is significant, even considering the similarities in grammar and vocabulary between English and European languages. In the same context, if the market principle applies to child care, Korea`s private daycare centers should be more popular than public facilities, but in reality the opposite is true. In her inaugural address, President Park said, “The future holds little promise when individual ability is stifled and when the only name of the game is rigid competition that smothers creativity.” She went on, “Our educational system will be improved so that students can discover their talents and strengths, fulfill their precious dreams, and are thus judged.”
I hope the president will succeed in fulfilling her promises. The nation`s educational system should end the regimented competition, which forces all students to rattle off uniform questions in math and foreign language for exams, treating those who lag behind as losers. To that end, our society should respect everyone regardless of whether they have graduated from university or not. This is the reason why educational reform is linked with social and economic reform policies.
[ March 2, 2013 ]
www.koreafocus.or.kr
Honesty Determines National Competitiveness
Ha Jong-dae International News Editor The Dong-a Ilbo
“If I receive these penalty points, my driver`s license will be revoked. Will you please take them for me?” “All right. I won`t lose my license even if I get them.”
Chris Huhne, 58, was a high-flying British politician on the short list of potential prime ministers. Ten years ago, however, when he was in danger of losing his driver`s license for speeding, he asked his then wife, Vicky Pryce, 60, to claim responsibility for the traffic violation and take the penalty points. But seven years later, they divorced after Huhne was found to have an affair with another woman and then Pryce disclosed the facts.
Huhne resigned from his cabinet post, taking moral responsibility for the case, but the British prosecution continued to interrogate him for legal liability. Finally, he was sentenced to eight months in prison for perverting the course of justice. Handing down the ruling, the judge said, “Shifting penalty points onto another person is a serious crime, which strikes at the heart of the criminal justice system.” The case clearly shows how strictly the British punish even what appears to be a “minor” irregularity.
In China, electricity is pre-paid. Therefore, to use electricity continuously, you have to buy an electricity card in advance and load money in it in time. When you neglect charging the card until it
completely runs out, you could face a lot of trouble with power outage late at night. You can`t turn on the light or TV, and all food in your refrigerator can go bad. Moreover, it is not easy to find a place selling electricity cards at night or on weekends.
The system causes a great deal of trouble and inconvenience to people but the government is unwilling to revise the system. It fears that if the system is changed into the deferred pay system, which charges rates according to the amount of electricity consumed, many people will run away without paying their bills. This case illustrates inefficiency caused by dishonesty and mistrust.
Honesty is a core element by which a society is judged. When I visited Japan in 2007, I was really surprised to see that the streets were so clean wherever I went, be it an urban or a rural area. Even in a shabby alley, there was not a single piece of garbage stealthily thrown away. At a similar time I travelled to China, where I was startled to see a taxi driver throw away trash out of the window while driving. “Is it okay to throw trash outside like that?” I asked. “Mei shi (No problem)!” he answered casually. Here lies the difference between an advanced country and a non-advanced country.
In Korea, the nomination of a high-ranking government official usually leads to the exposure of all sorts of irregularity and corruption the candidate has committed. For this reason, there was even a joke during the Lee Myung-bak administration that a high-ranking government official needed the five “essential” credentials: falsified resident registration, real estate speculation, evasion of military service, tax dodging and plagiarism.
In this regard, the Park Geun-hye administration does not seem much different. From Huh Tae-yeol, presidential chief of staff, who almost copied another person`s doctorate dissertation, to Kim Byungkwan, nominee for defense minister, who speculated in real estate in various places across the country, so many people have been disclosed to have committed shameful wrongdoings. And yet the bigger problem is that our society is still turning a blind eye to such irregularity and corruption, with voices calling for “clemency.”
There is a long way ahead before our country becomes an advanced society with the per capita GNP of $40,000 to $50,000. It will become possible only when those acting in good conscience receive sufficient rewards and those committing irregularity and corruption get harsh punishments without exception. Building an advanced society will remain a sheer illusion so long as skillful tax dodgers and illegal beneficiaries of state welfare are regarded to be competent. You will get a penalty of 30 times the fare if you travel by subway without a ticket, but a person charged for taking a large sum of
bribe is imposed with a penalty of only two to five times the amount he received. This is not fair.
Honesty is not a virtue possessed by great people only. It should be a moral standard for all citizens. Furthermore, honesty is a source of competitiveness for a society and a nation. Francis Fukuyama, a famous American political scientist, named the honesty-based network of trust and cooperation among members of a community as “social capital” and emphasized that this is the “third capital to define the future of our society.”
[ Dong-a Ilbo, March 15, 2013 ]
www.koreafocus.or.kr
- Psy’s K-pop Success a Role Model for Creative Economy - A Break Hardens Kim Yu-na’s Mentality - The Korean Wave Creeps into Cultural Heritage - Traditional Korean Gardens Await Global Promotion - The Scent of an Artist
Psy’s K-pop Success a Role Model for Creative Economy
Kim Dae-ho Professor, Department of Communications and Information Inha University
Psy`s latest single, “Gentleman,” has again amusingly astonished the global audience, with its video on YouTube reaching 100,000,000 views within just four days of its release. In my view, Psy defines the so-called “creative economy” more effectively than the Korean intellectuals and policymakers who are arguing over its concept as an engine for Korea`s another economic leap forward.
Psy may arguably be an emblematic figure who personifies the innovative dimension of Korea`s economic vision. The Korean rapper`s first global hit, “Gangnam Style,” also released on YouTube last year, was the result of his musical content reaching a global audience with great speed and efficiency through Web-based social media. Of course, Psy is not the first Korean pop musician who has reached the global market under the hallyu brand name. However, none of them have enjoyed such worldwide popularity and cultural impact. For “Gentleman,” Psy chose to reinterpret the hip-swinging choreography featured in “Abracadabra,” a hit single four years ago by Korean pop group Brown Eyed Girls. Psy`s version of the “Abracadabra” dance moves nonetheless display the signature characteristics of the musician/dancer with his humorous twists and sexy elements. It is fair to say “Gentleman” is a creative iteration of cultural content to better adapt it for the fast expanding networks of global music business. In this sense, Psy`s music correctly embodies the strategy of “creative economy” as the nation`s business
and technology policy orientation. “Creative economy” implies an innovative leap forward on the basis of science and information and communication technologies: it is a new paradigm of smart conversion between existing products and services and a fresh dose of creativity and imagination added to them to attain greater value-added. “Gangnam Style” established a new business model of globalization for Korean cultural products, whereas “Gentleman” shows a creative adaptation of the existing content. More often than not, we are exhausting ourselves trying to create things from scratch. However, creativity just does not happen out of the blue.
Talented individuals have displayed their creativity throughout history. They will continue to contribute to the betterment of the human race even without any systemized support by the government or other external organizations. “Creative economy” as a national strategy, however, adopts a different approach. It brings emphasis to the development of science and information and communication technologies. It should be noted that the creativeness of an economy often derives from a skilful utilization of what it already possesses and inherited from past experiences. Richard Florida, the author of “The Rise of the Creative Class,” argues that creativity does not necessarily involve “intellectual work” in the traditional sense. For him, creativity involves the ability to synthesize and make novel approaches. In short, it implies a fresh use of existing materials by passing them through a perceptual sieve. The starting point, therefore, is to discover and rediscover our current possessions. Without having to present himself as a leading expert in “creative economy,” Psy is applying highly creative strategies to his music business and thereby enjoying global stardom. Policy analysts and politicians in Korea should start their search for “creative economy” strategies by carefully evaluating and rediscovering things around them.
[ Chosun Ilbo, April 19, 2013 ]
www.koreafocus.or.kr
A Break Hardens Kim Yu-na’s Mentality
Kim Na-ra Research Professor, Student Counseling Center Korea University
Kim Yu-na won the 2013 World Figure Skating Championships, scoring 218.31 points in her first international competition in two years. Her performance of “Les Misérables” is being praised as the finest program ever and the excitement over her championship continues to linger days after the competition.
Not only did her performance earn Kim her own world title but it also secured spots for three Korean athletes, including herself, to compete in the 2014 Winter Olympics in Sochi, Russia. There was much scrutiny as to whether Kim would be in top form after her long layoff. No doubt she was the most anxious about what kind of result awaited her.
Taking time off, for whatever reason, can be a disadvantage to athletes. Many complain of having to readjust to tough pre-competition workouts and have a hard time staying motivated to sustain the rigorous training. They also need to deal with the fear of not knowing whether they will perform as well as before. Very few athletes manage to overcome these circumstances and make a successful reentry.
Kim Yu-na, however, made the right choice in taking time off when she lost the drive to continue training after she won her gold medal at the 2010 Vancouver Olympics. She discovered what she
needed the most during that period ― the reason to put on her skates and start competing again. She now has a stronger inner will and enjoys what she does best, rather than relying on extrinsic factors such as an Olympic gold medal to motivate her. This placed Kim more at ease as she prepped for the championships.
There is no guarantee for how one will do in a competition. As such, focusing on the results simply leads to uncertainty and much pressure. This prevents the athlete from focusing on the elements of the competition that truly matter.
The athlete should trust oneself and concentrate on each element of the program rather than the result that would come afterward. The stronger the inner drive, the more the athlete is able to focus on the competition itself. Naturally, this leads to satisfactory results.
Now that Kim has made her comeback at first place in the championships, there is much expectation for how she will perform at the 2014 Winter Olympics. However, the beginning of a successful comeback at the World Figure Skating Championships is no guarantee she will get a medal in Sochi.
It is hard to predict what might happen during the remaining season until the Olympics. However, with a relaxed and strong mentality that now matches her skills, Kim will most likely be unrivaled for the foreseeable future.
[ OSEN, March 28, 2013 ]
www.koreafocus.or.kr
The Korean Wave Creeps into Cultural Heritage
Choe Yeong-chang Assistant Culture Editor The Munhwa Ilbo
The “5000 Years of Korean Art” exhibition ― overseen by the late Choi Soon-Woo, then director of the National Museum of Korea ― is considered to be one of the major exhibitions to have spread knowledge of Korean history and cultural heritage overseas. It toured three Japanese museums in 1976, eight museums in the United States from 1979 to 1981, and three museums in Europe in the years 1984 and 1985, earning praise as an “unforgettable exhibition in the history of Korean museums.” Touring eight U.S. cities over two years and five months ― during which Korea experienced the assassination of President Park Chung-hee and the Gwangju Democratic Movement ― the “5000 Years of Korean Art” exhibition presented 354 objects, including pieces of comb-patterned pottery of the New Stone Age from 3000 B.C. alongside works by modern artists such as Yi Sang-bom and Byun Kwan-sik. The exhibition received considerable attention as the biggest and most comprehensive overseas exhibition of Korean cultural assets, although the U.S. audience was not as enthusiastic as one would have expected from the sheer number of two million visitors it attracted.
Yi Kun-moo, former director of the National Museum of Korea who oversaw the exhibition at the Asian Art Museum of San Francisco in 1979, recalls that the Korean War and taekwondo were about the only things people knew of Korea. Located in Golden Gate Park, the Asian Art Museum of San
Francisco was connected to the M. H. de Young Memorial Museum in the adjacent twin building. The audience of the Tutankhamen exhibition held at that museum had free access to the “5000 Years of Korean Art,” but not vice versa. Although those who saw the Korean exhibition claimed its collection was more diverse, even the fine quality of the exhibits could not rival the reputation of Tutankhamen. However, times have changed. A special exhibition named “Silla: Korea`s Golden Kingdom,” is scheduled to be held at the Metropolitan Museum of Art in New York City, from October 29, 2013 to February 23, 2014. The exhibition will feature 132 objects including 21 “national treasures” and “treasures,” such as the gold crown from the Great Tumulus of Hwangnam in Gyeongju, the ancient capital of Silla. First proposed by Lee Yeong-hun, director of the Gyeongju National Museum, five years ago, the exhibition will be held at the special exhibition galleries on the first floor of the museum.
Among the museum`s approximately 40 special exhibitions held annually, the most representative are the five to six held in the special exhibition galleries on the first floor, close to the Greek and Roman art galleries. Moreover, the Silla exhibition is slated for the peak seasons of Thanksgiving and Christmas. Although Korean art exhibitions, including “5000 Years of Korean Art,” have been held in the past, none of them were held at the special exhibition galleries.
The upcoming Korean exhibition at the Metropolitan Museum of Art is the result of not only the comprehensive support of the Korea Foundation and other government agencies, but also fund-raising activities through Korean cultural exhibitions held in the United States. This correlates with Korea`s national prestige which has been remarkably improved over the past three decades.
With the British Museum also showing interest in the Silla exhibition, the Korean Wave is starting to have impact in cultural heritage. Another significant exhibition of Korean cultural assets is being prepared for 2015 in the main hall of the Grand Palais in Paris to commemorate the 130th anniversary of diplomatic relations between Korea and France in 2016 and the homecoming of the Korean royal books from the royal library in Ganghwa Island. The special exhibition “Silla: Korea`s Golden Kingdom” at the Metropolitan Museum of Art will hopefully be the first stride of the Korean Wave to spread beyond K-pop and dramas to the origins of Korean culture.
