food-tradeoff

Safety At All Costs?

Starting with the Sewol accident a year ago, there have been many accidents that have occurred in Korea in the past year.

For one thing, there have been a couple of subway accidents. There was also an accident in a K-pop concert where sixteen people lost their lives. There were also a string of accidents at Hyundai in the past year. And of course, there has been the seemingly increasing number of sinkholes around Lotte Tower. Of course, there are many more examples that I could not list all of them here.

With each new accident reported in the news, there is plenty of hand-wringing in the news media. For instance, this op-ed from The Korea Times claimed “incompetence, irresponsibility and a lack of safety awareness” can be blamed for the Sewol accident. The earlier article about the subway accidents blamed outsourcing of safety inspections.

I am sure that those same culprits can be blamed for almost every other accident that occurs in Korea.

There are a lot more examples of hand-wringing that can be found on social media where the chastising is more sarcastic.

Of course, corporations have been blamed for the accidents, also. Specifically, many people have blamed businesses’ “ppali ppali culture” as well as “businesses that put money and profits ahead of human lives and safety.”

However, what none of these moirologists ever specifies is how much fewer accidents there have to be for them to be satisfied. Must the number of accidents be halved, or at least reduced by a third? How much should businesses spend on safety precautions before they are satisfied that businesses are not putting profits ahead of people? Or will they not be satisfied until there isn’t a single accident that ever occurs anywhere within Korea’s borders, including its maritime borders?

More importantly, do people truly believe that Koreans really lack safety awareness? If they do truly believe that, then I have to wonder just how arrogant and self-righteous one has to be to actually think that to be true.

It is true that we do not often think of our own mortality. Can you imagine if each person in the world actually spent a significant amount of time thinking about their own inevitable ends each day?

So we choose to put the Grim Reaper at the back of our minds and until that fateful day comes, we continue to choose to live because we must. And while we live, we have to make choices. And sometimes, those choices come down to choosing between safety and convenience.

Despite all the moralizing and hand-wringing that people take part in, the fact of the matter is that safety does not always trump convenience. If it did, no one would ever do anything. Jaywalking, eating food sold by a street vendor, climbing a mountain, swimming in a lake, getting inside a taxi cab – each of those things carries certain amounts of risk.

At every waking moment, each of us has to make trade-offs. Do we sacrifice some safety to get more convenience, or do we sacrifice some convenience to get more safety?

However, those are private choices that each of us has to make for our own selves. And no one should presume that their preferred balance between safety and convenience is or ought to be the preferred balance for everyone else.

But what about those children who died on that ferry? They didn’t choose to put their lives in danger. There was no trade-off between safety and convenience. They implicitly trusted that the ferry they boarded was going to be safe. The ship’s captain, some of the crew, Chonghaejin Marine Company, and the coast guard failed them all.

That is, indeed, true. When it comes to third-parties who suffer from the choices that others have made for them, there is no satisfying answer. There is no “gotcha” argument or a clever turn of phrase that people can give that will satisfy everyone. The best that we can say is that better decision-making ought to be practiced and incentivized.

However, we must never kid ourselves and delude ourselves into believing that human life is somehow priceless. The truth of the matter is that no human life is worth an infinite value. Life is all about trade-offs. And at the end of the day, we have to decide how much money, how much comfort, or how much anything we are willing to sacrifice to save one additional life.

For example, if there were a way to make sure that no ferry would ever sink again, but it would cost a billion dollars to do it, would anyone actually spend a billion dollars on each ferry to ensure such an outcome? No, no one would do such a thing. Such a decision would soak up resources that are needed for other things.

If not a billion dollars, then how about a hundred thousand dollars? Or a thousand dollars? No one can answer this question and say that it ought to be the same answer that everyone else ought to give.

Contemptible as it may be, economic factors have to be taken into account and we must remember that economic factors set a limit on what is feasible to do. It is easy to say that no amount of money should ever be valued more than the life of another human being. It sounds nice, but, like most rhetoric, it is empty of thought. Moral intuitions, even the most well-intended kinds, can lead people astray; and it is absolutely necessary to subject moral judgments to a reality check.

Abandon Ship 1

Captain Abandons Ship

One year ago today, April 16, 2014, and caught with his pants down, a Captain cowardly and scurrilously abandoned ship rather than face his responsibilities to his constituency.  He has since been tried, vilified, found guilty (in both legal court and court of public opinion), and sentenced for likely the remainder of his natural life to prison.   His name is now forgotten; his heinous reputation lives on.

