September 2015 - BusinessKorea

Contents
September 2015 / Vol.32 No.365
COvEr STOrY
20 Domestic Franchise Companies Accelerate Expansion to Overseas Markets
22 Korean Gov't Working to Protect, Grow Food Service Industry with Innovative Policies,
Technologies
24 CJ Foodville Enters 10 Countries with 4 Brands
SpECIAL rEpOrT
40 Increasing Value of DJSI Membership among Korean Companies
41 KT Tops Dow Jones Sustainability Index Again
Hyundai E&C Named Industry Leader in DJSI World
42 LG World Leader in Consumer Durable & Apparel in DJSI
SK Hynix Listed on DJSI World for Six Consecutive Years
43 Shinhan One of Few BanksRecognized by DJSI World
Lotte Shopping 7 Years in DJSI World
44 Samsung Securities Recognized by DJSI World for 6 Years Straight
FOCUS
08 Labor, Management, Gov't Agree on Labor Reform
NATIONAL
10 Korea, China Getting Closer to FTA amid Growing Concern over Agricultural Sector
11 Korea Frustrated at IFF Upgrade Request
Air Force: 'Korea Will Be Able to Continue KF-X Project without 4 Core Techs from US'
12 Positioning KISTEP as a Leading Global Think Tank through Science Diplomacy
14 Celebrating the 85th National Day of the Kingdom of Saudi Arabia
16 Korea, Paraguay Strategic Allies in Country Development
17 Shinsegae to Invest 500 Billion Won to Build Multi-shopping Mall in IFEZ
18 Mexico Celebrates 205th Independence Day
Scandinavian Food Focuses on High Quality, Safety,
Zambian Mission Sees First Delegation Head to Lusaka
19 See the Best Works of Portugal's Greatest Film Directors
Australian Wine Wins over Korean Aicionados
Azerbaijan Day Celebrated at Gyeongju Silk Road Cultural Festival
MONEY
28 Korea Showed Depressed National Income, GDP Growth in Q2
'GDP of Korea Likely to Show Little Growth This Year'
29 All Things Considered, Koreans Earn More than Japanese
Korea’s Labor Productivity Plummeting
30 Korea’s Gov't Debt-to-GDP Ratio to Break 40% Mark for 1st Time
31 Government Seeks to Exchange Money Laundering List with Other Nations
32 August Shows Largest Monthly Drop in Korean Exports in Six Years
33 Korea’s ICT Exports Turned Around Last Month
Korea Retains Recession-driven Current Account Surplus
34 4 Consortia Apply for Internet Banking Licenseswith FintechServices Emerging as
Mainstream of Banking
04
08
10
28
36 Competition Heating Up in Domestic
Hedge Fund Market
Treasury Stock Purchases Becoming
Increasingly Frequent in Korea
37 Foreign Investors’ Won-denominated
Bond Holdings Decline for the 3rd Month
38 Korean Insurers Can Join Lloyd’s Market
AEO MRA Expected to Widen Road to
India for Korean Exporters
39 Troubled Companies Put KDB under Great Strain
Ir & MANAGEMENT
46 Lotte World Tower to Host Supermoon
Photo Contest
No Problem in Meeting Goal of US$125
million in FDI
47 Busan City Hosts 2015 Busan Regional
Industry
Korea Energy Agency to Host Energy
Korea Forum 2015 in November
48 GKL Seven Luck Casinos Welcome More
Than 1 Million Visitors This Year
KB Kookmin Bank to Enter Global IB Market
49 Nongshim Celebrates 50th Anniversary
Samyang Corp. Merges with Samyang Genex
ICT
50 How Far has Korea’s Drone Industry Flown?
51 LG U+ Joins Hands with Ericsson to
Develop SDN as Key 5G Tech
Samsung Electronics Leads
Standardization of 5G Mobile
Communication Systems
52 Entertainment Industry Meets with ICT,
Reborn as Culture Platform
53 Mid to Low-priced Laptops, Tablets Getting
Popular, Following Smartphones
54 ‘Huge e-Commerce Trade Deicit Calls for
Cultivation of Korean eBay’
55 Naver, Daum Kakao Waging Mobile War
56 YouTube Targets Korean Mobile Video Ad
Market
57 500,000 Subscribers to Samsung Pay
Creates Anticipation for US Debut
Samsung Pay in Fighting Form against
Apple in US Mobile Market
58 Gov’t to Inject 420 Billion Won to
Invigorate IoT
1/3rd of Major Asian Enterprises Brought in IoT
59 Samsung Targets B2B Market with Launch
of IoT Access Point
KT Accelerating Construction of IoT
Ecosystem with 200 Companies
INDUSTrY
SME & STArTUp
60 Chinese, German Semiconductor
anufacturers Set for Memory Market Invasion
61 Semiconductor Market Sends Abnormal Signs
62 Samsung Showcases 3D V-NAND-based
SSDs in 48-layer Stack
63 Korea Sees Diminished Status as World’s
#1 Battery Supplier and Manufacturer
64 Korea’s Auto Industry Gets Stuck Due to
High Wages
65 Automakers Troubled with Euro 6
Hyundai Motor Succeeds in Localizing
Core Fuel Cell EV Part Technology for Tucson
66 Imported Cars See Higher Sales in Korea
than Japan
GM’s Impala Drives Hyundai’s Aslan into
Corner in Home Market
67 Sales of So-called OEM-based Import Cars
Skyrocketing in Korea
Korea to Take Recall of Volkswagen
Vehicles in the U.S. Seriously
68 Sapping Korean Consumer Conidence in
German Imports
69 Korean Medical Companies Sign 15 MOUs
with Chinese Counterparts
70 Korean Shipbuilders Embarrassed by
Delays of Drillship Deliveries
Korean Shipbuilders Divided in Dealing
with Labor Disputes
71 Indian Gov’t Asks HHI for Fleet Support
Ships
Big 3 Shipbuilders’ Growing Worries Over
Drop in Credit Ratings
72 Samsung, Govt. to Inject 30 Billion Won to
Build Smart Plants
Samsung to Actively Acquire Promising
Start-ups
73 Korean Big 3 Mobile Carriers Raise 1.7
Trillion Won for ICT Venture Firms
Startups in Korea Still Struggling
MICE
74 Inside Bitcoins to be Inside Kintex
Design Fair in Nov.
75 Nation’s Largest 3D Printing Industrial Fair
to be Held in Nov.
SCIENCE
76 Korean Research Team Develops Tech to
Measure Density of Silver Nanomaterials
Tech Developed for Immunotherapy to
Treat Bronchial Asthma
77 Tech Developed to Treat Alzheimer’s
Disease with Light
Working Principle of Protein Capable of
Extending LifeIdentiiedt
CULTUrE
78 Import Beers Chipping Away at Domestic
Beer Market Share
Korea Emerges as Mecca of 3T Trends
79 Korea Promoting Its Culture in France
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06
To our readers
Unification and
Nuke Renunciation
“A
unification of the Korean Peninsula
is the ultimate solution of the North
Korean nuclear issue,” President Park Geunhye said after a summit meeting between South
Korea and China on Sept. 3, adding, “I had
in-depth discussions on peaceful unification of the Korean peninsula with
China.” However, what really matters here is that China’s national interests
behind the diplomatic gesture of Chinese President Xi Jinping, who gave profuse red carpet hospitality to President Park, may go against President Park’s
unification plan.
Since the normalization of diplomatic ties between South Korea and
China, China has never changed its stance on the unification issue. At its
core, China is opposed to any absorptive unification involving a violent process, and any foreign power’s intervention when a contingency takes place
on the Korean peninsula, while saying that it supports a peaceful unification
of the Korean peninsula by the Korean people. It means that China can never
tolerate a unified Korea with U.S. troops stationed in it.
Even though North Korea and China now have an uneasy relationship,
there is no proof that China revised Deng Xiaoping’s guidance of 1992 that
North Korea is China’s rampart to protect China’s northeastern region. Furthermore, there is no evidence of China admitting a scenario of South Korealed unification.
The South Korean government reportedly persuaded the U.S. about
President Park’s attendance of China’s Victory Day event, with the logic that
South Korea cannot help but care first about the relationship with a China
that exerts a big influence on North Korea and the unification of the Korean
peninsula. Starting the discussion with China, South Korea is to make progress in discussing the unification issue with its neighboring countries such as
the U.S., Japan, and Russia, according to the logic.
Some experts claimed that South Korea did not need to bring up the
unification-first theory so quickly after South Korea reached an agreement
between high-ranking South and North Korean officials on Aug. 25, in a
touch-and-go situation involving a firefight. This is because they believe
that North Korea is suspecting that President’s Park’s unification drive aims
at unification through absorption, and may play a negative role in the talks.
Some predict that North Korea will carry out a fourth nuke test in honor of
the 70th anniversary of the establishment of the Labor Party.
In the meantime, President Obama and President Xi Jinping both voiced
strong opposition to North Korea’s development of nuclear weapons and
launching missiles in a joint press conference held in Washington on Sept.
25 (local time). Accordingly, President Park needs to minimize confusion by
clarifying her position about unification during her visit to the U.S. This is
because an expansion of the immature unification issue in the U.S. will not
do any good to further discuss the
matter, but on the contrary, weaken
the U.S.’s concentration on North
Korean nuke and missile issues,
Park Jung-hwan,
making Washington just repeat its
Publisher & editor-in-Chief
basic attitudes against the North.
focus
Labor Reform Milestone
Labor, Management,
Gov't Agree on Labor Reform
by Michael Herh
F
our representatives of the
nation’s labor, management,
and government sectors have come to
an agreement on labor market reform.
Although the deal needs to be approved
by the Federation of Korea Trade Unions
(FKTU) on Sept. 14, they turned the corner in labor market reform.
“We have drawn up a tentative agreement document since we agreed on two
key issues – dismissal of underperforming workers and change in employment
rules,” said Kim Dae-hwan, chairman of
the Economic and Social Development
Commission in a briefing at the Seoul
Government Complex on Sept. 13.
08
Therefore, an agreement was tentatively
reached by labor, management, and the
government for the first time in 17 years,
since a compromise among them which
legalized layoffs in Feb. 1998.
“We will prepare measures to make
an improvement to overall labor contracts with the participation of labor, and
management, and experts,” said Labor
Minister Lee Ki-kweon, Korea Employers Federation (KEF) Chairman Park
Byoung-won, FKTU representative Kim
Dong-man and Kim Dae-hwan, chairman of the tripartite commission in the
agreement. Moreover, “We will clarify
and honor conditions and procedures
for change in employment rules,” they
added. “During this process, the government will not unilaterally implement
the new system. The government will
deliberate with labor and management
enough.”
This means that they agreed that
even though the government will prepare guidelines on key issues such as
the dismissal of low-performing workers and change in employment rules, the
government will legalize them in the
long term without unilaterally implementing them. This agreement includes
the expansion of youth employment and
the extension of periods of the employment of temporary workers. The tentative agreement is expected to expedite
debates on labor market reform. The
government is planning to reflect the
agreement in a consultation on five
major labor reform laws between the
ruling Saenuri Party and the government
that will be held on Sept. 14.
In addition, the government will
devise measures about other issues such
as the extension of temporary workers’
employment periods and the expansion
of business types for contract-based
workers via deliberations with labor and
management and experts, to reflect them
in bills when a regular National Assembly meeting ratifies.
“We will carry out a consultation
based on the agreement and push forward with related legislation,” Labor
Minister Lee said. “Labor, management
and the government hammered out the
deal from the point of the general good,”
a Cheong WaDae spokesperson said.
“The agreement is quite meaningful in
that it will realize economic innovation
and expand youth employment. Even
focus
though the procedure is not completed
yet, we see it as a de fecto agreement.”
FKTU Chairman Kim DonFKTU Chairman
Kim Dong-man (left) shakes hands with Park
Byoung-won, chairman of Korea Employers
Federation in the office of the Economic and
Social Development Commission after reaching
an agreement about labor reform at the Seoul
Government Complex on Sept. 14.
Labor Agreement
Approval by FKTU Central
Committee Meeting
Kim Dong-man, chairman of the
KFTU, listens at the 59th meeting of
the central executive committee to ratify
theagreKim Dong-man, chairman of the
KFTU, listens at the 59th meeting of the
central executive committee to ratify the
agreement among labor, management
and the government at FKTU Hall in
Seoul’s Yeouido on Sept. 14.
On the same day, the agreement
agreed upon during the previous day
between labor, management, and the
government was approved by a central
executive committee meeting of the Federation of Korea Trade Unions (FKTU).
Thirty out of the 48 members of the
committee voted for the agreement. The
agreement was passed thanks to FKTU
Chairman Kim Dong-man successfully
persuaded participating members. The
agreement is now waiting for the final
chapter, since it was passed in the central
executive committee meeting.
Before approval, however, Kim Manjae, the head of the metal workers’ labor
union, set himself on fire, interrupting
and suspending the proceedings. The
FKTU was planning to report the details
of the agreement among labor, management, and the government by holding the
meeting in a room on the sixth floor of
the FKTU Hall in Seoul’s Yeouido district at 2 p.m. However, Kim Man-jae
rushed toward the platform and set himself ablaze about one hour after the start
of the meeting. A senior member of the
union was able to put out the fire with a
fire extinguisher.
The metal, chemical, and public
workers’ unions are taking strong issue
with the agreement among labor, management, and the government. They even
demanded that the leadership step down.
But the meeting was resumed after few
hours of recess, despite strong protests
from assembled union members.
The meeting of the central executive committee is a decision-making
organization with the participation of
executives of the FKTU, the chairmen
of industrial labor unions, and the heads
of regional headquarters. When they pass
the deal in a meeting of the central executive committee, the agreement is finally
completed.
The metal workers’ union, among
others, took the position against accepting the agreement which Kim Dongman, chairman of the KFTU, agreed on
yesterday. In particular, they are strongly
opposed to the fact that Kim accepted the
government’s plan to prepare guidelines
about general dismissals and easing conditions for changing employment rules.
General dismissals are to give pink slips
to low-performing workers and workers
with a bad work ethic. The Current Labor
Standard Law does not contain this element. Easing conditions for changing
employment rules is to ease a law that
makes it compulsory for an employer
to receive an agreement from employees when the employer makes his or
her company rules disadvantageous to
employees.
On Aug. 18, when the leadership of
the FKTU tried to persuade its members
to return to a meeting with management
and the government, about 100 members
of sectoral labor unions under the FKTU
such as the metal, chemical and public
workers’ labor unions occupied the meeting room, obstructing the leadership’s
declaration of its return to the tripartite
commission.
Number of Labor
Disputes Decline in Korea
In the meantime, the Ministry of
Employment & Labor announced on
Sept. 21 that 5,475 out of the 10,571
Korean firms with at least 100 employees completed their wage negotiations
for this year until the end of August. The
ratio increased from 41.8 percent to 51.8
percent between the end of July and the
end of the following month.
“They recorded an average rate of
wage increase of 4.2 percent, down 0.3
percentage points from a year ago, amid
the slowdown of the Chinese economy,
ongoing weak yen, and sluggish domestic consumption that are affecting the
business sentiment,” a ministry spokesperson explained.
The ministry spokesperson also
said, “During the first eight months of
this year, the number of labor disputes
in Korea decreased by 19.8 percent yearon-year to 65, and the number of lost
work days fell 2.5 percent to 259,000
days.” It added that this was partly
because of the particularly high number
of labor disputes that occurred last year
with regard to the ordinary wage issue.
In the automobile industry, GM
Korea, Renault Samsung Motors, and
Ssangyong Motors finished their negotiations, contrary to Hyundai Motor Company and Kia Motors. In the shipbuilding industry, Samsung Heavy Industries
completed the process, but Hyundai
Heavy Industries and Daewoo Shipbuilding & Marine Engineering are still at the
negotiating table. In the tire manufacturing sector, Hankook Tire and Nexen Tire
wrapped up their deals, while the trade
union of Kumho Tires decided to halt a
strike on Sept. 21 after some conflicts
with management.
09
national
Getting Feasible
Korea, China Getting Closer to
FTA amid Growing Concern over
Agricultural Sector
by Michael Herh
“T
h e K o r e a - C h i n a F TA
will increase agricultural
imports from China by 12.8 trillion won
(US$10.6 billion), while scaling down
Korea’s farming production by 6.7 trillion won (US$5.6 billion),” said representative Shin Jeong-hun of the New
Politics Alliance for Democracy who
belongs to the Agriculture, Forestry,
Livestock, Food and Fishery Committee
at the National Assembly on Sept. 7.
Rep. Shin said that he reached that
conclusion after analyzing the report
titled “Questions and Answers about
Profits that China Will Be Able to Gain
via the Korea-China FTA,” which
includes data in the China-Korea FTA
Joint Research Report by Governments,
Industries and Academies of Korea and
China, which was produced from 2007
through May 2010. But the lawmaker
claimed that the Korean version does not
have such content.
In 2012, a Chinese expert expected
Korea’s agricultural and fishery imports to
rise by 11.9 trillion won (US$10 billion)
10
and Korea’s agricultural productivity to
drop up to 14.7 percent (6.9 trillion won
or US$5.7 billion) in a contribution based
on domestic data, Rep. Shin said. That
is to say, even though domestic reports
warned that the Korean agricultural sector
would sustain huge damage, the results
of such research were not made public in
Korea, the lawmaker added.
In particular, Rep. Shin claimed that
it is suspicious that before the ratification
of the Korea-China FTA by the National
Assembly of Korea, the Korean government intentionally scaled down the
amount of damage in the Korean agricultural sector by making a financial plan to
support Korean farmers with 225.9 billion won (US$187.3 million) only, based
on 154 billion won (US$127.7 million)
in agricultural damage for 20 years. Rep.
Shin added that the 154 billion won in
agricultural damage for 20 years is what
the government claims. But the 6.7 trillion won in the joint report is a whopping
43 times as much as the 154 billion won
in the Korean government’s report.
Moreover, he said, “Among a total of
18 Korea-China research papers by outside researchers, only three papers were
made public, and the joint FTA effects
evaluation paper between the two nations
is the only report that directly dealt with
effects evaluation,” Rep. Shin said. “Did
the government disclose figures friendly
with the government’s intentions only?”
In the meantime, the Ministry of
Trade, Industry and Energy and the
Korean Agency for Technology and
Standards on Sept. 21, signed three
agreements with the Chinese General
Administration of Quality Supervision,
Inspection and Quarantine (AQSIQ) in
the interest of the promotion of the mutual recognition of compulsory certifications and cooperation for the enhancement of consumer product safety.
The purpose of the consumer product
safety agreement is for Korea and China
to work more closely together with each
other for the implementation of laws,
application of the necessary regulations,
management of conformity assessment
organizations, and exchange of information relating to safety in the field of consumer products.
The agreement for the mutual recognition of conformity assessments concluded at this time is to allow the China
Compulsory Certification (CCC) and the
Korea Certification (KC) to be accepted
at the same time in both countries. Specifically, its goal is to be met through the
five steps of the exchange of information on standards, comparison between
certification procedures and product
lists, discussion of measures for preventing potential problems, signing of a final
agreement, and fulfillment of the final
agreement.
The other one of the three pacts is for
cooperation in conformity assessment on
electrical and electronics products. Both
countries are planning to come up with
much more specific measures for mutual
recognition in the framework of this pactby March next year, in that those products have a high level of significance in
respect to compulsory recognition, and
international standards in the field have
been established well.
Growth Trap
Defense
national Low
KF-16 Issue
Korea Frustrated
at IFF Upgrade
Request
by Jung Suk-yee
T
he U.S. Armed Forces are urging
Korea to follow its identification
friend or foe (IFF) improvement. Under
the circumstances, unexpected expenditures will be incurred until 2020, the
deadline of the upgrade from Mode 4 to
Mode 5 set by the U.S.
The problem is that the efficiency of
joint military operations is significantly
affected when Korea fails to follow U.S.
military trends. Financial resources are
insufficient though. At present, the ROK
Armed Forces have 3,200 or so pieces
KF-16 fighter jets in flight over Dokdo.
of defense equipment waiting for the
switch, but not all of them are Mode 4,
and some are still even using Mode 1.
The U.S. is in a hurry because of the
safety of its soldiers. However, some
experts point out that the attempt by the
U.S. reminds them of a process in which
a company that lost its competitive edge
turns itself into a patent troll. The United
States is estimated to be able to make
tens of billions of dollars when its military allieslike Korea, Europe, and Japan
respond to its demands.
The financial burden on the part of
Korea is unpredictable for now. Some
remarked that the upgrade would take a
couple of trillion won, while some of the
others mentioned over 10 trillion won.
Soldiering On
Air Force: 'Korea Will Be Able to
Continue KF-X Project without
4 Core Techs from US'
An artist's depiction of the KF-X fighter when it
is completed..
by Michael Herh
A
ir Force Chief of Staff Jung
Gyeong-doo said that even
though the U.S. may not provide four
core technologies required for the development of the KF-X Korean fighter,
Korea will be able to push forward with
the KF-X project. The F-35A purchase
contract does not include providing the
four core technologies, either, Air Force
Chief of Staff Jung said in a parliamentary inspection of the Air Force Headquarters on Sept. 22.
Earlier, in Sept. 2014, the Korean
military demanded the transfer of 25
technologies such as AESA radar, flight
control, avionics, and weapons, while
deciding to introduce 40 F-35A fighters
for 7.34 trillion won (US$6.23 billion).
But the U.S. government refused to
approve exports of the four core technologies due to national security concerns,
the Defense Acquisition Program Administration (DAPA) said. The four items are
AESA radar, infrared search and tracking
equipment (IRST), electro-optical target
tracking devices (EO TGP), and RF Jammers. The Korean military was planning
to use the technologies in 2025. It was
known that the four technologies were
not included in the official contract when
the Korean government decided to introduce F-35A fighters.
The DAPA is considering going
ahead with the production of AESA
radar, infrared search and tracking equipment by way of technological cooperation with third countries such as those
in Europe and the development of other
technologies in Korea.
But today, during the parliamentary
inspection, lawmakers voiced concerns
about a delay in the Korean fighter
development program, since Korea has
promoted the program under the premise
that Lockheed Martin, the producer of
the F-35A, will transfer core technologies to Korea.
Some military pundits say that Korea
is one of the biggest buyers of U.S.
weapons, but the U.S. is very loath to
transfer technologies to Korea after selling them arms. “Lately, the U.S. is recognizing Korea as a competitor in the international arms market,” said a military
official. “The U.S. did not give Korea
promised technologies after selling the
F-15K.”
11
national Science Diplomacy
Long-term Vision
Positioning KISTEP as a Leading Global
Think Tank through Science Diplomacy
by Marie Kim
B
usinessKorea met with Dr.
Young-ah Park, the current
president of the Korea Institute of Science and Technology Evaluation and
Planning (KISTEP), former lawmaker of
the 18th National Assembly, and former
professor of physics at Myungji University, to talk about the current direction
of the institute and details about hosting
the upcoming OECD Ministerial Meeting Daejeon and the World Science and
Technology Forum (World S&T Forum),
which is scheduled to take place from
Oct. 19-23. She told us about her vision
for KISTEP and spoke about the strategy
behind sponsoring and participating in
the OECD Ministerial Meeting Daejeon
and World S&T Forum. Excerpts from
the interview follow.
Would you introduce KISTEP to
our readers?
Established in 1999, KISTEP is a
government-affiliated S&T-specialized
agency that performs a comprehensive
range of functions, including S&T policy
planning, budget allocation and coordination, and performance evaluations.
In charge of leading national S&T
policy, KISTEP determines future social
trends and pro-actively selects areas to
focus on and invest research resources.
KISTEP also seeks to create future values via its job of planning and evaluating government S&T projects. KISTEP
is one of the leading organizations behind
the Creative Economy policy, the current
government’s S&T flagship policy.
KISTEP initiated and successfully hosted the Asian Innovation
Forum (AIF) on Aug. 25-26. Please
tell us about hosting the AIF. Also,
we heard that KISTEP proposed
an initiative to establish the Asian
STI Think Tanks Network (ASTN)
during the AIF. Please tell us about
the ASTN and the specific expectations and plans that KISTEP has
for ASTN and its members.
The 1st AIF was an effort to expand
the scope of the annual Trilateral S&T
Policy Seminar to cover the entire region
of Asia. The AIF brought together leading figures and institutes in science, technology, and innovation (STI) to enable
discussions on research findings, policy
trends, and current challenges that each
county faces.
ASTN, which was launched at AIF,
also represents KISTEP’s long-held
vision. KISTEP has continuously strived
to position it as a global think tank by
actively participating in technology transfers and building networks with international key players. In launching ASTN,
KISTEP seeks to build a lasting platform
for communication and collaboration
with Asian STI policy institutes, where
KISTEP hopes to more effectively shape
global S&T values and visions.
This year, 15 institutes from 11 countries joined the ASTN. The majority of
these founding members have a history of
mutual exchanges with KISTEP. I hope
that the membership will grow in the
future so that ASTN can stand as a representative network of the region.
It seems that KISTEP spent a busy
week towards the end of Aug. hosting Gender Summit 6 Asia-Pacific
(GS 6 Asia-Pacific) immediately
following the AIF. What is the significance of hosting the Gender
Summit in Seoul, and what are the
plans for the future?
Dr. Young-ah Park, the current president of the Korea Institute of Science and Technology Evaluation
and Planning (KISTEP).
12
In the hope of encouraging gender discussions in S&T and wider participation, KISTEP, Center for Women
in Science, Engineering and Technology (WISET) and the National Research
Foundation of Korea (NRF) jointly
launched GS 6 Asia-Pacific 2015. The
national Science Diplomacy
The “Daejeon Declaration” will set
the course for the OECD’s work on S&T
policy for the next five years, and will
help set directions for the 2016 Blue Sky
III conference that will set the STI measurement agenda.
Invited speakers and distinguished guests at AIF
(Aug. 25-26)
latter marks the first Gender Summit
held in the Asia-Pacific region, a part of
the world where gender discrimination
against women in S&T is relatively more
pervasive.
At GS 6 Asia-Pacific 2015, KISTEP
introduced the Gendered Innovations
Index (GII), which is a measure to identify and measure gender discrimination
in S&T. The GII is also an effective tool
to find policy implications. Developed by
KISTEP, it is the world’s first attempt at
developing an index focusing on gender
discrimination in the S&T field. KISTEP
hopes to build a global platform for cooperation regarding gender issues in the
S&T field via GII.
As a government-affiliated institute
under the Ministry of Science, ICT
and Future Planning, KISTEP is
sponsoring and participating in the
upcoming OECD Ministerial Meeting Daejeon and the World Science
and Technology Forum (World
S&T Forum), which is scheduled to
take place from Oct. 19-23. Please
give us an overview of the upcoming OECD event.
The upcoming OECD Ministerial
Meeting Daejeon 2015 will gather the
Ministers of OECD countries as well as
the Ministers of ASEAN countries. The
World S&T Forum is organized backto-back with the Ministerial in Daejeon,
Korea to bring together the world’s most
distinguished STI leaders. The OECD
Ministerial Meeting Daejeon 2015 and
World S&T Forum have the shared goal
to discuss global challenges in S&T and
provide guidance for the international
community toward sustainable economic
growth for the next decade.
Could you elaborate a little more
on the program of World S&T
Forum and its significance?
The World S&T Forum is designed
to draw consensus on the common global
STI future, challenges, and directions for
STI policies and their socio-economic
impacts.
The program of World S&T Forum
will consist of four thematic discussions
that break into 12 sessions featuring a
National System of STI, STI that Shapes
our Future, STI for the Creative Economy, and STI for Sustainable and Inclusive Growth. The World S&T Forum will
also feature keynote speeches by leading
figures in the STI field, such as Jeremy
Rifkin and Nobel Laureate Aaron Ciechanover.
In particular, “Parallel Session 1-1”
hosted by KISTEP will cover topics such
as STI and R&D policy, implementation
of national STI policy, corporate good
practices, and public-private partnerships
in the innovation field.
The consensus drawn from the Forum
will be passed onto the Ministerial Meeting and guide the Ministers towards building a new innovation strategy for the next
decades. KISTEP is looking forward to
seeing synergy created from World S&T
Forum and the Ministerial Meeting, which
are held back-to-back and share the theme
of Creating Our Common Future through
Science, Technology and Innovation.
The OECD Ministerial Meetings
for Science and Technology in the
past have been an event exclusively
for OCED countries. But this year,
non-OCED countries like the Philippines, Thailand, and Vietnam will
also take part in the event. Please
tell us the reason for expanding the
scope of these meetings.
In order to more effectively tackle the
global challenges such as climate change,
new diseases, and energy crises, it is
necessary to bring countries both from
the developing and developed worlds to
the table. This is more so, given that the
interest in STI areas in developing countries in Asia has been significantly growing in recent years. Against this backdrop,
10 ASEAN countries were invited in
addition to the previously participating
OECD countries.
How much impact will the conclusions drawn from this OECD Ministerial Meeting for Science and
Technology have on OECD organizational policy and participating
countries?
As the Daejeon Ministerial will culminate in a “Daejeon Declaration,” this
will set the course for the OECD’s work
on S&T policy for the next five years,
and will help set directions for the future
STI agenda. The conclusions from the
Meeting will impact not only the OECD’s
future direction but also the international
agenda of the U.N., G7, and G20.
Events such as the AIF, Gender
Summit and OECD Ministerial
Meeting also represent opportunities for “diplomacy” in the area
of S&T. Could you share your
thoughts on “science diplomacy?”
As the name suggests, science diplomacy features elements of both science
and diplomacy. To the diplomatic end,
these events seek to further cement existing ties, build new ones, and also ease tension between nations. Communicating in
the universal value of truth, science has the
ability to build relations and encourage the
pursuit of mutually beneficial goals.
Science diplomacy holds a special
significance for Korea, which has transformed itself from an ODA recipient to a
donor country in a matter of decades. As
an exemplary beneficiary nation, Korea
has a great responsibility in transmitting
the significance of science diplomacy.
