Korean Job Discussion Forums

[sleep furious idea]

Regarding the very interesting thread going on about the so called Asian financial (IMF) crisis, there are some things worth mentioning.

First of all, as noted in said thread, the crisis was a larger regional problem spurned by overvaluing Asian currencies and markets. When many people, and, of course, media refer to it as the IMF crisis it suggests that the blame lay with the IMF. This is not true. The problem was corruption escalating the overvaluing of the market. There was a lot of smoke and mirrors in the books (and as we can see frequently in the news there is still something smoldering).

The IMF came and gave, I think, 20bil USD or something in loans. Some people mistakenly say that the IMF helped Korea rebuild its economy, like it is some kind of UN do-go organization. That is not entirely true. The IMF is not a charity. It's bailouts are rigged like a Trojan horse. They bring money, yes, but also conditions rigged by the corporate world so that western companies can swoop in and clean up.

During the 'IMF' crisis Korea shunned their advice - to their great benefit! IMF advice handcuffs economies and actually prevents them from successful recovery. I'm not going to bother with citations. You can do the research yourself if you doubt it. Basically, if I remember correctly, Thailand, the Philippines and Indonesia followed the advice, Korea and Malaysia shunned it and the latter are by far better off because of it.

One of the things Korea refused was to dump extra IT manufacturing equipment (semiconductor technology and the like) for cash. Pretty good idea.

[PRagic]

and the purpose of the thread is....?

[bassexpander]

I have a feeling that Korea's response to the IMF thing will only mean that fewer will be interested in bailing this country out when the next crisis comes.

And it will come.

[mercury]

[asylum seeker]

[bassexpander]

Ha... and you think that money will actually be used to help the Korean economy? Yeah, whatever. It will become a golden parachute for the rich, while the rest of the country (rich included) beg the rest of the world to help them.

Then, when it's all over, they'll turn around and bite the hand that fed them, claiming they were taken advantage of.

Such is the Korean way, and it is exactly why they will have to live with their own problems the 2nd time around.

[excitinghead]

[PRagic]

Ok, not it's getting interesting. Here are some things to watch for:

1) Household debt: While Korea's level is not as high as, say, Australia, the socio-economic system here was not, and is not, prepared to handle the level of household debt that Korea accumulated when the government freed up the capital market and credit card companies and consumers went bonkers. Traditionally, money here has been accumulated and passed down in Korea at the family level via investment in education and, later on, at the point of marriage and business funding. With debt levels at their current rates, Koreans in the coming generation will find themselves strapped. Look for this to have repercussions some 10-15 years down the road. This has been critically overlooked in the economic and socio-economic literature to date, although there has been some research pertaining to the amount of equity held in housing here that is not, but must be, converted to spending capital by retirement.

2) Investment in R&D: As one poster has already stated, Korean companies in general are not technologically keeping up. Their orignial strategy to pursue a low price strategy in mature technologies is being continued via FDI/OEM manufacturing in China. OEM deals don't last forever, though, and Korean companies will quickly be competiting against their Chinese counterparts. Not a good sign. Also, many of Korea's competitive technology products are still sourcing disproportunately from other economies (Japan, U.S., and Germany) in lieu of making genuine R&D investment in product development.

3) Inward FDI: While I don't agree that Korea still has an economy overly dependent on manufacturing (data says that Korea has tansitioned to a service economcy), its economy cannot be competitive without continuous inward FDI. The reasons aren't necessarily monetary. Rather, unlike years ago when Korea was competiting in lower-tiered manufacturing goods (textiles and sneakers), Korean firms are now competitive in globally diverse product markets, particularly in technology intensive areas. To maintain competitiveness, they need competition in their domestic market. Also, and truth be told, competing markets are no longer willing to sit by and let Korea close up its domestic market to competition. They learned their lessons from Japan's hot run in the late 70s - 80s.