Today, April 16, 2015, we commemorate the incident and the victims of the Sewol Ferry tragedy.  Park Geun-hye, her ship of state perilously listing amid bribery scandals that reach to the highest levels of her administration and threatening to sink her presidency, is embarking on a scheduled 12-day tour of four South American countries.  The timing of PGH’s trip and its minor importance have raised eyebrows.

On April 14, Blue House Foreign Affairs and National Security Secretary Ju Cheol-gi  offered a  media brief detailing PGH’s schedule and the significance of the tour.  “Central and South America are a land of opportunity, a place where we can reveal the potential for exchange and cooperation in diverse areas – including ICT, electronic government, nuclear power, and large-scale infrastructure – based on the cultural affinity created by the spread of Hallyu [the Korean Wave],”

According to the Hankyoreh’s unnamed sources, “there were also objections inside the Blue House to the timing of the trip, but no one came forward to officially call it into question.”  Playing the Get Out of Jail Free, papal dispensation, American Express Black, uber-trumper of all trumps, economy card, Ju deflected arguments that Park’s trip should be delayed out of respect for the Sewol sinking anniversary and amid the Sung Wan-jong/Prime Minister bribery scandal:  “There is no good reason to delay the trip, and it must go forward as planned. We have to create opportunities to help the economy, and ethnic Koreans in Central and South America are looking forward to the trip, so we will do what needs to be done.”

A year ago, people called the Sewol sinking Korea’s 9/11.  It wasn’t.  The similarities stop with what both represented to Americans’ and Koreans’ collective consciousness.  Even there, the Sewol tragedy falls short.  I can’t imagine the American president failing to adequately commemorate an occasion of such searing, binding pain in his people’s psyche …while scheduling an optional overseas trip …on the incident’s first anniversary …excusing himself citing money.

President Park’s trip comes amid the choking smoke engulfing her Prime Minister, her deputy for government affairs.  Korea is a less than one generation out of military dictatorship by coup and self-coup nascent democracy in a country without a culture or history of democracy, and the President’s spokesman sees “no good reason to delay the trip”?  As an expat living in Korea, I don’t know whether to take comfort in the President’s confidence or cover for her incognizance.  Regardless, the President’s overseas trip feels wrong.

…and no, the thought of the photo of the Sewol Captain abandoning ship serving as a visual metaphor for Park Geun-hye’s trip never entered my mind, and I am not incredulous that no Korean political cartoonist has drawn or photoshopped PGH’s head onto this piece’s featured image.

Are Koreans really unhappy? And what should be done about it?

How happy or unhappy are Koreans? The answer seems to depend on whom you’re asking.

According to this Gallup poll, Koreans rank 118th place out of a total of 143 countries. In this poll, Koreans are ranked as being as unhappy as Palestinians and even unhappier than the Iraqis. If the Iraqis weren’t so busy trying to get out of ISIS’ way, I think it is possible that they might post a series of “first world problem” memes to mock Koreans.

However, it is not all doom and gloom for Koreans. That is because according to this poll from Bloomberg, Koreans are the fourth happiest people in the world – far happier than Americans, the people whom Tocqueville praised for their optimism.

So why the discrepancy?

It has to do with the fact that “happiness” is a vague and complex concept, which means something different to different people. After all, how many of us can truly define what happiness is; which we can all universally agree to be correct? Even if happiness could be defined in such a way that everyone in the world could agree with the definition, how does anyone measure a qualitative concept? Quantifying a subjective opinion, which could be based on numerous factors such as affluence, culture, mood, psychological conditions, the weather, etc., is impossible. Therefore, it is no surprise that when researchers attempt to define and measure happiness in order to generate something that resembles meaningful data, the results are wildly different.

As such, pursuing government policies that are meant to increase happiness levels could lead to outcomes that could make people even less happy than they were before.

So, how would the government go about to improve happiness? Raising tariffs on rice might make the rice farmers happy, but what about the consumers who will not have the opportunity to buy cheaper rice? It could lead to happiness for some, but less for others. In fact, people tend to get quite a bit upset if there is even a hint that the government is helping some people become happier while it neglects others.