[ March 13, 2013 ]
www.koreafocus.or.kr
Traditional Korean Gardens Await Global Promotion
Hong Kwang-pyo Professor, Department of Landscape Architecture Dongguk University
The popularity of Korean pop culture overseas is on the rise. Psy`s “Gangnam Style,� in particular, has gained phenomenal popularity worldwide, immensely contributing to promoting Korea abroad. With the Korean Wave`s momentous surge, the government now seems to take note of traditional Korean gardens as a potential resource to raise the nation`s cultural brand value in the global community.
The international community knows very little about traditional Korean gardens, a stark contrast to Japanese gardens that are loved among people around the world. Only 14 Korean gardens have been built overseas so far; four each in Japan and Europe and two each in China, the Middle East and Africa. The number is tiny compared to Japanese gardens around the world. There are more than 200 in the United States alone. Worse still, it is doubtful whether the Korean gardens abroad properly represent Korea`s unique cultural identity and aesthetics.
In order to express the characteristics of Korean garden architecture successfully, it is imperative that a garden be equipped with all the necessary elements and built with the correct materials and methods. But this is not the case in reality. Media reports about the creation of a Korean garden in the United States several years ago made many Koreans feel proud as they were aware there were no Korean gardens worthy of note in that country. However, those who visited the garden were greatly
disappointed; all they found was a single thin cherry tree, two dark stone guardian images called Dolhareubang and a wooden farmhouse gate, all typical of Jeju Island.
There have been efforts to create a Korean garden in the United States. In 2005, 5.5 acres (about 0.02 km²) of land was secured in the Los Angeles County Arboretum and Botanic Garden with a basic plan drawn up to build a Korean classical garden. But the plan has yet to move ahead. The Korean Cultural Heritage Foundation in Los Angeles is engaged in fund-raising appeals, but it faces an uphill battle.
Korean gardens form a symbolic icon that Korean people have created to complement their unique environmental conditions. Korean classical gardens, ranging from the Anapji pond of the Silla Kingdom to the rear garden of Changdeok Palace of the Joseon Dynasty, which has been designated a UNESCO World Heritage site, offer markedly different landscapes and ambiences from gardens in other countries. Royal palace gardens demonstrated a high level of ornamentation through harmonious arrangement of ponds, pavilions, terraced flowerbeds and stone objects, while rural gardens of the literati emphasized natural scenery with minimum artificial elements. Private houses usually had simple gardens in the rear yard, with the front yard left empty and unadorned, creating unassuming beauty.
Rear gardens constitute a unique feature of traditional Korean landscape architecture, which is rarely found in China or Japan. A rear garden was typically formed in a hilly area at the foot of a mountain or along a mountain stream, with its boundary naturally defined by the surrounding topography, and a pavilion by a pond or a spring providing a space for relaxation and entertainment. All these are indispensable elements of a Korean classical garden.
A Korean garden in a country with Korean ethnic communities will effectively introduce Korean history and culture to the local society as well as illustrate how the Korean cultural and aesthetic sensibility differs from those of other Asian neighbors like China and Japan. It also can help manifest the quiet but resilient strength of the Korean nation proven through its 5,000-year-long history. Thus the Korean immigrants who are living far away from their homeland will receive consolation and their second- and third-generation descendants learn about their roots.
[ Dong-a Ilbo, March 26, 2013 ]
www.koreafocus.or.kr
The Scent of an Artist
Kim Tae-ik Editorial Writer The Chosun Ilbo
When I think of “the painter Kim Whan-ki,” an episode that is as beautiful as his paintings comes to mind. The episode dates back to when Kim bought a house from another painter, Kim Yong-jun (style name Geunwon), in Seongbuk-dong, northern Seoul, toward the end of the colonial period. Geunwon had built the house and named it Nosi Sanbang, meaning the “mountain studio with an old persimmon tree.” He had dearly taken care of the house but had become too financially strapped to keep it. Geunwon didn`t want to hand over his place to a stranger, so he sold it to Kim, nine years his junior, and moved to Uijeongbu, on the northern outskirts of Seoul.
After Korea was liberated from the Japanese rule in 1945, home prices throughout Seoul began to soar. Kim had proposals from various people who were willing to pay a huge premium to purchase the house. Needless to say, Kim did not sell the house. But he couldn`t help feeling sorry for Geunwon who had to dispose of his cherished house in a dire situation. He could not stand the increasing sense of discomfort as the price of the house abruptly jumped.
One day, when Geunwon visited him, Kim confided that he found it very difficult to withstand his uncomfortable feeling. In an essay written around that time, Geunwon said: “After that conversation, from time to time, Suhwa (style name of Kim, meaning “tree talk”) would give me money to spend or brought me antique objects he loved. I have made friends or worked with so many people, but all
of them betrayed my faith, friendship and even social connection for the sake of their personal interests and desires.” He went on: “Regardless of how much the price of that house goes up, one million won or even ten million won, it is nothing but an illusion. I am just pleased that under the spell of that illusion, I have earned a pure and innocent artist that our modern era does not deserve.”
This episode so vividly explains the man Kim Whan-ki. And, last weekend, I had an opportunity to encounter the traces of his lifelong journey at an exhibition under way at the Whanki Museum at Buam-dong, in northern Seoul. The exhibition, titled “Where, in What Form, Shall We Meet Again?” after one of his most famous paintings, which in turn was borrowed from a poem by his friend, Kim Gwang-sup, marks the centenary of his birth.
Kim Whan-ki was born the son of a wealthy land owner in an island in Sinan County, South Jeolla Province, off the southwest coast. Upon the death of his father, he emancipated himself from the bondage of material possession by absolving the debts of his family`s tenant farmers. He enjoyed a successful career as a painter and art educator, serving as a professor at Seoul National University, dean of Hongik University`s College of Fine Arts and chairman of the Korean Fine Arts Association. Then, he abruptly moved to New York, leaving everything behind, at the age of 50.
The exhibition presents about 70 paintings by Kim, created from the 1930s to his death in New York in 1974, along with his personal belongings, including memos, a jacket stained with paint, painting brushes, smoking pipes and lighters. Among the paintings on exhibit are the pieces Kim painted on copies of the New York Times. While living in New York, he often had difficulty making ends meet, let alone buying his painting materials.
That was why Kim painted on newspaper or canvases that he made from the pieces of wood bought from a lumber mill. In his self-imposed poverty, he waged his solitary struggle to reach the consummate level of his art. One day, in a letter to his wife, he wrote: “I destroyed a painting which was almost completed. I need courage ― the courage to destroy. I crushed away the trivial details, leaving only the big subject. It`s far better now.”
It may sound snobbish to discuss Kim`s position in modern Korean art history and at how exorbitant prices his paintings are traded nowadays. However, in a world where nobody can be free from worldly desires, we can get a striking awakening from the paradox in art history that the more an artist throws
away to empty himself, the greater achievements and honors he would attain. I came across the trajectory of an artist who achieved what no worldly desire can attain by emptying himself at an exhibition celebrating a century since his birth.
[ March 26, 2013 ]
www.koreafocus.or.kr
- North Korean Economy in the Kim Jong-un Era: Current Situation and Challenges - First Year of the Korea-U.S. FTA: Review and Prospects - Happiness of Koreans by Age Group: Background and Implications - What YouTube Can Teach Us about K-pop
North Korean Economy in the Kim Jong-un Era: Current Situation and Challenges Cho Young-key Professor, Department of North Korean Studies Korea University
I. Introduction Kim Jong-un emerged as North Korea`s new leader upon the sudden death of his father on December 17, 2011, and the North has sealed its third-generation family rule through a series of high-profile political events. Immediately after his father`s funeral, Kim became the supreme commander of the People`s Army. Four months later, in April 2012, the ruling Workers` Party named him first secretary and the Supreme People`s Assembly named him first chairman of the National Defense Commission, the North`s highest ruling body. On becoming the new paramount leader, Kim presented an ambitious reconstruction plan that included normalizing industries and resolving food shortages. But his biggest challenge is to solidify his rule quickly. The North`s basic economic policies cannot but follow this political imperative, which boils down to “military-first economic construction.”
During his first year in command, Kim Jong-un showed that he was more outgoing in public toward ordinary people than his reclusive father, but he deepened the North`s isolation from the international community. Defying the “Leap Day Agreement” with the United States on February 29, 2012 to freeze its nuclear program, Pyongyang launched a long-range missile and inserted the possession of nuclear arms in the preamble of its constitution. The new regime also spent a huge amount of money on projects idolizing Kim`s grandfather and father, diverting resources from welfare programs it emphasizes rather perfunctorily.
II. Economic Policies of the Kim Jong-un Regime 1. Direction of Kim Jong-un`s Economic Policies
North Korea`s political events in April 2012 were intended to establish the legitimacy of Kim Jongun as the third-generation leader from his family, rearrange the relationship between the Workers` Party and the military, and consolidate the nation`s economic foundation.
To reaffirm its legitimacy, the new leadership revised the North`s constitution and the charter of the Workers` Party. A special statement by Kim Jong-un on April 6, 2012 referred to the ideology of his grandfather, Kim Il-sung, and father, Kim Jong-il, as the guiding light of the party and emphasized the monolithic nature of the nation`s ruling system. The statement thus appeared to be an attempt to prevent the separation of Kim Il-sung`s Juche (independence) ideology and Kim Jong-il`s Songun (military first) ideology in the minds of North Koreans and use them to manifest the legitimacy of the Kim family`s hereditary rule. The April 6 statement also said that the “people`s desire” had prompted the new leadership to make improved living conditions a top priority. Accordingly, a set of action goals was unveiled: 1) A decisive transition should be made to improve the people`s livelihood and build a powerful economy; 2) food shortages should be resolved adequately; 3) electricity, coal, metals and railway transportation industries should be advanced to activate the people`s economy and improve living standards; and 4) the Cabinet should take responsibility for all economic programs to achieve a revolutionary shift toward improving living standards and becoming an economic powerhouse.
Then, on April 15, during a military parade commemorating the 100th anniversary of Kim Il-sung`s birthday, Kim Jong-un emphasized the major role of the military in economic construction. In a public address, he said: “An underdeveloped nation of the past has become a politically and militarily strong state and its people are dignified with independence.” The parade featured long-range missiles of the ICBM level to demonstrate the achievements of the military-first policy.
At the close of the April political events, Kim Jong-un issued another special statement on April 27, at a gathering of leaders of the party, economic organizations and workers` groups. Its main points were: 1) The landscape of national territory should be improved to match a strong socialist state; 2) Pyongyang`s monuments of revolutionary leaders should be beautified to turn the capital into a holy Mecca of revolution that will attract world attention; 3) land conservation projects should be perfectly executed to avoid wasting even an inch of land; and 4) arable land should be expanded to the maximum extent to resolve food shortages.
2. Characteristics of Kim Jong-un`s Economic Policies
1) Legacies of the Military-First Economic Construction Policy The primary task of the Kim Jong-un regime is to stabilize the new leader`s power as early as possible. New economic policies introduced before the ruling power structure takes root could cause confusion
in state administration as well as repercussions from the established power elite. Therefore, in order to minimize disruptions, Kim Jong-un must refer to the guidelines of his father, namely the “militaryfirst economic construction” policy. This meant prioritizing the development of defense industries, including the long-range missile and nuclear programs. But, because Kim Jong-il failed to construct a strong socialist state, his son needed to add new elements.
During the April political events, Kim Jong-un unveiled projects to improve the people`s livelihood, build new production infrastructure and develop a knowledge economy based on the advancement of science and technology. Improvement of people`s livelihood is closely related to the problems of sustenance and consumption, which are in turn related to the development of agriculture and light industry. Kim`s emphasis on displaying his love for the people reflects his desire for a safety valve for his hereditary power succession. The problem is that North Korea lacks the resources for the task.
2) Military`s Role in Economic Development Kim Jong-un`s April 15 public address stressed the role of the military in economic construction, obviously as a way to compensate civilians for the military-first policy. Rodong Sinmun, the party organ, said in its November 9, 2012 edition: “Aid for people is not a secondary or low-level mission. Our military`s campaign to do good work for the people aims to achieve the party`s vision to help our people fully enjoy socialist affluence and comfort.”
Throughout 2012, Kim followed in the footsteps of his grandfather and father and mobilized troops for infrastructure projects under the slogan of “military-civilian harmony.” A model case was the Huichon Power Station project, which was completed with massive participation of military personnel. Other recent public works projects that involved military personnel include the Potong River refurbishment and the construction of sports and amusement facilities in Pyongyang. To encourage and publicize such projects, Kim often visits the work sites and gives guidance with Choe Ryong-hae, chief of the party`s general political department, at his side.
3) Improved Economic Management by the Cabinet The biggest challenge in the North Korean economy is improving the people`s livelihood and its main problem is the moribund state sector. It is widely known that the Cabinet`s oversight of the economy is at its lowest point and considerable effort is needed to revive it. Specifically, the state planning, management and supervisory functions need to be normalized. The handling of state funds needs to be improved and the Cabinet`s power to use state resources strengthened.
Normalized control of the economy by the Cabinet will mean less military presence in economic affairs. North Korea`s military expenditures reached US$6.5 billion in 1995, the first year of the military-first policy. With the decline of the overall economic situation, annual defense spending went down to $4 billion in 1998, but it rose again to $6.5 billion in 2004 and to over $7 billion in 2005. These amounts account for 20 to 24 percent of North Korea`s gross domestic product.
