Korean Economy

One Nation, Under the Chaebol



by Third Bass

Aweek ago a friend passed on an intriguing post from the Global Voices website about a new piece of proposed legislation seeking to strike back at Korean consumers taking their business overseas. It appears that,  in order to skirt the significant markups on consumer electronics, younger consumers are increasingly utilizing overseas internet retailers such as Amazon, and this is creating quite a bit of consternation among the denizens of Korea Inc. For those that reside in the ROK, the atmospheric prices―relative to those in the U.S. at least―of computers, smartphones, speakers, autos, clothing, etc., is hardly shocking news. However, those unacquainted with shopping in Korea may be puzzled to learn that even Samsung, LG and Hyundai products sell at prices often two to three times greater than those charged in the U.S. market. In fact, one disgruntled Korean consumer cited in the story points to a Korean brand TV selling for roughly $5,900 in Korea and $1,550 in the U.S. This difference is stark. 

Did Korean Chaebol Follow This Advice Given 2.5 YEARS AGO?

Somehow, I Doubt It

Academics Are Now On Board
In Korea, the Samsung Economic Research Institute is probably the most well-know economic think tank. This guest post recently appear on FT’s blog, which suggests that the Yen’s decline has not yet hit Korea. I would totally disagree with this. The disruption is here, the result is global volatility, equity markets are higher than at any point over the past year, the KOSPI is flat at best. On the flip side, there are those that would have borrowed in JPY from Korea, and they will benefit (like plastic surgeons), or real estate investors. To what extent they have benefited is unknown, but it is there.

Tale of Three Pictures: Nikkei, KOSPI, and JPY/KRW


This blog has taken some grief for its analysis regarding the Korean Won, the Japanese Yen, and the fact that Korean chaebol have done well in no small part due to the incredible Yen strength.

Let’s take a look, shall we?

The KOSPI hasn’t moved over this last two years.

Chart forKOSPI Composite Index (^KS11)

Now, this is the Nikkei (Japanese stock market), which is now at a 5-year high.

Chart forNIKKEI 225 (^N225)

And now, the punchline:  this is the KRW/JPY exchange rate.  The lower the number, the stronger the Korean Won, compared to the Japanese Yen.

SK Global: Is the Tide Turning on Corporate Governance in Korea?

Do Not Pass Go.  Do Not Collect $200.
SK Group now-ex-chairman Chey Tay-Won was convicted of embezzlement and ordered directly to jail for 4 yours.  Just wow.  This blog has reported and comment on this issue, many times, in the past.  This isn’t the first time that this has happened in Korea, nor is it the first time that Mr. Chey and SK has become familiar with the Korean penal system.  In fact, the amount of money embezzled is small in scale compared to the past infraction of huge accounting abnormalities at SK Energy, for which  Mr Chey has served a 1 year jail sentence.  It is a little-known fact that the Korean government chose to not prosecute Mr Chey to the fullest extent possible at that time; the most -likely reason is that the government believed that the Korean economy was too weak to take such a massive blow.

Bullets Intact, Overshooting Prevented, BOK Does Its Job

Giving Credit Where Credit is Due
Those who have read this blog in the past know this fact: the Seoul Gyopo Guide is no apologist for the Korean government. However, you should make no mistake, the Bank of Korea deserves an A PLUS for its behavior and prudence under the strangest confluence of internal and external factors influencing its economy, and therefore, the Korean people. I repeat: the Bank of Korea has had the right, the obligation, to maintain its wait-and-see approach with respect to interest rates. Today, surprisingly, the Bank of Korea moved, and reduced interest rates by 25 basis points, from 3.25% to 3.00%.

A Different Kind of IMF 시대. The Good Kind.

Seoul Pledges $15 Billion to the IMF
In the late 1980s, South Korea faced sovereign default. The things you read about Greece? Korea was in virtually the same situation. It received enormous international financial assistance, in the form of loans from the International Monetary Fund (IMF). In Korea, this was called IMF시대 (please don’t say “HEY! Just like 소녀시대). Controversy ensued, but Korea paid back the loans, with interest, and in advance. It was an era of austerity for Korea and the Korean economy. One dollar bought 2,100 Korean Won at the time.

Japan’s Excruciating, Inevitable Economic Decline and Korea

This Is NOT An Personal Vendetta Against Japan, Nor The Japanese
Let’s get this straight. Japan has accomplished the near-impossible. No natural resources, surrounded by no allies to speak of, and thousands of miles away from the largest developed markets, Japan had, at one time, grown to the second largest economy in the world, with less than half the population of the U.S., the world’s largest economy. But things change, and the decline of Japan is akin to the train wreck that no can help but to watch. The Seoul Gyopo Guide has pointed this out on many occasions. And while the Japanese language is easy for native Korean speakers to learn, this blog has stated that learning Japanese is a huge waste of time.

Korea’s Opposition Threatens to Overturn KORUS FTA: Dumb Idea

How to Lose Friends and Aggravate Others
The informed recognize Korea’s ascension as a developed economy. that is undisputed to those that know better. That position is (relatively) secure. However, issues remain. One of these issues is highlighted here, in this Bloomberg article. The theme: legal system stability doesn’t exist in Korea.

Dear Korean Police: The Chaebol Are Laughing At You, LOUDLY

Charged With Embezzlement? Meh, Move Along…
You have to laugh, or else you will cry. The mK Business Daily reported that SK Group Chairman Chey Tae-won has been appointed to the Hynix board of directors. HUH? Now, as the largest shareholder of Hynix, there is no doubt that someone from SK Group deserves a place on the board. Zero doubt. However, does it need to be SK Group Chairman Chey, the same one that is being charged with embezzling almost USD 90,000,000 from SK, and its shareholders? By the way, those shareholders? Koreans, and most likely also Korea’s National Pension Fund. Just to get this straight: a person being prosecuted by the police, which is supposed to protect the inhabitants of Korea, are being laughed at by a company owned by the citizens of Korea. Looks contorted right? That is because it is.

Korea’s Growing (Aging) Pains: Housing and Real Estate

Note: This is the first in a series of posts that will focus on the challenges that Korea will face as a result of its aging population.

Welcome to the First World, Korea
This snippet at Yonhap points out one of the growing pains that Korea will inevitably face. There is no getting around it. Korea’s higher per capital GDP and improved nutrition (not to mention newly-imposed no smoking laws, will increase live expectancy).

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