Korea Business eZine – Korean Holidays – Korea Banks – Korean President – Korea Tourist Information - Korean Consulting & Translation Service, Inc.

Welcome to the Winter 2010 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.

Breaking News: Korea Business Central Exclusive Interview - Tom Coyner, Author of Mastering Business in Korea

Korea Business Central, the premier networking site for everything related to Korea and specifically business in Korea, has recently posted an exclusive interview with Tom Coyner, the author of Mastering Business in Korea. Tom is a Seoul based management consultant who has lived in Japan and Korea on and off for over 25 years total since 1970. Hence, he has experienced first hand the changes in Japanese and Korean society and business practices over the last 40 years.

The 18 minute interview can be listened to by simply going to the Korea Business Central website and we invite listeners to share their thoughts and any additional insights or questions they may have about doing business in Korea in the comments section.

At the start of 2010, Korea assumed the presidency of the G20 (Group of Twenty Finance Ministers and Central Bank Governors) and the country is eager to use this opportunity to cement its status as a developed country. As the Financial Times recently pointed out, the presidency is a point of national pride for a country that was destroyed by war in the 1950s and only had an annual per capita income of less than US$100 in the early 1960s. Today, that figure is about US$20,000 and Korea is among the world's largest and leading exporters of manufactured products, technology and culture.

Korea will attempt to use the presidency and its status as a developing nation that became a developed one to bring both the developed and developing worlds closer together. Moreover, Korea also intends to play a leadership role in the remaking of the global economic order.

In addition, Seoul will host the annual G20 Summit in November and this will coincide with the ceremonies marking the 60th anniversary of the outbreak of the Korean War.

Korea National Oil Corp. (KNOC) purchased Canada's Harvest Energy Trust for approximately US$4 billion last October as the race between cash rich Asian companies and nations to secure natural resources picks up. The deal was the seventh largest M&A transaction in the oil and gas industry for 2009 and the second largest outbound investment deal in Korean history (Doosan Infracore's US$4.9 billion purchase of Bobcat's assets in 2007 was the largest) along with the country’s single largest oil and gas deal to date. Back in February, KNOC also bought a stake in Peru's Petro-Tech Peruana for US$450 million.

However, the Harvest Energy deal will boost KNOC’s oil output by 76% to nearly 123,400 barrels of oil per day and help to meet a government target for the producer to pump out 300,000 barrels per day by 2012 by investing some US$16 billion to increase production. The acquisition will also help KNOC to secure new oil exploration technology and additional know-how in energy development.

At the end of December 2009, a Korean-led consortium that includes Doosan Heavy Industries, Hyundai Engineering and Construction, Korea Electric Power Corporation (Kepco), Samsung and US-based Westinghouse has won a US$20.4 billion contract to develop civilian nuclear power plants for the United Arab Emirates – beating out French, Japanese and US rivals. The contract will involve the construction, commissioning and fuel loads for four 1,400 megawatt plants to help meet the UAE’s soaring need for electricity.

The win came as a surprise to many as Korea lacks political clout in the region and it will mark the first time that Korea has exported one of its nuclear reactors.

A recent New York Times article entitled Baby Boom of Mixed Children Tests South Korea is well worth reading as it provides an excellent overview of where Korean demographics and society will be heading in the coming decades. According to the article, mixed-marriages between Koreans and non-Koreans have become so numerous in some parts of the country, especially in rural or undeveloped areas, that nurses in hospitals now say that they must learn how to say "push" in four different languages.

The article further pointed out that while only about 1% of the approximately 12 million people in Korea under the age of nineteen are of mixed ancestry, this rate could rise to one in nine children by 2020 while in some rural areas, 49% of all children could be of mixed ancestry. However, the article noted that changing demographics is also prompting national soul-searching about what it means to be Korean.

Korea is home to seven of the world's 10 largest shipbuilders while the shipbuilding industry itself is responsible for about 10% of the country's exports by value. However, the shipbuilding industry is beginning to feel the headwinds from the global economic and export downturn. In fact and by December of 2009, only 337 new vessels were ordered globally - down from 2,456 for all of 2008. Moreover, the global decline allowed Chinese shipbuilders to overtake Korean shipbuilders in the number of new ship orders received and in terms of order backlogs (albeit, Chinese shipbuilders build lower cost and less complicated ships than Korean shipbuilders).

In other words, activity in Korea’s shipyards will start to decline in 2010 and could fall off sharply in 2011 and 2012. This could also lead to big job losses – especially for outside contractors as larger shipbuilders will likely reduce their dependence on subcontractors.