The North Korean military began economic activities in the late 1960s when they were allowed to supplement food and equipment provisions with their own efforts. Their economic activities have expanded ever since to include international trade to earn foreign currency for equipment purchases. Shortages in military supplies justified the armed forces` participation in economic activities. But their deepening involvement in economy led to the corruption of senior officers. In the dollar-earning projects, in particular, collusion between civilian businesspeople and military officers often resulted in graft, which eventually affected the combat capabilities of the North`s armed forces.
In order to normalize management of the economy, Kim Jong-un transferred the foreign trade operations in the military to the Cabinet. Transfer of foreign trade activities to the Cabinet has blocked the sources of illegitimate income for senior military officers. Naturally, officers who are losing their privileges are opposing this measure. Vice Marshal Ri Yong-ho who was dismissed as the People`s Army chief of staff in July 2012 was believed to have been involved in the foreign trade business. Despite the refocused role of the Cabinet, considering the present political and economic situations in the North, it is hard to expect that the military`s role in its economy will soon be discontinued. Military supplies remain scarce and the troops are still counted on for infrastructure work.
4) June 28 Measures to Improve People`s Livelihood (a) Implementation of the Measures: Amid the continuing economic adversities since the 1990s, civilian economy has had little room for recovery with the military taking large chunks of available resources. Despite annual policy statements that emphasized improving living conditions, the life of ordinary North Koreans became increasingly destitute. For the newly installed Kim Jong-un leadership, the “improvement of people`s livelihood� was the most pressing task. Kim announced his determination to improve the situation in his statements on April 6 and April 27, 2012. He first needed to take measures to normalize agriculture and light industry, which are directly related to the people`s everyday living. On June 28, a set of new measures was unveiled to be implemented in a few selected places starting in October 2012. Their aim was reform of the collective farm system.
The June 28 measures are believed to be an extension from the “July 1 economic management improvement measures� of 2002, generally deemed to be a failure. What has so far been revealed has it that the basic size of collective farms is to be reduced to nearly the level for individual farming. First, each unit is allotted an area of land and the state lends support to increase productivity. Second, annual output is divided between the state and farmers by the ratio of 7:3 with the individual portion to be increased gradually. The ratio can be adjusted to 5:5 depending on the conditions of farmland. Third, the 30 percent farmers` portion is given in kind so that they can dispose of it independently. Products in excess of the set quota are also given to farmers. Fourth, farming expenses are provided by the state in advance and are collected after harvest, not from the individual portion but from the total gross output.
(b) Assessment of the Measures: The June 28 measures can be regarded as a major reform along with the reduction of party and military control of the economy and higher salaries at factories and enterprises. It was a move to cut the vicious circle of declining work motivation and output. But the measures designed within the framework of socialist planned economy have their own limitations.
Above all else, success of the June 28 measures depends on the state providing sufficient material and equipment to collective farms. But the state, having obsolete equipment and short supplies, is unable to fulfill its obligations. This causes competition and potential conflicts among farm units trying to secure limited resources. Second, output will differ among units because of their climate and geography. This could also cause conflicts between regions. Third, it is estimated that each household will be given 660 kilograms of grain under the June 28 formula of 30 percent share of output. Per capita share will be limited to 153 kg, which will be much lower than the normal collective farm distribution of 220 kg per person. Each household can supplement their income with produce from their private farming by up to 100 kg but again the state will recover its provisions for farming from the harvest. Individual income will remain below the original amount anyway as long as the 7:3 ratio is maintained and productivity is not increased.
Fourth, the state will gather more from the new system if the value of early provision is calculated arbitrarily. Farmers` income also could suffer from corruption by officials. Fifth, the state will need huge funds for crop purchases as well as early distribution of farming materials. If the government`s purchase prices are set at prevailing market prices, distribution prices should also be set at the market level. This will result in either steep rises in grain price or a huge fiscal deficit.
III. Internal Economic Situation under Kim Jong-un`s Rule 1. Decline of Industries and Increase of Consumptive Expenditures
The April political events in 2012 marked the completion of the succession process for Kim Jong-un and they could also be regarded as the first steps in the era of a “strong and prosperous state.� Large investments were made in the iron and steel, fiber and fertilizer plants to normalize the so-called Juche industries for self-sustained economy and in the construction of Huichon Power Station and 100,000 apartment units in Pyongyang. While there is no indication of substantial investment or higher production in heavy-chemical industry, there are reports of modernization in the light industry sector. Power production from the new Huichon hydraulic plant is reported to be offset by difficulties in thermal plants.
Since Kim Jong-un`s inauguration, a vast amount of money has been spent on missile and nuclear tests and various idolization projects for Kim Il-sung and Kim Jong-il. For missile programs, $400 million was consumed for the construction of launching sites, $600 million for assembling a longrange rocket and another $300 million for related facilities. An estimated $41.5 million was spent for the idolization of the Kim family and some $500,000 for a series of pompous political events. All these expenditures hardly have any economic effect but have seriously depleted the North`s foreign exchange reserves.
2. Food Shortage and Price Rises
North Korea has suffered chronic food shortages. It needs 5 million to 5.3 million tons of food grain a year while output remains at 4 million tons, creating a gap of 1 million to 1.5 million tons of shortage. The deficits are covered by foreign aid and commercial imports. The North`s total food production was 4.45 million tons in 2011 and 4.92 million tons in 2012, according to the United Nations` Food and Agriculture Organization and World Food Program.
The increased food production over the last few years can be attributed to efforts to cope with drought and floods, introduction of composite fertilizer plants, import of fertilizer from China, and expansion of farmland. Yet, there were reports of starvation in South Hwanghae Province and serious food shortages among poor families and low-level armed forces units.
Hyperinflation also is troubling North Korean society. The continuing scarcity of necessities, lingering fallout from the botched currency redenomination in 2009 and indiscreet currency issuance to finance the recurring political events in April 2012 combined to devalue the North Korean won. The authorities` intervention in the foreign exchange market also contributed to the inflationary spiral.
The price of rice per kilogram rose from 3,200 won in January 2012 to 6,400 won by the end of the year. The conversion rate of the North Korean won to the U.S. dollar also jumped by 77 percent over the 12 months in 2012. Now, an average North Korean factory worker can buy 0.3 kilogram of rice with his monthly salary of 2,000 won. The hyperinflation aggravates economic polarization in North Korean society.
IV. External Economic Conditions since Kim Jong-un`s Inauguration 1. Suspended Inter-Korean Trade and Increased China Trade
Inter-Korean trade was virtually extinct in 2012 except for the transactions at the Kaesong (Gaeseong) Industrial Complex. In the total South-North trade volume of $1,815 million in 2012, Kaesong account took up $1,806 million, or 99.5 percent. The near total suspension of trade was due to
sanctions that followed the North`s torpedo sinking of the South`s patrol boat Cheonan in March 2010.
On the other hand, trade between China and North Korea has increased rapidly, particularly since 2008 when Pyongyang gave up diversifying its trading partners and deepened dependence on China. It was not an economic choice but a political and military decision. In addition to the Cheonan incident, there were multiple factors that hampered normal business between the two Koreas after the inauguration of President Lee Myung-bak in the South in 2008. North Korean authorities` temporary closure of the gate to the Kaesong complex, North Korean guards` fatal shooting of a South Korean tourist at the Mount Kumgang (Geumgang) Resort, the North`s long-range rocket launch and nuclear tests, the Cheonan sinking and subsequent sanctions, and the North`s artillery attack on Yeonpyeong Island all combined to suspend inter-Korean trade. In addition, North Korea`s trade with Japan halted under international sanctions after its missile launch. Thus, China remains the North`s only major economic link still operating. Its loss of trade with the South was supplemented by increased trade with China. Table 2 shows the changing weight of North Korea`s trade with South Korea and China.
North Korea and China have a long history of strategic cooperation. Beijing believes that stability in North Korea serves its national interest as a territorial buffer. As for North Korea, it has no other choice but to rely on China for political and economic support. Pyongyang spared no effort to promote trade with China to secure daily necessities as well as the funds to maintain the new Kim Jong-un regime. Bilateral trade has increased notably with the North selling coal, iron ore and other natural resources to China while importing daily necessities and intermediary goods.
2. Expansion of North Korea-China Trade
After North Korea`s second nuclear test in 2009 brought about strong international sanctions, SinoNorth Korean economic cooperation leapfrogged. The two countries discussed expansion of economic collaboration during Chinese Premier Wen Jiabao`s visit to the North in October 2009 and Kim Jong-il`s tour of China in May and August of 2010. In December that year, the two countries signed an agreement for the joint development and management of the Rason (Rajin-Sonbong) and Hwanggumpyong-Wihwado special economic zones. Ground-breaking ceremonies were held for the two special zones in June 2011 with the announcement of master plans to establish integrated industrial belts in the two border areas. The Chang-Ji-Tu pilot zone plan was drawn up to promote development of the northeastern border area along the Tumen (Tuman) River, together with a highway project between Hunchun of China and Rajin of North Korea. A new bridge over the Yalu (Amnok) River to the west was also planned.
These cooperation projects have been further pushed after the installation of Kim Jong-un as the new ruler of the North. In August 2012, North Korea and China announced the establishment of joint management bodies for the Rason and Hwanggumpyong-Wihwado zones and signed an economic and technological cooperation agreement. The two governments decided to develop Rason into a manufacturing base and logistics center of Northeast Asia and create a knowledge-based industrial cluster in the Hwanggumpyong-Wihwado zone. Then they revealed plans to jointly develop four to five ports, including Chongjin, along the east coast of North Korea, which would be used to transport cargo to southern China. China is promoting these joint projects with a view to helping North Korea gain self-sustaining economic capabilities, which would lower the need for Chinese aid.
In order to apply the market principles to economic cooperation between China and North Korea, it is necessary for the North to adopt reform and openness. China has emphasized this point time and again on occasions of high-level contacts. When Jang Song-thaek, the second powerful man in Pyongyang, visited Chinese Premier Wen Jiabao, Wen gave him a list of economic steps that Beijing considered necessary to activate cooperation between the two countries. They included improvement of the rules and regulations concerning economic activities, increased cooperation between related districts, and application of the market principles in real estate transactions and tax levies, and enhancement of customs services. The list reflected China`s frustrations in doing business with North Korea, as well as its wishes for the North to accept reform and openness.
Through expanded bilateral cooperation, China could share its experience in economic reform and opening up, and help increase North Koreans` understanding of a market economy. North Korea`s
reform and openness would help attract foreign investment and activate production in the special zones and other places. Yet, expanded economic cooperation with China would also ramp up North Korea`s dependence on the neighboring giant and could ensure China`s monopolistic control of the North`s natural resources, making its economic independence even more difficult.
V. Economic Tasks of the Kim Jong-un Regime 1. Normalization of Economy 1) Meaning of ‘Economic Normalization` in North Korea Economic normalization means changing an economy`s inefficient and segmented structure into an efficient, productive system. New technologies and capital needs to be injected in every economic area. Internal and external behaviors should follow international norms and practices. And a structure for sustainable growth should be established. It means achieving an economy that ensures people`s material satisfaction by enhancing individual welfare and maximizing social care.
In North Korea, economic normalization would mean changing and developing its economy into a modern system that enables sustainable growth through industrialization, free markets and openness. In this normal economy, its residents will have the right to free choice as consumers, the hitherto closed economic structure will be replaced by an externally-oriented foundation, and all its economic and political entities will observe the universally-accepted economic order as members of the international community.
North Korea`s economy should be normalized to improve the quality of life of its people. The North should increase the operation rate of its manufacturing plants, remove inefficiencies stemming from the separation of military and civilian economies, resolve food shortages, obtain foreign exchange needed for the development of special economic zones, increase international competitiveness of export goods, and respect rules and regulations of international standards.
2) Obstacles to Normalization The collapse of the Soviet Union and East European regimes by the early 1990s clearly demonstrated the importance of an effective economic system to the survival of a nation. Since the 1970s, North Korea`s socialist planned economy has been burdened by systemic low productivity. The economic management improvement measures of July 1, 2002 and the guideline of June 28, 2012 were moves
to increase economic efficiency within the framework of a planned socialist economy. But the potential impact of those measures was limited because they only targeted localization and market factors on the basis of a rigid planned system.
Obstacles to the normalization of North Korean economy are detected from its inherent system, development strategy and isolationist policies. A socialist planned economy prioritizes politics; it gives precedence to the demands of society over those of individuals. Its incentives involve moral gratification rather than material rewards. The socialist planned economy funnels most of its benefits to the state and society, keeping individual economic motivation low, hence low efficiency. The only way to remove the inefficiency is to heighten the economy`s market function.
North Korea`s erratic development strategies also hinder the normalization of its economy. The North`s early emphasis on the heavy industry blocked the normal process of development from light to heavy industries. Opportunities for proper industrialization were lost and North Korea now suffers its consequences. Besides, the extreme pursuit of a self-supporting national economy made the small country unable to expand its market and thus enjoy comparative advantage in any specific industry.
