Can Japan Rise From The Ashes?

"Never thought I'd see a pin like this."



This is probably my third article related to how Japan is losing to Korea, with the latest one written right before my lengthy distraction - yes, I was distracted.

It seems like a large number of Japanese companies admit that they are lagging behind their Korean counterpart, in particular, the Television Industry to which Samsung and LG are currently holding the heavyweight title. To say that the Japanese are completely out of the picture however would be too much of an understatement; they are still somewhere on top with their Advanced Robotics Industry, among other high tech things.

I think the bigger question in this case would be how long can South Korea maintain their position as a top producer and exporter of electronic goods? I recall having this interesting chat with the Assistant Trade Commissioner from Korea based here; we were talking about how Koreans work late and I thought that this could be a factor draining creativity and innovation to which he couldn't agree more. He also questioned Korea's how long can they sustain their top position. Personally, what Koreans have achieved so far can be attributed to their sense in reverse-engineering; for instance, have you tried comparing Samsung's Galaxy series to Apple's iPhone? Notice the similarities? I also question their status as a "developed" country; and wealth generation which does not distribute income equally.

Korea's ability to maintain their top position can be question through the multiple suits launched by both Samsung and Apple against each other (to which I think was overly stupid and childish). Why you ask? Well after the couple settled down, Apple now plans on purchasing memory and microprocessors from Japan and Taiwan, in an attempt to "reduce their dependance on Samsung" to which, is nothing more than a bunch of pure, unadulterated bullshit. It's clear that Apple was butthurt with the entire charade; so their relataliating by swapping suppliers. Now the question is; how would losing a major client such as Apple affect Samsung's overall direction? I'm pretty sure their future direction now is somewhat shaky to the least.

Clearly, only time will tell.

The Great Hiatus

"We will return shortly ... maybe after 2 months"



... Yeah. Procrastination and pretending to be busy at work was probably the reason.

Getting back;,here are two interesting stories.

So it seems like there's a growing number of Chinese Companies defaulting on their contracts; why you cunning bastards. Can't blame them since there's their economy has been going downhill since last year. Now that demand on their side is weakening the whole world is in panic mode; affecting countries like Australia. Could this mark the downfall of China's economy - therefore the world? Fuck no. I'm pretty sure its temporary. I had a good chat with a newly made acquaintance who thinks that the China's economy isn't really slowing down; the Chinese government is artificially cooling (with the relevant policies) the economy to make sure they don't grow 12" inches too long or to a point where inflation comes on their faces harder than a brick wall. In his words; Effective first, then Effeciency. So I guess the government is making tweaks to make sure growth is stable in the long run; hell any GDP growth of <5% should be better than any of the already developed countries.

On another note, I recall reading an article on South Korea being pressured to halt their imports of oil from Iran; although America agreed to allow them to continue all non-oil related transactions, EU is starting to throw a fit and rejected any exemption appeals by the Korean government. Not a big fucking deal to me anyway but I was drawed towards this particular line in one of the articles;

European insurers have a monopoly on shipping insurance, so it will be extremely difficult to find replacements

How come they have monopoly over shipping insurance; in particular, for Oil Shipments? I think that is a huge fucking question that needs to be answered; I'm demanding it to be answered. Could it be because of the fact that they have been in the industry so long? Is it because only they have the capital for it? I doubt it. This is definitely something worthwhile doing a bit more research on.

Feels good to be writting again.

Korea Fastfoward?

I think its a Chinaman and nota Korean on the right side ...

As much as Japan is changing (refer to previous article) and how Korea is overtaking Japanese Companies, here's a newer area in which Korea is overtaking Japan in. Come on you Japs, what the hell are you guys doing?

Say No To Populism

Take ALL the money!

I've always wondered by the name Bahk Jae-wan comes up in ChosunIlbo; turns out he's one of those policitians who actually knows shit but not sucumbing into populist measures during election years, unlike Malaysia. Its these kind of politicans that we need - people who act not based on what the people want, but what what's best for the people.

Sustaining Japanese Exports

Good point; why dont they try to export their Sumo sports?

Well can they? In a recent article from Yomiuri, Japan posted their first Trade Deficit in 31 Years (since 1980); should we call this an achievement? Definitely, but not a positive one.

The deficit is a result of four consecutive events which occured in 2011; The Japanese Earthquake, The Flooding of Thailand, Appreciation of Yen and a Surge in LNG Imports to commenstruate the loss of power generated from the Fukushima Nuclear Plan. Now apart from Trade Deficit, another concern of theirs would be their dwindling Current Account Balance.