The fact that Korea will be hosting the
OECD Ministerial Meeting in Daejeon,
home to numerous R&D institutes, attests
to the country’s willingness to take on
that responsibility.
13
national National Day
Congratulatory Remark
Celebrating the 85th National Day of the
Kingdom of Saudi Arabia
by H.E. Fahad Al-Mutairi, Charge d’ Affairs of the Kingdom of Saudi Arabia
His Majesty King Salman
bin Abdul Aziz Al Saud.
T
his year’s 85th anniversary of
the National Day of the Kingdom of Saudi Arabia comes at a time
when the development renaissance in the
Kingdom is continuing apace. Indeed,
the foundations of the comprensive
revival of the Kingdom were laid by the
Founder His Majesty King Abdul-Aziz
Bin Abdul Rahman Al Saud and throughout his dutiful sons, up to the current era
of His Majesty King Salman bin Abdul
Aziz Al Saud, the Custodian of the Two
Holy Mosques. Based on the intellectual
and institutional fundamentals laid by
the late great Founder King Abdulaziz,
and guided by His Majesty’s ideas and
practices in development planning and
economic management, his sons and successors have continued the grand efforts
in all fields. Such ceaseless endeavor
has resulted in remarkable achievements
and successes in every field. There have
been continued rise of living standards,
improvement in quality of life, comprehensive construction and industrial
14
revival, and advanced economic and
social services throughout the country.
Undoubtedly, these achievements are
clear reflection of the effectiveness of
the developmental approach that were
adopted by the Kingdom; an approach
that combines scientific planning, targeted rationalization, and continued support
for private sector within the framework
of economic freedom and individual initiative. Over successive decades, structural, socioeconomic advances have been
achieved, at both the macro and sectoral
levels. The Saudi economy has gained
enormous strength, increasing its ability
to adapt to changes and developments
and withstand global economic fluctuations.
More than fifty years have passed
since the establishment of diplomatic
relations between the Kingdom of Saudi
Arabia and the Republic of Korea in
1962. During the past five decades, the
Saudi-Korea relations have witnessed a
qualitative leap, and amazing develop-
ments that have extended to all aspects
of political, economic, cultural, education, military and health fields. Such
developments are responsive to policies and principles stipulated in mutual
agreements, talks, and exchange visits by
officials of both countries. These efforts
made the bilateral ties-characterized by
sincerity, honesty and commitment-one
of the most important international relations within the half-century.
Following the establishment of Saudi-Korea diplomatic relations in 1962,
the Royal Embassy of Saudi Arabia
opened in 1974 in Seoul, as the first Arab
Embassy in the Republic of Korea. In
the early stages of the bilateral ties, both
countries made a number of significant
achievements, with the participation of
Korean experts and manpower in Saudi
Arabia to modernize its infrastructure,
mainly, with implementation of projects of roads, public buildings, water
desalination, power generation, information technology and many other various
industrial projects. This was, indeed,
quite enough to make Korea more qualified- thanks to its companies, experts,
Saudi Arabia is an Islamic state based on principles prescribed by the Qur'an (Islam's Holy Book)
and the Shari'ah (Islamic law); Provincial Council
System, Majlis Al-Shura (Consultative Council),
and Council of Ministers.
national National Day
Flag of Saudi Arabia.
and well trained labor-and thereby to win
a significant share of large-scale projects
carried out in the Kingdom. It also paved
the way to sign more important deals
between the two countries to carry out
projects, based on the needs of the Kingdom for its development.
It is also significant to note the Saudi-Korea economic and trade relations
where the two countries have witnessed
amazing developments. In 2014, the
bilateral trade volume reached almost 45
billion USD, and 20 billion USD as of
August 2015. Currently, Saudi Arabia is
the major trading partner to the Republic of Korea, being Korea’s fourth largest importer, while Korea is Saudi’s fifth
largest exporter.
A number of agreements and committees - mainly, Saudi-Korea Joint
Committee- assures the two countries to
build a genuine partenership, so that the
bilateral cooperation would be comperhenssive and responssive to the interest
of the peoples of the Kingdom of Saudi
Arabia and the Republic of Korea.
Another notable development was
seen in October 2014 when the first Economic Business Forum between the two
friendly countries was held with the participation of senior government officials
and business sectors from both sides. The
Forum surely added a new dimension in
the economic and trade relations between
Saudi Arabia and the Republic of Korea.
The visit of Her Excellency Madam
President Park Geun-Hye to the Kingdom of Saudi Arabia in March 2015 is
undeniably one of the latest vital developments between the two countries. The
Saudi-Korea bilateral summit talks with
the Custodian of the Two Holy Mosques
King Salman bin Abdul-Aziz was held
on a number of topics of common interests. Among these issues was cooperation in fields of diplomacy, security,
nuclear energy, construction, medical
services, information and communication
technology. The talks also included how
to increase the participation of Korean
companies in transforming the Saudi
economy to non-oil economy. Both
sides have signed 14 memorandums of
understanding in the economic field with
a total value of 5.4 billion USD. One of
these projects was to establish the e-government worth of 200 million USD, and
to build a pharmaceutical industrial park
worth of 200 million USD. Riyadh and
Seoul also signed another memorandum
of understanding to build and operate
two nuclear reactors of "SMART" type
by Korean companies worth of 2 billion USD, where, later on, both country
would manufacture and operate such
reactors in a third country. The two sides
agreed also to dispatch professors and
students of KAIST to Saudi Arabia to
assist in the opening of the department of
Nuclear Engineering, and to establish a
nuclear power, and renewable resources
training center in Saudi Arabia.
Those who review both countries’
economies, potentials, and status in the
global economic system will not find
themselves surprised at the solid SaudiKorean partnership for the last 50 years,
and their capabilities to create a productive environment, and how they became
to be the members of the G20, the group
of economically richest countries in the
world. The friendship between the two
countries, similarities in policies and
chances of available integration enabled
both governments to draw a road map
of their bilatreal relations with specifications appropriate for both sides.
Lastly, I would like to note with significance that such achievements in the
bilateral relations would not have been
accomplished without the kind and merciful assistance of Allah and the support
and guidance from both rational leaderships that pay special attention to sustain
and support the relationship between
the Kingdom of Saudi Arabia and the
Republic of Korea. Thanks to Allah, the
pace of the relations between the Kingdom of Saudi Arabia and the Republic
of Korea is moving smoothly as planned,
heading towards the steady and impeccable progress and growth in serenity and
harmony.
Charge d’ Affairs of the Kingdom of Saudi Arabia
H.E. Fahad Al-Mutairi.
15
national Interview with Ambassador
Manufacturing, Energy Gold Mine
Korea, Paraguay Strategic Allies in
Country Development
by Matthew Weigand
His Excellency Raul Silvero, ambassador of Paraguay to Korea, sits at his desk in his embassy in Seoul.
A
mbassador of Paraguay to Korea
His Excellency Raul Silvero just
arrived in Korea three months ago, and he
is already enjoying the experience. “I feel
like I am always surrounded by friends,
wherever I go,” he said in an interview
with Business Korea. Korean culture is not
as strange to him as one may think. He is
quick to point out that the two countries
have had a long-standing diplomatic relationship. He said, “Paraguay and Korea
have had diplomatic relations for 53 years,
and in 2015 we celebrate the 50th anniversary of the first Korean immigration to
Paraguay.” The minority Korean population remains to this day, no doubt enjoying
the wide open spaces of a country with 4
times as much land and only 15 percent of
the population as their homeland. Silvero
explained, “On April 22nd, we commemorate Korea’s Day inParaguay. This is to
remember the arrival of thefirst contingent
ofKorean immigrantscoming tomy country, in 1965.”
He also looks at his job quite positively, comparing the opportunities for
business cooperation between Paraguay
16
and Korea with a gold mine. Silvero
names the sectors of infrastructure building, food industry, logistics and services,
textiles, clothing and garment production, auto parts and car accessories, and
tourism as the main ways that Korea and
Paraguay can work together. And he also
emphasizes a new, more friendly business
environment in the country. “A new investor-friendly legal framework and efforts
to improve infrastructure are key to Paraguay’s efforts to diversify its economy,
and within this context, the korean companies will find a suitable environment for
their own business opportunities,” he said.
He went on to sum up by saying, “In short,
Paraguay sees the Republic of Korea as
a strategic ally in the building of our own
development.”
That is not to say that there aren't relationships already. “We have many projects,
in different areas, like in education, health,
infrastructure, agriculture, livestock, and
others supported by Korean organizations,”
he explained. The current trade relationship between Korea and Paraguay amounts
to about US$200 million; US$150 million
by Korean companies to Paraguay, and
US$50 million of food and industry returning. Silvero pointed out some of the most
prominent Korean companies in Paraguay,
too, by saying, “One of the biggest Korean
companies is THN Paraguay S.A., that is
working in the assembly of auto parts and
vehicle accessories in order to provide to
korean car manufactures Hyundai and Kia,
established in Brazil.” He also pointed out
another company from Korea, Vitzro Tech,
that is considering to invest US$10 million
in the energy sector to produce energy-saving equipment in the country. “My country
is one of the biggest hydroelectric powers
in the world,” he said.
When asked about the major economic
factors of his home country, H.E. Silvero
said that one of the biggest challenges is to
further diversify the economy and reduce
dependency on agriculture, which is unstable at the best of times. The government
has set in motion a plan of low taxes and
better business regulations, in combination with the country's naturally abundant
energy resources and a US$16 billion plan
to modernize the country's infrastructure.
“All of this has to be mounted on a Singapore-like platform,” said Silvero, continuing by saying, “which means a very open
economy, transparent, efficient, and nonbureaucratic.”
Silvero himself has a background in
economic and business administration. He
has worked at Paraguay's Central Bank, in
the Ministry of Industry and Commerce,
and as the General Director in the economic area of the Ministry of Foreign Affairs in
my country for many years. He graduated
from the Diplomatic Academy of Paraguay
in 1993, and has already represented his
country in Malaysia, Taiwan, Belgium, and
Switzerland. Korea is the latest of his many
appointments.
national Songdo Shinsegae
Songdo Shinsegae
Shinsegae to Invest 500 Billion Won to
Build Multi-shopping Mall in IFEZ
by Oh Se-eun
Yoo Jung-bok, Mayor of Incheon City and Jung YongJin, Vice President of Shinsegae Group, attended the
ceremonial event for signing investment contract for
Songdo shopping mall complex on Sept 23rd.
O
n Sept. 23, the Shinsegae Group
signed an agreement with the
Incheon Free Economic Zone (IFEZ)
Authority at Incheon City Hall to promote the establishment of the “Songdo
Shinsegae Multi-shopping Complex,”
participated in by Incheon Metropolitan
City Mayor Yoo Jeong-bok, Shinsegae
Group Vice Chairman Chung Yong-Jin,
Incheon Shinsegae Corporation CEO
Park Joo-hyung, Incheon Development &
Tourism Corporation (IDTC) CEO Kim
Woo-sik, and IFEZ Authority Commissioner Lee Young-geun.
The Shinsegae Group also plans to
invest 500 billion won (US$418.76 million), including some foreign capital such
as the Government of Singapore Investment Corp., to build the multi-shopping
complex by 2019. With a floor space of
59,600 square meters, the multi-shopping
mall will house a variety of facilities,
including a department store, a discount
store, entertainment and cultural venues.
Until now, Mayor Yoo has encouraged
the IFEZ Authority and the IDTC at first
hand, and made comprehensive efforts to
address the financial problems in the city.
That has led to an active discussion among
the parties concerned and the agreement,
which has been stalled for about two
years, with foreign investment firms.
Wi t h t h e ag reem en t , t h e I FE Z
Authority will be able to activate current
sluggish investment attractions. Also, it
can promote the development of the free
economic zone and revive the local economy by creating a distribution cluster of
Lotte, E-Land, and Hyundai.
The multi-shopping mall in Songdo, which will satisfy demand not only
at home but also of foreign tourists, is
expected to improve the brand value of
Songdo and to establish its status as an
international city.
The IFEZ Authority has improved
its financial position by selling land
for 136.5 billion won (US$114.32 million), while the IDTC has secured sound
finances through the block sale of Songdo Bridge Hotel worth 90 billion won
(US$75.38 million). Moreover, it will
promote the sale of 47 lots of unsold land
owned by the IFEZ Authority that are
adjacent to the site of Shinsegae at reasonable prices.
Developed as
“Lifestyle Center”
The Shinsegae Group is planning to
build 10 lifestyle centers, including multishopping malls in Hanam, Samsong of
Goyang, Cheongna, Anseong, and Daejeon, which will start opening in 2016,
and promote them as its medium and
long term growth engine in the future.
The development project is expected
to create more than 3,000 jobs, which
will stimulate the regional economy, by
actively accepting the participation of
local enterprises and hiring local residents first.
Unlike conventional shopping malls,
the Shinsegae multi-shopping mall will be
established on the concept of a “lifestyle
center,” which will allow users to enjoy
not only shopping but entertainment and
culture/leisure activities. Also, it will satisfy the diverse needs of up to 10 million
domestic and foreign visitors per year.
Incheon Metropolitan City Mayor
Yoo Jeong-bok said, “We expect the
establishment of the multi-shopping mall,
which is led by Incheon Shinsegae Corporation, to become the momentum that
gives a boost to not only Songdo but also
Incheon Metropolitan City and the new
creative industry that attracts domestic
and foreign tourists.”
Shinsegae Group Vice Chairman
Chung Yong-jin said, “We are very excited to sign the agreement to set up the
multi-purpose commercial complex in the
IFEZ in Songdo, which is emerging as
a major international business center in
Northeast Asia.”
Business Summary
•Investor Incheon Shinsegae Inc.
(registered on Jan. 29, 2015 as a foreign
registered investor)
•Location
Songdo International City, Incheon.
•Area about 59,624 m2
•Business mega lifestyle complex where
people can enjoy a wide range of activities
including shopping, entertainment,
recreation, and leisure activities
•Investment about 500 billion won or
US$420 million
(potential to create about 3,000 jobs)
•Period 2014-2018
View of Shinsegae Shopping Mall.
17
national Embassy Row
Mariachi Merriment
Investment Delegation
Mexico
Celebrates 205th
Independence Day
Zambian Mission
Sees First
Delegation Head
to Lusaka
by Sara Rai
T
he Embassy of Mexico in Seoul
commemorated the 205th Independence day of Mexico at the Grand
Hyatt on Sept. 15. This year also marks
53 years of diplomatic relations between
Mexico and Korea, and the 10th year of a
bilateral strategic alliance.
On this occasion, H. E. Jose Luis
Bernal, the ambassador of Mexico to
Korea, elaborated on how the continuous transformation, institutional development, and the quest for independence
of the Mexican people that started 205
years ago has led Mexico to become the
15th largest economy in the world and a
responsible actor in the global scene.
speaks on the occassion of the 205th Independence Day
celebration at the Grand Hyatt, Seoul on Sept. 15. of Korea
On this occasion, the ambassador
also mentioned signing the MIKTA,
an association of the five major middle
powers of Mexico, Indonesia, Korea,
Turkey, and Australia for innovative
partnerships 2 years ago. The association members aim to contribute to global
governance as constructive middle powers. He said, "Through MIKTA, we want
to deepen our bilateral ties and to jointly
collaborate for peace and security, global
governance, and development cooperation. But above all, we want to contribute
to make the voices of developing countries heard in the international forum.”
by Sara Rai
Zambian Ambassador Mumba S. Kapumpa (5th
from left) meets with a five-member Korean delegation at the Embassy of Zambia on Sept. 8.
T
Culinary Conscientiousness
Scandinavian Food Focuses
on High Quality, Safety,
by Sara Rai
N
ordic nations Finland, Denmark,
Sweden, and Norway came
together to introduce Nordic food at the
“Nordic Food and Beverage Promotion
Day” at the Grand Hyatt Seoul on Sept.
8. A total of 40 Scandinavian companies
and representatives of 300 Korean businesses attended the program organised
Attendees of the Nordic Food and Beverage
Promotion Day sample a buffet of Nordic food at the
Grand Hyatt Seoul on Sept. 8.
18
to introduce Nordic food, seafood, and
beverages to the Korean market. During
the program, Jesper Vibe-Hansen, deputy
head of mission and commercial counsellor of the Embassy of Denmark, mentioned that his hope and belief was that
the Nordic businesses would build a lot
of new contacts and build a new groundwork in the country.
His Excellency Thomas Lehmann,
ambassador of Denmark to the Republic
of Korea thanked the Korean attendees
for the great turnout at the first ever Nordic food event. He went on to state, “The
great turnout in the first ever Nordic food
event is a testimony to not only a good
relationship between Korea and Nordic
countries but also to Koreans' interest in
Nordic food.”
he first team of Korean prospective investors in Zambia will
land in Lusaka, Zambia on Sept. 8 (local
time), the first to obtain visas since the
Zambian Mission opened in late 2014.
This team will begin a seven day factfinding trip to explore the various opportunities available in the construction
sector. The delegation consists of Young
Jeong-jin and Joe Martin, consultants
from GE Construction; Ahn Chun-woo,
an architect from Design Group HAM;
Park Jae-hyun, an IT program developer
from East Busan Holdings; and Cha Richeon, a surveyor from Yoolim Drilling.
Speaking at a meeting held at the
Zambian Embassy in Seoul, Korea, Zambia’s Ambassador to Korea His Excellency Mumba S. Kapumpa, SC, said that
he is delighted that the team is heading
to Zambia and highlighted the various sectors that Zambia has to offer in
terms of investment. Kapumpa said that
much of the investment thus far in Zambia has been in the mining sector, and
there remains a number of vast untapped
opportunities particularly in the energy,
tourism, construction, and agriculture
sectors.
Growth
Trap
Embassy
Row
national
national Low
Portuguese Film Festival 2015
Silk Road Renaissance
See the Best Works of Portugal's
Greatest Film Directors
Azerbaijan Day
Celebrated at
Gyeongju Silk Road
Cultural Festival
by Sara Rai
A
month-long Portuguese Film
festival called “Cinemateca Portuguesa – João Pedro Bénard da Costa”
is coming to Seoul in commemoration
of the 80th birthday of João Bénard da
Costa, an icon and beacon of the Portuguese film industry. This festival will
show 17 remarkable movies in Portuguese cinematic history. Moviegoers
will be able to feel the unique aesthetics
of Portuguese films through dramas and
documentaries, where opposing aspects
like music and literature, reality and illusion are blended.
The festival will start on Sept. 9 and
last until Sept. 30 on the 1st floor of the
Cinematheque, Seoul Art Cinema, in
Grand Tasting
Australian Wine
Wins over Korean
Aficionados
by Sara Rai
T
by Sara Rai
R
Jongno-gu. Tickets are 8,000 won for
adults, 6,000 won for children, and 5,000
won for members, the elderly, and the
handicapped.
Korea has leveled the playing field with
European and Chilean wines. Australian
wine, which boasts more innovation and
variety and a rich history that goes back
to the 1850s, is looking forward to winning Korean customers.
The Head of Market Development
for Wine Australia, Stuart Barclay, said,
“Australia has been able to produce wine
that has won the hearts of wine enthusiasts around the world, and is preparing
wine that suits the taste of Koreans.”
In the same line, Senior Trade Commissioner Brett Cooper stated, “As much
as Australian wine is gaining popularity and increasing its demand, we wish
to introduce varieties that are not found
in the Korean market and increase the
choices for customers.”
he Australian Trade Commission
and Wine Australia held the Australian Wine Grand Tasting 2015 at the
JW Marriott in Seoul on Sept. 4. Fifty different brands from Australia showcased
their products. The display included popular types of wine like Chardonnay, Riesling, Sauvignon, Cabernet Sauvignon,
and Shiraz. Korean wine enthusiasts were
offered varieties of taste and flavor that
ranged from dry, sweet, still,
sparkling, and fortified wine.
The representatives of
many and varied Australian
wine estates were optimistic
about being successful in the
Korean market. The 15 percent
tariff that disappeared after the A selection of Calabria Family Wines on display at the
Australian Wine Grand Tasting 2015 at the JW Marriott Hotel in
FTA between Australia and Dongdaemun, Seoul, on Sept. 4.
epresentatives from Azerbaijan
participated in the Gyeongju Silk
Road Cultural Festival in Gyeongju, a
culturally rich region in the southeast of
Korea, on Aug. 22.
In attendance were Choi Yang-sik,
mayor of Gyeongju City, and RamziTeymurov, ambassador of Azerbaijan.
The Azerbaijan State Dance Ensemble,
Ensemble of Ancient Musical Instruments, saz players, pianists and singers from the city of Gabala Azerbaijan,
performed in celebration of Azerbaijan
Day. “Hosting Azerbaijan Day within the
Gyeongju Silk Road Cultural Festival
2015 attains great importance in terms of
introducing the rich culture of Azerbaijan to the Korean public, and also serves
the strengthening of people-to-people
exchange between our nations,” the
ambassador said in his speech.
The program started with the national
anthems of both Korea and Azerbaijan,
which were followed by speeches from
the Mayor Choi and Ambassador Teymurov. Ambassador Teymurov expressed his
gratitude to Kim Kwan-yong, governor of
Gyeongsangbuk-do; MehribanAliyeva,
first lady of Azerbaijan; the President of
the Azerbaijani Culture Friends Foundation; the Seoul-Baku Azerbaijan-Korean
Cultural Exchange Association; and the
Mayor of Gyeongju City for their support
in organizing “Azerbaijan Day.”
Azerbaijani daAzerbaijani dancers perform at the
2015 Gyeongju Silk Road Cultural Festival opening
ceremony.
19
COVER STORY
Go Global
Domestic Franchise Companies Accelerate
Expansion to Overseas Markets
by Oh Se-eun
S
ince 2010, more Korean restaurant franchise firms have been
tapping into overseas markets. Currently,
a total of 138 brands from 120 companies
have entered the global market. Since the
companies see a higher potential in foreign markets than the saturated domestic market, in a bid to gain a new growth
engine they have decided to go global.
The major decision factors are not only
Korea’s premium national image but also
cultural factors like the continued popularity of Korean pop culture, sometimes
called Hallyu.
Accordingly, domestic franchise companies are establishing outposts in over-
20
seas markets at a fast pace.
According to a recent complete survey of 2,822 brands from 2,276 food
service firms conducted by the Ministry
for Agriculture, Food and Rural Affairs
(MAFRA) as of Dec. 2014, a total of 138
brands from 120 companies have entered
the global food service market with 3,726
stores.
Among them, 53 brands from 46
Korean restaurant franchise firms have
348 overseas stores, while 85 brands
from 78 non-Korean restaurant franchise
firms have 3,379 stores abroad.
In 2013, 110 brands from 95 companies had 2,717 overseas stores. Of those,
26 brands from 26 companies closed 57
overseas stores. However, 55 brands from
52 firms opened 141 new stores abroad.
According to the survey, 147 brands
from 142 companies, which haven’t
entered the overseas market, are planning to extend their businesses abroad.
The number of companies and brands in
foreign markets in 2014 increased by 25
and 28 to 120 and 138, respectively, from
a year earlier, while the number of their
overseas stores grew by 1,009 to 3,726.
The firms have entered the markets in
about 40 countries. By country, China has
the highest number of domestic restaurant
franchise firms, brands and stores – 80
COVER STORY
Korean Cuisine
firms, 92 brands, and 1,505 stores.
China is followed by the U.S. with
34 firms, 36 brands, and 959 stores.
Then there is Singapore with 23 firms,
27 brands, and 82 stores; the Philippines
with 22 firms, 22 brands, and 192 stores;
and Indonesia with 18 firms, 19 brands,
and 72 stores.
About 67.5 percent of Korean franchise restaurants are in Asian countries,
such as China, Vietnam, the Philippines,
and Indonesia, while 25.7 percent of
them are in the U.S. It shows how domestic franchise firms are weighted towards
the Asian and U.S. markets.
For Korean restaurants, China has the
greatest number of stores with 201. For
non-Korean restaurants, China also has
the highest figure with 1,304, followed
by the U.S. with 933, Vietnam with 302,
and the Philippines with 177.
The respondents, who have already
entered the global market, said that they
are willing to open additional stores in
the markets in Indonesia, Thailand, and
the Philippines, while 70.1 percent of the
respondents who are planning overseas
expansion said that they intend to open
stores in China.
Also, the respondents who have
already entered the global market said
that the size of the local market is the
most important factor to decide which
country they should push into the market.
In contrast, 47.6 percent and 40.8 percent
of those who are planning for overseas
expansion said that Korean culture preferences and the size of the local market
are the most important. In the survey,
they could choose more than one answer.
Moreover, 73.7 percent of the respondents said that creating a local logistics
and supply system is the most important
factor to be successful in an overseas
market. Another 71.9 percent said that
making a strong local network was the
most important success factor.
All respondents said that the most difficult part to prepare overseas expansion,
investment, and operation is to understand legal regulations in countries they
are trying to tap into, followed by matters
related to food products. That includes
the establishment of the local food ingre-
dient supply and distribution channels,
and the understanding of the standards
of customs clearance and procedure for
Korean food products.
For difficulties in running local
stores, they said that recruiting workers is
the most difficult.
According to the survey, all firms are
having difficulties understanding information about local markets, and they are
often spending time and money on trial
and error.
Most respondents, who have already
entered the global market, selected liquid
and powdered sauces as additional items
that they want to export.
About 93.5 percent of overseas restaurants use Korean food products, and
Korean food materials account for 38.6
percent on average of total food ingredients. This is because they want to maintain Korean traditional taste, and there
are no substitutes in the market, said the
respondents. For Korean ingredients they
use the most, paste and salted seafood
ranked first at 67.3 percent, followed by
powdered and liquid sauces, grain, and
grain flour, and vegetable processed food.
For the reason to use alternative local
food ingredients in overseas restaurants,
most respondents said the high price of
Korean food ingredients, followed by
better food materials in the local markets
and complicated import procedures.
Also, 75.9 percent of the respondents
said that they are willing to use Korean
food ingredients in their overseas stores,
and they are willing to pay up to 20 percent more than the local market prices on
average.
Some 30 percent of the respondents
are aware of government support for
overseas expansion.
About 63.6 percent of the respondents who have entered the global market and are aware of government support,
had participated in government support
events. Most of them took part in overseas exhibitions, followed by local market information provision and overseas
expansion consulting sessions.
The reasons why they haven’t participated in government support are that they
don’t know much about the program, that
application procedures are complicated,
and that the timing wasn’t right for them.
Meanwhile, competition in the
domestic food service market is heating
up, and an increasing number of companies are pushing into foreign markets.
Accordingly, companies should expect
profitability from a long-term point of
view and carefully consider business
value, said an industry source.
Trend of increase in the number of food franchise companies
4000
3726
3500
3000
2717
2500
2000
1347
1500
1000
1485
991
500
0
2010
2011
2012
2013
2015
21
COVER STORY
Korean Cuisine
More and Better Food
Korean Gov't Working to Protect, Grow
Food Service Industry with Innovative
Policies, Technologies
by Oh Se-eun
BusinessKorea sat down with Director Oh Byeong-seok at the Food Service
Industry Division of the Ministry of Agriculture, Food and Rural Affairs and
talked to him about Korea's domestic food service industry, small and large businesses, and Korean cuisine abroad. What follows are excerpts from the interview.
Oh Byeong-seok,
Directorof the Food Service Industry Division
of the Ministry of Agriculture, Food and Rural Affairs.
The Ministry of Agriculture, Food
and Rural Affairs is engaged in
various programs to directly connect the food service industry with
agricultural product suppliers.
What is the current status of the
programs?
The examples include those for the
promotion of the consumption of domestically-produced food materials and the
designation of quality dining service
zones. The former is made up of the
International Food Ingredients Show, the
Local Food Ingredients Fair, the Cyber
Food Ingredients Mall, and the like.
The number of visitors to the show
has continued to increase from 11,258 to
12,937 between 2013 and 2015, and the
trade volume pertaining to the show has
gone up as well, from 13.7 billion won
[US$11.5 million] to 34.8 billion won
[US$29.2 million] during the same period. The dining service zone designation
is to give a certain title and assistance
to regions meeting requirements so that
the domestic food service industry can
be more unique and sophisticated. Businesses in the zones are to spend at least
40 percent of their expenditures on the
promotion of the consumption of local
22
food ingredients and the development of
hands-on programs utilizing such ingredients.
district data, and the ministry itself has
announced the Food Service Business
Index each quarter since 2011.
These days, an increasing number
of self-employed businesses are
found in the restaurant industry,
and the ratio of those going out of
business is on the rise, too. What is
your measure against this?
Some people are saying that smallscale food service businesses might
be increasingly affected when
restaurant franchises and large
corporations set foot in the food
industry one after another to accelerate the blurring of the boundary
between the food service and restaurant franchise sectors. What is
your opinion?
The industry had 636,000 businesses as of the end of 2013, and 88,000 of
them were franchises registered with the
Fair Trade Commission. The number of
franchises increased by 24 percent compared to 2011, while the number of restaurants as a whole went up by 5 percent
from 607,000. In the meantime, the ratio
of business shutdowns declined from
31.8 percent to 28.5 percent between
2007 and 2009, and then to 26.5 percent
until 2012.
The government is providing a variety of education programs in order to further lower the ratio of those leaving the
industry. For instance, the Small Enterprise and Market Service of the Small
and Medium Business Administration is
providing an index of the density of food
service providers based on its business
The Korea Commission for Corporate Partnership has curbed such a possibility by designating eight food service
segments, including bakeries, as fields
where large corporations’ activities are
limited. At present, large corporations
can do food-related business in exceptional locations such as subway station
areas, new towns, and the like. Conglomerates’ presence in the industry has negative side effects in the form of increasing difficulties on owner-operators’ part,
and so on. However, it can contribute to
the industry as well by means of market
expansion based on the creation of new
trends, enhancement of food safety, and
COVER STORY
Korean Cuisine
service improvement. In addition, it can
lead to closer ties between the restaurant
industry and agriculture by changing the
food ingredients distribution structure for
the better.