However, many shipbuilding firms will likely reschedule the delivery of some ships due in the coming years in order to stretch out the work and avoid large layoffs in anticipation for an order pickup as the global economy improves. Moreover, most shipbuilders remain busy finishing their order backlogs. For example, Samsung Heavy has an order backlog of US$41.5 billion at the end of the third quarter of 2010 – enough work to fill its drydocks until 2012.

Nevertheless, the news is not all bad for Korean shipbuilders. In December of 2009, it was announced that Daewoo Shipbuilding, the world's third-largest shipbuilder by revenue and tonnage, had received an order to build two oil-drilling ships for US$1.1 billion. Moreover, Korean shipbuilders are scrambling to win new orders to build offshore platforms for energy companies while the government has come up with a blueprint plan that calls for restructuring the most troubled small and medium sized shipbuilding companies and provides subsidies to encourage shipbuilders to enter new lines of businesses - such as the building of both onshore and offshore power-generating wind farms.

In fact, wind power generating equipment in particular offers Korean shipbuilders the chance to diversify as the facilities that generate energy through whirling blades uses the same principles as propellers that are used to propel ships. Hence and in August of 2009, Daewoo Shipbuilding acquired US wind turbine maker DeWind for US$49.5 million while in October, Hyundai Heavy’s new US$91 million facility in Gunsan began commercial operations and will start by building six power generators for US-based Wave Wind.

Meanwhile, Samsung Heavy has received an order to build a US$1.1 billion cruise ship that will become a floating luxury residence. The 105,000-ton ship will be called the Utopia and it will contain 200 luxury residences, a 204 room hotel, a night club, spa, swimming pool, casino and restaurants. The building process is set to begin in 2012 with a delivery targeted for 2013.

The awarding of the Utopia to Samsung Heavy shows that Korea’s shipbuilding firms which have long dominated the business of building bulk carriers, oceangoing container ships and energy platforms, are now moving into the business of building more complex ships that have long been built by European shipbuilders. In other words, they are moving up the value chain and diversifying.

Despite the lack of any real historical or cultural ties, the Philippines is the home of the largest population of Koreans in Southeast Asia and the eight largest population of Koreans outside of Korea - just behind Australia and the post Soviet-state of Kazakhstan. In fact and according to the Korean Ministry of Foreign Affairs and Trade, there are officially 115,400 Koreans living in the Philippines but this number might actually be much higher as many Koreans may be living in the Philippines on tourist or other temporary visas for long periods of time.

Moreover, the large-scale migration of Koreans to the Philippines is a relatively recent phenomenon as only a few Koreans settled in the country during the pre-colonial, colonial and American commonwealth eras or came with the Japanese Army or came as “war brides” after the Korean War. By the 1980s as the Korean economy grew, Koreans began coming to the Philippines in larger numbers as Korean manufacturers began to establish a presence in other countries with lower labor costs. However, it wasn’t until the 1990s and 2000s that larger numbers of Koreans came to the Philippines to set up import-export businesses along with restaurants and other businesses to cater to the growing number of Koreans either living in or visiting the country.

Furthermore and given the relative low cost of living and education in Philippines, many Koreans moved to the country in order to learn and study English. In fact and from 2004 to 2008, some 102,134 Koreans studied in the Philippines - an average of 20,427 students per year or 1,702 students per month. An additional 13,937 Koreans were granted student visas during the same period in order to enroll in degree courses and Koreans are now by far the largest group of foreigners studying in the country.

The country’s warm climate and short distance (only 4 hours by plane) from Korea has also attracted large numbers of Korean tourists. According to the Philippines’ Department of Tourism (DOT), a total of 611,629 Korean tourists visited the Philippines in 2008 compared to 578,246 Americans – making Koreans the largest tourist group in the country. In fact, there are even structured ESL tour programs that allow Koreans to both learn English and to travel around the country.

Meanwhile, Korean retirees are also increasingly drawn to the warm climate of the Philippines, low cost of living and special incentives given by the country’s government to attract foreign retirees. The Special Resident Retiree's Visa (SRRV) is a non-immigrant multiple-entry visa that has become popular with younger Korean entrepreneurs as it allows foreign retirees to enjoy permanent residency status, special tax privileges and other benefits such as bringing a spouse or children to the Philippines. Applicants only need to deposit US$50,000 into a local bank (convertible into a condo, business investment or golf or country club share) if they are in the 35-to-49 age bracket, US$20,000 if they are 50 years old or older or US$10,000 for any foreigner with a monthly pension of at least US$800 a month. Hence and by late 2009, there were 14,962 foreigners holding the SRRV visa and of these, 3,231 or 21.5% were Koreans – making them the second largest group behind the Chinese (who account for 4,863 or 32.5% of SRRV visas).