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As happiness is such a subjective concept, when policymakers try to improve people’s happiness, even if they have the purest intentions, as per human nature, they will naturally pursue policies based on their own idea about what makes people happy as opposed to what people actually care about. Which defeats the whole purpose of measuring happiness.

So, if the government cannot directly affect people’s happiness, at least not in a positive way, then what is the alternative? In my opinion, what the government should focus on is pursuing reforms that allow people the greatest freedom to pursue whatever makes them happy.

That way, the government would be able to deal with other pressing matters, such as national security, while leaving the pursuit of happiness to the people. After all, who knows better than the people themselves about what makes them happy?

South Korea Is To Join the AIIB

Though certain people thought I was “alarmist” in describing the earlier visit of Chinese President Xi and the PRC’s efforts to engage South Korea in the Asian Infrastructure Investment Bank (AIIB), South Korea has announced their intention to join the Chinese-lead bank. (link)

Supposedly Seoul has asked for improvement in the governing structure of the bank and other safeguards, which has been done.

Currently both Australia and Japan are considering whether or not to join as well.

The Economist on Korea’s Changing Economic Nationalism, but Lee Hyori is Doing Her Part!

Don’t often get long articles on South Korea in The Economist, but apparently tomorrow (the article is strangely dated into the future: January 17th) they will publish an article about Korean economic nationalism.  Yes, good old fashion economic nationalism!  Everybody has it, but Korea’s version seems to be a bit more, how shall we say?  Focused, aggressive and pervasive?  Yeah, that will work.

When South Korean celebrities, eager to prove their patriotism, swapped their German BMW cars for home-grown Hyundais on television, during the Asian financial crisis in 1998, they rallied the whole nation behind domestic products. To wean South Koreans off their Coke and Pepsi, a local firm launched “815 cola”, commemorating Korean liberation from Japan on August 15th 1945.

[…]

However, such appeals to patriotism seem to have run their course, and South Koreans have rediscovered their fascination for all things foreign. What has prompted them to rethink is a growing awareness of how much more they pay for things than foreigners do—and not just because of high tariffs—and how easy it has become to import cheap stuff.

[…]

Among the first signs that patriotic propaganda was losing its effectiveness came in 2009, when Apple launched the iPhone in South Korea. Samsung fought back by promoting its Omnia 2 mobile as “the pride of South Korea” and local media weighed in with negative reviews of its American rival. Yet Apple went on to seize a quarter of the country’s smartphone sales in one year. More recently, a petition by local grocers last March, calling for a boycott of popular Japanese-branded products, such as beer and cigarettes, flopped.

Yes, but economic nationalism is not dead!

The beautiful Lee Hyori (God bless her heart!) on Twitter said that if Ssangyong rehires all the workers they laid off in 2009, then she will star in a Ssangyong commercial promoting the Tivoli crossover, dancing in a bikini!

Lee Hyori- beautiful AND generous!

Unfortunately, Ssangyong showed their poor sense of aesthetic and business acumen by declining Hyori’s offer.

Personally?  I admire Hyori’s sense of community activism and civic virtue, whether or not it’s to promote Korean beef, or raise awareness for abandoned petsfeeding the poor or finding attractive mates for ugly Korean men.

Photo from Soompi.com.

 

South Korea to sell K-9 Thunder chassis to Poland

Announced earlier last month, but not seen until it was mentioned in Dave Axe‘s excellent War is Boring blog, South Korea and Poland just inked a deal to sell 120 K-9 Thunder chassis (and accompanying technology) worth $320 million USD.

(K-9 Thunder)

With the Ukraine getting sliced up by Russia like the proverbial holiday turkey, and with Poland essentially NATO’s eastern firewall with Russia, they have been beefing up on its defense procurement and expenditures.  Self propelled artillery is key in Poland’s defense plans and the K-9’s chassis (and perhaps other engine and transmission technology also?) will be incorporated to build a chimera product of sorts.  Poland’s self propelled artillery solution will be called the AHS Krab and will incorporate a K-9 chassis, with a British turret, a German Rheinmetall gun barrel and a Polish fire control system called “Topaz.”

(AHS Krab)

This deal represents the second export of K-9 components and technology, the first to Turkey in 2004.  Turkey has named their K-9 variant the T-155 Fırtına and it has been involved in pounding Kurdish-held territory and Syrian positions.

Probably another story for another time, but this deal represents the increasing size of South Korea’s arms exports, which hit a record high of $3.6 billion USD in 2014.

Photos from Wikimedia Commons.