We do not have to have a dichotomous view with regards to the large
corporations in the industry. Instead, we
need to figure out how to distinguish
their roles and drive them to work with
each other. Market creation by means of
cooperation and overseas market penetration making use of their resources
should be promoted, while any attempt to
disturb the order in the market should be
forestalled.
Major entertainment companies’
penetration of the restaurant
industry is drawing much attention nowadays. What is your view?
We are paying close attention to the
trend and its ripple effects. I believe that
the trend will result in the diversification
of food services and products that will
contribute to the competitiveness of the
industry at large. Celebrities’ contributions to the promotion of Korean food
is on the rise as well via international
events such as the K-Food Fair, the Hallyu Expo, and the foreign media.
Korean cuisine is currently leading
the trend of the industry back into
the limelight. What do you think
is the reason and how long do you
think will it continue?
Today’s rise in the interest in Korean cuisine has to do with an increasing
demand for healthful local and wellness
foods. As more and more people seek for
what is good for health, Korean cuisine
is gaining popularity. At the same time,
more various food products are being
sought after with people tired of what
they already have tasted. I think this also
has to do with the popularity of Korean
food.
Many Korean restaurant companies are expanding their business
abroad and not a few of them are
showing successful results. Still, it
seems that their success has little
to do with the utilization of Korean
agricultural products.
from Korea.
Korean restaurant companies have
been engaged in overseas business in
earnest since 2005, and the number of
Korean restaurants has increased at an
annual average of 36.8 percent since
then. To be specific, the numbers of such
companies and restaurants abroad skyrocketed from 44 and 221 to 120 and
3,726 between 2005 and last year, and
large Korean restaurants are found in 40
countries around the world at present.
The ministry has been working on
advanced techniques relating to food
material drying and processing so as
to help export food ingredients. Also,
it formed a consultative body with AT
and KOTRA to provide consulting and
guidelines as to customs clearance and
quarantine while cooperating with Korean restaurants abroad, so that they can
purchase more food materials exported
The restaurant agent market is
increasing its size as of late on the
back of the development of smart
information technology. How is
this changing the paradigm of the
industry?
Smartphone-based restaurant agency services can give consumers easier access to small restaurants and let
them be known to more people. At the
same time, however, it could lead to an
increase in business expenditures due to
the fees as well. Under the circumstances, we are closely watching how things
are going in the industry.
These days, some application providers have come up with a 0 percent fee
in an effort to deal with potential side
effects in advance. I believe such voluntary efforts should be the answer in the
end.
23
COVER STORY
Korean Cuisine
Korean Food Wave
CJ Foodville Enters 10
Countries with 4 Brands
by Oh Se-eun
CJFoodville bibigo's England store.
C
urrently, CJ Foodville has
entered the overseas markets
with the greatest number of brands
among domestic restaurant franchise
firms. Starting with opening a Tous les
Jours bakery chain, in the U.S. in 2004,
the company has pushed into the markets in 10 countries, including the United States, China, the U.K., Japan, Vietnam, and Indonesia, with its four brands
– Tous les Jours, Bibigo, A Twosome
Place, and VIPS, and is currently operating 229 stores abroad.
An official from CJ Foodville said,
“It took eight years to open its 100th
overseas store CJ Food World in Lidu,
Beijing, in Sept. 2012 from the first
launch. However, it only took less
than two years to open the 200th store
from the 100th store. We will grow into
a global food service company, like
McDonald’s and Yum.”
Recently, CJ Foodville put on the
most noticeable performances in China
24
and Southeast Asia. In China, the company has 97 stores as of the end of July
2015, leading the restaurant, café, and
bakery markets in the premium sector.
In particular, it has been making the best
use of the Chinese market as a foothold
to introduce Korean food culture to the
world from 2014.
In Southeast Asia, such as Vietnam
and Indonesia, Korean cuisine from
Bibigo has won the heart of local consumers, along with the premium bakery of Tous les Jours. From Indonesia’s
BibigoGrilled Zoneto Singapore’s Bibigo
Korean snack menus, the company has
developed menus tailored to local consumers’ culture and taste, successfully
achieving localization. Bibigo will also
take the initiative in spreading not only
Korean cuisine but also Korean culture
in the future, and shows the base of the
global Korean food brand.
The global business of Tous les Jours
is growing with different characteristics
by each country. The bakery brand has
tapped into Southeast Asian markets for
the first time in the domestic industry,
and maintained its top place from 2012
in terms of the number of stores and
sales after the first launch in Vietnam in
2007. In a bid to closely target China’s
large land area, Tous les Jours is using
two ways for the market expansion at the
same time – direct expansion and master
franchise expansion.
Bibigo is a global Korean food restaurant with new concepts, which the CJ
Group planned as a global brand from
the beginning. Its objective is to make
Korean food part of global consumer life
and culture by introducing the traditional
taste and charm of Korean food.
In a bid to create a virtuous cycle of
global consumers enjoying Korean food
inside and outside of their homes, the CJ
Group merged a Korean restaurant and
a processed food brand into one name –
Bibigo. This strategy is to introduce the
charm of Korean food to local consumers
through restaurants first in overseas markets, which still have low recognition of
Korean food, and to naturally lead them
to have Korean food at their homes by
purchasing Bibigo products.
SPC Going Global
in Earnest
Since the expansion into the market
in Shanghai, China, in Sept. 2004, Paris
Baguette, the nation’s top bakery café
franchise brand of the SPC Group, has
a total of 184 stores in China, the United
States, Vietnam, Singapore, and France
as of July 2015, introducing the excellence of Korean bakeries to the whole
world.
Marking the 11th anniversary of
COVER STORY
Korean Cuisine
43 stores, mainly in California and New
York. Particularly, it has opened stores in
Times Square, Midtown, and the Upper
West Side, the mainstream business district of Manhattan, from 2013, putting up
a good show.
Paris Baguette has also made more
active efforts to tap into overseas markets in 2012, opening its 100th overseas outlet in Cao Thang, Ho Chi Minh
City, Vietnam, in March, and started its
first business in Southeast Asia. Then,
it opened its first store in Singapore in
Sept. the same year. In 2014, Paris
Baguette opened an outlet in Singapore’s
Changi Airport for the first time in the
country, spreading Korean food culture.
In July 2014 it became the nation’s
first bakery to open a store in Paris,
France, the home of bread, paving the
way to enter the market of Europe and
pan-French cultural countries in the
future. With the success of the first store,
Paris Baguette opened its second Paris
store in the city's opera district in July
2015.
The bakery chain considers taste and
localization as the main reasons that it
has succeeded in these global markets.
Therefore, its most important strategy is
to make delicious products that suit local
customers’ appetites.
Kooksoondang Opens
Pub in Europe
Paris Baguette New York store.
the Chinese market advance in 2014,
in particular, Paris Baguette opened its
100th store in August 2012 and proved
its brand awareness and management
system settling in the market. Previously, Paris Baguette opened stores in
Nanjing in Nov. 2011 for the first time
in the domestic bakery industry, and in
Dalian in 2012, expanding its business
in the Chinese market. In the future, the
company is planning to open additional stores in the three northeast Chinese
provinces of Dongbei, Huaxi, and Huanan.
Establishing a subsidiary in the U.S.
in 2002, Paris Baguette opened the first
store in Los Angeles' Koreatown in Oct.
2005. Currently, the company operates
Kooksoondang Paris store.
25
COVER STORY
Korean Cuisine
Kooksoondang, the nation’s leading
brewery producing traditional Korean
alcoholic beverages, opened a pub in
Paris, the cultural center of Europe, in
March 2014. The pub specializes in serving traditional Korean food and alcoholic beverages like Bekseju. It is the first
time that a Korean liquor company has
opened a pub in the European market to
run directly from the headquarters based
in Korea.
Named “Bekseju Village Paris
branch,” the pub with a total of 48 seats
is situated on the Gobelins, the borderland of the 13th and 5th districts of Paris.
Kooksoondang also made efforts to recreate the uniqueness and authenticity of
the atmosphere of a traditional Korean
pub. The interior decorations are modeled on Baekseju Village pubs currently
operating in Korea.
Bekseju Village Paris branch is a
bistro-style restaurant that serves 5 traditional Korean food items, including kimchi stew, bibimbap, and bulgogi, during
lunch time. In the evening, the restaurant
turns into a bar that sells the company’s
flagship alcoholic beverages of Bekseju,
rice wine, and Icing.
It also offers a variety of traditional
alcoholic beverages like bokbunja and
other traditional fruit wines. For dishes
to eat with drinks, it has bossam, steamed
pork wrapped in greens; maekjeok, charcoal grilled pork; pajeon, a grilled seafood pancake; tangpyeongchae, mung
bean jelly mixed with vegetables; and
tofu kimchi, tofu with stir-fried kimchi.
They are chosen with special consideration for the taste of Europeans from
Korean traditional dishes.
In particular, Bekseju Village Paris
branch sells alcohol made in the authentic traditional way. Since 2009, Kooksoondang began to engage in the enterprise of restoring traditional alcoholic
drinks in a bid to propagate the uniqueness and the excellence of Korean traditional drinks to the global community. At
the Bekseju Village Paris branch, Kooksoondang serves Yihwaju. Yihwaju is the
original version of today’s makkeoli, and
was enjoyed by kings during the Chosun
and Koryo dynasties.
26
The period from its opening in March
to the end of last year marked an impressive start, posting a revenue of €353,000
(US$395,182 or 471.06 million won)
from 15,000 customers.
AKooksoondang spokesman said,
“Kooksoondang is working steadily
toward introducing the Korean food and
drink culture abroad, and Bekseju Village
Paris branch is especially meaningful in
spreading Korean food and beverage culture to the European community.”
BBQ Adopts 'Master
Franchise' Model to
Push into Global Market
Genesis BBQ is one of Korea’s leading food service franchise group that
spreads Korean restaurant and dining
culture around the globe. The company
has, so far, signed Master Franchise
agreements with local leading companies in 57 different countries including
the United States, China, Vietnam, and
Brazil. As of today, Genesis BBQ has
opened 500 locations in 30 countries.
For its global business strategy, Genesis BBQ adopts a Master Franchise
model for effective localization. A Master Franchise model is recently the common way for global franchise brands
to expand their business overseas. It is
an international franchise arrangement
where a franchiser enters into a partnerBBQ China store.
ship with a competent local business
partner familiar with the local business
environment. Under the Master Franchise arrangement, the franchiser grants
the local partner exclusive rights to use
its trademark, and transfers its business expertise to the partner in a bid to
increase the chance of success.
In 2014, the popularity of the Korean
soap opera “My Love from the Stars”
swept across Chinese screens, and so did
the popularity of Genesis BBQ chicken.
In particular, it turns out that Chinese
locals enjoy chicken in a luxurious atmosphere. For such a reason, one can easily spot people standing in a long line
for 30 minutes or more to enter the BBQ
premium cafés at Shanghai Expo, and in
Daehakro.
It has been 10 years since the company entered the Chinese market in 2003.
Based on the expertise it had accumulated in the last decade, Genesis BBQ
has striven to develop a new menu and
renewal and carry out strategic marketing campaigns with a goal of establishing
itself as a top restaurant in the Chinese
food service market.
With recent explosive economic
growth, the number of Chinese consumers who seek a higher standard of living
and luxury goods is continuously on the
rise. In line with such a trend, Genesis
BBQ launched BBQ premium cafes, providing high-quality services.
MONEY
Economic Shadows
Korea Showed Depressed National
Income, GDP Growth in Q2
by Jung Suk-yee
T
he national income of Korea
declined for the first time in four
and a half years in the second quarter of
this year, led by a decrease in the interest
and dividend income that Korean companies take from overseas subsidiaries. In
the meantime, the GDP growth rate for
the same quarter is estimated at 0.3 percent compared to the preceding quarter. If
this is the case, Korea’s QoQ GDP growth
remains below 1 percent for the fifth consecutive quarter.
The Bank of Korea announced on
Sept. 3 that Korea’s real GNI fell 0.1
percent from a quarter ago in Q2. The
most recent negative GNI growth was
witnessed in the last quarter of 2010,
when it lost 1.9 percent. Also, the real
GNI growth rate was exceeded by the
real GDP growth rate in three quarters,
by a margin of 0.4 percentage points at
this time. The decline in real GNI was
because foreigners’ income in Korea
increased on the contrary to the income
of Koreans abroad, with the real GDP
growth rate remaining at a low level.
Specifically, Korea’s net factor income
from the rest of the world dropped from
5.6 trillion won (US$4.7 billion) to 1.3
trillion won (US$1.0 billion) between Q1
Pessimistic Statement
'GDP of Korea Likely to Show Little
Growth This Year'
by Jung Suk-yee
A
n increasing number of organizations are estimating Korea’s
GDP growth rate for this year at slightly
over 2 percent, much more pessimistic
than the Korean government’s 3.1 percent
estimate and that of the Bank of Korea at
2.8 percent.
Morgan Stanley, Moody’s Investors
Service, and Commerzbank recently predicted that the rate would end up at 2.3
percent this year to reach the lowest level
since 2007, when it dipped to 0.7 percent. Nomura Securities, IHS Economics,
ANZ Bank, and Wells Fargo mentioned
2.2 percent, 0.1 percentage points lower
28
than that of 2012. All in all, the average
estimate of 36 foreign financial institutions is 2.5 percent. Investment banks
have lowered their estimates all the way
from 3.5 percent since the beginning of
this year.
In the meantime, the LG Economic
Research Institute recently said that
Korea is likely to record an annual average of 1.7 percent in potential growth
between 2020 and 2030. “The potential
growth rate fell from 4.6 percent to 3.6
percent between the 2000s and the 2010
to 2014 period, and the estimate for 2015
to 2019 is 2.5 percent,” it remarked, add-
and Q2.
Securities investment gains changed
little, from approximately US$400 million
during the period, but direct investment
dividends fell from US$2.5 billion to
US$2.2 billion. This can be attributable to
a decline in the dividend income of Korean enterprises with overseas subsidiaries.
“This year, more direct investment dividends were paid in Q1, which was unusual, to affect the national income growth
rate for Q2,” the central bank explained,
adding, “The net factor income from the
rest of the world increased from 5.1 trillion won [US$4.3 billion] to 6.9 trillion
won [US$5.8 billion] between the first
halves of last year and this year.”
In Q2, the nominal GNI declined
0.5 percent from the previous quarter
and gained 4.3 percent compared to the
same period last year. The GDP deflator rose 2.7 percent year-on-year, showing the highest rate of increase since Q4,
2010. The savings rate fell from 36.5 to
35.3 percent between Q1 and Q2, while
the gross domestic investment ratio edged
down from 28.1 to 28.0 percent, to continue to fall for three quarters in a row.
ing, “The amount of working-age population is likely to decrease from 2017,
accelerating the downturn in the potential
growth rate.”
The Hyundai Research Institute
warned that the potential growth rate
might dip below 2 percent in the near
future, too. “After having reached a peak
of 10 percent in the 1970s, it plunged
to 3.5 percent in the period of 2010 to
2014,” it explained, continuing, “The current rate is around 2 percent, but it might
decline further with time.”
MONEY
Higher Wage
All Things Considered,
Koreans Earn More than Japanese
by Michael Herh
S
ome Korean laborers earn more
money than Japanese laborers. It
has been revealed that the average salaries of workers in Korea’s three major
export industries -- automobile, shipbuilding, and electronics – outstripped
those of workers in the three industries of
Japan. Some are concerned that a rise in
labor costs is weakening the price competitiveness of Korean products in the
export market, at a time when a weakened Japanese yen is elevating that of
Japanese products.
Last year, the average salaries in
the Korean and Japanese automobile
industry stood at 82.83 million won
(US$71,237) and 6.88 million yen
(US$57,446), respectively, according to
the Electronic Disclosure System of the
Financial Supervisory Service (FSS) and
Japan’s Bureau of Statistics and Ministry
of Health, Labour and Welfare. A similar
phenomenon has happened in the shipbuilding industry as well. The average
salary in the Korean shipbuilding industry outnumbered that in the Japanese
shipbuilding industry by 73.37 million
won (US$63,101) to 6.23 million yen
(US$52,019).
In the electronics sector, similar stories are told even though there are some
differences by division. In the semiconductor industry, Japanese laborers
receive 6.36 million yen (US$53,104) a
year on average. But Korean laborers’
annual salaries average 67.54 million
won (US$58,087). In the home elec-
tronics and electric industries, Japanese
laborers earn a little more than Korean
laborers.
Taking into consideration the two
nations’ buying power, the gap between
the salaries in Korea and Japan further
widens. If applying a Purchasing Power
Parity (PPP) exchange rate, the average salary in the automobile industry is
US$96,610 in Korea and US$65,355 in
Japan. The foreign exchange rate plays
a role too. The Japanese government
pumping money into the economy has
lowered the value of the Japanese yen
against the U.S. dollar 6.7 percent over
the past three years.
A rise in labor costs parallels a drop
in cost competitiveness. In Aug. alone,
Korea’s automobile exports dropped 6.7
percent year-on-year. “A weakened Japanese yen and a drop in consumer price
growth caused by a long economic slump
began to reverse salaries in Korea and
Japan in 2013,” said a research fellow
at the Korea Institute for International
Economic Policy. “As Korea is shoved
in price competitiveness, Korea has to
set itself apart from others in expanding
its business in the world market, not with
low prices but through technology development.”
Low Productivity
Korea’s Labor Productivity Plummeting
by Jung Suk-yee
T
he Korea Institute for Industrial
Economics & Trade (KIET) said
on Sept. 16 that the labor productivity
per employee of the Korean manufacturing industry edged up by just 0.5 percent
last year, and declined by 2.7 percent in
the first half of this year after the heyday
between 2000 and 2010.
The productivity per employee
surpassed that of Japan in 2008, and
reached 110 percent of that country's two
years ago. The productivity per hour is
about 96 percent of that of Japan as of
now. When it comes to productivity per
employee, Korea currently ranks third
behind the United States and France
among the top 10 manufacturing countries, and tenth in the OECD.
Korea is at the 17th place in the
OECD as far as the productivity per hour
is concerned. By industry, the electrical
and electronics, metal product manufacturing, and textile sectors’ productivity
levels are higher than those of Japanese
counterparts unlike oil, coal, chemicals,
and basic metals.
The KIET advised that Korea needs
to stop its previous strategy of imitating
advanced economies so that more profits can be taken from the same amount
of labor by means of the development of
high-value-added products, with labor
productivity plateauing. It added that an
increase in output based on long hours
of labor should be avoided. At present,
Korean workers’ average working hours
exceeds the OECD average and that of
Japan by 22 and 25 percent, respectively.
29
MONEY
Public Debt
Korea’s Gov't Debt-to-GDP Ratio to
Break 40% Mark for 1st Time
by Jung Suk-yee
A
ccording to the Ministry of
Strategy & Finance, the government debt of Korea is estimated to
reach 645.2 trillion won (US$545.5 billion) next year, and it is predicted that
373.1 trillion won (US$315.4 billion) of
it should be covered by taxpayers, while
the latter amount for this year is 333 trillion won (US$282 billion).
The ministry explained that this
amount is forecast to increase to 410
trillion won (US$346 billion) in 2017,
442 trillion won (US$374 billion) in
2018, and 469 trillion won (US$396 billion) in 2019.
The ratio of the portion covered by
taxes to total government debt is going
up, too. Specifically, it amounted to
53.7 percent last year, and is expected
to reach 55.9 percent at the end of this
year. The estimates for next year and
2017 are 57.8 percent and 59.2 percent,
30
respectively.
With concerns mounting over its
national fiscal health, the Ministry of
Strategy & Finance recently remarked
in its National Debt Management Plan
report for 2015 to 2019 that the national
debt needs to be controlled in view of
the long-term fiscal risk factors including low fertility, costs associated with
inter-Korean unification, aging of the
population, and the size of public enterprise debts.
In the meantime, the Korean government finalized its budget for next year at
386.7 trillion won (US$324.3 billion),
up 3 percent compared to this year. The
rate of increase is the lowest since 2010,
when it reached 2.9 percent, in view of
fiscal soundness and the supplementary
budget of approximately 10 trillion won
(US$8.4 billion) spent this year for economic stimulus. However, the fiscal def-
icit increases by 37 trillion won (US$31
billion), 3.6 trillion won (US$3.0 billion) more than that of this year, and
Korea’s government debt-to-GDP ratio
is to exceed 40 percent in 2016 for the
first time.
With concerns mounting over its
national fiscal health, the Ministry of
Strategy & Finance recently remarked
in its National Debt Management Plan
report for 2015 to 2019 that the national
debt needs to be controlled in view of
the long-term fiscal risk factors including low fertility, costs associated with
inter-Korean unification, aging of the
population, and the size of public enterprise debts.
The government is planning to submit a budget bill to the National Assembly on Sept. 11. “This bill for next
year focuses on job creation, economic
recovery, and economic restructuring,”
Deputy Prime Minister Choi Kyunghwan explained, adding, “Although the
overall fiscal balance has deteriorated a
little, we will make up for it by means of
economic revitalization.”
Specifically, the budget increased in
10 out of 12 sectors including healthcare, welfare, and labor, but decreased in
industry, small and medium enterprise,
energy, and others.
The rate of increase went up from a
year earlier in five of them: healthcare,
welfare and labor (6.2 percent); culture,
sports and tourism (7.5 percent); national defense (4 percent); foreign affairs
and unification (3.9 percent); and general and local administration (4.9 percent). The healthcare, welfare & labor
budget, which totals 122.9 trillion won
(US$103.1 billion), accounts for 31.8
percent of the total budget.
MONEY
Tax Evasion
Government Seeks to Exchange Money
Laundering List with Other Nations
by Michael Herh
K
orean money launderers are expected to face a tougher
business situation, as the Korean government will push
for exchanges of money launderer lists with the U.S. and Asian
countries. According to industrial sources, the Financial Intelligence Unit (FIU) under the Financial Supervisory Commission (FSC) proposed exchanging Suspicious Transaction Reports
(STRs) with six Asian nations in an APG meeting held in New
Zealand in July.
Large businesses send more money to tax havens than small
businesses do.
They are China, India, Malaysia, Singapore, Hong Kong,
and Macau. The six countries are suspected of being hotbeds for
money laundering by Koreans and Korean companies. The STR
system makes it obligatory for financial companies to report illegal financial transactions to financial regulators.
Countries around the world are exchanging such STR data
with one another. But exchanges of data are done one by one when
they were requested. But the conclusion of a project agreement
will bring data in lump sums to Korea, elevating the efficiency of
investigations a great deal.
The FIU has pursued a second agreement with the U.S. since
the beginning of this year, and is close to inking the deal. The FIU
recently signed an agreement with the U.S. for the first time in
2012. Recently, it signed with Japan. The FIU received an STR
about 6,000 Koreans in the U.S. and 600 Koreans in Korea, and
shared the report with the National Tax Service.
In 2012, U.K.-based Tax Justice Network announced that
Koreans stashed a whooping US$779 billion abroad as of 2012.
This amount places third after China (US$1,189 billion) and Russia (US$798 billion won). The government is preparing various
measures, judging that overseas money laundering and tax evasion
are very serious.
The enforcement of a multilateral taxation information
exchange agreement beginning in September 2017 will enable
Korea to exchange taxation information with 50 countries, including tax havens such as the U.K., Germany, and the Virgin Islands.
Earlier this year, the Korean government was planning to
implement an automatic Korea-U.S. taxation information treaty,
but failed to do it within this year as the National Assembly has
not passed it yet.
Instead, the government is implementing a policy to not punish those who voluntarily come clean about their hidden assets in
overseas countries from Oct. to March of next year.
In the meantime, it has been shown that Korea places sixth
among OECD member countries in terms of the size of underground economies.
Korea’s underground economy accounts for 26.3 percent of
the Korean economy, according tolawmaker Oh Je-se of the New
Politics Alliance for Democracy on Sept. 10.According to Oh, the
percentage outweighs 18.4 percent, the average of the OECD, by
7.9 percentage points. It is also more than double that of Japan (11
percent) and more than triple that of the U.S. (8.7 percent). Korea
is similar to Greece, since both countries have a low tax burden
and tax rates, poor social welfare, deepening financial polarization,
high corruption level, and a big underground economy.“Policies
are urgently needed for the legalization of the underground economy,” said the lawmaker.
“Korea’s tax probe rate is much lower compared to those of
advanced countries such as the U.S. and Japan. This contributes to
the big size of Korea’s underground economy,” Rep. Oh pointed
out. “Korea’s tax investigation rate is 0.94 percent for corporations. The rate is lower than that 1.33 percent of the U.S. and 3.28
percent of Japan,” Rep. Oh explained. “In terms of self-employed
operations, the rate of Korea stands at 0.09 percent, which is less
than the half of that of the U.S. and that of Japan.”
Another problem is a steady drop in Korea’s tax probe rate. Ten
years from now, in 2005, the rates were 1.8 percent for corporations
and 0.18 percent for self-employed operations. But in 2014, the two
stood at 0.94 percent and 0.09 percent, respectively.
Money Sent to and Received from Tax Heavens
from 2007 to June 2015
(unit: trillion won)
Sending Amount
Receiving Amount
549
353
Large Businesses
210
310
Small Businesses
<Sources: The Bank of Korea, National Tax Service>
31
MONEY
Manufacturing Skyfall
August Shows Largest Monthly Drop
in Korean Exports in Six Years
An aerial shot of Jeongwang-dong, an industrial center in Ansan, Korea. The blue roofs of the factory buildings are made from aluminum.
by Michael Herh
I
n August, Korea’s exports dropped
15 percent year-on-year, the largest
monthly drop since the financial crisis in
2009. While the domestic market is recovering from the aftermath of the MERS
scare, Korea exports continued to fall for
eight straight months. This makes it not
so easy for Corporate Korea to reach its
economic growth of 2 percent or higher
in 2015. And a worse crisis is facing
Korean manufacturers sandwiched by low
domestic demand and a slump in exports.
According to the Ministry of Industry,
Trade and Resources, Korea’s exports in
Aug. stood at US$39.33 billion, a yearon-year drop of 14.7 percent. The drop
is the largest monthly drop in six years,
since Korea recorded a year-on-year drop
of 20.9 percent in exports in Aug. 2009,
shortly after the global financial crisis.
Since the beginning of this year,
Korea’s exports had slid 0.9 percent in
Jan., 3.3 percent in Feb., 4.3 percent in
March, 8.0 percent in April, and 10.9 per-
32
cent, the first double digit figure, in May.
Since June, they had fallen less sharply
by sliding 1.8 percent in June and 3.3 percent in July. But in Aug., they dropped
more sharply. By products, exports of
oil and petrochemical products dropped
40.3 and 25.7 percent, respectively, as oil
prices grew a little and then returned to a
decrease.
Also in the shipbuilding industry, the
postponement of orders amounting to
US$1.1 billion gave rise to a drop of 51.5
percent in exports. In addition, most of
Korea’s major export items such as automobiles (9.1 percent), general machinery
(15.5 percent), household appliances (8.7
percent), flat panel displays (6.8 percent),
auto parts (15.9 percent), textiles (21.4
percent), and steel products (17.4 percent)
inked drops in exports. By region, drops
in Korea’s exports to China (-8.8 percent)
and Japan (-24.4 percent) expanded. The
catastrophic explosion at Tianjin Port and
a drop in China’s demand for import prod-
ucts contributed to a decrease in Korea’s
exports to China.
A greater problem is that such sluggish exports will not rebound in a short
period. This is because Corporate Korea
is surrounded by such strong negative
factors as foreign exchange rates with a
weakened Japanese yen and devaluation
of the Chinese yuan, and seems unable
to escape them. According to economic
experts, Korean companies are not sure
that they can survive amid hot competition
among Korea, China, Japan and the U.S.
China can maintain its economic growth
rate if and when it continues to increase
its shares in markets where Korea is the
leader, such as the electronics and display
markets. Japan is in hot pursuit after the
long tunnel of its economic slump. The
American manufacturing industry is reviving after the U.S. overcame its financial
crisis. However, it is said that six out of ten
Korean companies listed on the KRX are
barely making ends meet.
MONEY
Reversal of Fortune
Korea’s ICT Exports Turned Around Last Month
by Cho Jin-young
T
he Ministry of Science, ICT &
Future Planning announced on
Sept. 17 that the exports from the ICT
industry of Korea increased by 0.7 percent from a year ago to US$14.44 billion in August, while imports went up
11.4 percent during the same period to
US$7.55 billion. Exports had declined
3.4 percent year-on-year in July due to
the global economic recession.
By export item, mobile phone exports
reached US$2.42 billion to show a 16.7
percent year-on-year growth. Meanwhile,
smartphone exports edged down by 0.2
percent. Semiconductor exports increased
4 percent to US$5.45 billion, led by system semiconductor products such as
application processors for use in smart-
phones. System semiconductor exports
jumped 19.1 percent to US$1.91 billion.
However, memory semiconductor exports
declined 1.4 percent to US$3.03 billion,
due to a decrease in DRAM prices.
Display panel exports fell by 7.5 percent to US$2.72 billion, and computer
and peripherals exports showed a 6.3 percent decrease to end up at US$510 million. Digital TV exports decreased 5.5
percent to US$530 million, too.
By region, exports to China increased
4.8 percent to US$7.84 billion, while
those to the ASEAN region and the United States jumped 19.5 percent and 15.7
percent, respectively. In contrast, exports
to the E.U. fell 26.4 percent to US$760
million. “Last year, Korea’s ICT exports
Money on Hand
Korea Retains Recession-driven
Current Account Surplus
by Jung Suk-yee
T
he Bank of Korea announced
on Sept. 2 that Korea recorded
a current account surplus of US$10.11
billion in July this year to remain in the
black for the 41st consecutive month.
This is a new record. The previous current account surplus streak was 38
months in a row from June 1986.
