20th Anniversary
Samsung Economic Research Institute Annual Report 2006
President’s Message
Korea’s economy began 2006 auspiciously enough. Forecasts for the global economy predicted an upward trajectory for the next four years, while domestic consumption, still sluggish from the effects of a consumer debt binge in 2001, was finally set to pick up steam again. From the second quarter, however, consumer spending began showing signs of a slowdown, dampening consumer demand throughout the economy, especially for services. At the same time, exports continued their outstanding performance by growing more than 14% from the same period last year. A continuing boom in China and favorable conditions elsewhere helped Korea’s exporters chalk up their fourth year of double-digit growth. Such strong export performance helped the economy post 5% growth, the highest number it has recorded in recent years. Despite the worries of domestic consumers and the uneven performance of the larger Korean economy, 2006 was a year of celebration for Samsung Economic Research Institute as it marked its 20th anniversary. The year proved to be an opportunity for SERI both to reflect on two decades of history as an eyewitness observer of the Korean economy and to explore the directions it will take over the next 20 years. SERI has witnessed a parade of changes in Korea’s political, economic, and social landscape. In the spring of 1987, democracy movements, ignited by protests from the middle class, helped to usher in direct presidential elections, and the nation’s first fledgling JUNG Ku-Hyun democracy. As political freedoms increased in the 1990s, tectonic President Samsung Economic Research Institute shifts in the country’s political and labor environment ensued; culminating in the 1997 financial crisis that completely reshaped the economy. By 2000, Korea would once again undergo dramatic changes as it attempted to reform capital and labor markets, revise corporate governance, and change methods of governance. Throughout these developments, SERI faithfully fulfilled its role as the observer of record on Korea’s economy. In its 20th year, SERI rededicated itself to this mission by pioneering research on pressing social issues, especially income disparity. As the widening gap between incomes provoked mounting public discourse, SERI responded with extensive research and analysis on the causes and implications of the phenomenon. 2006 also was a time for reflection and innovation. The institute’s “Review on the Korean Economy Over the Past 20 Years,”provided a comprehensive review of SERI’s 20 years of economic analysis. Meanwhile, SERI pioneered new forms and methods of analysis in its study on “policy knowledge ecosystems,”which applied techniques from complex systems analysis.
02 Samsung Economic Research Institute SERI also expanded and strengthened its partnerships with other research institutions in 2006. In its partnership with the Japan Research Institute, SERI participated in projects ranging from social aging to LCD clusters, with the latter study presented at the “Maekyung Tokyo Forum” held in September. Another study, “India and the Asia Corridor,”was done in collaborative effort with research institutions in Singapore and India and presented at a September seminar co-hosted by SERI and the Korea Trade-Investment Promotion Agency (KOTRA). 2006 also was a year of highly fruitful gatherings to share views. SERI sponsored 11 symposiums and seminars. In February, SERI kicked off the year with an international conference, “R&D Interplay in Northeast Asia: Corporate Strategy and National Innovation Systems.” Other meetings included a joint conference with the Survey Research Center at Sungkyunkwan University on the results of the Korean General Social Survey; a symposium on “Korea’s Policy-Related Knowledge Ecosystems”; and the “First Conference on Complex Systems.” SERI also monitored technological developments through its “Digital Convergence” lecture series and continued to host more than 100 monthly breakfast seminars in 10 cities and provinces, along with biweekly breakfast seminars for SERICEO members. SERI’s Internet presence has continued to grow, with members of SERI.org now numbering 1.3 million, making it by-far the nation’s most frequently visited economic think tank. SERICEO.org now serves 7,000 paying subscribers. Although SERI.org’s English and Japanese counterparts remained smaller in scale than their parent site, they are also gaining increasing notice as reliable and authoritative sources on the Korean economy. 2006 also saw SERI make important inroads in China. SERIChina.org debuted in 2006, and the site’s offerings continue to grow at a rapid pace. SERI’s Beijing office, now two years old, is also beginning to make its contributions to the analysis of the Chinese economy. More than 10 full-time researchers now work at SERI’s China division, in close cooperation with other Chinese scholars and analysts. 2006 also saw SERI achieve significant progress toward its 2010 vision of being a “Knowledge Hub for Creative Solutions.” SERI successfully completed its first three-year plan (2004-2006), which had two goals: innovation in the quality of research and innovation if the global reach of its output. The next stage will be on becoming a “Global SERI.” As SERI enters its third decade, it continues to dedicate itself to communicating the state of the Korea economy to an increasingly global audience. Finally, no mention of SERI’s achievements, whether in the past year or in the past 20 years, is complete without mentioning the support and hard work of all the people who have made SERI possible over the years. My sincere appreciation goes to the staff and executives of SERI both present and past, as well asour readers, customers, and partners, all of whom have contributed to making SERI what it is.