Get Out of Jail Free

Pardon moi? (redux)

Pardon me for resurrecting a prior post.

Voices for imprisoned conglomerate owners’ paroles and even pardons are gaining volume in Park Geun-hye’s ministries.  Floating pardons over a long yuletide weekend, the Blue House seems to be taking a page from the White House’s old play book.

On Christmas Eve, ruling Saenuri Party leader Kim Moo-sung argued for paroles and even special pardons for businessmen behind bars. “As the nation’s economy is struggling, those who need to work should work. Investment is impossible without the owner’s decision,” Kim said.

The day after Christmas, Floor Leader Lee Wan-koo banged the parole drum. “If the government requests discussions about conditional release of business people, we can consult with the main opposition party.”  Party spokesman Park Dae-chul gave an official statement:  “The role of entrepreneurs is important in order for Korea to revive the economy that remains in the doldrums. We urge the government to deeply agonize over the issue given the two criteria of economy and law.”

Cheong Wa Dae spokesman Min Kyung-wook told reporters that he did not know whether the president’s office was considering granting parole to businessmen, adding the Justice Ministry, not Cheong Wa Dae, is the authority on the matter: “Entrepreneurial parole is the justice minister’s own right.

The Joongang Ilbo added, “although the Blue House did not officially endorse granting parole for the convicted executives”, deference to the Justice Ministry could be “interpreted as its tacit recognition of the need to allow company heads more leniency in the legal system.”  In an opinion piece, the Joongang Ilbo went so far as to say “the minister’s comments could well translate into his de facto consent.”

Those eligible for parole include SK Group Chairman Chey Tae-won and his younger brother Jae-won.  The older Chey has served 23 months of his four-year sentence for embezzling tens of billions of won of his company’s money.  LIG Group Chairman Koo Bong-sang is also eligible for parole, having served 26 months of his four-year sentence for defrauding 215 billion won ($198 million) from investors.

Serving less than one-third of their terms, other imprisoned chaebol leaders are ineligible for parole; a presidential pardon is their only opt out of prison. A rouges’ gallery sampling includes the following:

  • CJ Group Chairman Lee Jae-hyun –  Sentenced in September to a three-year prison term for embezzlement, breach of trust, and tax evasion totaling 165.7 billion won (US$159.5 million). Having served only four months, Lee has been granted temporary medical parole to remain in the hospital for treatment following a kidney transplant.
  • Taekwang Group Chairman Lee Ho-jin – Sentenced to 4 1/2 years for embezzlement and breach of trust.  Having served 63 days behind bars, Lee has been hospitalized for two years and waiting for a liver transplant.
  • Former STX Group Chairman Kang Duk-soo – Sentenced in October to six years for cooking the company’s books for 584.1 billion won ($556.2 million) and embezzlement (67.9 billion won).  To his credit, “the figures were much smaller than the charges raised by the prosecution, which had claimed Kang’s accounting fraud and embezzlement reached 2.3 trillion won and 340 billion won, respectively.”
  • Tongyang Group Chairman Hyun Jae-hyun -Sentenced in October to 12 years in prison for fraud.  Hyun ordered Tong Yang affiliates to issue 1.3 trillion won (US$1.2 billion) worth of virtually worthless corporate bonds and commercial paper. “The business tycoon systematically covered up the companies’ troubled finances by asking media to delete or tone down articles questioning their financial health,” the court added.

All news stories and opinion pieces seemed to omit that the heads of Korea’s ministries are appointed, not elected, and Korea’s is not a coalition government.  The Justice Minister, appointed by PGH, serves at the President’s pleasure and carries out the President’s policies.  If Chung Wa Dae were against granting paroles, all speculation would end with a simple no.

Complicating the Justice Ministry’s plans for paroles and pardons are candidate Park Geun-hye’s own words (“There will be no special pardons of tycoons“) and the recent nut-rage incident, which brought to the surface Koreans’ long suffering and ever broiling sense of Korean chaebols’ families’ perceived entitlement and privilege.

These handful of minority, though perhaps plurality, shareholders have successfully held their companies and other shareholders hostage and hoodwinked the Korean government and media into thinking that the whole of the Korean economy depends on their captaining of their companies …which they embezzled from and defrauded …which is the reason they are in prison.  The Joongang Ilbo opined against a “quid pro quo”, that “the government must not grant them parole in exchange for promises to increase investments. It should be a matter of principles, not a business transaction.”  Under what principle should an embezzler of nearly $200 million dollars be paroled from serving his four year sentence?