2. Free Markets to Increase Supplies
Since the economic crisis of the early 1990s, North Korea`s planned economy has nearly neglected the consumer sector. While the central supply capacity remained extremely inadequate, state control of distribution only expanded black markets and aggravated fiscal difficulties. Black markets have continued to grow and authorities have kept their eyes closed. Now, the government may seek to increase the central supplies through limited acceptance of reform and openness, but then it will have to risk further expansion of markets and destabilization of the system.
Free markets are necessary because they are a better way to increase supply. Private markets were the key to the economic reform and openness in China, and all other underdeveloped countries have followed suit.
North Korea has allowed private markets to survive its dire economic conditions since the mid-1990s. As the rationing system ruptured, people cultivated patches of land around their homes and brought their crops to black markets to exchange for other necessities. The authorities alternately suppressed and tolerated markets, worrying over their impacts on the system.
North Korean authorities must be seeking to intervene continuously in the economic realities, but a return to the classic planned economy seems impossible now because they are unable to offer practical support. This means that the state at present needs the existence of free markets to fill the void that it cannot fill. More realistically, the markets will not be closed because they are linked to the chain of corruption involving the party and government officials.
3. Industrialization through Export
North Korea`s underdeveloped economy has the typical features of scarce capital and technologies. Industrialization of North Korea most urgently needs exploration of overseas markets. Cultivation of export industries is the only way to accumulate capital and develop technologies. In short, the strategy of export-oriented industrialization (EOI) is the best prescription for the North. The EOI strategy would not only bring in foreign hard currency it would also pull the North Korean economy into the global economic system. Moreover, it would expedite the adoption of a full-scale market economy.
Export industries can survive when they effectively cope with the demands of international markets. Exporters should better adapt themselves to the operational principles of international markets rather than internal economic principles. Armed with an EOI strategy, North Korea could adjust its economic operations to market-oriented methods and gradually expand its human resources who can understand and utilize the international market system.
Considering the natural resources available in North Korea, it is desirable to nurture export industries based on labor-intensive processing. They may start with bonded processing through contracts with foreign firms and then move on to the next stage of domestic manufacturing with imported raw materials and exploration of overseas markets for full-fledged international trade.
4. Openness through Special Economic Zones
A special economic zone (SEZ) gives foreign and domestic investors administrative and tax privileges that are otherwise unavailable. Such zones may specialize in trading, manufacturing plus trading, or science and technology development, or may have multiple purposes.
External openness is the primary feature of special economic zones. SEZs in North Korea, however, show a high degree of exclusiveness, which spoils the advantage of openness. As a result, SEZs in the North have very limited impact on other parts of the country. Pyongyang needs to shift its SEZ
policy from closed operations to an open system so they can maximize their benefits nationwide.
Diversity and competitiveness also characterize SEZs. South Korean enterprises should be able to make joint investments with North Korean or any other foreign firms in the SEZs. It is also important that enterprises within the SEZs can have tie-ups with outside firms for mutually beneficial cooperation. Moreover, development of “integrated economic zones� combining manufacturing and service businesses within the SEZs should be considered.
Autonomy based on the principles of market economy should be guaranteed in the SEZs. Yet, North Korea manages SEZs within its administrative framework of a planned economy. Control of SEZs through domestic administrative means not only interferes with the free economic activities within the zones but also cuts any possible link between businesses inside and outside the zones. Currently, administrative restrictions are applied to production, distribution, procurement of raw materials, and export-import affairs.
SEZs have so far been established only in the North Korean territory. Now the two Koreas need to develop joint industrial complexes and free economic zones. These can take the form of 1) South Korean enterprises relocating operations to industrial complexes in the North, 2) building new plants with joint investment by South and North Korean firms, and 3) South Korean companies acquiring shares in North Korean businesses. In a joint free economic zone, which may be established in any border area, including the Demilitarized Zone, the sovereignty of any one side shall not be exercised to fully ensure free economic activities. These new concepts of joint economic operation will enhance the formula of inter-Korean cooperation now limited to SEZs founded by North Korea. They will help speed up the North`s economic reform and openness with the introduction of the market economy and private ownership.
[ KDI Review of the North Korean Economy, February 2013, Korea Development Institute ]
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First Year of the Korea-U.S. FTA: Review and Prospects Kim Hyung-joo Research Fellow LG Economic Research Institute
One year has passed since the Korea-U.S. Free Trade Agreement took effect. Since the official announcement of the launch of free trade talks between Seoul and Washington in 2006, the bilateral trade pact has not only been a major source of heated debates over its impact on the Korean economy; it also has been a controversial issue on political and social fronts. The views over the FTA`s possible effects on Korea covered a wide spectrum, ranging from positive vision to dark pessimism.
Optimists expected the bilateral trade agreement would encourage the nation`s exports and enhance the competitive edge of its service industry, leading to a second takeoff of the Korean economy. The pessimists worried that cheaper agricultural products from the United States would devastate Korean farmers and the agreement`s investor-state dispute (ISD) clauses would limit Korea`s judicial sovereignty. As of now, however, it is difficult to determine which side was more prescient.
Economic Evaluation Still Premature It cannot be said the KORUS FTA has not produced any macroeconomic achievements. Generally, the success of an FTA is determined by trade expansion, growth of direct investment, and improvement of industrial competitiveness. In this sense, the performance in trade and investment under the KORUS FTA has been relatively strong. Although Korean exports as a whole suffered from unfavorable external conditions, exports to the United States rose by 1.4 percent and, particularly, exports of tariff-reduced items surged by as much as 10.4 percent. As a result, the average utilization rates of the FTA also rose from about 50 percent at the end of last June to 69.6 percent at the end of February this year.
The import front, however, has had mixed results. Korea`s total imports fell by 3.8 percent, whereas its imports from the United States dropped by 9.1 percent, pushing up its trade surplus with the world`s largest economy by as much as 39.1 percent over the previous year. Given that the primary goal of an FTA is to effectively distribute resources, the yawning trade imbalance cannot be viewed positively. Furthermore, in terms of direct investment, U.S. investment in Korea increased more than two-fold to $4.5 billion (based on reported cases), whereas Korea`s investment in the United States
shrank both in the number and value of deals.
However, it is difficult to assess the overall outcome of the KORUS FTA based on such trade figures. Although tariffs on auto parts were removed right after the FTA went into effect on March 15, 2012, those on finished vehicles will be lifted in 2016 and a total tariff removal will be applied to sensitive items such as medical goods in four or five years. This means it is not until then that a comprehensive assessment of the FTA can be possible.
Now is also not an appropriate time to assess whether Korea`s competitiveness has been enhanced. The basic goal of the bilateral FTA is to improve the efficiency of the local service industry through competition encouraged by the opening of the market. However, given that major business service areas have just entered into the first phase of market opening, it is difficult to expect rapid full-scale effects of the trade pact. Take, for example, legal and accounting service areas. They are now at a nascent stage in market opening; only local branch offices have been established. Significant changes cannot be expected from such a modest entry. Therefore, genuine effects of the FTA will likely emerge in two to five years when partnerships with Korean law firms are formed or independent business activities are permitted.
Still, it is clear that U.S. law firms aggressively established their presence in the first stage. According to an analysis by the Korea Institute for International Economic Policy, as of February 15, 2013, 28 out of 37 foreign lawyers and 12 out of 15 international law firms operating in Korea belong to law firms headquartered in the United States. In addition, the process of making Korean law firms bigger and globalized is now under way in anticipation of American law firms beginning operations in Korea in earnest.
Signs of Change in International Trade Order In the maiden year of the KORUS FTA, signs of some significant changes have been detected on the international trade scene.
First, there have been signs of preferential trade agreements at the multilateral level moving into high gear. The Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP) are typical examples: the RCEP involves Korea, China, Japan, ASEAN, Australia, New Zealand, and India. The TPP consists of the United States, Chile, Australia, Vietnam, and Pacific coast nations such as Brunei.
Since the late 1990s, when multilateral talks for trade liberalization which required participation of all members of the WTO were stalled, the integration of the global economy has been actively carried out in the form of preferential trade agreements between two parties, or bilateral FTAs. Bilateral free trade agreements have greatly contributed to lowering tariff and non-tariff barriers across global markets: a partner country can readily be chosen, and quick decision making and implementation are allowed. However, the proliferation of trade deals has resulted in a “spaghetti bowl� of agreements that have varying rules of origin, thus increasing the administrative costs of exporters.
Consequently, small-scale negotiations on trade liberalization among countries with regional and cultural proximity or common interests have increasingly taken place to improve the utilization of FTAs.
Second, advanced countries are becoming more active in signing FTAs. The United States and Japan have attempted to integrate global markets by means of the TPP; the United States and the EU are also about to embark on talks for an FTA, or the Transatlantic Trade and Investment Partnership (TTIP).
There have been attempts at economic integration among advanced countries before. In the 1990s, conceptual examinations and informal research on economic integration were constantly conducted. However, no tangible results emerged. The benefits of FTAs were questioned because of the trade environment at the time: a mere 1 to 2 percent tariffs and relatively easy market access. In addition, diplomatic tension among world powers clouded the mood for trade negotiations.
In the wake of the 2008 global financial crisis, advanced nations once again realized the necessity of economic cooperation among themselves as manufacturing and exports became increasingly important in tackling unemployment and the threat from Asian economies increased.
It is unlikely that FTAs between advanced economies will be concluded within a short period of time due to their massive conflicting interests. These countries share highly similar industrial structures and have political systems in which special interest groups and vulnerable sectors can effectively apply pressure. However, in the process of forming FTAs, advanced countries will likely engage in
business cooperation, which in turn will likely lead to the creation of new manufacturing standards and trade rules that are favorable to advanced economies over emerging ones. This is why the formation of FTAs among economic powers requires attention.
Third, Japan is changing its attitude. Traditionally, the Japanese government displayed indifference toward FTAs. It seldom led discussions or made major concessions to make headway in negotiations. On economic integration with other advanced nations, which required high levels of trade liberalization and fierce competition, Japan`s attitude was even more passive. However, the Shinzo Abe administration, which took office in late 2012, has displayed a far different attitude. As illustrated by its recent announcement of participation in the TPP, Japan is now quite active in market opening. Unlike in the past when it was reluctant to open the market to protect its weak industries, Tokyo now wants these vulnerable industries to enhance their competitiveness.
Preparation for Changes in Global Trade Environment These changes in the international trade order have a great implication for the Korean economy. This is because Korea, which has actively pushed forward with bilateral FTAs, now needs to turn its attention to the expansion and realignment of multilateral free trade agreements. Particularly, given that an increasing number of small and medium-sized companies have been heavily burdened by the administrative costs to comply with FTA requirements, multilateral agreements are a useful option to address the problem.
The proliferation of economic integration among advanced countries threatens the Korean economy because strategic alliances formed by advanced economies and their common endeavors to hold China in check are likely to significantly disrupt the global production networks built so far by Korean companies around East Asia.
There is a concern that Japan`s active involvement in FTAs will threaten Korea`s status as an FTA hub. Since its conclusion of FTAs with the United States and the EU, Korea has seen sharp increases in foreign direct investment not only from advanced nations but also from emerging economies such as China and India, and also benefited from global division of production. But, if Japan with its competitive advantage in the production of capital goods and manufacturing actively participates in FTAs, it is likely that Korea will have to share with Japan the benefits it has enjoyed solely up until now.
Therefore, on the occasion of the first anniversary of the KORUS FTA, it is more imperative for Korea to discuss how to prepare itself for the rapidly changing global trade order than to evaluate the outcome of its free trade with the United States during the past year.
[ LG Business Insight, March 20, 2012, published by the LG Economic Research Institute ]
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Happiness of Koreans by Age Group: Background and Implications Kim Dong-yul Senior Research Fellow Hyundai Research Institute
I. Low Level of Happiness Korea is the world`s eighth-largest trading country and 15th largest economy, with a gross national income per capita of $20,000. Yet, Koreans` quality of life and happiness do not match their economic achievements.
The first International Day of Happiness (March 20) designated by the United Nations finds Korea in 24th place on the “Better Life Index” of the 36 member nations of the Organization for Economic Cooperation and Development (OECD); 38th out of 100 nations in the World Value Survey`s happiness index; and 96th out of 148 countries in the Gallup Poll`s survey of “positive emotions.” Some of the OECD sub-indices were lower than similar indices compiled by the World Value Survey and the Gallup Poll. Among the 11 dimensions of well-being that constitute the OECD happiness index, Korea was below average in six ― income, jobs, work-life balance, community, health, and environment.
In the “economic happiness index” of Hyundai Research Institute (HRI), Korea had less than 50 points out of 100. By age group, those in their 20s had the highest level of economic happiness while those 60 years old and over had the lowest, creating a downward curve toward the right. Income level rises from the 20s through the 50s. Nevertheless, those in their 50s, the top income earners, were right behind those in their 60s or older on the bottom levels of happiness. Koreans have never scored over 50 points since December 2007 in the HRI index. They had 39.9 points in December 2007 and 40.4 points in December 2012, failing to exceed 50 points through consecutive surveys.
On the occasion of the first International Day of Happiness, HRI examined the difference in the “infrastructure of happiness” among varied age groups by focusing on five economic indicators ― income, distribution, employment, consumption and preparation for old age.
II. Gaps in ‘Happiness Infrastructure’ Hyundai Research Institute created a “happiness infrastructure” of five indicators related to economic happiness ― income level, income distribution, consumption level, job security and preparation for old age ― for its survey leading to the latest happiness index.