President & CEO Samsung Economic Research Institute
Samsung Economic Research Institute 03 CONTENTS
President’s Message 2
Korea Economic Review 5
SERI Activities 23 Research Calendar 24 Symposium 26 Seminar & Forum 31 Publications 38 Creative Solutions 40 Top Ten Hits of 2006 67
About SERI 69 History 70 Mission & Vision 73 Research Areas 74 Consulting Areas 75 About SERIChina 76 SERI@Net 80 Organization 82 Korea Economic Review Korea Economic Review
Looking back on the Korean Economy in 2006
Overall, the Korean economy in 2006 proved to be a disappointing gift wrapped in attractive packaging. On the surface, the nation managed to post 5% growth despite high oil prices and a strong won, marking the first time the nation performed beyond its potential in four years. Exports exhibited double-digit growth for the fourth consecutive year, surpassing the psychologically significant US$300 billion point. Notwithstanding these improved numbers, income for households and workers stagnated, while corporate earnings declined. Job creation hovered below the average level for previous years, causing a shortage of decent jobs and prompting the economically inactive population to soar to a record high level. A number of destabilizing factors negatively affected overall economic sentiment. Housing prices, which had shown signs of leveling off since the August 31 real estate stabilization measures, shot up again triggering concerns of a third bubble amid continuing excess liquidity. Labor disputes at some major worksites intensified, while North Korea’s surprise nuclear test led to heightened concern about security risks on the Korean peninsula. The nation’s currency also continued its upward march, fully regaining its pre-1997 financial crisis strength, and putting further pressure on the nation’s exporters.
Figure 1. State of the Korean Economy in 2006
An attractive package hides a disappointing gift
●``Actual growth surpasses ●``Stagnation in household income
potential growth ●``Deterioration in corporate profits
●``US$300 billion in exports ●``Inadequate job creation
Concerns for the Future (Weaker Economic Sentiment)
●`Appreciation of the Korean currency
●`High oil prices
●`North Korean nuclear weapons
●`Unstable labor-management relations
●`Surging real estate prices
●`Burgeoning household debt
06 Samsung Economic Research Institute I. The Korean Economy in 2006
An Attractive Package: 5% Economic Growth and $300 Billion in Exports
The Korean economy in 2006 performed significantly better than in 2005, despite unfavorable conditions like a strong currency and high oil prices. Economic growth, at 5%, surpassed the previous year’s lackluster 4%, and beat the potential growth rate of 4.8% for the first time in four years. This favorable outcome was brought about by solid export performance amid improved domestic consumption and investment. Exports climbed by 14.6%, maintaining double-digit growth for four years from 2003. In volume, exports surpassed $300 billion. In another favorable development, the nation’s stock market index climbed to a record high of 1,464.7 on May 11, 2007 with total market capitalization at 704.6 trillion won, up from 655.1 trillion won a year earlier. The composite stock index continued its upward trend, despite ominous tidings from North Korea’s nuclear test and continued profit taking by foreign investors through sale of shares. Stock prices did not suffer any significant corrections in 2006, despite surging in 2005 (54% compared to 2004).