All this makes me wonder how Apple would fare if Steve Jobs were to die or what Microsoft would do if Bill Gates retired to pursue philanthropy.  Given Korea’s dependence on Samsung, the real elephant in the economy, what would happen if Lee Kun-hee suffered an incapacitating heart attack?

I handicap the paroles and perhaps some pardons happening between Korea’s New Years:  sometime after solar New Year, sometime before March 1, and with a probability density centered around Seollal.

Pardon my French, but ce qui la baise?

To THAAD or not to THAAD? That is Korea’s question.

What is THAAD?  It stands for Terminal High Altitude Area Defense and it’s essentially a province/state, small country-wide anti-ballistic missile defense system.  It apparently has a range of 2,000 kilometers and the U.S. is offering it to both Japan and South Korea.  So what?  Well, the Chinese don’t like it.

(Image from JoongAng Ilbo)

Although the U.S. says it’s to protect South Korea and Japan against possible missile attack from North Korea, the pure raw capabilities of the THAAD system would indicate that the defensive target isn’t just North Korea.  The long-range THAAD missiles, along with their powerful X-Band radars, if deployed in both South Korea and Japan, offers a multilayered anti-ballistic missile defense that could theoretically render a sizable chunk of China’s ballistic missile arsenal obsolete.

Earlier this year the U.S. delivered the enormous X-Band radar that helps power the THAAD, to Kyoto, Japan and the PRC was not pleased.

The spokeswoman for the Chinese foreign ministry, Hua Chunying, said “the deployment of anti-missile systems in the Asia-Pacific and seeking unilateral security is not beneficial” to regional security. In an apparent reference to the Washington’s often quoted excuse of protecting against North Korean antagonism, Hu said the deployment should not be an “excuse to harm the security interests of other countries.”

The Chinese have given rather ominous warnings to South Korea not to adopt THAAD:

China has told South Korea that joining the U.S. missile defense system would cross a “red line” in their bilateral relationship.

And the PRC’s ambassador to South Korea Qiu Guohong:

“The THAAD would have a range of around 2,000 kilometers, which goes beyond the goal of countering missiles from North Korea,”

[…]

“The deployment of the THAAD will badly influence the relations between South Korea and China … It would harm China’s security system,”

Cross a “red line?”  Badly “influence” relations?  Uh, oh.  That doesn’t sound good.  South Korea, for their part, says they are not interested in THAAD because they are apparently developing their own anti-ballistic weapons system.

In Oct., 2013, South Korean Defense Minister Kim Kwan-jin said South Korea would “definitely not join the U.S. missile defense system,” citing the associated costs and plans to develop South Korea’s own, similar system.

And that would be the so-called KAMD (“Korean Anti Missile Defense“) system, a mix of  Patriot  PAC-3 missiles, SM-6 and perhaps SM-3 missiles,  guided by the Israeli Green Pine radar.  There is also an apparent “indigenous” Korean anti-ballistic missile in the works, which may be similar to an Israeli Arrow type missile.

Publicly, this has been what the Korean government has said about why they may not adopt THAAD, but some Koreans are taking China’s tough talk seriously.  One of Korea’s most popular best selling authors, Kim Jin-myung, suspended all this other projects to rush and write a new novel titled “THAAD.”  According to Kim:

If it accepts the U.S. calls to deploy the anti-ballistic missile system here, he predicts, this will cost the country its No. 1 trading partner. China remains suspicious of the U.S. motive to deploy THAAD on the Korean Peninsula because it will nullify its ballistic missile system.

[China] reportedly believes that the United States seeks to encircle it.

If South Korea rejects the U.S. calls, Kim claims, it will not only lose its closest ally but also may face a catastrophic circumstance — a war on the peninsula.

A “war on the peninsula?”  A bit of hyperbole IMHO, but Kim Jin-myung says he’s not going to take a side in his novel.  He just believes there should be public discourse and concensus before the Korean government makes a decision on THAAD.

South Korea’s traditional ally the U.S. or China?  Not saying the choice is between the two here, but the choice for South Korea is getting increasingly more complex, especially in light of China’s growing economic power and influence.

(Graphic from the WSJ).

NOTE

Russia doesn’t like THAAD in Korea either.

