The Marmot's Hole

Korea... in Blog Format

Category: Korean Economy (page 2 of 29)

A different kind of Chinese invasion

Tourists and RMB.  Yep, Korea is becoming awash in both.  Quartz article sums it up nicely:

Chinese tourists are heading to South Korea more than any other destination this year, according to travel agency Ctrip. That’s because political instability has turned many off Thailand, and China’s ties with South Korea have been warming.

Invasion central?  Jejudo.

But most of all there is the undeniable appeal of JejuThe resort island off the South Korean coast is drawing Chinese tourists with its subtropical climate, visa-free status, and attractions like casinos and an erotic-sculpture theme park known as Loveland.

[…]

In 2013, almost four million mainland Chinese tourists visited South Korea, and 1.8 million of them went to Jeju…If Ctrip’s predictions are correct, the number of mainland tourists visiting South Korea will rise to 5.6 million this year—equal to over 10% of South Korea’s population.

Chinese tourism for 2014 may equal 10% of the ROK’s population?  Holy cow!

 

A New Era in Korea – Minus the American Influence

President Xi of the People’s Republic of China, and a large entourage of Chinese businessmen (Alibaba, Baidu), are currently visiting South Korea. The PRC is hoping for improved business ties but this time, there is, IMHO, the possibility of a sea change on the Korean peninsula.

Why and how?

China wants to change that status quo – they want to do so through money and through a redefinition of regional security – without American influence.

First, in business, China is proposing the foundation of a $50 billion “Asian Infrastructure Investment Bank”, first proposed by President Xi in October 2013, during a tour of Southeast Asia. This bank would have the PRC holding a fifty-percent stake in this bank and has hinted at benefits to those nations that participate and Xi’s visit to Seoul, currently under way is very much about the benefits to South Korea. (we will get to what South Korea might actually want from joining this venture shortly). South Korea has expressed an intent to become an offshore trading centre in Chinese currency (renminbi) and this current meeting is expected to address this as well.
For South Korea, this is useful and important since South Korea’s two-way trade with China was $229 billion last year, exceeding the combined value of South Korea’s trade with the U.S. and Japan. Xi told reporters after the 2013 summit that the two countries will strive to boost their trade to top $300 billion (cite). This trade has been hampered by the fact that both countries transactions have been based in US Dollars (because the Yuan and Won are not directly traded) which costs more and reflects the indirect influence of things American in Asia. A statement from South Korea’s finance ministry and central bank said the South Korean won will become directly exchangeable with the yuan, joining major currencies such as the U.S. dollar, Japanese yen and euro that are convertible with the Chinese currency. The decision also makes the yuan only the second currency after the U.S. dollar that is directly convertible with the won. (cite)
China has also given consent to South Korea’s investment of tens of billions of yuan (billions of USD) in Chinese bonds and stocks. The PRC Government is encouraging businesses to invest in Korea as well. Chinese investors are highly interested in cultural content, software and real estate development, thus would explain the drive by the Korean side to have Chinese investment in the so far failed Saemangeum Project (cite) or the attempt at luring Chinese investment in the Yeosu – Dadohae Haesang National Park area, as well as some yet to be announced projects.

There is also the issue of the recent Conference on Interaction and Confidence Building Measures in Asia (CICA) and the PRCs desire to exclude powers – such as the U.S. – from regional security, suggesting an arrangement, guided by the PRC that is more than a little reminiscent of the Greater East Asia Co-Prosperity Sphere plan of Showa Japanese origin. As reported in The Diplomat:

Xi called for the creation of a “new regional security cooperation architecture.” He proposed that CICA become “a security dialogue and cooperation platform” for all of Asia, from which countries can explore the possibility of creating a regional security framework. He further indicated that China would take a leading role in exploring the creation of a “code of conduct for regional security and [an] Asian security partnership program.”
In promoting China’s vision for a new regional security framework, Xi took specific aim at the basis for the current status quo: military alliances. Xi tied such alliances to “the outdated thinking of [the] Cold War.” “We cannot just have security for one or a few countries while leaving the rest insecure,” Xi said. “A military alliance which is targeted at a third party is not conducive to common regional security.” Xi in turn offered an alternative vision for Asia, one based on an all-inclusive regional security framework rather than individual alliances with external actors like the United States.” (cite )

The real horse dealing that is not hinted at in the Korean press (which has been very quiet yet unmistakably pro-Chinese) is how will the PRC, under Xi, will resolve the issue of reunification between the two Koreas. The South Korean Government reportedly wants substantial help from Xi for making reunification a reality – in both financial aid and in the momentum that can only come from the DPRK’s only substantial supporter. Though many believe that the PRC will likely not destabilize the DPRK, if the ROK buys into the Chinese sphere of financial and political influence, rejects the American presence in the region and further guarantees their responsibility in dealing with the potential North Korean refugee problem, I honestly don’t see how a belligerent DPRK could possibly avoid change and reunification with the southern half since it would be a matter of survival to do so.