Figure 2. Business Trends for 2006 and Composite Stock Price Index
Changes in the Coincident Index (2000=100) Stock Price Index (Based on Monthly Averages)
102.0 1,450 Coincident Index of 101.5 Macroeconomic Indicators 1,400
101.0 B D J M C I L 1,350 H K 100.5 G E 1,300 A 100.0 F 1,250 99. 5
99. 0 KOSPI 1,200
98. 5 1,150
98. 0 1,100 '05.10'05.12 '06.02'06.04 '06.06 '06.08'06.10 '06.12
Note :
A : Busan APEC summit H : POSCO union goes on strike B : Monetary Policy Committee hikes benchmark rate to 4% I : Dubai oil prices reach record highs C : Comprehensive real estate measures announced on March 30 J : Monetary Policy Committee hikes benchmark rate to 4.5% D : KOSPI index reaches all-time high K : North Korea announces nuclear weapons test E : First round of Korea-U.S. FTA negotiations L : Real estate measures announced on Nov. 15 F : Monetary Policy Committee hikes benchmark rate to 4.25% M : Lone Star cancels deal to sell its controlling stake in Korea G : Germany hosts FIFA World Cup soccer games M : Exchange Bank to Kookmin
Samsung Economic Research Institute 07 A Disappointing Gift : Negligible Household Income Growth and Inadequate Job Creation Despite improved prospects for economic growth, household and worker income stagnated. Monthly average nominal income for households nationwide increased by a meager 4.2% for the first nine months of 2006, marking the second year that income growth remained in the 4% range. Income growth for salaried workers declined on worsening corporate profitability. Job growth numbers were also anemic; 250,000 new jobs, far short of the 400,000 forecast by the government at the beginning of the year, and well below the yearly average of 340,000 for 2001- 2005. With a dearth of decent jobs, the idle workforce has continued to expand to alarming proportions.
Table 1. Trends in Job Creation (Unit: 1,000 jobs)
2002 2003 2004 2005 2006
Number of Newly Created Jobs 597 -30 418 299 295 Number of “Decent” Jobs 424 -296 305 141 157
Note : “Decent jobs” refer to jobs created in areas whose average income exceeds that for their industry in terms of nominal income. 2006 figures are estimates by SERI. Source : ECOS Database, Bank of Korea.
Concerns : Heightened Risks at Home and Abroad Through 2006, Korea faced an array of domestic and international risk factors, including high oil prices, the strengthening Korean won, and protracted labor disputes. The won’s climb undermined profitability for exporters, while soaring oil prices diminished purchasing power for households. 2006 also witnessed a host of other external events, including slush fund scandals, controversies on Lone Star’s KEB sale, conflicts over the proposed Korea-US FTA, and labor unrest in the automobile industry. Real estate prices skyrocketed despite the government’s attempts at stabilizing the market, while household debt soared. North Korea’s nuclear test also raised overall concerns regarding national security. All of the foregoing factors combined to adversely affect economic sentiment. Poor business sentiment for manufacturers was reflected in the Business Survey Index compiled by the Bank of Korea, which stood at 91 in January, 88 in December, and below 100 for most of the rest of the year. The consumer expectation index (compiled by the Korea National Statistical Office) also plunged from 104.5 in January to 93.7 in December.
08 Samsung Economic Research Institute II. Major Issues in the Korean Economy in 2006
Major developments in the Korean economy in 2006 included the attainment of $300 billion in exports, the surge in housing prices, excessive liquidity, the Korean won’s rise to pre-crisis levels, reform in the labor laws, unstable labor relations, North Korea’s nuclear weapons test, and heightened security risks. Although some of these were favorable developments, most of them placed additional burdens on the Korean economy, as detailed in the following:
1. Beginning of the $300 Billion Export Era
2006 saw Korea become the world’s 11th largest exporter, with cumulative exports surpassing $300 billion. The export tally for the year amounted to $325.99 billion, up 14.6% from the previous year. The fact that Korea reached this milestone just two years after it reached $200 billion in exports is all the more remarkable in light of the fact that it took the US eight years and Japan five years to attain the same feat. Such noteworthy growth underscores the continuing ability of Korean businesses to be competitive exporters.