HRI analyzed the results by age group, from those in their 20s to the 60s, by using micro data of Statistics Korea`s surveys on household budget and household finance and welfare.
1. Income Level
By age group, income level is highest among people in their 50s and lowest among those in their 60s or older, with the percentage of households sustaining deficits highest in the latter group. In 2011, the income of household heads in their 50s averaged 2.04 million won, while that of 60-something or older householders was merely 1.12 million won.
Among the households sustaining deficits, the proportion of families in their 60s or older was the highest at 38.2 percent in 2011, up from 35.8 percent in 2007. The share of red-ink households in their 20s sharply rose from 19.4 percent in 2007 to 26.1 percent in 2011. Households in the red among those in their 30s also edged from 20.6 percent to 23.3 percent but those in their 40s declined from 28.0 percent to 27.3 percent.
Households in their 60s or older who had a budget surplus rose from 16.6 percent in 2007 to 21.9 percent in 2011, while the comparable ratio fell in all other age groups during the same period. The
fact that the percentage of households with a budget surplus rose among those in their 60s or older, despite the rising percentage of red-ink households in this age group, means most of the households` balance sheets, except for some, worsened in 2011 compared to 2007.
2. Income Distribution
The older the household heads, the lower the percentage of middle class. The relative poverty rate was the highest among households headed by people in their 60s or older at 40 percent, and this age group also had the lowest ratio of middle class. Households of those in their 50s, too, showed weak income distribution.
While the proportion of low-income households among people in their 60s or older inched up between 2007 and 2011, the comparable shares among those in their 20s to 50s declined. The proportion of high-income households among those in their 60s or older was 13.1 percent, below the overall average of 20.4 percent, and middle-income households remained at 46.9 percent, far short of reaching the overall average of 65.3 percent. In the case of 50-something households, the share of middle-income households remained below the overall average, while that of high-income households was above the average level, suggesting inequality in income distribution.
3. Consumption Level
The older the households the higher the Engel`s coefficient, while spending on quality of life, such as cultural events and dining-out costs, was lowest in households in their 60s or older, followed by 50-something households. The average consumption expenditure of 60-and-above households was about 1.24 million won, less than half of the 2.66 million won for the 40s bracket. The Engel`s coefficient of the former group was 21.2, far higher than the overall average of 14.3. Their spending related with quality of life, such as culture and entertainment expenses, and dining and lodging bills, was far below the overall average as basic living costs took up much of their budget. Food and utility costs of the oldest households accounted for 15.7 percent and 11.6 percent of their total disposable income, respectively, far higher than the overall average of 10.2 percent and 7.9 percent.
Among households in their 50s, the Engel`s coefficient was second highest and spending related with quality of life was second lowest. This suggests their standard of living is below average, next to the oldest households. Households in their 40s spent 13.7 percent of their income on education, the highest among all age groups. The shares of their non-consumption expenditures (tax, social
insurance, etc.) and other spending (debt repayment) also stood at the highest levels. This age group also had the highest share of households sustaining deficits.
4. Job Security
The employment rate of people in their 60s or older stood at 37.5 percent, far lower than the overall average of 59.4 percent, indicating a gradual decline from the past. Among those, only 29.5 percent had regular jobs, far below the average, indicating most of their employment is on insecure shorttime basis. People in their 50s show the second lowest level of job security.
The employment rates show an inverted U-shaped curve with the youngest and oldest age groups at the low ends. The breakdown was those in their 20s at 58.1 percent; 30s at 72.7 percent; 40s at 78.3 percent; 50s at 72.2 percent; and 60s and older at 37.5 percent.
In 2012, the share of those 60 years old and above holding regular jobs was 29.5 percent, a drop from 34 percent in 2007 and less than half of the overall average at 66.7 percent. In the 50s group, the share of those with regular jobs climbed from 57.4 percent in 2007 to 62.4 percent in 2012, but that was still below the overall average. All of the other age groups had a higher share of regular job holders compared to 2007, at levels that exceeded the overall average.
Looking at the “work status” of household heads in varied age groups as of 2011, 49.2 percent of people over 60 years old said they were jobless or belonged to the “other” categories by making no replies. The job security of the 50s bracket was also quite unstable. The proportion of regular employees was highest among those in their 20s and 30s, but it dropped steeply with the 40-49 group.
The share of self-employed begins to surge from the 40s and peaks at the 50s. The 50-somethings show the highest self-employment rate of all age groups with 21.9 percent, and a much lower rate of regular employment than those in their 20s, 30s and 40s, reflecting an extremely vulnerable state of job security.
5. Preparation for Old Age
The percentage of those 60 and older who had public insurance was only 14.6 percent and their enrollment in retirement pension plans was also very low. This can be attributed to the public pension`s relatively short history of 25 years. Enrollment in public pension was 84.0 percent among those in their 30s, followed by 80.7 percent among the 40s group, and 77.1 percent among the 50s group.
The enrollment ratio of retirement pension is also highest among people in their 30s with 47.0 percent, and the corresponding ratio stands at a paltry 7.6 percent among those in their 60s or older, most of whom have already retired from active work. No fewer than 78.7 percent of household heads aged 60 or older said that they are “insufficiently prepared for old age� (no preparations, poor preparations,
no replies). That was 20 percentage points higher compared with other age groups.
III. Implications While people over 60 years old generally show the highest level of happiness in most industrial countries, Koreans over 60 years old are the least happy of all age groups. They lag behind other age groups in income level, income distribution, household balance sheet, consumption and employment. They are especially vulnerable in preparations for old age.
The government will have to provide policy support for aged people. This could involve creating jobs and improving the “basic senior pension� benefits, which currently fall far short of providing minimal sustenance.
Household heads in their 50s show high income levels but are second to last among all age groups in income distribution, consumption, employment and preparation for old age. They are particularly
weak in job security, which seems to pull down their level of happiness. To help strengthen job security for this age group, the government needs to consider expanding the “salary peak system,” extending the retirement age and providing training for new careers.
Policy support should also be expanded for second- and third-generation household heads who share their home with their aged parents. By increasing policy support for those households and easing their economic burdens, the government will be able to push up the level of happiness felt by household heads aged 60 or older.
<References> - Statistics Korea, Household Budget Survey, micro data, 2007 and 2011 - Bank of Korea, Household Financial Survey, micro data, 2012 - OECD, Better Life Index (http://oecdbetterlifeindex.org/) - Columbia University, World Happiness Report (http://earth.columbia.edu/sitefiles/file/Sachs%20Writing/2012/World%20Happiness%20Report.pdf) - Hyundai Research Institute, “Growing gaps in income and quality of life,” Weekly Economic Review, No. 476, February 3, 2012 - Johannes Wallacher, “Mehrwert Glück,” 2011 - Bruno S. Frey and Alois Stutzer, “Happiness and Economics,” 2002 - Helena Norberg-Hodge, “The Economics of Happiness,” 2012 - Carol Graham, “Happiness around the World,” 2011 - Andrew J. Oswald, “Happiness and Economic Performance,” 1997 - David G. Blanchflower & Andrew J. Oswald, “Is Well-being U-Shaped over the Life Cycle?” 2008
[ Weekly Economic Review, No. 529, March 15, 2013, published by the Hyundai Research Institute ]
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What YouTube Can Teach Us about K-pop Kim Yae-ri Novelist and Professor of English Seoul National University
“Hello. Welcome to Vince and His K-pop! First of all, I`m sorry that my hair sort of looks like a discombobulated mess. I literally just got out of the shower.” This is how Vince (of Vince and His K-pop) starts his YouTube video titled “How I Got into K-pop & My K-pop Biases.” In the video Vince talks about his first encounter with K-pop, his favorite groups and his opinions on K-pop in general. Why? He explains, “Recently I got a lot of subscribers and a lot of positive comments from my last video, the music video review of the Wonder Girls` ‘Be My Baby.` People have been asking me what bands I listen to and also telling me that I should listen to so and so. So I thought I`d let you know what bands I listen to, what my K-pop biases are and everything.”
Vince and His K-pop Vince, with scruffy hair and glasses, is an American teenager, still very young, judging from his cute chubby face with no trace of facial hair. But his speaking style is very smooth. You could even call it slick. The walls of his bedroom, which can be seen in the background, are covered with posters of Kpop groups, female celebrities, and video games.
In regard to how his interest in K-pop was sparked, Vince tells his anonymous watchers that it wasn`t anything special: “So in 2009, I was on YouTube looking for nothing in particular. I don`t know, I was probably watching videos of bunnies, and eventually I came across a Super Junior music video, and I was like ‘Hmm. What is this?’ So I click on it, and it ended up being the brand new ‘Sorry, Sorry’ music video. So I`m watching the video, and I`m like ‘Wh…wh…what, wo!’ Basically, I thought it was really awesome and I was captivated. You know, it was new…It was just awesome.” Then he came across TVXQ`s “Mirotic” video, which he also liked. But afterwards, he made no real effort to look up any other K-pop music videos, or songs by either of the artists he had already seen. As Vince explains, he just “stopped.”
But about a year later, in August 2010, he stumbled across an anti-SNSD (Sonyeo Sidae, aka Girls` Generation) video where people were making all sorts of comments about “SNSD.” Which got Vince wondering: “Who are these SNSD people?” So he did a search and the first video he came across was “Run Devil Run,” originally performed by the American singer Ke$ha. Vince continues: “The beat started, and I was like ‘Oh, this is the same song.’ I didn`t really like Ke$ha`s ‘Run Devil Run.’ I didn`t like her vocals at all…So I was like, well what`s so different about this one? But the moment that Jessica opened her mouth…” Here Vince pauses for dramatic effect, and then says, “I was speechless. I was speechless. It just got better and better as the video was going on. I was like ‘What is this?’ It really mesmerized me.”
Vince then set out to find out all he could about Girls` Generation and even watched their TV commercials. This eventually led him to seek information on other K-pop groups.
How They All Got Hooked Two other K-pop fans, Katie and Mindy, talk about their introduction to K-pop on a YouTube video titled “Questions and Confessions: How We Got into K-pop.” The two girls, who seem a year or two older than Vince, sit side by side on a couch.
Katie: It`s actually a very odd story. Here`s how it went. Mindy: I was not involved in this. Katie: She kind of comes a little later. Last summer I went on a study abroad to London. I happened
to go with Amanda. It was the same program as I was on…Through our mutual interest in other things she started trying to show me K-pop and I was really disinterested at first. Like she kept trying to show me things like Beast and Super Junior and things like that, and you know, they`re really good but for me it wasn`t enough to hook me right away…I was not used to all the weird costuming and the lip gloss. (In a high squeaky voice) I don`t know what`s going on here. It`s confusing me. Then one day, back in America, Amanda posted Big Bang`s “Fantastic Baby” video on Katie`s Facebook. And when Katie saw it she was hooked.
Katie: My life changed! Mindy: The second she saw GD on his throne she was gone… Katie: Actually it was more Daesung, with his shirt off and his beautiful body… Mindy: (Cutting Katie off in embarrassment) Anyway… Katie`s reaction to “Fantastic Baby” was by no means uncommon. In the “reaction videos,” where people record themselves watching K-pop videos for the first time, many female fans have even stronger reactions than Katie`s. In another video titled “Big Bang Fantastic Baby MV Reaction,” two black teenagers Courtney and Jasmine watch the video with their mouths open, squealing every now and then. When Taeyang and Daesung appear with their shirts off they start screaming and stop the video for a moment to calm themselves down. In yet another reaction video “Big Bang — Fantastic Baby M/V (reaction and review),” made by three Swedish girls, one of the girls jumps up and runs around screaming.
These videos are just a few of the countless K-pop related videos on YouTube. While there are a lot of K-pop videos on YouTube there are more videos made by fans that provide great insight into the relationship between K-pop and foreign consumers. There are sing-along videos, parodies, and reviews where fans give their opinions of K-pop videos and songs. But the majority of fan videos are more private and informal. They show fans reacting to K-pop videos as they watch them alone or with friends, showing off their K-pop collections, or talking without reservation about events in their lives that are linked to K-pop.
Fan Videos Flood YouTube After the huge success of the K-pop concert held in Paris in 2011, popular music has come to the fore to lead the Korean Wave. PSY`s “Gangnam Style,” so popular around the world that it was even
introduced on CNN, underscored the move and pushed interest in K-pop both at home and overseas to new heights. But on the other side of the international success of K-pop lurks the skepticism of Kpop at home. The sight of fans all over the world going wild over K-pop stirs both pride and disbelief among most Koreans. This is largely because the singers getting the biggest rave overseas are the “idol bands,” the boy bands and girl groups that have been disparaged in their own country: Girls` Generation (Sonyeo Sidae), Big Bang, 2NE1, SHINee, Super Junior and the likes.
They have been criticized for gaining popularity based on their looks rather than singing ability. They have been dismissed as consumer products made to satisfy sexual appetites and targeted by critics` opining about repetitive melodies and shallow lyrics. Their fans are likewise derided over their music tastes. As such, the popularity of idol groups in Korea is regarded as a sign of the depravity of Korean popular music, and it is difficult to put a positive spin on the popularity of K-pop overseas.
