LA LETTRE DU KOTRA Juin 2001
Centre Coréen du Commerce Extérieur et des Investissements
KOTRA PARIS - 36, avenue Hoche - 75008 Paris Téléphone : 01.42.25.09.57 - Télécopie : 01.42.25.09.50 - email : kotra@wanadoo.fr M. Seong-Kuk Hong - Directeur Adjoint M. Frédéric Claveau - Chargé de Mission
S O M M A I R ERELATIONS INTERNATIONALES ET BILATERALES French film fest to feature hits, classics U.K.-Korea relationship flourishing in hi-tech construction, academics ROK May Become Richer Than France,Candada,UK,Switzerland by 2010 EU Chamber of Commerce offers tips on South-North Korean business ties Foreign firms give helping hand to drought victims POLITIQUE ECONOMIQUE, MACRO-ECONOMIE ET RESTRUCTURATIONS How They stacked up - Korean Industrial Rankings for 2000 Economy to grow 5.4% in 2002, KERI forecasts 3 Scenarios for Korean Economy ROK Urged to Create Global Entrepreneurs Korea boasts 297 globally competitive items Government to stimulate facility investments Gov't rolls out red carpet for foreign investors What Foreign Firms Contribute to Korea Foreign Investment Firms Rush to Korea In what ways is foreign investment decided and how can we increase it? KOTRA discusses Western vs. Korean business European businesses called on to help with World Cup games SECTEURS ECONOMIQUES Management, questions interculturelles The 7 Secrets of Doing Business in Korea Globalization of Standards Cross-Cultural Understanding Key to Business Success Managers Lack Risk Management Skills Turning the Intellectual Property Rights tide in Korea Government officials accept foreigners' union 'fait accompli' Surenchères syndicales en Corée du Sud - Le mouvement social ne bénéficie plus du soutien populaire. Finance, banque et bourse Strengthening Shareholder Rights FTC Plans for Strict Investment Ceiling System Technologies de l'information Korea An International IT Powerhouse in the Making Korean online game maker to start pilot service in Italy Services, hotellerie, luxe Foreign Hotel Managers Comment on Their Korean Experience Marché des produits haut de gamme - Les entreprises coréennes doivent investir Biotechnologie Biotech Evolution Emerging in Korea Biotech startups pursuing M&As Biologie : Vieillissement - la piste sud Transport : construction navale Korea, EU Fail to Straighten Out Differences in Shipbuilding Talks Korea, EU launch talks on shipbuilding today BTP Lightening tax burden on SOC investments Large construction firms begin hiring new employees Défense European consortium voices willingness to meet Seoul's offset requirements for fighter project ENTREPRISES CORÉENNES The Chaebol at the End of an Era LG forms dye alliance with German firm LG-Philips Joint Venture to Be Based in Europe BT May Stay With LG Telecom GM to present takeover bid for Daewoo Motor today General Motors, la main sur Daewoo - L'américain s'apprête à acquérir le constructeur automobile coréen. Foreign investors interested in Hynix DRs Doosan to sell stake in OB to European firm ENTREPRISES FRANÇAISES Carrefour poursuivi en justice par la Commission de la concurrence Renault Samsung Going its Own Way Renault Samsung sales top 100,000 units Renault Samsung SM5 reaches sales milestone
FRENCH FILM FEST TO FEATURE HITS, CLASSICS
A broad suite of the latest French films will hit the local screens in an upcoming festival, offering a rare glimpse into the time-honored cinematic traditions and prowess of the European country. The French Embassy in Seoul will hold the 1st French Film Festival June 25-29 at Central Cinema complex in southern Seoul, showcasing 12 standard movies by established directors and six short films directed by up-and-coming artists.
The movies to be shown were chosen because they were deemed to best represent not only the artistic aspects of the French filmmaking industry but also its popular, commercial aspects, organizers of the event said.
Artistically acclaimed movies in the collection include "La Chambre des Officers" and "Selon Matthieu," which were invited to the competitive divisions of the Cannes Film Festival and the Venice Film Festival last year, respectively. The buddy movie "Roberto Succo" competed in the Cannes festival this year.
"La Chambre des Officers" portrays an injured military officer who is hospitalized for five years and finds the meaning of life and his self through the friendship with his long-time hospital mates.
Directed by Francois Dupeyron, the 135-min epic drama was invited to the competitive division of the 2001 Cannes Film Festival. Another centerpiece of the French film collection is "Le Placard," noted for its popular success last year. Surpassing the Hollywood-made "Unbreakable" in box-office sales, the 2000 movie attracted 2.5 million viewers in just two weeks for its ingenious combination of creative subjects.
In the comic drama, the male lead Daniel Auteil plays an accountant at a large corporation who is to be laid off but pretends he is gay in order to avoid being fired.
The film festival will also treat Korean viewers to "La Verite si je mens 2," one of France's most successful blockbusters in recent years. On the heels of the mega-hit original version of the same name, which attracted 5 million viewers in 1997, the sequel depicts the friendship and troubled lives of five Jewish merchants in Paris who are driven to the edge due to poor business. The sequel, produced and released in 2000, remained at the top of the box-office chart for three weeks with a total of 8 million viewers.
"In recent years, Korea and France have laid a solid foundation for cooperation and future partnership in the film industry as the powerhouses representing Asia and Europe, respectively," said Daniel Toscan du Plantier, president of Unifrance, a public corporation devoted to promoting and exporting French films, in a statement.
The festival will also serve as an extended industry forum to share information and strengthen the networking efforts of the two countries in the film industry.
Scheduled to join the Seoul event is the 30-member French delegation consisting of high-profile industry officials, directors and actors and actresses, including director Gerard Corbiau, actor Benoit Magimel and actress Nathalie Baye
Magimel, who starred in two of the movies in the Seoul festival collection, "Le Roi dance" and "Selon Matthieu," was honored as best actor during the Cannes festival this year.
In order to reserve tickets, all priced at 5,000 won per movie, check out www.central6.com or call 02-6282-1900~5 for ARS information services. (khjack@koreaherald.co.kr) By Choe Yong-shik Staff reporter Source : Korea Herald 2001.06.16
U.K.-KOREA RELATIONSHIP FLOURISHING IN HI-TECH CONSTRUCTION, ACADEMICS
Following is a message from British Ambassador Charles Humfrey on the occasion of the official birthday of the Queen Elizabeth II. - Ed. In June the British Embassy celebrates the official birthday of Her Majesty Queen Elizabeth II, by holding a reception in her honor. In the United Kingdom, the Queen's birthday is marked by a parade near to Buckingham Palace. When I called on the Queen before my departure for Seoul last year, she still had happy memories of her state visit to Korea in 1999. All those involved were touched by the warm welcome from the Korean people. The U.K.-Korea relation ship is flourishing, as today we are developing more and more areas of cooperation. One of these is high technology, where many British and Korean firms are working together. In September we shall host the second U.K./Korea High Technology Forum, bringing together many such businesses.
Many U.K. technological strengths mirror the priority sectors identified by the Korean government for Korean industry. We are developing cooperation in software, e-commerce, telecommunications, digital broadcasting and biotechnology, to name but a few sectors.
Another area where British and Korean firms are cooperating successfully is in overseas construction projects, where British financial, legal and project management expertise complements the strong Korean production base.
In recent years there has been strong growth in the number of Koreans looking to study in the U.K.. The U.K. is an excellent place to study. It offers an English language environment, and academic qualifications which are recognized worldwide as of the highest standard. Over 12,000 Korean students are on long courses at colleges and universities in the U.K.. Art and design is one of the rapidly growing popular areas for study. The U.K. also has an exceptionally strong science base. British scientists have received 70 Nobel prizes - proportionally a much higher success rate than the United States, for example.
The British Council in Seoul provides an education counselling service, to help Koreans find the right course in the U.K. to match their career goals. The British government also runs an extensive scholarship scheme, known as Chevening Scholarships. Around 80 scholarships are awarded to Koreans each year, for post-graduate studies in the U.K.. The scheme targets future leaders from a wide range of fields including politics, journalism, law, science and technology, business and the environment.
Chevening scholars for 2001/2001 have already been selected and will formally receive their awards in June. Those who have been to the U.K. always return full of enthusiasm for British life. I hope many more Koreans will choose the U.K. for their overseas study. Source : Korea Herald 2001.06.11
ROK MAY BECOME RICHER THAN FRANCE,CANADA,UK,SWITZERLAND BY 2010
By Gregory C. Eaves
Korea can realize a per-capita gross domestic product(GDP) of $ 31,000 by 2010 if a series of reform actions are taken,according to a report by Mckinsey & Company.
``We emphasize that this level of economic development is possible only if a series of reform actions are taken, resulting in a dramatic improvement in the country's labor and capital productivity.'' Those are McKinsey & Company's words on the Korean economy: bullish with a caveat.
The global consultancy firm reported their findings in an internal document about the Korean economy, ``Korea In The Third Millennium,'' to be officially released in two months.
In an interview with The Korea Times, Director Dominic Barton of the McKinsey & Company offices in Seoul spoke about the tremendous growth potential in the Korean market. But he also emphasized the hurdles along the way: deal with dead assets, work as a team, renovate regulations.
If you run down a list of the pros and the cons of the Korean economy, they're about even, but with a window of opportunity for the pros.
It's that window that's enticing; that's where the money is to be made. If that opportunity is well managed, then the consultancy predicts a possible GDP per capita of $31,000 in 9 years, placing the republic between Ireland and Australia, and richer than France, Switzerland, Canada and the UK.
To get there, though, the current slapdash method of running a company must mature. It comes down to basic things, Barton pointed out. Companies must make money. That may seem pretty basic, but it's fundamental. You don't make money? You go under.
Barton pointed out some of the pros: Internet penetration into most households, half the country with a mobile phone, the world's largest ship builder, one of the world's largest semiconductor makers, the world's largest oil refinery, a slick new airport, good highway system, thorough public transportation, good geographic location. The economy here, said Barton, is ``huge''.
It's not all simply old economy either, he pointed out. There're a lot of new, good, high tech players, running their companies from a shareholders' point of view; he mentioned Serome, an Internet telephony company, as one of them.
But there are also numerous cons: bosses more interested in drinking or napping than in working, disorganized ministries, finger pointing politicians, unproductive workers, stubborn management, stubborn unions, feeble education, untrained and incapable seniors, a reliance on banking for most financing, a tiny capital market.
Barton noted that one European company, Nokia, a Finnish mobile phone maker, has more capitalization than the entire KOSPI market. A market this small yet with so much potential sitting in the economy, like a vein of gold begging to be tapped, is enough to make investors drool.
About the capital market, the McKinsey report noted that ``to reach its goal of a GDP per capita equivalent to that of leading OECD countries by 2010 Korea will need to deploy a capital base that adequately supports continued growth.''
By this, they mean that investments will have to be made, certainly in new plants and factories, and new office buildings, but especially in service establishments (such as retail stores and restaurants), and social infrastructure (such as roads and bridges).
McKinsey pointed out that ``the U.S. has made the most effective capital investments: for every dollar of capital invested, the U.S. has been able to get twice as much economic growth as Japan has. Korea's effectiveness is between that of the U.S.' and Japan's.'' The consultancy feels that Korea can afford the needed investments.
Aside from the capital base, though, the government must also face the new economic situation.
One factor in the absolute transformation seen on the peninsula since the '70s _ where grandmas today grew up speaking Japanese, illiterate, rural, with no car and now speak Korean, a bit of English, live in a slick new apartment, own two cars, three mobile phones, and vacation in Guam _ was that the government funneled personal savings from bank accounts into specific industries and businesses.
This direction from the top was Korea's strength, points out McKinsey.
But, alas, time moves on and now the new Korean economy has ``developed to a stage where active government direction is counter-productive, distorts the performance of companies and financial institutions, and contributes to market failure.''
Instead of ``perpetuating the historical role of active intervention and direction'' the government _ much like a parent does when a child grows inevitably into a teenager _ must make the critical transition to a role that is focused on facilitating and supervising.
Facilitate a fair environment for all: established companies, entrepreneurs, workers; supervise to ensure that stakeholders are complying with policies and regulations, said McKinsey.
Twenty years ago, a job for, say, the Ministry of Information and Communications would be to tell each company how much market share to control. In the 21st century the job of the ministry is to let them go at it themselves, making sure that nothing illegal occurs.
But consensus is key. Barton used Ireland as an example. Ireland was a basket case economy in the mid-eighties. They got their act in gear _ attracted investment, clarified regulations, dealt with debt _ through a consensus, an agreement, across political parties, across electorates and across elections.
It is this sort of common identity, a belief that we're all in it together, that Barton does not see in Korea. And certainly, if we look at voting patterns in Korean national elections, votes go local, to your local candidate.
Barton stressed that a consensus must be built across parties, across administrations. Just like no one is to blame for the current imbroglio, no one person can fix it.
The firm views this unsolicited document as an investment in the Korean economy. It gives them somewhat of an ``ivory tower'' aloofness to the way in which their words are received, but it also allows them to make unbiased and, what are in their opinion, true statements concerning the Korean economy.
gceaves@hotmail.com Source : Korea Times - 6/6/2001
EU CHAMBER OF COMMERCE OFFERS TIPS ON SOUTH-NORTH KOREAN BUSINESS TIES
To ensure that political considerations do not interfere adversely with business prospects, Seoul should pursue its sunshine policy of dissociating economic cooperation from political or security issues in dealing with North Korea, a European business leader said. "If the two topics are too closely linked, it will likely slow down the business developments there as well as discourage foreign companies from dealing with Pyongyang," Jacques Beyssade, chairman of the European Union Chamber of Commerce in Korea (EUCCK), said.
This was one of a number of specific suggestions Beyssade offered at a seminar held yesterday to commemorate the first anniversary of the June 15 Joint Declaration between South and North Korea signed last year.
As a representative of the European business community in Korea, which has had a very special relationship with North Korea through its seven-year contact, Beyssade was asked to offer some suggestions on how South Korea could improve the economic conditions in the North and build stronger inter-Korean business cooperation.
Focusing particularly on trade and investment issues, Beyssade stressed that another important move for South Korea could be for it to ease travel and communications restrictions on North Korea, which are fundamental to international business. "Currently the laws forbid direct travel and communication and have very tough visa requirements for inter-Korean visits, leaving multinational companies to deal with Pyongyang through Beijing," he said, pointing out all the hassles this causes, which discourages many foreign firms from approaching North Korea at all.
On the trade front, Beyssade suggested that Korea's Trade Promotion Agency (KOTRA) offices around the world put their resources at the disposal of North Korean companies. Having "North Korean Desks" in each of these widely-established branches could have an effect that North Korea probably cannot reach by their own means, he said.
As far as investment is concerned, Seoul could offer to guarantee the political risks of companies that invest in North Korea, he said. "Such a guarantee would make the financing of North Korean projects easier, a very necessary thing as long as multilateral organizations such as the Asia Development Band, the International Monetary Fund, etc. remain closed to North Korea," he said.
"This would alleviate many of the restrictions that potential investors have relating to the political stability, the legal environment, the currency regulation in North Korea."
On the other hand, foreign investments in North Korea should be more than just contributions, Beyssade warned. "They must create companies that may be European by birth, but that are Korean in terms of location, of employment, of fiscal contribution." All of these tips were designed with North Korea's special needs in mind, Beyssade said, pointing out that North Korea's most dire needs are in establishing a better trade balance and attracting foreign investment.
"North Korea's total trade volume was $2 billion last year. This compares to South Korea's $333 billion. (North Korea trades in one year what South Korea trades in 48 hours.) I believe we must do whatever we can to increase this level of trade," he said.
In order to do this, North Korea must first increase its exports (North Korea imports about three times more than it exports), starting with whatever raw materials it is lucky to have, such as coal and minerals with some light goods like textile, he said.
"This is important because it would not only help North Korean economy develop, but also link the country more closely to the international community," he said.
In order to get accepted into this international community, though, North Korea will also have to do its part to build a level of confidence that they will bring investors profits, and guarantee warmer political relations to their business partners, he added.
Meanwhile, the European business community feels comfortable making these propositions in light of its special relationship with both South and North Korea, Beyssade said.
Most EU member states have already established diplomatic relations with North Korea and the European Union itself has diplomatic relations with the country, making it a leading cooperation group with the country.
"And then, the relations between the European Union and South Korea is clearly a success story in many fields and I believe that we can derive some useful lessons from this story," he said.
Europe has contributed to Korea's recovery from its financial crisis in 1997 and 1998 by offering many investments and Europe is now the third largest trade partner of Korea, behind the United States and Japan.
(mihui@koreaherald.co.kr) By Kim Mi-hui Staff reporter Source : Korea Herald - 2001.06.12
FOREIGN FIRMS GIVE HELPING HAND TO DROUGHT VICTIMS
As what is considered the worst drought in almost 100 years continues to grip the nation, a number of foreign corporations operating in Korea are rolling up their sleeves to help the victims, mostly by offering cash donations to emergency campaign organizers.
Among the companies that have given contributions are Softbank Korea (5 million won), Compaq Korea (5 million won), BASF (3 million won), Renault Samsung Motors (3 million won) and Volvo Construction Equipment Korea (1 million won).
"We consider ourselves part of the Korean community and we wanted to share the burden of the Korean farmers who are suffering from the drought," said Cho Don-young, senior executive managing director of communications at Renault Samsung.
The American Chamber of Commerce in Korea (AMCHAM) also presented 10 million won to MBC, one of the drought campaign organizers, on Monday.
In addition, the chamber sent letters to its 2,200 members, asking them to help with the national crisis. "The entire nation is struggling hard ... As a member of the community, let me encourage you to contribute toward this campaign as well," Jeffery Jones, president of AMCHAM, wrote in the request.
Meanwhile, this is just one example of how foreign corporations working here have come to play a significant role in Korean social welfare.
Not only have the growing number of foreign businesses here helped in emergency situations like floods and droughts, they are working to improve more basic social ills, proving that their presence is benefiting Korea in more areas than just economy.
One example is Sony Korea, which launched its "clean up environment program" last month. About 300 volunteers, including company employees, traveled to Yangpyoung in Gyeonggi Province to clean areas around the Han River.
The company plans on continuing a series of other environmental-related events through April of next year, working under the motto, "Earth is One, Nature is One."
Citibank Korea, on the other hand, focuses on the less fortunate in Korea. One of its most recent activities is "Micro Credit," a program where the bank works with a non-governmental organization, Joyful Union, to give loans to very poor people.
"This is more than just quick charity as the loans help them establish means that will allow them to support themselves in the future," said Sajjad Razvi, country corporate officer of Citibank Korea.
"We are devoted to hosting programs like this in order to become a true Korean bank with strong interests in local society," he said. Some of the other notable companies doing charity work include Sunrider Korea, Ltd., which has year-end donation programs for building social facilities for the poor, and McDonald's Korea, which helps poor children and those with birth defects.
Working with Samsung Seoul Hospital and Pusan University Hospital, McDonald's sponsors free operations for children with hereditary deformatities. It has helped 12 children so far and plans on helping at least 20 children every year. Prudential Life Insurance Company of Korea, Ltd., also has a unique project for helping Korea's young, "The National Volunteer Award Program," which rewards a volunteer attitude in Korean youths as a way of building a better society for the future. Complementing these individual efforts are the activities of AMCHAM and the European Union Chamber of Commerce in Korea (EUCCK), the two biggest foreign business groups here, which each have 2,200 and 642 members, respectively. EUCCK last month founded the EU Chamber-Korea Foundation (EKF), which will carry out various social welfare projects. The first is sending 200,000 soccer balls to North Korean children with the money made from auctioning of 2002 World Cup mementos like autographed soccer balls and uniforms of famous international players. "Launching this foundation is really a sign that the European business community here understands that it has achieved a high stature and that it wants to take part in the life of Korean society," Jacques Beyssade, chairman of EUCCK, said in a recent interview with The Korea Herald.
AMCHAM also founded a non-profit foundation, "Partners for the Future," which is devoted strictly to helping unemployed families and college students.
With the funds from the charity, AMCHAM recently gave 60 Korean students, who have been affected by unemployment in their family, full scholarships to universities.
The foundation also plans on co-hosting a charity concert on Oct. 6, where all proceeds will go to helping the unemployed, and a giant scale "Job Fair," on Aug. 4 and 5, to help college graduates who are looking for jobs in multinational corporations.
