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Aug 29, 2013

Korea's Low Birth Rate: Problem that May be Impossible to Fix

South Koreans take pride in leading the world in many categories. But one distinction is vexing – the lowest birthrate of the world’s most developed economies. The economic and political ramifications are massive.  And yet one wonders if effective countermeasures are even possible.

The International Herald Tribune, recently, ran a story about private and government initiatives to encourage marriages and thereby raise South Korea’s birthrate.  For the past three years, for example, South Korea’s Ministry of Health and Welfare has promoted dating parties for its employees with counterparts from corporations.

Other corporations have responded favorably to invitations from various government organizations to organize similar events.  Meanwhile, “no internal dating” corporate rules are disappearing as more and more business leaders take seriously birthrate-related problems, such as fewer future workers.

While all of this may sound potentially positive, we find Koreans nonetheless being highly selective – no, extraordinarily picky – about whom they marry and even date. The reasons are both traditional and contemporary.

First, Koreans, in spite of their gregarious personalities, are generally quite shy about meeting strangers and request introductions for both public and private interactions.  That is why arranged marriages continue to exist, although they are much less common than a generation ago.

As so-called “love marriages” become increasingly popular with young Koreans who tend to be more individualistic and independent, other contemporary factors offset freer social associations. With the nation’s rapidly developing wealth has come increased social insecurity.  In highly competitive South Korea, too often family status and family acquisition and retention of wealth have become paramount in many households.

To be sure, there are many Koreans who are most concerned that their children have happy and successful marriages as a first priority. And to be sure, most young people desire “love marriages” where both partners appreciate and respect the other person’s intrinsic qualities above all other factors.

In the case of parents, “if at all possible” the children should not marry “down,” as defined by the prospective partner’s education, career, physical attributes, financial and social status. Which means, any child bringing home a potential fiance not measuring up to these standards can likely anticipate some kind of parental opposition.

There are several reports of parents in nouveau riche Gangnam forbidding their children to date children who reside north of the Han River.  In even more extreme cases, some families insist that their children only socialize with offspring of families who live in certain districts of Gangnam or only in certain expensive, high-rise apartments.

In the case of young people, their standards are pretty much the same as their parents’, but naturally they are going to be much more concerned about physical attributes such as height, weight, beauty as well as the capacity to immediately share an exciting lifestyle.

The problem has been exacerbated by South Korea’s declining birthrate over the past two decades. Increasingly, young people come from “only child” or two-child households where they have been raised as little princes and princesses without serious concerns about sharing toys, etcetera with siblings.

Consequently, when many of these young darlings enter into marriage with a similar soul mate, one or both newlyweds experience the shock of their lives, such as dealing with someone who constantly expects special treatment and consideration.

Two royals in the same small Seoul apartment do not often bode well for making a long-term marriage. So it is not unusual for South Korean honeymooners to return home from their first week together in separate airplanes. In fact, South Korea has caught up with other advanced economies, such as the United States, where the divorce rate is now roughly 50 percent.

All of this diminishes the likelihood that these only children will produce more than one child of their own.  This same mentality that creates these rocky marriages also works against young South Koreans getting to know each other, given their high standards and prejudices and the aforementioned intrinsic Korean shyness. So it is not surprising that on average most South Korean women delay marriage until age 29 and most men marry on average at almost 32 years old.
Certainly, one of the growing factors for South Koreans to delay marriage is the economy, where today it takes more time to adequately save to set up a household than it did a generation ago. But what is considered to be today’s minimally acceptable household is luxurious compared to what was required a generation ago.

However, the economic influences can be viewed as red herrings as to why South Korea has such a low birthrate. Korean families are usually remarkably generous in helping determined younger relatives to set up their first household. The fundamental issue is Korean tradition and culture, as manifested in today’s dynamic society. While this nation has quite rightly received due accolades for becoming the “Miracle on the Han,” it has come at a price.

