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    South Korea’s “Closed Internet”: And Why It Hampers a Creative Economy

    April 12th, 2014  by  Asia-Pacific Global Research Group - Jasper Kim

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    South Korea is heralded as the new “future city.” A city one envisions when thinking of a megacity of the future – modern, trendy and tech-savvy. The country is publicly touted as the most wired economies in the world, boasting the highest penetration of broadband internet users in the world. The nation also aspires to incorporate 5G broadband capabilities by 2020, allowing users access to internet speeds 1,000 times faster than the nation’s currently existing 4G network (in which a full movie can be downloaded in mere seconds).
     
    The irony is that South Korea’s blazing “bullet-speed broadband” internet technologies are highly constrained by a “closed internet” ecosystem–in which internet content and its users are subject to often intense scrutiny and intervention. This not only hampers creativity, it also hampers future start-ups.
     
    Instead, South Korea should deregulate, not over-regulate, its internet ecosystem to become a prime example of an “Asian start-up nation” fostering a “Second Miracle on the Han River.”
     
    Consider the following few examples of South Korea’s “closed internet” ecosystem:
     
    – In 2013, Freedom House, an American NGO, ranked South Korea’s internet as only “partly free
     
    – Reporters without Borders has placed South Korea on a list of countries “under surveillance”, alongside Egypt, Thailand and Russia, in its report on “Enemies of the Internet”
     
    – Every week portions of the Korean web are taken down by government censors. In 2013, about 23,000 Korean webpages were deleted, and another 63,000 blocked, at the request of the Korea Communications Standards Commission (KCSC), a nominally independent (but mainly government-appointed) public body
     
    – In 2009, the KCSC made 4,500 requests for deletion.
     
    – Online gaming is banned between midnight and 6am for under-16s (users must input their government-issued ID numbers as proof of the user’s legal age).
     
    – A law dating back to the 1950-53 Korean War forbids South Korean maps from being taken out of the country. Because North and South Korea are technically still at war, the law has been expanded to include electronic mapping data—which means that Google, for instance, cannot process South Korean mapping data on its servers and therefore cannot offer driving directions inside the country.
     
    – In 2010, the UN determined that the KCSC “essentially operates as a censorship body”
     
    The South Korean government has recently placed a policy emphasis on deregulation to foster the nation’s so-called “creative economy” while bolstering SME growth.
     
    Given this, we believe that South Korea would benefit economically as an open civil society in the twenty-first century if it deregulated related internet freedom laws. This would spur innovation and creativity–while signaling that South Korea’s policymakers are invoking a form of “domestic trustpolitik” between the government and the constituency they are designated to serve–the general public.

     
     

     
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    South Korea’s Deregulation Decision: If You Love Creativity, Set the Economy Free [Asia-Pacific Global Research Group]

    March 22nd, 2014  by  Asia-Pacific Global Research Group - Jasper Kim

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    SEOUL, March 20 (as reported by Yonhap News) — President Park Geun-hye held a nationally televised meeting with regulators and businesses Thursday in a highly symbolic show of determination to undo non-essential regulations she has denounced as “cancer” that’s killing South Korea’s economy.
     
    Park has made deregulation the most important point in her drive to reinvigorate Asia’s fourth-largest economy under her three-year economic innovation plan. The plan calls for raising South Korea’s potential growth rate to around 4 percent and the per capita national income to more than US$30,000 by 2017.
     
    Deregulation is also important in realizing Park’s “creative economy” vision that calls for boosting the economy by turning creative ideas into real businesses through science and technology and information technology.
     
    Park has repeatedly stressed the importance of deregulation and how much she is committed to it, with the language and tone in her appeals growing increasingly stronger in a sign of frustration she feels about the lack of progress and the difficulty getting bureaucrats to remove regulations.
     
    During the meeting, the government reported that it will cut the total number of registered regulations on business activity to 80 percent of the current level by 2016. That translates into the removal of 2,200 regulations and a drop in the total from 15,269 to 13,069.
     
    The government also reported it will adopt Britain’s “regulation cap” system to keep steady the total cost of regulations borne by businesses and the public. The system calls for removing old regulations to make room for new ones. British Ambassador Scott Wightman has also been invited to speak at the meeting about the country’s “regulation cap” system that calls for keeping the total number of regulations steady by making it mandatory to remove old regulations in order to introduce new ones, officials said.
     
