http://mobile.bloomberg.com/news/2012-12-20/park-presidency-gives-fighting-chance-to-south-korea-s-chaebols.html

Park Geun Hye’s election as South Korea’s 18th president lowers the risk that families in control of the chaebols dominating the economy will see their power reduced.

Opposition candidate Moon Jae In had proposed breaking up cross-shareholdings used by the founding families of Samsung Electronics Co. (005930) and Hyundai Motor Co. (005380) to control conglomerates with minority stakes. Park, 60, of the ruling New Frontier Party and daughter of the dictator who backed the chaebols, has said she won’t dismantle those structures even as popular support wanes for the business groups.

Samsung Group and Hyundai Motor Group, run by South Korea’s two richest people, would have been vulnerable to Moon’s plans, according to Macquarie Group Ltd. analysts Chan Hwang and Joe Huh. Sales at the main electronics unit of Samsung Group, led by Chairman Lee Kun Hee, was equal to 19 percent of the country’s gross domestic product. Hyundai Motor and Kia Motors Corp. (000270) made Chung Mong Koo’s conglomerate surpass Ford Motor Co. (F) and Daimler AG in number of cars sold.
“Park’s policies may imply a less significant change in the structure of large globally competitive Korean corporates,” HSBC Holdings Plc analysts led by Herald van der Linde wrote in a report yesterday. “South Korea will likely maintain its export-led growth.”

The never-married, eldest daughter of former leader Park Chung Hee said she would block new cross-shareholdings while proposing stricter laws on chaebol owners who commit crimes, and increasing fines for violations of fair-trade laws to as much as 10 times the damage. Park’s father, who took power in 1961 after a military coup, encouraged growth in automaking, steel and shipping by backing the chaebols until his assassination in 1979.

“Big businesses aren’t the only ones in the economic ecosystem,” Park said at an Oct. 30 rally for small business owners and independent shopkeepers. “Nobody should fall behind because of an unfair structure.”

Exports by the 30 largest chaebols accounted for 84 percent of South Korea’s overseas shipments in 2010, according to the Federation of Korean Industries, which represents the nation’s biggest companies. Exports account for about half of the $1 trillion economy.

Those 30 chaebols employed just 6 percent of the nation’s workforce, while corporate tax paid by groups with more than 100 billion won ($93 million) in sales amounted to 12 percent of the total tax collected in 2010, according to the government.

“Korea’s basically a one-trick economic act at this point,” Jasper Kim, chief executive officer of Seoul-based Asia-Pacific Global Research Group, said in an interview. “It’s basically chaebol chaebol chaebol.”

Samsung Electronics declined 4.1 percent to close at 1.442 million won in Seoul trading, after the European Union said it’s preparing an antitrust complaint against the world’s biggest phone company. The stock has gained 36 percent this year.

Hyundai Motor was unchanged at 222,500 won and has gained 4.5 percent this year.
Popular opinion toward chaebols soured as growth slowed and the wealth gap widened. The nation’s richest 20 percent earned 7.86 times more than those in the bottom fifth last year, the widest margin since Statistics Korea began publishing the data in 2006.

A February survey showed 62 percent of respondents said the chaebols contributed to economic development, down from 70 percent in August 2011. Another survey published in October showed 93 percent of 20- to 30-year-olds said government policies on companies favored the business groups.

“It’s a post 2008 subprime crisis effect — this is the first presidential election in which the voters were able to express their discontent,” said Asia-Pacific Global Research’s Kim. “Income inequality was an issue globally, but it is a big, big issue in South Korea.”
The nation’s Gini coefficient, which measures income inequality, rose from 0.306 in 2006 to 0.311 in 2011. Zero represents perfect equality and a level of 1 signifies one person holding all the wealth.

Limiting or banning cross-shareholdings would put pointless pressure on companies, cause investment to shrink and hamper job creation, the Federation of Korean Industries said in an August statement. Companies would also be vulnerable to foreign takeovers, it said.

Samsung’s Lee, South Korea’s richest person, owns 3.4 percent of Samsung Electronics’ common stock and 0.1 percent of preferred shares, 21 percent of Samsung Life Insurance Co. (032830) and 1.4 percent of Samsung C&T Corp. (000830), according to the Bloomberg Billionaires Index. The 70-year-old billionaire controls 81 companies connected by a maze of shareholdings.