The main standards for evaluating singers and their work are singing ability and the lyrics and melodies of their songs. Under these standards, the highest marks naturally are given to those singers with a wide, accurate vocal range rather than those with pretty faces and tight choreography, and to songs with strong emotional appeal, critical awareness or experimentalism. For a long time it has been taken for granted that a song must first and foremost display musical artistry and a singer`s vocal ability. In the current music scene, which is criticized as lacking artistry and brimming with singers who cannot actually sing, this way of seeing things is not questioned. Much-touted TV competition programs such as “I Am a Singer” are proof of this.
But the standards for judging the ability of a singer and the artistry of a song, which are taken to be universal, are in fact grounded in a particular media and set of cultural beliefs. First, these standards are based on the premise that popular music primarily consists of audio text (songs). In other words, they are standards that call on the listener to focus on the audio aspects under the belief that music is meant to be listened to. Therefore, the visual aspects such as dazzling dance moves or attractive appearance are regarded as secondary elements, or attempts to divert the audience`s attention from poor singing ability. By the same token, music videos and visual effects at concerts are seen as a waste of money.
It`s More Than Listening Second, these standards have their roots in analogue media such as LP records and cassette tapes, which are purely audio media. Of course, CDs, which until recently were the major media for music
consumption, are counted as digital format, but they too are also purely audio media. Such audio media reconfirm the belief that singers and songs should be judged on audio factors alone. In fact, a singer`s face, body and voice are all parts of the physical whole, and when considering they are all subject to constant training and development it is not natural to make a distinction between a singer`s appearance and voice.
But audio media such as radio, records, cassettes and CDs separate the singer`s voice from the body. Although the singer`s face can be seen on television, these purely audio media are considered more important in terms of sustained consumption, a perception that is reinforced by an environment where posters, photographs and other visual material are considered only as by-products.
Third, these standards make a strict distinction between the text and the consumer, who listens to the song, and the relationship between the two is defined as appreciation of the song. In this case the song is not only a purely audio text unspoiled by visual elements, it is a fixed text that can be repeated endlessly and reproduced but cannot be changed. Appreciation of this independent and unchangeable song revolves around the song or the artist who sang it, not the listener`s feelings.
Therefore, the most natural and appropriate conversation about popular music is about the elements of a song and the singer. The mass media, including television, magazines and newspapers, talk about which songs are good and which ones are bad, evaluate their strong points and weak points, judge the originality or attractiveness of the melodies, interpret the meaning of the lyrics, and discuss the singer`s intentions and abilities. Internet blogs, which have taken on this function as well, do not depart greatly from this pattern. The act of “appreciating” a song means that there is the song and the singer on one side and that there is a clear boundary between them and the listener. The relationship between the song and the listener is a very private one. In listening to the song, deciding on its value, and interpreting its meaning, the listener forms a one-to-one relationship with the song and no third party can interfere. This is similar to the relationship between a book and its reader. Only after listening to a song, can opinions about it be shared. If we presume this is the ideal and normal relationship between the song and the listener, then it is quite natural for pop music fans, or “groupies,” to be showered with derision and scorn.
Visual Images Create Intense Reactions The flood of fan-made videos on YouTube, however, shows just how far removed the K-pop craze is from these three premises. The videos discussed above make it evident that the fans perceive K-pop as something to “watch” rather than “listen to.” During her whole video dialogue, Katie focuses on visual elements. Her initial antipathy to K-pop was caused by the appearance of the singers, particularly their fashion and makeup, and when she was drawn it was once again the visuals that were important. That is, she was attracted to Big Bang because of the looks of boys in the group. While Vince says he was drawn to Sonyeo Sidae by their singing rather than their appearance, his interest in the group and K-pop was sparked by music videos. Dylan of the Channel of Dylan, another Sonyeo Sidae fan, confesses in a video titled “SNSD has taken over my life” that he became a fan after seeing a music video. “OK. I have a disease and I need to know if anyone else has it. I was searching the Internet the other day, not looking for anything in particular, so I wasn`t really searching, I was on YouTube for some reason. And I came across a related video. And that related video was SNSD,” Dylan says. Mentioning that the first SNSD videos that he saw were “Oh!” and “Gee,” Dylan likens his obsession with a disease that is becoming more and more acute.
Scandinavian Monkey, a Super Junior fan, is another who got into K-pop through music videos. Like
Dylan, and Vince, and Katie and Mindy, she clearly remembers her first encounter, a music video of SHINee`s â&#x20AC;&#x153;Lucifer.â&#x20AC;? As she says, most overseas K-pop fans are first hooked by music videos, which are a combination of visual and audio elements. For them, K-pop is a hybrid form of entertainment.
The importance of the visual elements is corroborated by the fact that most overseas fans have no idea what the K-pop lyrics mean. Some fans set out to learn Korean after getting hooked on the music, but most of them know absolutely no Korean and stay that way, or learn some very basic expressions only. For overseas fans the audio elements are confined to the melody, rhythm and sound of the singer`s voice. The meaning of the song is conveyed not by the lyrics but by the visuals in the music video. The singer`s looks, trendy outfits, impressive dance moves and mesmerizing special effects are more important to overseas fans. They are caught first by these visual aspects than the song itself.
K-pop is perceived as a visual form of entertainment, which is evident from the so-called reaction videos. There are no videos on YouTube that show people reacting as they listen to a song. Reaction videos, whether of one person or a group, always show reactions to watching a K-pop video. And it is the visual elements rather than the audio ones that bring out the strongest reactions. While fans do sing and dance along with the music, the appeal of a reaction video lies in watching the fans go crazy and run around screaming with excitement. Such intense reactions are caused by the appearance of their favorite singer or some overtly sexual or stimulating scenes. To help others understand their reactions, fans who make reaction videos sometimes insert a small version of the video on the same screen, another indication of the importance of the visuals in the enjoyment of K-pop.
Reaction videos as a genre are interesting in that rather than the star or the song, the focus is the consumer and his/her expressions of enjoyment. As the term indicates, reaction videos not only capture the relationship between the popular music consumer and the song, but also the consumer`s reaction. Makers of reaction videos capture their own appreciation of the song on camera. Those who watch reaction videos do so not to listen to the song or watch the original video. They want to see how other fans are responding to the music. In this case, the song and the music video are a device to connect the producer and viewer of the reaction video.
The close-up of the consumer watching the music video and the small insert of the music video itself is a visual representation of this relationship. In this sense it reverses the traditional one-to-one relationship between the song and the consumer. Reaction videos present a new pattern of consumption whereby the music video is used to link consumers with each other. The point of such consumption is interaction among multiple consumers.
New Patterns of Consumption The highlight of such consumer-focused, exchange-focused consumption is the sight of hysteric fans in the reaction videos. Those fans who film themselves are not embarrassed to show themselves losing self-control when they see their favorite stars and squealing at suggestive scenes. Actually, they seem rather proud of showing their over-the-top behavior. Watching these fans makes clear two things about their relationship with K-pop.
First, their enjoyment of K-pop is centered on self. Fans who like to show off their excitement are not worried about being criticized or judged. Their enjoyment is what matters the most. The point is not the singer`s ability, nor the beauty and originality of the song, but how much “I” like that singer and how excited “I” get at that song or a particular scene. The second point is that fans seek to share these highly self-focused reactions with others. By posting on YouTube those videos they bare themselves to everyone and thereby try to communicate with one another.
The same intentions are evident in other videos related to K-pop. Many of them show fans talking about their K-pop experiences and showing off their K-pop collections. The fans like to produce and distribute such videos and find there is an audience for them. Sometimes videos are made at the request of other users or in answer to questions posed by them. Katie and Mindy`s video was made at the request of friends asking about their K-pop obsession. Likewise, Vince`s videos can be seen as a response to other fans` questions, though at first he might not have intended to do so. Scandinavian Monkey`s video was posted in response to a previous video by her friend RandomMe2011.
This new pattern of consumption shown by K-pop fans is closely connected to the fact that the Internet has been the most important media for the spread and consumption of K-pop. The emphasis on visual elements and instant communication are characteristics of the Internet. Fans who first come into contact with K-pop via the Internet continue to consume it online, highlighting the consumption process. Though they end up purchasing the CDs and DVDs, this does not indicate a switch in media; such purchases are also a part of their online activities as K-pop fans. On YouTube it is easy to find videos of fans showing off their CD collections.
In the process the characteristics of the Internet naturally become an integral part of K-pop consumption. As LPs, cassettes and CDs separate the visual and audio elements, emphasizing the latter, the Internet turns K-pop into a cultural product whose visual side is as important as the audio
side. As the Internet, unlike other media, allows for multi-point and instant communication, it entices fans into revealing their desires and sharing their experiences to their heart`s content in the process of K-pop consumption.
New Standards for Evaluation To sum up, overseas K-pop fans` consumption is based on the Internet, or online media, which means they enjoy K-pop in a completely different dimension compared to the conventional audio media. It is necessary therefore to find new methods for evaluating K-pop as a genre and the texts (or songs) that constitute that genre. Pop music has been judged on audio elements, including singing ability, lyrics and melody, while visual elements such as the singer`s appearance, dance ability and music videos have been given little regard. But K-pop, which is largely spread and consumed online, cannot be properly evaluated under such standards. Likewise, the fans cannot be properly understood.
Whether K-pop`s current worldwide popularity can be maintained and expanded is the biggest issue for everyone in the industry and anyone with an interest in Korea`s popular culture. To sustain the current popularity, high-quality artists obviously need to be nurtured and supported with high-quality production. The problem is, however, deciding what constitutes â&#x20AC;&#x153;high quality.â&#x20AC;? Standards based on old media and the domestic market cannot properly evaluate K-pop, which is based on new media and new patterns of consumption, nor can they provide direction for future development.
[ 21st Century Literature, Winter 2012, a quarterly published by the Isu Group ]
www.koreafocus.or.kr
- ‘Yes, I Must be a Freak!’
‘Yes, I Must be a Freak!’
Uh Soo-woong Staff Reporter The Chosun Ilbo
Upon closing the last page of the novel “The Surrendered,” I sent an email to the author, Lee Changrae, 48, an acclaimed second-generation Korean-American writer. Lee wrote in English and I read a translation of the novel (by Na Jung-gil). The ostensible reason I wrote him lay in the fact that his novel was one of the most impressive works I have read in the past year. However, the actual reason was that I wondered why the Princeton University professor, who has been thought of as a possible Nobel Literature Prize winner, obsessively explores extraordinary literary themes like a “freak,” which appears to be his literary persona lurking in his inner world.
Since he is part of the post-Korean War generation born in 1965, Lee never experienced the brutality of war. Yet, the central themes of his work are extraordinary tragedies, such as war and massacres. Unlike his contemporary writers, Lee is quite indifferent to issues such as the absurdity of everyday life or the self-consciousness of an individual. Instead, he tenaciously chases after the traumatic scars such horrendous experiences have left on individuals, which are often too fatal to heal.
Traumatic Scars of War and Massacres - Given your obsession with such extraordinary themes, do you ever think of yourself as a freak or a geek? “Yes, I must be a freak! Even close friends of mine, who think I am usually a quiet, gentle and reasonable person, are often amazed that I`m telling such harrowing stories. This novel, “The Surrendered,” is set in a Korean War refugee train, Manchuria where the Japanese army committed atrocities in 1934, and the peaceful city of New York in 1986, crisscrossing these three different times and spaces.
- You seem more interested in life after war than in war itself, don`t you? “I want to shed light on the consequences of war and violence, in other words, on the inner and outer world of the people who were run over by the wheels of history. My focus is always on the aftermath of war, that is, post-war mental and physical traumas. There are three main characters in “The Surrendered”: June, an 11-year-old girl who witnessed the death of her younger twin sisters; Hector, an American soldier who had to kill a young North Korean solider; and Sylvie, who was forced to watch his parents and girlfriend being tortured and killed by a Japanese army officer. These three characters were all psychologically and physically ruined by the war. Although novelists are often regarded as students of human nature, Lee said that, while working
on the novel, he was able to explore human emotions like guilt, emotional pain, bitterness, self-hatred, confusion, deliberate indifference, and especially endurance. - As for readers who have read “The Surrendered,” one of the most unforgettable scenes may be in the first chapter when one of the main characters and her family are on the roof of a refugee train heading south. June lost her two younger sisters on top of the train. What sort of research did you do to create that scene? “Actually, in that scene, I fictionalized my father`s own experience. During the Korean War, my father and his younger brother, still young boys, climbed on top of a refugee train. However, one night, his brother was killed in a fall from the train. I was told that my father had no choice but to just watch this tragic accident happen. According to the sources that I met, such accidents frequently happened during the war. - Although the novel`s title has been changed to “The Survivors” in Korean, the meaning of “The Surrendered,” the original title, is those who yield to somebody or something. What does the original title imply? What I mean is, to what or to whom they are surrendering? “It is the forces beyond human control: to one`s own delusions, headlong desires, and darkest self, and perhaps, ultimately, to each other. When Shin Kyung-sook, the author of “Please Look After Mom,” was selected as the winner of the Man Asian Literary Prize, deemed the Asian version of the Man Booker Prize, last year, Lee Changrae was among the judges. The decision must have been made totally based on the literary merit of her work, but I wondered whether he felt a sense of ethnic bond at that moment. He gave an expected answer to my question: “It was not my sole decision, but a unanimous one by the awarding board of three judges. But, of course, I was pleased that the winner was a Korean.”