I suppose this is logical; solving Korea’s problem long-standing problem with the north and the cost of unification, while resulting in the exit of America’s influence in Korea and pushing the US further out of the region and likely gaining more support for the egregious regional claims made by the PRC. There is little America can do about this too, since the Chinese have the means to deliver the reality of unification to South Korea and whereas the U.S. can not.

Looking into a Sino-Korean future; also worrisome is the shortage of personnel to staff the larger Korean projects and the increased likelihood that more Chinese will see living and working in Korea as business ties and opportunities grow in the future. What impact this will have on Korean society remains to be seen and considering the tremendous potential influx of money into Korea, the Korea of fifty years from now will likely be a very different one from what we observe today in terms of world view and its relationship with Europe and the US.  Some may even talk about Korea as being a Chinese colony, wistfully remembering the days when their elders talked about how Korea was really an American colony.

Paris Baguette and Caffé Bene. Will they play in Peoria?

Ah, Paris Baguette.  The ubiquitous Korean bakery, with the strange name, serving Asian inspired and decidedly non-French pastries everywhere from the plush streets of Gangnam, to the shigol to even the doomed Sewol.  They, along with Caffé Bene and Tom N Toms,  are expanding into ‘Murica.  Their foray into the land of the free and the home of the brave is highlighted in this recent Fast Company article:

Three of South Korea’s biggest coffee shop chains, Paris BaguetteCaffe Bene, and Tom N Toms, have all embarked on American market expansion over the past several years….  Bene and Paris Baguette, especially, play down their Korean origins–and are planning to ramp up even more U.S. market expansion over the next two years. In a vivid example of 21st-century globalization, both chains are bringing South Korean-style customer service and corporate organization to the United States–except they are serving French- and Italian-style pastries and sandwiches instead of Korean food. 

Surprisingly, there are already 35 Paris Baguette locations and 99 Caffé Benes in the States.  Here are some boots on the ground reviews:

No word on if “A Twosome Place” (투썸플레이스) would be making the Transpacific plunge.  If they did, one would most certainly think they would have to consider a name change.

Hyundai does well in latest JD Power survey of initial quality

The annual JD Power & Associates survey of automotive initial quality places the Hyundai brand 4th, the highest non-luxury brand in the survey.

The rankings are below:

jdp-iqs-survey-1

(Photo from egmcartech.com)

Hyundai’s ranking in initial quality has gone up and down over the last decade, peaking at #4 in 2009, but spiking to has high as #25 the following year (2010).  According to this graph from the JoongAng, Hyundai’s ranking has improved for three year’s straight:

Hyundai scored number one in three product categories: small car (Accent), compact car (Elantra) and midsize premium car (Genesis).  It scored number two in two categories: midsize sedan (Sonata) and midsize SUV (Santa Fe).

Who else did well?  Kia, surprisingly at #7, ahead of BMW and gasp, Honda.  Chevy also did well at #4, welcomed news I’m sure given GM’s tough year of mass recalls and Congressional inquiries of potentially life threatening defects.  Bringing up the rear?  Fiat.  How does a car so small have so many problems?  Yes, I’m sure YangachiBastardo would be proud.

How do Koreans handle a foreign work environment?

Here at TMH we often get “colorful” commentary on what foreigners think about their Korean places of work and their bosses.  With that in mind, I’ve often wondered how the rank and file Korean felt about working in foreign owned companies and with foreign bosses.  Would Koreans be happier in a Western work setting vs. a Korean work environment?  Conventional wisdom may indicate that a Korean might be less stressed in Western work culture where there could be less emphasis on leadership hierarchy, expectation of face time, and perhaps the ability to exercise a bit more creativity and/or independence.

According to the JoongAng Daily, employment website Job Korea surveyed 942 Korean workers in both Korean and foreign owned (i.e. mostly Western) companies and government agencies with questions on their job satisfaction.  The results were not as clear as the expectations may be and point to there being a fair amount of stress and frustration for Koreans at foreign companies.

Unlike people working at Korean companies, who said their jobs caused them stress because they were concerned about their future and job stability, those employed by foreign companies said that they felt stress when senior workers gave them too much work and had unreasonably high expectations.

The survey results are ironic because many first-time job seekers consider foreign companies their top choice because of good benefits and a horizontal corporate culture.

