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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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    South Korea’s “creative economy” – 6 strategies

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

    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
    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.

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    Happy Holidays & A Happy New Year – from Asia-Pacific Global Research Group (

    December 20th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    Wishing You and Your Loved Ones A Very Happy Holidays & Happy New Year
    Asia-Pacific Global Research Group.



    Korea in 2014: Big 3 Impacts to Watch

    December 19th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    1. NORTH KOREA’S NEXT MOVE: North Korea could decide to initiate provocative acts in 2014, including the early part of the new year. The months of January and February are particularly noteworthy, since these months include dates commemorating the birth of both of the DPRK’s former leaders, Kim Il Sung and Kim Jong Il. Precedent also exists for such provocative acts. Earlier this year (in 2013), North Korea also tested its nuclear weapons technology at the start of the Chinese New Year, which both Koreas recognize and celebrate. Although the financial markets generally have not overreacted to North Korea’s often purposely provocative acts, given the high inter-linkage of the Asian markets, an unexpected known-unknown black swan event could lead to market surprise to the downside.
    2. BANK OF KOREA’S (BOK) KEY RATE HIKE: the BOK has left its key rate steady at 2.75% for seven consecutive months, as the local economy is showing signs of a moderate recovery amid tame inflation.But the BOK is likely to increase its rate in 2014. The BOK’s decision to keep its rate steady at the end of 2013 came as a set of data pointed to a moderate recovery of the Korean economy while the timing of the Federal Reserve’s monetary stimulus tapering still remains uncertain. The South Korean economy grew 1.1% on-quarter in the third quarter, the same pace as in the second quarter, on improving domestic demand and a pickup in facility investment. The country’s industrial output grew 1.8% on-month in October, the fastest gain in 11 months, indicating that the economy might be picking up. South Korea’s inflationary pressure remains subdued as consumer prices are running below the BOK’s 2.5-3.5% inflation target band for the 18th straight month in November. The on-year growth of consumer inflation picked up to 0.9% in November from 0.7% in October.
    3. REAL ESTATE AND CONSUMER DEBT MAY MOVE UPWARDS: The South Korean real estate market has been relatively static in 2013. But a pick up in the real estate market could occur based on relaxed policies in 2014. This potential positive upward movement in the nation’s residential real estate market, however, must also be managed with the nation’s burgeoning consumer debt levels. A survey of 20,000 households conducted jointly by the Bank of Korea (BOK), Statistics Korea and the Financial Services Commission showed households had an average debt of 58.1 million won ($55,000) in March, up 6.8% from the previous year. The debt of those households in the lowest-income group rose 24%, from 10 million to 12.4 million won, while the other groups, not including the richest, saw their average debt increase between 9.7 and 16.3%. Of households in debt, 8.1 percent said they may not be able to repay the money they owe, up from last year’s 7%. The survey showed that the lower a household’s income level, the higher the ratio of people who said repayment was unlikely.
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