Samsung Life has the biggest stake, at 7.5 percent, of Samsung Electronics, which holds 37 percent of Samsung Card Co., which has 26 percent of unlisted theme-park operator Samsung Everland, which owns 19 percent of Samsung Life.

Lee’s net worth is estimated at $11.3 billion and his fortune has increased 42 percent this year, according to the Bloomberg Billionaires Index. Chung is valued at $6.7 billion and his wealth has increased 12 percent in 2012, according to the index.

The conglomerates’ economic power will make reforms difficult, said Tom Coyner, who helps advise foreign investors as president of Soft Landing Consulting Ltd.
“The chaebol have grown at least collectively, if not individually in some cases, more powerful in many areas than the government,” he said in an e-mail. “It will be almost impossible to effectively implement campaign promises, unless the chaebol view substantial reforms to be in their own long- term best interests.”

The below op-ed piece was based on two email exchanges I had with Bloomberg News. As was to be expected, the Bloomberg piece used only about 10 percent of my “wisdom.” Below is the Full Monty as printed on Boxing Day in Seoul.

It’s always re-assuring that this critical review of the chaebol is being printed in a chaebol (Samsung)-owned newspaper. Compared to much of Asia, there are many positive things to be said about South Korea.

Tom

What the election will not mean
Taking on the largest chaebol within Korea is not dissimilar to a kamikaze attack.

by Tom Coyner
Korea JoongAng Daily
December 25, 2012

http://mengnews.joinsmsn.com/view.aspx?gCat=010&aId=2964450

While in Thailand, I watched how Wednesday’s elections were reported. Once journalists quickly got past the first woman president, whose father was a dictator, sound byte, all reports noted how both candidates called for curtailing the chaebol’ influence on the Korean economy.

From my vantage point, I looked at the conservative party’s “light on the road to Damascas” epiphanies as not being substantially more than the old Korean form-over-substance behavior of “pomseng pomsa.” Madam Park badly needed to use the “minsaeng” or common people’s anchor in her campaign to align herself and her party closer to the alienated electorate than to the economic elite as epitomized by the chaebol oligarchy. Her chaebol reform promises were expected.

But, while both parties advocated some good ideas during the campaign, the fact remains that the chaebol have grown at least collectively, if not individually in some cases, to be more powerful in many areas than the ROK government. Consequently, no matter who took over the Blue House, it would be almost impossible to effectively implement campaign promises, unless the chaebol view substantial reforms to be in their own long-term best interests.

We should remember that both progressives and conservatives while in the Blue House have tried to curtail the chaebol’s grip on the economy – and all have effectively failed. Meanwhile, the chaebol’s power has only grown in the National Assembly. Their effective lobbying, as well as their latent threats in their being less geographically anchored than their regulators, cannot be discounted. All of which makes today’s politicians, regardless of ideology or intent, even less capable of bringing around real change in this critical area.

Stepping back for a moment, we may ask why would any form of dismantling the chaebol – at least to the levels common with major corporations in other major economies – be good for the economy? I can answer that in just three letters: P-S-Y.

What Psy with his “Gangnam Style” unintentionally illustrated is that when Koreans circumvent the massive corporate dictates, the entrepreneurial and artistic Korean genius percolates to the surface and unintentionally shames the big top-down bureaucratic approaches of large Korean organizations.

Today’s chaebol not only dominate but cynically, and inefficiently in the long term, suck out much of Korea’s vitality. Most Korean SMEs generally have few choices but to serve the chaebol as suppliers. While the chaebol have understandably attracted overseas accolades for their achievements, the larger story of how Korea inefficiently supports these corporate vampires remains largely unknown outside of Korea.

What is good for the chaebol ultimately has been primarily good for the chaebol. Korea has benefitted from the positive spillages of chaebol successes, but not without major costs. There has been a remarkable lack of fairness in dealing with the chaebol for Korea’s SME suppliers, since for each supplier driven to bankruptcy by chaebol work scope creep, pricing reneging and unethical practices, there are several competing vendors waiting desperately to replace them.

Yet for all of Korean politicians’ talk about reforming the chaebol, it’s very much like people talking about the weather. That is, everyone talks about it but no one is able or willing to do anything about it. Taking on the largest chaebol legally or legislatively within Korea is not dissimilar to a kamikaze attack. Even if one wins, ultimately one must be prepared to make a supreme sacrifice. Unsurprisingly, we have yet to see any politician willing and able to face down the chaebol.