- You have been regarded as one of the strongest candidates for the Nobel Prize in Literature by the British and American media over the recent few years. Do you think such talk serves as a positive stimulus to your writing? “No writer writes novels in order to be awarded, be it a Nobel Prize or a school contest. Of course, I expect there would be readers who are waiting for my work. However, whenever I`m writing, I`m doing so totally for my own sake: to express my own feelings and opinions about the intricate and
strange world around me.
His assertion seems to reveal his artistic pride.
<About Lee Chang-rae> After graduating from Yale University with a degree in English, he worked as a Wall Street analyst and later started to write novels. He immigrated to the United States with his family when he was three years old, so his command of Korean is low. He has published four novels so far: “Native Speaker,” “A Gesture Life,” “Aloft” and “The Surrendered.” Currently, he teaches in the Creative Writing Program at Princeton University.
[ March 6, 2013 ]
www.koreafocus.or.kr
- The Old Seoul Still Around with Many Ancient Roads - Life Story of a Towering Figure in Korean Progressive Politics - Reading Joseon History Anew â&#x20AC;&#x2022; Goryeo Elites Remained as Powerful as Ever
The Old Seoul Still Around with Many Ancient Roads
Hwang Gyeong-sang Staff Reporter The Kyunghyang Shinmun
“Ancient Seoul” By Choi Jong-hyun and Kim Chang-hee, Dongha Publishing Co., 364 pages, 20,000 won
Is it possible to spot roads in Seoul that were built during the Goryeo Dynasty (918-1392)? Seoul is such a fast-changing city that it is difficult to deduce what it was like 10 years ago, much less centuries ago. But roads are typically placed where passage is most convenient and therefore do not suddenly disappear as time passes, according to authors. For example, Jongno, created when the Joseon Dynasty (1392-1910) was founded, still runs through the old city center of Seoul.
The steps the authors took to find the old roads in the sprawling modern megalopolis of Seoul are as intriguing as a mystery novel. First they excluded roads and tunnels that were constructed in modern times. Then they crosschecked roads on old maps against the names of places mentioned in old literature. The arduous process revealed some of the roads trodden by people for more than a thousand years. What is left to do is to actually walk the byways to confirm the findings.
Soon after the Joseon Dynasty was founded, King Taejong ordered that a secondary palace be built “east of Hyanggyo-dong.” This by itself is a very trivial clue. To the west of where Changdeok Palace currently stands there used to be a public school and shrine honoring Confucian sages, called
hyanggyo, during the Goryeo period. The village that formed around the school was likely to have been named Hyanggyo-dong, which is the present-day Gyo-dong.
Cutting through the Gyo-dong area is Donhwamun-no, or the Donhwamun Avenue, that was built to the south of the main entrance to Changdeok Palace and parallel to the road on both sides are pimagil, the narrow roads for pedestrians only. The small alley that does not crisscross with these roads is thought to date back to the Goryeo period. We finally come across the crooked road that extends 500 meters from the intersection close to Exit 6 of Jongno 3-ga Subway Station. Walking along the roads once taken by our ancestors several centuries ago, we naturally come across both the past and the present. Thus, the authors unravel the wonders of Seoul history with the “things that we can see with our very eyes now.”
During the reign of King Yeongjo (r. 1724-1776) of Joseon, the Cheonggye Steam running through the capital was dredged and all the earth and sand dug out from the stream bed formed a little hill. The remains of the hill still stand about five meters high across the Jeon Tae-il Bridge, which honors a young labor leader who burned himself to death in the early 1970s to demand better working conditions for textile and garment factory workers in the area. If we were to close the book and set out to visit the hill, we would be able to see it in a whole new light.
The process would be very much similar in tracing when and where Seoul began. The book takes us to a little hill situated inside the northern gate to Gyeongbok Palace. In 1104, some 300 years before Seoul was named the capital of the newly founded Joseon, there already was a king who looked down on the city from atop the hill, receiving words of congratulations from his courtiers. King Sukjong of Goryeo, who had wanted to relocate the capital to Namgyeong, or the “South Capital,” built a detached palace on the northwestern corner of the present Gyeongbok Palace compound. Thus, the history of Seoul is extended from six centuries to nine centuries. We also have to take note of Seochon, or the “West Village,” located between Gyeongbok Palace and Mount Inwang. This area to the west of the main palace of Joseon used to be inhabited by families and relatives of the king who could not rise to the throne and were not allowed to live inside the palace. Some of them did actually become a king, notably King Sejong (r. 1418-1450), who is indisputably the most respected monarch in Korean history. Sejong was born where the current Hyojadong branch of Woori Bank is located along Jahamun-no. Seochon was also home to Prince Anpyeong, Sejong`s third son and a renowned calligrapher, who was slain by his elder brother, Prince Suyang, who usurped the throne through a bloody power struggle.
The authors rely on Prince Anpyeong`s anecdote and estimate the angle of “Dream Journey to Peach Blossom Land” (Mongyu dowon do), a famous painting by An Gyeon depicting a dream of the prince. The painting resembles Mount Inwang and Mount Bugak as viewed from the house of Prince Anpyeong. During the mid-Joseon period, Seochon used to be the center of literary and artistic activities, and Seong Su-chim, a leading Neo-Confucian scholar of mid-Joseon, was one of its famed residents. Toward the end of the dynasty, some jungin, or middle-class people, including Cheon Sugyeong, achieved fame as poets, and the neighborhood was callled Songseokwon after the name of Cheon`s house.
During the Japanese colonial period (1910-1945), pro-Japanese Korean aristocrats such as Yi Wanyong and Yun Deok-yeong occupied vast plots of land in Seochon and built gorgeous mansions. Writer Yi Sang was born and raised in Tongin-dong in this neighborhood, where he wrote the anomalous poem “Au magasin de nouveautes” and painted “Self-portrait.” Poet Yun Dong-ju`s boarding house used to be in Nusang-dong where he would look up at the cross on the church building while writing poetry. All this imbues the Seochon neighborhood with a more special meaning.
The authors searched through the real estate registration papers and visited sites where these people lived. It reminds us that when we begin to think about the relationship between people and places then we come across rich stories and implications.
[ March 23, 2013 ]
www.koreafocus.or.kr
Life Story of a Towering Figure in Korean Progressive Politics
Gil Yun-hyeong Staff Reporter The Hankyoreh
“Cho Bong-am: A Critical Biography” By Lee Won-gyu, Hangilsa Publishing Co., 632 pages, 22,000 won
Each time cabinet minister nominees are questioned in confirmation hearings at the National Assembly, suspicions arise about their illegal acquisition of farmland. The Farmland Reform Act, which was enacted on June 21, 1949, established the principle of only farmers owning farmland. Therefore, if anybody registers a rural address for speculative purposes and actually lives elsewhere, both the Farmland Act and the Resident Registration Act are violated.
Cho Bong-am (1898-1959, pen name Juksan), a star-crossed politician, helped abolish the age-old tenant farming system and spearhead farmland reform. Cho is the third “forgotten revolutionary” bright to light by the author, following “Yaksan Kim Won-bong” (2005) and “A Critical Biography of Kim San” (2006). In his preface to this latest book, the author defines Cho as “a martyr who sowed seeds of peace and justice,” saying, “I pledged to write about Juksan as my last biography. I poured my heart and soul into this book; I have no energy left to think about writing another book.” You can imagine what efforts Lee made to complete this book, just as he declares in the preface, if you look at a reference
list of more than 10 pages and records of interviews with Cho's family members and other people who had known him well.
What attracted the author to this figure? Kim Won-bong (1898-1958), despite his prominent achievements at a young age as the leader of Uiyeoldan, or the “Band of Righteous Patriots,” sank into oblivion amid the turmoil of national liberation and division, and the Korean War. Kim San emerged as an accomplished legend thanks to “Song of Ariran: A Korean Communist in the Chinese Revolution,” jointly written with Nym Wales, but soon became indistinguishable in a huge maelstrom called China. In contrast, Cho was “judicially killed” by Syngman Rhee in his blind pursuit of power.
However, the spirit of the Farmland Reform Act, which Cho helped take root, remains valid, and his ideas of peaceful reunification of the Korean nation and social democracy are now taking center stage in public debates in our society. Because he consummated his lifetime aspirations through his death, Cho`s death does not convey so much sense of futility and mercilessness as that of either Kim Wonbong or Kim San. This may be the reason why Cho naturally crossed the author`s mind after writing the tragic life stories of those two men.
As suggested by its vast volume, the book traces in detail the entire trajectory of Cho`s life from his birth to his youthful days when he grows up as a communist, anti-Japanese struggles waged in Moscow, Manchuria and Shanghai, parting ways with communism after national liberation, and his rise as a politician. In the process the author kindly explains the strife among Korean communists, who were divided into the factions of Shanghai and Irkutsk; the three rounds of creation and disruption of the Communist Party of Korea; and the post-liberation political turbulence, which most general readers would otherwise have found difficult to understand. This is a remarkable trait that sets this book apart from abstruse academic writings by professional researchers.
The highlight of the book is its illumination of Cho Bong-am as a man as remembered by his family members. According to their testimony, Cho dominated all discussions with his eloquent speech and strong leadership; he liked to go to the cinema with his eldest daughter and he was often moved to tears while watching sad movies. Although it may seem inappropriate to discuss the matter here, it is interesting that he was involved with many women and how those affairs negatively affected his political career later.
While he was young, Cho was a dyed-in-the-wool communist. But he was shunned by mainstream communists after making a “mistake” in Shanghai, and finally swore to renounce communism to
become a social democrat. Hence he was able to win 30 percent of votes in the 1956 presidential election (given the vote rigging, it is highly likely that he actually won far more votes). In this regard, he is still credited with an election record that no progressive party in South Korea has ever been able to break.
If he had remained a communist safeguarding his conviction or a purist with no political ambition, Cho would never have acquired the unique status he is now enjoying in South Korean society. He made not a few mistakes and errors, and was executed before fulfilling his life's goals. The author may have wished to deliver some other message through Cho Bong-am, but his book resonates with an uncomfortable sensation emanating from the â&#x20AC;&#x153;ironyâ&#x20AC;? that pierces through his life.
[ March 16, 2013 ]
www.koreafocus.or.kr
Reading Joseon History Anew ― Goryeo Elites Remained as Powerful as Ever
Lee Hun-sang Professor of Korean History Dong-A University
“The Origins of the Choson Dynasty” By John B. Duncan, translated by Kim Beom, Neomeo Books, 488 pages, 25,000 won
This book is the byproduct of the hard work done by Professor John Duncan, a Korean history scholar at the University of California at Los Angeles. Looking at the title alone, one may think that the history of late Goryeo (Koryo, 918-1392) is discussed. However, the book traces the origins of Joseon (Choson, 1392-1910) back to when Goryeo was founded, stressing the continuity between the two dynasties. That is probably why the book is not titled “The Formation of the Joseon Dynasty.” Instead, it examines the dynasty`s origins, a word which historians try to avoid using.
History classes teach that in every critical era, a new force emerges to become the ruling power. The examples include powerful local clans like the head-rank six (yuktupum), who resisted the rule of the true-bone (jingol) royal family at the end of the Silla Kingdom; the military officials of Goryeo, who rose up against the civilian bureaucrats; new noblemen, local functionaries (hyangni) and founders of the Joseon Dynasty; the appearance of the rustic Neo-Confucian literati (sarim), who stood up against the conservatives during early Joseon, and the ensuing literati purges (sahwa); and large-scale farm households and the farmers` uprising. As such, the traditional textbooks discuss the change and
expansion of leadership. The conventional view of Joseon is that the ruling class changed and a new aristocracy emerged.
Professor Duncan questions this type of formulaic thinking and fundamentally challenges the conventional view that Joseon was the creation of a new noble class. Instead, he sees the dynasty as the result of continuous efforts since early Goryeo to build a centralized bureaucracy, a long process that saw central office holders of Goryeo triumph over the local officials.
To a reader who is familiar with the theory of the emergence of a new aristocracy that led to the foundation of Joseon, this may all sound shocking. Taking this into account, Professor Duncan reviews in great detail critical topics, including the political system of Goryeo, the boom period of its centralized bureaucracy, the yangban aristocratic class during the dynastic transition from Goryeo to Joseon, the systemic crisis in the latter half of Goryeo, reform and change of dynasties, and the reform ideology of Joseon.
It is quite impressive how he elaborates on the family backgrounds of major office holders, how the officials were appointed, and their career paths. As a result, he reveals that the founders of Joseon actually shared a continuum with the ruling elites of Goryeo, and that the origins of the Joseon founders go back to when Goryeo was founded.
