Wednesday, May 30, 2012

The Land of the Morning Calm

Haven’t blogged about them in a bit.

South Korean businesses have suffered losses of up to ten trillion won (US$8.3 billion) from the cutbacks in inter-Korean economic cooperation under the Lee Myung-bak administration, figures show.

The losses taken by South Korean firms are fives times the 1.8 trillion won (US$1.7 billion) North Korea’s estimated losses. The results show an unintended effect of Seoul’s May 24 sanctions, which were meant to punish North Korea economically for the shooting death of a tourist at the Mt. Kumkang resort, the sinking of the Cheonan warship, and the shelling of Yeonpyeong Island. North Korea has offset these losses with increased cooperation with China. …

According to Unification Ministry figures, some 319 of the 1,106 companies involved in inter-Korean economic cooperation, or 28.8%, have shut their doors since the Lee administration took office in 2008.

Chung Yang-geun, chairman of the Committee to Promote Inter-Korean Economic Cooperation, said an independent study in March 2011 showed more than 400 of the 1,017 participating businesses, or 39.3%, as either having closed down or being out of contact. Thirteen of the 32 business operating in the Mt. Kumkang tourism zone, or roughly 40%, have also closed down.

Lee Jong-hong, vice chairman of the council of businesspeople working in the Mt. Kumkang zone, said an independent study found the 32 businesses there suffering losses of 208 billion won through the end of May after investing a total of 134 billion won.

“With the government providing loans for just 12 billion won, which is 9% of the investment, we’re having a tough time keeping the businesses going,” Lee said.

Unification Ministry exchange and cooperation bureau director Hwang Bu-gi said the government had never encouraged businesses to take part in economic cooperation projects in the first place.

“These economic cooperation efforts with North Korea were the participants’ own responsibility,” Hwang said. “They have to bear that risk.”

But Ahn Gyo-sik, former chairman of the Kumkang businesspeople’s council, said the businesses invested after receiving government approval for their North Korea efforts, including tourism at the resort, and ended up suffering losses after the government blocked their efforts.

“The risk occurred because of changes in government policy, not any kind of management errors from the businesspeople themselves,” Ahn said. “The government owes them compensation.”

The government is partially subsidising trade with a country it must put sanctions on because it is communist, war-like and completely untrustworthy. South Korean businesses aren’t taking crazy pills at this point; they’re taking stupid pills.

A reunified Korea would be capable of joining a select group of countries with a per-capita income of over US$30,000 and a population of 80 million, some pundits believe. …

To reach that level, Korea would have to rely far more than it does now on domestic consumption and reduce its dependence on exports. Domestic consumption accounts for 70 to 80 percent of the U.S. and Japanese economies. "If the economy gets bigger due to a growth in the population, it would become less vulnerable to external shocks despite trials and errors as it pursues innovative steps," said Kim Hyung-joo at the LG Economic Research Institute.

But a unified Korea would have a long road ahead boosting per-capita GNI to $30,000, since North Korea's was a mere $720 or 1/20 of the South’s last year. Even in the case of unified Germany, it was not until the mid-2000s for the index to reach that level again even though the gap was much smaller. The per-capita income of East Germany was around one-third of West Germany's before reunification.

"We could end up mired in problems without ever nearing the $30,000 per-capita GNI level if we fail to prepare for reunification," said Yoon Chang-hyun at the Korea Institute of Finance.

Korea needs to bolster its capital reserves for reunification, develop its industrial base and take other economic preparatory steps, as well as strengthening diplomatic efforts for such a scenario, pundits said.

The experience of reuniting communist East Germany and relatively capitalist West Germany has not been a smooth and easy one due to high costs, monetary disparity, poor infrastructure and concepts on capitalist societies such as property rights.  How does a society like the North Korean one which has languished for decades under Stalinist and backward rule flourish and merge into the South Korean one, and this is assuming China is willing to give up its favourite buffer state? This is why South Korea had better have a plan B, C, D and possibly E.

In early May in front of the New York Maritime Museums along the Hudson River in Manhattan, dozens of people were queuing up in front of a tiger-striped truck. Bearing the name Korilla BBQ, it offers a peculiar fusion cuisine and is run by three second-generation Korean-Americans.

Edward Song, who majored in finance at Columbia University, and his two friends offer Porkinator, a taco made with pork and kimchi, and Wonder Bird, a taco with chicken and kimchi. Korilla BBQ has over 18,000 followers on Twitter.

Korean cuisine was first introduced to the U.S. by first-generation Korean immigrants, and now their children are having fun reimagining it. Many of these successful second-generation Korean cooks are young, business-minded graduates of prestigious universities. They strictly try to approach Korean food from American point of view and reinvent it to appeal to the taste of local people.


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