    It will first be tested by seven ministries, including the Ministry of Land, Infrastructure and Transport, starting July, before being expanded across the government starting in January next year.
     
    ASIA-PACIFIC GLOBAL RESEARCH GROUP’S IN-HOUSE VIEW:
     
    We absolutely believe in the principles of principled deregulation for the South Korean economy. This is especially the case in the 21st century, as Asia’s fourth largest economy tries to “free the minds” of its untapped youth and next-generation creative talent. Currently, the economy is overly top-heavy as reflected in an industrial infrastructure that is heavily producer and export-driven. Today, most of South Korea’s GDP is export-dependent. This is good when South Korean exports are in demand by overseas markets, but not so good when such demand falters for endogenous or exogenous factors.
     
    We commend President Park Geun-hye’s latest public efforts to deregulate. Hopefully, such governmental will not turn into another added and ironic regulatory layer in and of itself to get the mission accomplished.
     
    In addition to such government-led deregulatory efforts by the Park administration, why not try an alternative approach?
     
    Why not set out the principles of deregulation in the form of “negative” and “positive” rights?
     
    this would be an elegant, efficient, and effective step forward, without requiring overly burdensome legislative efforts.
     
    To illustrate, during the formation of the U.S. (the world’s oldest democracy), The Declaration of Independence calls for the British government to end the “long train of abuses and usurpations” of “certain unalienable Rights,” specifically “Life, Liberty and the pursuit of Happiness.” The authors and signers of the Declaration did not desire for government to provide “Life, Liberty and the pursuit of Happiness”, but rather they expected government to protect their pre-existing rights which were “endowed by their Creator.”
     
    The unalienable rights in the Declaration and many found among the first amendments to the Constitution are considered “negative rights.” A “negative right” restrains other persons or governments by limiting their actions toward or against the right holder. In other words, it enables the right holder to be left alone in certain areas. For example, the right to be secure in one’s home requires that others refrain from trespassing or entering without permission.
     
    On the other hand, many claims of rights emerging since America’s founding, such as rights to healthcare, housing, or standards of living, are considered “positive rights.” These positive rights essentially provide the right holder with a claim against another person or the state for some good, service, or treatment. Thus, a right to housing obligates someone – presumably the state – to provide the right holder with housing, typically via resources obtained from others.
     
    The words “negative” and “positive” reflect the nature of the right itself.
     
    Applying “negative” and “positive” rights, entities in the South Korean marketplace (including SMEs and start-ups) could be protected under both a “negative” right (i.e., freedom from overly burdensome regulatory processes; specifics could be listed instead) as well as certain “positive” rights (e.g., freedom to pursue life, liberty, and happiness through the pursuit of commercial activities; this is just a broad case in which specifics could instead be provided by the state).
     
    After all, everything else being equal, wouldn’t we want to “let a thousand start-ups and new enterprises bloom” in South Korea and elsewhere with less (rather than more) regulation?

     
    If you are interested in how Asia-Pacific Global Research Group can help your organization, CONTACT US HERE.
     

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    Korea-Canada FTA Concluded: 5 Things You Need to Know

    March 14th, 2014  by  Asia-Pacific Global Research Group - Jasper Kim

    Park Geun-hye and Stephen Harper
    On March 11, South Korea and Canada on Tuesday concluded their negotiations for a bilateral free trade agreement (FTA), which will likely be signed and ratified later this year.
     
    1. EXECUTIVE SUMMARY: The Korea-Canada FTA is expected to help significantly boost bilateral trade. The Korea-Canada FTA completely removes the two countries’ import tariffs on 97.5 percent of products traded between them within 10 years from the day of implementation.
     
    2. SEVEN YEARS TO NEGOTIATE: The negotiations for the Korea-Canada FTA resumed late last year after five years of stalled talks. The FTA negotiations were first launched in July 2007, nearly seven years ago. Canada has signed FTAs with nine other countries, but South Korea is the first Asian country to sign an FTA with the North American nation.
     