In short, the book does not stop at challenging the preconception about the creation of the Joseon Dynasty but even presents a new historical model. At the bottom of all this is the author`s view of the big framework of conflict and balance between aristocracy and bureaucracy. This is a hypothesis that Professor James B. Palais (1934-2006) introduced to explain the characteristics of the Joseon monarchy. Professor Duncan took the theory of the Korean studies forerunner and extended it to the Goryeo Dynasty. He meant to emphasize the continuity between Goryeo and Joseon. Professor Duncan criticizes the â&#x20AC;&#x153;internal development theoryâ&#x20AC;? propounded by Korean historians, which most Koreans are familiar with, and its faults. The Japanese imperialists wanted to legitimize their annexation of Korea and emphasized the stagnancy of Korean history, which the local historical circle tried to overcome after Korea`s liberation from the Japanese colonial rule. The internal development theory was created during this process. Major transitions during historical periods were interpreted as signs of dynamism and development. The discussions about the changes in leadership throughout Korean history share the same logic.
This theory was criticized for a long time on the grounds that it regards Western historical development as the universal model and at the same time takes on a note of ethnocentrism. Professor Duncan`s book also shows some intellectual tension vis-à-vis the mainstream internal development theory but it is not certain whether it would produce some constructive discourse. It just shows how wide the gap is between the two perspectives.
Nonetheless, we should not overlook the outstanding features of the book. Rigorous research was put into the book, and its fluent writing style enables the readers to easily empathize with the author. The reality is such that although we talk about making history more popular, we still are left out of the experts` world where only the learned discuss the important issues. The book is a joy in itself that it provides abundant and profound historical narratives.
The media book reviews do not often mention the translator, but this book should be an exception. Translator Kim Beom, who is a researcher at the National Institute of Korean History, already translated “Confucian Statecraft and Korean Institutions” by Professor Palais and this time pulled off yet another difficult feat. Edward Wagner, Martina Deuchler and other Korean history researchers of the West shunned the Korean method of understanding history in a schematic or standardized way. Korean society today embraces diverse understandings, positions and interpretations. That is why we need to pay attention to the research results produced by those who lie outside the typical boundary. We appreciate the chance to add Professor Duncan`s work to our collection to pore over.
[ JoongAng Ilbo, March 23, 2013 ]
www.koreafocus.or.kr
- Han Jae-kwon: â&#x20AC;&#x153;54,000 North Korean Workers make a living from Kaesong Industrial Complex.â&#x20AC;?
Han Jae-kwon: “54,000 North Korean Workers make a living from Kaesong Industrial Complex.”
Choi Bo-sik Senior Reporter The Chosun Ilbo
“My company has two employees permanently stationed at Kaesong Industrial Complex. They telephoned me and asked me about the media hype about (North Korea`s) security threat. There is a significant divergence between media reports and our on-site observations,” said Han Jae-kwon, 58, chairman of the Corporate Association of Kaesong Industrial Complex, which represents 123 South Korean companies operating at the joint industrial park in the North Korean city of Kaesong (or Gaeseong as spelled by South Koreans). The lively tone of his voice contrasts with the escalating security tensions on the Korean peninsula. [Editor`s Note: North Korea suspended the operations of the pilot economic zone and the only peaceful link between the two Koreas on April 9, two weeks after this interview was published, by withdrawing its some 54,000 workers.]
Q. At her first cabinet meeting, President Park Geun-hye said that her government would make utmost efforts to ensure the safety of South Koreans working at Kaesong Industrial Complex. Don`t you feel the gravity of the current situation?
A. Even my friends blame me for investing in Kaesong. But my employees there say things are alright. They are the first to feel the changing currents, if any. After enduring many extreme circumstances, they think the current situation is still manageable.
Q. Do you keep constant contact with your employees there?
A. Internet and mobile phones are not available but we have landline telephones for cross-border communication. Whether to stay or to leave Kaesong to come back to the South is entirely up to individual employees. A company cannot force its employees to work in North Korea. In fact, it is the employees themselves who prefer working at Kaesong, seeking better financial compensation. (The number of South Koreans at Kaesong currently stands at 770.)
Han owns a handkerchief manufacturing company, headquartered in Daegu. In 2006 he relocated some of the sewing and packaging lines to the Kaesong Industrial Complex. His company currently employs 150 North Koreans.
Q. Even though your employees say it is okay to stay there, as the top manager of a firm, you should prioritize their safety over any business considerations. Don`t you think?
A. The worst security crisis so far for us has been the shelling of Yeonpyeong Island. The access to Kaesong was prohibited for a couple of days, prompting worries that a war might break out and the South Korean workers at Kaesong might be held hostage. I told them they might withdraw and it was totally up to their judgment of the situation. But they said they did not feel any change in the atmosphere and they were fine.
Q. Do you think they feel the current crisis and the North`s provocative threats are not serious?
A. I am not sure if the North will actually mount provocations again. They are escalating threats to maintain their regime, and I don`t think they will really use nuclear weapons. They should know that, in case they do so, their system cannot remain safe. If the current situation develops into war, it will be a problem of not only Kaesong but the entire Korean peninsula.
Q. Do you believe that South Korean workers will not be taken hostage under any circumstances?
A. The government should prepare for whatever possibility. But we don`t believe North Korea will do so.
Q. Why are you so confident about that?
A. North Korea should start reform and opening up sooner or later. They are eager to obtain investment from overseas high-tech companies. At present, 70 percent of South Korean companies operating in Kaesong are sewing factories. North Korean officials have been asking us if they can have some different types of businesses other than sewing. If there is any incident like hostage taking in Kaesong, how can they expect foreign enterprises to be interested in moving their operations there? The North Korean officials are worried that the current crisis could make the South Korean government control entry to Kaesong, eventually leading to a massive exodus of South Korean enterprises. For North Korea, Kaesong Industrial Complex is the sole source ofâ&#x20AC;Ś.
Q. You mean it is the single lawful source of foreign currency for the cash-stripped North Korea?
A. Yes. U.S. dollars flow into the North through Kaesong, and some 54,000 North Korean workers make a living there.
Q. How much in dollars do they earn from Kaesong?
A. The average monthly salary of North Korean workers is about US$130. The workers at each factory simply sign off on their salary, and then the aggregated amount is paid in cash to the North`s General Bureau for Central Guidance to the Development of Special Zone. The total monthly payment amounts to $7.2 million, which means $86.4 million a year. North Korean authorities take dollars and pay the workers their salaries in local currency and coupons for daily necessities. For the North Korean regime, Kaesong is a very important source of finance that they can never give up.
Q. North Korea once demanded wage hikes up to $300, which caused friction.
A. At that time we were paying monthly wages of $100 on average. And all of a sudden they asked for $300. When the Kaesong complex was founded, the government set a guideline that the annual salary increases for workers would not exceed 5 percent. We said we were willing to pay a maximum of $200, but we wanted to apply different pay rates according to work performance. Why should we offer the same amount to every one? We also said we needed to exercise control over personnel decisions. We said we would positively consider pay increases if we are guaranteed a business environment on par with that in China. North Korea couldn`t accept our proposals.
Q. Are overtime and night shifts allowed?
A. Of course. Incentives surely make a difference. For example, if you offer additional pay for meeting a target production of 10,000 units in a given period of time, you will see the worksite supervisor`s eyes shine and indeed he will drive workers to work harder. I am sure a differentiated pay scheme will improve productivity.
Q. Don`t you have control over personnel affairs, like hiring and firing North Korean workers?
A. Workers are allocated by the North Korean authorities. We discuss work schedules with North Korean worksite supervisors. In these meetings the worksite supervisor is always accompanied by a general affairs manager. There is no one-on-one meeting to ensure mutual monitoring and surveillance.
Q. Are South Koreans prohibited from having personal contact with North Korean workers in factories?
A. We give work orders through worksite supervisors. We are not allowed to have meals with North Koreans. We eat at separate places. However, North Korean workers at the Kaesong Industrial Complex know how things are in the South. Their families and neighbors should also know how much South Korea differs from their country. You may think that at least 300,000 people have thus been infected.
Q. Do you mean that they have a yearning for the outside world?
A. When founding the Kaesong complex, the South Korean government wanted to impress the North Koreans by showing something they don`t have in the North. Therefore, the construction guidelines were even rigorous than those in the South. The buildings are fully air-conditioned in the summer and nicely heated in winter. Each production unit is equipped with shower stalls and employee amenities. North Korean workers shower there once a week. Workplace preference surveys in North Korea show local workers opt for the Kaesong complex only next to overseas placements, their top choice.
Q. Do you believe that the Kaesong industrial park can bring about changes in North Korean society?
A. Change begins with small things. For example, North Korea runs a few restaurants and souvenir shops inside the complex. Initially the attitudes of salespeople there were very passive. But they have started to learn competition and customer service. During the last Dongji (winter solstice) day, they even served sweet red bean porridge for free. South Korean employees there said they had never imagined enjoying the seasonal delicacy in Kaesong.
Q. I heard that [South Korean chocolate and marshmallow snack] Choco Pies are very popular among North Korean workers.
A. For them, Choco Pie is money. We used to distribute six Choco Pies a day, which means more than 300,000 pieces for 54,000 workers at the complex each day. These days Choco Pies are in large supply on black markets, depressing the price. Therefore, the workers asked for South Korean instant noodle packages instead of Choco Pies. Now we distribute one noodle package and three Choco Pies per worker every day. With a few more industrial zones like Kaesong operating in its territory, North Korea would naturally begin opening up.
Q. You have quite a different view than those who are talking about closing down the complex.
A. Kaesong has actually served as a conduit of dialogue to create a breakthrough in inter-Korean confrontation. A few years ago when dialogue between the two sides ran aground after a nuclear test by the North, a representative of the South`s Unification Ministry met his North Korean counterpart at Kaesong.
Q. It seems South Korean investors grow increasingly sympathetic toward North Korea, hoping that our government would not interfere with their business in the joint industrial zone.
A. Not at all. Food aid and commercial trade completely ceased due to economic sanctions under the Lee Myung-bak administration. We experienced a lot of inconvenience at that time, so we disliked the Lee administration because of its hard-line policy. Eventually, however, it was a way to tame North Korea and give it some lessons. We had a hard time for a while, but I believe it would ultimately help improve the inter-Korean relationship in the long run.
Q. What were the reasons for your decision to relocate some of your production facilities to Kaesong?
A. It was becoming increasingly difficult to find workers in Daegu. My father came down from the North. I had hoped to move my company`s operations to the North even earlier in the mid-1990s, when the Daewoo Group began constructing an industrial complex in Nampo. But the project was aborted because the Daewoo Group went bankrupt. When I applied to set up production facilities at Kaesong, the competition among South Korean enterprises was as high as 7 to 1. In the screening interview, I said I was planning to export products manufactured in Kaesong to Japan.
Q. Are you shipping your products from Kaesong to the United States as well as Japan?
A. When I moved operations to Kaesong, my Japanese buyers asked me to ensure that products from Kaesong would not be exported to Japan. They said they needed a document to send to the Japanese customs office, which required such an assurance. We`ve been requesting that Kaesong be categorized as an offshore manufacturing area. It still remains a tough political issue.
Q. Your sewing factory is relatively small in size compared to other South Korean firms operating at Kaesong. How did you become the chairman representing the interests of all resident companies?
A. The job of the chairman often involves tough negotiations with North Korean authorities. A company which has made a large investment in Kaesong with its vital business interests at stake cannot argue with North Korean authorities. In comparison, even in the worst-case scenario, where I would lose all my investment in Kaesong, I still have a sufficiently large production base in Daegu.
Q. What have you fought for vis-à-vis North Korea?
A. The Paik Hospital opened a branch at Kaesong some time ago. We asked for Internet access for emergency medical service through remote video examination and treatment. We have had no response yet. The first steps are always hard to take. Q. That doesn`t quite sound like a “fight.”
A. In another example, North Korea designated January 2nd and 3rd as temporary public holidays in an ad hoc manner to celebrate their launch of long-range missiles in December last year. They notified us of the sudden decision just a day earlier. We delivered our message to the North`s General Bureau
that all manufacturing plants have their shipment schedules to keep and a one-week notification should be the business norm. We said that we were not going to accept unexpected ad hoc holidays unless they are marked in the printed calendar and that we would apply the â&#x20AC;&#x153;no work no payâ&#x20AC;? rule. Corporate representatives stationed at Kaesong also got together to demonstrate our collective will.
Q. So you didn`t pay for un-worked days?
A. We had to pay.
Q. Do the South Korean companies operating at Kaesong generally show good performances?
A. Just like in the South, some companies perform better than others, and some worse. It is costly to move into Kaesong and maintain facilities there. The economy of scale applies here, too. Companies that operate large-scale production lines tend to be more profitable. One shoe manufacturer employs as many as 2,500 North Korean workers.
Q. I heard that some companies have organized a separate interest group apart from your association.
A. Latecomers could not get sufficient labor. In total, we have a labor shortage of 15,000 workers. North Korea ran out of labor. They cannot find extra workers from Kaesong city and its adjacent areas. About 200 commuter buses are operating. North Korean authorities say they are ready to provide more workers from distant areas if accommodation facilities are made available for them.
Chairman Han visits the Kaesong Industrial Complex once a month on average. He takes a highspeed KTX train from Daegu at 5:30 a.m. to pass the border control by 9:30 a.m. To return to the South he leaves Kaesong around 4 o`clock that afternoon to take a KTX train departing at 6 p.m. and arrives back to Daegu a little after 8 p.m. Despite the ideological and political differences and barriers, the isolated hermit kingdom seems not too far for those who find it necessary to visit there.
[ March 25, 2013 ]
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