AMCHAM is currently looking for individual members who are willing to contribute 10,000 won per month to "Partners for the Future." The members will receive a credit card that will give them discounts at specific hotels and shops. (For more details, call 02-6201-2250~1.) Source : Korea Herald 2001.06.13
HOW THEY STACKED UP - KOREAN INDUSTRIAL RANKINGS FOR 2000
The Korean industrial rankings underwent a number of changes in 2000. The Samsung Group topped the list of the nation's top 30 conglomerates (based on asset value) for the first time while Hyundai Motor and Pohang Iron & Steel Co. (POSCO) were newcomers to the group. Only four conglomerates maintained the positions they held at the end of 1999. They are the LG Group in third place, the SK Group in fourth place, Hyundai Oilbank in 13th place and the Kolon Group in 20th place.
For the first time since 1987, when the government system of ranking large conglomerates was first introduced, the Hyundai Group was relegated to second place. However, the aggregated weighting of the Hyundai family of affiliates was enhanced. With the entry of Hyundai Motor (to fifth place) and Hyundai Department Store (to 26th), the number of Hyundai affiliates in the list of the nation's top 30 conglomerates rose to five. The other two are Hyundai Oilbank (13th place) and Hyundai Industrial Development (22nd place). Moreover, Hynix Semiconductor, formerly Hyundai Electronics Industries (with a total of 17.8 trillion won in assets) and Hyundai Heavy Industries (9.9 trillion won) are scheduled to be spun off from the parent Hyundai Group within this year. The number of Hyundai affiliates in the top-30 corporate ranking is then expected to increase to seven next year.
Meanwhile, Hyundai Engineering & Construction is set to be spun off from the group altogether following a May 18th shareholder meeting. Shareholders appoved a capital write-down plan that would scrap the stakes of Hyundai Asan Foundation chairman Chung Mong-Hun and other Hyundai affiliates.
Of particular note was that POSCO, formerly a wholly state-owned enterprise, joined the group of the 30 biggest companies. Following its privatization last year, POSCO entered the rankings at seventh place, ahead of 15 affiliates that included POSTEEL. With the new entry of Hyundai Motor and POSCO, two other companies were pushed down a couple of notches. The Hanjin Group was relegated from fifth place to sixth, while the Lotte Group was downgraded from the sixth to eighth. Overall, the financial structure of chaebol improved, with debts down and profits up. Specifically, the total assets of top 30 business groups increased by 25.2 trillion won in 2000 from the previous year while debts declined 18.3 trillion won on a yearly basis. Consequently, the debt-to-equity ratio of all 30 groups fell from 218.7 percent to 171.2 percent during the period.
The chaebol recorded a combined 13.8 trillion won in deficits in 1999, but last year posted 2.1 trillion won in surpluses. (The net profit ratio of the group reached 0.5 percent).
However, with the exception of the Samsung Group the debt-to-equity ratio of the top four groups rose. In particular, the debt-to-equity ratio of the Hyundai Group, now in a liquidity crisis more than doubled from 152.0 percent in 1999 to 329.3 percent last year. By comparison, the financial structure of conglomerates in the fifth to 30th rankings improved sharply. This turnaround is attributed to the elimination of insolvent groups from the list of top 30 groups and the efforts of the remaining companies to improve their financial structures having paid off.
KOREA's Top 30 CONGLOMERATES,2000 (Unit: billion won)
Ranking Group No. of affiliates Assets Liabilities
1(2) Samsung 64 69,873 103.5
2(1) Hyundai 26 53,632 329.33
3(3) LG 43 51,965 166.14
4(4) SK 54 47,379 150.85
5(-) Hyundai Motor 16 36,136 160.56
6(5) Hanjin 19 21,307 215.67
7(-) POSCO 15 21,228 88.48
8(6) Lotte 31 16,694 74.59
9(-) Kumho 17 11,606 259.610
10(9) Hanwha 25 11,496 151.511
11(12) Doosan 18 11,192 162.312
12(10) Ssangyong 20 9,039 512.313
13(13) Hyundai Oilbank 2 7,243 556.114
14(11) Hansol 19 6,983 229.315
15(19) Dongbu 19 5,831 165.316
16(17) Daelim 17 5,395 134.1
17(21) DongYang 30 5,107 232.518
18(16) Hyosung 15 4,950 177.719
19(23) Cheil Jedang 30 4,763 128.620
20(20) Kolon 25 4,640 160.921
21(15) Dongkuk Steel 8 4,342 164.122
22(25) Hyundai Development Company 9 4,070 234.2
23(-) Hanaro 7 3,369 100.424
24(29) Shinsegae 9 3,221 197.125
25(30) Young Poong 24 2,897 109.126
26(-) Hyundai Department Store 15 2,858 141.9
27(-) Oriental Chemical 22 2,826 125.828
28(24) Daewoo Electronic 4 2,725 -
29(-) Taekwang 15 2,598 35.530
30(26) Kohap 6 2,501 -
-Total 642 437,866 171.2
Note: 1.Samsung Corning is a joint venture between the Samsung Group and Corning of the United States 2.Pan Asia Paper Korea is a joint venture between Hansol Paper, Abitibi (Canada), and Norske Skog (Norway)Source: Korea Foreign Company Association (KOFA), SER
Source KT&I - May-June 2001
ECONOMY TO GROW 5.4% IN 2002, KERI FORECASTS
The Korean economy is expected to enter a recovery phase by the end of this year and post annual growth of 5.4 percent next year, a leading think tank said yesterday.
In its latest economic forecast, the Korea Economic Research Institute said that the economy is projected to show signs of gradual upturn in the second half of this year, recording annual growth of 4.3 percent in 2001.
In 2002, steady increases in consumption and a rebound in exports will elevate the gross domestic product (GDP) growth to 5.4 percent, the KERI report said.
Corporate facility investments will also swing from a 0.1 percent contraction this year to a growth of 7.3 percent next year, raising hopes for balanced economic growth, it noted.
The nation will be able to attain a current account surplus of $14.2 billion in 2001, up from $11 billion in 2000, thanks to significant reductions in imports. But the surplus is expected to shrink to $6 billion in 2002, with increased investments leading to more imports.
Trade surplus will also expand from $16.6 billion in 2000 to $18 billion this year before slipping to $10.1 billion next year, with exports of $180 billion and imports of $169.9 billion.
The KERI, affiliated with the Federation of Korean Industries, predicted that consumer price increases may reach as high as 4.3 percent this year, before stabilizing to the 3 percent level next year.
The long-term interest rate will continue its upward move this and next year, influenced by high inflation and greater corporate demands for investment financing, it said, adding that the benchmark three-year corporate bond yield would rise from an annual average of 7.7 percent in 2001 to 8.4 percent next year.
The won-dollar exchange rate will slide to 1,250 by the end of this year and stay in the 1,200 range next year.
"The KERI's latest economic forecasts are based on the assumption that the financial and corporate restructuring would proceed smoothly," said Huh Chan-kuk, a senior KERI researcher.
"The outbreak of labor unrest and other negative factors will create adverse effects for the nation's sovereign credit rating and the overall economy, resulting in lower economic growth," he warned.
3 SCENARIOS FOR KOREAN ECONOMY
By Lee Chang-sup - Business Editor
McKinsey &Company came out with an unsolicited report featuring three scenarios for Korea's economic future
The most ``doomsday'' of them is Korea's modeling of Japan's growth path, with per-capita GDP growth dropping from an average of 7 percent in the past decade to 3 percent in 2010.
If no fundamental reform is pursued, according to McKinsey, new jobs created in the manufacturing and service sectors will be on the decline despite stable employment in the manufacturing sector and a high investment rate --29 percent of GDP.
Its second scenario assumes that reform is pursued in the financial and manufacturing sectors. The possibility of another financial crisis would be greatly reduced with the implementation of partial reform and economic growth would increase slightly, probably by 4 percent in per-capita GDP.
Jobs in the manufacturing sector will be cut by 20 percent over the next decade due to pressure from creditors and as foreign competition leads to an improvement in productivity. Reemployment opportunities would be hampered by regulations in the service sector. A 12 percent unemployment rate might become a reality when minimum wage and unemployment benefits are kept at the U.S. level. Korea would be similar to France or Germany, which failed to completely remove regulations in the service sector.
McKinsey assumes Korea's service sector to be additionally reformed in its third scenario. The global consultancy said that the removal of regulations that hamper productivity would help induce service sector growth, leading toward a GDP growth of 6 percent over the next decade.
It predicted that attractive new jobs would be created for the jobless in the service sector. Deregulation in the service sector will have a positive impact on the manufacturing sector, stimulating additional output from the manufacturing sector.
It advised Korea to pursue productivity-led and profitability-based growth, adding that economic growth has been driven by factor inputs as in the Japanese growth model. The average return on investment has been below the financing cost for the majority of Korean firms during the past 15 years.
Such phenomena resulted from low capital productivity in the Korean economy. Government barriers in the market have made business managers less willing to introduce advanced management skills.
It pointed out that Korean businesses value only results, while global businesses are interested in efficient utilization of labor and capital.
The Korean management style is described as having no way out, because once a decision is made, there will be no correction afterward.
It noted that Korea's current labor policy is moving against global trends. If Korea increases the number of jobless by reducing working hours and maintaining a high minimum wage, this will put a higher burden on the economy.
McKinsey noted that some countries, based on their experience, view these measures as ineffective. The consultancy advises Korea that support for the unemployed should be designed to motivate them to work by subsidizing basic necessities instead of simply handing out money.
It added that the government should subsidize the gap between the minimum wage and wages set by companies. Through these measures, companies could seek efficiency while workers receive socially acceptable protection.
According to its estimation, more than 5 trillion won per year is required to implement these policy measures.
McKinsey noted that Korean management and society needs the wisdom to see this not as a cost but as an investment in social infrastructure required to build a modern country.
It said workers should not resist the change but accept it. It may become inevitable that some 5.6 million people will lose jobs or move to other jobs over the next decade as Korea carries out industrial restructuring to become an advanced country. If Korea rejects this change, a modern Korea will never come!
McKinsey recommended that Korea needs immediate action to activate the dormant capital market. It diagnosed that the current Korean capital market has an extremely abnormal structure. The stock market is too small and the reliance on bank loans is too heavy. It predicted that the Korean stock market would grow six-fold and the bond market two-fold over the next decade. These two markets are expected to play critical roles in activating dormant capital markets of some 2,100 trillion won.
Investors in international stock markets like New York or London gain an average return on investment of 18 percent per year while Korean markets see only a 3.9 percent return.
McKinsey said that, so far, some 135 trillion won has been injected to clean the financial system but predicted that Korea should be prepared for potential problem loans that amount to some 245 trillion won in the worst case.
According to the Standard & Poor's yardstick, 70 percent of Korean companies are below investment grade. Six out of 10 listed companies do not even meet the more generous standard of a 200 percent interest coverage ratio.
It predicted that Korea needs capital of around 2,200 trillion won to achieve an average 6.1 percent growth per year through 2010. That means that on a national scale one-fourth of GDP should be set aside every year for future growth.
Most important of all is political stability in Seoul. McKinsey picked Ireland as a country that has been successful in forming a social consensus and implementing a consistent economic policy, despite changes in government, to lift itself out of economic doldrums.
In 1987, the two main Irish political parties came up with a grand consensus on economic stability. Though there have been three changes of government since, Ireland's economic policy has been implemented consistently based on a social consensus among political parties, workers and businesses.
Will the ruling and opposition parties in Seoul be able to make an open pledge not to change economic policy despite a change of government?
Are Korean voters willing to shed their voting practice of picking favorites from their hometowns and stand behind a presidential candidate who has a vision for making Korea an advanced country? Source : Korea Times - 11/06/2001
ROK URGED TO CREATE GLOBAL ENTREPRENEURS
By Seo Jee-yeon
Cultivating global entrepreneurs capable of doing business in multiple countries is not a cultural matter but an institutional matter, said Simon Johnson, assistant director of the MIT Entrepreneurship Center, yesterday.
In a speech organized by the Federation of Korean Industries (FKI), he recommended that the Korean government conduct regulatory reforms to foster entrepreneurship, an essential factor for future success.
He used Sweden as an example to prop up his view that institutions help determine whether or not people becomes entrepreneurs. ``In terms of culture, some people says Sweden is a ``big firm'' country.
Swedes aren't innovative. Or Swedes don't want to take risks,'' but things have changed recently, he said, adding that Sweden is becoming more and more entrepreneurial.
``Many young Swedish engineers are looking for ways to start their own companies. Swedish corporations are investing in start-ups and spin-offs.
The national culture changed dramatically over 10 years,'' he said.
``Results stem mainly from changes in institutions, which include rules, practices, and organizations, such as regulatory agencies. Swedish institutions support investment in human capital and technology, which improve access to finance and complement other elements of government policy,'' he said.
He pointed out that India is another exemplary case, having the institutions in place to promote entrepreneurship. Excellent Indian engineering schools send students to the U.S. for advanced training, Johnson explained, which leads individuals build cross-border networks of relationships.
``The Indian government set up software technology parks to promote local investment. It also achieved some overall liberalization of the business environment in the 1990s and created conditions for multinational investment,'' he said.
Closer to home, he used Taiwan as an example. ``Because of the institutions in Taiwan, it became possible for Taiwanese to gain access to U.S. higher education and to top engineering schools. An export oriented development strategy and close integration with U.S. firms allowed Taiwanese companies to get an understanding of globalization early on.''
``In addition, the Taiwanese government also promotes overseas investments, including in mainland China, to gain access to strategic resources, such as cheaper labor, and strongly protects investors in the stock market, encouraging capital-intensive technology investments,'' he said.
During the FKI symposium, Johnson explained that creating entrepreneurship is an institutional matter, adding that the government here should build institutions for developing excellent human capital and should increasingly support education across borders, such as the cooperation seen between MIT and Singapore.
Johnson went on to say that the government needs to create institutions to promote connections between leading global technology communities and to encourage decentralized networking, by supporting cross-border start-ups with tax rules and providing some seed capital for initial commercialization.
Strong institutions are needed to protect entrepreneurs against the government, Johnson explained. He pointed out that Singapore and Taiwan created investment zones in Vietnam, which protect minority shareholders against entrepreneurs, thereby making it easier to raise capital, to grow quickly, and to lessen the likelihood of a crash.
Although reform is often a slow and difficult process, he predicted regulatory reforms in Korea would also move toward supporting firms in doing business in an efficient way and protecting investment shareholders.
Simon Johnson is Associate Professor of Entrepreneurship at the Sloan School of Management, MIT. He teaches courses on entrepreneurship and venture capital finance, with a particular focus on emerging markets.
The FKI invited Johnson to visit Korea to talk about entrepreneurship. jyseo@koreatimes.co.kr - Source : Korea Times - 22/05/2001
KOREA BOASTS 297 GLOBALLY COMPETITIVE ITEMS
Korean conglomerates are estimated to have a total of 297 globally competitive products, the Korea Trade-Investment Promotion Agency said yesterday, calling for a drive to export small business-built goods under existing global brands.
In addition, the nation is armed with a total of 369 globally renowned product brands, including 152 owned by the Samsung Group, said the KOTRA in a report.
The LG Group also has 110 globally competitive product brands, followed by Hyundai (37) and Daewoo (31), said the KOTRA report.
Of the 297 world-class industrial products, televisions, air conditioners and electronic goods accounted for 42 percent, or 123 brand names, while cell-phones, semiconductors and other information technology products made up 31 percent, or 92, it noted. Automobile-related goods accounted for 16 percent, or 48 brands.
In China, for instance, LG's air conditioners and microwave ovens are among the most competitive products, while Lotte's gum, Nongshim's ramyon (dry noodle), Tongyang Confectionery's chokopie biscuits, Hyundai and Daewoo cars and Samsung's wireless phones are among the top brands. In the United States and Japan, flat-panel screens by Samsung and LG are strong contenders in their fields.
"The 297 Korean products are ranking among the top-10 competitive goods in 66 countries across the world," said the KOTRA report. "The agency will push to combine the conglomerates' brand and marketing powers with domestic small businesses' manufacturing capabilities, as part of its export drive." For instance, little-known domestic producers of Web cameras could export their goods under the Samsung brand, it explained. Source : Korea Herald 2001.06.07
GOVERNMENT TO STIMULATE FACILITY INVESTMENTS
The government has decided to inject long-term funds for facility investments into the corporate sector via state-run banks. The decision was reached at a meeting of top financial policymakers held Saturday to discuss ways to give financial aid to Korean companies to promote exports and facility investments.
The meeting's result will be reflected in the government's economic plan for the latter half of the year.
Attending the meeting were Finance and Economy Vice Minister Kim Jin-pyo, Financial Supervisory Commission Vice Chairman Yoo Ji-chang and Bank of Korea Deputy Gov. Park Cheul.
At the meeting, the government also decided to instruct local banks to bring the proportion of non-performing loans in their accounts under 5 percent by the end of the year Source : Korea Herald 2001.06.18
GOV'T ROLLS OUT RED CARPET FOR FOREIGN INVESTORS
To attract foreign capital, the government has initiated a "red carpet service," a program catering for leaders of world-famous businesses likely to invest in Korea. As part of the service, the government picks up the tab for their airfare and expenses, betting that once they see Korea firsthand they will commit resources here.
The Ministry of Commerce, Industry and Energy said yesterday Marcel Meeus, the general manager of the Belgian firm Union Miniere's battery division and another senior executive have arrived for a five-day visit under the red carpet program.
The trip marks the second time the government has rolled out this red carpet service to lure foreign investments. In April it invited executives from eight venture capital companies, including Jafco and Itochu of Japan.
During his stay, Marcel Meeus will meet senior officials from the ministry and South Chungcheong Province. He will also visit such companies as Samsung SDI, LG Chemical and SKC and inspect the Cheonan Complex, an industrial park for foreign firms in South Chungcheong Province.
The Belgian company, which produces high-quality cobalt oxide for lithium ions, recorded $24 million in sales from its Cheonan factory, which opened in 1999. It reportedly plans to make an additional investment of $15 million in the near future. The ministry plans to invite executives from Terrawat, a German energy development firm, June 18. Source : Korea Herald 2001.06.12
WHAT FOREIGN FIRMS CONTRIBUTE TO KOREA
The average foreign company in Korea has an average of 489 employees and spent on average W547.5 million for research and development (R&D) and W183.9 million for employee training respectively in the three years from 1997 to 1999, according to professors Lee Dong-ki and Lee Jae-ho of Seoul National University Friday.
The two academics just released a report titled, "The Contribution of Foreign Companies to the National Economy."
The report looked at 104 foreign companies, which are at least 50 percent owned 50 by foreign investors with investments amounting to US$1 million or more.
The report also revealed that the net exports of the companies studied from 1997 to 1999 averaged US$50.6 million and did not contribute significantly to the overall trade surplus of the nation.
It is also reported that Samsung Corning spent the most money for R&D with US$10.2 billion, followed by Handok Pharmaceutical with US$4.7 billion, and Heungnong with US$4.2 billion. However, 40 out of the 104 companies reportedly did not spend any money for R&D and 12 of them reportedly spent nothing on employee training.
In terms of foreign direct investments, Coca-Cola Korea spent US$773.9 million for its bottling plant in Korea and ranked first, followed by Hotel Lotte with US$668.67 million, Korea P&G with US$258.7 million, and Korea BASF with US$223.59 million respectively. "When the companies are rated for management transparency, trade balance and technology transfers, Samsung Corning ranks first, followed by Korea BASF, Coca-Cola Korea bottling, Korea Lotte and Korea P&G," said Lee Jae-ho. (Song Eui-dal, edsong@chosun.com) Source : Chosun.com - 10/06/2001
FOREIGN INVESTMENT FIRMS RUSH TO KOREA
By Kim Jae-kyoung - Korea Times - 24/05/2001
Large foreign investment companies from the U.S. and Europe are moving fast to make inroads into the Korean market. Reportedly, a total of six foreign companies plan to set up investment trust and management companies in Korea and are expected to make their debut in the Korean market early next year.
According to securities industry sources yesterday, Fidelity Investment, the largest investment firm in the U.S., Deutsche Bank and Jadin Fleming have shown strong intentions to launch business in Korea.