The recent current account surplus of
Korea is because of its imports declining
faster than its exports. In July, Korea’s
commodity exports fell by 10.4 perent
from a year ago to US$48.2 billion,
while its commodity imports dropped
by 20.6 percent to US$37.35 billion. The
goods account surplus decreased from
US$13.14 billion to US$10.86 billion
between June and July, and the service
account deficit was reduced from US$2.5
billion to US$1.92 billion.
The travel account balance took a
serious hit from the spread of the MERS
coronavirus. The deficit totaled US$1.45
billion to reach the highest level since
July 2008, when the amount added up to
US$1.65 billion. The travel account deficit was approximately US$410 million in
May this year, but increased to US$1.04
billion the following month, when the
infectious disease appeared.
In the meantime, the net financial account outflow edged up from
US$10.49 billion to US$10.64 billion
between June and July. However, net
outflow from the securities investment
account jumped from US$6.5 billion to
US$7.15 billion during the period with
more foreign investors leaving the Kore-
Smartphones being shipped out on an Asiana
Cargo aircraft.
ranked fourth behind those of China, the
United States, and Germany, but Korea
overtook Germany this year,” the ministry said, adding, “At the same time,
Korea recorded the second-highest rate
of increase in exports among the top five,
second only to China.”
an stock market than vice versa. The net
outflow reached the highest level since
Feb. 2014, when the total had been
US$7.39 billion.
Korea’s total current account surplus
for the first seven months of this year
added up to US$62.43 billion. During
the period, the total exports declined 10.6
percent year-on-year to US$327.12 billion, and imports dropped 18.7 percent to
US$256.15 billion. According to the central bank’s report released in April, Korea
is estimated to record a current account
surplus of US$98 billion this year, much
more than the record high of US$89.22
billion posted last year.
33
MONEY
Fintech Frenzy
4 Consortia Apply for Internet Banking
Licenseswith FintechServices Emerging
as Mainstream of Banking
by Michael Herh
A
s fintech and Internet banks are
having their time in the sun,
financial IT services, which have been
classified as a special area in the past, are
now emerging as the mainstream business of banks.
According to financial industry sources on Sept. 9, KB Kookmin
Bank and Woori Bank are competing
over offering banking services without
ActiveX. Woori Bank launched a mobileonly bank service called “WiBee Bank”
on May 26 this year. Industrial Bank of
Korea (IBK) has also launched “i-ONE
Bank” on June 18. It offers mobile
platforms where customers can access
around 200 financial services around
the clock, including deposits, installment savings, funds and loans, through a
smartphone application.
Moreover, there is competition
between banks to create a fintech ecosystem. NH Nonghyup Bank announced that
it was building an NH Fintech Open Platform at the end of March in order to support fintech firms, and has been striving
for the project since then. On Aug. 26,
NH Nonghyup Bank and NH Nonghyup
Mutual Finance signed MOUs with 20
fintech companies. Previously, Shinhan
Financial Group announced an official
launch of Shinhan Future’s Lab on May
26, and has been putting group-level
efforts into the cooperation program with
fintech firms.
Under the circumstances, it is being
forecast that preliminary approval will be
given to one or two Internet bank consortia this year, although Lim Jong-ryong,
the chairman of the Financial Supervisory
Commission, said that he would flexibly
34
think about it on Sept. 13. Four consortia have expressed their desires to take
part in preliminary approval of Internet
banks. One of them has not been concrete
about their official plan. It is expected
that it will be difficult for all applicants
to receive preliminary approval, since the
system is not a registration system.
Financial regulators will give preliminary approval to one or two consortia
this year. This is because Internet banks
need stronger safety due to the characteristics of the financial business. More
consortia are expected to receive approval after a revision of the Banking Act.
“When the Banking Act is revised,
the scope of partner selection will
expand with the participation of more
businesses such as IT companies,” a
financial expert said. “Then applying
for approval next year will bring more
advantages to consortia.”
Four Consortia
First of all, the Kakao Bank Consortium is expected to publicize its strong
domestic platform as its biggest weapon.
Kakao says that it is able to offer optimized services such as mobile crowd
funding or P2P loans based largely on
customers that Kakao Talk has secured.
Kakao Talk is enjoying an 80 percent
share in the mobile messenger market.
Of late, Kakao has been expanding its
functions to apartment management
expenses, utility bills, and water bills
through its mobile platform. In addition,
Kakao will be able to create huge synergies with Korea Investment Holdings
and KB Kookmin Bank. Korea Investment Holdings is a stock industry market
leader, and KB Kookmin Bank is a retail
banking specialist.
The KT Consortium led by KT will
MONEY
include Woori Bank and Kyobo Life. But
it is not clear whether or not Kyobo will
stay with them. Industry experts say that
the greatest strength of KT is the data
that it has on about 18 million subscribers of its wireless mobile service and 26
million members of BC Card, one of its
subsidiaries.
NH Investment & Securities, SK
Telecom, the Industrial Bank of Korea,
NHN Entertainment, Yellow Financial
Group, Welcome Savings Bank, and GS
Home Shopping are taking part in the
Interpark Consortium led by Interpark.
This group features a commerce-type
platform service that covers overall life
matters based on their experiences and
technological prowess in e-commerce.
The consortium can make the most of
synergies with SK Telecom, with a market share of 50 percent in the mobile
telecommunications market. It is likely
that this consortium will capitalize on the
promotion of finance for ordinary people such as small loans for SK Telecom
users. The Industrial Bank of Korea has
high expectations for collaboration with
Interpark, since the bank aims to create a
middle interest rate loan market for small
business owners. Interpark is developing business models for small business
owners.
The 500V Consortium is based on an
alliance between 500V, a venture start-up
and the Korean Federation of Small and
Medium Business (KBIZ). The consortium is developing services based on its
rich experiences in the fintech industry.
tions to the minimum capital possibility. Non-financial companies, including
ICT firms, insist that minimum capital
not be a barrier against companies that
want to found an Internet bank. “Banking and industry separation regulations
are precluding large companies from taking part in Internet bank consortia,” said
an industry watcher. “Under these circumstances, minimum capital should not
be used as a barrier.” Minimum capital
should be about 25 billion won as set in
a revision of the Banking Law brought
before the National Assembly in July, he
said. “In overseas countries, minimum
capital is not set as a barrier,” he added.
The U.S. has no regulations, and in
Japan, the minimum necessary capital
is about 25 billion won. But the financial industry calls for higher minimum
capital. They say that minimum capital
should be scaled up, since it is a buffer
for banks to safely play roles.
On the other hand, controversies are
brewing over banking and industry separation regulations. “We will strictly apply
the banking and industry separation principle to Internet banks,” said Lim Jongryong, chairman of the FSC during a
parliamentary inspection of the administration on Sept. 14. The current Banking Law allows industrial capital to own
only four percent equity in a bank. Some
experts argue that this policy is against
the purpose of establishing an Internet
bank.
Even if an IT company draws up an
innovative business plan that can offer
benefits to consumers and work in the
global financial market based on its
mobile platform and networks among
numerous customers, the current banking industry structure will not allow the
company to set up an Internet bank. A
recent report from the Korea Information
Strategy Development Institute (KISDI)
says that even if regulations are eased for
a non-financial company that intends to
establish an Internet bank, not all industrial capital can engage in the banking
business.
“Financial regulators can prevent
industrial capital from making a foray
into the Internet banking business by
strictly checking other approval conditions, as well as the corporate governance structure of the bank,” a KISDI
research fellow said. Even if a nonfinancial company is allowed to do the
Internet banking business, the government can promote the stability and development of the financial market through
post-approval control methods such as
enjoining various duties, he added.
Minimum Requirements
The FSC is also brooding over the
minimum necessary capital for an Internet bank. According to the FSC, the
requirements could be 100 billion won
(US$85 million), 50 billion won (US$42
million), or 25 billion won (US$21 million). According to current Korean Banking Law, 100 billion won is the minimum
requirement for a Seoul-based commercial bank, while 25 billion won is the
minimum requirement for a regional
bank.
Companies have had mixed reac-
35
MONEY
Hedge Heat
Competition Heating Up in Domestic
Hedge Fund Market
by Jung Suk-yee
T
he number of hedge fund firms
in Korea is expected to increase
from 21 to over 80 after the revision of
the Financial Investment Services and
Capital Markets Act in July, which
lowered the minimum equity capital
requirement applied to a private equity
fund from 6 billion won (US$5 million)
to 2 billion won (US$1.7 million), and
allowed the establishment of such firms
by registration instead of permission.
Even securities firms can handle private equity funds if they have an M&A
record, and NH Investment & Securities,
which is a combination of former NH
Nonghyup Securities and Woori Investment & Securities, is preparing to release
hedge funds.
According to industry sources, a total
of 49 asset management firms and investment advisory service providers, have
reported that they would handle such
funds since the revision of the act. The
companies include Samsung Securities,
Mirae Asset, KB, Korea Investment Management, and Daishin Asset Management.
In addition, four securities investors,
19 real estate investors, seven special
asset management firms and the like are
expected to fill out the application by
Oct. 24. A company that takes over KDB
Daewoo Securities is likely to follow suit
as well.
Hedge funds guarantee fund management fees and performance incentives
about 10 times that of bond and stock
funds. Under the circumstances, even a
number of newly-established firms in the
asset management industry are showing
interest in the business, with the twoyear business experience requirement
repealed in the act.
Treasury Stocks
Treasury Stock Purchases Becoming
Increasingly Frequent in Korea
by Jung Suk-yee
T
he amount of treasury stock purchases by companies listed on
the Korean stock exchange has already
exceeded last year ’s total, with the
means emerging as an effective method
of shareholder return and corporate governance structural enhancement, not to
mention stock price stabilization. The
trend is likely to continue for the time
being, as the government is putting an
increasing pressure for more dividend
payments, and a number of conglomerates are scheduled to be engaged in governance structural reorganization.
According to the Korea Exchange
and financial data provider FnGuide,
the amount reached 3.4375 trillion won
(US$2.8725 billion) as of Sept. 23,
while last year’s total was 3.3407 trillion won (US$2.7915 billion), and the
preceding year’s total was 1.5493 trillion
won (US$1.2948 billion). The number
36
of companies that reported on treasury
stock purchases was 168, one less than a
year ago.
On Sept. 23, Hyundai Mobis reported on a treasury stock purchase worth
212.2 billion won (US$177.3 million).
Experts point out that this is to prepare
for a conversion into a holding company
that is likely to occur in the near future.
“Although treasury stock purchases of
the past were mainly adopted by small
firms for the purpose of preventing a fall
in stock price, today’s trend is that larger
companies with higher aggregate market
value carry it out to protect their rights of
management during the course of governance structure reshaping,” IBK Investment & Securities explained.
The technique was utilized during
the merger between Cheil Industries and
Samsung C&T, too. The SK Group’s
ongoing treasury stock purchase worth
870 billion won (US$727 million) is said
to have to do with the rights of management as well. “Purchased treasury stocks
should be retired after the purchase, in
order for an increase in shareholder value
to be achieved as the purpose of the purchase,” said an industry insider, adding,
“However, share retirement is rarely
carried out these days, which means the
technique is for the rights of management rather than shareholder value as of
late.”
It is also said that the listed companies are opting for treasury stock purchases over dividend payments under
increasing pressure for the latter. The
number of such firms is likely to increase
once the Korean government’s plan for
levying taxes on internal reserves and
providing incentives for those paying
much in dividends is implemented within
the year.
MONEY
Monetary Harvest
Foreign Investors’ Won-denominated
Bond Holdings Decline for the 3rd Month
by Jung Suk-yee
T
he balance of won-denominated
bonds owned by foreign investors decreased by approximately 400 billion won (US$336.8 million) from a month
ago to 102.6 trillion won (US$86.3 billion)
in August. The downtrend continued for
the third consecutive month, although the
decrement was reduced by close to 2.2
trillion won (US$1.9 billion) compared to
July. Under the circumstances, the overall balance, which had reached 106 trillion
won (US$89 billion) at the end of May,
decreased 3.4 trillion won (US$2.9 billion)
in the following three months.
Some bond experts say that this is
because foreign investors are continuing
to reduce their assets in the Korean capital
market. “Investors are shunning emerging economies these days amid the Chinese financial shock and with an interest
rate hike by the Fed around the corner,”
said bond manager Park Hyuk-soo at the
Daishin Economic Research Institute, adding, “It seems that Korea is no exception in
this trend, and things are becoming worse
and worse, as even emerging economies
are recovering their investment in foreign
bonds in order to get more U.S. dollars.”
However, the others are predicting that
a sudden capital outflow similar to those
recently seen in Thailand, Malaysia, and
the like is rather unlikely. According to
them, foreign investors are currently holding cash only temporarily, while waiting
for reinvestment in view of global financial
volatility as of late, and Korea is showing
a lower ratio of short-term foreign debts
along with foreign exchange reserves of
as high as US$400 billion. “A drastic capital outflow is less likely, because Korea’s
macroeconomic conditions are pretty
favorable,” said Shin Hong-sup at Samsung Securities. Hana Financial Investment
director Shin Dong-joon agreed by saying
that Korean treasury bonds are still appealing, with the 10-year treasury bond yield
expected to go down to 2.10 percent in the
fourth quarter of this year.
Nevertheless, both agreed that future
conditions hinge on fund flow from this
month on. “We need to pay attention to
whether foreign investors will reinvest
the 4 trillion won [US$3.4 billion] reaching maturity this month,” the bond manager continued, adding, “Predictions will
be possible from late this month.” Korea
Investment & Securities Analyst Lee
Jeong-beom mentioned that the Chinese
economy and the Chinese government’s
plan should be seen because its drastic
downturn could lead to greater capital outflow pressure, with the Chinese government currently holding won-denominated
bonds worth a total of 16.7 trillion won
(US$14.1 billion).
Meanwhile, the 10-year U.S. treasury
bond yield closed at 2.286 percent a year
on Sept. 15. On the same day, the 10-year
Korean treasury bond yield was 2.252 percent. The reversal can be attributed to the
uncertainties related to an interest rate hike
by the Fed.
Such a reversal was also witnessed in
June this year, when the Bank of Korea
decided to continue to lower the benchmark rate and the Fed was said to be preparing its exit strategy. Under the circumstances, concerns are mounting over foreign investors selling won-denominated
bonds to trigger a massive capital outflow.
Nevertheless, experts point out that
foreign investors are unlikely to dispose of
their won-denominated bonds in quantity
for the time being, given that their investment in Korea revolves around short-term
bonds. In fact, the 30-year U.S. treasury
bond yield has remained over the 30-year
Korean treasury bond yield since March.
Specifically, the former and the latter
were 3.07 and 2.50 percent as of Sept. 15,
respectively.
“The reversal in bond yield that has
been shown since March has had no significant impact on the market,” said NH
Investment and Securities bond manager
Park Jong-yeon, adding, “Likewise, the
more recent reversal is likely to result in
no substantial capital outflow, with most
of the bonds they have in Korea are threeyear ones.”
37
MONEY
Market Entry
Korean Insurers
Can Join Lloyd’s
Market
by Michael Herh
A
road has been paved for Korean
insurers to join Lloyd’s market,
the world’s first insurance cooperative
in London. This is because the Financial Supervisory Commission (FSC)
has decided to abolish regulations such
as allowing Korean insurers to provide
security to their overseas affiliates.
Following Korean RE’s entry into the
Lloyd’s market in April, Samsung Fire
and Marine Insurance and Seoul Guarantee Insurance are expected to join the
market as members. On Sept. 24, the
FSC announced that it will improve the
system after reviewing suggestions from
financial companies.
The gist of the change is to permit
Korean insurers to provide collateral to
local banks in overseas countries when
its affiliates open a letter of credit at the
banks. The FSC has decided to revise the
related laws. The Lloyd’s market membership requires insurers to provide collateral to their overseas affiliates.
The Lloyd’s market is the world’s
first insurance cooperative with a
327-year-old tradition that plays the roles
of the center of the global insurance market. Member firms under the Lloyd’s
market number 94, and ranked 6th in the
world in terms of insurance premiums in
2013. If an insurer becomes a member of
the Lloyd’s market, the insurer can make
good use of the Lloyd’s market’s credit
and enhance its reputation, expanding
their business areas.
The change in the system will promote Korean insurers’ entries into the
Open Wider to India
AEO MRA Expected to Widen Road to
India for Korean Exporters
by Jung Suk-yee
K
orean exporters will secure an
important foothold to the India
market after Korea will sign an Authorized Economic Operator Mutual Recognition Agreement (AEO MRA) with
India this Oct. Although India is the
eighth largest export market for corporate Korea, non-tariff export barriers
have been very high, posing difficulties
for Korean companies.
In early Oct. the Korean and Indian
Customs Service finally agreed to ink the
agreement in a meeting of high-ranking
customs officials of the ASEM. which
will be held in New Delhi, India.
An AEO stands for an Authorized
Economic Operator validated and authorized by the Korean Customs Service. An
AEO can enjoy various customs service
38
such as faster and fewer export cargo
checks. The system is in place in 65
countries around the world. If the Korean and Indian Customs Service sign the
agreement, an AEO can enjoy the same
benefits in both countries, even it was
only authorized in one of the two.
The Korean Customs Service
explained to its Indian counterparts that
the abolition of non-tariff barriers will
fuel Korea’s investment in India. In fact,
India was not interested in signing the
deal first, now that Korean AEO companies number 202, but Indian AEO companies number about 20 and India does
not export many products to Korea.
India lags behind in global customs
standards, as it places 142nd in customs
environment standings according to the
market. At the moment, Korean RE is the
only Korean member of the cooperative.
Korean RE became a member after paying about 16 billion won (US$13.4 million) in sales funds.
Seoul Guarantee Insurance is also
considering joining the Lloyd’s market.
Samsung Fire and Marine Insurance
joined the market in 1996, but left the
market on the heels of the 2008 financial
meltdown. But it is known that Samsung
Fire and Marine Insurance is pushing
forward with reentering the market.
Escalators inside the Lloyd's of London building.
(Photo by Phogel via Wikimedia Commons)
World Bank. The country has high nontariff barriers, which percentage in customs troubles for exporters jumped to 7.4
percent in 2014 from 4.8 percent in 2013.
The AEO MRA is expected to find
Korean exporters better access to the
Indian market. “This agreement will
save Korean exporters US$22 million in
customs clearance costs, as it decreases import inspection ratios for Korean
exports to India and helps more Korean
exporters make a foray into the Indian
market,” a representative of the Korean
Customs Service said.
MONEY
Can't Restructure Everyone
Troubled Companies Put
KDB under Great Strain
by Michael Herh
A
t the end of 2013, the Korea
Development Bank (KDB)
began to restructure the slumping Dongbu
Group. At that time, many pundits expected a fast recovery. They analyzed that
Dongbu Steel could improve its financial conditions by selling off many valuable assets such as its Incheon factory.
But things went wrong with the KDB's
attempt to sell off both Dongbu Steel’s
Incheon factory and Dongbu Power Generation Dangjin to POSCO as a package.
But the KDB failed to reach a
deal with POSCO, and lost the golden
moment selling off the assets, deteriorating Dongbu’s financial trouble. At the
moment, even though Dongbu’s major
affiliates were sold off or are waiting to
be, Dongbu’s financial woes are still lingering. Financial specialists give failing
marks to the results of the restructuring
of Dongbu, saying that KDB dropped
the ball. What'w worse, the continuing
economic slump is brining increasingly
more and more faltering enterprises to
the KDB's door.
That makes the KDB too busy supporting troubled companies to demonstrate enterprise management capabilities
that match its status as a leading financial institution for government financial
policies. Many point out that the KDB’s
corporate restructuring systems are not
working properly. Banks’ total amount
of credit extended to companies under
workout programs stood at 4.8856 trillion won (US$4.1610 billion), according
to material that the Financial Supervisory Commission submitted to Rep. Jung
Woo-taek on Sept. 15.
Among that credit, the KDB is holding 925.5 billion won (US$788.3 million),
or 18.9 percent. This is because the government-run KDB accepted the burden to
give additional support to companies that
went under, while private banks are withdrawing from corporate restructuring due
to a drop in profitability. Including credits on companies under court receivership
and voluntary agreements further strains
the KDB’s extended credit. On Aug. 20,
companies under the KDB’s restructuring program totaled 99 -- 43 companies
including Kumho Industrial under its
workout program, 43 companies including Keangnam Enterprises, and 13 companies under voluntary agreements.
The KDB had a total of 10.0541 trillion won (US$8.56217 billion). This
means that the KDB had 34.6 percent of
the 29.0355 trillion won (US$24.7292
billion), which is the financial industry’s
total credit to companies. Some experts
are becoming more concerned about the
burden of corporate restructuring becoming too heavy for the KDB and undermining its soundness.
The KDB’s non-performing credits
stood at 3 trillion won (US$2.6 billion)
as of the end of June. They accounted for
2.44 percent of all credits. The percentage is higher than 1.5 percent, the average of nationwide commercial banks.
The more corporate restructuring
fails, the greater burden the KDB has
to accept, Rep. Jung said. “It is time to
ponder making a change in the restricting
system. Financial regulators need to take
stronger action about financial stability,”
Jung added.
Financial regulators are seeking to
change restructuring systems via the
establishment of corporate restructuring companies, under the judgment that
it needs changing for the KDB to take
nearly full charge of corporate restructuring. “The KDB has played a key role in
corporate restructuring such as handling
underperforming companies,” a financial expert said. “But this process gives
the KDB a huge burden.” It is necessary
to transfer some of the roles of the KDB
to the private sector, such as corporate
restructuring companies.
KDB Bank Seoul
39
Special RepoRt
2015 DJSI Results
Increasing Value of DJSI Membership
among Korean Companies
by Marie Kim
T
he Korea Productivity Center (KPC) announced the 2015
results of the annual Dow Jones Sustainability Indices (DJSI) On Sept. 10.
Jointly managed by global financial
information provider Dow Jones Indices
and Swiss-based sustainability evaluation
agency SAM, DJSI assesses the quality of sustainability management based
on economic, environmental, and social
performances. The DJSI’s comprehensive questionnaire integrates economic,
governance, social, and environmental
issues with economic and financial ones.
The assessment is also industry-specific
and identifies the industry's best-in-class
company, or industry leader, from 59 different industries on a global basis.
The high value of a membership on
the DJSI and the competitive atmosphere
of sustainability ratings and rankings signify that the index is in fact value generating. These days, stakeholders and consumers are demanding that firms demonstrate their commitment to sustainability
and corporate ethics.
“The index suggests to businesses
what they need and what should be done
for sustainable growth and development.
It is also the standard of corporate social
responsibility for local companies wishing to compete at the same level as global players,” said Hong Soon-Jik, chairman and CEO of the Korea Productivity
Center. Consumers who want products
and services from sustainable businesses
and investors wishing to invest in such
firms can refer to the index.
Although in the 80s and 90s South
Korea emerged as a leading global economic center, firms in the country have
seldom stood out as sustainability leaders. The rapid growth in the economy has
brought about allegations of poor labor
40
standards, un-checked pollution of the
environment, human rights violations,
and aggressive breaches of copyright. As
seen in this year’s DJSI review, several
South Korea-headquartered companies
came out as the highest scoring firm in
respective industries worldwide.
In fact, when asked about the demand
to deliver sustainable products and services, the majority of Korean companies
said that they felt pressure from investors and customers to deliver sustainable
products and demonstrate that their companies fulfill corporate and social responsibilities. As such, a good reputation
accompanied by membership on the DJSI
helps a company in a substantial way.
The DJSI family is comprised of
DJSI World, DJSI Asia Pacific, and DJSI
Korea. In DJSI World, the top 2,500
global companies are evaluated in terms
of sustainability. Among them, only 317
companies, or 12 percent, are included
in the 2015 DJSI World. Out of the 317
companies, 21 were Korean. Samsung
SDI successfully re-entered the index,
while Daelim was dropped this year.
DJSI Asia Pacific evaluates the top 600
companies in Asia, and DJSI Korea tests
200 companies.
For DJSI Asia Pacific, out of 608
companies, 145, or 23.8 percent, were
listed this year. Among 145 companies,
41 are Korean. BNK Finance Holdings,
CJ Cheil Jedang, and Hyundai Glovis
have succeeded in newly re-entering
the index, whereas Daelim, Kia, and
Hanwha Chemical Corp have been
dropped.
DJSI Korea is the world's first country-specific index. Out of 202 tested
Korean companies, 52 companies (25.7
percent) are listed. DJSI Korea has been
managed by the Korea Productivity Center (KPC) since 2009, along with S&P
Dow Jones Indices and RobecoSam.
Samsung SDI, CJ Cheil Jedang, LG
Hausys, GS E&C Corp., Korea Electronic Power Corporation, and Hyundai Glovis have all made successful entries into
DJSI Korea, whereas Nongshim, DaumKaKao, LG Corp, KCC, Korea Gas Corporation, Hyundai Marine, and Hyundai
Steel have been dropped from the list.
Companies that respond to the DJSI
questionnaire receive a company benchmarking scorecard that shows their sustainability performance compared to the
industry average and the industry's bestin-class company on a global basis. The
evaluation is detailed, with around 200
factors examined in around 30 categories. The categories include governance
structure, risk management, innovation,
gas emissions, climate change, human
resources, and social contributions. The
evaluation period is from April to August
every year.
Special RepoRt
Sustainable Management
KT Tops Dow Jones Sustainability
Index Again
by Marie Kim
K
T Corp. (CEO Hwang Changkyu) came out as the highestscoring firm worldwide in the telecommunication field at Dow Jones Sustainability
Index (DJSI) World. It was also the highest scoring Asian company in the overall
criteria, topping traditional sustainability
leaders such as Nestlé, Vodafone, E.ON,
and BMW. This year is the sixth year that
the company has been incorporated in
DJSI World.
As for the telecommunication service
field, the DJSI combines both wired and
wireless communications. In 2011, for the
first time as a Korean company, KT was
named an “Industry Leader” in the field of
telecommunication services and remained
in that position for three consecutive years
from 2011 to 2013. This year, KT again
returned to the world’s top position and
reconfirm the company’s longevity potential.
Currently, under the vision of “Giga
Topia,” KT plans to introduce new technological paradigms to wide-ranging
industries such as smart energy, integrated
security systems, next-generation media,
healthcare, and an intelligent traffic control
system where the company promotes not
only the convenience but also the safety
of users.
KT is also actively exercising and
incorporating into practices the concept of
so-called corporate citizenship. In March
this year, KT opened Gyeonggi Innovation Creative Center, a high-tech cluster
where KT works to realize the global standardization of indigenous technologies
and cooperates with startups in the form
of technology transfers, financial support,
and training. Also, through a project called
“GiGA Story,” KT is working to bridge
the gap between cities and remote or
mountainous areas in terms of education,
culture, and economic criteria. KT plans to
provide customized infrastructure and IT
solutions to the residents in remote areas.
Oh Young-ho, head of the Communication Department, said “Despite the high
standards and difficulty of being listed in
DJSI World as a telecommunication company, KT is recognized as a number one
company. The accomplishment sends out
a significant message.” He added, “KT
won’t stop here, but will continuously
work hard to best serve customers and the
interests of shareholders.”
Global Recognition
Hyundai E&C Named Industry
Leader in DJSI World
by Marie Kim
H
yundai E&C was rated number one in the construction and
engineering field of the 2015 Dow Jones
Sustainability Index (DJSI) World.
Hyundai E&C has not merely been
listed for the sixth year in a row since
2010 in the coveted “DJSI World” rating, but it has also been ranked the number one company, or “industry leader,”
for three consecutive years. A company
spokesperson said, “Such a phenomenon
is a rarity among construction companies
worldwide,” adding, “The DJSI names
the top performing company from each
of 25 industries “Industry Leader,” and
Hyundai E&C has been selected over
100-year-old German Hochitief or American Bechtel.”
Hyundai E&C has received worldwide recognition for its excellent performance not merely in economic and
financial sectors, but also social and
environmental aspects, and now can
stand shoulder to shoulder with global
companies for its entitlement for longterm investment.
Hyundai E&C has been striving to
meet the expectations of the DJSI’s sustainability criteria and incorporate them
into its practices. In 2014, Hyundai E&C
reduced waste emissions by 26.3 percent, posting 452,021 tons, down from
613,302. In the case of sewage emissions
for wastewater, the company reduced
the amount by 2.1 percent, recording
1,093,787 tons, down from 1,117,667
tons the previous year.
Hyundai E&C is also actively engaging in outreach programs. Since 2009,
Hyundai E&C has been locally involved
in six outreach programs, including one
that supplies free lunches to undernourished children. The company is also
extending the same kind of activities
abroad by engaging in 18 outreach programs in 13 countries including the Philippines, Columbia, and Kenya.
41
Special RepoRt
Consecutive Recognition
LG World Leader in Consumer
Durable & Apparel in DJSI
by Marie Kim
L
G was once again named an
industry leader in the Dow Jones
Sustainability Index (DJSI)’s Consumer
Durables and Apparel Industry Group, a
coveted position shared with other leading companies such as Volkswagen and
Unilever. Twenty-four top companies in
each industry are awarded the prestigious
title, like Volkswagen in the automotive
sector, Unilever in the food sector, and
Air France-KLM in the transport sector.
This is the second year in a row that
LG has led the Consumer Durables and
Apparel Industry category, among the
four consecutive years the company has
been included in DJSI World.
“LG is honored by this recognition
by such respected names in the business
world,” said Lee Choong-hak, executive
vice president at LG Electronics. “RobecoSAM’s annual corporate sustainability
assessment helps us to assess our performance as a responsible organization
against other very capable companies,
Proven Sustainability
SK Hynix Listed on DJSI World for Six
Consecutive Years
by Marie Kim
42
and it’s quite a feeling to know that we’re
exceeding all expectations. This feedback is very constructive and it’s great to
know that the hard work and effort of our
employees made a difference.”
In addition to DJSI World, LG Electronics is listed for the sixth consecutive
year on the “DJSI Asia-Pacific Index,”
and on the DJSI Korea Index for seven
consecutive years.
The component list for the DJSI will
be published on the Sustainability Indices website on Sept. 14.