So is the situation hopeless? In the long run, I remain optimistic due to the chaebol’s self interests rather than any feckless government regulation. For example, today some of the forward-thinking chaebol are placing progressive Korean and even foreign executives in charge of large business units as parts of their drives to become better internationalized. As you would expect, these CEOs are smart, extraordinarily skilled – but they are also inherently more ethical in business than their peers.

With the rise of Chinese and other nations’ multinational corporations, the chaebol will discover that ethical behavior can be a competitive advantage in this increasingly information-connected world. Korea already has a superior reputation for now being a nation of laws. The next natural step is for its chaebol to become the preferred option among other players who make similar offerings but who still retain sordid foundations.

This kind of chaebol evolution will take more time than most people may like, but global competition is certain to have a much greater effect than politicians’ unfulfilled campaign promises in meeting Korean voters’ frustrated expectations.

*The author is president of Soft Landing Korea, a business development firm, and an alliance partner of Odgers Berndtson Japan, a global Big Six executive recruitment consulting company.

by Tom Coyner
Korea JoongAng Daily
November 29, 2012

http://koreajoongangdaily.joinsmsn.com/news/article/article.aspx?aid=2963093

Reading the newspapers, it looks like Korea’s liberals are on the verge of repeating the same, fundamental mistake as America’s conservatives.

The current liberal debacle appears to have been similar to watching a slow motion train crash. In fact, at the last minute, the train was able to come to a halt before a complete crash. But let’s not fool ourselves. Before the wheels stopped turning, substantial damage was done.

Consider last week’s television debate. By all accounts, the face-off seemed more like a squabble between Tweedledee and Tweedledum – on downers. There was little substantial disagreement other than each of the candidates proclaiming they were better able to implement the generally agreed upon reforms. Gallingly, neither candidate bothered to explain how many of these good ideas would be financed.

So it has come to pass that Ahn blinked first, but in a way that maintained his integrity. He is not joining forces but only supporting Moon Jae-in.

Looking at the two candidates, it may have been preordained that it would have to be Ahn to back down. Moon had fewer options. Mr. Moon is and was simply a politician. Ahn, on the other hand, is a medical doctor, a software mogul and a dean of Korea’s most prestigious university. In other words, in spite how passionate Ahn may be, he has more than three respected occupations to resume. Moon has just one, and if he had acquiesced to Ahn, his solo career would have been set back.

Like North Korea, which plays aggressively with a bad hand of cards in diplomacy, Moon and his supporters had few if any options other than to insist on leading the liberal cause. As a result, they were forced to focus solely on one feasible outcome. Ahn was like the U.S. in the sense that he and his followers have had almost too many options, regardless of this current focus. As much as his clique wished to come out on top, they knew they could walk away and win some other day.

Furthermore, as recent reports show, Park Geun-hye of the conservatives has been strengthened by this outcome. Whereas the overwhelming support for Moon had come from within the greater DUP, Ahn has been leading a broader-based citizens group. Consequently, almost a quarter of Ahn’s independent followers are indicating they are switching their support to Ms. Park rather than supporting Moon and the DUP.

All of this plays poorly for South Korean politics. Consider five years ago, when the old Grand National Party attempted to put together a coherent political platform as part of their campaign for the Blue House. Furthermore, there was an open primary election among candidates where Lee Myung-bak barely squeezed out Park Geun-hye.

Now consider that Ahn Cheol-soo jumped into the fray as a major political reformer. Many of his notions on first bounce seemed quite good. But when pundits began teasing these ideas out and considering how the notions may be practically implemented, the Ahn camp could only suggest their genius leader would eventually figure out the details, or at least attract the governance talent to deal with the particulars.

In other words, as much as Mr. Ahn champions badly needed political form, he follows the old model that largely hobbles Korean and other Asian democracies. That is, rather than championing a specific and reasonably detailed platform of reforms, he largely relies on his charismatic presence to rally the masses. Well, how many times have we seen that before?

If anything that Ahn and Moon have in common it’s a shared ideology that largely can be traced back to the democracy movement of the 1970s and 1980s. Fundamentally, at a high level, most South Koreans agree with these principles of genuine participatory democracy that does not overly favor the ruling class largely made up of families running the chaebol conglomerates. The shared problem is that this ideology remains more of a set of ideals than well thought out strategies for needed political reform.