In addition, the U.S-based Invesco, Britain-based Prudential and Netherlands-based Forties are likely to follow suit.
A ranking official of Fidelity Investment said, ``By setting up our own investment trust and management company in Korea early next year, we will try to become one of the big five among local investment trusts within 5-10 years by carrying out aggressive management.''
The sources said that the six companies have already wrapped up market research and are now in the middle of consultations with the Financial Supervisory Service (FSS) on establishment approval.
They explained that the rush of foreign investment firms to the Korean market is ascribed to the fact that they believe they will be able to attract Korean individual investors' money, using their ample funds and top- notch know-how in product development.
``The Korean capital market has a strong potential and has been making fast progress,'' an official of a foreign investment firm said,
A FSS official added, ``Along with the market's potential, with the introduction of the mark-to-market bond rating system, it became easier for foreign firms to enter the local market.''
Meanwhile, market experts voiced concerns that if foreign companies utilize an aggressive management strategy using their existing popularity, they will probably be able to encroach on the local market earlier than expected, adding that the rich show more interest in foreign investment companies.
kjk@koreatimes.co.kr
IN WHAT WAYS IS FOREIGN INVESTMENT DECIDED AND HOW CAN WE INCREASE IT?
By Kim Sang-beom Deal Manager of Tech Pacific Korea
In what ways is foreign investment decided and how can we increase it? Most economic experts seem to agree that the latest decrease of inbound FDI is caused not just by internal economic issues but mainly by external economic downturn.
Thus, apparently there is nothing we can do and also, so far, most articles titled in research of FDI have mainly focused on what government should do or what regulations need to be improved in order to attract more FDI.
However, given current regulations and external economic environment, what could you do if you were an entrepreneur trying to attract foreign investment? This essay is focused on what processes foreign investment firms go through in an investment deal and how domestic entrepreneurs can actually complete it in success on their own.
- General Steps and Processes
There are many types of FDI such as investment in stock market, buy-out for listed companies, venture investment before IPO, or M&A for strategic/operational synergies.
In most cases, FDI goes through eight steps/processes: Deal sourcing, Valuation, Negotiation, Due diligence, Fund raising (project financing)*, Contracting, Monitoring, and Exit.
Surely, these processes occur sometimes spontaneously but sequentially as well. However, lack of understating of these processes and the differences between domestic and foreign business practice in each step leads domestic companies into difficulties to draw successful FDI.
- Sourcing Phase
Deal sourcing is the phase in which an investor search for an investee and vice versa. In this phase, what an investee should consider are threefold.
First, an investee should be able to target right investment companies.
Most investment firms have their own investment focus such as investment region, industry, period, stage of corporate development and etc. To approach an investor without above information is like trying to shop clothes for an adult in a children's clothing section in a department store.
Secondly, an investee should be more careful to choose a funding broker.
Currently, there is a large number of small funding agencies in Korea, but a few of them actually have enough experience and networks to lead an international investment.
Thirdly, investment from foreign countries naturally takes longer time. It sometimes takes a few weeks but sometimes more than a few years but it certainly takes a longer time than usually expected due to different investment terms, practices, physical distance, language barriers and etc.
In fact, I met a small domestic venture, running out cash, and its broker said that they planed to raise money from a US based large buy-out fund: However, as a reference, large buy-out funds rarely invest in a small size venture company.
Prepare valuation based on various methodologies and be equipped with logical arguments for defense.
There are various ways to evaluate the value of a company such as comparable-based, Discounted Cash Flow-based, or liquidation value-based.
The company should be aware of its price based on most of these methods and prepare reasonable arguments to face the investor's efforts to cut down the price.
One thing an investee should be really careful here is to prepare arguments based on objective facts and data rather than a personal opinion and belief.
Always create an alternative with out-of-box thinking and manage the schedule up-tightly.
- Negotiation Phase
Negotiation is like an ever lasing, tiring, and tensed rope dancing.
Conflicts for benefits of each counter party always exist and to overcome, a company should be able to make a third way of 'win-win' or 'give and take' rather than 'yes or no' and 'all or nothing'. Surely, creating alternatives rely heavily on experiences of a company itself. However, Korean companies tend to lead the negotiation with a mindset of 'bull shit, no way'.
Furthermore, a company must have an uptight schedule management. Generally an investor is not in rush at all to close the deal because he has money.
Therefore, person to aggressively confirm the next step and milestone is the investee not the investor.
- Due diligence Phase
Bluffing is poison in due diligence. Generally, a company has a tendency to exaggerate his status to woo an investor. He might overestimate the revenue, underestimate the cost, say his technology is more advanced than anything else, and no way to be copied.
However, when an investor is at the company or is in a talk with potential customers of the company in due diligence, holes are everywhere. Once an investor feels that the company is not reliable and unethical, the investment is very unlikely to happen.
On the other hand, if the company says he will achieve 10M$ in sales and actually achieved 15M$, he will gain stronger trust and more autonomy.
Especially, fake accounting is really dangerous. Hidden numbers on a book will be found soon. The company should be honest with its weaknesses but tell an investor how he can get over them in a realistic way.
Don't be afraid of English contracts, understand foreign business practice, and try to read implications between the lines in the contract.
- Contracting Phase
In most cases, a deal with a foreign company is made with English contracts based on international investment practice and regulation.
English contract is certainly difficult and complicated to be understood even by English native speakers and sometimes doesn't make any sense under the current Korean regulation.
For example, issuance of Redeemable Convertible Preferred shares, Put- option, and tag-along are not familiar to Korean companies while Korean regulation to prevent a company with negative profit from redeeming investment is also not familiar to foreign investors.
Therefore, a company cannot persuade an investor with only insisting, "we can't accept that clause", but make an investor yield through complete understanding of exact implication in each line with thorough reading.
Don't think monitoring of an investor as an officious interference but build coherent mutual trust.
- Monitoring Phase
Once an investor injects his capital into an investee's account, they both are not counter parties anymore but they are in a same boat. In other words, an investor after investment turns out to be the owner of the company.
Therefore, it's so natural for the owner to be able to participate in the management. Furthermore, foreign investment firms generally have more management knowledge, networks, and information and very keen to maximize the corporate value.
It might not be that harmful for a company to listen to the investor's advice and he should also develop ways to cooperate with the investor in more harmonized way for the future growth of the company
Understand that an investor should harvest his money at the end and also be flexible for various exit options
- Exit Phase
Since the most of funds are raised with the life cycle of 5 to 7 years, investment firms should, anyhow, dispose of their portfolios. Then, what an investee should do? He, at least, should know when the disposal will happen exactly and prepare for it.
In Korea, there is a tendency that most companies believe that the only exit option is IPO. However, in fact, there are some other options too: M&A, Management-buy-out, back-door listing, and etc. Whatever the methodologies are, when the time comes, the investor will try to dispose of the company to pay back to fund donators.
Therefore, the company should rather be proactive to secure those exit options in advance before the investor, being rush at the last moment, takes an unfavorable option to the company,.
In capital market, investors usually complain that there is nowhere to invest while investees complain nowhere to be invested. Why it happens? It is because investors and investees have different ways of thoughts and eyes.
Therefore, what should an investee do? Think and prepare in the eyes of an investor and that's the best way to happily get married with foreign investments.
*In this essay, fund raising will not be explained since it's business btw investors and fund donators. The writer is working for the Tech Pacific which is a venture capital and corporate finance advisory firm headquartered in Hong Kong Source : Korea Times 2001.06.01
KOTRA DISCUSSES WESTERN VS. KOREAN BUSINESS
Korean businesspeople tend to take business matters personally, don't speak directly, blindly obey their superiors, value friendship more than partnership and criticize finished deals.
A politically incorrect statement filled with generalizations and stereotypes, you say?
Even so, knowing such information may help your next business project with Koreans, leaders of foreign business communities in Korea advised at a seminar titled "Korean Business Culture Seminar" held at KOTRA Conference Hall yesterday.
"Korea is a country with a unique history and deep Confucian beliefs, both of which contribute to its distinctive business culture," said Tami Overby, executive director of American Chamber of Commerce in Korea, who was one of the two foreign guest speakers at the event. Therefore, foreigners should try to understand its history and culture if they are to succeed in business with Koreans, she said.
For instance, Confucianism provides a social code for proper behavior here, Overby said. It includes obedience and respect for superiors and elders; regard for humility, sincerity and courtesy; and belief that the community prevails over the individual.
Some of the difficulties that may arise from these characteristics are that Koreans usually prefer to speak indirectly as a way of being polite and foreigners will have to be careful not to make them "lose face," or pride, Overby, who has been in Korea for over 13 years, said.
Another key difference between the two cultures is that personal connections are vital in Korea, she said. While the United States is a contract-based society (businesspeople and lawyers spend much time hammering out the details of the contract and the terms of conditions of the deal), Korea is a more trust-based society.
Accordingly, developing personal relationships is crucial, she said. "Americans finish a business and then build a relationship after the deal is signed. Koreans are the opposite - they want to build the relationship first and if they trust you, they do the deal."
Some of the other tips Overby offers: When Koreans say "No," it often just means "Not that way"; socializing (during and after work) is an extremely valuable networking mechanism; and don't think Koreans are rude or dishonest when they don't look you in the eyes as they believe that it's disrespectful to make direct eye contact with their seniors.
"We often encourage Americans not to focus too much on the details of how projects get done but to spend their time emphasizing the end result. Koreans will never do it the way you would and your way often won't work here," Overby said. Philippe Tirault, president of Heidrick & Struggles (Korea) Inc., who represented European businessmen working in Korea, also recognized Korea's Confucian beliefs as the key to Korean business culture.
"A European businessman has to first understand that seniority is extremely important in Korea and that they work in a top-down system. This affects everything from organization of Korean businesses to communication to negotiation systems," Tirault, who has been in Korea since 1984, said. Of the many differences between the two cultures, though, the biggest may be Koreans' reliance on verbal agreement versus Europeans' emphasis on written contracts, he said.
"Europeans tend to think that the deal is final when the contract is signed. But Koreans don't hesitate about rediscussing agreements if conditions change," he said. How Koreans deal with problems are also very different from Europe, and recognizing this difference will be beneficial to both cultures, he said.
"In Korea, problems are hidden as long as possible, many conflicts are solved outside the office environment and conflicts well solved are rapidly forgotten. Also, disagreements often get personal and Koreans look for black or white solutions. "On the other hand, Europeans like to look for win-win solutions, problems are openly discussed, there are company rules for problem solving (code of conduct) and conflicts seldom go outside the office. Also, conflict resolved between two individuals still leaves traces," he said. Despite these lingering differences, though, there are many signs that Korean business culture is becoming more multicultural, Tirault said.
"For example, more firms are run by managers who do not belong to the country of origin of the firm," he said, adding, "But working in a multinational environment still requires investment on both sides as well as a great deal of flexibility."
Meanwhile, Korean speaker, Kim Pyung-hee, one of the counselors at the Office of the Investment Ombudsman, the organizer of the event, presented 10 guidelines for doing successful business in Korea.
Among them: try to save your Korean partners' "face" whenever possible. (don't criticize others in public); make friends first, clients second (develop trusting personal relationships with business partners through socializing); and "how" is very important (a modest and moderate approach is more effective than a direct or aggressive approach).
It is also important for one to adapt to Korean-style negotiations (though Koreans are famous as forceful negotiators, keep the negotiation mood as warm as possible); meet face-to-face rather than simply writing; and try to learn about Korean culture like food and mannerisms because it helps build friendships with Korean business partners, he said.
Source : Korea Herald 2001.06.07
EUROPEAN BUSINESSES CALLED ON TO HELP WITH WORLD CUP GAMES
The top organizer for the 2002 World Cup games yesterday highlighted the important role European businesses in Korea could play in ensuring the successful hosting of the sports event.
"The games are a great opportunity for bringing Asia and Europe together and the European businesses in Korea can help us with both marketing and ticket sales," said Chung Mong-joon, vice president of FIFA and co-chairman of the Korean Organizing Committee for the 2002 FIFA World Cup-Korea/Japan (KOWOC).
Chung was the guest speaker at the 15th Annual General Meeting of the European Union Chamber of Commerce in Korea (EUCCK), held at the Shilla Hotel.
In this light, Chung commended EUCCK for its latest campaign to send soccer balls to North Korean children. "This was a very meaningful initiative that Koreans appreciate very much," Chung said.
The EUCCK recently announced that it would auction off a number of soccer balls autographed by Korean soccer players and key organizers, the proceeds of which would go to buying soccer balls to be sent to North Korean children. The auction continues through June 10.
To show his appreciation to EUCCK and its efforts, Chung presented 20 tickets to the France-Brazil game to the chamber's president Jacques Beyssade.
Meanwhile, Chung expressed concerns about tensions between Korea and Japan, co-host of the games next year.
"As far as the organizers are concerned, the Japanese textbook issue is totally separate from the World Cup, but in the mind of the public, that doesn't seem to be the case," Chung said. He cited recent polls that showed that the number of Koreans who believe the joint hosting of the World Cup games between Korea and Japan will improve relations between the two countries has decreased noticeably.
"It's important that we work with Japan closely on a number of issues before and during the game. We hope our working relations won't be affected," he said.
Chung also expressed hope that their plan to hold a couple of games in North Korea, which has a stadium with a seating capacity of 150,000, would be possible. "So far, we have received two negative responses from them. But we don't want to close opportunities too early, so we will continue to wait for positive response," he said.
With less than a year to go before the opening of the event, there are a number of other issues like transportation, accommodations and language services that Korea will have to work out, he said.
One such issue is transportation between Korea and Japan. Although Korea plans to run about 80 flights (40,000 passengers total) between the two countries, this is only one tenth of what is needed. Korea will probably have to find a way to utilize regional airports, he said
Other key issues like language and accommodation, however, are slowly being worked out, he said. The KOWOC is currently recruiting about 16,000 volunteers and will soon begin special language training programs.
The problem of accommodation has been solved in part by the enthusiasm of many Korean families to participate in homestay programs during the World Cup Games
In the end, the only real major problem may be what to do with the 10 new soccer stadiums after the games, which were constructed for the World Cup for more than $2 billion, he said.
"In Europe, football fans tend to stick around the stadium for about an hour afterwards, socializing. We believe we can do the same and open the stadiums up as social venues," he said. Source : Korea Herald 2001.06.08
THE 7 SECRETS OF DOING BUSINESS IN KOREA
Speak softly and carry a bilingual business card. Those were two of the seven secrets to succeeding in business in Korea, according to Tami Overby, executive director of the American Chamber of Commerce (AmCham).
Overby gave the advice in a speech titled, "The Seven Secrets to Doing Business in Korea," delivered at an event for foreign business people sponsored by the Korea Trade-Investment Promotion Association Tuesday.
Overby advised foreign business persons to introduce themselves as softly as possible, never to make their business partners look bad and not to kick off the first business meeting with intense negotiations.
Overby said foreigners should pay careful attention to the interesting juxtaposition of Confucian culture and Korea's unique history, which survived through continuous foreign invasions and helped to form the emotion instilled in Korean's blood called "han," or a sense of sorrow.
She advised foreigners to pay close attention to Korea's offbeat business practices as well and to be patient in dealing with English spoken by Koreans, adding foreigners should try to confirm what had been discussed in writing after key meetings.
She also said that once they build up the personal ties with Koreans and foreigners is expected to last for many years as foreign businesses will have to devote time and effort to building a faithful personal relationship from the start.
She also said that if a foreigner has been treated to lunch, dinner, a golf appointment or gifts from a Korean business partner, the foreigner should seek to return the favor within reason.
Overby has been living in Korea since 1988. She took the post of AmCham executive in 1995.
(Song Eui-dal, edsong@chosun.com)
Source : Chosun.com 5/6/2001
GLOBALIZATION OF STANDARDS
By Kim Wan-soon - Investment Ombudsman
The decision to create and abide by a set of standards was based on the need to harmonize, simplify, and make more convenient the interaction between people. More specifically, by establishing internationally recognized guidelines regarding the shape, size, quality, method of production, method of measurement, and conditions for safety, this enhances a firm's productivity and its overall competitiveness.
In addition, compliance with international standards benefits the consumer in terms of qualitative improvements to the product along international standards. It is conformity to international standards which serves to facilitate and add to the fairness of international commerce. On an international level, the phenomenon of cross-border trade involving the promotion of goods and services and the enhancement of cooperation in the intellectual, scientific, technical, and economic realms are well underway. To facilitate this development, the International Organization for Standardization (ISO) is playing a role in promoting worldwide harmonization of each country's standards by developing international standards, acting as an intermediary for the exchange of information between member countries and technology committees, and seeking cooperation between related international organizations.
However, Korea's standards regime, which should be contributing to the development of international trade, is under sharp criticism from overseas. The brunt of the criticism lies with the closed mindset. This entails the perception that a strict and independent standards regime is necessary to asserting the sovereignty of a nation.
For example, even though an import tire has already been approved by a credible and stringent international standard such as by the U.S. Department of Transportation (DOT), Korea, still requires that the DOT- approved tires pass Korea's inspections separately. The absurdity of this cumbersome system could be made even more poignant if Korea required that such internationally renown football stars such as Maradona or Pele undergo inspection before being allowed to join Korea's football team. Thus, the need to re-test imported products that have already passed internationally acknowledged standards such as the ISO is totally unnecessary.
Korea's standards system also lags behind the rapidly changing technological environment. In the case of disinfectants for foods and dishes, products are constantly being upgraded and changed with the advent of cutting edge technology. The inability of Korea's standards system to keep pace with changing realities results in an incomplete and inadequate food standards system, which gives rise to unreasonable results.
In many advanced countries, a person may eat the food after it has been disinfected with a chemical solution. As there are no legal provisions related to edible disinfectants in Korea, people are still required to rinse food and dishes with water even after applying the disinfected solution. All this, even though the disinfected solution has been deemed safe in advanced countries. This is like using a dirty public towel for washing one's hands. The act of rinsing the already disinfected food and dishes with water is so absurd.
Even if the standards system is revised to reflect changes, the correct application and interpretation of the law by the relevant government organization is another matter.
A company importing food colors was not able to make it through customs because the food colors were not listed. Some time later, the law was revised to permit the importation of food colors.
However, the customs officers narrowly interpreted the revised law as strictly applicable only to newly imported food colors and thus, didn't allow for the entry of formerly imported food colors.
This is just the tip of the iceberg. There are a host of complaints dealing with inconsistent application of the law according to region, assigned officers, and types of importers. The rationalization of standards and the harmonization of the application of laws are both important.
The standards system should be made to reflect the stage of economic development or the maturity of the particular society rather than just aiming at the best one. Korea's standards system tends to excessively benchmark the American standard, which is noted for being the strictest in the world.
Due to this tendency, even products, which are consumed widely in Western Europe, occasionally are rejected and deemed unsuitable for circulation under Korean standards, which mimic overly strict U.S. standards.
To reduce the import barriers, Korea should improve its standards system through a multilateral solution along the lines of an OECD agreement among advanced countries so that it promotes transparency, harmony, rationality and reasonableness in overseas eyes. Source : Korea Times - 11/06/2001
CROSS-CULTURAL UNDERSTANDING KEY TO BUSINESS SUCCESS
Following are excerpts from a speech delivered by Tami Overby, executive director of the American Chamber of Commerce in Korea, and Kim Wan-soon, investment ombudsman, during a seminar on the business climate in Korea organized by the Korea Trade-Investment Promotion Agency (KOTRA) at the KOTRA building yesterday _ ED.
Kim Wan-soon Investment ombudsman
In my capacity as investment ombudsman for the past two years, the troubled state of industrial relations in Korea has become a salient issue among foreign investors, following the financial crisis of 1997 and economic restructuring efforts by President Kim.
Based on my conversations with a number of foreign investors, the source of the labor disputes partially stems from cultural miscommunication and misunderstanding.
Thus, effective communication between foreign CEOs and Korean employees require a cross-cultural understanding.
When communicating with the local people, foreign investors should keep in mind that there are many different forms of communication across cultures.
In terms of persuasion techniques, in Southern Europe and Africa the emotional approach is more effective, whereas in Northern Europe and North America, the logical and rational approach is a more effective method of persuasion.
Perhaps, most baffling to Westerners when doing business in Asia, especially Korea, is the tendency of Koreans not to give a clear ``yes'' or ``no'' response, unlike the Anglo-Saxon countries that prefer a clear cut decisive answer.