S
K Hynix (CEO Park Sung–
wook) announced that it has been
listed on the Dow Jones Sustainability
Index World (DJSI) for six consecutive
years on Sept. 11
Beginning with SK Hynix being first
incorporated under the Asia Pacific category of DJSI World in 2010, the company was incorporated under the category of Korea in 2011, and has been continually listed in DJSI World ever since.
SK Hynix has been committed to social
responsibility through its commitment to
labeling company products with environmental certifications and voluntary staff
contributions to a “Happiness Sharing
Fund”. A company spokesperson commented that the company will continue
to carry out its social responsibility and
work to realize sustainable management.
He added that in this way, SK Hynix
believes that the company will continue
to satisfy the interest of both investors
and local society.
Special RepoRt
Money Matters
Shinhan One of Few Banks
Recognized by DJSI World
by Marie Kim
S
hinhan Financial Group, Korea’s
largest financial holding firm by
assets, has been listed on the 2015 Dow
Jones Sustainability Index World (DJSI
World). This is the third year in a row
for Shinhan to be recognized by DJSI
World, and the first time for a Korean
bank to be consecutively listed on DJSI
World.
In the banking sector, 27 companies
were listed on the index including Westpac, Standard Chartered PLC, Citigroup
Inc. BNP Paribas, and Barclays. Shinhan
is the only Korean banking group that
has been listed on the index for three
consecutive years. In Asia, only two
financial groups ― Shinhan and E. Sun
Financial Holding of Thailand ― are
Retail House
Lotte Shopping 7 Years in DJSI World
by Marie Kim
L
otte Shopping, the retail arm of
the Lotte Group, has been incorporated in the 2015 Dow Jones Sustainability Index (DJSI World) for seven
years in a row, S&P Dow Jones Indices
and RobecoSAM announced on Sept.
10.
The company was also chosen as an
industry leader for the sixth year. Lotte
Shopping is the only retailer chosen as
industry leader among domestic companies included in the DJSI World indices.
With Lotte Shopping’s seventh
inclusion in DJSI World, the company
enhances it’s image as a global corporation exercising ethical practices.
In addition, the fact that Lotte Shopping has been selected as an “indus-
try leader” in retailing for six years in
a row validates its status as a globally
recognized retailer. Industry leaders are
the companies that scored highest in
sustainability metrics out of each of 24
industries.
Lotte Shopping has incorporated
environmental values into its business
practices since the company declaration
to exercise environment-sensitive management practices in 2004. Since then,
the company implemented such a policy
by building rooftop ecological parks at
its department stores in Ilsan, Nowon,
and Centum City. Lotte Shopping has
addressed diverse social problems.
It launched a childbirth promotional
campaign to grapple with the low birth-
recognized by the index. Shinhan said in
a statement that the company had high
scores this year in codes of conduct,
corporate citizenship and philanthropy,
financial stability, and brand management based on stable corporate governance.
Shinhan launched its Social Responsibility Management Committee this
year for the first time as a Korean
financial group. The company also
has run programs to support the sustainability of its affiliates. As a result,
Shinhan received a grade of A+ by the
Korea Corporate Governance Service in
its 2015 ESG management evaluation
report. ESG is a short form of environment, social responsibility, and governance. Shinhan was the only firm given
the top grade among 828 companies
listed on the KOSPI and KOSDAQ. In
addition, Shinhan joined the Carbon
Disclosure Project (CDP) club, Korea's
Carbon Management Club in 2014, as
well as becoming one of 100 globally
sustainable companies at the World Economic Forum this year.
rate. In 2014, Lotte Shopping ran a bus
ride for patients in a marginalized community. Lotte Shopping also actively
promotes global CSR in accordance
with its status as a global retailer. Lotte
Shopping built Lotte schools in Vietnam
and the Lotte Dream Center in Ethiopia, as well. Lee Won-jun, CEO of Lotte
Shopping, said, “We will continue on
our way to becoming the world’s leading
retail company by pursuing environmental and social sustainability.”
43
Special RepoRt
Winning Streak
Samsung Securities Recognized by
DJSI World for 6 Years Straight
by Marie Kim
S
amsung Securities (CEO Yoon
Yong-Am) has made it onto the
2015 Dow Jones Sustainability Index
(DJSI). This is the sixth year for Samsung
Securities to be listed in the DJSI World,
and the first time for a Korean financial
institution to be continuously recognized
by DJSI World for this length of time.
Samsung Securities was first incorporated into DJSI World in 2010, and has
been listed every year since then. Samsung
Securities has also been continuously listed
on DJSI Korea since its inception in 2009.
The assessment is also industryspecific. Being listed on DJSI World is a
rarity among companies in the Diversified Financials sector; this year, only 12
worldwide financial institutions out of 317
selected companies in Diversified Financials are listed. These companies are Samsung Securities, Credit Suisse, Deutsche
Bank, and UBS.
When asked about tips for continuously being recognized for longevity
potential by the prestigious DJSI World,
a spokesperson for Samsung Securi-
ties said, “Despite high risks, the majority of financial institutions tend to pursue
short-term profits with a potential for high
returns. But Samsung Securities insists on
the opposite, engaging in a wide range of
activities that orient Samsung Securities
toward sustainable growth. Such activities enhance internal compliance, rigorous brand management, financial management, andriskmanagement. Samsung
Securities also pays great attention to
ways to sustain employee retention rate,
and save energy, and to contribute to the
welfare of society. To this end, under the
administration department, the company
set up a strategy-planning team specifically in charge of management of corporatesustainability performance.”
The spokesperson for Samsung Securities also noted, however, that there is no
direct link between being incorporated
into DJSI and sales. But the spokesperson
did admit that having the company name
on the DJSI clearly serves to raise brand
value. For instance, Samsung Securities
was selected as one of the Top 50 brands
in Korea, a ranking sponsored by Interbrand Korea. In addition, the spokesperson
noted that being listed on the DJSI helps
increase the company’s share value about
by about 1 percent.
Samsung Securities also notes that
complying with the expectations set by
the DJSI criteria and the process of data
collection by the DJSI serve to promote
a sense of unity within the company. The
spokesperson noted that as members of the
company understand the concept of “sustainability performance,” and how they
can contribute to enhancing the company’s
competitiveness in the area, the new values and efforts serve to bring employees
closer together.
Overall,Samsung Securities received
high scores across economic, social, and
environmental criteria set by the DJSI.
In particular, Samsung Securities earned
the highest scores on economic criterion including risk management, code of
conduct, brand management, and CRM.
Samsung Securities also earned satisfying scores in Social Responsibility criterion, doubling the average score for the
industry. However, as far as environmental
criterion is concerned, there proved to be
some room for improvement. A company
spokesperson said, “Mediocre scores in
environmental criteria are a commonality
among companies in the financial sector,
but Samsung will try to improve on it.”
Students who attend the “Youth Academy for Economics” hosted by Samsung Securities from Sept. 18 to 19 pose for a picture. Established in 2005, the Youth
Academy for Economics is Samsung Securities’ outreach program. So far, about 16 million students have participated.
44
IR & ManageMent
Supermoon
Free Economy
Lotte World Tower to Host
Supermoon Photo Contest
No Problem in Meeting Goal
of US$125 million in FDI
by Lee Song-hoon
by Marie Kim
E
xpecting to see a super moon on Chuseok, or Korean Thanksgiving Day, Lotte World Mall and Tower
plans to take photos of the night view in Seoul and Lotte World
Tower, along with professional photographers specializing in
night photography, and host a photo contest in a bid to share
pictures of an extra-large full moon.
Lee Jong-soo, a photographer for VENTI, said, “If you are
a Korean photographer specializing in night and landscape photography, you will always want to try taking pictures of a night
view of Seoul from the highest building in the nation. That’s
why I was so excited. I hope that Lotte World Tower will be
completed as soon as possible, so I can take photos of the landscape of Seoul in all seasons in a serial form to share with many
people.”
A supermoon is the coincidence of a full moon or a new
moon with the closest approach the Moon makes to the Earth
on its elliptical orbit, resulting in the largest apparent size of
the lunar disk as seen from Earth. On Chusoek this year, the
distance between the Moon and the Earth will be approximately
356,800 kilometers, which is 23,000 kilometers closer than the
average distance between the Moon and the Earth.
Lotte Corporation will hold “Lotte World Tower Super
Moon Photo Contest” on Lotte World Tower’s official Facebook
page at www.facebook.com/lotteworldtower for four days from
Sept. 26 to 29. You can enter the event by uploading a picture
of Lotte World Tower or the full moon with your wish. Winners will be selected
in drawings and will
receive tickets for
the aquarium. From
Sept. 14 to 18, Lotte
Corporation hosted
“Lotte World Tower
Chuseok Nightscape
Event” and offered
Lotte Rent-a-Car
vouchers to winners.
Together with
VENTI, the Lotte
Corporation will
shoot pictures of
the supermoon and
post them on its
A multi-shot image of Lotte World Mall and
Facebook page and
Tower with the moon before the Chuseok holidays
blog.
46
T
he Busan-Jinhae
Free Economic
Zone (FEZ, Commissioner
Huh Sung-gon) hosted a
briefing session on the status of foreign investment in
the Busan-Jinhae FEZ on
Sept. 7. Eighteen people,
The Busan-Jinhae Free Economic Zone
headquarters building.
including the commissioner, team leaders, and representatives of investors attended the event.
The event was held with the purpose of examining the investments accrued so far, identifying problems, and establishing alternative strategies to realize the ultimate goal of attracting US$125
million.
According to the insiders, as of the end of Aug., the BusanJinhae FEZ has received investments via 21 separate cases, which
together amounted to US$64.9 million but come short of the original goal by 48.1 percent. However, the situation turned out to be
more hopeful on the ground, as the Myeong-ji Area in Busan was
chosen as a preferred bidder for a multi-purpose area and succeeded in securing US$30 million for a business contract. The Mi-eum
area is also expected to receive US$10 million in investment for a
manufacturing sector.
In addition, the Nam-moon area and Ung-dong area of
Gyeongnam Province are in the process of negotiating with investors for investments in the high tech and logistics sector, and are
expected to receive investments that exceed US$125 million, the
goal amount of the Busan-Jinhae FEZ.
Huh Sung-gon, the commissioner, said, “Despite shocks in
the financial sector originating in China and spreading around the
world beyond Asia and Europe, the Busan-Jinhae FEZ will overcome the challenge by targeting and focusing on key investment
target sectors in relation to the logistics, shipbuilding, automobiles,
and machinery industry clusters.” He stressed that the BusanJinhae FEZ should try hard to achieve the goal early this year.
Huh, the commissioner, is currently working to eliminate
unnecessary regulatory restrictions for foreign investment. In
particular, he is in the process of talking to government officials
regarding 4 regulatory issues, including the restrictions relating to
individual foreign investment.
Meanwhile, the Busan-Jinhae FEZ will host a briefing on
investment targeting potentially-interested enterprises and investors, including the European Chamber of Commerce, at the Park
Hyatt Hotel in Busan on Sept. 18.
IR & ManageMent
Showing the New
Energy Forum
Busan City Hosts 2015
Busan Regional Industry
New Tech Expo
Korea Energy Agency to
Host Energy Korea Forum
2015 in November
by Lee Song-hoon
by Lee Song-hoon
T
he 2015 Busan Regional Industry New Tech Expo,
which showcases new technologies developed by small
and mid-size venture firms in the region at one place, was held
at Busan Exhibition & Convention Center (BEXCO) from Sept.
10 to 12.
Taking place for eighth time this year, the event was the largest new tech expo in the southeast of Korea, hosted by Busan
Metropolitan City (Mayor SuhByung-Soo), organized by Busan
Techno Park, and sponsored by the Ministry of Trade, Industry and Energy, the Korean Intellectual Property Office, Busan
Ulsan Small Medium Business Administration, and major media
organizations in the region.
The expo displayed excellent patent technologies and products of small and medium-sized venture companies. In order to
actively help them build up the market at home and abroad, it
hosted Busan International Business Conference as a concurrent event. Through the conference, 26 foreign buyers and 12
participating companies, including 4ENS Co., signed export contracts worth 17 billion won (US$14.39 million) with 10 forms
in six countries, including Russia’s Auto System Co., Ltd. Also,
it carried out a total of 191 consultation sessions and made purchase contracts worth 1.5 billion won (US$1.27 million) from 50
domestic buyers. Accordingly, the expo positioned itself as the
representative forum in the region for exporting new technology.
An official from Busan City said, “As the 2015 Busan
Regional Industry New Tech Expo, which was held for the
eighth time this year, provides one-stop customized services for
companies, many small and mid-size venture firms take part in
the event. Accordingly, it will become priming water for bearing
substantial fruits of the creative economy, and greatly contribute
to creating jobs in the regional industry.”
W
ith the theme of “Opening the Future with New Energy Industry,” the Korea Energy Agency is to host a
large international forum at the Grand Ballroom in the KINTEX
convention center in Ilsan on Nov. 18 to seek a breakthrough in
the recent change of the energy paradigm.
At the forum, JB Straubel, who is part of the founding team,
along with Tesla Motors CEO Elon Musk and the Chief Technical Officer of Tesla Motors, an electric car company based in the
U.S., will deliver keynote addresses.
The forum will be divided into two tracks by themes. With
the theme of “Energy Future Business Model Construction
Plan,” Track One will share the successful cases of innovative business models in the new energy industry, and suggest
solutions to create business opportunities. Track Two, with
the theme of “Policy and Technology Development Plans for
Changing Energy Paradigm,” will foster a discussion about policy and technology development plans according to the changes
of the national energy policy paradigm, focusing on demand
administration rather than supply.
Moreover, the Korea Energy Show 2015, the nation’s largest energy convergence exhibition, and 100 seminars related to
the energy sector will take place at the same time from Nov. 17
to 20, providing an opportunity to confirm general knowledge
about energy.
Overview of Energy Korea 2015
The BEXCO convention center in Busan.
•Title
•Dates
•Venue
•Scale
•Host
•Organizer
Energy Korea 2015
Nov. 17-20, 2015 (4 days)
Kintex Exhibition Center (31,000m2)
about 500 companies with 1,500 booths
Ministry of Trade, Industry & Energy (MOTIE)
Korea Energy Management Corporation (KEMCO)
47
IR & ManageMent
Gambling Popularity
Investment Banking
GKL Seven Luck Casinos
Welcome More Than 1
Million Visitors This Year
KB Kookmin Bank to Enter
Global IB Market
by Jung Suk-yee
by Jung Min-hee
G
rand Korea Leisure (GKL) announced on Sept. 7 that
the three foreigner-only casinos under its Seven Luck
brand surpassed the 1 million mark in terms of attendance as of
Aug. 26, 2015.
The average daily number of visitors of Seven Luck casinos
reached nearly 4,900 from Jan. to the end of May 2015. However, the figure dropped sharply to 3,200 in June and 2,500 in July,
due to the rapid decrease in the number of foreigners who visit
Korea after the country confirmed cases of Middle East Respiratory Syndrome (MERS).
With the government declaring the official end to the MERS
outbreak at the end of July, the number of foreign travelers is
increasing again. Accordingly, the number of Seven Luck casinos guests has increased to 3,500 on an average a day in Aug.,
being on a very fast recovery track.
As of Aug. 26, the cumulative number of its visitors this
year stood at 1,002,315, up nearly 12 percent year-on-year,
while its cumulative sales were about the same. It was largely due to the fact that general customers substituted for the
decrease in VIP customers. A customer spent approximately
300,000 won (US$249) on average.
ImByung-soo, CEO of GKL, said, “Unlike other casinos,
Seven Luck has been trying to become a leisure place for not
only VIP customers but also general travelers as public casinos.
Despite numerous unfavorable factors this year, we could maintain sales performance and achieve the 1 million mark in terms
of attendance early. This would be a result of our steady efforts
to provide the best environment and services to customers.”
48
K
B Kookmin Bank is pushing into the global investment
banking (IB) market, which is considered an impregnable area for domestic commercial banks. This is a game changer
for the bank, which is reckoned to fall rather behind in global
competence. Also, the bank will rearrange its overseas network,
which is its foothold to tap into the global IB market. At the
time when most banks are trying to change their foreign branches into corporations, Kookmin Bank is planning to break into
the market through its “inverse thinking strategy,” to switch its
corporations in Hong Kong and the U.K. over to branches.
According to financial industry sources on Sept. 13, Kookmin Bank is currently discussing overseas expansion plans with
the Export-Import Bank of Korea and Korea Trade Insurance
Corporation, with the aim of making inroads into the global IB
market next year. The bank is planning to first enter the markets
of neighboring countries in which it is relatively easy to analyze
the market, such as Hong Kong, China, and Vietnam. It will then
gradually expand the markets to other countries. Currently, the
bank has sent out the employees of its IB division to its corporation in Hong Kong, and is conducting market research there.
Moreover, the bank is trying to cooperate with international
organizations. Kookmin Bank is seeking various plans for overseas market invasions, including signing MOUs with Asian
Development Bank (ADB) and International Finance Corporation (IFC) under the World Bank. The bank’s team in charge
of IB contacted Jin Liqun, the president-designate of the Asian
Infrastructure Investment Bank (AIIB), who visited Korea for
two days from Sept. 8.
An official from Kookmin Bank said, “We are discussing
measures to tap into the global IB market with policy financing
institutions, and appreciable progress has been made in the work.
Since the big market has been steadily opening in the overseas
IB market, including the launch of the AIIB, we have no choice
but to put efforts into the overseas market expansion.”
IR & ManageMent
Day of Gratitude
Consolidation
Nongshim Celebrates 50th
Anniversary
Samyang Corp. Merges
with Samyang Genex
by Marie Kim
by Marie Kim
N
ongshim (CEO Shin
Choon-ho) released
a business blueprint for Baeksansoo, its natural mineral
water, on the 50th anniversary
of the company’s foundation.
Nongshim has been a
leading company in the snack
ANongshim Spicy Mushroom Shin
and noodle market since its
Ramyun bowl.
foundation on Sept. 18, 1965.
In popular perception, the company is known for rolling out
sensational products like Shin Ramen and Sae-woo-kkang.
During the last half century, Noshim has joined the ranks of
global companies exporting products to about 100 foreign markets. Introducing innovative products, Nongshim has successfully shaped trends both in domestic and foreign markets.
On Sept. 17, Chairman Park Jun and President Shin Choonho gathered with 200 employees at the headquarters in Shindaebang-dong, Seoul to celebrate the 50th anniversary.
At the ceremony, Chairman Park Jun said, “The development history of Nongshim is representative of the whole country’s industrial development history. During that time, the company has led the culinary culture of the country.” Park continued, “In the 70s, at the crossroads of life and death, the company rolled out innovative products like Jajangmyeon, Beef
ramen, and Sae-woo-Kkang.” Then Park turned to his employees and said, “Based on the half-century experience and accumulated knowledge, let’s continue to grow with Backsansoo
until the company reaches its 100th anniversary.
The construction of the new plant to produce Baeksansoo is scheduled to be completed in Oct. Based on its experience of producing the top-selling bottled mineral water in the
past,Noshim plans to grow Baeksansoo into a premium global
brand for bottled water.
Recently, Nongshim has switched the company’s focus from
the past paradigm concept of “safety and convenience” to “
health and happiness.” Nongshim is determined to continue the
legendary success of Shin Ramen by continuously introducing
innovative and creative products like Jjawang.
Meanwhile, in celebrating the 50th anniversary, Nongshim
sends out gifts to employees at home and abroad. The gifts contain 50 flagship products of Nongshim including Shin Ramen,
Jjawang, Neoguri, and Sumi chips. A spokesperson for the company said that these gifts are intended to send the message of the
company’s gratitude to employees for their hard work.
S
amyang Corporation,
Samyang Holdings’ subsidiary, announced on Sept. 11 that the
company will merge with Samyang
Holdings’ other subsidiary, Samyang Genex. The merger ratio was
1:2.1791119, and date of the merger is scheduled to be Jan. 1, 2016.
A spokesperson for Samyang Group said, “The purpose of the
merger is to maximize business competitiveness by creating synergy effects.” He also said that with this merger, the company seeks to
strengthen financial stability and realize sustainable growth by creating
more investment opportunities.
Samyang Corporation has been running business units in food,
chemicals, industrial fiber, and ion exchange resin. For the food sector,
Samyang has an integrated food brand, Kyuwon, which specializes in
the production of sugar, flour, and food processing. Samyang Corporation also runs a logistics company for food ingredients named ServeQ.
As for the chemicals segment, Samyang focuses on engineering plastic
(EP), fibers for industrial materials, electronic material polycarbonate,
BPA, and high-purity terephthalic acid (TPA). Samyang is currently
pursuing the development of new materials.
In the meantime, Samyang Genex specializes in the production of
starch, starch sugar, alcohol, and cosmetics. Samyang Genex has been
involved in a wide range of segments including food, pharmaceuticals,
paper, textiles, and cosmetics. For the first time in the starch industry,
Samyang Genex has established a research institute and produced modified starch for paper. Also, it entered the cosmetics business through the
brand “About US” and integrated its health and beauty segments.
Samyang Corporation is now expected to reach the scale of economy in food after the merger with Samyang Genex. In addition, the
two companies can achieve sustainable growth by integrating research
capabilities in the areas of chemicals and food. For instance, last year,
Samyang Genex succeeded in producing isosorbide, a corn-made material to produce plastics.
The sales of Samyang Corporation last year were 1.3551 trillion
won (US$1.1637 billion), and the net income for the current term posted 30.5 billion won (US$26.2 million). Samyang Genex, on the other
hand, recorded 3.948 trillion won (US$3.392 billion) in turnover, and
23.3 billion won (US$20.0 million) in net profits for the term.
The Group’s attempt at restructuring the company has been an
on-going process. In 2013, Samyang Corporation incorporated Samyang EMS and Samyang Welfood to improve efficiency. Last year,
the corporation merged with Samyangmilmax, a flour manufacturer,
removed the PET bottle business segment, and launched a packaging
business.
49
ICT
Autonomous Progress
How Far has Korea’s
Drone Industry Flown?
T
he global drone, or Unmanned
Aerial Vehicle (UAV), market is
rapidly growing, and so is the industry.
Technological advancement in the area
of sensors and GPS is one of the driving
factors, in addition to the growing scope
for commercialization and the size of the
market.
In the past, drones are mainly used
for only military or security purposes,
but today, commercial drone use is soaring. Drones are used in situations where
manned flight is considered too risky
or difficult. They provid troops with a
24-hour “eye in the sky,” seven days a
week. Today, their uses range from crop
spraying to cargo transport, disaster relief,
search and rescue, damage assessment,
motion picture film-making, intelligencegathering, and surveillance.
As such, the growing technological
ecosystem of drone software and hardware
producers can now cater to a long list of
clients in agriculture, land management,
energy, construction, and other fields.
One of the most noticeable developments in the recent year is the fast-growing Chinese drone industry and market.
China currently dominates 70 percent of
the global drone market. The world’s larg-
50
est consumer drone maker is a Chinese
company named DJI (CEO Frank Wang)
that has a turnover for 2015 at over US$1
billion.
According to BI Intelligence, the size
of the world’s consumer drone market is
600 billion won (US$498 million) in 2015,
and is expected to rise to 2.6 trillion won
(US$2.2 billion) by 2023. In Korea, the
government expects the size of the domestic consumer drone market to reach 600
billion won by 2022, up from 60 billion
won (US$50 million) this year. Accordingly, the Korean government listed drones
as one of the 19 industries to focus on
under the current administration as a new
engine of growth. Also, it claimed that the
government would work to make Korea
break into the top 3 countries in the drone
industry. To that end, the government
specified that by 2019, it government will
invest 25 billion won (US$21 million). It
also announced that the government would
work to create 5,000 jobs and 100 companies in the industry. Nevertheless, the commitment proves to be somewhat limited
when t comes to relaxing regulations.
According to the Korea Aerospace
Research Institute (KARI), as far as technology is concerned, Korea belongs to
by Marie Kim
the top tier. Recently, KARI successfully
developed a tiltrotor drone (TR-60), which
is able to take off and land vertically like
a helicopter, while flying like an airplane.
Able to stay in the air for up to six hours,
the TR-60 can reach speeds of up to 500
kilometers an hour, making it the fastest
of its kind in the world. KARI also mentioned that Korea has possessed most of
the core technologies related to drones.
The main concerns are the relatively small
size of the domestic market and regulations.
In Korea, due to security reasons, the
commercial use of drones is limited to
agricultural use and filming. According
to Korea’s transportation ministry, drones
are not allowed to fly at night, between
sunset and dawn. The ban also applies to
certain places such as close to airfields or
crowded venues. To fly drones in restricted zones, like the DMZ, a company needs
formal approval from the government.
And a drone must remain in the pilot’s
sight at all times.
Some have pointed out that relaxing
regulations isn’t going to be a panacea. As
seen in the U.S. case, many governments
still retain regulation to uphold civilian
safety and protect privacy.
ICT
5G Network
Killer App Search
LG U+ Joins Hands with Ericsson to
Develop SDN as Key 5G Tech
by Cho Jin-young
L
G U+ announced on Sept. 1 that
it has jointly developed a software-defined networking (SDN) technology, which can adjust a network for any
new services via software, in partnership
with Ericsson.
SND is a technology that decouples
the controller, which is run by software,
from network equipment. Also, it is considered one of the key technologies in the
era of 5G, which enables service interworking, systematic centralized management, and cloud network automation.
Until now, SDN technology development has focused on separating the
equipment from the controller. Based
on this, however, the development from
now on will focus on automating and
systematizing network operations management by connecting with various
Employees of LG U+ and Ericsson test SDN technology at the LG U+ office building in Sangam on
Sept. 1.
apps, said the two companies.
LG U+ will connect the technology
with Network Function Virtualization
(NFV), execute test operations within
this year, and apply it to the 5G-based
network in the future.
Communication Mobility
Samsung Electronics Leads Standardization
of 5G Mobile Communication Systems
by Cho Jin-young
W
hile many countries in the world
such as China, Japan, and the
U.S. are in tough competition to commercialize 5G mobile communication technology and dominate market in advance, Samsung Electronics has suggested the technology to a private organization that sets
up global telecommunications technology
standards.
Samsung Electronics announced that it
has proposed a vision of 5G mobile communication systems and next-generation
mobile communication technology at the
3GPP RAN 5G Workshop held in Phoenix,
the U.S., for two days from Sept. 17 (local
time). 3GPP is a private organization that
actually decides technical standards and
includes the world’s major mobile communication service providers and equipment
firms.
The 3GPP RAN 5G workshop was
meaningful in that 3GPP, which is in
charge of settling global mobile communication technological standards, started a
discussion about 5G network standardiza-
tion for the first time.
The workshop was attended by 500
officials in the mobile communications
technology industry and included contributions from 60 mobile carriers.
Samsung Electronics took the lead in
drawing up a joint contribution through
strategic cooperation with major companies of 3GPP, and proposed to the workshop. The joint contribution was written
by 23 major mobile communicationrelated groups, including global producers such as Samsung Electronics, Ericsson,
Nokia, Qualcomm, KT, SK Telecom, NTT
DoCoMo, and research institutes such as
The Electronics and Telecommunications
Research Institute of Korea.
The joint contribution proposes a
phased standardization schedule to complete the first standard of the 5G network,
including technologies of higher frequency
bands above 6 GHz, by Sept. 2018, and its
second standard by Dec. 2019.
The phased standardization formed a
consensus from many participating firms,
Samsung Electronics’ research engineers demonstrate a high-speed 5G mobile communication
technology in a car going more than 100kph in
Oct. last year. engineers
since it can effectively proceed with the
standardization of the 5G mobile communication technologies which include various service options.
Also, the participating companies set
a goal to comprehensively satisfy not only
the maximum transfer rates and improve
frequency efficiency, which have been
important in existing 3G and 4G network
systems, but also improve energy efficiency, increase the number of devices possible
per unit area, and decrease transmission
delays for Internet of Things services in 5G
mobile communication technology.
Meanwhile, Samsung Electronics has
initiatively started 5G technology research
and development from 2011 and succeeded
in the world’s first demonstration of gigabit-level (1.2 Gbps) seamless data transmissions using the microwave frequency
in 2013.
51
ICT
Entertainment
Evolving Content
Entertainment Industry Meets with ICT,
Reborn as Culture Platform
by Cho Jin-young
T
he entertainment industry is
evolving into new content platforms by combining with ICT.
Korean entertainment giant iHQ
announced that it will develop a content platform in earnest by acquiring SK
Communications. The nation’s top portal
operator Naver is also leading competition for entertainment platforms through
its new streaming mobile app named
“V.”
The winner of a competition for content platforms, which are a combination
of the entertainment industry and platforms, is expected to be in an advantageous position to lead the Internet and
52
mobile video market. Therefore, competition to combine the culture industry
and ICT is likely to intensify.
According to industry sources on
Aug. 31, Naver launched a streaming mobile app V, on which K-pop idol
groups have signed on to appear live.
Afreeca TV will establish a joint venture
called Freec with entertainment company Mystic Entertainment to start a new
content business.
As SK Communications was purchased by iHQ, Nate, a portal site operated by SK Communications, is expected to be changed into another entertainment platform. Industry analysts are
saying that Nate, which lacks in video
content, will make various types of content using celebrities belonging to iHQ,
aiming to create synergy.
Pandora TV signed a Memorandum
of Understanding with entertainment
agency Humap Contents to forge a partnership and create content, and recently
released a new music video named Pinocchio from singer Insooni through joint
planning and production. The music
video has attracted millions of views on
the Humap Media channel inside Pandora TV, as it was only released on that
channel.
As an increasing number of new
platforms that expand communication
among users, artists, and producers
through partnerships between entertainment and ICT companies are being created, industry analysts believe that the
Internet industry is being developed into
a market that leads to the generation of
different kinds of profits and the flow of
culture, going beyond just existing portals.
Experts are saying that the quality
of content is important for content platforms, but an ICT partner’s proper role
as a platform provider gives an advantage over others in competition.