Ouch! Two hits in one year; that can't be pretty. Apparently the majority of the surplus in their Account Balance is driven from the interest payments received from U.S. Bonds in which the Japanese Government holds quite a nice sum. This is what happens when you get America to spend a lot, and East Asian countries to produce them; imbalance in the production and spending side of Capitalism. So when a major importer like America and EU get hit by recessions, they don't have anywhere to export their products. This trend can be seen happening in all high value (non commodity) export-dependant countries like South Korea as well; actually based on another article from Voxeu, Korea's economy looks much more volatile compared to Japan.

The graph basically depicts Import Contents of each main GDP Component; carefully look at their "Exports" column, and you'd be surprised to see that close to 40% of the products they produced contain imported contents (most probably from Japan or China). So what does this tell us? Simple. Either find new markets, or stimulate your domestic economy. Concerns are currently being raised in Japan; the appreciation of the Yen has led (more like forced) companies to move their manufacturing operations overseas, potentially hollowing out Japan's manufacturing industry. So what happens next? Good example is America; where the rich get richer and the poor get poorer.

Don't you just love the world that we live in?

Repurcussions on Denouncing FTAs

Sorry ... I don't speak Chinese, English please?

I was surprised to read an article saying that should the opposition party in Korea win the upcoming April 2012 elections, they might be inclined to repet the US-Korea FTA which was some at, uhm, sometime ago after (what I recall as) a long series of negotiations. To answer the question whether they should or should not write off their FTA, they must first ask themselves; what made them negotiate and sign an FTA with America in the first place?

I recall reading a discussion on the US-Korea FTA in one of my groups on LinkedIn. As far as I can remember, the argument was even though both parties opened up certain industries for mutual benefit, Korea loses grounds in their agriculture industry; where the evidence can be seen in the government's efforts to give support to their Farmers and Fisherman (also interesting; 15,000 farmers earn more than USD 100,000 annually). Now as much as I am all go for Free Trade Agreements, one thing I would disagree is creating a disadvantageous environment (unfair competition) for key industries, one of which is Agriculture. The reason being is, if you open yourself or create an environment where basic necessities such as food being open to foreign competition, what if the import supply gets cut off?

Now of course, this is quite a contentious issue and the government knows this and is trying to circumvent the issue by giving them subsidiaries. But would that be enough? We all know subsidies can help cushion certain impacts but also creates market distortions. So the question now for this particular issue is; are they making the right move?

Obviously no.

Repatriating Koreans

Picture totally unrelated. Seriously.

A bit off topic - but I plan on making this a regular thing.

This is an amazing article about how the founder of Ticket Monster (Dan Shim) quit his job at a reputable consulting firm (McKinsey) to do his own startup - very inspirational indeed. Remind to self; start doing your own research and brainstorming sessions.

Is Japan Changing?

But didn't the Americans already do that in WW2?

This morning, I suddenly recalled this article which I read on Choosun Ilbo - which pretty much explains on what we can learn from Japan from South Korea's perspective. Out of all the things being discussed and elaborated in the article, I found one to be most agreeable - Japan's inability to change and adapt to modern times, in essence, failure to ride the wave of globalization. Now yes, I know, how can say such a thing for a country whose manufacturing goods are all over the place? If you look closely, they're not anymore. You want to talk about TVs? Samsung is now the world's largest TV maker, and Hyundai overtook Toyota in America's market. They're still up there, but they're not as dominant as they were during the 1980s and 1990s. South Korea has started to take up their fair shair of the world, even their music industry is starting to shine brighter than Japan's J-Pop.

Now I can give hundreds of reasons why (too nationalistic, their attitude being less inclined to learn English compared to South Korea, and there's also the factor where they have such an advanced robotics industry, losing ground in the automotive and electronics industry may not seem to be such a big deal) they are falling behind against their Korean rivals - maybe I'll do another post on that later. But for now the question is, are they changing? Are they reacting positively to these signs? Seems like like they are.

Ex-CEO of Olympus - Michael Woodford

Let's start of with the Woodford Olympus Controversy - the first Non-Japanese to become the CEO of a Japanese corporation, only to be fired 6 months into the job for investigating what seemed to be a potential (okay, maybe the appropriate word would be apparent) coverup by the directors. For being a whistleblower, he was fired. But now since the issue went to headlines, and after much pressure from the public, he was invited to attend a Board Meeting this week, which he accepted. This is definitely fresh and different to how the old-school hard headed Japanese would normally handle things - cover up with your superiority in rank and lobby the media and politicians.