Whenever an observer attempts to take in the enormity of this nation’s population crisis, he or she can only be amazed that South Korea’s very low birthrate is actually as high as it is. One can only wish public and private leaders all the best of luck in getting more young people to marry earlier and produce more babies. The low birthrate remains one of this nation’s most vexing challenges.

by Tom Coyner.  President of Softlanding Korea and Senior Advisor to IPG Legal.
You can find Tom at: www.softlandingkorea.com
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Aug 22, 2013

Korea is Second in the Number of Anti-dumping Lawsuits filed against Korean Companies

According to statistics from the World Bank, Korea is second to only China in the number of anti-dumping lawsuits filed against Korean companies (Chinese companies accounted for 28.7%; Korea 10.7%; U.S. 3.5%; and Japan 3%).

It is advisable for clients engaged in anti-dumping cases to confirm the veracity of the data presented to the U.S. International Trade Commission (ITC).  The ITC have few resources to confirm the data.  

We were retained, last year, for an anti-dumping case against a Korean conglomerate.  We have seen a drastic increase in the number of clients interested in taking on Korean and Chinese companies alleged to be dumping products into the United States.  We expect the number of cases will increase after a few successful cases by U.S. and European companies against Korean and Chinese companies.  
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Aug 20, 2013

Korea’s Defense Acquisition Program Attracts Attention because of F-35 Judgment

The Korean Administration began its final bidding session on Tuesday, August 13th to find a replacement for its obsolete 1960’s-era F-5 fighter plane.

The bidding is expected to last until Friday, August 16th. It’s anybody’s guess as to whether Korea is going to go with the Boeing F-15, Eurofighter Typhoon, or Lockheed Martin F-35. Of these planes, the F-35 is by far the most advanced – and the most expensive, at nearly USD 100 million per unit.

While the F-15 seems to be the favored plane at the moment, a Korean rejection of the F-35 could spell disaster for the F-35 program itself. The Pentagon’s controversial F-35 program has definitely seen better days. The fifth-generation stealth fighter, which is still in development, has been designed to replace the Pentagon’s now-aging fleet of F-16’s and eventually make up the bulk of the U.S. Air Force.

The Pentagon hopes to make the F-35 into its “one-size-fits-all” fighter (as much as this concept is possible). The three F-35 variants, the F-35A, F-35B, and F-35C, each have different mission capabilities and combat roles. The idea of an easily-upgradeable and mission-shifting aircraft is very attractive to the Pentagon given that the potential mission objectives for the U.S. are nearly limitless in scope.

This open-ended development philosophy has also unfortunately led to a problem of “feature creep” in the design, where proposed features seem to be endlessly added at a cost that is spiraling out of control.

While it’s not unusual for a Defense Department project to experience the usual political ups-and-downs over cost, for some reason the F-35 just can’t catch a break. Let’s take a look at the estimated costs of the program: Projected development cost: USD 40 billion. Projected acquisition cost of 2,443 aircraft: USD 391 billion Projected total cost over the 55-year lifetime of the aircraft: USD 1.5 trillion

These numbers have led to the program being the subject of repeated calls for cancellation by U.S. politicians and elites in the Pentagon. Sequestration has increased the frequency of these calls. Are these just idle threats designed to get the project moving in the right direction? Nobody knows.

The Pentagon’s equally controversial F-22 stealth fighter program was itself cancelled two years ago after only 195 of the planes were produced – so outright cancellation is certainly not out of the question. Is the F-35 going to face a similar fate?

What happens in Korea on Friday may help answer this question. Korea purchasing the F-15 or Typhoon may create a crisis of confidence in the US-ally states that are helping with the development of the F-35 program. Several of these states have already voiced concern that steep prices would lead to a reduction in the overall amount of units purchased – a few have even threatened outright cancellation of orders.

The F-35 cannot afford to lose the bid in Korea. It’s also not even a certainty that Korea is going to choose an American plane over a European one, so we can’t just assume that the F-15 is going to win the bid as a cheaper and safer alternative to the F-35.

This past February, Korea opted to purchase attack helicopters from the Anglo-Italian company AgustaWestland instead of American - Sikorsky Aircraft. Any of these planes are fair game, and several other countries are waiting to see which direction Korea goes before they make their own decision on the F-35.

What do you think? Would the F-35 be good for Korea?
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 info@ipglegal.com

Aug 12, 2013

GM to Reduce Production in Korea because of Labor Costs

GM has been a success story for Korea FDI, however, the success story may have been more of a fairytale.