“In Korean corporate culture, senior workers become a guardian when a junior first joins the team,” [Jung Joo-hee, a spokesperson for Job Korea] said. “Even though they nitpick or scold the juniors .?.?. the seniors have the intention to guide them to learn job tasks more efficiently and to help them become part of the team quickly.”

She explained that the absence of such guidance, which puts full responsibility for a task on a junior worker, may make Koreans feel even more pressured and isolated.

Here’s a summary of the findings:

(Source: JoongAng Ilbo)

Interesting.  Everybody got the same number 2, however foreigner bosses appear to be piling it on more than the others (32.1% vs. 28.9%, 28.7% and 27.4%).  Relationship ambiguity with their foreign seniors also appears to be scaring the crap out of Koreans.

And then there’s Samsung

If you haven’t read it yet, Kurt Eichenwald’s piece on the Great Samsung—Apple War in Vanity Fair is a MUST READ.

Samsung does not come off very well at all, but to be honest, my impression after reading the story is that the Korean electronics giant should count itself lucky—it could have come off much, much worse.

And that’s all I’m going to say about that because, well, not to put too fine a point on it, but Samsung scares the shit out of me.

Meanwhile, earlier this week, Samsung rather unexpectedly apologized to workers who contracted cancer at the company’s semiconductor factories and their surviving family members (read that Businessweek piece in full). Of course, there’s still negotiating to do before Samsung, like, compensates anyone, but I suppose a start’s a start.

(HT to KB, Colin)

Samsung Selfie-Gate

So, Samsung arranged for some guy who plays for the Red Sux to take a selfie with President Obama. Samsung Tweets photo, which subsequently goes viral. White House gets angry:

The selfie was taken during a visit to the White House this week by the 2013 World Series winners. Ortiz, who has an endorsement deal with Samsung, put the photo on Twitter, and the electronics company re-tweeted the post to its 5.2 million followers.

But turning the event into a promotional exercise for Samsung was apparently not on the White House’s agenda.

“I can say that as a rule, the White House objects to attempts to use the president’s likeness for commercial purposes,” White House press secretary Jay Carney said Thursday. “And we certainly object in this case.”

HT to Anonymous Joe and others.

As you probably know, the record-setting Ellen DeGeneres selfie at the Oscars was also a Samsung marketing stunt.

Well, anyways, White House lawyers are now involved. Great.

Say what you will about the Samsung Selfie Strategy, but give credit where credit is do—Samsung’s marketing has come a long, long way.

The Philippines officially orders 12 F/A-50s

The Filipino air force is a joke.  The last jet fighters they had were the old F-5 Freedom Fighters that they retired in 2005.  Even their Defense Secretary teased, “Our Air Force… [is]… all air without force.”

China lays claim to much of the South China Sea (particularly the Spratly Islands) and have routinely violated the Philippines’ territorial claims with both military aircraft and ships.  As of now, the Filipinos have nothing to send in response, other than unintimidating prop planes, patrol boats and antiquated destroyers.  Although the Filipinos do not officially acknowledge they are seeking weapons to counter Chinese incursions, they are essentially trying to obtain specific weapons to counter Chinese incursions.

Yesterday, the Philippines and Korea signed a contract to provide 12 F/A-50 light fighter-bombers, within 38 months, for about $420 million.  As both a war capable plane and a trainer is it the be all and end all for what the Philippines needs to counter China?  No.  But, the Philippines is not a rich country and cannot afford to buy and maintain more capable planes such as Saab’s Gripen, the F-16C (Block 40 or better), the Sukhoi Su-27, etc.  Plus, they are nine years out of practice in flying jet fighters and probably couldn’t use top-of-the line planes to their fullest capabilities because they have no training infrastructure.  The Filipinos themselves acknowledge that the F/A-50 was the best they can do for now.

Manila buys fighter jets worth $520m

(Photo credit: Oman Daily Observer)

Predictably, the Chinese were not happy with this news.  Rumor has it (from the Chosun Ilbo via the Yomiuri Shimbun) that a “Chinese official” made a request to the Park administration to not sell the jets, which Korea reportedly ignored.

So, what could the Chinese hypothetically send against Filipino F/A-50s?  It would have to have long range, so probably Sukhoi Su-27s or Sukhoi Su-30MKK.  Head to head does an F/A-50 have a snowball’s chance in hell against an Su-30MMK?  Most likely not.  An Su-30 is faster, more powerful, has advanced beyond visual range (“BVR”) missiles and sensor driven helmet mounted displays that control “off-boresight” weapons.  However, the F/A-50 has something that may save it: Link-16.  The Philippines are buying long range ground based radars that they will station near the Spratlys.  If linked with the F/A-50s then they can see Chinese planes before Chinese planes can see them, thus giving the F/A-50s a fighting chance, particularly if they are armed with their own BVR missiles.