Today, Koreans living in the Philippines provide a significant boost to the local economy – spending over US$1 billion per year. In addition, a number of “Korean Towns” have sprouted up around Metro Manila while outside of the capital many Koreans now reside in or own businesses in major provincial cities such as Bacolod, Baguio, Cebu, Davao and Subic.

There are two issues that have a strong impact on Korea-based international operations — non-Korean executive-level management and Korean overseas teams (ju jae won) - and its members of this later group who sometimes get overlooked by management.

Firstly, most Korean overseas subsidiaries have Korean managers assigned to the host country and the general term for these representative employees, whether they are at the senior executive level or just the middle management level, is ju jae won.

Executive ju jae won are usually key members of the executive management team — the CEO, COO or CFO. A second layer of Korean management will serve as managers or coordinators. Roles vary with each company, but most often coordinators will act as key liaisons between Korea and the subsidiary.

To be eligible for their first overseas assignment, most new ju jae won have worked for their company for about 6-8 years. They also know their company procedures very well and they have been successful in their jobs. Moreover, they often were assigned to the headquarters’ overseas support teams, have traveled extensively to subsidiaries and were educated outside Korea.

So where is the challenge? New ju jae won are skilled and accomplished in Korean style business operations, norms and practices. However and when they are assigned to an overseas subsidiary, they will find that norms, practices, expectations and laws differ. Moreover, their responsibilities and assignments in the subsidiary may be in a department or a specialty in which they had little or no experience in when they were back in Korea.

Be proactive. Require all new ju jae won to get intensive training and coaching in management skills needed for your market, region and subsidiary. Expecting the new ju jae won to just pick up needed skills is like throwing someone into the deep end of the pool for the first time and expecting them to swim. Support your Korean teams by providing them with training.

By the way, most Korean executives, both in Korea and with overseas Korean subsidiaries, have had several postings in overseas markets and some have been overseas for most of their careers. Over the years as ju jae won, they polished needed interpersonal and management skills while they learned the subtleties of many different markets. I still see this group as still needing support, but a different level of support from the new junior ju jae won.

Supporting ju jae won and non-Korean executives is a must for all Korean-based organizations. This support must be more than Korean-Western cross-cultural understanding. Mentoring and coaching are the keys. Experience and skills vary, so each program must be tailored to address individual needs. More significant, mentoring requires the Coach to understand both Korean and western business practices, not to mention the specific Korea-based firm and the industry in general.

Individual names are almost always our first point of reference when we meet someone for the first time and could easily be the first point of confusion if the person is from a culture different from our own. After all and in some cultures, the first name is not always the given name and could in fact be the family name.

In Korea, a name is made up of three Chinese characters and each character is pronounced as a single syllable. And while Westerners say their given name first and their family name last, Koreans say the family name first and then the rest of their name. Hence, the first character is the family name and the rest of the characters are the given name. However, the last name could also consist of two characters (around a dozen or so two-syllable last names exist in Korea although they tend to be uncommon) and while there are no middle names in Korea, many Koreans have a given name that includes a generational name syllable (although this practice is on the decline among younger generations) and an individually distinct syllable. In addition, married women usually keep their family names after marriage while children will inherit the father's family name.

Additional confusion for non-Koreans will be the fact that while there are a great variety of Korean given names, there is a limit to the number of Korean last names. In fact, there are only about 250 last names in all of Korea with the last names Kim, Lee and Park accounting for about 45% of all Korean family names! In fact, the five most common last names in Korea (more than half of the Korean population) are used by over 20 million people in the country and as you can imagine, this may lead to some confusion for non-Koreans as there may be several Koreans at the same company with the exact same given and family name.

In addition, there are strict norms governing names in Korean society and it is generally considered rude to address someone by their given name – especially if the person is older (However and among children and close friends, using a person’s birth name is common practice). However, there are a variety of substitutes and addresses used in place of someone’s actual name. Adults with the same status may address each other by their full name with the suffix ssi (氏, 씨) while someone with a higher rank is addressed using the name of their title - often with the honorific nim (님) added (In addition, the full name of the person may also be added.)

Understanding Korean names and how to address someone in Korea will go a long way towards making a good first impression during your first trip to Korea or when you meet Koreans for the first time.