Video communication platform Air
Live developed its own media server in
2011, after three years of research and
development, showcasing a function to
do live broadcasting via a mobile device
for the first time. Air Live’s technology
was developed more than three years
earlier than that of live video streaming
apps Meerkat or Periscope. Due to the
recent live streaming service craze, the
Korean company is expected to attract
investment from other countries soon.
ICT
Laptop
A Google Chromebook.
Hardware News
Mid to Low-priced Laptops, Tablets
Getting Popular, Following Smartphones
by Cho Jin-young
W
ith mid to low-priced craze in
the smartphone market, the
sale of mid to low-end laptops and tablets is sharply rising as well. As the technology to make laptops and tablets has
been standardized, the performance gap
between products in the range of 200,000
to 300,000 won (US$169 to $254) and
expensive ones is not wide. Moreover,
cheaper models are easy to carry around,
and so they are popular in the market.
According to industry sources on
Sept. 9, increasingly-popular Chromebooks are leading the low-priced laptop
market. Based on Google’s ChromeOS,
Chromebooks store files on Google’s
cloud server. Although they can only
be used for certain purposes, Chromebooks are light and can operate apps fast.
Hence, they are rapidly increasing their
share in the low-priced laptop market.
In response, Microsoft also slashed
license fees of Windows 8.1 by up to 70
percent, and released low-end Windows
laptops. It shows that competition in the
mid to low-priced laptop market is heating up.
Lenovo Korea rolled out the S21e as
well, which is sold for only 200,000 won
(US$169) per unit. The low-end product
features Intel’s dual-core CPU, Windows
8.1, and a 11.6” HD display.
HP’s Stream 11 opened the era of mid
to low-priced laptops, which was priced
at US$199 (240,000 won). The company
included low-end models in the lineup of
Stream series late last year, in partnership
with Microsoft. The Stream 11 received a
lot of attention, since it weighs only 1.28
kg, and is much easier to carry around.
An industry source said, “Manufacturers are actively seeking to expand the
low-priced laptop market as part of their
strategy to increase brand awareness or
their share in the operating system market
in the long term, rather than making profits right now.”
The low-end tablet market is also
growing. Samsung Electronics launched
the Galaxy Tab A.E. in the range of
200,000 to 300,000 won (US$169 to
$254) in the first quarter of this year. The
low-end, mid-range model was introduced to the U.S., Korea, and India in
April, after Russia and the Netherlands in
March of this year. The Galaxy Tab A.E.
has been popular thanks to its affordable
price.
With low-priced tablets taking root
in the market, US$50 tablets have also
emerged. Amazon is planning to sell
US$50 tablets late this year. The online
retailer has reportedly decided to sell
low-end tablets to target customers who
want to do simple tasks like streaming
video processing or online shopping.
53
ICT
e-Commerce
Local Equivalence
‘Huge e-Commerce Trade Deficit Calls
for Cultivation of Korean eBay’
by Michael Herh
A
Korean Economic Research
Institute (KERI) report says that
since Korea suffers an e-commerce trade
deficit amounting to 1.3 trillion won
(US$1.1 billion), the country urgently needs a global player equivalent to
e-Bay. The figure is also on a steady rise
– it stood at 515.0 billion won (US$442.5
million) in 2011, 770.5 billion won
(US$662.0 million) in 2012, 1.1244 trillion won (US$996.07 million) in 2013,
and 1.3342 trillion won (US$1.1463 billion) in Oct. 2014.
In addition, eBay runs two major
Internet sellers in Korea – Gmarket and
Auction. The two companies enjoy a
combined market share of 65 percent in
Korea. U.S.-based Amazon and Chinabased Alibaba are also planning to make
full scale forays into the Korean e-commerce market. Moreover, global search
company Google and global SNS Facebook are already becoming more popular in the country. China’s three Internet
business leaders – Baidu, Alibaba, and
Tencent – are expanding its business
scopes into Online to Offline (O2O) and
fintech services, such as taxi reservations and food deliveries, in addition to
its major business items such as search,
e-commerce, and messengers.
Public opinion is preventing Korean
Internet portals from entering the e-commerce market, the report explains. Of
late, the government has been overhauling systems and making improvements
to regulations for the purpose of promoting e-commerce exports and the fintech
industry. But controversies are continuing over the possibility that Internet
portals will chip away at the market for
small businesses and become monopolistic or oligopolistic players.
54
The report brings up the Naver case.
Naver is the leading Internet portal company in Korea. Naver has been under
fire for maintaining its monopoly in the
search market by offering special services. The research institute claims that
Korea is in a situation where it cannot
nurture a rival horse in the global e-commerce market due to negative public
opinion. “Innovation happens and global
competition is on in the e-commerce market,” said a research fellow of the institute. “Korean Internet business firms,
including Naver, should be allowed to
engage in various sales activities.”
Some, however, are negative about
the intention of the Korean Economic
Research Institute, which sided with
Internet portals such as Naver. This is
because the Federation of Korean Industries (FKI), which runs the Korean Economic Research Institute, attempted to
bring in mid-sized companies and service
firms as its members after announcing
that it would take off to be an economic
group trusted by the people. In particular, Naver and Daum, which rank first
and second in the Internet portal market,
refused to join the FKI, although the FKI
has made efforts to attract them.
But Naver explained that it was not
quite right for them to become a member of the FKI, which represents large
companies, as Naver joined the Korea
Medium Industries Association and is
concentrating on realizing mutually beneficial growth with small and mediumsized companies. Naver is also maintaining a negative opinion on joining the FKI
and take the stance of the interests of big
companies, since Naver has to work for
the development of an Internet ecosystem and mutually-beneficial growth with
other companies.
ICT
Mobile
LOW GROWTH TRAP
Infighting
Naver, Daum Kakao
Waging Mobile War
by Cho Jin-young
N
aver and DaumKakao, which
have been leading the Korean
Internet industry, are waging an all-out
mobile war with each other. The war started when DaumKakao decided to focus on
mobile-oriented Kakao, de-emphasizing
the name of Internet-based Daum.
Moreover, as the number of mobile
searches, which is directly connected
with profits from mobile ads, has overtaken that of online searches, competition
between the two companies to lead the
mobile market is likely to intensify.
According to industry sources on
Sept. 2, Naver and DaumKakao are
going head to head with each other in the
fields of not only mobile messenger apps,
mobile SNS services, but also financial technology (fintech) and Online to
Offline (O2O) services, including simple
payment services.
The nation’s biggest online search
engine, Naver, is dominating the mobile
search area, but it is unable to assail
KakaoTalk’s stronghold in the mobile
messenger service market. KakaoTalk is
growing as a social platform in numerous realms like games, music, and
e-commerce, and has embedded itself
into everyday life, including mobile payments, money transfers, and taxi-hailing
services. In the mobile SNS service area,
DaumKakao’sKakaoStory and Naver’s
Band are competing with each other to
nab the top position. Both of them are
devoting themselves to making profits
from mobile SNS services, as seen by
Naver’s launch of Pholar, a photo-sharing social media app, and DaumKakao’s
release of Zap, a photo messaging app.
However, it won’t be easy for the top portal operator to overtake DaumKakao in
the SNS area, since KakaoTalk still has a
big networking influence in the field.
Observers say that fintech and O2O
services will become the highlight of the
mobile war between the two companies.
In particular, mobile payment services
NaverPay and KakaoPay are related to
the commercialization of O2O platform
Shop Window and KakaoTaxi, which are
ambitious works of each company.
Naver is cultivating NaverPay as a
payment method of Shop Window, which
offers shopping information about fashion, everyday items, and foods nationwide. The whole process, from shopping
searches to purchases and to payments
through NaverPay, is done via the mobile
app. In fact, more than 50 percent of
stores offered space at Shop Window are
using NaverPay.
DaumKakao is pursuing a strategy
that expands user experience by applying
its simple payment service to Kakao Taxi
and its limousine service. All local credit
cards are accepted on Kakao Pay. The
payment service is available at 210 affiliated stores nationwide, and it can be used
by registering credit card information and
a password for payment, regardless of
mobile carrier, handset, or mobile operating system. KakaoTaxi is also increasing
its brand power, as witnessed by the fact
that 1,500,000 taxi drivers nationwide are
using the service.
Naver and DaumKakao are also
fiercely competing in the fields of mobile
games and content like webtoons, in
which success is directly connected to
profits. In particular, they are likely to
compete to make profits from music and
online video services, where they are
forced to compete with global companies
as well.
Among them, the online video service market dominated by YouTube is
directly connected to profits from ads,
like the online search market, and thus
Naver and DaumKakao are forging strategic partnerships with terrestrial broadcasting companies.
In the online video area, Naver
reportedly made an exceptional offer to
three terrestrial broadcast service providers for their content. DaumKakao has
recently introduced Kakao TV as well,
providing a service that makes it possible
to communicate with friends and watch
videos on KakaoTalk or KakaoStory
through the Kakao TV player.
An official at an Internet service provider explained, “Naver is highly likely
to enter overseas markets for webtoons
or games, based on its mobile messaging
platform Line, but Line lags far behind
KakaoTalk in the nation.” The official
added, “The ‘mobile first’ offensive of
DaumKakao is attributable to the fact
that a favorable environment has been
already created for the company to surpass Naver.”
55
ICT
Mobile
G
lobal video platform YouTube
is actively seeking to target the
Korean mobile video ad market using its
“selection and focusing” ad strategies.
Naver is also scheduled to showcase an
open-source video platform called Play
League on Oct. 5. As a result, competition between global companies to make
profits in the local mobile video ad market is expected to intensify.
According to industry sources on
Sept. 7, the center of gravity for video
platforms is shifting from terrestrial TVs
and PCs to mobile devices. As datacentered cell phone plans, which do not
impose a big burden on people for using
wireless Internet, are taking root in the
market, the mobile video ad market is
rapidly growing as well.
Data recently compiled by the Ministry of Science, ICT and Future Planning shows that the use of mobile data
is increasing sharply each month. More
than half of the increase is concentrated
on video.
In line with this trend, not only
online video platform providers at home
and abroad, but also Naver and DaumKakao are competing for content to
secure profits. They are seeking to dominate the market by offering web dramas,
web movies, and highlights of popular
terrestrial broadcasting.
In the past, the main ads were
exposed before large-scale soccer games
or popular dramas started, but premium
ads that only last 5 to 15 seconds are
now posted in real time on online and
mobile platforms, which the majority of
consumers love to use.
YouTube is going to unveil Google
Preferred, a package ad product targeted
at local YouTube channels ranked within
the top 5 percent, on Oct. 1. It provides
support for advertisers so that they can
post ads through popular channels based
on YouTube’s algorithm that reflects
the popularity and participation of each
channel and that measures the number of
revisits and video plays.
The nation’s large portal operators
are actively responding to YouTube’s
offensive in order to keep the local
mobile video ad market, after losing the
56
Online Advertising
YouTube Targets Korean
Mobile Video Ad Market
by Cho Jin-young
PC one.
Naver will release a beta version of
Play League on Oct. 5. The video platform will be beta tested for 6 weeks, and
will be officially launched within the
year. Anyone who has a Naver ID will
be able to participate in it. Naver also
unveiled Internet-only entertainment
content New Journey to The West via
NaverTVCast. The variety show led by
start producer Na Young-suk virtually
exposes the name of specific products,
since the online program is less regulated than terrestrial broadcasting.
DaumKakao launched Kakao
TV last June, in which it is possible
to watch video content while chatting
with acquaintances on KakaoTalk. The
company believes that Kakao TV can
easily spread content, since it automatically recommends friends fit for video
content. Furthermore, observers say that
Kakao TV will create synergy in the
mobile video ad market with an increase
in the number of KakaoTalk subscribers.
The number of Kakao TV subscribers is
approaching 40 million, in addition to
the strength that KakaoTalk is one of the
mobile services in which people usually
stay for a long time.
This kind of move is likely to be further expanded using Multi-Channel Networks (MCNs) as a springboard. MCNs
help individuals create videos, forge
partnerships with advertisers, and manage profits, like entertainment agencies.
An official at a local mobile SNS service provider said, “Thanks to an unlimited data plan in the range of 50,000 to
60,000 won each month, watching videos via mobile devices does not impose
a big burden for users.” The source
added, “With the appearance of MCNs,
a keyword for this year, I think that ad
services using video platforms will be
expanded.”
ICT
Mobile
Samsung Storm
500,000 Subscribers to Samsung Pay
Creates Anticipation for US Debut
by Cho Jin-young
The number of subscribers to Samsung Pay has exceeded 500,000 after its
introduction to the nation on Aug. 20,
and both the ICT industry and Samsung
Electronics are apparently surprised.
When Hana SK Card was launched in
2010, the credit card company set a goal
to secure 500,000 members per year
while betting on mobile payments. However, Samsung Pay has already achieved
the number less than one month after its
release. If this trend continues, it seems
to be only a matter of time to surpass 1
million subscribers in 1 to 2 months.
Samsung Electronics is also accelerating efforts to roll out its mobile payment service to other countries based on
its huge popularity at home. The Korean tech giant is going to release Samsung Pay to China as early as the end
of this year, following the U.S. on Sept.
28. Afterwards, it is planning to target
Europe, including the U.K. and Spain.
To achieve its goal, Samsung has
A Samsung executive presents Samsung Pay at
the Mobile World Congress in Barcelona in March
2015.
already secured distribution networks by
forging partnerships with major financial companies overseas. In the U.S., the
tech firm is a partner company of Bank
of America, U.S. Bank, Visa, and MasterCard. In China, Samsung is finalizing
its partnership with China UnionPay, the
largest card issuer in China.
Alternative Front
Samsung Pay in Fighting Form against
Apple in US Mobile Market
by Cho Jin-young
S
amsung Pay is setting new
records every day in Korea. The
cumulative number of registration cards
has exceeded 500,000 a month after the
launch, and the reuse rate has reached 90
percent.
Based on the success in the domestic market, the service is tapping into
the U.S. market on Sept. 28. Samsung
Electronics has already secured its partners – the Bank of America, U.S. Bank,
Visa Card, and MasterCard. The company has started providing a trial service of Samsung Pay in the U.S. from
Aug. 25. According to industry sources,
the number of Samsung Pay trial service
subscribers in the U.S. already surpassed
500,000.
No concrete schedule has been outlined yet. However, Samsung Electronics plans to expand the service to China
and Europe as well. In order to do so, the
company is in the closing stage of partnership negotiations with China’s largest
credit card firm UnionPay.
Apple Pay has launched a service
with a new near field communication
(NFC)-powered mobile payment system
last year, but it is currently struggling
to increase affiliated stores and users.
At the same time, Google is expected to
release Android Pay in Oct. But with the
advantage of being able to be used with
existing magnetic card readers, a Samsung Pay official said, “We have already
secured more than 1 million stores,”
showing confidence in market expansion when unveiling the service early this
year.
JP Morgan also said in a report called
“It could be a game changer” that only
1 million to 2 million stores, or 10 to 15
percent, in the U.S. have NFC-powered
payment systems. So, there are limits for
Samsung Pay uses Near Field Communication to
transmit payment information.
both Apple Pay and Android Pay. Since
Samsung Pay can be used in the existing
magnetic payment system, Samsung Pay
has a decided advantage.
However, Samsung Pay has its own
shortcomings. Currently, the service
is only available on four devices – the
Galaxy S6, Galaxy S6 Edge, Galaxy S6
Edge Plus, and Galaxy Note 5. In a bid
to improve it, Samsung Electronics will
release Samsung Pay devices at low prices.
An official from the industry said,
“Once Samsung Pay is expanded with
low-end models, it will spread in all
directions in not only the domestic market but also the global markets. Moreover, the effect will maximize that customers stick to Samsung products.”
57
ICT
IoT
300 IoT Start-ups
Gov’t to Inject 420 Billion Won to Invigorate IoT
by Jung Suk-yee
T
he Korean government has
decided to invest 420 billion won (US$353.9 million) by 2019
in order to invigorate the smart device
industry using the Internet of Things
(IoT). It also revealed a plan to nurture
300 venture firms with specialized technology to lead the global IoT market,
including those who manufacture components for 10 major IoT smart devices.
The Ministry of Science, ICT and
Future Planning and the Ministry of
Trade, Industry, and Energy announced
the K-ICT strategy to nurture the smart
device industry at the 18th ministerial
meeting for economic issues at Government Complex Sejong on Sept. 22.
The government said that it intends
to dominate the global market with
investments in the belief that the IoT
industry will become the driving force to
innovate daily life and the entire industry, including the smart manufacturing
sector and smart city, going beyond
wearable devices.
To achieve the goal, Seoul selected 4
projects to develop technology for components and modules for 10 smart devices and convergence products, to provide
support for commercialization, to create
and cultivate markets, and to expand a
culture for creating devices. It also decided to inject 420 billion won of the government budget into this field by 2019.
The government’s plan is focusing
on selection and focus, which is aimed at
leading the market by growing 300 companies by 2020 with specialized technology in the IoT era.
The government also chose 10 fields
of components and modules for smart
devices, in which local small and midsized companies are more likely to dominate, and will provide full support to
selected companies. It is going to make
an investment in 10 areas – nanoIoT sen-
sors, wireless charging methods, modules for heads-up displays and wearable
displays, biosignal measurement devices,
optical image sensors, modules for biometric authentication using fingerprints
and irises, movement recognition sensors, and ultra-low-power communication modules. The government plans to
integrate core components and technology into finished goods made by promising companies in the fashion, safety, and
medical industries.
Internet of All Things
1/3rd of Major Asian Enterprises Brought in IoT
by Cho Jin-young
V
odafone Korea released this
year’s Vodafone M2M Barometer Report on Sept. 10.
According to it, one out of every
three enterprises in Asia is adopting the
Internet of Things (IoT) in the interest
of their business, while approximately
60 percent of global industry leaders are
enjoying an increase in profits by means
of IoT principles.
The report was prepared based on a
survey covering 650 enterprises located
in 16 countries arond the world. In the
survey, chief officers of the respondents
were asked about how they were making
58
use of the IoT and what the future prospects of the technology were. A total of
59 percent of the respondents answered
that they earned a substantial income
within a year from investment in IoT
equipment and facilities, while 83 percent of the surveyees said the IoT was
predicted to be a yardstick of corporate
competitiveness soon.
Korean, Chinese, and Japanese companies showed particularly high rates of
introduction. As of the end of the first
quarter of this year, 35 percent of Asian
companies were utilizing the IoT, while
the ratio was 31 percent in Europe and
17 percent in North America. By industry, the application of IoT increased 88
percent in retail, followed by healthcare
(47 percent), public development (32
percent), and automobile (14 percent).
ICT
IoT
Internet of Commodified Things
Samsung Targets B2B Market with
Launch of IoT Access Point
by Cho Jin-young
O
n Sept. 14, Samsung released
the IoT Access Point that supports ZigBee, a global wireless standard
to provide the foundation for the IoT, and
Bluetooth low energy.
Wi-Fi, Zigbee, and Bluetooth represent about 70 percent of total wireless communication technologies for
the IoT, and Samsung’s new IoT Access
Point supports all of them. Since it also
supports 802.11ac, the device provides
wireless LAN services to the tune of 1.3
Gbps speeds. It can be used to provide
different kinds of IoT services, including
the control of lighting and the management of energy in buildings.
The Korean tech giant also rolled
out a mesh-type outdoor access point
(model name: WEA463e), a successor to
WEA453e, which was introduced early
this year.
Samsung's new IoT Access Point.
Internet of Cooperative Things
KT Accelerating Construction of IoT Ecosystem
with 200 Companies
by Cho Jin-young
K
T is spurring the construction of
an ecosystem for the local Internet of Things (IoT) industry in the belief
that its first priority is to create a virtuous
circle by teaming up with large, medium,
and small companies altogether, going
beyond just launching IoT services.
KT held the first OllehGiGAIoT Alliance Makers Day at the GiGAIoT Business Cooperation Center on Sept. 17.
At the event, the nation’s second-largest
mobile carrier announced measures to
grow the IoT ecosystem, its cooperation
with the Center for Creative Economy
and Innovation, ways to use IoT platforms and penetrate overseas markets
including China, and shared information
with member companies.
The carrier set up the “GiGAIoT
Alliance” on Aug. 25, in which Samsung
Electronics, Nokia, China Mobile, and
Microsoft are key members. The num-
ber of members has increased to around
200 only three weeks after its establishment. The industry is paying a lot of
attention to the alliance to the extent that
it receives an average of 10 inquiries
per day about joining the organization,
according to KT.
Currently, KT is offering an opensource IoT software platform called
IoT Makers to members. Members are
aiming to develop IoT solutions in just
three days, as opposed to several months
in the past, using the platform. The carrier also proved the compatibility of IoT
Makers with other platforms during the
First oneM2M Interoperability event at
the headquarters of the European Telecommunications Standards Institute in
Sophia-Antipolis, France from Sept. 14
to 16.
KT’s entry into the Chinese market
will be made through China Mobile,
which has recently joined the alliance.
“Our company will invite 10 Korean IoT
companies to China every quarter and
help them display and publicize promising IoT products in the nation,” said
QiaoHui, the head of China Mobile’s IoT
business, through a video message at the
event.
59
Industry
Memory Market Mergers
Chinese, German Semiconductor anufacturers
Set for Memory Market Invasion
by Jung Min-hee
I
n the global memory semiconductor market, which is
being led by Korean firms such as Samsung Electronics
and SK Hynix, the recent actions of Chinese and German producers are alarming.
The U.S. still has the majority of the global semiconductor
market.
According to foreign media reports including the EE Times
on Sept. 21, new semiconductor firm FMC, which consists of
workers from German semiconductor company Qimonda that
filed for bankruptcy in 2008, will soon be officially established.
Currently, FMC is separating from the Technical University of
Dresden and is raising funds from numerous investors, including the government.
FMC is a company that was funded after being recognized
for ferroelectric semiconductor technology using hafnium
oxide (HfO2). The firm is trying to produce Ferroelectric RAM
(FRAM), which is called “dream memory,” by using hafnium,
a chemical element with atomic number 72. FRAM has all the
advantages of next-generation RAM. Many countries, including
Korea, have been studying FRAM, but the research has come to
a standstill, since there are many problems in terms of materials and the degree of integration. Samsung Electronics has also
been studying FRAM since the 1990s.
An official from semiconductor industry sources said, “After
Qimonda went bankrupt in 2008, many domestic industry
watchers believed that the German semiconductor industry was
over. However, Germany’s Infineon Technologies has recently
ranked first in the auto semiconductor sector again, surpassing
60
Japan’s Renesas Electronics Corporation, showing a clear sign
of a rally. It is joining hands with Intel and Grand Foundry to
push ahead with the next-generation memory business, based
on the Dresden region, an important spot in the semiconductor
industry.”
China is also aggressively seeking market advance as it
unveiled a large semiconductor industry roadmap, which is
led by the government, last year. The country decided to raise
US$118 billion (139.4 trillion won) last year, whereas it raised
US$600 million (705.9 billion won) in 2002. The figure is
equivalent to capital that is able to build Samsung Electronics’
semiconductor conductor plants in Giheung and Hwaseong, the
nation’s largest, and three to four more plants in terms of the
local monetary value.
According to McKinsey & Company, the Chinese government has already raised US$22 billion (25.88 trillion won),
or 20 percent, of a total target of US$118 billion (138.83 trillion won) in the last eight months. Also, it has already invested US$1.8 billion (2.12 trillion won), or 1 percent. The most
striking part is that the government is encouraging mergers and
acquisitions (M&A). McKinsey & Company said in the report
that R&D investment funds have increased by more than 40
times, compared with the past projects, and the country will
develop the industry by actively pushing for M&As.
Shares of Global Semiconductor Market in 2014
by Country
China
1.8
Others
11.8
Taiwan
5.3
Japan
11.6
2014
(unit: %)
U.S.
53.3
South Korea
353
16.2
Source: IHS
Industry
Semiconductors
Market Signals
Semiconductor Market Sends
Abnormal Signs
by Cho Jin-young
U
nfavorable factors like the negative growth of the Chinese smartphone market and the declining PC market
have led to growing oversupply in the global memory semiconductor market.
The semiconductor equipment market is forecast to grow
the most in Taiwan, and the least in Europe.
According to semiconductor e-commerce site DRAMeXchange on Sept. 9, the price of DRAM for PCs and for servers
in Aug. decreased by 7 to 8 percent month-on-month. The price
of NAND (MLC 64Gb) in late Aug. also fell by 6 to 7 percent
compared to early Aug. NAND flash has suffered the biggest
decrease in price over the last three months.
After 32 months of growth, the global NAND flash memory
market posted negative growth to reach US$3.77 billion in June,
and the market shank again to US$3.35 billion in July, according to World Semiconductor Trade Statistics.
In particular, the negative growth of the world’s largest smartphone market is fueling anxiety. Data compiled by
research firm Gartner in Aug. shows that the sales volume of
smartphones in China contracted by 4 percent in the second
quarter of this year, and so the Chinese smartphone market
recorded negative growth for the first time.
Some in the industry say that this trend will continue for
a long time due to semiconductor companies’ further investment in facilities. Samsung Electronics is building the world’s
largest semiconductor complex in Pyeongtaek, Gyeonggi Province, with a 1.56 billion won (US$1.31 million) investment.
SK Hynix is going to mass produce 20 nm DRAM in the M14
facility in Icheon, Gyeonggi Province, starting in 2016. In the
NAND flash field, Samsung, Toshiba, and Micron Technology
are expected to fiercely compete with each other to take the
initiative in a 10-nanometer-class production process and 3D
NAND, and they are likely to adopt an aggressive pricing strategy as a result.
To date, only Samsung has mass produced all NAND flash
memory in the form of 10-nm-class NAND or 3D V-NAND,
but the weight of NAND suppliers’ mass production of 10-nmclass NANDs will reach 80 percent in Q4 this year, according to
DRAMeXchange.
However, many in the industry think that it is difficult to talk
about demand and supply in semiconductors for the next two
to three years, owing to the characteristics of the ever-changing
semiconductor market. Park Yu-ak, an analyst at Meritz Investment Bank, said, “Samsung has yet to decide what kinds of
products will be made in its semiconductor complex in Pyeongtaek,” adding, “So, it is too early to link the enlargement of
facilities with oversupply in two or three years.”
Shares of Global Semiconductor Market in 2014
by Country
* ( ) : Growth Rate
(unit; US$ billion)
4.5(4%)
China
Europe
Japan
Korea
N. America
Taiwan
2.5(5%)
5.2(27%)
8.1(19%)
6.2(-23%)
9.5(2%)
<Source: SBM>
61
Industry
Semiconductors
2,500 Megabytes per Second
Samsung Showcases 3D V-NAND-based
SSDs in 48-layer Stack
by Cho Jin-young
W
ith competition for 3D V-NAND flash in the memory
semiconductor market heating up, Samsung Electronics unveiled the 3rd-gen 3D V-NAND-based solid state drive
(SSD), with a storage capacity 1.4 times as large as its 2nd-gen
SSD, thanks to its new 48-layer stack technology. The Korean
tech giant is planning to strengthen the productivity of existing
850 series SSDs using this technology.
Samsung revealed five new SSD lineups based on 3D
V-NAND (19 models per storage capacity) at this year’s Samsung SSD Global Summit at the Hotel Shilla, Seoul on Sept. 22.
During the event, the company announced that it would introduce the new SSD lineup to 50 countries, including Korea, the
U.S., China, and Germany, starting this month. It means that the
company will roll out this 3rd-gen SSD only one year after the
launch of the 2rd-gen SSD in a 32-layer stack.
What is notable is that with chip makers having difficulty
making 256 Gb planar NAND flash, Samsung has succeeded
in producing 256 Gb SSDs based on 3D V-NAND technology. A source in the semiconductor industry explained, “Samsung’s success is significant in that it became the first company
to overcome the difficulty of making planar NAND-based SSDs
by producing 3D V-NAND-based ones instead.”
Samsung, which makes up more than 40 percent of the global SSD market, is expected to strengthen its offensive. As the
62
productivity of the 850 EVO SSD, which is enjoying high sales,
has increased to the 40 percent level, the company is likely to
assert dominance over others in price competitiveness and profits. Samsung represents 43.8 percent of the global SSD market
as of the second quarter of this year.
The tech firm also debuted new products for the Non-Volatile Memory Express (NVMe) SSD market, in which Samsung
and its rivals like SK Hynix and Toshiba are fighting for global
dominance. The 950 Pro M.2 SSD works at a speed of 2,500
MB/s reading, more than twice as fast as existing SSDs. The
speed of the new NVMe SSD is a twenty-fold increase from
HDDs. Using Samsung’s own design technology that can maintain fast speed at a high temperature with less power consumption, the energy efficiency of the new SSD has increased by a
great deal. In fact, it can process 650 MB of data with only 1 W.
Samsung also showcased new products to target the corporate
SSD market, which is rapidly growing in tandem with increasing demand for data centers. As a new enterprise-centered card
storage product, the PM1725 SSD can operate at speeds so fast
that it is possible to transfer a 5GB full HD video in 3 seconds.
The next-gen NVMe SSD is durable enough that it is suitable for
enterprise storage, where high-capacity data is transmitted at high
speeds. It is also possible to write and delete 3,200 5 GB videos
every day for five years without damaging the drive.
Industry
Batteries
Draining Batteries
Korea Sees Diminished Status as World’s
#1 Battery Supplier and Manufacturer
by Jung Min-hee
K
orea’s status as the world’s largest battery supplier and
producer is being shaken. This is largely due to the
fact that Chinese producers are rapidly growing, thanks to the
world’s largest domestic market and the Chinese government’s
policy support. This is happening not only in the battery industry but also across all eco-friendly industries, including light
emitting diodes (LEDs) and solar energy.
According to the Financial Supervisory Service and industry
sources on Aug. 31, battery-related sales of Samsung SDI and
LG Chem, which maintain the number one and two positions in
the world’s lithium ion secondary battery market, dropped 5.6
percent and 0.7 percent, respectively, from the same period last
year. It is the first time for LG Chem to see a decrease in sales
since 2010.