Lastly, as I had mentioned before, the procurement pattern for the T-50 family of jets appears to belie the fact that it was originally designed as a trainer.  The customers (namely Iraq and the Philippines) want this supposed “trainer” to fight.  As a cheap jet fighter in a “stop gap” role it may not be all that bad.  Smaller and poorer nations don’t have a lot of choices.  Back in the Cold War the Soviets and the Americans sold their poorer client states cheap and easy to maintain Mig-21 Fishbeds and F-5 Freedom Fighters.  America and Russia don’t offer these planes (or modern facsimiles) anymore so there is a market need.  At the end of the day the T-50 family might be a better 21st century F-5 than a 21st century version of a T-38.

Next up?  KAI is pitching the T-50 family to the UAE, PeruBotswana, Thailand, not to mention the U.S. T-X program (in conjunction with Lockheed).

Quest for the T-X Holy Grail

The original rational for Korea Aerospace and Lockheed’s cooperation in developing the T-50 was to build a trainer that could qualify for the “whale” or “mother lode” account: America’s replacement for the venerable, but older than dirt, T-38 Talon.

KAI and Lockheed’s chief rival has always been Alenia Aermacchi’s M-346 Master.  In the global pre-battles between KAI and Alenia Aermacchi there have been wins and losses.  Alenia drew first blood with a win in Singapore.  Then KAI won an order from Indonesia.  Alenia won Israel.  KAI got a big order from Iraq.  Alenia won a modest order from Poland.  KAI is apparently dotting the i’s and crossing the t’s with the Philippines.  It’s been back and forth for the past four years.

However, all this is early dress rehearsal for the estimated 350 new jet trainers that the U.S. Air Force will need.  This is, to say the least, a huge account, that neither side can afford to lose, thus both are playing to win.  Alenia has partnered with General Dynamics, one of the largest U.S. based aerospace companies, and has offered to manufacture the M-346 at General Dynamics’ plants in Arizona and North Carolina.  Needless to say the Koreans and Lockheed are probably dreaming up the same manufacturing arrangement in order to buyrecruit the support of influential Congressman.

Today’s Flightglobal has an excellent summary analysis (with a lot of pretty pictures) of the upcoming battle:

Richard Aboulafia, vice-president of analysis at Teal Group, calls the KAI/Lockheed T-50 Golden Eagle the “most capable” option – but also probably the most expensive to buy and operate. Lockheed declines to discuss prices, but Aboulafia estimates the T-50’s flyaway cost will be $26 million per aircraft.

[…]

The T-50, which has been in service since the mid-2000s, can reach Mach 1.5 and pull 8g, Lockheed says. The type’s single General Electric F404 engine also has an afterburner. “If the [USAF] has the budget, and they want [pilots] to [transition] easily into an F-22 or F-35, the T-50 is the choice,” says Aboulafia.

The BAE/Northrop Hawk option is the cheapest at an estimated $21 million per, but they are clearly the dark horse in this fight.  The Alenia Aermacchi option is in the middle at an estimated $24 million per.

Aboulafia says Alenia Aermacchi’s T-100 – a derivative of its M-346 trainer – holds the middle ground. The aircraft are “very modern”, have “great flying characteristics” and will likely cost about $24 million each, he estimates. The M-346 (below) is powered by two Honeywell F124-200 turbofans, can pull 8g and reach 590kt at 5,000ft (1,520m), according to Alenia Aermacchi.

[…]

“It’s a good compromise,” says Aboulafia of the T-100. “The market has spoken to that. Israel and Singapore [are] two of the most prestigious militaries around.”

Here is a blog with an interesting (but technical) specification comparison between the two jets.

It will be an interesting, hard fought battle between the two.  I am not normally a betting man, but looking at the selection process I would say that the M-346 Master has the edge if a pure trainer is what you are looking for.  Key U.S. allies with similar air power doctrines have the M-346 or have it on order (Singapore, Poland and Israel).  Out of all the KAI wins, only Indonesia has selected the T-50 as a pure trainer.  The procurement history would favor the M-346 and imply that the T-50 a bit of an underdog.  However, as it often happens, the USAF may want the “Cadillac” option and if so, then that would give the T-50 the edge.