But political reform is obviously overdue. The widening economic and opportunity gap between the haves and have-nots continues to widen and to exasperate the electorate. Five years ago, the conservatives won by a landslide after ten years of progressive rule that was marked by its ideals and poor governance. But during the past five years, the voters have been regularly reminded by the conservatives’ habitual corruption and cynicism. The conservatives, regardless of their political party’s name, have alienated the general masses so much that one may say that in this presidential vote, it’s the DUP’s election to lose. And, by golly, they may just do that.

One only has to look to the recent U.S. elections where the Republicans, too, had general voter discontent working in their favor. They, too, had an election to lose. The Republicans call themselves the GOP, or “Grand Old Party.” But this year the GOP transformed itself into the Grumpy Old White Men’s Party by clinging to a far-right ideology inflexibly rooted in the 20th Century without adequate, practical regard for current times. Similarly, South Korea’s progressive camp seems unable to extricate itself from an aging ideology in favor of truly pragmatic policies.

Recently, during a BBC-broadcasted debate, Tony Blair suggested that ideology-based politics is something more in keeping with the 20th Century; whereas today, what nations need are sets of ideology-free practical programs. Obama seemed to have understood this principle better than Romney. Based on what we have seen so far, we may well be witnessing Korea’s liberals falling into the same trap as the one that caught America’s conservatives.

* The author is president of Soft Landing Korea, a business development firm, and an alliance partner of Odgers Berndtson Japan, a global Big Six executive recruitment consulting company.

Whenever I read a news item regarding Korean corruption, I have mixed feelings. Usually, the article is based on the latest finding by a well-meaning NGO that focuses on the corrupting influence of big business on government without adequately addressing the root causes or even the breadth of corruption. Korean corruption doesn’t limit itself to envelopes and car trunks of cash being paid by business people to government officers.

So one may ask oneself, “Can Korea end its many forms of corruption?” That is the essential question, and the obvious answer is “no.”

I don’t mean that as a cynical observation. Rather as much as I recognize Korean corruption having greatly decreased from its much higher levels of 30 years ago, the nature of Korean society precludes corruption from being significantly reduced from present levels.

When I was a Peace Corps volunteer in the Korean countryside in the 1970s, virtually everyone lived in poverty by U.S. standards. Some lived in squalor, but the overwhelming majority lived simply and frugally. Those who were considered well-off at that time and place would nonetheless have been considered to be poor by American standards. However, the relatively well off often had an attitude that could be haughty given that their well-being was measured in the context of their villages and towns.

At the other end of the scale, Korean public servants were paid ridiculously low wages, as is the case in many developing countries. They actually needed outside income to live relatively comfortably and send their children to schools and universities. Often, the only plausible means for this large societal segment was to receive “gratuities.” One could normally count on having to pretty consistently pay 10 percent to get various matters handled. Eventually, the Korean government realized that low public sector wages were a poor value.

Today, Korean public sector workers overall get decent wages, steady employment and superior retirement benefits – so much so that the competition to get these jobs often even by over-qualified applicants is quite severe.

In any case, wealth, which many people may assume to be the end goal of corruption, is only relative. Rather, social power, as defined within one’s social context, is the real corrupting influence. And the corruption is not limited to government officials and business tycoons. NGO executives, particularly when the left wing is in power, find themselves in privileged positions and, unsurprisingly, as we witnessed under Presidents Kim Dae-Jung and Roh Moo-hyun, there was a 10-year spike in corruption involving NGOs.

If corruption were measured by money or goods, then we might consider a limit on luxury handbags and gold watches. But the fact is, on the other extreme, if someone has 10 gold watches and two dozen luxury handbags, there will be a quest for even more. One can say the motivation is greed, but it’s obviously not greed for even more handbags and watches. More likely, these well-off individuals are driven by envy of anyone else possessing the same or a greater number of goods newer or higher quality or status.

The fundamental problem is that being a member of Korean society is very much a status-conscious undertaking, partially based on insecurity as to whether any individual or family truly deserves its presumptive ranking.

What is less controversial is whether a Korean is in possession of enviable goods or amounts of money. And to make matters even more competitive, success, achievement and social ranking are more narrowly defined in Korea than in many advanced societies.

Consequently, once an individual or family feels secure that they are not in danger of being left behind, they immediately recalibrate their insecurity so as to try to catch up to, if not lead, other people in the next higher levels of society.