Hiroshi Mikitani - CEO of Rakuten

In another two cases, Yamada Denki, Japan's largest electronic retail chain decided that they will now sell more foreign brands in their stores in a response to an increasing demand and interest for Samsung and LG products. They recently opened a procurement office in China - something which Japanese companies would not normally do. The CEO of Rakuten, one of Japan's largest online retailer, shocked the media by giving a press conference in English - and in response to fears in losing their Jobs, more and more Japanese are taking English lessons to justify / exert their importance in their respective companies.

This is, without a doubt, signs of change - from their inclinedness to learn English, to the way they run companies. However, one key area which still requires improvements is their political system; they need a strong and visionary leader to take them out of this trap. These are good signs - they're probably 10 years behind South Korea now, but that does not mean that they won't be able to catch up. Knowing the level of rivalry between them, and the advantage that Japan has in certain industries, I'm very confident that Japan can pick themselves up again - maybe not to a point as high as where they were, but to the least, high enough to ride the tide of total globalization.

The only question is - how long will it take?

Capitalism 4.0

Damn Socialists 4.0!

An article I found on Chosun Ilbo (my new favorite English-based Korean newspaper) on how Korea is meant to be a model for a new type of Capitalism (hence, Capitalism 4.0). If so, who were meant to be the holders of the previous versions?

Kinda makes me curious now.

Antidumping Measures During Financial Crisis

I dont think its THAT free

Here we have an article from this new website I found on how South Korea uses antidumping measures when protecting its domestic market during financial crisises. I don't really feel like writing anything in depth until later on this week since I was too pre-occupied doing other things, hopefully I can catch up on my readings within the coming days.

As for today, its time to relax!

Ease of Doing Business 2011



Thats what I call ease of doing business.

I was really impressed when Malaysian Insider reported that Malaysia has risen ranks to number 18th on World Bank's Ease of Doing Business Report for 2011. But this was somehow shattered when I saw 113th for the "Dealing with Construction Permits" category, and took another level when they ranked 1st for "Getting Credit" category, along with countries such as United Kingdom, and ironically, South Afirica. Recalling my previous post on rising household debt, I don't know whether I should see our position in being number one in getting credit as a positive thing.

Korea & Japan ranked 8th and 20th respectively; I was rather dumbfounded to see Japan being ranked below Malaysia. It seems that South Korea had a major advantage in ranking when it comes to Enforcing Contracts, whereas Japan was ranked well below in terms of Paying Taxes. Also surprisingly, Malaysia was seen as a better place compared to both of the countries in terms of protecting investors - something which a country still short of high income status really needs (capital investments in particular). All in all, aside from the Getting Credit category, I think there is still much room for improvement in Malaysia's rankings.

Looking forward to next year's rankings.

Shared Growth; Enhancing Economic Development

Now thats what I call true teamwork.

Further to my previous article on shared-growth, here we have an article addressing the issue of the declining middle income group in South Korea. Let's give this a thought for a moment; the decline could be caused by;

1) The growth of either class outpacing each other or;

2) The substantial decline in the population growth of the middle class group.

But logically, I find reason 1) to make more sense in this case as we have large conglomerates moving their operations overseas - depriving the middle income group of growth. Can we blame them for doing so for the sake of higher profitability and productivity? The public might throw a fit; why dont they explain it to the shareholders of the companies then.

But one thing I really liked about the article was how it mentioned that Korea has developed this perception that "money would bring happiness"; prevalent in its society due to long working hours and high suicide rates, disregarding any other values which would contribute to an overall better and higher quality of living. I couldn't agree more on this. Their substantial economic growth has indeed resulted in them becoming money grubbing people; a philosophy they have picked up from the Yanks.

Coming back to shared growth, it seems that there are a number of companies who have started to adopt this policy, as can be seen in this article. The importance of SMEs or Trading Companies in the economy of Japan can be seen through their stringent regulations in protecting them from larger corporations, resulting the birth of the term Sogo Shosha - relfecting how the people and government view these small players as an integral part of the econonmy, unlike South Korea.

So in essence, developing pro-shared growth policies without a doubt would foster the economic growth of a country, creating a symbiotic win-win relationship between the smaller companies and their larger counterparts. But as I mentioned in my earlier article; would it be possible to implement? Implementing is one thing, changing people's mind is another.

Bottom line, we'll just have to wait and see.

Household Debts; A Major Concern?

So how long will it take until it goes boom?