USAF%20T-50.jpg

(Photo credit: Flightglobal)

FATCA Has Arrived and What It Means For Americans in South Korea

Koreans have protested the American FTA as being a means by which American law could be used to subvert Korean interests. Likewise, America has managed to insert themselves into other countries practices through treaty. One current bit of American legislation that has finally come about is the 2010 Foreign Account Tax Compliance Act (FATCA), which affects all Americans living overseas that keep a bank account in a foreign country.

South Korea has finally negotiated an reciprocal FATCA agreement with the US (that goes into effect this September) so that Korea can snoop on the Koreans that may have evaded paying Korean taxes by keeping their money in America. Likewise, the National Tax Services (NTS) will provide information about Americans, in Korea, with account balances of $10,000 or more to the U.S. Internal Revenue Service, beginning in September. This has happened because, the American Government thinks that there are so many Americans evading taxes overseas, thus robbing the country of money (they so desperately need to waste). The result is FATCA. The real fact is this treaty will not stop tax evasion and will likely cost the government more to implement it than is taken in by it:

. . . In the past, the OECD has used pressure and coercion to compel low-tax jurisdictions to agree to rules against their own economic interests. It is unclear how well such tactics will work in this instance, however, as the new rules impose a much more significant cost by signifying an end to the idea that nations can attract investment by offering more competitive tax systems than those of the high-tax welfare states. (cite).

So not only does America waste my tax money but South Korea will put the extra cost of reporting expatriates, through NTS, upon the already burdened banks (additional cite) or will they waste the tax I pay them here just to make American’s lives more complicated!?

Living overseas is already a burden for the American expatriate:

. . . No group is more severely impacted than U.S. persons living abroad. For those living and working in foreign countries, it is almost a given that they must report and pay tax where they live. But they must also continue to file taxes in the U.S. What’s more, U.S. reporting is based on their worldwide income, even though they are paying taxes in the country where they live. (cite)

Reading through the wiki article for FATCA lists the deficits of this treaty as:

  • Cost. Although numbers are still somewhat speculative, estimates of the additional revenue raised seem to be heavily outweighed by the cost of implementing the legislation. The Association of Certified Financial Crime Specialists (ACFCS) claims FATCA is expected to raise revenues of approximately US$800 million per year for the US Treasury; however, the costs of implementation are more difficult to estimate, and estimates between hundreds of millions and over US$10 billion have been published. ACFCS also claims it is extremely likely that the cost of implementing FATCA (which will be borne by the foreign financial institutions) will far outweigh the revenues raised by the US Treasury, even excluding the additional costs to the US Internal Revenue Service for the staffing and resources needed to process the data produced. Unusually, FATCA was not subject to a cost/benefit analysis by the United States House Committee on Ways and Means.
  • Capital flight. The primary mechanism for enforcing the compliance of foreign financial institutions is a punitive withholding levy on US assets. This may create a strong incentive for foreign financial institutions to divest (or not invest) in US assets, resulting in capital flight.
  • Foreign relations. Forcing foreign financial institutions and foreign governments to collect data on U.S. citizens at their own expense and transmit it to the IRS has been called divisive. Canada’s Finance Minister Jim Flaherty has raised an issue with this “far reaching and extraterritorial implications” which would require Canadian banks to become extensions of the IRS and would jeopardize Canadians’ privacy rights. (also this article from Canada) There are also reports of many foreign banks refusing to open accounts for Americans, making it harder for Americans to live and work abroad.
  • Extraterritoriality. The legislation enables U.S. authorities to impose regulatory costs, and potentially penalties, on foreign financial institutions who otherwise have few if any dealings with the United States. The U.S. has sought to ameliorate that criticism by offering reciprocity to potential countries who sign Intergovernmental Agreements, but the idea of the US Government providing information on its citizens to foreign governments has also proved controversial. The law’s interference in the relationship between individual Americans or dual nationals and non-American banks led Georges Ugeux to term it “bullying and selfish.”
  • Citizenship renunciations. Time magazine has reported a sevenfold increase in Americans renouncing U.S. citizenship between 2008 and 2011, and has attributed this at least in part to FATCA. According to the The New American a record number of Americans have given up U.S. citizenship in 2012 “amid IRS Abuse” and “facing an increasingly out-of-control federal government in Washington, D.C” . According to the BBC, the act is one of the reasons for a surge of Americans renouncing their citizenship – a rise from 189 people in the second quarter of 2012 to 1,131 people in Q2/2013. Another surge in renunciations in 2013 to record levels has been reported in the news media, with FATCA cited as a factor in the decision of many of the renunciants.  Forbes Magazine writes that the renunciation of citizenship by Americans is up by 221%, as of this time (cite).
  • American citizens living abroad. According to the Canadian Broadcasting Corporation many Americans living abroad may face large fines as a result of this legislation. According to the story a forty-years old developmentally disabled man, and a Canadian man married to an American will become some of the victims of this law. According to Time (magazine) American citizens living abroad are unable to open foreign bank accounts.
  • IRS not ready. According to the NYTimes it is unclear whether the IRS is ready to handle millions of new complicated filings per year.  According to one former IRS Deputy Commissioner, this summer is going to be one large FATCA “train-wreck” (cite).
  • Effect on “accidental Americans”. The reporting requirements, including penalties, apply to all U.S. citizens, including those who are unaware that they have U.S. citizenship. Since the U.S. considers “all persons born in the U.S., and most foreign-born persons with American parents, to be citizens, FATCA affects a large number of foreign residents who are unaware that the U.S. considers them citizens.
  • Complexity. Doubts have been expressed as to workability of FATCA due to its complexity, and the legislative timetable for implementation has already been pushed back twice.