Ergo, my conclusion is this: Some improvements in reducing corruption will likely be made by new legislation, regulations, enforcement, or the likes. But until Koreans essentially ease up on themselves and learn to be happier with who they are and what they possess, envy and insecurity will drive otherwise intelligent individuals to participating in foolhardy acts, including corruption.

So can corruption be effectively reduced in large measure from present levels? Perhaps. Will we see substantial reductions? I’m doubtful.

On the other hand, Koreans have surprised both the world and themselves many times over. At the same time, the causes of corruption rest on the bedrock of Korean cultural and group psychology fundamentals. At best, I can only hope matters may improve over time. And who knows? They just may.

* The author is president of Soft Landing Korea, a business development firm, and an alliance partner of Odgers Berndtson Japan, a global “Big Six” executive recruitment consulting company.

Suffer the Korean voter.

No matter which direction the electorate turns, the choices seem to be disintegrating with each passing day.

The presumptive first woman president, conservative Park Geun-hye, has watched her chances for election fall just short of going down in flames. First, there were the corruption scandals among her campaign organizers that did a brilliant job of reminding folks that Ms. Park comes along with all the sordid baggage of the conservative camp. Then her belated apology to the victims of her father’s excessive abuses of power as president, which came across as too late and too cynical as a means to prop up her sagging polls numbers. And now, there is the least-expected development – major infighting in her campaign, as a result of Ms. Park trying to widen her appeal to the anti-Park family Jeolla region.

During the recent holidays and at a relative’s wedding, I talked with my in-laws, who have generally supported the opposition camp even though they hail from arch-conservative Daegu. They are ardent Ahn Cheol-soo supporters. When I asked them about whether Ahn was truly qualified to serve as president given his absolute zero experience in government and politics, I was told that Ahn is very intelligent and that they expected him to surround himself with equally intelligent advisers.

Okay, I said, but can Ahn beat Park if Moon Jae-in is also running? Of course not, was the reply, but Moon will certainly join up with Ahn in order to beat Park; or in a worst case, Ahn will join forces with Moon.

I responded that both Ahn and Moon are exceptionally intelligent men, but no one has really tested their emotional intelligence. High IQs are often dwarfed by giant-sized egos. If this was a game of chicken to see who would succumb first and offer to join forces, we would have major blood on the highway. And so far, my dire forecast seems to be fulfilling itself.

The fundamental problem, however, may not be the individual psychologies of these leading candidates. The underlying problem is the relative immaturity of Korean democracy that lacks strong political platforms on which candidates stand and for which they volunteer to support. Instead, we have strong personalities that form cliques with lesser politicians. And surrounding these cliques are many hopeful hangers-on who have much to lose should their candidate bow out and support another candidate.

These low-profile power groups place huge amounts of pressure on their candidates that often preclude the politicians from being adequately flexible enough to do the right thing for overall good of the country, or to risk taking turns holding power, by chancing deals where this year’s dominate candidate will support the subordinate candidate during the next major election.

In some ways, one may say that the candidates are figureheads for large vested interest groups that may not actually be all that different on policies but fiercely competitive to gain power. Picture if you can, a three-team rugby match with scrums made up from three teams. The primary difference is one cannot easily see the whole team but only the team captains in these scrums.

Sadly, most of the electorate would very much like to see a change from the current administration of corrupt conservatives who overly favor chaebol and seem incapable to adequately serve the rest of society – regardless of their actual intentions. At the same time, the so-called progressives are proving to be remarkably unreliable and possibly implausible.

But right now, the electoral choices look much less appealing than they did even a month ago. The only person who has proven to be universally popular in Korea these days is, of course, Psy. I joked with my in-laws that perhaps he should run for president. The more I quipped about this outrageous idea, the more practical it seemed, much to my surprise and dismay. But consider the following:

First, Psy does not have a cadre of hangers-on, expecting political spoils. Sure, some want to share in the current limelight. But Psy is not closely affiliated with any political camp.

Second, Psy has as much experience in governance as Ahn Chol-soo. The two men share rock star-like fame. But if only because fame is more recent, Psy seems to be handling his popularity better, recognizing that while his global recognition is well earned, his fame is also a bit of a fluke.

Third, across political lines and generations, Psy is someone that almost everyone in Korea is proud of.

Fourth, Psy has proven exceptional leadership around the world in motivating hundreds of thousands of people to do the horse dance.