Thus, the foreign CEO must ask repeatedly the same question to determine the intent of the Korean employee or business partner.
Without an adequate knowledge of the vast cultural differences that exist across cultures, relations between the foreign CEO and the Korean employee or partner can experience serious strains that undermine the business relationship.
Beyond communication, there exists a deep chasm between the foreign CEO's understanding of friendship and that of the Korean's concept of friendship.
A European manager pointed out to me that Westerners tend to separate friendship from business. This means that all business decisions are based on an objective calculation of costs and benefits, devoid of any personal or emotional considerations.
In Korea, it is not uncommon to see a Korean businessman establish a partnership with another Korean based on similar ties or connections. For instance, if the two partners were from the same high school or college this would be the overriding factor determining the success of a business venture.
This tendency dumbfounds many foreign managers, who are accustomed to evaluating a successful business venture based on price and quality rather than relationships.
Some additional cultural factors that foreign managers should bear in mind are that Koreans exhibit unprincipled flexibility, brinkmanship, short-term planning rather than long-term forecasting and planning, obsession with saving face, and blatant aggressiveness.
Also, Koreans tend to be non-transparent, especially in their responses.
In answer to a question, many foreign managers complain about a vague negative response, which is similar to the Japanese. Being direct is considered rude among Asians and so, being able to read between the lines is a very important tool to understanding Korean employees or partners.
Traditionally, the Korean workplace is organized along a vertical hierarchical structure with an authoritative decision-making process, rather than a more horizontally structured system that is transparent.
Patriotism With Daewoo Counter-Productive
In Korea, the deep sense of patriotism is something that most foreigners can never understand because we don't have the same history. This nationalism can be both a strength and a weakness.
When Korea was trying to work itself out of the economic crisis of 1997- 1998, this patriotism was a huge national asset. But when these feelings prevent the sale of a bankrupt company, like Daewoo, it becomes counter- productive.
Business in Korea is unlike business anywhere in the world. Your very unique history and circumstances have shaped modern Korea. Americans should recognize that it is the sheer mental toughness of the Korean people that is secret to their great success.
``Hahn'' is a Korean phrase that doesn't really translate well into English. It means, roughly, pent-up energies and frustrations that develop under extreme oppression and hardship.
Foreign occupation, social immobility, sexual discrimination, and crushing poverty all contribute to Korea's ``hahn''.
As a result, Koreans tend to exhibit extreme nationalism, xenophobia and a suspicion of foreigners. Looking at their history, it is easy to understand why they feel this way. But sometimes Americans coming to do business in Korea don't take the time to study the history or culture so they are frequently confused and frustrated.
To do business successfully in Korea, it is also very helpful to know a little bit about Confucianism and how it affects people's behaviors.
Confucianism provides a social code for proper behavior. It emphasizes obedience and respect for superiors and parents as well as family and friends. It values humility, sincerity and courtesy. It makes for a very strict hierarchical work place where the company president or chairman is treated as a king or a ruler.
Koreans tend to be more formal in their business relationships. You need to read between the lines _ ask a lot of questions, look for subtle hints.
No often means ``not that way''.
Help your Korean partner and staff avoid embarrassment, and _ if you can _ give them an honorable out. You will make friends and people will be much more willing to help you when you need it.
Personal connections are vital in Korea _ cultivate close ties. When you receive a business card, Koreans sped a few minutes looking at it closely.
They are trying to determine where in the organization you fit.
Americans tend to work very hard from 8:00 a.m. to 6:00 p.m. and then they want their own lives with their families or to pursue their hobbies.
Koreans often socialize and work much longer hours. Many Americans say that Koreans would be much more efficient and productive if they just focused on work and didn't spend so much time chit-chatting. That chit- chatting is actually extremely valuable networking.
Koreans want to get to know you before they decide if they want to do business with you. Americans build the relationship after the deal is done.
Koreans won't do the deal until the relationship is established. Source : Korea Times - 5/6/2001
MANAGERS LACK RISK MANAGEMENT SKILLS
By Seo Jee-yeon
Many Korean companies lack risk management, according to a survey.
The consensus was formed when the Korea Associates Business Consultancy conducted a survey of about 100 Korean and international financial managers who attended a conference held on Wednesday at the Shilla Hotel.
Those surveyed agreed that Korean managers do not yet fully understand the principles of risk management.
The problem, identified by Tony Michell of the Korea Associates Business Consultancy, was that Koreans identified only spot risks, single risks managed in isolation, such as foreign exchange risk, and did not consider the entire business context.
Kevin Knight, chairman of the Australian Standards Committee, said at the conference that enormous progress had been made in the 1990s in response to Western business failures and new attitudes toward business responsibility toward managing all types of risk.
Justin Jagger of Herbert Smith and Partners explained about the changes in the legal environment in the U.S. and Europe which made directors and officers liable to civil and criminal action for a wide range of management failures. He linked this to the growth of minority shareholders' rights in Korea and the need for liability insurance.
Chris Park, chairman of Deloitte Consulting, explained that in the U.S.
the outsourcing of internal auditing functions was one of the fastest growing businesses. He predicted that this would also happen in Korea as a result of the new awareness of the need for transparency.
Reg Bancroft, CEO of Royal and Sun Alliance, explained the many dimensions of risk and the principles of risk management.
He said that Royal and Sun aimed to improve the standards of the insurance industry in Korea by providing leadership in risk management advice. This would lead to both lower premiums for many types of insurance and more profitable insurance companies, he said.
Higher share prices would also result as risk management principles adopted by Korean companies became known to foreign investors. Source : Korea Times 15/06/2001
TURNING THE INTELLECTUAL PROPERTY RIGHTS TIDE IN KOREA
Korea's lack of complete protection for Intellectual Property Rights (IPR) continues to irk its trading partners. Although the country's IPR regime may lag advanced-country standards, such criticism discounts the great strides that Korea has made in this regard and indeed must continue to do so to maintain development and global competitiveness
They strike without warning, ransacking government offices, corporate suites and game rooms throughout the nation. The hunters are police teams empowered by the Public Prosecutor's Office. Their quarry is unauthorized software widely and unconscionably used, a form of virtual theft that cost U.S. companies $118.9 million in 1999.
The raids are the latest element in a drive by the Korean government to fortify intellectual property rights (IPR) in a country where regard for such rights has historically been low. Statistics released by the French Customs Service in 2000 indicate Korea as the leading country of origin of counterfeit products. Meanwhile, this past January the United States Trade Representative (USTR) elevated Korea to its "priority watch list" of countries for which it has serious concerns about their IPR infringements.
The government has a three-fold motivation in mounting the direct action against illegal software and other products. Firstly, to avoid the possibility of countermeasures from trading partners and so maintain normal commercial relations. Secondly, to create an environment conducive to high-tech foreign investment by removing the threat to proprietary knowledge, and thirdly, to protect and foster the development of Korean and foreign-invested knowledge-based industries as part of a general drive to enhance national competitiveness.
Raids certainly bear fruit. Following a crackdown ordered by President Kim Dae-jung in February, 130 persons were arrested in March for illegally copying software. A further 5,113 were booked without detention for violating intellectual property rights. Some 1,914 were charged with illegally copying computer software programs, 1,483 with violating copyrights and 857 with the illegal use of trademarks. The arrested included a 30-year old operator of a Busan game room charged with distributing 40,000 illegal copies of computer game CDs. Government inquiries into the use of illegal software can produce surprising and unwelcome results. A 1999 government commission revealed 99 percent of software used in the treasury department was pirated and 50 percent of all software used in government PCs was unauthorized.
- Eradicating Piracy
A presidential directive the same year resulted in more than 3,000 individuals prosecuted for illegal software use, a 290 percent increase from a year earlier. Overall there was a 92.2 percent increase in the number of prosecuted individuals for IPR infringements of all kinds and a 30.2 percent increase in the number of arrests, according to the Supreme Prosecutor's Office. Software company revenues grew following the raids but ebbed once they were halted.
Said Tami Overby, executive director of the American Chamber of Commerce in Korea (AMCHAM), "Korea does have enforcement campaigns, but we would like to see enforcement done continuously, as part of regular business." She also noted the "results of the raids are not always shared with the public. You can't always find out what happened." Undoubtedly there continue to be shortcomings in the government's record. Nonetheless, because of the president's demonstrated resolve to eradicate intellectual property pirating and a new awareness by Korean society of the damage and disincentive such piracy wreaks, the chamber has taken new confidence in Korea's progress toward developed-country standards on the issue. At a March 19th press conference, AMCHAM president Jeffrey Jones explained why the chamber would ask the USTR to remove Korea from its watch list during its upcoming "door-knock campaign" in Washington, DC. "President Kim has shown a strong commitment to protecting software copyright, which we applaud," said Mr. Jones. "From now on the U.S. and Korea will work together to protect these rights for the sake of Korean companies, too." He explained that as Korea was promoting the development of its own information technology industry in earnest, IP rights were also essential for this developing sector of the Korean economy. "We intend to request that the USTR remove Korea from its list as we don't think the problem is so critical," Mr. Jones said.
- Pioneering Legislation
Other observers believe that Korea is at an earlier stage than the developed countries in respecting IPR and the need for enforcement. "Intellectual property rights are weaker here than in the West but I would not say they are weaker at the same stage of industrialization," said Brendan Carr of Seoul-based Aurora Law Offices. Mr. Carr has participated in raids on local copying shops on behalf of the Association of American Publishers in response to copyright violations. "The United States was no respecter of European intellectual property rights at the said turn of the century and [on that basis] we sold all that we could." Mr. Carr said the United States did not institute an IPR protection regime until American inventions began to flourish. "Korea cannot be expected to do everything the United States does immediately," he said. "Meanwhile, there is no one more strict than the recently converted."
Jai W. Lee, senior legal counsel with Oracle Korea Ltd., a U.S. patent attorney and a member of the AMCHAM IPR Committee points out that the "History of IPR in Korea is quite short compared to Western countries, perhaps 15 to 20 years" but local legislation had made significant advances. "After a U.S. Supreme Court decision in 1981 opened the door to software patenting, Korea was the third country to adopt legislation specifically to patent software." In 1989, the Computer Program Protection Act (CPPA) was enacted to extend copyright protection to computer software. In Europe, software is generally protected by copyright as it was previously in the United States. "Again," he said, "following another Supreme Court decision last year that allowed the patenting of business methods, Korea introduced relevant legislation." This was a pioneering move on Korea's part said Mr. Lee, noting that in Europe such legislation does not exist. Andrew Park, co-chair of the IPR committee and an attorney with Kim & Chang noted the Trademark Act has recently been amended to enable plaintiffs to take action to invalidate pirated trademarks. A further amendment includes an anti-dilution provision enabling plaintiffs to seek invalidation of a pirated trademark even when it is not being used in connection with the type of goods it is normally associated with.
- Learning the Value of IPR Protection
Issues, however, abound. The CPPA has undergone a number of amendments but the most recent of December 1999 failed to satisfy the USTR completely on the use of "temporary copies." The representative thus maintained that the amendments did not fully comply with the World Intellectual Property Organization (WIPO) Copyright Treaty. The USTR cites another area of concern, also raised by the European Union Chamber of Commerce in Korea, that of protection of pharmaceutical data.
The chamber's Pharma/IPR Committee has reported instances where an originator's technical data submitted to the Korean Food and Drug Administration (KFDA) has been used by generic competitors to gain registration. Published data has used to gain product approval by KFDA contrary to Korea's commitments under the World Trade Organization's TRIPs (Trade-related Aspects of Intellectual Property Rights) protocol. Furthermore, the committee noted the absence of coordination between health and safety officials at KFDA and intellectual property officials at KIPO. The committee thus called for a system linking product registration review at KFDA with the patent protection enforcement powers of KIPO, since the absence of such a system has resulted in granting approval for products that infringe existing patents.
Meanwhile, cheap imitations of well-known foreign brand products can be bought at the immensely popular Seoul shopping areas of Tongdaemun, Namdaemun and Itaewon.
For the future, two forces will compel Korea to bring its level of IPR protection closer to OECD standards. The first concerns the need to ensure that the creativity necessary to encourage further Korean development is rewarded. Said Ms. Overby: "As Korea is producing more value-added product, Koreans are learning the value of protecting intellectual property rights."
The second concerns the need to attract and retain advanced technology investors to build national competitiveness. Investment Ombudsman Kim Wan-soon wrote in the Korea Times April 3rd, that "Recognizing the contributions of foreign direct investment to development, the Korean government intends to actively induce foreign high-technology companies into Korea to pursue its goal of developing an internationally competitive economy heavily focused on the IT sector. I believe," he continued, "that without comprehensive and proactive intellectual property rights protection, Korea will not be able to attract many high-tech foreign-invested companies since such companies typically are deeply concerned about the security of their technology and ideas." Source : KT&I May-June 2001
GOVERNMENT OFFICIALS ACCEPT FOREIGNERS' UNION 'FAIT ACCOMPLI'
The Labor Ministry said yesterday that foreign workers here are entitled to organize themselves and that it does not intend to interfere with the recent launch of the nation's first migrant workers' union. "It is our principle to treat all workers equally, regardless of their nationality," said Heo Won-yong, an official of the Labor Ministry.
"There is no clause in the nation's labor laws that discriminates against workers of foreign nationalities. There's no legal ground on which we can oppose their forming a trade union," Heo said.
About 150 foreign workers, many of them overstaying their visas and facing deportation, launched Korea's first labor union chapter consisting of migrant workers Saturday. The group is under the wing of the Seoul-Kyonggi-Inchon Region Equality Trade Union (SKIRETU). SKIRETU is affiliated with the Korean Confederation of Trade Unions (KCTU), one of Korea's two umbrella labor groups.
Heo added that it is beyond the ministry's jurisdiction to take issue with the workers' illegal residence status. He said that he could not predict what actions the Justice Ministry or the prosecution, which are in charge of immigration control, would take if the identities of some of the migrant workers are discovered as a result of their union activities.
The Justice Ministry said cautiously that there would be no change in the ministry's basic position to deport foreigners who are staying in the country illegally. "As a law-enforcement agency, we're not concerned with what kind of activities migrant workers engage in," a ministry official said.
"The primary principle is that they should be subject to deportation according to the current immigration law and we may have to send them home if their activities make them visible," the official said, requesting anonymity. According to the ministry, there are an estimated 200,000 illegal foreign workers in Korea, including about 40,000 who entered the country as "industrial trainees." The industrial trainee system was introduced in 1994 to help ease labor shortages at "3-D (dirty, dangerous and difficult)" workplaces. Under the program, foreigners, mostly from Southeast Asia, can stay in Korea for up to three years, during which they are trained and employed by local small businesses.
The industrial trainee system has often been abused, however, with many of the trainees abandoning their designated workplaces for jobs offering better pay and outstaying their visas. Employers, in turn, have taken advantage of foreigners' illegal status to withhold their wages, dismiss them from their jobs without warning and violate their human rights. Amidst international criticism of human rights violations, the government last year announced a plan to introduce a new foreign worker employment system. It calls for equal treatment of foreign workers and their Korean counterparts in terms of wages, medical benefits, union activities and other working conditions. But the issue has been drifting in the face of strong opposition from major business organizations who argue the change will cause small and medium-sized firms greater financial burdens. Source : Korea Herald 2001.05.29
SURENCHERES SYNDICALES EN COREE DU SUD, LE MOUVEMENT SOCIAL NE BÉNÉFICIE PLUS DU SOUTIEN POPULAIRE.
Par RICHARD WERLY - Le jeudi 14 juin 2001 - Libération
Ils sont de nouveau descendus dans la rue pour dire halte aux réformes et aux licenciements. A l'appel des syndicats coréens, une grève générale a paralysé mardi la compagnie aérienne Korean Air et plus d'une centaine d'entreprises. Mercredi, les grands hôpitaux coréens ont à leur tour interrompu leurs activités. Manifestations, revendications, confrontations avec la police anti-émeute... le feuilleton social sud-coréen a un air de déjà-vu. Mais les irréductibles syndicalistes de la péninsule emmenés par la puissante confédération KCTU ne bénéficient plus du soutien populaire des années 1997-1998, lorsque la crise financière avait amené le Fonds monétaire international (FMI) à débloquer d'urgence 58 milliards de dollars (68,5 milliards d'euros). Leur résistance suscite de plus en plus de perplexité.
- Porte-à-faux.
La raison de ce retournement tient à la conjoncture. Il y a quatre ans, les ténors de la KCTU - confédération indépendante affûtée par sa résistance aux dictatures militaires - catalysaient le mécontentement national. Le séisme financier asiatique de 1998 avait ouvert une brèche. Les "chaebols", ces grands conglomérats qui faisaient la fierté du pays, apparaissent alors sous un jour peu reluisant. Les syndicats font alors un carton en dénonçant pêle-mêle leur endettement excessif, leur paternalisme exacerbé, leurs liens occultes avec la classe politique. La KCTU obtient d'être associée aux négociations entre le FMI et l'administration du nouveau président élu Kim Dae Jung, intronisé en février 1998. Le chef de l'Etat, dissident historique, tient à ce partenariat avec les syndicats qui l'ont soutenu: "Le cliché était parfait, résume un diplomate européen. Le démocrate et les partenaires sociaux main dans la main contre les ravages de la mondialisation libérale. La Corée du Sud était le modèle à suivre."
Aujourd'hui, le tableau est bien différent. Le ralentissement économique est passé par là. La Corée du Sud, qui avait renoué en 1999-2000 avec un taux de croissance d'environ 8 %, n'est pas sûre d'atteindre en 2001 les 4,5 % prévus par les autorités. La panne du secteur des nouvelles technologies aux Etats-Unis a entraîné une chute de plus de 40 % de ses exportations électroniques et informatiques qui constituent l'un des atouts majeurs de ce pays, dont les entreprises de main-d'œuvre (textile, chaussures, etc.) délocalisent en masse vers le reste de l'Asie. Les secteurs émergents, comme l'industrie des jeux en ligne ou les télécoms, sont une terre peu fertile pour les syndicats formés au moule des industries de masse.
Pire: ceux-ci se retrouvent en porte-à-faux. Kwak Tak Sung est chercheur à l'Institut d'étude du travail de Séoul: "La KCTU proteste contre les restructurations mais reste composée en grande majorité des employés des "chaebols" nostalgiques des avantages d'antan et de la sécurité de l'emploi. Elle représente les salariés d'avant la crise."
- Bras de fer.
Le discours volontiers nationaliste des syndicats coréens est en outre à double tranchant. Dans le cas du constructeur automobile Daewoo Motors, dont l'américain General Motors étudie le rachat, les métallurgistes de la KCTU réclament une nationalisation jugée irréaliste par tous les experts. D'où le retard pris dans la négociation au sein de cette entreprise qui risque de mettre la clef sous la porte si elle ne trouve pas de repreneur. "Les syndicats coréens ont une force de frappe due à leur organisation et à leur capacité de mobilisation. Mais ils vont la perdre s'ils persistent à privilégier la confrontation au dialogue", pronostique la sociologue Lae Soon Jo.
S'ajoute un bras de fer politique lié la proximité de l'élection présidentielle, début 2002: convaincu que les réformes sont indispensables pour remettre la Corée du Sud sur les rails de la prospérité, Kim Dae Jung est aujourd'hui en conflit ouvert avec un mouvement social largement responsable de son accession au pouvoir.
STRENGTHENING SHAREHOLDER RIGHTS
Company law reform in Korea
Company law reform seems to be on the agenda in nearly every country. The driving forces behind current company law reform everywhere are much the same, i.e., the pressure of internationalization and competition, rapid changes in the shareholder population and composition, and striking developments in financial markets and modern information technology. Yet the recipes for how to deal with these new challenges vary considerably. In some countries board reform is clearly the focus. In other countries the role of the shareholders, both institutional and private, is being enhanced.
Company law reform initiatives in many countries have tried to cope with so-called principal-agent problem, namely, to make the board more responsive to shareholder interests. One key problem is striking the right balance between allowing directors free reign of judgment, and imposing control by structural and other legal rules, ultimately, by apportioning liability. In practice, though, the primary principal-agent conflict in the Korean business community like many other countries is not the conflict between the shareholders and the board of directors, but rather the conflict between the minority and the majority shareholders. Therefore the protection of minority shareholders from majority abuses is one of the most important objectives of company law reform in Korea. The need for such reform is particularly pressing in regard to those Korean companies that are controlled by a small group of shareholders, or where managers possess substantial stockholdings. Thus, the strengthening of shareholders' rights refers in many cases to the strengthening of minority shareholders' rights by blocking the arbitrariness of controlling shareholders and management.