So, is FATCA good, bad or not a factor for Americans living in South Korea?

Bad – If you are living here and earning income, you will spend more time and money complying with this extra tax hassle just to prove you don’t owe anything to the government or have complied with current tax law. For foreign non-Americans, in America, this is possibly also bad news since under U.S. diplomatic agreements to enact FATCA, U.S. financial firms must share information on foreign-born U.S. residents with foreign governments (cite).
IMHO, this is bad legislation that is directly from the nightmares of so many Americans that fear ever increasing government encroachment into their private affairs if not pocketbooks. I place this sort of government handiwork into the same category as the Department of Justice arranging to arrest foreigners on a layover through the US because they run a foreign online casino that Americans might spend money on – forget the law or the rights of individual, this is all about a bungled, misinformed, congressionally-lead, grabbing of money and not about fighting tax evasion.

More useful links for Americans on FATCA and for information to fight this legislation:

http://americansabroad.org/issues/fatca/

pursuance-of-money
photo credit: Celestine Chua via photopin cc

Hello, America. Is your cheese more expensive?

Well, it would appear so.  A pound of American cheese on the open market is $2.22 (as of March 6th, 2014) vs. $1.56 a year ago.  And it’s getting more expensive.  As a matter of fact, some investors worry that the age of cheap pizza may end because of the rapid rise in cheese prices.  What?  You mean the end of $9.99 extra large pepperoni pizza, with free garlic bread, and a second medium sized pizza for two bucks more?  Dammit!  There goes my football party.  Who do I go and blame?

According to the news blog Quartz, it’s the Koreans.  They love their cheese and they are buying more than ever due to the KORUS FTA.  The Koreans seem to be drizzling cheese on everything from corn to ramen, to their crime againstversion” of  “pizza,” or eating it straight as a snack.

Times are good for American dairy farmers. They are selling milk at the highest prices on record, up 17% in January on the previous year.
That’s surprising, because US consumers aren’t demanding more milk…

[…]

South Korea blew past Japan and Canada in 2008 to become the number two market for US cheese.

Here’s some data:

Top-importers-of-US-cheese-as-a-percentage-of-total-cheese-exports-2003-2013_chartbuilder

Holy, gorgonzola! That’s a lot of cheddar.

The other side of the cosmetics and plastic surgery discussion

When it comes to the topic of plastic surgery, many people take a “good or bad” value position.  The unofficial consensus is if a lot of it is done to a normal face then it’s “bad,” but if it’s done to restore looks lost due to an accident, then it is generally thought of as “good.”

When it comes to South Korea, much of the press is negative and borders on reporting mostly on the strange and/or weird such as the so-called “tower of jaw bones,” the proliferation of plastic surgery ads in Gangnam-gu, startling before and after shots, or the fact that South Korea undergoes the highest number of plastic surgery procedures per capita in the world.

Korean culture, particularly modern urban culture, puts an extraordinary amount of emphasis on outward appearance.  Clearly, sociological pressures play a decisive role.  Interestingly enough, there is pressure on the supply-side too.  Korean doctors essentially have their incomes capped by price controls mandated by the National Health Insurance plan, so there is pressure to turn to plastic surgery to escape limits on their pay.  All this has created a massive aesthetics-based business of cosmetics companies, skin care clinics and plastic surgeons.

All points well taken from a position that’s attracted a lot of attention, debate and discussion.  IMHO, criticism of Korean sociological pressures and aesthetics culture is not without merit.