Fifth, if elected, we could have one of the most amazing North-South summits. Kim Jong-un is about the same age, size and build as Psy – and has only a year or two more of political experience. What we could be witnessing would portend the future of a unified Korea. Eventually we may even see a “cool” walk-off on live television. We could see who has the better moves, postures and body language – with and without sun glasses.

While I’m not genuinely sincere about a Psy presidential candidacy, we need to also look at where are today. If the election were to be held today, we might expect low voter turnout with the conservatives retaining power as those who desire stability are more likely to turn out in greater numbers than the disheartened idealists who are looking for genuine change in governance.

But it is still a long, long while in political time until the December elections, so matters could very well turn upside down quite unexpectedly. Perhaps Psy entering the fray on one level or another is just what this election needs.

* The author is president of Soft Landing Korea, a business development firm, and an alliance partner of Odgers Berndtson Japan, a global Big Six executive recruitment consulting company.

Georgy Toloraya considers the implications of Russia’s recent decision to forgive 90% North Korea’s 11 billion dollar debt (USD). According to reports, the remainder will be transferred to the Russian Vnesheconom bank account at the North Korean Bank of Foreign Trade, to be used for projects that will promote the development of educational and health care systems and the energy industry. Toloraya notes that the absence of the debt problem will make financial arrangements for future projects, like the proposed gas pipeline, easier, but that the fate of such projects now depends on Seoul’s position, not on Pyongyang’s credit rating.

http://nautilus.org/napsnet/napsnet-policy-forum/roadblock-removed-the-issue-of-north-korean-debt-to-russia-settled/

Sometimes a girl has gotta do what a girl’ gotta do…

I doubt this apology by itself is going to put the matter behind her, but Park is suddenly playing catch-up when after the past 5 years she has been essentially the presumptive next S Korean president. Still, she has more than once come from behind, so now the presidential race is really getting to be remarkable.

Ahn is by far the most charismatic of the Big Three contenders, but has never served a day in an elected position. He claims that to be an asset, but many business people who wearied through the 5 years of Roh Moo-Hyun rule are less impressed with his leadership ability than his ideas. During Pres. Roh’s tenure, lots of good and loopy ideas where put into effect. These initiatives were a bit unnerving for conservative business types. But over time, the business community soon realized that whatever was put in effect was rarely followed up by the Roh government, given its remarkably poor administrative skills.

Moon may appear to be bright and almost as charismatic as Ahn, but he was part of the same harebrained Roh administration. He has the right pedigree, and like Ahn, he could fulfill the general populace’s desire for change. But he has to convince voters he will be able to do a better job than Roh in running the country.

Meanwhile, as much as Park is the conservatives’ sweetheart, last week’s bribery scandals remind the populace just who are the conservatives, regardless if the Iron Princess is at the helm. On the other hand, women tend to be less corrupt than men politicians – regardless of party affiliation, so Park is as good as the Saenuri party has to offer.
Anyway one may loot at it, this political race is proving to be much more interesting than recently anticipated.

Park apologizes for suffering caused by late father’s rule
朴 “아버지 무덤에 침 뱉기를 원하는건 아닐 것”

YONHAP
Korea JoongAng Daily
Sept 25, 2012

Click here to read article.

Park ceding popularity as election nears, poll shows
In two-way race, Saenuri candidate seen as losing to Ahn
심상찮은 박근혜 지지율, 2주새 무려…

By Shin Chang-un, Lee Eun-joo
Korea JoongAng Daily
Sept 24, 2012

Click here to read article.

I’m not yet convinced how this restarts foreign direct investment clock, but it is nonetheless noteworthy.

Roadblock Removed—The Issue of North Korean Debt to Russia Settled
Nautilus Peace and Security (NAPSNet)
June 29, 2012

Click here to read article.

From betrothals to presidential elections, Korea’s regionalism has been a major factor in Koreans’ decision making. But this is one of the first articles I have come across how regionalism affects consumer product selection. While the below comes as no real surprise, it is interesting to get some hard numbers on this phenomenon.

Regionalism takes toll on F&B sales
Ice cream, noodles and alcohol affected by local loyalties, baseball teams
By Kim Jung-yoon
Korea JoongAng Daily
Sept 13,2012

Click here, to read article.