GM produces around 1/5 of its automobiles in Korea.  According to local media sources, management at the company is posed to lower production in Korea because of rising labor costs in Korea that are caused by bonuses being included in "regular wages," thus, increasing severance obligations, a union that threatens to go on strike nearly every year (last year all full-time employees received based on a threat of strike a bonus of around USD 9,000) and increasing wages year-on-year.

GM has, already, decided to not produce the new Chevy Cruise in Korea.   The current model will, still, be produced in Korea.  It has been noted by NBC that the development center for the Chevy Cruise has been moved from Korea to a technical center near Detroit.  A small SUV produced in Korea and sold throughout Europe, seemingly, will have a similar fate.

What is the answer to this problem?

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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Aug 7, 2013

Possible Strike for Employees of Hyundai Motors

It has been reported, in the local Korean papers, today that negotiations between the Hyundai Motors Union and Hyundai Management have ended without a deal.  The union reported that they would not budge on the basics of their proposal. 

The union has been demanding the increase of the retirement age to 61 (Korean law mandates a minimum retirement age of 60 by 2016), a pay raise, shorter working hours and an increase in some basic benefits.

Hopefully, the union and management realize that these situations make Korea look like a not so business-friendly destination.  Another strike would have a very harmful impact on the image of Korea in the minds of companies that are considering destinations for investment.

Korea is increasingly struggling to obtain FDI with labor being one of the major red flags for investors.  
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Aug 6, 2013

Possibile Successful Business Opportunities in Korea

I just read a blog post by my friends over at the China Law Blog that motivated me to write the following post.  Korea is an excellent testing ground to determine the feasibility of your business for other Asian markets such as China.  The country has, also, proven more profitable, for many businesses, than the often too hard to catch "Chinese Middle Class."

The following is a list of some industries that are succeeded in Korea.

1.  Franchises.  The franchise market in Korea is booming.  All major players are in Korea and, most,  are doing very well.  Many of the less known franchises have, also, succeeded. 

2.  Education.  Koreans have a thirst for education that seems insatiable.  Much of the market, however, is closed to foreign competition. 

3. Military Technology.  Korea is one of world's largest purchasers of military technology.  All major players have a solid footing in Korea with many of the second-tier players playing a vital role in Korea's blossoming native military technology industry.  

4.  Food & Beverage.  Foreign products are now seen, everyday, on Korean dinner tables. 

5.  Health & Pharmaceuticals.  As an aged society, Korea has struggled with many of the same diseases as seen in the West. 

6.  Fashion & Textile.  The middle and upper class in Korea have an aptitude for luxury goods that is beginning to rival even the Japanese. 

7.  Green Tech.  As the world changes so does Korea.  The World has a thirst for sustainable solutions and Korea is, slowing, following suit. 

8.  Suppliers to Chaebols.  The major companies in Korea are purchasers of everything from automobile supplies to crude oil. 

9.  Software.  The top foreign players dominate the market with a few Korean companies that have made a substantial niche in the market.  Many foreign players have successfully licensed software to major conglomerates with success. 

10.  Industrial Machinery.  Surprisingly enough, Korea is an importer of high-tech industrial machinery.  A great deal of the machinery is imported from Japan.

11.  Entertainment Business.  With a shrinking workweek and more disposable income Korea consumers are increasingly spending on entertainment and leisure.  I am looking forward to Metallica in Seoul at the end of this month. 

12.  Tourism.  Tourism spending has increased over the past decade, leading to low hotel vacancy rates and a boost in retail spending on fashion, entertainment and electronics.  The largest tourist population visiting Korea is the Chinese.  The Chinese find, in many cases, shopping in Korea more economical than shopping in Hong Kong.

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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com

Aug 1, 2013

Minimum Wage to Increase in Korea to KRW 5,210

The minimum wage in Korea has increased by over 7%.  The new minimum wage is now set at KRW 5,210 which equates to KRW 41, 680 per day or KRW 1.08 million per month.  Korea's Ministry of Employment and Labor statistics indicate that 2.56 million workers are paid, only, the minimum wage.
 
Unions were pushing for a 21.6% rise in the minimum wage, while business lobbies were calling for a wage freeze.   The largest number of individuals being paid the minimum wage are in service and light manufacturing.
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SeanHayes@ipglegal.com

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.

www.ipglegal.com