However, is it all bad?  If we are to take perhaps subjective values out of the equation and just look at economic impact, then is this all “bad,” per se?  From an economic and business perspective, Korea’s highly demanding aesthetics culture is creating an expertise, technology and infrastructure base that’s become the core of a highly developed cosmetics and plastic surgery industry.  It’s an industry that’s so developed it is attracting considerable overseas demand, particularly in medical tourism and cosmetics.  The big prize is China’s aesthetics market, for which Korea may be uniquely positioned to capture a greater share of than more established players in Japan (i.e. Shinseido), France (i.e. L’Oreal) and the U.S. (i.e. Procter & Gamble).  From a plastic surgery standpoint, Chinese patients now make up the largest percentage of medical tourists visiting Korea.

Tremendous domestic demand and emphasis on quality is creating a “virtuous cycle” of sorts, that’s in turn supporting an industry that’s becoming increasingly more attractive to a lot of non-Koreans.  The demand translates into sales and profits, which creates additional capital to be available to fund more product and service improvements and to keep comparative costs down due to efficient capacity utilization and expansion of economies of scale.  This creates even more non-domestic demand, further expanding and accelerating the cycle and thus giving Korea, Inc. yet another industry to hang its hat on.

Korea a great place to get fertility treatment… as long as you’re officially married

A piece in the, again, the Chosun Ilbo notes a rather odd quirk that’s hurting the medical tourism industry.

Namely, a number of foreign couples who come to Korea for artificial insemination procedures are being denied the procedure because they aren’t officially married.

Korea’s biological ethnics law apparently requires couples to submit a marriage certificate or a similar certification before they can undergo an artificial insemination procedure. This particularly sucks for potential patients from Russia and elsewhere in the former Eastern Bloc, where—due to decades of rule by godless commies—only about 60% of couples living together are officially married.

Some 90% of foreign patients who come to Korea for fertility treatments come from Russia and elsewhere in the former Soviet Union. Over the last three years, the number of Russians who’ve come to Korea for fertility treatments has quintupled.

Anyway, some now ask if perhaps some flexibility might be required in the case of foreign patients.

Chinese tourists feel disrespected in Korea: Ye Olde Chosun

Despite being the biggest customers in the Korean tourism market—both in terms of numbers and money spent—many Chinese tourists come away with bad feelings.

Or so reports the Chosun Ilbo, citing a poll it took of 100 Chinese tourists in Myeong-dong, Dongdaemun and Gangnam taken last year.

A full 25% of respondents said their image of Korea worsened after actually visiting the country. In particular, 37% responded that they were the target of real or perceived contempt from Koreans. Only 10% said they’d felt such contempt when traveling in other countries, which would suggest—says the Chosun—that globe-trotting Chinese tourists get such a strongly negative impression only in Korea.

Chinese not only accounted for a full third of all the foreigners who entered Korea last year, but they also spend the most money here. In 2012, the average Chinese tourist spent USD 2,153.7 in Korea, 140% the foreign tourist average of USD 1,529.5. They also spent USD 378 per day; likewise, this was the highest among foreign tourists. Chinese tourists are also responsible for a considerable amount of added value—perhaps as much as KRW 7 trillion’s worth.

Of the disrespected Chinese tourists, 12 said they were verbally disrespected, 11 pointed to facial expressions, and eight cited body language.

One 20-something Chinese tourist the Chosun met in Myeong-dong recently was pissed off about an incident that took place in a subway. On the second day of her visit, she was talking in Chinese with her friend on the subway when an ajumma tapped her with her foot and motioned for her to go into another carriage. She could feel the contempt in her eyes, she said. At Dongdaemun Market, the only time she felt welcomed was when she handed over money.

When Chinese tourists head off the major tourist track, things get even worse. Volunteer Chinese interpreters say the places about which they get the most complaints are the well-known beauty salons in places like Sinchon and Apgujeong (Marmot’s Note: Well-known hair stylists? Being dicks? To tourists? Noooooooooooooooo!). One volunteer said he took a 20-something Chinese woman to a hair stylist in front of Ewha, but when they got there the owner’s faced turned sour. The volunteer said the open display of dislike was embarrassing.

Despite this, Korean officials are still saying there’s nothing to worry about. A government survey on inbound tourism taken this year showed the Chinese tourists were highly satisfied with their travel experience, scoring 4.14 points out of 5. This was the same level of satisfaction as the total average. Experts say this is an illusion, however. The government polls are often given of tourist groups at select shopping malls, hotels and restaurants—places where tourists are unlikely to meet the “real Korea,” so to speak.

China experts warn the impact of this goes beyond money—it could affect the entire Sino-Korean relationship. One foundation director head said the Sino-Korean relationship was an important matter on which Korea’s future depended, and lessening the gap in culture and values was the basis of diplomacy, both at the private and government levels. He added that this social value was a national asset much more important than money.