Korean company law, as primarily codified in the Korean Commercial Code ("the KCC" has consistently evolved to confront these challenges. International financial markets urgently exerted pressure to bring about further reform in the wake of the 1997 financial crisis. Thus it has undergone drastic changes in a very short period. In fact, after an amendment in 1995, it was further amended in 1998 and again in 1999. Yet another amendment introduced by the government ("the Amendment Bill") was submitted to the National Assembly at the end of 2000.
Company law reform is aimed firstly at enhancing the protection of the interests of the shareholders as a whole. Reform has focused mainly, but not exclusively, on the following areas:
· Strengthening the rights of minority shareholders
· Reinforcing the power of the board of directors as a decision-making body to block the excessive influence of controlling shareholders
· Strengthening disclosure requirements to bolster management transparency
· Strengthening the role of auditors including the introduction of the auditor committee system to check the misuse of power by directors
· Introducing stock option schemes to provide directors and employees with incentive to work toward furthering the interests of shareholders.
Another aim of the reform drive is to create a legal infrastructure that will permit and facilitate the restructuring of a company. Until the financial crisis in 1997, there was little demand for corporate restructuring. However the crisis and increased competition in global markets subsequently created a huge demand for restructuring. The main features of corporate reform in this respect are:
· Drastic liberalization of the law and regulations regarding mergers and acquisitions
· Deregulation of the procedure governing the redemption of outstanding shares
· Introduction of a "corporate division system" to facilitate the splitting-off of a particular business division of a company without the approval of individual creditors
· Introduction of a "share exchange or transfer system" in the Amendment Bill to facilitate the establishment of a holding company as allowed by the Monopoly Regulation and Fair Trade Act.
Following is a brief overview of company law reform in Korea, in regard to its strengthening of shareholders' rights by amendments introduced in the wake of the crisis.
Nomination and election of directors
The principal constraint on directors is the right of shareholders to elect them periodically. In order to protect shareholder control, the KCC sets a maximum three-year term for directors. For the same purpose, shareholders have the power to remove members of the board. This may be done at any time and without any stated cause by a special resolution at a general meeting of shareholders. In such cases a special resolution may be passed with two-thirds of the votes present and representing one-third of all issued shares.
Cumulative voting rights The KCC allows minority shareholders with no less than 3 percent of all issued shares to request a cumulative method of voting for members of the board of directors, except as otherwise provided by the articles of incorporation of a company. Cumulative voting enables a larger minority shareholder to obtain representation on the board of directors, or a group of small shareholders to put an "outsider" on the board who is not connected to the majority or the management of the board. In fact, many companies exclude all mention of cumulative voting from their charter; therefore, there is a debate in legal circles in favor of making cumulative voting mandatory. On the other hand, oft-repeated arguments against cumulative voting maintain that it is likely to polarize a board of directors.
Shareholders' proposal rights
In order to protect shareholder authority and the interests of minority shareholders, it may be appropriate for company law to give shareholders the power to act on their own initiative. To enhance the right of shareholders to take decisions without a proposal from the board of directors, it was decided the law should contain procedures for shareholders to put issues on the agenda of shareholders' meetings. The "shareholder's proposal clause" introduced in the KCC provides that shareholder(s) with no less than 3/100ths of all issued shares (excepting shares without voting rights) may ask directors to place certain matters on the agenda of a general meeting of shareholders. The Korean Securities and Exchange Act ("the KSEA" allows this right to shareholder(s) of public companies (stock-listed companies on the KSE or association-registered companies on KOSDAQ) possessing no less than 10/1,000ths of all issued shares.
Interim payment of dividends
Dividends are means for companies to distribute some of their accumulated profits to shareholders. Shareholders must approve dividends at an annual meeting as a form of approval of the annual financial statements. For the purpose of stimulating a rapid recovery in investment, the KCC introduced an interim dividends system. Therefore, the articles of incorporation of a company may provide that interim dividends can be paid just once during a business year, either out of the previous year's profits or as an "advance payment" against the next approved dividends.
Appraisal and redemption of shares
The right to an appraisal of shares is permitted under two exceptional instances:
· In the process of one of several types of company reorganization. For example, a merger, an accession, a division, a separation or a transformation
· A major transaction such as disposal of substantial assets.
The Amendment Bill adds acquisition of substantial assets or a business as a type of transaction necessary to be approved by a special resolution of a shareholder meeting since such an acquisition can involve a correspondingly high risk of damage to shareholders. A judge or an independent appraiser should determine a value when an agreement on the price of redeemed shares cannot be reached between the shareholders and the company.
Preemptive rights
Preemptive rights refer to the rights of shareholders to have the first opportunity to purchase any newly issued shares. Such rights are intended to protect shareholders against both "targeted" sales of new shares to others and general attempts to dilute the voting rights of existing shareholders. According to the KCC at present, this requirement could be waived by including articles of incorporation that provide otherwise. However, the Amendment Bill restricts the inclusion of this waiver in articles of incorporation only when it is necessary for the introduction of new technologies or the improvement of a company's financial structure.
Right to take a derivative action
Any shareholder who holds no less than 1/100th of total outstanding shares may file an action against directors to enforce their liability if the company fails to file such an action within 30 days after receipt of such demand from the shareholder. The KSEA allows this right to shareholders holding no less than 1/10,000th of outstanding shares. A shareholder that brings such a suit and is successful in recovering damages on behalf of the company has the right to be reimbursed for his/her expenses, including legal fees, as long as these expenses are reasonable in relation to the amount of the damages.
Disclosure to shareholders
All company laws require a company to provide basic information to shareholders periodically. The KCC also provides that a company is required to provide shareholders, at least once a year, with a balance sheet, a statement of profits and losses, and a written report on the company's activities. Any shareholder may demand, at any time during business hours, to inspect or copy the articles of incorporation, the register of shareholders and the register of bonds. Those shareholder(s) who hold no less than 3/100ths of all outstanding shares may demand in writing to inspect or copy the account books and related documents. The disclosure requirements of the KSEA in regard to public companies are even stricter.
Improvements following developments in information technology
How might new information technology be used to improve the shareholder rights in terms of information dissemination and voting procedures (including the use of proxies)? The KCC takes no account of the benefit that information technology might offer shareholders. In fact, it only allows shareholders to exercise their voting rights in writing in lieu of attending the meeting. By contrast, in the case of a resolution by the board of directors, it allows voting on the adoption of a resolution by means of a communication system transmitting and receiving visual images and sounds simultaneously without personal attendance.
Han-Ju Kim: Dongsuh International Law Offices Tel: (82-2) 3471-3705, Fax: (82-2) 3471-3708 E-mail: hjkim@bizlaw.co.kr Source KT&I mai-juin 2001
FTC PLANS FOR STRICT INVESTMENT CEILING SYSTEM
Lee Nam-ki, chairman of the Fair Trade Commission (FTC), yesterday said the agency would strictly apply the rule that prevents major conglomerates from investing more than 25 percent of their net assets into subsidiary companies.
``The principle will be unswervingly applied to the leading enterprises wanting to invest in state-run companies that are in the process of being privatized,'' Lee said during a meeting with leading business leaders.
In this context, FTC deputy chairman Kim Byong-il explained that Lee's statement meant that the FTC would not permit any exceptional cases just because conglomerates invest in state firms undergoing privatization.
``But the investment ceiling system could be operated flexibly in case the investment is pertinent to corporate restructuring, or meant to strengthen core business divisions,'' he said.
He noted that the FTC is considering a legal review about whether or not the case involving Doosan, which recently took over state-run Hanjung, would meet the requirements for an ``exceptional case.''
In the meantime, Lee clarified that the FTC would strictly crack down on the alleged practice of cross debt payment guarantee among subsidiaries of the same conglomerate.
He criticized some major enterprises for having begun to rely on ``blank check'' methods as a new way of guaranteeing debt payment for their affiliates.
``As the conglomerates are required to clear away their debt guarantees by March next year, some of them have begun to depend on such inappropriate means,'' said Lee.
Touching upon the recent demand for early completion of the reform drive and taking economic stimulus measures, he said that ``It is not the proper time to wrap up the reform drive and adopt economic stimulus steps.''
jayshim@koreatimes.co.kr - Source : Korea Times - 23/05/2001
KOREA AN INTERNATIONAL IT POWERHOUSE IN THE MAKING
Korea's information technology industry has been central to the country's economic recovery. Moreover, the worldwide recognition it has won is positioning it to become a major element in the international IT market The rapid Korean recovery from the 1997 financial crisis held the promise that it might put the country on the path to sustainable growth but the economic slowdown that began in the latter half of last year is dimming growth prospects. In some quarters, speculation is brewing of impending crisis. However, foreign views on the Korean economy are not nearly so negative.
The Aug. 8th 2000 edition of BusinessWeek magazine featured a story on the runaway success of the Korean information technology industry, the enthusiasm of Koreans for IT and how Korea is outstripping Japan in this regard. The story described how the country's outstanding information technology (IT) and supporting infrastructure and booming info-tech industry have turned Korea, which was teetering on the verge of national collapse just three years ago, into an economic dynamo of the Digital Age. In fact, all indicators emphasize how Korea is firmly positioning itself as an Asian IT powerhouse.
With the development of the domestic IT industry, a number of major international players have established in Korea and continue to expand their presence. Despite an economic slump and a widespread collapse of dot-com firms last year, IBM Korea recorded 127.3 billion won in ordinary profits, HP Korea 73.5 billion won, Microsoft Korea 56.9 billion won and Fujitsu Korea 20.3 billion won. IBM Korea's performance in 2000, in fact was the best since the company arrived in Korea in 1967. HP Korea's sales hit an all-time high of 1.5 trillion won. After recording only 500 million won in surpluses in 1998 Microsoft Korea last year generated 148.2 billion won in sales and 59.6 billion won in ordinary profits with the result it now regards Korea as one of its largest strategic markets. The Korean subsidiaries of Cisco Systems, Oracle and Sony also recorded ordinary profits in the range of 10 billion won. The deepening involvement of these foreign IT companies in the Korean market is paralleled by the heightened investment of their domestic counterparts. For example, Internet and e-business company Nortel Networks formed a strategic alliance in digital healthcare support with Korean venture company Mediface, a world leader in the field of Picture Archiving and Communication Systems (PACS). Nortel Networks is also aiming to become a supplier of equipment for the next-generation IMT-2000 wireless telephony project due to debut in Korea this year. Compaq Korea is planning to switch manufacture of its leading PC model to Korea. Local production of a notebook computer and workstation is also planned. IBM Korea recently switched its target market from corporate clients to individuals. Moreover, it is planning to introduce Korean-language versions of its "Transmate" and "homepage Builder" homepage construction software. Microsoft is also out to expand its share of the software market by launching a version of MS Office for home use. Moreover, Microsoft has formed Appli-cation Service Provider (ASP) alliances with 28 Korean companies since September 2000.
Fueling the intensive growth that matches that of the multinationals is the Korean IT industry's world-class competitiveness in digital electric home appliances. In set-top boxes, digital TV and DVD players, and in hardware such as PCs, semiconductors and mobile telecom equipment, Korea has no equal.
New Force in the Korean IT Industry
While production of information, communication and peripheral computer equipment is beginning to slow with the decline in world demand, the software sector -particularly the System Integration (SI), multimedia contents industry such as games and on-line education - is emerging as a new force in the Korean IT industry.
According to the Korea Information Society Development Institute (KISDI), the software industry will achieve revenues of $1.3 trillion by 2005. As the software industry creates added value in the order of 40 percent, it is regarded as a leading industry of the 21st century with far-reaching ability to shape both the economy and society. It is expected to make a huge contribution to the national economy by boosting the international competitiveness of the manufacturing, financial and distribution industries.
The software industry is largely divided into the package software, computing-related service and digital contents sectors. Package software refers to software sold in standardized forms to the general public. Its installation is relatively simple, enabling consumers to buy and use it at need without additional services.
KISDI reported the output of domestic package software reached 1.87 trillion won last year and is projected to grow by 40.5 percent on average annually to be worth 1.87 trillion won by 2005. The government's recent crackdown on software piracy and the anticipated change of perception toward the practice will further fuel the growth of package software industry. In addition, the expansion of e-business is stimulating the rapid growth of the personal and corporate software markets. Within the corporate market, Enterprise Resource Planning (ERP) will likely be the source of steady demand among middle-sized enterprises, central and local governments, and state-invested institutions. The Knowledge Management System (KMS) and Customer Relationship Management (CRM) markets are also expected to sustain growth as the government, financial sector and Internet-based companies continue to make massive investments.
The computing service or System Integration (SI) industry currently represents the largest domestic software market. The SI market, which accounts for 80 percent of the domestic software market, was worth some 6.98 trillion won in 2000 and is projected to grow by 26.8 percent annually on average to 22.9 trillion won by 2005. Market watchers ascribe the rapid growth of the SI market to massive project orders placed by the finance and defense sectors together with swelling Internet-oriented corporate demand for Internet data centers and ASPs.
The computing service market will undergo even faster growth in the future through the rise of application outsourcing and e-commerce. The SI industry was previously dominated by the computerization-related divisions of large conglomerates such as Samsung SDS, LG-EDS, Hyundai Information & Communication and SK C&C. The industry picture is now changing as mid-sized SI firms aggressively advance into China and Vietnam through localization and alliances with foreign companies. For example, KCC Information & Communications and Dongyang Systems, two leading middle-sized SI companies, are marketing an international financial solution for overseas branches and a new information system for the non-banking sector, respectively, as major products with which to tap the potential of foreign markets
The digital contents industry uses information technology to package, process and distribute information through telecom networks, digital broadcasting systems and digital storaging media. The industry is composed of educational and game software, plus multimedia contents development and database manufacturing services. Industry revenues were up 60 percent from the previous year to 400 billion won in 2000, and are projected to grow by 58.6 percent annually to reach 4 trillion won by 2005. The industry is positioned to record spectacular growth this year thanks to major infrastructure projects such as IMT-2000, digital satellite broadcasting and the information super-highway. Because of the rapid increase in domestic Internet use, the digital contents industry is likely to undergo further growth in the future. With the probable switch from off-line to on-line contents, the significance of the digital contents industry as an emerging core industry within the digital-based economy is likely to increase.
It's More than a Game
The stellar performers of the domestic contents industry have been in game software. The game business has recently experienced explosive growth due largely to that unique Korean institution, the PC room. The huge popularity of game software such as Starcraft and Diablo 2 produced by Blizzard Co. of the United States demonstrates the potential of the Korean game market. According to Hanbit Soft, the local arm of Blizzard, over 2 million copies of Starcraft have been sold since its market debut in 1998, while 750,000 copies of Diablo 2 have been sold since its introduction in June of 2000. It was previously unprecedented that more than 2 million copies of a software program would be sold in a single market. In addition, on-line game market leader NC Soft chalked up 57.4 billion in sales in 2000 with its "Lineage" game. Sales are expected to top 100 billion won this year. The company's achievements stimulated the domestic industry to bring on-line games up to world levels. Nexon Inc. has claimed a major share of the domestic on-line market through its "Kingdom of the Winds" and "Legend of Darkness" games.
The market for educational contents is on the rise in tandem with the popularity of on-line education. The expansion of high-speed information networks has increased the accessibility of on-line education, which is emerging as an alternative to expensive private tutoring in education-conscious Korea. An educational information network linking all primary, middle and high-school classrooms via the Internet was recently completed. This network represents a cornerstone of government policy to enhance educational infrastructure. While Singapore may boast a comprehensive broadband network, it exists only within the confined limits of the city-state. Meanwhile, the scale of the Korean initiative has not been matched anywhere in the developed world. Coupled with the government's commitment to promoting IT-based education, the explosion of public interest in on-line education indicates its growth potential. Given the strong Korean appetite for education, the Internet education sector will likely continue to grow in turnover and value-added. The on-line education market is not limited to the field of contents and still requires a massive amount of investment before it can claim to be fully developed. The attractiveness of the market is heightened by the fact that peripheral demand is constantly being generated for equipment and solutions in addition to contents.
Last year, Korean venture firms made greater inroads into international markets than anytime before. Ahn Lab is a leader in the field of computer virus vaccines and software development as well as a pioneer in the domestic security software market. Worth 350 billion won last year, the market continues to make huge annual gains. The company recorded 10 billion won in sales last year alone through its V3 series computer virus vaccine program and is seeking to penetrate foreign markets. Shipments of V3 and its EnDe system protection program constituted Ahn Lab's first exports to Japan last year. Meanwhile, the company plans to make inroads into the Chinese and U.S. markets this year. The industry is continuing to make advances overseas in fields such as security consulting, vaccines and ASP. Web-page builder Namo Interactive exports software to 23 countries.
Trends in domestic software output by sector (Unit: 100 billion won)
1999 2000 2001 2002 2003 2004 2005
Package 12.9 18.7 27.6 40.0 56.1 76.2 102.8
Computing 50.3 69.8 96.3 127.1 161.6 194.0 228.9
Contents 2.5 4.0 6.7 11.0 17.5 26.4 40.2
Total 65.7 92.6 130.6 178.2 235.2 296.5 371.8
Source: KISDI
Capitalizing on Domestic Popularity
The company recently contracted with Tinyred.com of Singapore to export "Deep Search," an English-language version of Namo Durebak.With the deal, Namo has secured a foothold in the wider Southeast Asian market. Last year, the company signed export contracts with buyers in Europe, Japan and the United States, capitalizing on the popularity it enjoys in the domestic market. The company is targeting sales of 11.5 billion won and exports of 3.5 to 4 billion won this year.
Haansoft, the producer of the popular "Hangul" Korean word-processing program began exporting a Japanese-language version to Japan in 2000. Sales for the year were worth 1 billion won. Following an initial shipment of 5,000 copies at the end of November 2000, the company expects to have exported 500,000 copies by 2003. Despite a delay in the introduction of its "Hangul Wordian" last year, Haansoft earned 40 billion won in revenues from the word processor thanks to a surge in sales in the fourth quarter of 2000.
In addition, Humax exported $100 million worth of set-top boxes to claim more than 40 percent of the European market. Handisoft's Biz Flow was selected as the standard software to power the Intranet system of the U.S. Department of Commerce.
The escalating enthusiasm for on-line education worldwide as well as in Korea is serving to boost exports of the necessary solutions. Cyber EduTown, Nextedu Information & Communication and Youngsan Information & Communication are aggressively marketing their products in China and Southeast Asia and establishing local subsidiaries. Cyber EduTown contracted with a Chinese company to export a total of $1.2 million worth of distance-learning solutions over the next three years. Nextedu Information & Communication has formed a partnership with a Malaysian company specializing in remote-education services to build its market in Southeast Asia.
This corporate activity contributed to national software exports growing by 60.8 percent in 2000 to $180 million, so boding well for the future of the Korean software industry in global markets. According to the KISDI, domestic software exports will grow by 81.8 percent on average annually over the next five years to $3.3 billion by 2005. The software trade balance will remain in the red this year but future deficits are projected to decline. The balance is expected to be in surplus territory from 2002 onward to amount to $2.4 billion by 2005.
The Korean software industry has huge potential. Industry sales grew by 41 percent last year while exports also increased, rising 60.8 percent year-on-year to $180 million. With increasing digitalization throughout the economy, the demand for Internet-based solutions plus security and game software are expected to skyrocket. A major plus in the future of Korean software industry is the country's well developed IT infrastructure. With 21 million Internet users, five million high-speed Internet subscribers, 27 million mobile-phone subscribers and the completion of an information super-highway connecting 144 key points across the country, the local IT infrastructure can claim to be better developed than that of Japan. It is, in fact, close to being the best-developed in Asia. The extent and depth of the IT infrastructure acts as a spur to the country's software development capability as it serves to create demand for Internet-related solutions and services, and digital contents. Likewise, the mobile-phone subscriber population and the wireless Internet user base of 5 million will stimulate innovation in the fields of wireless-telecom and Internet solutions and software, together with wireless-Internet digital contents.