Tom Coyner
Korea JoongAng Daily
Sept 17,2012

Most companies and entrepreneurs are dealing with difficult times without even grasping the fundamentals of our condition. Most of us are operating under the delusion that we are experiencing a particularly tough recession. The fallacy is premised on past experiences that are clouding our view of present and future realities.

The tough truth is we have entered a new paradigm. Yet many people in both the private and public sectors are assuming current events are a heady dose of the familiar, old circumstances. But that is not the case. Around the world, we are experiencing globalization that is shaking every economy and market to its core.

This summer I traveled extensively in Ireland and the U.S., which are arguably polar opposites among responsible, developed economies, but which both face difficult economic adjustments. Comparing what I witnessed in those two economies with what I see happening in Korea, plus having had extensive conversations with our partners in Japan, I have come to a sobering realization.

It may not be exactly what Alan Toffler had in mind when he coined the term “future shock,” but we are experiencing something very similar. No matter what people may have debated about globalization, it is now very much in effect. It is shaking out market inefficiencies, often in very painful ways.

Even “free markets” have had their protections removed. Regardless of governmental regulations, lesser skilled jobs are moving from advanced markets to developing nations. Companies recovering from the financial shocks of 2008 have discovered more cost-effective processes than older, more labor-intensive means through technology and outsourcing. Consequently, the recent economic rebounds have not been matched with expected re-employment.

Independent “knowledge professionals” represent more and more of the labor force. Decreasing numbers of “permanent” employees mean more reliance on multi-skilled, independent specialists on a plug-in and plug-out basis for short- and medium-term projects. This major development is becoming an increasingly common aspect of this new paradigm.

Furthermore, according to my observations in Ireland, the U.S. and South Korea, there have been steadily spreading economic disparities. In all three economies, I have seen an erosion of the middle classes, and a strengthening of the upper-middle classes and upper classes, while the lower classes are growing in size. At the same time, I have seen the middle class getting by on less, and becoming much less aggressive consumers.

On the flip side, we see in certain parts of China, Vietnam, Indonesia, Thailand, India and now parts of Africa the creation of expanding middle and upper classes. While the global economy does not operate on a zero-sum-game basis, it is undeniable that wealth is being more equitably redistributed at the expense of the traditionally advanced markets. Standing back and looking at the overall reality, there are many positive things to be said about globalization. But as an American, I can feel some real pain.

Looking at the U.S., I noticed that two years ago there was a political backlash in the form of the Tea Party movement and related reactionary forces, who issued the following demand: “I want my country back!” Most of these hand-wringers were white, middle class, middle-aged or older. I also know there are people in Ireland who look back to the days of the Celtic Tiger, hankering for “the good ol’ times.”

The harsh reality is that we are not going to get our countries back to the good old times. The world has moved on, largely removing economic boundaries and thereby creating new commercial realities. Similar observations are being made by increasing numbers of people. But what is unsettling is that none of us can completely get our heads around the scale of this change.

To put it in a way that many readers of this paper may be able to relate to, what we are experiencing today is like a form of culture shock. When experiencing culture shock, we are very well aware that we are in a state of psychological disorientation. But we can never fully understand the shock’s entirety until after we get through that phase in our lives.

The same can be said as we go through today’s massive economic adjustments. Unlike culture shock, which can last for weeks or even months, this globalized future shock is taking years and could well take decades, as various economic factors resolve themselves on a globalized scale.

Given all of this, what am I advising my sons to do?

First, keep on learning. In a sense, it doesn’t really matter what one is studying today, but it is important to keep one’s learning skills sharp for tomorrow. More than ever, today’s young people will have to reinvent themselves professionally over and over – and yet over again – during their careers.

Second, while it is important to reasonably master whatever skills you may employ to make a living, it will become much more important to be able to understand once-unrelated fields and skills to keep oneself economically competitive. The Internet can be a great exploration tool, but it can also be a trap. Too often, people use the Internet to reconfirm their current perspectives, without using the same tools to expand their understanding of new perspectives.

Finally, understand and accept that while we cannot go back to the past, the present will soon change. Whether change is good largely depends on the individual, as people can learn, not just to sink or swim, but also to surf. Of course, it’s even more important not to drown. And one way to drown is by trying to paddle back to where we once were, rather than learning how to move with the incoming tide.

* The author is president of Soft Landing Korea, a business development firm, and an alliance partner of Odgers Berndtson Japan, a global Big Six executive recruitment consulting company.