Knowing a few basic phrases or words will go a long way in aiding one’s stay in Korea and help to build the personal relationships and rapport required for successful business and personal relationships in Korea.

Below are some common accounting or office related terms that an expatriate or a business traveler may encounter while doing business in Korea. Recognizing the appropriate character and knowing its correct pronunciation will certainly go a long way in helping a visitor find what he or she needs while in an office in Korea:

Korean shipbuilder Hanjin Heavy Industries and Construction has invested US$1 billion to build a shipyard near the former American naval base in Subic Bay, the Philippines, and is planning to build a US$2 billion shipyard on the island of Mindanao in the southern part of the country that will be ready in time for the global economic recovery.

In 2009, Chinese firms made seven of the 10 largest Asian outbound oil and gas acquisitions while Korea had two of the 10 and India had one of the 10. (1)

Korea is the world’s fifth-largest oil importer and like Japan, it must import nearly all of its energy. On the other hand, China is 70% sell sufficient in energy due to coal deposits.(2)

In 2009, the turnaround in Samsung Electronics Co.'s chip and display businesses helped the company to recover from operating losses earlier in the year and to push its market capitalization past that of Intel Corp.'s for the first time. (3)

In addition, Samsung Electronics Co.’s revenues are also closing in on Hewlett-Packard’s roughly US$110 billion in annual sales. They have achieved this by making both the components for electronic products and the actual devices sold to consumers - a structure and a strategy similar to that of IBM’s in the 1980s. (4)

Moreover and by pushing into new areas such as health care and home energy products, Samsung aims to have US$400 billion in revenue, the current level of Wal-Mart Stores, by 2020. (5)

Three years ago, Samsung surpassed Sony Corp. as the world's largest TV maker; two years ago, they surpassed Motorola Inc. as the second-largest cellphone maker after Nokia Corp.; and today, they are battling another South Korean firm, LG Display Co., to be number one in LCD sales. (6)

In Septembet of 2009, Samsung launched an online application store for cellphone users in the France, Italy and the UK. Although the 3,000 or so applications available is well below the 75,000 or so available for the iPhone, this number is expected to increase rapidly and similar online stores are planned in 30 countries by the end of 2010. (7)

Toward the end of 2009, NHN’s Naver accounted for 66% of search engine queries in Korea, Daum accounted for 21%, SK Telecom’s Nate site accounted for 6%, Yahoo Korea accounted for 3% and Google accounted for ony 2%. (8)

In December of 2009, Google changed the simple look of its home page in South Korea, the first time they have significantly altered the site’s appearance to adapt to local market conditions. (9)

1) “Asian rivals race to acquire natural resource companies.” Asiamoney. October 2009.

2) “Resource-hungry Seoul snaps up Harvest Energy for C$4.1bn.” Financial Times. October 23, 2009.

3) “Samsung Seeks Some iPhone Magic: Korean Electronics Giant Tries to Encourage 'Apps' for Its Phones, TVs and Other Devices.” Wall Street Journal. October 14, 2009.

4) "Samsung's Size Brings Big Challenges: Company Walks Tight Rope Between Its Interests and Those of Other Electronics Makers.” Wall Street Journal. November 12, 2009.

5) "Samsung's Size Brings Big Challenges: Company Walks Tight Rope Between Its Interests and Those of Other Electronics Makers.” Wall Street Journal. November 12, 2009.

6) "Samsung's Size Brings Big Challenges: Company Walks Tight Rope Between Its Interests and Those of Other Electronics Makers.” Wall Street Journal. November 12, 2009.

7) “Samsung Seeks Some iPhone Magic: Korean Electronics Giant Tries to Encourage 'Apps' for Its Phones, TVs and Other Devices.” Wall Street Journal. October 14, 2009.

8) “Google Tailors Korean Home Page to Local Tastes.” Wall Street Journal. December 11, 2009.

9) “Google Tailors Korean Home Page to Local Tastes.” Wall Street Journal. December 11, 2009.

10) “South Korea: Country Profile.” Euromonitor. December 4, 2009.

11) “Job Losses Reach 11-Year High in 2009.” Korea Times. January 13, 2010.

12) Oanda (http://www.oanda.com)

13) “South Korea: Country Profile.” Euromonitor. December 4, 2009.

14) “South Korea: Country Profile.” Euromonitor. December 4, 2009.

15) “Foreign Net Buying Hits Record High.” Korea Times. December 30, 2009.

Steven's Weblog Nojeok Hill: My View from the Top - Korean Business Drivers

Steven's Weblog Nojeok Hill: My View from the Top - Bragging Rights