Industry sources say that the main reasons for the downturn in sales are the growth of Chinese battery producers in the
mobile and IT device battery market, including smartphones, as
well as currency problems. According to a report published by
market researcher B3 early this year, the share of Chinese manufacturers such as ATL, Lishen, and Course Lite in the mobile
and IT devices battery market will increase to 22.1 percent this
year from 21.1 percent last year. By comparison, the figure of
domestic battery producers, including Samsung SDI and LG
Chem, is expected to increase 0.3 percent from last year.
An official from the industry said, “More and more fastgrowing Chinese smartphone manufacturers are recently using
locally-produced batteries. Since there is not much
technical gap in small batteries between Korea,
Japan, and China, the market share of Chinese battery
producers will continue to
increase.” In fact, three Chinese smartphone producers – Huawei, Xiaomi, and
Lenovo – have a 19 percent
share in the global smartphone market in the second
quarter this year, chasing
down Samsung Electronics,
the industry’s number one at
21.7 percent.
They are rapidly expanding the share even in the medium
and large batteries market, which still have technical gaps with
Korea. As of 2012, Chinese battery manufacturers rarely produced electric vehicle batteries. However, they held 3.8 percent
of the market in 2013, and quickly increased to 8.3 percent last
year.
This is because China’s electric car market is growing fast.
According to data from the China Association of Automotive
Manufacturers, China has produced 76,000 eco-friendly cars in
the first half of this year, up 250 percent from the same period.
Also, sales stood at 72,000 units, up 240 percent from last year.
In contrast, Korea sold only 3,000 electric vehicles as of the end
of last year. With the Chinese market growing rapidly, domestic
battery producers, including Samsung SDI, LG Chem, and SK
Innovation, are gaining their production bases in China in the
form of joint corporations.
Accordingly, some are raising concerns over technology
leaks to China. It is already easy to hear the rumors that several
technicians in the domestic battery industry are moving to Chinese firms. However, it is inevitable for domestic firms to secure
production bases in China, as the Chinese market is growing
rapidly.
Industry sources say that the government and private firms
need to create an ecosystem, as batteries are emerging as a key
competitiveness in the new market in the future, just like ecofriendliness and Internet of Things technology.
63
Industry
Automobiles
Competitive Disadvantage
Korea’s Auto Industry Gets
Stuck Due to High Wages
by Jung Min-hee
W
hen Labor Minister Lee Ki-kwon recently met reporters,
the high wages of Hyundai-Kia Motors came up in the
conversation.
In regard to the government’s labor market reform, he said,
“The automobile industry is the most important sector. The average
annual salary of Hyundai-Kia Motors is between 94 million won
(US$79,864) and 97 million won (US$82,413). Compared to the
gross national income per capita, the figure of Hyundai-Kia Motors
is 3.3 times higher, while the figure of Toyota is 1.7 times higher.”
According to data from the Korea Automobile Manufacturers
Association (KAMA) on Aug. 30, the average annual salary for five
domestic automakers – Hyundai Motor, Kia Motors, GM Korea,
Renault Samsung Motors, and Ssangyong Motor – reached 92.34
million won (US$78,454) as of last year.
The figure is slightly higher than the figure of Volkswagen in
Germany at 64,783 euros (US$73,192 or 90.62 million won), said
the association. Also, it is even higher than the figure of Toyota,
which is estimated based on its business reports, at 8.38 million yen
(US$69,400 or 83.51 million won). Considering the fact that Toyota
doesn’t include incentives in its business reports unlike domestic
car producers, however, the average yearly wage at Toyota will be
higher, said industry officials.
Sales per worker at five domestic automakers stand at 747.06
million won (US$634,715), which is lower than the figure of Toyota
with 160 million yen (US$1.33 million or 1.59 billion won), and the
figure of Volkswagen with 612,700 euros (US$692,226 or 857.12
million won).
The average ratio of wages to sales at Korea’s five automakers
is 12.4 percent as of last year, which is also higher than the figure
of Volkswagen with 10.6 percent and the figure of Toyota with 7.8
percent as of 2012.
It means that the domestic car producers pay similar or even
higher wages to employees, though they produce lower-value-added
products than foreign automakers.
Labor costs of the domestic firms, including wages and other
employee benefits, have gone up at an average annual growth rate of
6.6 percent from 2007 to 2014. In contrast, the figure of automakers
in Germany, Japan, and France have gone down by 0.4 percent, 6.6
percent, and 4.1 percent, respectively, while the figure in the U.S.
slightly grew by 0.1 percent.
The domestic auto industry shows high payroll costs but low
productivity, according to the data. Taking a look at the hours per
vehicle factor (HPV), a key indicator for personnel productivity
analysis of a production plant, the figure of domestic firms is 26.4
hours as of last year, while the figures of Toyota and GM are 24.1
hours and 23.4 hours, respectively.
64
HPV refers to hours taken to produce a vehicle, and it is an
indicator to evaluate the manufacturing competitiveness of a car
producer, such as production facilities, management efficiency, and
labor productivity. The lower the figure is, the higher the manufacturing competitiveness.
For Hyundai Motor, the HPV factor at its domestic plants as of
the end of June last year, including the one in Ulsan, was 26.8 hours,
which is higher than its overseas plants in the U.S. with 14.7 hours,
China with 17.7 hours, the Czech Republic with 15.3 hours, India
with 20.7 hours, and Turkey with 25 hours.
Regarding this, labor industry sources claim that it is hard to
compare productivity by making a simple comparison since every
plant has different rate of automation and car models to produce. For
instance, the HPV factor of Hyundai Motor’s old plant in Ulsan is
almost two times higher than that of its relatively new plant in Asan.
Nevertheless, industry experts say that it shows how low
the productivity at Korea’s auto industry is. Kim Kyung-yoo, a
researcher of the Korea Institute for Industrial Economics and Trade
(KIET), said, “It is true that Hyundai Motor’s overseas plants have
higher productivity since they were built after 2000, while its Ulsan
plant was established in the 1970s. Considering the fact, however,
the productivity of its domestic plants is low, as there is a big difference in the HPV factor between its domestic and overseas plants.”
Also, there is a general consensus in the industry that domestic
plants have low flexibility in production. It says that it is hard for
one production line to manufacture various models, struggling to
produce flexibly.
An official from Hyundai-Kia Motors said, “It is not easy to
deal with domestic plants, since we have to hold talks for a long
time, unlike overseas plants.” However, he said that the productivity is improving after the executives of the union have recently
changed, adding, “There is still bad practice from the past but there
is a changing trend as well.”
Comparison of Average Annual Salaries
ininKorean
Koreanand
andJapanese
JapaneseAutomobile
AutomobileIndustries
Industries
(unit: million won)
Korea
Japan
93.04
81.55
86.56
76.48
78.01
83.38
75.26
52.99
2008
2011
2012
2013
<Source: Korea Automobile Manufacturers Association (KAMA)>
Industry
Automobiles
Real Driving Emissions
Automakers Troubled with
Euro 6
by Jung Min-hee
D
er Spiegel recently measured the exhaust emissions of
vehicles based on the Real Driving Emissions (RDE)
and Euro 6 with the International Council on Clean Transportation (ICCT) and the AllgemeinerDeutscherAutomobil-Club e.V.
(ADAC), and found that 22 out of the 32 models of 10 manufacturers they examined failed to pass the test.
The RDE is scheduled to be introduced in 2017 to take the
place of the New European Driving Cycle (NEDC) that is currently in effect in Europe. The biggest difference between the
two is that the latter is based on indoor measurement whereas the
former is based on the measurement of emissions on a road by
the use of a vehicle equipped with a mobile measurement device.
At the test, Volvo exceeded the nitrogen oxide emission limit
by a factor of 15 times, followed by Renault (nine times) and
Hyundai Motor Company (seven times). BMW became the only
manufacturer that completely passed the test. In fact, a number
of automakers were found to be short of Euro 6 Standards as
early as last year, when the ICCT conducted the first test of that
kind and only one out of 15 models made it.
Under the circumstances, carmakers around the world are
increasingly opposed to the timing of the introduction of the
World Light Vehicle Test Procedure (WLTP). Recently, they
asked the European Commission to change the timing from Sept.
2017 to 2020 or later.
“Companies have discontinued the production of certain vehicle models and marked up the prices of cars by 2 million won to
5 million won [US$1,694 to $4,234] in order to cope with the
Euro 6,” said an industry insider, adding, “Given the size of the
investment that Euro 6 requires, they are likely to focus more on
electric and hybrid vehicles than on diesel cars.”
Core Fuel Cell
Hyundai Motor Succeeds in Localizing Core
Fuel Cell EV Part Technology for Tucson
by Jung Min-hee
H
yundai Motor has succeeded
in localizing all the parts
manufacturing technologies required
for the Tucson Fuel Cell hydrogenpowered SUV, which has started mass
production in 2013.
The nation’s largest carmaker
announced on Sept. 14 that it has successfully developed the technology to
manufacture a membrane electrode
assembly (MEA), which is used in an
electric battery. Accordingly, Hyundai
Motor has localized all fuel cell EV
parts. The MEA is a core fuel cell part
equivalent to the engine cylinder of an
internal combustion engine. However,
Hyundai has imported all its parts from
overseas manufacturers.
The Hyundai Tucson powered by hydrogen fuel cells.
According to Hyundai Motor,
the Hyundai Eco Friendly Vehicle
R&D Center has successfully localized the MEA-related technology,
including the design and establishment of the MEA production process,
after a decade of research. A unit of
the MEA costs nearly 16 million won
(US$13,531). Once it is localized, the
production cost of a hydrogen fuel cell
vehicle will be about 2 million won
(US$1,691) less.
A company spokesman said that
the price of the vehicle will not go
down immediately, though Hyundai Motor has localized its fuel cell
EV part technology. This is because
the company currently sells the
fuel cell vehicle at 85 million won
(US$71,882), which is lower than the
manufacturing cost of some 100 million won (US$84,567), in order to
expand the infrastructure for ecofriendly vehicles.
However, the price of the vehicle
will steadily go down in the future,
with the success of mass production of
its core parts, said a company spokesman. At the early stage of mass production in 2013, the price of hydrogen
fuel cell vehicles stood at 150 million
won (US$126,850). However, it has
been decreasing to nearly 100 million
won (US$ US$84,567) now, as the
company has expanded the part localization percentage.
65
Industry
Automobiles
Foreign Popularity
Imported Cars See Higher
Sales in Korea than Japan
by Jung Min-hee
A truck driver prepares to transport BMW Mini cars in Goyang, north of Seoul.
A
s sales of imported cars are higher in Korea than Japan in
July and rapidly growing, Korea’s auto market is quickly
being eaten into by global automakers. At the time when imported vehicles have reached an all-time high of 16.6 percent of the
domestic market share in the first half of this year, the government
has recently come up with a measure to decrease individual consumption taxes in a bid to boost domestic consumption. Accordingly, there is concern that the measure can accelerate the invasion
of imported cars into the domestic market.
According to data from the Korea Automobile Importers &
Distributors Association (KADIA) and industry sources on Aug.
30, sales of imported cars in Korea fell short of 10,000 units in
2001, and the figure surpassed 100,000 units in 2011. This year, it
is expected to exceed 200,000 units for the first time.
This is largely due to the fact that foreign automakers have
released 80 new models in the first half alone, launching a series of
attacks, and European automakers are having price competitiveness
as well due to the weak euro, rapidly raising market share.
In fact, 3,596 units of the BMW 520d and the 4,926 units of the
Volkswagen Tiguan SUV with the 2.0 TDI turbo fitted with BlueMotion technology were sold in the first half of this year alone. The
BMW figure went up even further, to 5,828 units, when including
the BMW 520d Xdrive. In contrast, 2,326 units of the Kia K9 and
2,413 units of the SsangyongRexton W SUV were sold, showing
much lower sales than that of imported cars.
Sales of imported cars, including the two models, were up
27.1 percent in the first half from the same period last year. About
20,000 units have been sold every month, and a total of 119,832
units were sold for six months. Also, imported vehicles account for
16.6 percent of the domestic market share in the first half of this
year, reaching an all-time high.
In July, the first month of the second half, 20,707 units of
imported cars were sold, surpassing the figure of 20,607 units
in Japan for the first time. That more imported cars were sold in
Korea than in Japan is considered a rare case, because Japan has
twice the population and three times the economy. Although the
66
market share of imported vehicles in Japan maintains 10 to 11 percent, the figure in Korea is increasing by nearly 2 percentage points
every year.
Hyundai-Kia Motors posted a 69.3 percent domestic market
share last year, which was the lowest level since Hyundai Motor
acquired Kia Motors in 1998. The company is still struggling to
reclaim 70 percent this year. Based on stable domestic demand,
Hyundai Motor has been trying to expand to markets overseas,
but is facing a crisis as the domestic market is shaky. Also, Hyundai-Kia Motors is losing ground in China, the largest market in
the world, with local automakers recently increasing their market
shares in the country.
In Sept., when new car models will pour into the market due
to the effects of the decrease in individual consumption taxes,
both domestic and foreign automakers are expected to launch
new products and hold large-scale promotional events, becoming
fiercely competitive. Volkswagen will lower the price of the 2016
Tiguan and offer discount benefits worth more than 1 million won
(US$846) in Sept. BMW will also release the new 3 Series on Sept.
7, while Jaguar and Lexus are to release new models targeting the
market as well.
Impala Vs. Aslan
GM’s Impala Drives Hyundai’s
Aslan into Corner in Home Market
by Jung Min-hee
T
he Chevrolet Impala
full size sedan from
General Motors
is selling like hot
cakes in the domestic market, while its
competitor, Hyundai
Motor's Aslan, is
driven into a corner enough to make its bid for changing the model.
According to auto industry sources on Sept. 17, the supply of
the Impala, which goes on sale in the domestic market from this
month, cannot meet demand due to an aggressive price policy. The
backlog of orders has surpassed 8,000 units.
Pre-orders for the Impala already reached 4,000 units before
the official release, receiving an enthusiastic response. The company also received more than 900 orders on Aug. 31 alone, the day
when the model went on sale. A week later, the number of orders
far exceeded 1,400 units on Sept. 7, becoming a sensation.
GM Korea expected that its model would compete with
Hyundai’s Grandeur and Aslan. The price tag for the Impala starts from 33.63 million won (US$28,805) to 41.36 million
won (US$35,426). It is cheaper than the local market, though it
The Chevrolet Impala.
Industry
Automobiles
is imported from the U.S. Compared to Hyundai’s Grandeur, the
Impala is about 4 million won (US$3,426) more expensive, but the
Impala provides more technical specifications, said GM Korea. The
Impala is 4 million won (US$3,426) less expensive than Hyundai’s
Aslan.
Due to the popularity of the Impala, the Aslan, which has continuously seen a decrease in sales, is under a bigger threat. According to data from Hyundai Motor, the cumulative sales of the Aslan,
which went on sale in Nov. last year, stood at only 6,267 units as of
Aug.
Hyundai Motor has announced that it will sell 22,000 units of
the Aslan this year, writing a new history in the high-end car market
with competition with German automakers. However, the company
will not be able to achieve half of the target sales according to the
current trend.
Under the circumstances, more cars are expected to be put
on the domestic market this way, as they can have a competitive
edge in terms of price based on the sharing of existing sales and
maintenance networks. However, it is said that the automakers are
unlikely to manufacture those vehicles in Korea instead of importing them, even when the sales volume gets on track.
Noncompliance Investigation
Korea to Take Recall of Volkswagen
Vehicles in the U.S. Seriously
by Michael Herh
Sales of So-called OEM-based
Import Cars Skyrocketing in Korea
by Jung Min-hee
C
oncerns
are rising
that some automakers in Korea might
become mere sales
and marketing
bases of their parent companies, as
The QM3, which is currently manufactured in
the domestic sales
Spain, is accounting for 30 percent of the total
of
domestic
brands of
domestic sales of Renault Samsung Motors.
cars are being imported. Some examples of domestic import brands are Renault Samsung Motors’ QM3 and GM Korea’s Impala, are showing a rapid
increase.
According to the Korea Automobile Manufacturers Association, the sales volume of such cars stood at only 1,661 in 2009, 0.1
percent of the total car sales volume in the domestic market.
The number plummeted to 79 in 2012, but soared to 1,194
in 2013 and to 18,249 last year, when Renault Samsung Motors
began to sell the QM3 manufactured in Spain. During the first eight
months of this year, the volume increased by no less than 62 percent from a year ago to 14,943. It is estimated to amount to 25,000
or so, given the popularity of the Impala recently brought into the
domestic market.
The ratio of such vehicles in the Korean car market rose from
1.2 percent to 1.5 percent between 2014 and this year, too. The
QM3 is currently accounting for 30 percent of the total domestic
sales of Renault Samsung Motors.
T
he cat is
out of the
bag. The Volkwagen
Group was ordered
to recall about
500,000 vehicles
after its failure to
satisfy the gas emissions standards in the
U.S. This is expected to stir up a big wave in Korea, too. The Volkwagen Group had gas emissions reduction devices work normally
when Volkwagen and Audi cars were tested and had them turn off
when running on roads, the U.S. Environmental Protection Agency
(EPA) explained.
According to the U.S. environmental watchdog, the volume
of gas emissions from Volkswagen cars running on roads were up
to 40 times as many as that of Volkswagen cars at test centers. The
EPA announcement prompted the Korean government to review
the news and decided to look into Volkswagen and Audi vehicles.
“We judge that it is highly likely that the Volkwagen Group
used similar schemes in countries in addition to the U.S.,” said a
spokesperson for the Korean Ministry of Environment. “We are
planning to test gas emissions from the Volkswagen models in
question in Korea, too.”
Recalled cars in the U.S. totaled 483,000 units. They are the
Golf, Jetta, and Beetle models produced from 2009 to 2015. The
Passat models in question are those produced in 2014 and 2015. In
the case of Audi A3 vehicles, 2009 to 2015 models are subject to
the recall.
“Korea’s diesel vehicle regulations are the same as those in
Europe. Diesels cars imported to Korea are different from those
imported to the U.S.,” a spokesperson for Volkswagen Korea said.
“The U.S. recall is not related to Volkswagen cars in Korea.”
The Volkswagen Group could be fined up to US$18 billion in
addition to direct damage from the recall if the allegations prove
true in the U.S. Furthermore, consumers can take the company to
court as well.
A Volkswagen Beetle Cabriolet.
Importing Domestic
67
Industry
Automobiles
Volkswagen Scandal
Sapping Korean Consumer Confidence
in German Imports
by Michael Herh
T
he expansion of Volkwagen’s gas emissions device rigging scandal is showing signs of undermining the position of German cars in the imported car market in Korea. Some
even predict that import car sales will plummet in the third and
fourth quarters of this year, as most imported cars in the Korean
market are diesel.
German brands that have enjoyed rapid growth in the Korean car market based on the popularity of their diesel cars are
particularly concerned over the current situation that has led to
a significant loss of trust.BMW and Mercedes Benz as well as
Audi and Volkswagen are wary of the possibility that Korean
consumers could turn their backs on diesel.
According to industrial sources, German cars such as those
of Volkswagen, Audi, and Mercedes-Benz enjoy the lion’s share,
74.6 percent, of the Korean market in Aug. They were followed
by Japanese cars (10.2 percent), U.S. cars (5.3 percent), U.K.
cars (3.9 percent), and French cars (3.7 percent). In a nutshell,
German cars stand out from the domestic pack.
From Jan. to Aug. of this year, German automobiles recorded a 69.2 percent market share in the import market in Korea.
Japanese cars led by Toyota inked 11.6 percent. In particular, the
bestselling import car in Korea in Aug. was the 854 Volkswagen
Passat 2.0 TDI. 854 units of this model were sold. The Audi A6
35 TDI came in second with 795 units, while third place was
held by the Volkswagen Golf 2.0 TDI at 740 units. Volkswagen
and Audi are subsidiaries of the Volkswagen Group.
At the moment, this scandal is highly likely to make a
change in the market situation. This is because diesel vehicles
accounted for 72.3 percent of import car sales in Aug. In terms
of total sales from Jan to Aug., the percentage stood at 69 percent.
Such worries are already having a negative impact on some
import car dealerships. Increasingly, customers who bought
Volkswagen and Audi cars have called their dealerships in Seoul
to ask them whether or not their cars are okay. Such dealerships
are also suffering a drop in customer visits.
“The media continues to carry stories that Volkswagen cars
have some problems, so I called my dealership and asked them
whether or not my car had such problems,” a customer who purchased a Golf 2.0 TDI last year. “But they said that they did not
know about that yet. I am not happy about that.”
Amid the worldwide spread of the Volkswagen scandal on
the manipulation of gas emissions devices in its diesel vehicles,
68
The Volkswagen logo on a TDI diesel engine of one of its cars.
the Korean government launched a special investigation into the
same model in Korea.
According to the Clean Air Conservation Act, imported
vehicles have to pass certification tests by models or types when
they are first introduced to Korea. Irregular and special tests
were conducted on following imported cars to check whether or
not they are the same as the first cars that passed the tests.
The models subject to the scrutiny are the Jetta, Audi A3,
and Golf, which has been in the Korean market since July last
year. About 6,000 units of these models were sold over the past
15 months in Korea.
Meanwhile, Japanese automakers including Toyota, which is
struggling to beat the German carmakers in Korea, are anticipating that this can be an opportunity for them to turn the tables.
Nissan, which produces the pure electric car Leaf, is another
company that is expected to be able to take advantage of the
situation
On the other hand, on Sept. 19 (local time), the U.S. Environmental Protection Agency (EPA) confirmed that Volkswagen
rigged software in the emissions control devices of its diesel
cars to have them work properly only when they were tested for
automobile certification, and turn off when they hit real roads.
This made such Volkswagen cars spew up to 40 times more
NOx than what the U.S. environmental standards allowed into
U.S. air.
Industry
Medical
During a telemedicine demonstration in 2012, employees of Seoul National University Hospital consult with a patient in Abu Dhabi. 2012, employees
Medical MOU
Korean Medical Companies Sign 15
MOUs with Chinese Counterparts
by Michael Herh
K
orean health and medical companies will be able to
speed up their advancement into the Chinese market.
They secured a bridgehead into the Chinese telemedicine market by inking agreements with Chinese medical institutions and
pharmaceutical companies. They will be able to export drugs
and biotech products to China, too. These developments will
prepare Korea to become one of the seven health and medical
powers in the world in five years.
The Ministry of Health and Welfare announced that medical companies and institutions visited Shanghai as members of
the economic delegation and signed 15 MOUs during President
Park Geun-hye’s visit in Sept. Seoul St. Mary’s Hospital will
build a chronic disease management model based on a smart
healthcare system. Seoul National University Hospital will build
a 1000-bed state-of-the-art private hospital in Yueyang City,
China. The Korea Health Industry Development Institute signed
an MOU to jointly develop medical tourism packages with
China National Travel Service. Also, Korea’s BK Plastic Surgery agreed with China’s Suning Group to jointly build a plastic
surgery hospital.
In the medical equipment sector, Korean medical equipment makers struck eight deals to make forays into Shandong
and Jiangxi, China. Therefore, they will establish plants or joint
ventures with Chinese companies. Then their products pro-
duced there will be recognized as Chinese-made products. On
the other hand, three Korean pharmaceutical companies signed
agreements with Chinese companies. Huons signed an agreement with Northland Bio to introduce technology to produce a
new psoriasis treatment drug. Apcontech signed an MOU with
Sinomab to set up a company to produce antibiotics. Donga ST
inked an agreement with High Hope to supply fertility drugs,
bio-similar products, and others.
Korea will aim to strike gold in the IT health market of
China. Telemedicine services has a bright future in China, since
China has a small number of doctors compared to OCED countries. Medical services are concentrated in urban areas. This fact
makes the potential of telemedicine greater in China. China has
1.5 doctors per 1,000 people. This figure is less than the average
of OECD countries at 3.2 doctors per 1,000 people. With the
aim of solving this problem, China allows mobile service-based
medical treatments.
According to the Korean Ministry of Health and Welfare,
the Chinese health and medical market is expected to grow 10
percent annually to reach US$1 trillion in 2020. “Korean health
and medical companies should cooperate more closely with the
Korean government to secure an early dominance of the Chinese market with the conclusion of the Korea-China FTA as a
momentum,” a ministry representative said.
69
Industry
Shipbuilding
Cost of Delays
Korean Shipbuilders
Embarrassed by Delays of
Drillship Deliveries
by Michael Herh
D
elays of drillship deliveries are putting Korean
shipbuilders into the
awkward blues. Samsung Heavy Industries had to reschedule
delivering a drillship
to its owner in the
Oceania Region from
this December to June
The West Vela, a drillship owned by Seadrill
Ltd. and operated by BP, built by Samsung
2017. This is because
SHI in 2013
the owner asked Samsung Heavy Industries to delay the delivery under the condition that
the owner will pay an extra 100 billion won (US$85 million).
Also on Aug. 28, Samsung Heavy Industries postponed the
delivery of two drillships amounting to 1.17 trillion won (US$995
million) to Seadrill of the U.K. from November of this year to
March 2017. Such delivery delays are putting Korean shipbuilders
on alert. This is because a drop in oil prices since the second half
of last year has forced clients to ask Korean shipbuilders to put off
the deliveries of many drilling facilities such as drillships and semisubmersible oil drilling rigs.
To add to their misery, the delays are making matters worse for
Korean shipbuilders, which have recorded an astronomical 8 trillion plus loss since last year. Delivery postponement means delays
in final payments, which account for 70 to 80 percent of the total
price of the vessel.
This year, Samsung Heavy Industries postponed the delivery of
six drillships. Among the six, four were scheduled to be delivered
to their owners. Taking into consideration the fact that the company
has received orders to build ten drilling facilities, 60 percent of the
company’s volume is delayed.
Most of the owners who want to postpone the deliveries of
their ships placed orders at a venture without securing charterers.
Such owners are avoiding the deliveries of drillships, as a drop in
international oil prices has significantly lowered drillship charter
fees. The daily drillship charter fee peaked at US$600,000 in 2012
and 1013. But at the moment, the fee is at around US$300,000.
But delivery delays are not the worst. The cancellation of drilling facility deals shortly before their deliveries will incur hundreds
of billions of won in damages to Hyundai Samho Heavy Industries
and Daewoo Shipbuilding & Marine Engineering, respectively.
70
U.K.-based Seadrill informed Hyundai Samho Heavy Industries
of canceling an order to build a semi-submersible oil drilling rig
amounting to about 670 billion won (US$570 million) in the middle
of Sept. The shipbuilder booked the order in the middle of 2012.
Seadrill called off the contract ten days before final delivery, making a pretext of the fact that the shipbuilding schedule was delayed
for about nine months. Seadrill is demanding the return of the down
payment of 176 billion won (US$149 million) plus interest.
On Sept. 19, Daewoo Shipbuilding & Marine Engineering canceled a contract to build a drillship amounting to 703.4 billion won
(US$598 million) with a U.S. client. The owner did not make the
intermediate and final payments shortly before its delivery.
Labor Pains
Korean Shipbuilders
Divided in Dealing with
Labor Disputes
by Jung Min-hee
K
o r e a n
shipbuilders, each suffering from business
losses of trillions of
won these days, are
drawing different
pictures of progression or regression
depending on the choices of their trade unions.
Recently, the management and the union of Samsung Heavy
Industries barely reached an agreement just one step away from
a strike, and Sungdong Shipbuilding & Marine Engineering
had a resolution meeting for the co-prosperity of the employers
and employees. On the contrary, Hyundai Heavy Industries and
Daewoo Shipbuilding & Marine Engineering found themselves
driven to the precipice, with their unions unwilling to give in.
The union of Samsung Heavy Industries, which did not participate in the joint strike of labor unions in the shipbuilding
industry on Sept. 9 because the wage negotiations were still
going on, succeeded in signing an agreement with management
at the end of Sept. 10. The base pay of its workers is to be raised
by 0.5 percent according to the agreement, and 3,626 out of
5,115 union members voted that day for the tentative agreement
prepared on the previous day.
In the meantime, the management and the union of Sungdong Shipbuilding & Marine Engineering also finished their
negotiations on the same day and agreed to work more closely
with each other, so that the business of the company can get
back on track soon.
Industry
Shipbuilding
Supporting the Support
Credit Consequences
Indian Gov’t Asks HHI for
Fleet Support Ships
Big 3 Shipbuilders’ Growing Worries
Over Drop in Credit Ratings
by Jung Min-hee
by Michael Herh
C
HHI Chairman Choi Gil-seon explains about the company to Indian Prime
Minister NarendraModion May 19 (from left: Ulsan Mayor Kim Kie-hyun,
Chairman Choi Gil-seon, Prime Minister NarendraModi and CEO Kwon Oh-gap)
T
he Indian government keeps expressing very much interest in Hyundai Heavy Industries (HHI), drawing attention.
India’s Prime Minister NarendraModi visited only Hyundai’s Ulsan
plant during his two-day trip to Korea in May, and also suggested
to India’s Defense Ministry to join a project to build fleet support
ships for the country’s navy with India’s state-run shipyard.
According to shipbuilding industry sources and local media
reports on Sept. 2, India’s Ministry of Defense is anticipated to
place an order for five fleet support ships this year. Rear Admiral
N. K. Mishra, chairman of Hindustan Shipyard Ltd., which will be
in charge of constructing the ships, said, “When Hyundai builds the
ship at its plant in Korea, we will dispatch some workers there to
learn and experience their technology and expertise. Then, we will
build the other four in India with technical advice from the Korean
shipbuilder.”
The deal to build a fleet support ship will be valued at 20 billion rupees (US$301.86 million or 35.74 billion won). The ships
will have a speed of 16 knots, range of 12,000 nautical miles, and
carry ballistic weapons.
Currently, India is planning to construct numerous ships,
including multipurpose landing ships, in a bid to increase naval
power. Accordingly, it is showing great interest in the technology of
HHI, which has a wide variety of experience in shipbuilding.