Marmot’s Note: Being from New York, I just naturally assume tourists are treated like jerks and am pleasantly surprised when they aren’t.

Speaking of which, somebody posted this on Facebook yesterday. I thought it was hella funny:

Anyway, Korean readers, on your way home today, please hug a Chinese tourist. They apparently need one.

Korean firms sue striking workers in Cambodia/N. Korean-built museum in Siem Reap

Korean garment companies in Cambodia are suing the head of Cambodia’s opposition party and a union for USD 10 million in losses from a strike and subsequent protests. And the Kyunghyang Shinmun doesn’t like it one bit.

Technically, the lawsuit is being raised by the Garment Manufacturers Association in Cambodia (GMAC), but the Kyunghyang notes it is Korean companies that have been driving the lawsuit (with Chinese and Taiwanese companies tagging along for the ride—how’s that for cross-strait cooperation!). Unionists have been striking to see their minimum wage immediately doubled to USD 160 a month, and things have been getting ugly, with police killing five protesters and Cambodian special forces being called in to protect a Korean-owned factory.

The Kyunghyang blames Korean garment factories for doing in Cambodia what companies do in Korea—trying to crush labor with big lawsuits. The Kyunghyang is right that this is often used as a way to negate workers’ right to strike, and the ILO has been asking Korea to do something about this for years. I am sympathetic to arguments that sit-down strikes and factory occupations are essentially the illegal seizure of private property, but I suppose that’s neither here nor there.

Anyway, according to the Kyunghyang, the protests grew worse—and led to bloody repression—because the GMAC, including Korean companies, refused to negotiate on the wage increase and threatened to move their factories elsewhere. The Kyunghyang worries that the inhumane behavior of some Korean companies overseas might not only harm Korea’s national image, but also bring about something even worse. It also calls on the government to demand that Korean companies in Cambodia respect international standards and universal human rights (Marmot’s note: to be fair to the Korean companies, seeing how they’ve been joined by the Chinese and Taiwanese, it seems they are behaving to international standards, at least as far as respect for labor rights is concerned).

BTW, if you think this has nothing to do with you readers in the States, guess where a lot of this clothing is going:

Nam-Shik Kang, managing director of Phnom Penh-based Injae Garment Co, which employs 3,500, said that despite the new plan, he stood to lose out on profits.

“Our factory currently has a full capacity of orders to fill by February, most of it being material equating to about three million garment pieces. We will send to partners in either Indonesia or Vietnam . . . This is a huge quantity and a very big disaster for us and for others,” said Kang, whose South Korean factory supplies Wal-Mart and JC Penny.

“Even if we ship part of our shipment, about one million pieces, we will incur shipping costs of about $200,000 or even $300,000. And it will not even solve the problem.”

Meanwhile, it appears North Korea’s Mansudae art studio sunk about USD 10 million into building the Grand Panorama Museum near Angkor Wat. North Korea is hoping it might yield profits when it’s done, and at any rate, Pyongyang has something of a special relationship with Cambodia:

At first, it’s hard to imagine why any country would commission an isolated, autocratic government to build a museum of culture in a tourism hotspot. But for Cambodia, whose head of state once called North Korea’s iron-fisted founder “brother”, the news is not so surprising. The mercurial former King Norodom Sihanouk, who in the 1970s was a figurehead for the murderous Khmer Rouge regime, forged a close friendship with Kim Jong-Il’s father, Kim Il-sung, who ushered in a similarly brutal communist regime. Between 1979 and 2006, Sihanouk made numerous retreats to Pyongyang, where he relaxed in a 60-room royal palace and shot amateur films.

The “special relationship”, as it was referred to in a US diplomat Wikileaks cable from 2006, has since faded, following the deaths of both Kim Il-sung, in 1994, and Sihanouk, in 2012. The Cambodian government’s attention has turned to South Korea, the country’s second biggest investor. Nonetheless, Cambodia still holds the dubious accolade of hosting the world’s second highest concentration of North Korean overseas operations, after China.

The country is already home to three outlets of the government-run Pyongyang restaurant chain, and a fourth is on the way. The North Korean women who staff them and perform nightly dance shows are believed to be kept inside, under surveillance, and subjected to gruelling rehearsal schedules. The Kathmandu branch, closed in 2011, was found to be a North Korean spy base. Both the restaurants and Mansudae art studio are believed to be at least partly managed by Kim Jong-Il’s younger sister, Kim Kyong-hui, wife of Jang Song-thaek, who was publicly purged and then executed in December.

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