The BCCK brings you a blog to share and discuss doing business in Korea. Each month our rotating blogger will provide insight into a 'micro-topic of interest', usually in relation to doing business in the Korean market. We welcome topic suggestions for future blog posts, as well as your own contributions, in order to broaden the discussion.
May 2, 2013 | Comments
It takes time for expats here to begin to understand what a good posting this place really is.
Years ago it was known as the Country Manager’s Graveyard.
On the business front it’s still seen as tough,with long hours and more involvement with corporate lawyers and labour consultants than most will experience for the rest of their careers.
If the company gets it wrong Korea can still be a graveyard ,but if they get it right Korea will often be amongst their top worldwide affiliates.
25 years ago western home comforts were definitely thin on the ground, and were usually packed in home leave suitcases, but with the remarkable growth of the Korean economy Western living is fairly easy.
Most newcomers are still wary of our Hosts, initially suspecting that they are being discriminated against and sometimes cheated.
It takes time to recognise that Koreans, excluding Union Chairmen usually give Foreigners preferential treatment in many different ways.
Looking at the other positives, the climate is excellent, the housing is usually good and the cuisine is now fully variable.
Crime against Foreigners is very low and our families can move around in full safety. Although the foreign schools are expensive they have a drug free culture.
Transport compares very favourably with the West being clean and punctual and it is certainly cheaper than back home.
The fact that the traffic light sequences are randomly variable and that high powered motorcycles can jostle you on the sidewalk seems a small price to pay for all the advantages.
August 2, 2012 | Comments
Unlike most doomsday headlines at the moment I want to ignore the short term critical questions of what will happen to the Euro and the fiscal cliff and look at demographics instead.
In the 1960’s there were 18 Koreans under the age of 20 for every one over the age of 65. By 2050 there will be 3 Koreans over 65 for every 1 under 20. Over 65’s will make up almost 40% of the population by 2050, against 20% for the US.
The fertility rate has dropped from 6 in the 1960’s to around 1 today, far below the 2.1 needed to maintain a steady population level. At the other end, life expectancy has risen from 52 years in 1960 to 79 years in 2005.
All this means the age structure has moved from a pyramid in 1960 (with many young people at the base and a few old people at the top) to a diamond shape today. By 2050 it will be an upside down pyramid. The magnitude of this change and the speed it is approaching is unprecedented. By 2050 the third youngest population in the OECD is going to become the oldest.
So can Korea defy the critics yet again and get out of another straightjacket?
Unemployment, at 3%, may not be an obvious place to start to look for the answer. However, within that number there is 8% youth unemployment. Look further and we see only 20% of young people are actually in the labour force compared to 40% OECD average. Look further again to find female participation rate of the labour force is 51% compared to 74% OECD average. Koreans also retire early, at 53 years old according to the Korea Labor Institute.
Korea has a high tech economy supported by good levels of R&D spending and an educated and increasingly creative workforce. If they can get more of the young, old and female into this workforce it will make a massive difference to the economy in the years ahead.
Easier said than done and even if it could be achieved would it be enough to diffuse the time bomb?
June 15, 2012 | Comments
Way back then in 2003 when President Roh Moo-hyeon came to power and Korea announced its intention of developing Seoul into the regional financial hub of Northeast Asia, the vision was born. However, there was a huge amount of scepticism both in Korea and abroad, about that vision ever becoming reality. So what has transpired? You will be surprised.
In an article in The Korea Times on 13th June 2007, Larry Berger of McKinsey took the view: “Significant steps have been taken by Korea in the past several years to create this financial hub, commencing with the MOFE study in 2003 followed by the establishment of the MOFE Financial Hub working committee.” (Folk who like to deep dive into the detail go here http://search.korea.net:8080/intro_korea2008/economy/pdf/02_05.pdf)
“An international financial center is being built in Yeouido and plans are being discussed to designate a part of the city center as the hub area, perhaps along Cheongye Stream. The initial plan envisions asset management as an important component of the hub and major international firms have begun to grow their asset management businesses in Seoul. Former mayor Lee Myung-bak formed the Financial Hub Advisory Committee to inform and advise him on the key initiatives required to make Seoul a successful financial hub.
Unfortunately, while important, these initiatives have been insufficient given the escalating competition in Asia and globally. The recent London ``Global Financial Centers Index'' ranked Seoul as 43rd amongst global financial centers and 9th in the Asia/Pacific Basin region.
Well the IFC in Yeouido is getting there, after the travails of the 2008/2009 financial crisis, and if the hub area “along Cheongye Stream” is meant to be the assortment of cafes and restaurants lining the roads either side of the stream, well, yes, we are nearly there. But enough of the sarcasm: its hard facts that count for you, so for consistency purposes, I will stick with Larry’s “Global Financial Centers Index” (GFCI). In fact to be completely transparent, I should declare that, in preparing for a lecture at Hanyang University the other week I undertook research on this very subject, using the last three GFCI published results. I was very surprised. In the most recent index Seoul was ranked 9th, yes 9th” globally. So it has moved up 34 places in less than five years. It has moved up two places from 11th to 9th since the last index was published six months previously. Seoul has a rating of 685. Eighth-placed Shanghai has a rating of 687 and has dropped three places since the previous index compilation. So all the signals are that by the time the next index is published, Seoul will likely have moved-up to lucky 8th place. Indeed with Chicago in 7th place on 688, Zurich in 6th place on 689 and Tokyo in 5th on 693, if the trend of the last three published indexes remains, Seoul very soon could be ranked 5th behind London, New York, Hong Kong and Singapore. Obviously something right is happening. Us Seoulites are too busy to see it and stick to the mantra, “Seoul, the hub of North East Asia, you must be kidding.” But in fact investors like markets that are liquid and even though in Korea foreign investors need to seek approval to obtain an Investor Registration Certificate and the won is a non-convertible currency, once that approval is secured the Korea Exchange, the central securities depository, the KSD and the four major international regional banks involved in Custody and Clearing, offer a combined service second to none. Korea is a market you can get in and out of very quickly. Investors love that. The price-earnings ratio of the market is very attractive with the “Korea Discount” still in force, but to a lesser amount these days, as compensation for generally inferior corporate governance with too much cross-holding of shares allowed. Dividends are good.
We are coming to the end of the current Presidential term. It will be interesting to see if the new President and his/her administration carry-on with the vision of Seoul becoming a (not the) financial hub of North East Asia. Probably best not to and just let it happen and accept the platitudes.