There seems to be some concerns by economists after the Budget anouncement; that the government seems to be spending their coffers without taking into account the global conditions - in other words, they're being too optimistic. Economists are concerned about the rising household debt in Malaysia, apparently walking on a trend similiar to the 2008 financial crisis. Apparently the rising debt is attributed to repayment of loans (housing and car) as well as private consumption. Let me just touch on the two; repayment of housing and car loans.

For housing loans, I think its quite evident that the majority of the snowballing rise is attributed to owners purchasing their 2nd or even 3rd house ; leaving to the younger first house buyers outside of the loop. The reasoning? Pure investment. But many people fail to realize that once the market moves into a purchasing frenzy through, driven by pure investment rather than consumption, this could flow into a housing bubble. The result? Those with vision (too much vision) and considerable income have no liquidity; whereas the young ones end up homeless and fighting for a good space. As for car loans, its simply pure manipulation; the government actually wants people to get car loans - to help Proton, much like how they subsidize fuel to keep it cheap, to help Petronas. These two factors inarguably results in citizens not pressuring the government enough to develop a world class effecient public transportation system.

Now apparently, the same problem is happening in Korea, but it is slightly different in the case of Koreans. Based on my readings and observations, the rise in debt is mostly attributed to Jeonse Loans, and unlike Malaysia, they have limited land and twice the number of people. What is similiar to Malaysia is the rising debt is attributed to rising living expenses however there is no market distortion in Korea; no subsidies, no manipulation of preferences - creating a competitive and effecient market driven system. The Korean government was even forced to take measures such as increasing interest rates, with a more extreme method of blocking personal loans. To the least, the government recognizes this issue and is actually formulating a plan to combat and reduce the household debt in the country. What about Malaysia's Government?

Now I hate banks even more.

Miracle of The Han River; South Korea

I dont think that'll be enough for him

This is mainly a compilation article about some of the interesting articles I've found about South Korea. We'll start with the latest one I found off of a Korean Newspaper. This was relating to the current level of debt being taken out by individuals, corporations and the government. To be frank though, I don't think its nowhere alarming yet, but for some reason they're starting to freak out over it. Logically, for any export oriented country who wishes to turn its economy into more of a domestic consumption based structure, then obviously you'll need to debt to rise to generate retail sales. However, for some reason, I think Korea's rising debt is more related to its rising living expenses rather than a showcase of increase in domestic consumption. Now if that was the case, it could be something noteworthy.

The second article I read was actually a compilation of McKinsey; featuring a 6 articles each with its distinctive topic of focus. The first one elaborates on how South Korea spends more on Research & Development Per GDP compared to other advanced nations. The second article touches on Korea's resilient economy with the third talking about its national brand. The fifth details on how Korea should start shifting its economy to a service-based economy, and finally, a four step guide on how Korea can propser further in the future. Rather interesting, but I still think they still lack China's manpower, and Japan's technological superiority over them, not to mention how I think that the people in the region lack English proficiency; an essential component in becoming a globalized economy. But then again, English is without a doubt over-rated.

Annyeong!

Where Are We Headed Part 1

Coming soon to a store near you.

In the west, we have America's debt ceiling crisis (which remains partially unresolved), with Europe on the verge of kicking Greece out of the eurozone for failing to meet their fiscal targets; being one of the conditions they accepted when receiving the bailout fund from the European Financial Stability Fund / European Central Bank. I knew that this whole debt-crisis bullshit would somehow spread to the east, but I didn't expect it to have such an impact to a point where Fitch Ratings changed their outlook to China to negative, with a high probability of downgrading their bond ratings as well; including Japan.

Although numerous organizations are confident that chances for a double-dip recession or a meltdown similiar to 2008 are low, the outlook is still bleak, worse, we might even be heading towards a total global stagflation. Personally I believe this is the only direction in which the global economy is heading, and the signs are evident. High inflation, with moderated or low economic growth leaves legislators and central bankers with a massive headache. The South Korean government is one of the many countries currently experiencing this issue.

Despite all this, OECD has called for central banks to maintain their interest rates, wheras the IMF has urged countries to opt for stimulus packages or introduce some measures to develop growth (provided that they develop a credible mid-term debt control strategy) instead of focusing on short term austerity measures. These options however, are extremely tight and limited; not many countries (especially ones which are currently debt riddled) have the luxury executing anything else except an expenditure cut. So where does all this leaves us? In a shithole without a doubt.

Maybe Paul Krugman can come up with a Plan C this time?

World's Solar Panel Industry

We needz moar energi!