Korean Foreign Trade in S/W(Unit: US$ million)
2000 2001 2002 2003 2004 2005 2001-2005 (% change)
Exports 182 306 607 1,169 2,087 3,344 81.8
Imports 385 491 586 688 796 928 17.2
Trade Balance -203 -185 21 481 1,291 2,416 -
Source: KISDI
Having the Resources to Make it Happen
The software industry is technology-intensive. Further, more than any other industry it is skilled-personnel dependent. In this area Korea has a particular advantage for the future development of the industry. In addition, the government plans to promote training in the IT field with the goal of producing a total of one million IT technicians by 2005.
The software industry stands to benefit further from the Korean venture capital market and the technology weighted KOSDAQ over-the-counter stock market. Both provide avenues for venture startup and growth. Venture companies constitute the driving force of the software industry.
The expansion and increasing sophistication of the Internet are also facilitating growing e-commerce in software. As corporate software has been made more widely available through ASPs, prices have declined and demand has concomitantly strengthened.
Government commitment to fostering the software industry also portends well for its development. Under a mid-term program dubbed "Software Power 2005" the government will invest a total of 1 trillion won into the industry by 2005 including 160 million won for this year, in order to develop it to advanced- country levels. The overall goal is to quadruple anticipated 2001 output to 37 trillion won by 2005 and achieve exports of $3.3 billion over the same period to place Korea among the world's top seven software producers. In addition to two existing IT marketing support centers for Korean software companies in Silicon Valley and Beijing, the government will establish four more, in Boston, Tokyo, Shanghai and Britain this year, and six more in 2001 to bring the total to 12. The centers offer the necessary office space and facilities for domestic software companies to export, carry out joint R&D activities and attract foreign capital. The government's concerted effort to develop Korea as a top-class player in global IT markets is further cause for confidence in assessing the outlook for the industry.
The government's recent crackdown on software piracy is a welcome about-face from its previous lackadaisical stance. Software piracy is cited as the main obstacle to the software industry's advance, since the end result is to undermine technological creativity and suppress profits. The crackdown, aimed at promoting the sound development of software industry and laying foundations for its growth, is also in response to international concerns about the need to protect intellectual property rights in Korea (see "Investment Window").
Is Korea's goal of achieving the status of a new international software powerhouse by 2005 realistic? The national IT infrastructure is among the best in Asia and Korean technology especially in game software, and vaccines and security fields has received international recognition. Although it is a leader in Asia, it is yet too early to claim that the industry enjoys global competitiveness. Software manufacturers, venture firms for the most part, have difficulty in tapping overseas markets due to a lack of marketing ability despite their technological edge. Also, as foreign software giants dominate the market, local companies have difficulty in competing with them. However, those fast growing venture companies that have won international recognition point the way for the rest of the industry.
The goal of becoming a major player in the global software market may not be realized in the short term. Korea, though, has the potential to make it happen. The future of Korean software industry is extremely positive because it has an edge in human resources, the most valuable asset in this knowledge-based business. If the correct synergy between Korea's IT infrastructure, venture spirit and creative, dynamic business environment can be achieved, the Korean software industry will be well positioned to surpass its Asian competitors and take its place among the majors of the world market. Source : KT&I - May-June 2001
KOREAN ONLINE GAME MAKER TO START PILOT SERVICE IN ITALY
Wemade Entertainment, a Korean online game software maker, said Saturday it will start a pilot service for its online game "Legend of Mir II" in Italy from Monday, through an Italian game software distributor.
This marks the first time that the implementation of a pilot system for a Korean online game has been made in the European region.
The Italian-bound game is a traditional role-play challenge with 800,000 members in South Korea.
Wemade plans to market the product there under the name of "The Three Heroes" in the latter part of the year. Source : Korea Herald 2001.06.04
FOREIGN HOTEL MANAGERS COMMENT ON THEIR KOREAN EXPERIENCE
"When I was working in Hong Kong, I saw the 1988 Seoul Olympic Games on TV. That was my first encounter with Korea. Korea's gallant traditional dress and dynamic formation dancing was absolutely striking. That is when I first thought that I want to work in Korea, and it's been ten years already since I came to Korea." Manager of the Westin Chosun Hotel, Bernhart A. Brander started his career as an hotelier, back in Germany as a cook. In 1991, he moved to Westin Chosun Hotel from the Sheraton Walkerhill Hotel and is the longest serving foreign manager of a deluxe five star hotel in Korea.
People often refer to managers of hotels as "quasi diplomats," because they constantly meet with people of all walks of life from all around the world. Foreigners spend most of their time in the hotel, thus their image about the hotel is closely linked to the image they create about that country. Brander meets with more than 100 people a day and says that there are a number of points that Koreans should be aware of.
The World Cup Games can be a good opportunity for Korea to elevate its image to the outside world, so he hopes that taxi service and city pollution problems are addressed and corrected in time. He also said that there are some Koreans who seem to think that the world should answer all their requests and once they get their hands on what they want, they disappear, simply to return when they need something else. In short, he said that if one fails to build credibility, one will lose heavily when it comes to international or business relationships.
Brander was born in Germany in 1945. His career in hotel started in 1960, when he worked in hotels in Germany and Switzerland. In 1974, he moved to the Intercontinental Hotel in Bali, as the head chef. Since then, he served as the director in charge of food and beverages in deluxe hotels in Bangkok, Kenya and Hong Kong.
Antonio Samora is the chief manager of the COEX and Grand Intercontinental Hotels in Samsung-dong, Seoul. Since he came to Korea in March last year, he has met or will meet with 3 tenors and 22 leaders of the nation. During the ASEM, the leaders of 22 countries stayed and held meetings in the Intercontinental Hotel. Luciano Pavarotti, Placido Domingo, and Jose Carreras will be staying in Intercontinental for their joint concert in Seoul next week.
Samora who has worked at hotels over Asia including Hong Kong, Indonesia and China for the last 25 years, says Confucianism is essential to understand the society and culture of the east. "I can say I fully understand Korea living here only for 15 months. Yet, I think Korean society is based on the ideology of Confucianism. I've learned about the basic idea of Confucianism while I was in China and Hong Kong and these experiences greatly helped me understand Korean society."
Samora likes to go to theaters with his wife when has some free time. He mentions diverse cultures as one of the merits living in Korea. "Except for Tokyo, Seoul provides many of the most diverse performances in Asia," said Samora. He said managing the hotel in Korea is not as difficult as it seems as the economy is growing with political stability. Furthermore, Korea has excellent human resources. ¡°Our employees are very diligent, but if I have one thing to desire, that is our employees will be equipped with a better command of English." He also added "Koreans tend to be too much nationalistic and introversive."
Roderick Lowe who was assigned as a general manager of the Renaissance hotel in Korea on the May 9, last month, will debut as an officiator on June 23 for a couple who are having a second wedding ceremony 30 years after their marriage. This is part of his efforts to be closer and more familiar with people in the country where he is working. "I attended weddings in Japan, Hawaii, Latin America, the US, Britain, and Spain. Thus I am very excited to attend a wedding in Korea thinking of how it will look." He regrets the fact he doesn't speak Korean. This is the first time for him to be assigned in an Asian country, so he said his top priority is to learn eastern culture. Source : Digital Chosunilbo 2001.06.17
MARCHE DES PRODUITS HAUT DE GAMME
LES ENTREPRISES COREENNES DOIVENT INVESTIR
Le marché des produits de luxe a connu récemment un développement rapide. Cela s'inscrit dans une tendance récente des consommateurs à préférer des produits chers et de qualité supérieure.
Le développement du marché des biens de luxe offre des opportunités commerciales intéressantes pour les entreprises nationales dans la mesure où il démontre que les modes de consommation des classes supérieures de revenu sont demeurés assez stables indépendamment des variations économiques depuis la crise monétaire. En conséquence, le marché des produits de luxe constitue une niche sûre même en période de récession économique.
Les entreprises coréennes ont cependant été lentes à renforcer leur position sur ce marché. Un sous investissement en recherche-développement a conduit à l'absence de marque domestique puissante dans ce domaine.
Plusieurs firmes étrangères ont profité de ce vide et dominent aujourd'hui virtuellement le marché des produits de luxe. C'est pourquoi il est urgent que les entreprises coréennes jettent un ©"il à l'état actuel du marché et adoptent une réponse appropriée.
La distribution
Les ventes de produits de luxe importés ont explosé récemment dans les grands magasins. La réputation d'un grand magasin dépend d'ailleurs des marques prestigieuses qu'il propose. Pour cette raison, les grands magasins élargissent l'espace alloué aux produits de luxe importés au détriment des produits locaux. Illustrant cette tendance, des magasins de taille plus modeste visant la classe moyenne, qui vendaient précédemment des produits bon marché, se transforment en enseignes spécialisées proposant des produits de luxe importés.
Les appareils électroménagers
Les appareils électroménagers gagnent en taille et en qualité. Par exemple, le marché domestique des réfrigérateurs premium géants a enregistré une croissance rapide malgré le déclin de la demande globale pour les réfrigérateurs depuis 1995.
Cette tendance à la hausse a été fortement encouragée par a suppression de la réglementation sur les importations en juin 1999, autorisant désormais l'importation de produits japonais. Résultat, les importations de produits japonais tels que les téléphones portables, les autocuiseurs électriques, et les télévisions ont augmenté de 939 % et les caméscopes japonais représentent déjà 70 à 80 % du marché domestique.
L'automobile
Depuis la crise monétaire, le marché automobile domestique a également enregistré des gains continus. Cependant, alors que la demande pour les mini-voitures a décliné, celle pour les berlines de grande taille d'une puissance supérieure à 2000 CC et pour les véhicules multi-usages coûteux tels que les 4 x 4 a rapidement décollé.
Cette tendance a été particulièrement perceptible en 2000 où, par exemple, les ventes du modèle Hyundai le plus coûteux, la berline Equus, ont enregistré une hausse de 90 %. La hausse des ventes de modèles légèrement moins chers, comme la Grandeur ou la Dynasty également commercialisés par Hyundai, ont également été en hausse, respectivement de 25,3 % et 30,6 %.
La demande pour les véhicules de luxe importés, qui avait décliné fortement en raison de la crise monétaire, a également sensiblement augmenté en 2000, enregistrant une hausse de 83,8 %.
Les services financiers
Les établissements financiers coréens sont récemment entrés dans le private banking business, c'est-à-dire les services proposés aux riches particuliers possédant un montant important d'actifs financiers. Les banques Shinhan, Hana, Kookmin et KorAm proposent déjà ce type de services qui incluent la gestion des comptes courants, les affaires fiscales, les conseils juridiques et les conseils en matière d'investissement.
Les maisons de titres se sont également engagés sur ce secteur : l'an passé, Dongwon, Hyundai, Samsung et Daewoo ont commencé leurs propres services et d'autres comme Merrill Lynch les ont rejointes plus tard. Ces firmes n'offrent pas seulement des services relatifs aux actions et produits d'investissement, mais également toute une gamme de services financiers relatifs à la fiscalité, l'assurance, les fonds de placement, et l'immobilier, ainsi que des consultations individuelles.
Dans le même temps, les compagnies de carte de crédit ont également enregistré un boom dans le domaine des produits haut de gamme comme. La " carte platinium " introduite en septembre 1998 s'est rapidement développée au sein de la classe supérieure de revenu malgré son prix élevé (100 000 wons par an).
Conseils aux entreprises coréennes
Il est urgent que les firmes coréennes se développent sur le segment des produits haut de gamme pour se prémunir des fluctuations économiques et maintenir des ventes stables. Elles doivent également introduire un système de gestion et de collecte de données statistiques sur les comportements de consommation et les styles de vie des classes supérieures de revenu pour maximiser leurs stratégies. Lee sang-min Le Courrier de la Corée -2001.06.05
BIOTECH EVOLUTION EMERGING IN KOREA
By Alvin Toffler
Korea's new cyber-infrastructure can help Korean firms move into the world markets and fields most likely to expand in the decades ahead. One of the greatest opportunities for expansion lies in the field of health. Two powerful forces are converging to create explosive growth, not merely in health services that will provide new job opportunities, but in self-care, and in advanced health technologies. As populations age, not only in Korea but also from Japan and China to Europe and the United States, demands for health care will escalate. Innovative health services will be required. Many of these can be facilitated or actually delivered by the cyber-infrastructure.
The market for small, smart, cheap medical technologies for use in the home will also expand. Biosensors to monitor heartbeat, blood pressure and other body functions, and to transmit them to physicians via the Internet are already appearing in the marketplace. The number and variety of these will soar, and Korean industries are well placed to design and produce them. Even more important, however, the shift toward an older population is converging with spectacular discoveries in biology, from stem cells, and cloning, to potentials for the fusion of human nerve cells with computer chips.
Blue Gene Computer
Korea can position itself as one of the world's most important users and exporters of advanced biotechnologies for human (and animal) health, and of services related to them.
The coming full fusion of Information and Technology (IT) and biology opens new opportunities for Korea in both fields. IT acts as a primary tool in biotech research in fields like genomics and proteomics, as the rising power of computers makes possible and reduces the cost of massive computations. Thus IBM is developing an even more powerful ``Blue Gene'' computer that will reportedly ``tackle a problem so complex that it makes simulating a nuclear explosion, or the collision of two galaxies, look like a picnic in comparison. It is intended to help biologists explore how proteins fold themselves up into their distinctive shapes.''
This move is part of IBM's plan to become the biggest supplier of computer hardware and software to biologists, a market estimated to reach $10 billion two years from now.
According to IBM vice-president Caroline Kovac, ``Biology is the science that's driving high-performance computing today.'' Compaq Computer has created a $100 million investment fund to acquire stakes in biotech start- ups. Sun Microsystems started an Information Advisory Council to puts its designers in touch with biotech researchers and executives.
Two years ago, Hitachi Corp. of Japan formed a ``Life Sciences Unit'' with a product-redesign mission similar to Sun's.
At the same time, biology could well transform computers and computing. Successful development of techniques for growing ``biochips'' could impact Korea's competitiveness in the semiconductor market. Beyond this, the integration of information technology, biotechnology, materials sciences, and nano-technology will spur innovation across many disciplines. Korea should participate in all these efforts.
The Korean government designated biotechnology as a key industry for the 21st century. The 14-year Biotechnology 2000 Programme began in 1993 and involves seven government ministries. Nearly half of $900 million of biotechnology products, including vaccines and antibiotics, produced annually is exported, mostly regionally.
However, a review by the Organization for Economic Cooperation and Development (OECD) found gaps between scientific research, applications research and commercialization of technology in Korea. It also found that most Korean production technology is imported and for many of big chemicals and food processing businesses, biotechnology is only a sideline. This leaves considerable room to increase the level of research and to capture more value than the research currently underway.
Korea's goal of raising biotechnological capabilities to the level of the world's leading countries by 2007 will depend on its ability build on and move beyond successes such as fermentation technology, antibiotics, diagnostics, and Hepatitis B vaccines to such fields as ``farm-aceuticals''- for example, the attempt to harvest human antibodies from genetically altered plants grown cheaply on an agricultural scale.
Over the next decade, biotech research will move from the medical lab and supercomputer to the desktop. This will open up possibilities for smaller firms and those without access to supercomputers. In the meantime, however, the need for technology and expertise will require collaboration between firms and with university research centers, and the government.
China is making a major push in genetics, cloning, and other biological fields. It staffs its leading research centers with very young graduate students finishing their masters and Ph.D. studies. It also maintains close contact with ethnic Chinese researchers in American and European laboratories. According to the Far East Economic Review this web of personal contacts facilitates ``the transfer of ideas, personnel and funding. back to China.''
Bio Fund Is Key To Development
Today, as venture capital funding for advanced technology shrinks in the U.S. and elsewhere as a result of stock market declines, the Korean government should quickly create, jointly with Korean private companies and universities, a ``Bio-Venture Fund''. The Fund should be used to make limited investments, with careful accountability, in 100 small, leading edge biotechnology start-ups in the U.S., Europe and China - with the proviso that Korean scientists and graduate students accompany the investment and participate in the work.
In this way, while some small investments will be lost, others may compensate for the loss, while exposing Koreans to the most advanced knowledge in the field. It can also help Korea take the next step, which is not merely to develop biotech, but to identify, as early as possible, the key subsets or niches of the biotech industry that will yield the highest value a decade or more in the future.
The advance of the biotech industries will give rise to a wide array of support services, to which Korea might contribute. For instance, the new industry will require scientists with business skills and managers with a background in genetics.
Leading Korean universities or private firms might create a new kind of MBA- a ``Master in Bio-Administration'' that could produce the next generation of CEOs in this key industry of the future.
The proximity of a large Korean ethnic community in Southern California to the fast-emerging ``Biotech Corridor'' between Los Angeles and San Diego offers plentiful opportunities for joint efforts between U.S. and Korean research institutes and companies.
We have focused on biotechnology, not merely for its own importance to Korea's future, but as a case model of what might be done with respect to other advanced industries, too, as Korea seeks its place in tomorrow's tri- sected world.
This is the fifth in a series of articles based on excerpts from a paper published by well-known futurist Alvin Toffler and an independent advisory group, Toffler Associates, at the request of the Korean Information Society Development Institute (KISDI) about the emergent global economy of the 21st century and Korea's place in it. -ED Source : Korea Times - 14/06/2001
BIOTECH STARTUPS PURSUING M&AS
Biotech startups have been actively pursuing mergers in a bid to expand their turf, business sources said yesterday.
Biornds (www.biornds.co.kr), which specializes in raw materials, last year acquired the genetic engineering firm Primebio and took over Bio CNG, a maker of deodorant, last month.
Following the merger and acquisition, Biornds recently shipped $500,000 worth of improved germs required for the production of animal growth agents to a German pharmaceutical company.
Biornds expects its sales to increase by about 2 billion won this year.
Diachip co. (www.diachip. co.kr), a protein chip developer, plans to buy a bio startup that produces protein chip manufacturing equipment and diagnostic instruments in July.
Diachip expects the acquisition to provide it with a comprehensive research system ranging from the development of protein chips to the production of analyzers.
Lee Seung-moon, director of Biornds Co. said that most bio startups are pursuing mergers and acquisitions in a bid to overcome limits in their technological expertise. Source : Korea Herald 2001.05.06
BIOLOGIE : VIEILLISSEMENT - LA PISTE SUD
Une équipe de chercheurs sud-coréens a déclaré le 23 mai dernier être en possession d'éléments d'information biologique sur la remise en état des cellules usées, une découverte exceptionnelle qui selon eux pourrait ouvrir la voie à une prévention du vieillissement cellulaire.
L'Université nationale de Séoul (SNU) a fait savoir que les résultats de l'étude dirigée par le professeur Park Sang-chul dans ce domaine avaient été publiés par le Journal of the Federation of American Societies for Experimental Biology (FASEB, Journal de la Fédération des sociétés américaines de biologie expérimentale), une revue de biologie qui jouit de l'estime de l'ensemble de la communauté scientifique mondiale.
Cette étude, la première à présenter une méthode de restauration des cellules endommagées par le vieillissement, a fait naître l'espoir de parvenir à soigner les maladies liées à ce processus et à mieux comprendre ce dernier.
Afin d'en étudier les mécanismes, les chercheurs du département de biochimie et de biologie moléculaire de l'Université nationale ont utilisé un fibroblaste diploïde humain (FDH). Ces travaux leur ont permis d'isoler une protéine dénommée "amphiphsine" qui facilite la circulation des éléments nutritifs au sein des cellules et se raréfie considérablement lorsque ces dernières vieillissent.
L'équipe a alors entrepris d'accélérer ce processus en procédant à des injections d'amphiphsine dans des cellules vieillies, explique l'un de ses membres, le chercheur Park Jeong-su.
L'amphiphsine est le seul type de protéine qui disparaisse lorsque le vieillissement cellulaire dépasse le stade dit de l'endocytose, durant lequel les cellules se développent normalement.
"Nous sommes parvenus à prouver le rôle prédominant de l'amphiphsine dans le vieillissement cellulaire en démontrant qu'une diminution du taux d'amphiphsine dans les cellules jeunes réduit leur apport en éléments nutritionnels et qu'à l'inverse des microinjections d'amphiphsine sur des cellules vieillies permettent de rétablir cet apport au niveau de celui qui s'opère dans des cellules jeunes", explique M. Park.