Foreign firms need to want to be here, and that isn't happening. Sure, the strength of the won doesn't help Korea's cause, but the word on the street is that there is still just too much red tape to muddle through here, and the business and financial service sectors just isn't savvy enough to meet the needs of global firms. After peaking in the post-crisis years, inward FDI has again begun to shrink, despite all the 'hub-ub'.

Outward FDI: We see two fundamental changes here. First, large Korean firms are increasingly (continuously, actually) coming under fire for making investments without considering share holders. Origninally, owner/managers had the power to move quickly into new markets and to exploit opportunities. They did so, however, without being checked. Korean banks had no power over them (nor were there any institutionalized need to worry about it), and shareholders were a silent majority. That is changing now. Korean firms need to readjust their outward FDI strategies to reflect a more transparent managment system, a system that has not materialized to the extent many had hoped after the crisis.

This is related to another point. Korean firms are active in foreign markets, but are they capitalizing on their location potential? Research says they could be doing a better job. Rather than leveraging location-specific potential, Korean subsidiaries are still largely just gathering market/customer/product knowledge and transmitting it back to the HQ in Korea. Additionally, they are merely poaching highly qualified personnel, rather than tapping locally educated future professionals. Normally, this isn't necessarily a bad thing. However, as foreign hires are rarely integrated into the management structure, their value input potential has an imposed ceiling on it.

Just off the top of my head. Hope the thread continues...

[jdog2050]

While I would have liked to have seen more sources from that other guy's post, I did think that he was on to something.

Since we aren't back home, I don't think a lot of us here realized how f'ed up the Prime Loan scandal (and it's a scandal) is back in America. It's Enron times 20, and this time, instead of one state, it's the country, and instead of one corporation...it's ALL of them.

What they were doing was this:

giving loans to people who couldn't pay them back, meanwhile, they were selling the interest on the loans to other countries in the form of bonds. However, a lot of the countries buying these bonds didn't understand, fully, what it was that they were buying and why these loans were made in the first place. The loans were sold to them as being given to credible sources who could pay them back, when in reality, the loans and mortgages were given to people who were damned near homeless at ridiculously high interest rates. Thus, the housing bubble, bound to burst once the interest rates set in.

One of the main buyers of these loans was...dun dun dunnn, South Korea.
http://www.globalization101.org/index.php?file=news1&id=87

Also, this should show you how out of touch the Korean government is with the situation:

"Local financial firms have a combined $850 million subprime-related exposure and most of their investment is related to higher-rated securities."

Ha!!! They are either hiding or don't realize that this Sub-prime issue is a *scandal*; there's no such thing as a "higher rated" security with this because they were virtually all frauds.
http://www.kdi.re.kr/kdi_eng/highlights/govern_view.jsp?no=1806&page=21&rowcnt=10

Hopefully, the saving grace of this situation is that so many other countries bought into these, that the damage will be spread evenly.

[FistFace]

Ok, to those of you who think you know what to expect, where is a safe place to keep money?

Also, should I open a Euro bank account instead?

[PRagic]

Great points. I don't know if Korea's financial institutions will necessarily be crushed by the sub-prime debacle, but I do know that there has been growing concern over the short-term credit trend. It's smart up to a point, but with no transparancy, there is little known about exactly what point that is! This is what contributed to the first financial crisis as well.

Where's a safe place to put your money? Safest? Long term savings. Next safest? Managed low to medium risk funds geographically distributed. Kind of Risky? High risk growth funds. Really Risky? Play the market yourself. Insane? Buy property in Korea now.

The way I see it, the dollar won't stay so weak for so long. A weak dollar translates into inflation, which won't stand in US politics. However, if China and Japan decide to jump ship by dumping US debt, they'll pull the plug on the dollar and it could drop even more. But this would drive up the cost of imports for US buyers even more, something that neither Japan nor China wants. Gets befuddled in here.

In terms of currency, unless you are moving heaps, and unless there is a monster correction, it generally doesn't matter one way or the other. That's built into the system. With the dollar so weak, though, if you plan on moving back to the US, then why not ship it home? With the won strong, and you plan on heading (back) to Europe, why not by Euro?