I have always been under the impression that America is the world's leader in terms of innovation, technological development and advancement in sciences. But with the closure of some of the Solar Manufacturing Companies; some backed by Barrack Obama himself, citing stiff competition from their Chinese counterpart, is this a tipping point where soon we will see China lead the way for solar panel developments?  It seems that solar panel manufacturers in South Korea are also suffering due to the loss of their American competitors and Chinese competition. Surely this is a sign predicting a shift in the World's Economic Centre of Gravity?

Cliche, but only time will tell.

Shared Growth; Feasibile? or Detrimental?

Small Businessman with Small Software and a small .... ?

It seem's that Lee Myung Bak is either a people's man or is just desperately trying to gain public support as he came under fire for another one of his antics on shared growth. A feasibility study was conducted by Korea Economic Research Institute (KERI) which claims that the "profit sharing" proposal he came up with does not carry positive impacts on the economy. But despite the report published by KERI, Lee's administration continued to search of areas in which they can help SME's grow, by developing a "Chaebol Shield"; which technically bars certain companies from participating in certain "SME Designated" industries. This however is still criticized by certain parties as the regulation set is non-conforming (not legally binding / entirely up to corporation's discretion). This however did not stop the Korean government from expanding the chaebol shield to include certain products such as tofu, and industries such as expendable office supplies and IT contents with further designation SME-protected industries to be developed in the future. Although many disagree on this policy, there are others who are completely behind it citing that Chaebol's ability to dominate the market through their suppliers and ability to receive cheap financing as factors that should change the non-conforming ordinance into a legally binding one. Not to mention that since most of the Chaebol's are family owned, wealth distribution is narrowed and limited to certain few - something which the Koreans call "top 1%".

Out of curiousity, I did a mini-search on the number of South Korean corporations listed in Forbes 2000, the number of employees in which they employ, and compared the number of employment to the country's population. For benchmarking purposes, I chose Taiwan and Turkey since they have roughly the same GDP Per Capita as South Korea;

	Taiwan	S. Korea	Turkey
Population (Million)	23	49	73
Employees (Per 100 Thousand)	0.8	0.4	0.2
Ratio Population : Employment	3.48%	0.82%	0.27%
Forbes 2000 Listed Companies	42	52	11

The results are quite interesting. We can see clearly from the table that although South Korea have corporations which are more globally recognizable compared to Taiwan (at least from my view), it seems that Taiwan is winning in terms of developing a more distributed form of competition, and that the corporations they develop employ more people according based on the Ratio Population.

So the question now is, would the "Shared Growth", "Profit-Sharing" and "Chaebol Shield" system proposed and implemented by the government would lead to a better wealth distribution system? My personal view would be Yes (with the exception of the Profit-Sharing policy), however, it would take time, and changing such a concept will not be easy. It all depends on what the people want, whether corporations are willing to oblige, and whether South Koreans themselves are willing to shift away from having a "Chaebol-oriented" mentality to a one focusing more on a "United Growth".

But at the end of the day, I guess its just all about greed.

Socialism vs. Capitalism

Picture not associated with post ... at least not directly.

I think it should be more like Article(s). JoongAng Daily daily reported huge tensions between the business community as well as the lawmakers of the country, to the extent that a politician dubbed a chairman of a  shipping company a 'murderer', some even calling 'stupid'. It seems that a similiar situation is also growing in Germany where industry players claim that the government led under Chancellor Merkel have stopped listening and taking feedback from coporate leaders.

On another note, we have North Koreans travelling to Canada to do their Masters in Business Administration. Seems that they are trying to pickup a thing or two from the free-market system which could be taken back home.

Thing's are moving and changing a bit too fast don't you think?

Korea and External Uncertainties

O RLY? NO WAI!

In a report done by Morgan Stanley taken from JoongAng Daily, South Korea was rated last amongst Asia's emerging economy (including Malaysia, Philippines, China, Taiwan & Indonesia among others) in terms of ability to handle any external financial shocks. Now as much as I somewhat agree on this issue (since almost any export-dependant country might have difficulties in handling external financial turbulances), why was did Morgan Stanley classify South Korea as an "emerging economy"?

With a 1 trillion dollar economy, and per capita income way above World Bank's threshold for 'high income economy', would they be already have a developed economy? But it seems like there's a difference between "emerging economy" and "developed country".

Nonetheless, even local South Korean think tanks, LG Economic Research Institute (they seem to have a lot of corporate funded economic research organizations) mentioned that due to the Debt Crisis plaguing America and Europe, they too think that Korea's economy will not meet its projected GDP growth.

Maybe it's time they should switch to a more domestic based economy rather than relying on exports.