 

Apple cannot cure itself of its Samsung addiction

If one is to believe “a source familiar with the deal” from Korea Times, then yes.  It was announced recently that Apple and Samsung had signed a huge chip manufacturing deal for Samsung to fabricate 80% of all of Apple’s application processors (“AP” chips) by 2016.

“Apple has designated Samsung as the primary supplier of its next A-series chips powering iOS devices from 2016 as the alliance with GlobalFoundries (GF) enabled Samsung to cut off capacity risk,” a source familiar with the deal said.

It was speculated earlier this year that Apple would primarily drop Samusung as an AP chip supplier:

TSMC was expected to handle up to 70 percent of the manufacturing load, while Samsung would pick up the rest. Production problems may, however, have resulted in Samsung being removed completely from the A8 supply chain.

Samsung “being removed completely from the [Apple] supply chain” has been a fervent wish by many Apple fans since at least 2010, when they started to compete directly in smart phones.  Invariability, every year since 2010 there is always some rumor that Apple is going to drop Samsung  as a major AP chip supplier and every time that rumor ends up being false.

Part of the issue is that it is very hard to make a lot of complex chips quickly, efficiently and with very little defect rate.  Initial capital expenditures and investments are prohibitive as well.  For those type of manufacturers you have pretty much only four games in town: 1) Samsung 2) Taiwan Semiconductor (“TSMC”) 3) Globalfoundries and 4) Intel.  Of the aforementioned, Intel has very little experience in mass fabricating smart phone AP chips.  Samsung and Globalfoundries appeared to have foreseen the threat of TSMC and had thus gotten into a strategic partnership in April of this year.  This relationship seems to have paid big dividends for both companies.

MarketInsider also has interesting information on why Samsung is in a superior position:

TSMC will ramp up production of chips using 16-nnometer FinFET technology. Samsung’s technology is better in terms of efficiency and energy consumption…. Bernstein Research in a note to clients. IM Investment, a local brokerage, expects Samsung to win more orders to fabricate customized chips from Qualcomm, Nvidia and Sony, helping it generate more revenue to make up for its struggling smartphone business.

On the flip side, this would appear as if Apple is throwing Samsung a lifeline while its profitability is declining.  AP chip fabrication is difficult, but higher margin and as such is known to be among the most profitable of chip manufacturing jobs.

The Korean government’s $500 billion tax-free reunification plan

No, weed is not yet legal in Korea and yes, you heard correctly.  Tax-free.

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(Image from Abihollow via iamkoream.com)

According to Korea’s top financial regulator, Shin Je-yoon, Chairman of the Financial Services Commission (“FSC”), it will take 20 years and $500 billion USD to satisfactorily integrate North Korea into the south.  Now, this won’t be a perfect one-to-one integration mind you, but an attempt to get the north up to a level where it can operate at some workable and complimentary level with the south.

FSC’s blueprint added that the estimated sum would be sufficient to increase North Korea’s gross domestic product (GDP) per capita from last year’s $1,251 to $10,000 in 20 years. North Korea’s current GDP total of $31 billion is equivalent to South Korea’s 1971 GDP and just 2 percent of its GDP from last year.

Okay, if not taxes, then where would all the money come from?

According to Yonhap:

The FSC said state-run policy financing agencies, including the Korea Development Bank (KDB) and Korea Exim Bank, will play a major role in raising the funds, as Germany’s government-owned development bank, or the KfW, did 24 years ago.

The state agencies will take responsibility for up to 60 percent of the total expenses by running development projects in North Korea, while the rest will be raised by collecting overseas development aid (ODA) and private and public investments.

The Hani was a little more detailed:

In order to raise these funds, the government proposes to have public financial institutions find between US$250 billion and US$300 billion, 50% to 60% of the total, and to allow the private sector to invest between US$107.2 billion and US$186.5 billion in special economic zones and projects with guaranteed profitability.

The government also predicts that it can put US$100 billion of the US$330 billion in tax revenues it collects during the economic development of North Korea to use as funds for further development. These figures were calculated using the South Korean tax rate of 26%, under the assumption that North Korea will experience an average of 8% yearly growth during the first decade of development and 10% of yearly growth during the second decade. In addition, the government believes that it can secure US$17 billion of funding through overseas development aid (ODA) from other countries.

