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Success eZine – Spring 2009
Korea Business Success eZine – Spring 2009
Welcome to the Spring 2009 issue of the Korea Business Success eZine of Korean Consulting & Translation Service, Inc. We hope you find this information helpful to your business in Korea and with Koreans everywhere. Table of Contents
Welcome to the new look of the Korea Business Success eZine. We’ve gone deeper into business topics, with special emphasis on important news for the companies interested in business in Korea, as well as practical insights and lessons. We look forward to feedback, both friendly and otherwise, so that we can improve it further in the future. [ top ] Cisco Systems, the world's largest networking equipment maker, recently announced that it will invest US$2 billion in South Korea over the next 5 years. Specifically, Cisco will build a new US$1.1 billion research and development center that will specialize in intelligent and eco-friendly urban planning. In addition, Cisco will form a US$40 million fund to invest in IT venture companies in Korea in the first half of this year and invest or lend about US$500 million worth of telecom equipment and IT infrastructure to SMEs over the next five years. Much of this investment will focus on promising firms in the information, communications and green technology sectors. Since 2000, Cisco has invested about US$700 million in Korea and the latest announcement bodes well for the current administration's plan to turn the country into a regional financial and business powerhouse. [ top ] The New Capital Market Act: Korea’s Big Bang Having taken effect last February 4th, the Financial Investment Services & Capital Market Consolidation Act (FSCMA) is expected to cause a “big bang” in Korea’s financial services industry by breaking down the barriers between financial firms involved in shares, futures and asset management. By consolidating 14 capital market-related laws into one, the Act is intended to deregulate the market and help local financial sector players develop into global investment banks with the ultimate goal of creating a home grown Goldman Sachs. In fact, experts predict the major beneficiary of the Act will be brokerage firms who can now create any new financial product except ones that are clearly banned and (midway through the year) they will be allowed to introduce settlement and payment services (currently offered only by banks). Hence, some are predicting that brokerages firms may ultimately become bigger than banks over the long haul. Furthermore, the whole Korean financial market will experience a huge change in the near future with competition intensifying and a complete realignment of financial investment firms, banks and insurance companies occurring. [ top ] Tourism Soars (Especially from Japan) on Won’s Decline The appreciation of the Yen combined with the depreciation of the Won has turned Korea into a shopper’s paradise with the number of Japanese tourists visiting Korea surging 52% in December and 55% in January. In fact, visitors from Japan accounted for 39.1% of the total number of foreign tourists in January with 58.1% or 138,105 of them being women – an increase of 94.2% from 71,101 a year ago. Interestingly enough, 14.7% of Japanese female tourists were in their 20s. Meanwhile, the usual gap between visitors to and from Korea has narrowed with overall visitors in January to Korea increasing 25.3% to 607,659 while the number of Koreans going abroad fell 38.6% to 812,901. In addition, the number of Korean visitors to Japan fell 52% - the biggest drop since 1991. To cash in on the boom, airlines in both countries have added flights and retailers in big cities are now hiring Japanese speaking workers and are putting up advertising signs in Japanese. Meanwhile, Korea's national tourism agency has launched a campaign in Japan entitled: "Visit Korea Now - Double Your Joy at Half the Cost." Nevertheless, the current tourism boom will not completely offset Korea’s exposure to the global export downturn but it will certainly help to ease some of the economic pain coming from this downturn. [ top ] Belt Tightening Instead of Layoffs Amidst the steady news of layoffs around the world, Korea Inc. has largely decided to take a different and more collective approach to cope with the global downturn. This approach includes voluntary pay cuts, work hour reductions and bonus returns to other belt tightening measures such as reducing travel expenses by having executives fly coach. Notable examples have included:
In addition, leaders of Korean Inc., unions, civic groups and government ministries met back in February to create a non-legally binding “grand bargain for social utility” where employers agreed to not fire employees, unions agreed to accept salary freezes or cuts while the government agreed that it will offer tax breaks to firms that preserve jobs. Such practices are in line with the centuries-old Korean notion of putting community ahead of individual achievement – beliefs that turned Korea into one of the 20th century’s great economic miracles and helped it to overcome past crises. [ top ] 3. Feature Article: The Green New Deal Last January, the Korean government announced the so-called "Green New Deal" - an ambitious program that will invest more than 50 trillion won (US$36.4 billion) over the next four years in so-called “green” projects. The plan is projected to create 960,000 jobs over the next 4 years and 3.5 million jobs over the next 10 years. Furthermore, exports from existing and newly created growth industries are projected to increase by 18% annually and reach US$900 billion by 2018. To achieve these ambitious targets, the plan has been divided into four major categories:
The current plan’s centerpiece will be the redevelopment and restoration of Korea’s four biggest rivers – the Han, Nakdong, Yeongsan and Geum. As part of the restoration plan, about 18 trillion won (approximately 36% of the total Green New Deal budget) will be spent to clean up the rivers and rebuild the surrounding areas in order to prevent floods and minimize the impact from droughts and create an estimated 280,000 new jobs. In addition, the government plans to double its R&D investment in green technology by 2012 with new investments being concentrated in 27 key technologies that were selected based upon their strategic importance and potential contribution to the country’s future economic growth. These investments will include expanding research into green technology and creating the infrastructure for it and the transformation of existing industries into green industries. When describing the new plans, Kwon Tae-shin, minister of the prime minister's office, recently told the Financial Times that “we know that the old strategy of semiconductors, mobile phones, cars and ship-building cannot continue. This is the biggest policy paradigm shift." With such an ambitious policy shift planned, Korea is no doubt on track to be at the forefront of the coming green revolution. Thus, foreign businesses and investors looking to cash in on the coming global green revolution will need to seriously consider looking at Korea both as a potenial source of new green technologies and as a destination for both green investments and new green technologies. To read more about Korea’s “Green New Deal,” the Korean Herald has published a lengthy series of articles entitled “Green Growth: Korea's New Strategy.” [ top ] China has long had a close relationship with Korea and a Korean ethnic minority – many of who trace their ancestry to late 19th and early 20th century migrants. In fact, several Tang and Ming dynasty generals were ethnic Koreans and so was the composer of the People's Liberation Army March. Today, it estimated that there are over 2.7 million ethnic Koreans living in China with approximately 1.9 million of them citizens of China and the remainder being expatriates from either North or South Korea. Most of the ethnic Korean Chinese citizens speak both Mandarin Chinese and Korean and are concentrated in Northeast China and in the Yanbian Korean Autonomous Prefecture. Since the 1980s, many of these Yanbianese Koreans have chosen to seek employment in Korea where a large portion of the labor market consists of legal and illegal Yanbianese workers who are prepared to do jobs that Korean born workers tend to avoid with Yanbianese men taking jobs on construction sites or in factories and Yanbianese women taking jobs in restaurants or in private homes as housekeepers. However in recent months, the numbers of Yanbianese workers coming to Korea has fallen with many of those already in Korea choosing to return home to China due to the Won’s depreciation. Meanwhile, China’s economic boom over the past two decades along with Korean investment in the country has attracted a new influx of Koreans into China – particularly to Beijing, Qingdao and Shanghai. In fact, up until recently, there were over 100,000 Koreans living in the Shanghai area alone although the current economic downturn has significantly decreased this number as Korean companies send managers and executives or their families home. Nevertheless, the 1997 financial crisis saw waves of laid off Korean workers set off for China in search of new business opportunities and to this day, Korean entrepreneurs continue to move to China where they see opportunity – especially in China’s second tier cities where consumption and development will continue to rise. Hence, a new Korean Diaspora of entrepreneurs is fast rising in China to the benefit of both countries and their economies. [ top ] When writing a Korean person’s name, red ink should never be used as Koreans, the older generation in particular, have traditionally had a taboo associated with the use of the color red for writing names. In order to understand this so-called “red complex,” one must understand 20th century Korean history. During the Japanese occupation of Korea when a census register was adopted, the Japanese would cross out the names of the dead and of independence fighters in red. Furthermore, Korea went through one of the bloodiest conflicts in the 20th century where red was seen everyday as blood spilled in battle and as the symbol of communism. When the war finally ended and Korea adopted a staunch anti-communism national policy, red was used to describe communists and the color was viewed with disapproval. Today, this so-called red-complex is fading fast as the later half of the post war generation matures and takes their place in Korean society. However, it is important to remember that there are occasions where you may interact with older Koreans from the Korean War and Japanese occupation generation for whom the “red complex” was part of their every day lives at some point. Hence, be sure to have business cards with your name printed in a color other than red and to be careful when using red pens and when creating PowerPoint presentations or other written materials. Doing so will go a long way to avoid any unintended gaffes or awkward situations. [ top ] In Korea, business is a very personal endeavor and it will take time to build up a personal relationship with your business partners and colleagues. Hence, assigning the right person to work for or represent your business in Korea will be critical to its success while assigning the wrong person could be disastrous for it. Nevertheless, assigning the right person to Korea does not necessarily mean they will avoid all of the cultural pitfalls of doing business there. Hence, below are some basic tips to keep in mind in order to select the right person to send to Korea and how to avoid some of the potential cultural and etiquette pitfalls once there:
Keeping the above points in mind will greatly aide in building up the personal relationships that are the key to success when doing business in Korea. And remember, if you do not know or are unsure of the answer or what to do in a particular situation – ask someone who does. [ top ] Knowing a few basic phrases or words will go a long way to aiding a non-Korean’s stay in Korean and help to build the personal relationships and rapport required for successful business and personal relationships in Korea. Below are some common titles that a business traveler may encounter while on a business trip to Korea. With hierarchy and rank being of the utmost importance in Korean business and corporate culture, recognizing the appropriate title and knowing its correct pronunciation will go a long way to ensuring a smooth “getting to know you” phase:
Source: LifeinKorea [ top ]
1) “Research
and development: Rising in the East.” The Economist (January 14, 2009). [ top ]
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