    3. AUTOMOBILES AS WINNERS: South Korea will completely remove its 8 percent import tariffs on all automobiles and auto parts from Canada as soon as the bilateral trade pact goes into effect. Canada, on its side, will reduce its current 6.1 percent import tariffs on South Korean automobiles and parts to about 4 percent within 24 months of the implementation. In 2013, South Korea shipped over 130,000 vehicles worth some US$2.23 billion to Canada while importing approximately $92 million worth of vehicles and parts. Canada is the world’s fifth-largest market for South Korean automakers, also importing about 90,000 cars per year from South Korean manufacturers in the United States, according to the trade ministry.
     
    4. RICE MARKET STILL PROTECTED: A total of 211 of 282 total products, including rice, will be permanently exempt from market liberalization. Rice is often considered one of the most sensitive items with South Korea’s FTA negotiations with various counterparties.
     
    5. BEEF IMPORTS NOW ALLOWED: South Korea will also gradually remove its tariffs on another sensitive domestic issue– beef imports -from Canada over a span of 15 years.
     
     
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    If you are interested in how Asia-Pacific Global Research Group can help your organization, CONTACT US HERE.
     

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    South Korea’s “creative economy” – 6 strategies

    February 12th, 2014  by  Asia-Pacific Global Research Group - Jasper Kim

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    South Korean President Park Geun Hye’s agenda for the economy’s second miracle on the Han River is under the title of “the plan for Creative Economy-Measures to Create the Ecosystem for Creative Economy.”
     
    But what does “creative economy” mean exactly? Now that the Korean president has had time to adjust and initiate her policies, we begin to see what the policy mantra of “creative economy” means as a matter of policy:
     
    The post-Great Recession global economy has witnessed a shift in focus of value creation to the “innovative technology and creative idea (creative economy)” away from labor and capital, reflecting the 20th century industrial economic ecosystem–towards knowledge and information technology, reflecting a 21st century economic ecosystem and knowledge-based economy.
     
    The “creative economy” policy hopes to leverage the country’s cutting-edge technology, culture, and art. The policy’s focus has been placed on supporting and expanding small-to-medium businesses that can lead to job creation up the value chain. South Korea also mapped out the strategy (creative economy plan) for a unique and value-added creative economy that fully leverages its comparative advantage in its ICT capabilities towards creativity-driven growth, moving beyond the catch-up growth strategy based on imitation and application. The creative economy economic policy initiative presents the vision and objectives of the so-called creative economy. Putting together and integrating the tasks of several government ministries, related tasks have been identified jointly by such respective government ministries since late March 2013. The opinions of the various ministries were accepted and reflected in the administration’s creative economy plan.
     
    Creative Economy – Policy Summary:
    ◎ Presentation of 3 major goals, 6 strategies
    The creative economy plan envisions three goals to create an economic ecosystem for fostering a creative economy in a new era of hope and well-being of the general public:
    ▲ Creation of new jobs and market through creativity and innovation
    ▲ Strengthening the global leadership of the nation’s creative economy with other global economies
    ▲ Respecting creativity and promoting creativity within society
     
    The 6 strategies are as follows:
    ▲ Creating an economic ecosystem where creativity is fairly rewarded where business startups are easier (Strategy 1)
    ▲ Promoting venture capital firms and small-to-medium businesses playing a leading role in the creative economy and make inroads into global markets (strategy 2)
    ▲ Creating the growth engine for pioneering new industry and markets (strategy 3)
    ▲ Fostering the global creative human capital talent who have the vision and wherewithal to become a vital part of the creative economy (strategy 4)
    ▲ Expanding the nation’s science technology and ICT innovation capabilities, which lay the foundation for the creative economy (strategy 5)
    ▲ Initiating the creative economic culture that promotes the involvement of both government and people (strategy 6)

     
     
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    Doing Business in the Philippines 101: 5 Things to Know (Asia-Pacific Global Research Group)

    January 16th, 2014  by  Asia-Pacific Global Research Group - Jasper Kim

    Philippine Call Center
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    Foreigners travel to the Philippines for vacation and some of them get the idea to set up a business there so that they can live in a cheap, friendly, tropical paradise year-round. When you look at the economy’s growth potential, this seems like a great idea. The Philippines economy is expected to be one of the fastest growing in the world. The Philippines has an abundance of inexpensive labor due to a population of over 100 million, much of which is young. The country continues to try to reduce corruption, a problem that has plagued foreign investment and economic success in the past. The country recently had its credit rating increased as well, which is a sign that foreign investment will be increasing in this country. So, why not set up a business on one of its 7,000 tropical islands and live the dream?
     