Enfin, le professeur Park Sang-chul estime que la réalisation que représente cette étude revêt une grande importance dans la mesure où elle permet pour la première fois le rétablissement d'une régulation en aval des réactions cellulaires qui sont au centre du processus du vieillissement. LJH - Source : Le Courrier de la Corée - 2001.06.05
KOREA, EU FAIL TO STRAIGHTEN OUT DIFFERENCES
IN SHIPBUILDING TALKS
Nho Joon-hun
Korea and the European Union have failed to find common ground on disputed shipbuilding issues during three days of talks in Seoul, the Ministry of Commerce, Industry and Energy reported yesterday.
According to ministry officials who participated in the talks at the Second Government Complex in Kwachon on the southern outskirts of Seoul, the main bone of contention was an increase in price.
``The EU delegation has been insisting on an increase of 5-15 percent in the bidding price for vessels but this is not something that the government can commit to,'' one of them said.
He said a major portion of the talks focused on an increase in bidding price but Korea's position was that the margin is too high and that any such commitment needs consultation with shipbuilders.
``We clarified our position that anything concerning the bidding price has to be discussed with shipbuilders. Even then, the scope of implementation is difficult to set as is monitoring conformity later,'' the official explained.
Still, he said, it became evident through the talks that both sides would rather settle their differences through dialogue rather than take the issue to the World Trade Organization (WTO).
The two sides ended the three-day consultation after exchanging their position papers with a promise to sit down together for further discussions in Brussels in two to three weeks.
``We will now have to go through the position paper and consult with shipbuilders as to what concessions Korea can make to resolve the dispute with the EU,'' the official said.
The EU has long expressed displeasure with the Korean shipbuilding industry, complaining about alleged subsidies from the Korean government and Korean companies outbidding European competitors with allegedly below- market prices.
The European Commission has, in fact, endorsed a motion to take the case to the WTO for mandatory bilateral consultation but the EU decided to try to resolve the problems through dialogue.
``We were actually optimistic about the possibility of reaching a compromise but we will have to go for more talks in Brussels, hopefully with a better understanding of what our counterparts want,'' said one senior official who represented Korea in the talks.
Faced with the possibility of going through bilateral consultations with the EU, the Korean government had said earlier that it will also file a petition with the WTO on allegations that the EU was also preparing to renew subsidies for European ship builders. jakenho@koreatimes.co.kr Source : Korea Times - 30/05/2001
KOREA, EU LAUNCH TALKS ON SHIPBUILDING TODAY
Korea and the European Union will start three-day talks in Seoul today to resolve the shipping dispute between the two sides.
The meeting is the first one since the EU decided on May 8 that it would file a complaint with the World Trade Organization regarding Korean shipbuilders' alleged illegal practices, unless it can reach a negotiated settlement with Korea before the end of June.
The EU has asserted that Korean shipbuilders have been offering dumping prices to receive orders in the region, assisted by unwarranted subsidies from the Seoul government.
The 12 Korean negotiators include officials from the Ministry of Commerce, Industry and Energy, Ministry of Foreign Affairs and Trade, Ministry of Economy and Finance, Korea Shipbuilders' Association, Hyundai Heavy Industries and Daewoo Shipbuilding.
Karl Falkenberg, trade director at the European Commission, will head the 12-member EU delegation, which comprises officials from the EU Commission and the European shipbuilding industry.
The EU side is expected to request a 10 percent hike in Korean shipbuilding costs, in which case a negotiation will be hard to reach, a commerce ministry official said.
"The standards for assessing shipbuilding costs are ambiguous and a negotiation with the Korean shipbuilding industry should precede a price hike," the official said.
Considering the friendly cooperative relations between the two groups, a resolution through negotiations is preferable to legal actions such as filing a complaint with the WTO, the official added.
Korea plans to propose a second round of talks in June if some progress is made in this meeting, the official said. (jhl@koreaherald.co.kr) By Lee Jae-hee Staff reporter Source : Korea Herald - 2001.05.28
LIGHTENING TAX BURDEN ON SOC INVESTMENTS
The International Institute for Management Development (IMD) recently announced in its "World Competitiveness Yearbook for 2001" that Korea's national competitiveness ranked 28th among 49 nations for the second consecutive year. Analysis reveals that Korea went up two notches in terms of government effectiveness, but dropped in the business performance (19th to 23rd), business effectiveness (27th to 31st), and social infrastructure (28th to 34th) categories. Here, social infrastructure refers to railroads, airports, roads, etc. To offset the decay in Korea's social infrastructure and to induce continued investment, I suggest that the current tax reduction and exemption incentives, mainly applied to manufacturing industries, be expanded to SOC (Social Overhead Capital) investments.
This suggestion had been made before. The Ministry of Commerce, Industry, and Energy (MOCIE) previously asked the Ministry of Finance and Economy (MOFE) to expand the tax incentives from high-tech and industry supporting service businesses to foreign SOC investors too. However, the MOFE rejected, saying that it would be unfair to other non-manufacturing businesses if favorable tax treatment, currently applied to manufacturing businesses, was extended to social infrastructure projects. This decision should be reversed in light of the unquestioned importance of foreign investment in SOC projects.
What follows is a detailed argument in support of the intrinsic value of SOC investments:
First, social infrastructure is a long-term investment of sizable capital. The long-term nature of this investment is a positive development, in light of Korea's past experience with a foreign exchange crisis precipitated by capital flight.
Since the SOC projects are generally run by "project financing" this presents a good opportunity to learn advanced financing techniques as well.
Second, SOC construction has the benefit of generating more employment than other industries. With a billion won investment, SOC construction creates 35 jobs. In contrast, manufacturing only creates 26 jobs and the service sector just 4 jobs. Furthermore, the Bank of Korea recently announced that SOC investments are the single greatest variable influencing GDP growth.
Third, improving the nation's infrastructure can significantly reduce logistical costs, which comprise a maximum of up to 17 percent of sales, thus benefiting the average consumer in terms of lower prices. Better road conditions cut down on delivery times as well as providing enhanced access to certain distribution points for the sale of goods. Also, the continued upgrading of social infrastructure conditions will help solve the problem of severe over-concentration of enterprises in the metropolitan area. If the transportation networks between the metropolitan areas and the provinces are well developed and other reliable infrastructure is in place, companies might not insist on locating their factories in the metropolitan area. Consequently, the development of social infrastructure could settle disputes over the divisive factory quota system overseen by the Committee of Metropolitan Areas. With more companies willing to locate to rural areas the factory quota system would be rendered obsolete.
Overall, SOC investment has two primary benefits. First, it benefits the Korean people and local businesses. Second, an improved social infrastructure is a serious factor that foreign-invested companies consider when deciding whether to setup operations in a particular country. From this perspective SOC investments are just as important, if not more important, than investments in the manufacturing sector. Therefore, tax incentives for SOC investments should naturally be extended. Currently, the government has allocated only 14.1 trillion won in its SOC budget for 2001, which is no more than 3 percent of GDP for 1999. This level is far lower than the recommendation issued by the International Bank for Reconstruction and Development (IBRD), which suggested an SOC budget of at least 5 percent of GDP.
Considering the Korean government's financial difficulties, it seems unlikely that it will be able to increase its SOC budget significantly in the near future. In order to maintain economic growth, the deficit in SOC investments should be offset with private capital or foreign investment. However, due to the unstable financial situation of many Korean companies, private investors can only play a limited role. Thus, finding ways to attract foreign investors into the SOC sector will be doubly important.
In a rapidly changing world, Korea can no longer afford to think only of its self interest, and remain oblivious to the outside world. Since foreign investors are only human, Koreans cannot expect them to invest in Korea without being assured of making profits. Thus, offering tax incentives for investments in the infrastructure sector should not be viewed as a special privilege but as adequate compensation for the cost and risks associated with doing business in Korea, which after all, helps develop the national economy. Tax incentives in the SOC sector can only materialize as a win-win situation for both foreign investors, who are interested in lowering their overhead costs, and the Korean economy, which stands to benefit from a vastly improved social infrastructure and access to foreign capital.
The writer is a consultant at the Office of the Investment Ombudsman. He can be contacted on (02) 3460-7647 or aquifer@kotra.or.kr - Ed. Source : Korea Herald 2001.05.30
LARGE CONSTRUCTION FIRMS BEGIN HIRING NEW EMPLOYEES
Major domestic construction firms have begun hiring again; for some, these are the first payroll additions since the financial crisis in late 1997.
The council of personnel managers of construction firms said yesterday that member firms had hired 232 new employees as of the end of last month, and rehired 91 others. The council expected the firms to employ around 400 new employees by the end of this year, as well as taking on 50 more experienced employees.
Samsung Corp. plans to add 50 to 60 new employees to its residential and general construction units, while Lotte Construction plans to hire 30-40 college graduates in the second half. The firm hired no one in the first half.
Daewoo Construction, too, will hire 80-90 new employees, although the company has not hired anyone since the financial crisis. POSCO Development is also expected to hire 30-50 new employees.
Kolon Construction, which hired 25 new employees in the first four months of 2001, will hire another batch of 20 this time around.
But some large construction firms, which have already padded their payrolls, have no plans to hire again in the second half. These firms include Daelim Industrial, which hired 50 new employees; Lotte Construction, which took on 22 new employees; Kumho Construction, which added 15 new employees; Korea Development, which hired 33 new employees; and Dongbu Construction, which took on 13 new employees.
Hyundai Engineering and Construction, which has just installed a new president, is unlikely to hire any new employees due to its on-going restructuring.
A council official noted that construction firms are mainly filling vacant clerical positions since they had not hired any new employees in the past several years, and as such, the increased employment isn't an indication that the industry has turned around. - Korea Herald - 2001.05.23
EUROPEAN CONSORTIUM VOICES WILLINGNESS TO MEET SEOUL'S OFFSET REQUIREMENTS FOR FIGHTER PROJECT
Eurofighter International is willing to meet the 70-percent offset requirements proposed by the South Korean government for its 4.3-trillion won ($3.4 billion) next-generation fighter program, the CEO of the European fighter consortium said yesterday.
"The proposed offset value of the program to Korea would amount to $2.8 billion and we are committed to meeting the very demanding target," Cesare Gianni said.
"Eurofighter International hopes to achieve this target by breaking this down to 40 percent ($1.2 billion) in local parts manufacturing, 35 percent in technology transfers and 25 percent in depot-level maintenance," Gianni said in a news conference at the Shilla Hotel.
In April, the Seoul government strengthened the offset requirements for the next-generation fighter program, code-named the "F-X" project, by raising the portion of local production from the previous 30 percent to 70 percent of total arms procurement value.
Eurofighter International does export marketing for its most advanced multiple-role combat aircraft, the Eurofighter Typhoon.
Eurofighter GmbH, a consortium of four European nations, produces the fighter, which is competing with three other models for South Korea's F-X project. The competitors are Boeing of the United States, which offers its F-15E; Dassault Aviation, the French maker of Rafale; and Russia's Rosvoorouzhenie.
South Korea is scheduled to announce the winning foreign firm and model for the F-X project in September this year, which calls for the introduction of some 40 fighters into the South Korean Air Force.
"The purpose of my visit this time is to meet with officials to discuss our bid and to attend a defense industry conference, which we are hosting in connection with the bid in order to bring together Eurofighter's European suppliers with Korean defense firms," Gianni said.
Early in the day, Eurofighter International opened a five-day conference on the Korea-European defense industry aimed at exploring partnerships and other areas of cooperation to support the bid of the European consortium for South Korea's F-X project.
"Our proposal to Korea is very simple: we are inviting Korea to be our partner, that means to be a part of the largest European defense program," he said. "In making this offer, we are seeking to combine our goals with those of Korea's in a win-win situation."
In addition to providing the South Korean Air Force with the world's best aircraft, he added, the European consortium wants to assist Korea in meeting its objective of developing the domestic aerospace industry, so it can manufacture its own aircraft.
"As a partner, Korea would be able to share technology used by the four other nations. In addition, Korea would be able to produce the Eurofighter at production lines in Korea to meet both domestic and export orders," said Gianni.
"I firmly believe that the Eurofighter Typhoon is the best insurance for the South Korean Air Force, now and for the future," he said. (sjkang@koreahearld.co.kr) By Kang Seok-jae Staff reporter Source : Korea Herald - 12/06/2001
THE CHAEBOL AT THE END OF AN ERA
The death of Hyundai founder Chung Ju-yung marks a crossroads for Korean conglomerates in their battle to stay competitive and relevant in a fast-changing business environment
The passing of no other person had ever elicited such an outpouring of grief. When Chung Ju-yung, late founder of the Hyundai Group, was reported to be near death March 21st, he received condolences from all quarters of business and government. Upon his decease some 37,000 mourners visited his home in Chongun-dong, central Seoul to pay their last respects. More than 300,000 others called at 111 Hyundai branch offices and factories in Korea and overseas (including some in North Korea) to express their grief and sign books of condolence. According to the final will and testament of the deceased, who maintained a frugal lifestyle in keeping with Confucian tradition, the funeral was a family event. However, it was universally regarded as an event of national import. Mr. Chung was the first non-governmental figure to receive condolences on their passing from North Korean leaders as well as former presidents of the South and the current presidential incumbent. He was put to rest surrounded by flowers they had sent.
Moreover, his death drew global attention. China offered government-level condolences and United Nations secretary-general Kofi Annan wrote to President Kim Dae-jung praising Mr. Chung's pioneering spirit and his commitment to Korean reunification.
Assessments of his life were mixed. Some hailed him as "A man who created a legend" and "The leading contributor to the Korean economic growth." Others meanwhile criticized him as "A typical chaebol boss who fostered his business through corrupt relations with politicians," "A businessman who distorted the corporate structure through reckless expansion" and "An entrepreneur who stained his industrial career by dabbling in politics." Evaluations of his life were as varied as what he had achieved in it.
Undoubtedly, it may be said that Chung's life is central to the transformation of the Korean economy from an agrarian country, newly emerged from the ravages of the Korean War in the 1950s, into the world's 11th largest trading country and a leading manufacturer of vessels, semiconductors and automobiles.
At a time when the Korean economy is struggling as a result of chaebol debt and lack of corporate governance and transparency, Mr. Chung's lifetime achievements appear truly remarkable. However, he will also go down in history as an entrepreneur who had the misfortune to witness the breakup of his own industrial group after he failed to successfully adapt himself to such major changes as the switch to a market-led economy and the advent of the information society.
The breakup of the Hyundai Group heralded also the demise of other chaebol, who distorted the Korean corporate structure with imperial-style and clan-centered management.
The Hyundai Group, which originated from Hyundai Construction (later Hyundai Engineering & Construction, HEC) in 1947, began the road toward complete dissolution with a feud among his sons over the managerial control of the group just 54 years after HEC's inauguration.
Disappearing into History
As the breakup of the group is hastened, the ranking of the top industrial groups is also changing. Hyundai once occupied the top position in the industrial sector with 80 or so affiliates, 75 trillion won in annual sales and 250,000 employees. It was forced from the top three grouping after it was divided into three smaller groups: automobiles, construction and heavy industries. The parent group is presently undergoing a complete dissolution while the three smaller groups are preparing for spin-off as autonomous entities. Hyundai Motor Chairman Chung Mong-koo heads the automobile group, Chung Mong-hun the construction group, and Chung Mong-joon, advisor to Hyundai Heavy Industries, the heavy industries group. Hyundai Electronics Industries (now Hynix Semiconductor) and financial arms such as Hyundai Investment Trust & Securities are looking to effect their complete split off from the parent group through government and foreign investments. Chung Mong-koo, the late Mr. Chung's eldest son, is expected to head automobile-related units such as Inchon Iron & Steel, Hyundai Mobis and Hyundai Motor. Chung Mong-hun, the fifth son, will take over management of core business sectors such as HEC, Hyundai Corp. Hyundai Merchant Marine and Hyundai Asan Corp. (operator of the Mt. Kumgang tourism program). Chung Mong-joon, the sixth son and the largest shareholder of Hyundai Heavy Industries, is expected to leave the management of the group to a professional manager and concentrate on external activities such as promotion of the 2002 World Cup and his role as lawmaker. Chung Mong-il, the eighth son, serves as chairman of Hyundai Finance Corporation. Earlier, Chung Mong-keun and Chung Mong-yun, the third and seventh sons, inherited Hyundai Department Store and Hyundai Marine & Fire Insurance, respectively, and separated them from the group. The Chung family was forced to abandon control of the group's financial units after the insolvency of Hyundai Investment Trust & Securities. The government is now trying to dispose of the company to U.S. insurer, AIG. The Hyundai Group, which ascended to the premier position in the Korean industrial sector in 1987, will end its reign marked with both honor and disgrace by disappearing into history. Meanwhile individual companies will arise to operate in specialized fields.
Collapse of the 'Too Big to Fail Myth'
The foreign exchange crisis of 1997 created the necessary momentum for the restructuring of the chaebol after several gave lie to the myth that it was a possible to be too big to fail. Nine groups including Daewoo, Kia and Halla were dissolved following the crisis. Cited as the principal cause of the crisis, the Kia Group had once risen to eighth place in the industrial rankings. When crisis hit the nation on Nov. 19th 1997, the group was immediately excluded from the list of the top 30 groups. A number of companies fell into crisis due to reckless and illegal actions by top managers. The most outstanding example in this regard is that of the Hanbo Group. Although Hanbo's financial structure was extremely weak, it launched into steel making with the support of powerful politicians who were bribed by the group into putting pressure on lenders. Hanbo ranked 25th in the industrial rankings for 1987 but failed to be listed among the top 30 for some time afterwards. It made a comeback in 1994 to 28th place, rising to 18th the following year. It eventually rose to 14th place in 1996 before its collapse in early 1997. The demise of the Halla Group followed an increase in debt load incurred by reckless investment in additional shipyards. It was subsequently forced to sell off most of its assets.
The rise and fall of the Daewoo Group reads much like a Greek tragedy. During the 1980s the group rose to second place in the industrial sector and remained in third or fourth place through the 1990s. In 1999, Daewoo beat out the Samsung Group for first place as the nation's largest group. It is now defunct and its chairman, Kim Woo-choong is on the run following charges that false accounting between 1997 and 1998 inflated the value of Daewoo equity by $32 billion.
Auditing is still underway at numerous foreign subsidiaries of the group, whose finances are densely inter-linked. Presently, only Daewoo Electronics among group affiliates is in the process of rehabilitation following court receivership.
The Dong-Ah Group was listed as the nation's 10th largest group in 1998 and left its mark in Korean construction history by winning a $5 billion order to construct Libya's Man-made River waterway project. However, it was excluded from the list of the top 30 business groups after it was hit by a financial crunch when domestic construction market cooled off. It is now undergoing liquidation following a debt-workout program.
The Hyundai Group maintained its place as the nation's top group for 14 years from 1987 to 2000. A feud among Chung Yu-yung's sons resulted in the automobile group being spun off and the group relinquished its top position to the Samsung Group. Unlike other business groups after the financial crisis, Hyundai persisted in expansion-oriented management. Despite fears of the creation of a monopoly in the auto industry, Hyundai Motor bid for, and eventually was successful in taking over Kia Motors. Hyundai Electronics Industries (now Hynix Semiconductor) absorbed LG Semiconductor and competed with Samsung Electronics for the top spot in the global chip market.
Hyundai's swim against the corporate tide did not last for long, though. Pressed by the slumped construction market, accumulated deficits from overseas construction projects and enormous financial costs, Hyundai Engineering and Construction fell into a severe liquidity crisis to the extent that it was unable to extend the maturities of its corporate bonds and commercial paper.
Hyundai Electronics Industries found itself unable to cope with the heavy debts incurred by its takeover of LG Semiconductor after semicon prices crashed. Consequently, the Hyundai Group was pushed out of the top industrial position and is now undergoing a procedure for revival through the separation of its affiliates.
From reckless diversification toward focus
Although chaebol still dominate more than 50 percent of the Korean economy, the winds of corporate change in the form of restructuring and chaebol dissolution are gaining strength.