Separately, Hyundai Heavy is expected to clinch another deal
from India to build liquefied natural gas (LNG) carriers. GAIL
Ltd., India’s largest state-owned gas firm, is scheduled to place an
order for up to 11 LNG carriers this year to transport LNG from the
United States to India for 20 years from 2017.
When Prime Minister NarendraModi visited Korea in May, he
said, “Since India has 2500 km of coastline, there is plenty of room
for development in the shipbuilding industry. I hope that Korea,
which has considerable technical skills in the shipbuilding industry,
makes investment in India’s shipbuilding industry.”
oncerns are
growing over
the financial costs of
Korea’s Big Three
shipbuilders caused
by the deterioration
of their business performance and drop in
their credit ratings.
On Aug. 31,
the Korea Investors Service lowered the credit rating of Hyundai Heavy Industries from “AA-” to “A+” and brought down its
outlook on the credit rating from “stable” to “negative.” Those
corporate bonds and commercial papers of Hyundai Samho Heavy
Industries and Hyundai Mipo Dockyard were adjusted from “A+”
and “A2+” to “A” and “A2,” respectively. Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering saw their
credit ratings fall around the same time, too. Korea Ratings took
down the credit rating of Samsung Heavy Industries from “AA(negative)” to “A+(negative),” and that of Daewoo Shipbuilding &
Marine Engineering from “BBB+(negative)” to “BBB(negative).”
The Korea Investors Service warned Daewoo Shipbuilding &
Marine Engineering that the credit rating company may additionally lower Daewoo’s credit ratings.
The point is that such credit rating adjustments lead to a change
in interest rates. If a credit rating is high, the interest rate will fall.
But otherwise, the interest will rise. At a time when some projects
may be delayed, they are facing a vicious cycle where a drop in
credit ratings will weaken expectations for the inflow of cash and
make cash drain more likely.
The balances of the three shipbuilders’ corporate bonds and
commercial papers added up to approximately 6.6 trillion won
(US$5.6 billion). Even if the interest rate rises merely 0.5 percentage points due to lowered credit ratings, it will financially cost
the three about 33 billion won (US$28 million) more a year. The
financial burden is relatively light for Samsung Heavy Industries,
since the balance of its corporate bonds is around 1.4 trillion won
(US$1.2 billion). But Daewoo Shipbuilding & Marine Engineering
may face a cash crunch now that its corporate bonds and CPs total
around 2.665 trillion won (US$2.261 billion). The financial industry is still very skeptical about the future of the three’s offshore
plant business. This means that financial firms cannot rule out the
possibility that the three will suffer additional drops in their credit
ratings around 2018, when they will complete the deliveries of offshore plants that have already been ordered.
71
SME & STARTUP
Smart Money
Samsung, Govt. to Inject 30 Billion
Won to Build Smart Plants
by Jung Min-hee
S
amsung Electronics and the Ministry of Trade, Industry and Energy
(MOTIE) will jointly inject 30 billion won
(US$25.37 million) in total by 2017 to help
more than 600 small and medium-sized
manufacturers in Korea construct smart
plants. The support is part of the government’s “Manufacturing Innovation 3.0”
strategy for the creative economy.
Samsung Electronics and the MOTIE, in
the form of a public and private joint smart
plant steering committee, signed a memorandum of understanding (MOU) at the
Korea Chamber of Commerce & Industry
in Seoul on Aug. 31 to jointly raise funds and
promote the project in a bid to build smart
plants. The MOU signing ceremony was
attended by Lee Gwan-sub, first vice minis-
ter of the MOTIE; Kim Jong-ho, head of the
set manufacturing unit at Samsung Electronics; and Park Jin-woo, head of public and
private joint smart plant steering committee.
Under the agreement, Samsung Electronics and the MOTIE will invest 15 billion
won (US$12.68 million) each to establish
smart plants over the next two years from
2016. The program will benefit over 600
small and medium-sized manufacturers.
On top of the investment, Samsung
Electronics will dispatch professionals in
the manufacturing sector to the smart plant
steering committee and establish a “smart
plant academy” at the North Gyeongsang
Province creative economy innovation center. Also, Samsung will transfer the expertise of the smart plant operation system,
process simulation, and automation consultancy by utilizing businesses and manpower across the nation.
The MOTIE will create the foundation to promote smart plants, including
standards and certifications and technology
development, and raise the efficiency of the
project through an integrated management
system of similar projects in other governmental ministries, including the Ministry of
Science, ICT and Future Planning.
The smart plant steering committee
will be responsible for the management
of fund raising, establishment of standard
business operating procedures, training
professionals in technological partnership
with Samsung Electronics, and the development of its joint model.
Seeking to Devour
Samsung to Actively Acquire
Promising Start-ups
by Cho Jin-young
T
he Samsung Group is preparing
to enjoy the fruits of the creative
economy in Daegu, its birthplace. With
the Daegu Center for Creative Economy
and Innovation starting to create results
in cultivating and nurturing promising
venture firms after its establishment
on Sept. 15, 2014, the Samsung Group
revealed its intention to buy companies
that can facilitate its growth.
A total of 35 companies were created
at the Daegu Center for Creative Economy and Innovation led by the Samsung
Group, through C-Lab, which imitated
Creative Lab, Samsung’s program that
turns ideas into money-making ventures.
There are some companies that have
been growing rapidly. Walnut, a venture
firm that specializes in designing fabrics,
72
are increasingly trading with companies
at home and abroad through C-Lab’s
mentoring program and Samsung
Ventures’ investment. The start-up is
expected to grow 40 times its size yearon-year to reach 1.2 billion won (US$1
million) this year, from 30 million won
(US$254,346) in sales last year.
Since Sept. of last year, the Samsung Group has invested 10 billion won
(US$8.4 million) to 48 venture firms
and start-ups through the Youth Start-up
Support Fund and Samsung Ventures’
investment fund. In addition, the corporation is helping nascent entrepreneurs
acquire expertise in business by dispatching executives at its affiliates. The Samsung Group also allows those who are
willing to start businesses to use its dis-
Daegu Mayor Kwon Young-jin; Science, ICT
and Future Planning Minister Choi Yang-hee;
Kim Sun-il, head of Daegu Center for Creative
Economy & Innovation; Samsung Electronics
President and CFO Lee Sang-Hoon; Samsung
Ventures C.E.O Lee Sung-jong; and others.
tribution networks at home and abroad
when they cultivate a market. Samsung
plans to invest 20 trillion won (US$17
billion) by 2019 in order to nurture venture firms and start-ups, which includes
10 billion won (US$8.5 million) for the
Youth Start-up Support Fund, and another 10 billion won for Samsung Ventures’
investment fund.
On top of that, the Samsung Group
has already disclosed 400,000 patents
owned by its major affiliates like Samsung Electronics, Samsung Display,
Samsung SDI, and Samsung ElectroMechanics to nascent entrepreneurs.
SME & STARTUP
Venture Promotion
Korean Big 3 Mobile Carriers Raise 1.7
Trillion Won for ICT Venture Firms
by Jung Suk-yee
K
orea’s top three mobile carriers will raise 1.7 trillion won
(US$1.44 billion) in the next nine years in
a bid to support venture firms and start-ups
in the information and communications
technology (ICT) sector, such as the Internet of Things, the Cloud, and Big Data.
T h e K o r e a Te l e c o m m u n i c a tions Operators Association (KTOA)
announced such a plan, while co-hosting
the third Korea IT Fund (KIF) launching
ceremony with SK Telecom, KT, and LG
U+ at the Korea Press Center in Jung-gu,
Seoul, on Sept. 22.
KIF is a 300 billion won (US$253.7
million) fund, which is financed by the
three mobile carriers in 2002. KTOA has
been managing the fund for 13 years.
Based on 300 billion won (US$253.7
million) investment, the fund is increasing its capital every year, and has invested a total of 1.2 trillion won (US$1.01
billion) in 522 venture companies in the
last 13 years, with additional investments
from mobile carriers. Among them, 62
firms have been listed on the KOSDAQ,
said KTOA, becoming medium-sized
enterprises.
On the same day, KTOA and the
three mobile carriers announced that they
would launch the third KIF in order to
respond to the government’s policy for
creative economy activation. The third
KIF has decided to extend its operating
term by 10 years from the existing 2020
to 2030. Also, the KIF will add 700 billion won (US$592 million) in the next
nine years to the existing amount of 1 tril-
lion won (US$845.67 million), to make
1.7 trillion won (US$1.44 billion) in total.
Then, it will support the government’s
nine K-ICT strategic industries – IoT,
Cloud, Big Data, information security,
software, UHD and smart devices – and
start-ups and venture companies in the
converged ICT sector, including fintech.
Moreover, the third KIF has formed
specialized funds for start-ups and abolished the reserve system for losses. This
is largely due to the fact that it tries to
help start-ups in earnest by reorganizing
the funds as venture investments, according to the KTOA. The three mobile carriers will strengthen links between their
creative economy innovation centers and
the funds in a bid to offer foundation
funds to firms in the centers.
Small and Medium Enterprises
Startups in Korea Still Struggling
by Jung Min-hee
T
he Korean government declared
three years ago that it would create a boom for startups. However, many
in the field are still saying that the situation is the same as it was 15 years ago.
According to them, the government
provides a variety of assistance programs
for firms in their early stages, but financial assistance is rarely available after
they enter a growth stage. They also
point out that a large number of startups
are in a handful of industries, such as
application development, and this has led
to cannibalization, making investment
recovery difficult.
“Things may look good on the surface these days, but many startups actually don’t think so,” McKinsey Consulting
partner Kim Joo-wan said on Sept. 22.
According to him, a couple of government programs provide 30 to 70 million
won (US$25,250 to $58,930) for an average startup in its initial stage nowadays,
but funds of about 100 to 300 million
won (US$84,225 to $252,558) required
for product marketing in the growth
stage is still hard to get. “Most startups in
Korea run into financial difficulties about
six to 12 months after starting their business,” he explained.
It is angel investors that those startups resort to in order to deal with this
pitfall. However, many angel investors
are thinking that Korea is a less attractive investment destination, where IPOs
and M&A have yet to be facilitated. Statistics on Korean startups’ success cases
based on M&As are not available yet. It
is estimated that an average of 12 years
are required for a newly established company to reach an IPO. In contrast, the
length of the period is 3.9 years in China,
and American startups spend an average
of five years between business establishment and M&A.
“In the United States, acquirers
purchase 100 percent of the stocks of
the firms they take over, but minority
shareholders such as angel investors are
deserted, and only the rights of management are taken during M&As in Korea,”
said TransLink CEO Heo Jin-ho, continuing, “The minority shareholders can
enjoy no profits at all before IPO.”
73
MICE
Blockchain Continuing
Inside Bitcoins to be Inside Kintex
by Marie Kim
In April, Inside Bitcoins was held in New York City.
I
n Jan., famous venture capital firm DFJ made a US$75
million (82.5 billion won) investment in U.S.-based bitcoin company Coinbase. The amount marked by far the largest investment made in Bitcoin. Goldman Sachs, a major U.S.
investment bank, also made a US$50 million investment in
Circle, a start-up specializing in bitcoin authorizations and payments. The Singaporean Central Bank is currently known to
be involved in a monumental project to build a smart financial
center worth US$225 million. What brings these investors to
invest in bitcoin despite the uncertainty about the future of
bitcoins?
One may find the answer to the question at the largest Asiawide conference on Bitcoin, or virtual currency, called Inside
Bitcoins Conference & Expo 2015. Scheduled to be held in
Dec. this year, the conference is co-organized by KINTEX and
MecklerMedia. Twelve countries including the U.S., the U.K.,
Germany, Hong Kong, and Israel take turns in hosting the conference every year. The conference also has an international
reputation as the best conference in the field.
The event will also be an educational venue where ordinary
people unfamiliar with Bitcoin can have a first-hand experience
of what Bitcoin is like and learn about its basic concepts and
principles. On the first day of the conference, through practical
training, participants will learn about the blockchain, the operational principle of bitcoin from virtual currency specialists. The
concurrent events include special sessions and exhibitions on
fintech, sponsored by the Global Fintech Research Institute.
At special sessions on fintech, participants will have a
chance to learn about transferring money, payments, secu-
74
rity, crowdfunding, virtual currency, and government policies
from leading lights in each of these areas. The session will take
either in the form of solo sessions or panel debates. As various
global and local institutions in fintech such as the Global Fintech Research Institute and the Korean fintech forum sponsor
the event, relevant local institutions and start-ups are expected
to benefit by attracting foreign and domestic investments and
international marketing.
Currently, 20 international speakers are confirmed including Roger Ver, a billionaire in the bitcoin business; Simon
Dixon, a financial innovation investor from the U.K.; and
Justin Newton, an early Internet pioneer and start-up expert.
As for the Korean experts, Park Soo-yong, the director of the
Global Fintech Research Institute; Professor In Ho, an authority in virtual currency; and Hong Ki-hoon, a PhD from Cambridge University and Professor at Hongik University are confirmed for participation. A spokesperson for the conference
said, “As much as we made considerable efforts in bringing
the renowned speakers, sponsors, and investors, we hope that
this event will making meaningful contributions to industries
relevant to fintech and virtual currency.”
Media interest in bitcoin has more to do with the implications of its operational system, the blockchain, rather than
bitcoin itself as a currency. Despite the diverse views surrounding Bitcoin, most people agree about the endless possibilities
deriving from blockchain technology and its applications in the
financial sector. According to the organizers, it may not take
any longer than 5 years until the blockchain technology will
bring about sweeping changes to the current financial system.
Early registration is possible via the official website. Those
who apply before Oct. 14 can get discounts of up to 40 percent.
For more relevant information, contact the International Exhibition Conference Secretariat at +82-31-995-8074 (ext. 8076)
or [email protected].
Event Overview
Title
Inside Bitcoins Conference & Expo 2015
Venue
Kintex 2nd Exhibition Room, Hall 6
Dates
Dec. 9 (Wed) 2015 – 11 (Fri)
Sponsors
Kintex, MecklerMedia
Content
International conference (total 20 sessions), professional trade
show, startup competition, intech special session etc.
Subjects
exchange, security, billing, and platform solutions, intech
Host Cities
New York, Chicago, Berlin, London, Seoul
MICE
3D Printing Korea 2015
Nation’s Largest 3D Printing Industrial
Fair to be Held in Nov.
by Lee Song-hoon
3
D Printing Korea 2015 will be
held from Nov. 4 to 7 at COEX
in Seoul. In the fair, visitors can view the
trends in the 3D printing industry, which
is considered to be a next-generation
technology leading the manufacturing
revolution, and technology use cases.
Hosted by the 3D Printing Industrial
Association (Chairman KukYeon-ho),
also known as 3DPA, and the COEX
Convention and Exhibition Center (CEO
Byun Bo-kyung), the second 3D Printing
Korea this year is a specialized exhibition that builds on the foundation of the
domestic 3D printing industry in order
to compete with global leaders with core
source technology in the market, converge technology across industries, and
activate the appliances and materials
industries.
In particular, around 150 member
companies of the 3DPA, which has rapidly grown by establishing its branches
across the nation, will take part this year,
strengthening the substantiality of the
exhibition.
In addition to the association’s member companies, more than 100 3D printing firms and university research labo-
ratories at home and abroad will participate in 3D Printing Korea 2015. Through
various display items, such as 3D printers, 3D printing materials and parts, 3D
scanners, software, experimental and
educational prototypes, and other applied
products, it will be a good opportunity
to look at 3D printing technology convergence, its applied cases and growth
potential, and to prepare for the maturity
of the domestic 3D printing market.
The 3D Printing Industrial Association Chairman KukYeon-ho said, “The
3D printing industry, which changes the
paradigm of the manufacturing industry,
is gradually expanding to the bio, construction, and root industries. Also, its
market is rapidly growing by converging
with other industries, such as the Internet
of Things, materials, and software. We
will make every effort to help domestic
small and mid-size companies strengthen
their abilities and tap into the global market through 3D Printing Korea 2015.”
75
Science
jDr. Kim Deok-jong.ong.
Tiny Work
Korean Research Team Develops Tech to
Measure Density of Silver Nanomaterials
by Cho Jin-young
O
n Sept. 10, the Korea Institute
of Machinery and Materials
announced that one of its teams headed by
Dr. Kim Deok-jong successfully developed
a technology that can select and measure
the density of minute amounts of silver
nanolines and particles that exist in water.
The research team succeeded in determining the types of silver nanomaterials
with oxidation potential values that were
created when they are oxidized in an electrochemical manner for 1 minute after
attaching the nanomaterials, which exist in
water solutions, to electrodes for 10 minutes, and in measuring the density of silver
nanomaterials with current values. It is the
first time to develop a technique to recognize the kind and density of silver nanomaterials at the same time.
The existing method to create high-frequency inducted plasmas allows researchers to measure the density of silver nanomaterials without determining their types.
Since a pre-conditioning process that ionizes silver nanomaterials by melting them
with nitric acid is required, it is impossible
to measure their density on the spot. It normally takes more than one day.
The new tech that can distinguish silver nano-lines and particles from nanomaterials is likely to be usable especially in
an industry that manufactures high-quality
transparent electrodes.
In addition, it will be much easier to
monitor silver nanomaterials in valleys,
rivers, and seas. With the introduction of
different kinds of silver nanoproducts,
much attention is being paid to how the
strong antibacterial characteristics of silver nano materials affect the environment
and the human body. Therefore, the newly-developed method is expected to help
researchers recognize the kind and density
of silver nanomaterials in the environment.
The research findings were recently
published online by Analyst, a scientific
journal published by the Royal Society of
Chemistry.
Medical Treatment
Tech Developed for Immunotherapy
to Treat Bronchial Asthma
by Cho Jin-young
A
Korean research team has successfully developed immunotherapy to
treat bronchial asthma and defined the mechanism for the treatment.
On Sept. 14, the Ministry of Health and
Welfare announced that a joint research team
from Chonnam National University and the
Institute for Basic Science succeeded in curing asthma-induced mice by injecting flagellin, a protein that forms the filament in a bacterial flagellum, and asthma treatment materials that combine asthma-causing allergy
antigens into the group of experimental mice.
The research team found out that such
a treatment could have similar effects on
humans through nonclinical testing that uses
dendritic cells extracted from the blood of
asthma patients suffering from house dust
mite allergy and T cells, a white blood cell
that plays an important part of the immune
76
system. Dendritic cells let T cells recognize the penetration of allergy antigens by
gobbling up and cutting the antigens short.
Those cells can also give T cells directions as
to how to respond.
The research team already has a patent at
home and abroad for immunotherapy using
flagellin, and proved that the method is safe
and stable in the nonclinical testing, which is
in its final stages of completion.
“We discovered that it is possible to
treat allergic asthma by spraying the aqueous solution containing our newly-developed treatment substance into the nostril of
asthma-induced mice, since the substance
works on dendritic cells that reside in the
airway, changes T lymphocytes to control
the immune system, and thereby balances
the body’s immune system,” professor Lee
Joon-haeng from Chonnam National Uni-
versity explained, who led the research team.
He added, “Our research team is preparing for a clinical trial involving chronic and
intractable asthma patients. We’re also working to develop a cell treatment that takes
out and reinjects drug delivery systems and
dendritic cells, after teaching them about the
function to balance the immune system.”
There’s no cure for asthma, and steroids
are used to treat the disease. However, the
use of steroids for a long time causes side
effects. The newly-developed immunotherapy is expected to have far-reaching influence,
since it could be used to treat various types of
allergic diseases, including atopic dermatitis
and food allergies.
The research findings were first published online by the Journal of Allergy and
Clinical Immunology, a medical journal published by Elsevier.
Science
Healing Light
Tech Developed to Treat Alzheimer’s
Disease with Light
by Cho Jin-young
A Korean research team has suggested
a new treatment method that can prevent
or ameliorate Alzheimer’s disease using
light.
The Korea Advanced Institute of Science and Technology (KAIST) announced
on Sept. 21 that a research team headed by
Park Chan-beom, professor of the Department of Materials Science and Engineering at KAIST, and Ryu Kwon from the
Korea Research Institute of Bioscience
& Biotechnology, succeeded in controlling the agglutination of beta-amyloids,
which is known as a substance that causes
Alzheimer’s disease, using porphyrin, an
organic molecule that responds to light.
The disease starts when a protein
fragment called a beta-amyloid accumulates in the brain. The aggregating agent
damages brain cells, leading to a decline
in brain functions, which shows up as
dementia. If the agglutination of beta-
amyloids is successfully controlled, the
formation can be prevented, which, in
turn, can prevent or ameliorate Alzheimer’s disease.
The research team used a bio-friendly organic molecule called a porphyrin
derivative and blue LED light on a group
of fruit flies, effectively controlling the
agglutination of beta-amyloids. When
porphyrin absorbs light energy, it releases
a highly-reactive active oxygen. When the
active oxygen combines with beta-amyloid monomers, they become oxidized
and no longer agglutinate in the brain.
After experimenting with this method on a group of fruit flies, the research
team discovered that symptoms found
in Alzheimer’s disease were relieved,
including damage to areas that join nerves
and muscles, a reduction in brain nerve
cells, and a decrease in mobility and longevity. The newly-developed method
Korea Advanced Institute of Science and
Technology building in Daejeon, Korea.
makes it possible to treat the disease more
effectively than conventional drug treatments using a smaller amount of drugs.
The new method has few side effects as
well. Hence, the research team anticipates
that if the technology is developed further,
it can be used widely.
Professor Park explained, “There have
been no cases where photodynamic treatments were used in degenerative brain
diseases like Alzheimer’s.” He added,
“We are planning to examine the applicability of various types of organic and inorganic light sensitive materials and to continue our research involving vertebrates.”
The research findings were featured
as a cover article in the Aug. 21 issue of
AngewandteChemie, a weekly scientific
journal published by the German Chemical Society.
Immortality via Sir2
Working Principle of Protein Capable
of Extending LifeIdentifiedt
by Jung Suk-yee
A
local research team has successfully identified the working
principle of a protein that can control the
aging process and prolong life.
A research team headed by Professor
Kim Jung-yoon from Chungnam National University announced on Sept. 22 that
they identified how the protein named
Sir2 slows down the aging process, and
proved what role Sir2 has by limiting the
intake of calories.
The research findings are likely to get
rid of suspicions over the role of Sir2 in
controlling the aging process.
The research team discovered that
Sir2 removes acetyl attached to lysine-16
residues of histone H4, which curbs the
realization of specific age-accelerating
proteins (those that control a potential
difference in cell membranes and ribosomal proteins) and prolongs the life
expectancy of yeast. They also found
out that it is controlled by a protein that
attaches a phosphate to Sir2.
These findings are expected to play
an important role in the development of
A scene from the movie The Fountain, which
tackles the ideas of life, death, and immortality.
anti-aging substance and treatments for
aging-related diseases.
Professor Kim explained, “The
research findings are an important
achievement that can end 10-year-old disputes about the life-extending function of
Sir2.” He added, “Our study is significant
in that we presented a method to develop
aging-related substance and treatments
for aging-related diseases by activating
the life-prolonging function of Sir2.”
77
Beer Wars
Import Beers Chipping
Away at Domestic Beer
Market Share
by Michael Herh
A selection of domestic beer brands.
T
hanks to a growing preference for beers with thick and
rich flavors among Koreans, import beers have nearly
caught up with Korean beers this summer. According to BGF
Retail, import beers accounted for 43 percent of beer sales at
CU convenience stores in July and Aug. During the same period, domestic beers stood at 57 percent. In the same period of
last year, sales of domestic beers outnumbered import beers 7
to 3.
Sales of import beers have soared as a malt beer fever has
gripped the nation. The malt beer is made from 100 percent
barley. The beer market, represented by larger, has moved to
100 percent malt beer which is a kind of lager beer but a little
heavier. Demand for thick ale is also rising among beer maniacs.
Import beer sales at CU convenience stores rose 33.6 percent in 2013 and 40.6 percent in 2014, respectively. Lately,
the curve became sharper. From Jan. to Aug. of this year, they
jumped 84.5 percent. By contrast, the growth of domestic beer
sales slowed down, with 11 percent in 2013 and 4.6 percent in
2014. This year, it fell 0.1 percent for the first time. Other convenience stores have seen sales of beer soar as well.
In GS25, the sales ratios of domestic beer and import beer
stood at 6 to 4 in July and Aug. this year. During the same peri-
od last year, the score was 8 to 2.close At e-Mart stores, the
ratios are 60.5 percent and 39.5 percent during the same period.
The gap decreased from last year, when they were 66.7 percent
and 33.3 percent. The percentages did not change considerably,
since a change in consumer preferences for beers comes more
slowly to e-Mart stores than convenience stores. But in terms of
sales growth, import beer sales grew 24.6 percent, while domestic beer sales fell 4.6 percent in the same period.
It is said that this import beer fever was fueled by a craze for
thick beers and the conception that Korean beers are not tasty.
Lately, domestic beer companies are launching new upgraded
products in terms of taste and flavor.
An increase in overseas travel thanks to low-cost airliners also contributed to a variation in consumer preferences for
beers, according to market experts. Growing demand for beers
enjoyed abroad in the Korean market prompted distributors
to hold several import beer promotions. This has also had an
impact on the domestic beer market. Convenience stores and big
retail chain stores are meeting customer needs by selling a wide
array of import beers such as those from Japan, Australia, the
Netherlands, and the Czech Republic.
Trendy Seoul
Korea Emerges as Mecca
of 3T Trends
by Jung Min-hee
U
ntil now, global luxury fashion brands have focused
on Japan and China for Asian fashion and beauty.
However, they are recently beginning to acknowledge Korea
as the trend maker, trend setter, and trend leader, as the country
quickly accepts fashion trends and reproduces them after modification and reinterpretation.
According to industry sources on Sept. 8, this year has
become the first year of the start of culture marketing, as more
global leading luxury fashion brands such as Chanel, Louis
Vuitton, and Dior, are spending time in Korea.
78
A photo of the “House of Dior” store, the brand’s largest flagship store in the
world, which opened in June in Cheongdam-dong, Seoul.
culture
Flagship stores of luxury fashion brands are springing up in
Cheongdam-dong fashion street for the first time in 10 years.
Also, they are renovating their stores to the largest and the
most luxurious in the world. This is because they can attract
attention and make huge advertising effects in the global
markets with the opening of their stores in Seoul, which has
become the mecca of trends.
An unprecedented increasing number of masters in the
fashion industry are visiting Korea. Karl Lagerfeld, the head
designer and creative director of Chanel, visited Korea early
this year and said, “Tradition and cutting-edge technology
coexist in perfect harmony in Seoul and it is the dynamic and
creative city.” Lagerfeld is nicknamed to be the Pope in the
fashion industry. Also, Suzy Menkes, a fashion journalist who
exerts powerful influence on the global fashion trend, visited
Korea in July and said, “Now it is Seoul.” She also promised
that she would visit Korea again next year.
Korean cosmetics firms are leading the trend in the global beauty market with AmorePacific, which has first created
the “Cushion Foundation,” in the lead. Lancôme, the leading French luxury beauty brand, has replicated the product of
AmorePacific and asked to build a strategic partnership, while
other global leaders, such as L’Oréal and ELKA, are showing
their eager attention in domestic cosmetic producers. In the
rear, smaller beauty brands are creating the global facial mask
market and forming the emerging K-beauty corps, and domestic cosmeceutical brands are tapping into the global niche market.
Since Korean consumers have more knowledge than workers in the beauty industry due to the effects of social network
services making them trendy and smart consumers, Korea has
changed from a test market in the past to a qualified market
now. So the country is being paid attention to by global beauty
brands as a bridge market, the center of the trends in Asia.
130th Anniversary
Korea Promoting Its
Culture in France
by Marie Kim
K
orea and France will kick off their bilateral cultural
event with artists and musicians performing Korea’s
royal ritual music, JongmyoJeryeak, at the Théàtre National
de Chaillot in Paris, on Sept. 18. The Prime Minister of Korea
will make an official visit to the event. This is the first time that
JongmyoJeryeak will be performed in its entirety on foreign
territory, and the event is expecting 115 artists to attend, the
largest number to date.
The Ministry of Culture, Sports, and Tourism said that the
2015-2016 Korea-France Bilateral Exchange is being organized to commemorate next year’s 130th anniversary of diplomatic ties between the two sides.
The event will have some 150 cultural programs featuring
traditional and contemporary Korean music, visual arts, films,
and literature to be hosted by renowned artists in France, starting in Paris.
The Ministry of Culture, Sports and Tourism (Minister
Kim Jong-deok) will open the Korean year in France on Sept.
18, which is part of the 2015-2016 Korea-France Bilateral
Exchange organized to commemorate the 130th anniversary of
diplomatic ties between the two countries.
The 2015-2016 Korea-France Bilateral Exchange is comprised of the Korean Year in France (Sept. 2015–Aug. 2016)
and the France Year in Korea (Jan. 2016-Dec. 2016), and features the dynamic exchange of arts and cultural programs in
both countries. The Korean Year in France will proceed with
The Korean Year in France is from Sept. 2015 to Aug. 2016, and the French
Year in Korea is from Jan. 2016 to Dec. 2016.
cultural events and performances played at many popular venues in Paris, Nantes, Marseille, Lyon, Lille, and Nice.
This two-year event was agreed on between the two countries during President Park Geun-hye’s state visit to France in
Nov. 2013. Subsequently, the organizational committees of
both countries established joint rules and organize programs
through joint meetings.
Cho Jun-ho, the art director of the Korean side of the organizing committee, said, “By having our Korean culture permeate the daily life of the French people, we hope to take
the traditional ways of cultural exchange up a notch.” He also
added, “The exchange will mark an opportunity to prepare for
continuous cultural exchanges.”
The Korean Year in France runs from Sept. 2015 to Aug.
2016, while the French Year in Korea starts in Jan. 2016, four
months later, and will run throughout 2016. A special session
for French films is scheduled as part of the opening ceremony
celebrating the 20th anniversary of the Busan International
Film Festival this year.
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