    While investing in the Philippines may be a great long-term move for well-diversified institutional and retail investors, those who are thinking of investing a significant piece of their savings in a business here should proceed with extreme caution. For most people who are considering relocating to the Philippines, the best advice may be to invest in a well-diversified portfolio, go ahead and move here if your income is sufficient, and avoid setting up a business here. Stories abound of foreigners coming here and losing a large chunk of their savings of even their lives. The Philippines can be a very dangerous and risky place to do business. It’s a bit like the Wild West in America. However, for those who have the risk appetite, have enough capital to open a business and still survive if everything is lost, and have the appropriate business experience, it can be “More Fun in the Philippines.”
     
    If you believe this is you and you still want to open that business and live the dream, here are 5 recommendations to help lower the risk of your business investment.
     
    1. Keep Your Friends Close and Your Business Partners Closer: As a practical matter, subject to local counsel’s input, it is highly recommended that you set up a corporation as opposed to a sole proprietorship or partnership. This will primarily serve to lower your individual risk and protect your assets outside of the corporation. Even though this is not a partnership, many corporations in the Philippines may require a Filipino investor, and a majority of Filipino board members. In many cases, foreigners are not allowed to own over 50% of a corporation, which effectively means you are not in control. In these cases it is extremely important to do your due diligence on your partners. Have they done business successfully with other foreign investors? Are they well-diversified? Rushing to open your corporation by finding Filipino partners that have not been well-vetted is a perfect opportunity to kiss your money goodbye if you’ve chosen incorrectly.
     
    2. Set up an Operating Agreement with Your Fellow Owners: Have an experienced attorney set up an operating agreement for your business. Among other things this will serve to reduce your chances of being sued if something goes wrong. In addition, talk to your attorney about having an arbitrage clause in your operating agreement. If you have some dispute with the other investors, it can take years to settle these disputes in the Filipino legal system. With an arbitrage clause you’ll be able to get a legally binding outcome much, much faster if a problem does occur.
     
    3. Monitor Your Cash Flow Early and Often: As my former teacher Steven Kaplan at the University of Chicago Booth School of Business taught me: Cash Is More Important Than Your Mother. If you don’t have cash you won’t have a business, but you’ll still have your mother. In addition, because corruption has been a problem for many business owners here, you have to monitor the cash flow and analyze it. If you don’t know how to do this, you should hire an analyst who does. They will be able to spot any potential abnormalities which you can then address before it turns into a majority disaster for your investment. In addition, a good analyst can provide additional recommendations on how to increase the profitability of your business.
     
    4. Setup A Computer Database to Track Your Business Activity: A lot of the business activity in the Philippines is recorded on paper. Although, some of this may be necessary, it is recommended that you enter the information directly into a computer where possible and hire someone to do the data-entry to get it into the system for all other cases. Having all of your business activity in a database is essential for the analyst monitoring your company. With a properly configured database, you will be able to monitor your company’s cash flow and increase its profitability much easier. The idea is to get the data, analyze it, make changes to improve profitability, get the new data, analyze it, etc. This will allow you to monitor and continuously improve your business.
     
    5. Don’t Cut Corners: Some people may be tempted to follow some of the corruption they see around them by doing things such as paying bribes, not paying all of your taxes, or not following other regulations. Doing business in the Philippines is not going to be easy. But if you have the right experience, business plan, strategy, patience and dedication, you can have a viable long-term, profitable and fun company. If you feel you have to cut corners to make it, you either don’t have the patience or the right business plan to succeed in the long-term. In that case you are better off not opening the business.
     
    Brian Sullivan is an Assistant Professor of Finance at Hallym University in South Korea where he teaches classes in Financial Management, Risk Management and Management Strategy. He has over 15 years of real world experience analyzing companies. He is a graduate of both the University of Chicago Booth School of Business and the University of California at Berkeley. His wife is from the Philippines.

     
     
    If you are interested in how Asia-Pacific Global Research Group can help your organization, CONTACT US HERE.
     

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