Innovations such as bringing professional managers on board after structural reforms, greater transparency in accounting and enhancing the role of minority shareholders are changing the corporate landscape. Strict limitations on group investment in affiliates are forcing them to stay afloat through their own competitive ability. In addition, global competitive pressures are forcing more and more companies to adopt developed-country management standards, reducing debt-to-equity ratios to under 200 percent and concentrating on core businesses and efficient asset management. Overall, a new management paradigm is quietly taking root in the chaebol, under which they are adopting advanced forms of management systems that prize transparency, responsibility and above all, profitability. In the past, a compulsion to diversify in order to lessen dependency on one line of business resulted in chaebol expanding into a variety fields, giving rise to the saying that conglomerates were into everything, "From rubber gloves to oil tankers." With corporate focus increasingly recognized as essential to profitability, chaebol are moving away from expansion-based management toward improving their financial structures.
Under a strategy dubbed "World Best," the Samsung Group recently drafted a development plan centered on next-generation industries such as electronics, semiconductors and information/communications as core businesses. The LG Group also reoriented its business structure around electronics, information/communications and chemicals while the SK Group is successfully transforming itself from a textile company into a group specializing in petrochemical goods and telecom services. The Doosan Group consolidated its 29 affiliates into four core companies to improve profitability and competitiveness and is being cited as a model case of corporate restructuring.
To concentrate on core businesses, other large corporations have sold non-core units to overseas buyers. In the process of reducing the number of its affiliates to 47, the Samsung Group sold off 10 units. They included its construction machinery and forklift truck divisions to Volvo and Clark, respectively, for a total of $1.5 billion. The LG Group sold off the LCD division of LG Electronics to Philips for $10 billion while the Hanhwa Group sold off seven units including its bearing division to FAG of Germany and reformed itself into a company specializing in information/communications, the Internet and bioengineering.
Chaebol are currently simplifying their business portfolios by selecting businesses in line with their long-term goals and are making intensive investments in new businesses with dramatic growth potential.
Era of Professional Management
SK Group chairman Sohn Kil-seung became the first professional manager in Korean corporate history when he was appointed to his position in September 1998. His inauguration surprised the whole country as well as the business circle. The appointment of a professional manager as chairman by a giant chaebol instead of a family member of the group leader was accepted as a pleasantly shocking event that would have been totally unthinkable in the past. As such, it heralded the advent of a new era of professional management. Mr. Sohn's inauguration as group's chairman was possible because he had demonstrated his management ability by developing what was primarily a textile company into a highly competitive group specializing in petrochemicals and next-generation mobile telecom services.
As such, the group became one of the nation's top four conglomerates with annual sales of over 36 trillion won.
Lee Jun-yong, chairman of the Daelim Group, which stands at 17th in the industrial rankings officially withdrew as chief executive officer of Daelim Industrial Co., a core company of the group, and appointed a professional manager in his place. Similar professional management appointments were made in Korean Airlines, Cheil Jedang, and the LG and Daesang Groups.
Before the financial crisis erupted, the debt-to-equity ratios of the chaebol stood at over 400 percent on average. When the crisis struck, reducing ratios through assets sales and foreign-capital attraction became the chaebol's first order of business. As a result, the ratios of the nation's four largest groups all fell below 200 percent as of the end of 1999. That of Samsung stood at 166.3 percent, Hyundai 181.0 percent, LG 184.2 percent and SK 161 percent. Such levels compare favorably with the American and Japanese corporate averages of 155 percent and 195 percent, respectively. The ban on cross-debt payment guarantees among affiliates also reduced the potential for multiple insolvencies within groups.
Corporate Korea is now moving to implement management strategies based on cash flow and profitability. It was recently reported, for example, that to avoid the same fate of Hyundai and Daewoo, the Samsung, LG and SK Groups built cash reserves of 3 trillion won, 2 trillion won and 1 trillion won, respectively, often at the expense of research and development programs.
Persistency in Chaebol Reform Policy
Foreign and domestic observers have lauded the policy of chaebol reform pursued by the Kim Dae-jung administration over the past three years as already "a half-victory" on account of the huge changes it has wrought in chaebol management styles. Specifically, it has stymied irrational management and the problems stemming from reckless expansion.
The government is now striving to lift unnecessary corporate regulations to improve the business environment. To aid corporate financing, it is continuing its policy of selective financial support while spurring efforts to strengthen corporate governance. The perception that business transparency and improved governance are paramount to attracting foreign investment and upgrading corporate credit ratings is gaining ground. Meanwhile, the government is encouraging companies to voluntarily meet the standards for appointing outside directors enacted at the end of last year to prevent business owners from engaging in arbitrary and irregular management activities.
Large corporations are increasingly realizing the interrelationship between market mechanisms and share prices in determining credit ratings. Companies are able to borrow long-term at low interest rates almost at will when the stock market is bullish as it was last year. When the market hits bottom like this year, though, their fate could hang in the balance.
Chaebol are striving to change now, not to please the government but to receive favorable evaluations from the market. Under a changed business management environment, the invisible hand of the market is gaining more power. The Korean business management environment is fast changing to the extent that the government also dreads the power of the market since it might undermine its position. Chaebol are moving from one-man imperial and nepotistic styles of management to enhancing management transparency and paying heed to the concerns of minority shareholders. The introduction of outside directors and profitability-oriented management to maximize shareholder profits are likely to further accelerate the breakup of chaebol.
The reform process of the chaebol can be said to be moving from being government-led to market-driven. However, their rate of progress has come under criticism and allegations are being made that the recovery has sapped the will of the chaebol to change. Recently, the foreign press including BusinessWeek warned that Korea would face trouble again unless the government pushes ahead with chaebol reform more effectively. The thrust of the criticism was that the chaebol have a long way to go in improving the transparency of accounting, developing a system for the orderly exit of nonviable affiliates, reducing debt-to-equity ratios and abandoning expansion-oriented management practices. However, in the midst of a fast-changing business environment characterized by the trend toward digitalization and professional management, large conglomerates are slowly but surely learning that the toughest lesson for survival is to specialize in core sectors and improve their financial soundness. While it remains to be seen how many Korean chaebol will successfully adapt themselves to these changes, Samsung, SK and LG are providing role models for success in a world vastly changed from when Chung Ju-yung made his first foray into business more than a half century ago. Source : KT&I may-June 2001
LG FORMS DYE ALLIANCE WITH GERMAN FIRM
LG Chemical said yesterday that it signed a global alliance agreement with M.Dohmen GmbH to collaborate on dyestuffs. M.Dohmen is a leading distributor of specialty dyes based in Germany, which holds a large global market share mostly portioned in Europe and North America.
On forming the strategic alliance, LG Chemical will make investments in M. Dohmen by transferring its dyes business in Korea and stakes in its Tianjin joint venture in China (Tianjin LG Specialty Chemical Co. Ltd), while acquiring 49 percent of M.Dohmen's shares worth $33.7 million.
The transaction will position the partnership as the world's fifth largest dyestuff supplier with annual sales exceeding $140 million, equivalent to around 4 percent of global market share.
The move was triggered by the global trends of business consolidation seen in Dystar, BASF and Yorkshire. Textile-dye operations based in low cost areas such as China and India are growing in number, driving manufacturers towards challenges in a tough business environment.
Through the tie-up, LG Chemical hopes to further diversify its product lines with M.Dohmen's extensive technology in diverse applications for dyes and cooperate on developing more high value added dye products. In return, M.Dohmen would secure a stable supply of raw materials in Asia enabling it to make inroads into the Korean and Asian markets.
Source : Korea Herald 2001.05.24
LG-PHILIPS JOINT VENTURE TO BE BASED IN EUROPE
LG Electronics has decided to locate the head office of its planned joint venture with Philips of the Netherlands, to be called LG Philips Display, in Amsterdam in the Netherlands. The company is in the process of incorporation. Investments are equally divided between the two firms, which will become the world's largest producer of color tubes for televisions. Observers say it is the first time a large Korean firm has set up the head office of a joint venture overseas. Top executives signed on the joint venture in Amsterdam, and the two are expected to contribute their existing production facilities. LG Electronics had set up LG-Philips LCD, an earlier joint venture with the Dutch firm in 1999, with the head office in Seoul. A high-ranking official at LG-Philips said his company reached the conclusion to locate the head office in Europe because it would make advancement into other countries easier and because of a more business-friendly environment in the Netherlands. Once combined, LG and Philips will be the largest Braun tube maker in the world, with a production capacity of 80 million units a year and a 27.7 percent global market share.
Source : Digital Chosunilbo 2001.06.13
BT MAY STAY WITH LG TELECOM
British Telecom is allegedly considering the continuation of its partnership with LG Telecom by not selling its 24.1 percent stake in Korea's smallest large mobile service provider.
An LG Telecom source said BT's attitude is critical in light of the last 3G auction, due soon. LG hopes to attract foreign companies into its third- generation (3G) consortium by using BT's trust in the company as evidence to attract other potential partners. However, it is not clear whether the British telecom giant might sell its stake or not. The source said that the speculation is likely to be merely a political maneuver on the part of BT to sell its stake at a higher price.
Analysts took a below-market price of LG Telecom share as a clue that the British company was seeking to hold its stake. Last April, LG said BT may dispose of all its stake in the company by the end of this year as part of its plan to pare back its overseas operations. Industry watchers said BT's reaction is connected with the unexpected extension of an application schedule for the forming of a 3G consortium. LG Telecom planned to invite local companies into the consortium by June 5th. However, the company said it extended a deadline to June 13th.
LG said around 500 local companies, including 20 business conglomerates such as Hyundai-Kia Motor, submitted applications to be part of the consortium.
BT, the second largest shareholder in LG Telecom after LG Electronics has negotiated with Canadian telecom operator Telesystem International Wireless (TIW) to sell its stake as part of its debt repayment program.
``It is almost clear that TIW will join the LG-led 3G consortium by acquiring BT's stake in LG Telecom,'' said people close to the talks. ``However, the proposed plan may remain a conundrum if BT continues to hold its stake in LG Telecom.'' BT ran up much of its debt acquiring licenses for 3G mobile phones. The troubled company said last month that it plans to sell its London headquarter building and its stakes in Asian telecom companies.
That announcement came a day after BT's rival, Vodafone, bought out its shares in Japanese and Spanish mobile phone operators for $6.9 billion. Source : Korea Times 2001.06.08
GM TO PRESENT TAKEOVER BID FOR DAEWOO MOTOR TODAY
General Motors (GM) will submit its takeover proposal for the car unit and related businesses of Daewoo Motor Co. today, a senior official of Daewoo's main creditor Korea Development Bank said yesterday.
"After GM offers its official proposal, working-level negotiations will start at a third country around this weekend or next week," said Lee Sung-keun in a news conference.
The contents of GM's proposal will not be made public, he said.
The domestic negotiation team will comprise officials from Daewoo Motor and the state-run bank, while Morgan Stanley and three other firms will participate in the talks as advisers, he said.
KDB confirmed that Daewoo Motor, its domestic creditors and GM have agreed to kick off their official negotiations on the sale of assets of the ailing company's car-making unit and its affiliated operations.
Both sides have agreed to conclude the talks as quickly as possible because it will be conducted after a six-month assessment of Daewoo's enterprise value and GM's drawing of a future business plan, Lee said.
"GM and KDB have agreed to sign a memorandum of understanding on the sale of Daewoo Motor as soon as possible," he said. Lee further said that the sale negotiations will be held in a third country because there are so many interested parties. Both sides have also agreed to keep all facts concerning the negotiations confidential till a final deal is signed, Lee Said. Meanwhile, Financial Supervisory Commission Chairman Lee Keun-young met with a GM negotiation team yesterday, during which the GM mission called for the government's cooperation in the envisioned takeover talks. Daewoo Motor has been a burden to its creditors as well as the government and the Korean economy as a whole. In the wake of a liquidity crisis at its parent Daewoo Group, Daewoo Motor was placed under a debt workout program in late August 1999 and went bankrupt in November last year. After its bankruptcy, the creditors promised to provide Daewoo Motor with 727.9 billion won ($561 million) in fresh loans during the first half of this year to keep it afloat, with KDB providing 482.3 billion won.
Daewoo Motor's creditors had been in talks with Ford Motor but the U.S. carmaker withdrew its bid for the ailing company in September last year. Since then, the creditors have been in contact with GM for its sale.
Source : Korea Herald 2001.05.30
GENERAL MOTORS, LA MAIN SUR DAEWOO - L'AMERICAIN S'APPRETE A ACQUERIR LE CONSTRUCTEUR AUTOMOBILE COREEN.
Par NICOLE PÉNICAUT - Le mercredi 30 mai 2001 - Libération
Cette fois-ci sera-t-elle la bonne? Après plus de six mois d'investigations dans les tripes du constructeur automobile coréen, General Motors (GM) s'apprêterait finalement à acquérir Daewoo Motors. L'américain a en effet annoncé hier qu'il allait entamer des pourparlers avec les banques créancières du troisième constructeur coréen en redressement judiciaire. Chaebol déchu. Cette étape est, en principe, la dernière avant l'acquisition pure et simple des activités de fabrication de véhicules de tourisme et autres activités liées de Daewoo Motors. Il reste malgré tout un petit "mais". "Outre le paiement, la reprise ou non par GM de l'usine de Pupyong sera l'objet d'oppositions. Ceci est intimement lié à des craintes de conflits sociaux", a fait remarquer à l'AFP un analyste de LG Securities en Corée.
Prudence donc. Depuis août 1999, date à laquelle le mythique "chaebol" Daewoo a explosé en vol avec ses 80 milliards de dollars (93 milliards d'euros) de dettes, le constructeur automobile qui en était l'un de ses plus beaux fleurons se cherche un repreneur.
Un temps intéressé, Ford avait fini par jeter le gant. C'était en septembre 2000 et au terme de longues discussions avec le coréen. General Motors qui, avant son concurrent Ford, avait déjà exprimé de l'intérêt pour Daewoo Motors avant de changer d'avis, est alors revenu à l'attaque.
Alliance avec Fiat. Pour l'occasion, la compagnie américaine a formé un consortium avec Fiat. GM tardant ensuite à présenter une proposition officielle, des rumeurs selon lesquelles l'accord ne verrait jamais le jour étaient apparues.
Daewoo Motors, qui est maintenu sous perfusion financière par les banques créancières, depuis 1999, a subi en deux ans une série d'opérations chirurgicales. Objectif: le rendre plus appétissant aux yeux d'un éventuel repreneur.
FOREIGN INVESTORS INTERESTED IN HYNIX DRS
Foreign investors are "unexpectedly" positive about acquiring depository receipts (DRs) to be issued by Hynix Semiconductors, a Samsung Securities analyst said yesterday.
Lee Nam-woo, research head of Samsung Securities, participated in a Hynix road show held recently in Singapore.
Lee said that foreign investors' favorable response to Hynix DRs boosts the chances of the ailing semiconductor company successfully selling the securities as planned.
The analyst offered his own explanation for foreign investors' positive attitude toward Hynix DRs. He said that this year, foreign investors could not earn large gains in Asian markets because in most bourses, yellow chips rose much higher than the blue chips favored by foreign investors.
In particular, the top five Korean stocks in terms of market value provided disappointing returns to investors.
"Hence, there appears to be a desire among investors to raise their low earning ratio by betting on a high-risk, high-return product such as Hynix DRs," Lee said.
As other factors, Lee cited the powerful push by Salomon Smith Barney, the lead-manager of the DR issuance, and strong support for Hynix by domestic financial institutions.
But Lee said that Hynix would have to offer big discounts to foreign investors, pointing to the 30-50 percent discount that British Telecom had to offer in increasing its capital.
The analyst added that June 15 will provide a watershed for the Korea stock market. On that day, GM is expected to present its memorandum of understanding on the acquisition of Daewoo Motor, while the prices of Hynix global depository receipts (GDRs) and high-yield bonds will be fixed June 14 and 15, respectively.
If the two deals end are successful, Lee said, they will set the stage for a re-evaluation of domestic stock prices.
Weeks ago, Lee said that foreign investors had given up hopes of successful restructuring of the big four problem corporations - Hyundai Construction, Hynix Semiconductors, Daewoo Motor and Ssangyong Cement - and their pessimistic assessments had been reflected in the then prices of Korean stocks.
He said that as such, a successful sale or restructuring of any of the four companies would constitute a net gain for the Korean bourse, since it will improve foreign investors' perception of the Korean economy
Source : Korea Herald 2001.06.08
DOOSAN TO SELL STAKE IN OB TO EUROPEAN FIRM
The Doosan Group said yesterday that it is now in talks with an European investment company to sell off a large proportion of its 50 percent stake in Oriental Brewery, Korea's second largest beer producer.
But the equity sale talks have run into a last-minute stalemate due to pricing differences, group sources said. Belgium's Interbrew has another 50 percent stake in OB. Source : Korea Herald 2001.06.04
CARREFOUR POURSUIVI EN JUSTICE PAR LA COMMISSION DE LA CONCURRENCE
La Commission de la concurrence (Fair Trade Commission, FTC) a annoncé le 7 mai dernier qu'elle avait entrepris de poursuivre Carrefour Korea en justice en raison des refus de la multinationale à prendre des mesures de correction de certaines de ses pratiques commerciales. La commission a également appliqué une amende de 500 millions de wons à la chaîne française de magasins de vente au rabais.
Selon la FTC, elle avait enjoint Carrefour Korea au mois de mars de l'an dernier à corriger ces pratiques consistant à transférer diverses dépenses sur ses fournisseurs, ce qui constitue une violation de l'Acte de concurrence (Fair Trade Act). La FTC a déclaré que Carrefour Korea avait " omis " de verser à ses fournisseurs 22,7 milliards de wons en 1998, 57,1 milliards en 1999, et 97,8 milliards l'an passé, en soustrayant de ses factures diverses dépenses d'une manière tout à fait unilatérale.
Carrefour aurait ainsi contraint ses fournisseurs à payer les frais dans près de 20 types de transactions comprenant les frais de publicité, de présentation, la rémunération des employés travaillant à mi-temps et le soutien financier aux magasins récemment ouverts. Courrier de la Corée - 2001.05.23
RENAULT SAMSUNG GOING ITS OWN WAY
Renault Samsung Motors CEO John Stoll said his joint venture company, launched in September of last year, thinks the road to success can be found with a local map. Stoll said that all decisions are made in consideration of the management environment in Korea and that the French-Korean company has not been applying the head office's management principles across the board. For example, the CEO said he has been concentrating on weaving the firm's management philosophy with Korean culture and has been listening to diverse advice so that he could be fully aware of the company's character and the sentiment of Korean consumers. He said that his company has been very active in participating in various cultural events in other regional areas, including Seoul, Busan and Gwanju and his company has been moving ahead with thematic marketing for each month designating last April as environmental awareness month and May as family month. Commenting on the shortcomings and strengths of Korea's business environment, he said the core strength lies in the speed of economic development here. He said Korea realized high-speed economic growth in the shortest period of time in history. Stoll, however, said the nation's financial structure will have to be realigned and the paradigm for the Korean economy will have to be remodeled, jettisoning its conventional emphasis on leveraged expansion to a focus on profitability. (Song Eui-dal, edsong@chosun.com) Source : Chosun.com - 10/06/2001
RENAULT SAMSUNG SALES TOP 100,000 UNITS
Renault Samsung Motors Co. said yesterday that sales of its SM5-model broke the 100,000 mark as of Friday since it launched the sedan in March, 1998. The carmaker sold 41,949 SM5 cars in 1998, 6,338 units in 1999, 26,877 units in 2000 and 22,166 units over the first five months of this year. Renault Samsung is giving away car-related accessories, airbags and vouchers for oil purchase to customers to celebrate the event. It will give the owner of the 100,000th car an opportunity to take part in a full-page ad in major dailies.
RENAULT SAMSUNG SM5 REACHES SALES MILESTONE
Sales of Renault Samsung's SM5 sedan broke through the 100,000 mark at the end of last week, three years and three months since its launch. The carmaker sold 41,949 SM5 cars in 1998, 6,338 units in 1999 after economic crisis brought Samsung Motors to its knees and into the arms of Renault, 26,877 units last year and 22,166 over the first five months of this year. The company's CEO John Stoll said the Renault Samsing joint venture company, created last September, is acting as a quasi-independent unit within the Renault group, operating very much as a Korean entity rather than as the local offshoot of a multinational group. In an attempt to communicate is Korean-ness, it is spending much of its marketing budget on sponsoring cultural events around the country. It is also following a rolling program of special monthly marketing themes with May, for example, being 'family month'. Source AutoAsia - 18/06/2001