I don’t know.  Sounds a little voodoo to me and it assumes that people would want to invest in the north and that the north’s population would be stable and productive enough to draw some tax revenue to cover the spread.  Still, $250-300 billion is a lot of debt to raise and plunge into the 1960’s era relic that is today’s North Korea.

It must be said that the $500 billion estimate is at an overly optimistic the lower end of a range of assessments.  The upper range being $5 trillion.

Hyundai and Kia to pay U.S. EPA fines for bogus fuel efficiency claims

Back when the Hyundai Sonata (6th generation) and Kia Optima (3rd generation) came out in around 2010 in the U.S. both Hyundai and Kia claimed miles per gallons “EPA” estimates of 35 mpg on the highway.  They ended up being about 8% wrong.  The actual EPA mpg estimates should have been 33.

Both Hyundai and Kia did try to make amends by giving their customers a gas card credit, however the EPA just handed the two Korean car companies a fine of $100 million, forfeiture of $200 million in greenhouse gas emissions credits they didn’t rightfully earn and mandated that they spend $50 million on measures to prevent future violations.  The total of $350 million in fines sounds like a light tap on the wrist monetarily, but does have the auspicious distinction of being the largest such fine in EPA history.

To be fair other car companies have been shown to fudge their EPA estimates, but Hyundai/Kia’s discretion is over a longer list of cars affected and non-hybrids as well.

Hyundai denies any wrong doing and claimed that:

… test engineers in Korea made ”an honest mistake” due to a “procedural error”

Kim Young-ha at the NYT: Getting ready for a Korea without Samsung

Although I briefly mentioned in my last post that Samsung’s Chairman Lee Kun-hee had suffered a heart attack, over at the NYT Kim Young-ha says that there  are apparent rumors that he’s dead or near death:

On May 10, the chairman of the Samsung Group, Lee Kun-hee, had a heart attack and stopped breathing. He was resuscitated at the hospital but remained in a coma for more than two weeks. As the country waited for information about his condition, rumors ran rampant. One of the most widely circulated was that Mr. Lee, 72, had already died and Samsung was covering it up.

Samsung announced last week that Mr. Lee had stirred. One story goes that the chairman opened his eyes for a moment just when Lee Seung-Yeop, a Samsung Lions’ slugger, hit a home run.

Personally, I think Lee Kun-hee is still alive as they don’t build elevators in your house for dead men.  However, the man responsible for much of Samsung’s meteoric growth over the last three decades will eventually die.  Probably sooner rather than later.  Currently, it sounds like his cardiac and pulmonary system is being held together with duct tape and chewing gum.

With the tycoon ailing and with his crown jewel, Samsung Electronics, sucking wind from competition with the Chinese and Apple, the talk is if Korea is ready for a future without Samsung.

As Samsung prepares for its post-Lee Kun-hee future, South Korea needs to prepare for a post-Samsung future. Just like any other company, Samsung can fail, and if that happens, how will the South Korean economy overcome the shock? If we don’t decrease our over-reliance on the chaebols and prepare to let smaller, dynamic start-ups fill the gaps in their place, it won’t.

Related

The WaPo talks about Samsung’s “Imperial” succession plans to the third generation (HT to DLBarch).

Pardon moi?

Citing the downturn in the Korean economy, members of Park Geun-hye’s ministries have floated the possibility of special pardons to conglomerate owners and family members in prison on convictions of economic crimes such as embezzlement, breach of trust, and incurring losses to their companies.

On September 24, Justice Minister Hwang Kyo-ahn hinted at the possibility of releasing or pardoning imprisoned businessmen by rhetorically asking, “Couldn’t they be given a chance if a national consensus is formed?”, and on September 25,  Deputy Prime Minister for Economy Choi Kyung-hwan supported  Hwang’s position:  “Punishing businessmen with excessively stringent penalties is no help when it comes to economic recovery.”

Candidate Park Geun-hye campaigned on a promise that President Park Geun-hye would have zero-tolerance for chaebol chiefs’ crimes.  Hwang had previously reiterated PGH’s stance for strict application of law regarding business irregularities, and a special amnesty in January did not include businessmen involved in financial crimes:  “The Justice Ministry last year declared that those in leadership positions in society and high-ranking government officials will not be given parole, as a matter of principle. It was in that spirit of nontolerance that Park Yeon-cha, former chairman of Taekwang, was denied parole even after approval was granted by the parole board.”

Chaebol Prisons Sentences

Now two high ranking members of PGH’s ministries have publicly voiced statements for some tolerance.  Given PGH’s bloodlines, Korea’s hierarchical culture, and PGH’s reputed imperial presidency, any remaining doubt whether PGH herself tested the proposal should be dispelled by Cheong Wa Dae’s failure to rebuke, deny, or distance itself from the proposal.  More so, two officials from two separate ministries making two such statements on two consecutive days feels like a toe in the water approach to ease the cold shock of an inevitable plunge.

The one positive, real difference that I had seen in PGH’s presidency was her stance on chaebol chiefs’ misconduct and the signal that got sent to Korea’s subculture of corruption.   Cheong Wa Dae’s seeking economic salvation from criminals convicted of accounting fraud, tax evasion, and embezzlement seems like bringing back the fox to shape up the hen house.

Pardon me, but are convicted criminals truly the best Korea can do?

MBC says Korean Tourism is “Shameful.”

The blog koreaBANG comes out with some good stuff every now and then.  Added bonus?  They translate some Korean reader comments into English.  Yesterday they outlined MBC’s exposé on how some tourists (namely from that country just across the Yellow Sea) were being “taken for a ride” and how it could be damaging Korea’s long-term reputation as a tourist destination.

Korean tourism has made great strides over the past ten years, from 4.8 million tourists (or “number of arrivals”) in 2003 to 12.2 million in 2013.  However, despite the growth, there is some evidence that Korea may not be getting a lot of value from the increased numbers.  Part of it is structural (i.e. lower income of Chines visitors vis-à-vis Japanese tourists, the rising value of the won, etc.), however, some of it may be due to unscrupulous Korean merchants.  According to the MBC report a lot of tourists are getting scammed, leaving a bad taste in tourists’ mouths and threatening Korea’s long-term tourism growth:

However, Korea may not be drawing as much value from their tourist numbers than they perhaps should.  According to the MBC report a lot of tourists are getting scammed, leaving a bad taste

The shop owner: “This jacket is 120,000 won. The price is so cheap compared to its high quality.” The Chinese man paid about 210,000 won for 3 pieces of clothing.

The journalist tried buying the same clothes in the same shop.

(Journalist: “How much is it?”)
Shop owner: “You can take it for 55,000 won, if you pay cash.” When the journalist bought the same clothes that the Chinese man did, the price was about 100,000 won cheaper.

[…]

… Police investigated a Korean restaurant for Chinese tourists only, qualified as an outstanding restaurant by Tourism Board Organization. In the kitchen they found food that had passed the expiration date, and even leftovers that had been stored in the freezer.

Police: “3 years has passed (since the expiration date), 3 years.”

The same problem is occurring with accommodations. Among 70% with quality credentials have been reported for not meeting the requirements of a quality guarantee. Organizations awarding these credentials can also not be trusted…

The government has decided to loosen many regulations in order to raise the number of foreign tourists to 20 million by 2017. However, people point out that the government should combine all the quality assurance systems into one, and run it well.

So, there could be some long-term issues with Korean tourism and greater infrastructure integrity needs to be maintained while the industry continues to grow.  So, who has Korea decided to have helm the ship in these challenging waters?  Well, one important appointee is a former actor named Johnny Yune.  Ah, Johnny.  A very colorful guy who’s Korean-American (i.e. he’s got a U.S. passport), got his big break when he appeared on The Tonight Show Starring Johnny Carson in the 1980s and starred in the comedy movie “They Call Me Bruce?” (a surprising hit movie making almost $17M in only 325 screens in 1982).  He also had his own talk show on some UHF channel called “The Johnny Yune Show.”  Wow, can’t make this stuff up!  Well, there’s always a chance that Johnny will pull a Reagan (another former actor) and perform better than expected.

A couple more interesting Korean tourism factoids:

  • Russians apparently spend a lot of money in Korea while they are visiting.  Apparently for “medical tourism” (yes, plastic surgery is counted in those “medical tourism” numbers).
  • As far as Korea’s tourism has come, its overall size is still small compared to the rest of the OECD. Korea’s direct tourism industry accounts for about 2% of the GDP, whereas the OECD’s average is 4.7%.  However, that isn’t the median (which is probably somewhere around 3.8 to 4.0%).  The outlier Greece has skewed the average a bit with its whopping 16% of GDP.  Wow, they sure are getting all they can out of some warm weather and some ancient ruins.