Figure 3. Korea’s Export Growth
3,500 $326.0 bil. (2006) 3,000
$253.9 bil. (2004) 2,500 $172.3 bil. (2000) 2,000 Annual growth of 12.7% 1,500 $82.2 bil. (1993) 2 years 1,000 $47.3 bil. (1987) $125.1 bil. (1995)
$21.3 bil. (1981) 500 $10 bil. (1977) 9 years 18 years 0 '57 '59'61 '63 '65 '67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09
Source : KITA.net Database, Korea International Trade Association.
Samsung Economic Research Institute 09 Semiconductors, cellular phones, automobiles, and ships led growth in exports, taking 40.2% of the total,1 Based on statistics compiled from January 1 to December 20, 2006, semiconductors and automobiles surpassed $30 billion in volume for the first time.2 Export volume from January 1 to December 20, 2006 amounted to US$35.9 billion for semiconductors and $31.4 billion for automobiles. Exports continued to show strong performance despite a strong Korean won, thanks to improved technological competitiveness and product quality. Semicondutcors showed strong performance with Korean manufacturers taking 43% of the world’s DRAM market, Samsung led the way with its 50-nanometer 1-gigabyte DRAM.The nation’s shipbuilding industry also embraced change by moving towards higher value-added products, including LNG carriers and oil drilling ships. Despite these achievements, the current account surplus, the barometer of the nation’s external trade performance, dwindled from $8.89 billion to $6.09 billion. Rising commodity imports from high oil prices, a strong won, and a record service sector deficit of $18.76 billion, accounted for these developments. The service sector deficit was further aggravated by the nation’s continuing weakness in tourism and education, as well as the appreciation of the Korean won, which dramatically eased the ability of Koreans to travel overseas for sightseeing, study, and training.
2. Home Prices Surge
Home prices, which had shown signs of cooling down after government measures to stabilize the market in 2005, began surging again in 2006. Prices rose by 13.8%, the third steepest hike since 1990. In Seoul, rising valuations finally engulfed the entire city in the second half of the year, as home prices began soaring even in Gangbuk, the less affluent part of the city north of the Han River. Soaring valuations were caused by a rush to buy homes early, as well as widespread public distrust in the government’s real estate policy. Prospective homeowners thronged to purchase homes as news of price hikes for new apartments became known in September 2006. Market anxieties grew further due to failures in government policy along with growing public cynicism. Government policies to curb demand failed to achieve their intended effect, instead spurring price hikes and undermining the market’s ability to balance supply and demand.
1 Basad on statistics compiled from January 1 to December 20, 2006. 2 Export volume from January 1 to December 20, 2006 amounted US$35.9 billion for semiconductors and $31.4 billion for automobiles.
10 Samsung Economic Research Institute Figure 3. Korea’s Home Prices
(%) Nov. 15 Measures 7.0
6.0 Nationwide 5.0 Aug. 31 Measures 4.0 Mar. 30 Measures Gangbuk 3.0
2.0 Gangnam 1.0
0.0 '05.1 3 5 7 9 11'06.1 3 5 7 9 11 -1.0
Note : 1. Price change rates calculated vis-à-vis the previous month; 2. Gangnam refers to 11 districts in southern Seoul, and Gangbuk to 14 districts in northern Seoul. Source : Monthly Home Price Database, Kookmin Bank.
After it became clear that its efforts to suppress demand had failed, the government came up with new measures on November 15 that envisaged building 1.64 million new houses in the capital area through 2010. These measures were intended to alleviate housing supply problems caused by the dwindling supply of new homes in the region, which had fallen to 44.4% in 2004, and 42.7% in 2005. While the new measures are expected to contribute to improving stability in the housing supply, and at the very least, address some of the failings of the August 31 measures, any real effects probably will not be visible until 2008.
3. Excess Liquidity
In late 2005, the Bank of Korea began taking steps in earnest to reduce excess liquidity. From October 2005, the central bank raised its benchmark interest rate five times for a total 1.25 basis points. In the third quarter of 2006, the excess liquidity ratio declined to 8.8%, a more than 100% drop from 19.2% in 2005.
Samsung Economic Research Institute 11 Figure 5. Liquidity Index
(M1/Nominal GDP) 0.45
0.40
Real value 0.35
0.30 Trend line 0.25
0.20
0.15 '90 '92 '94 '96 '98 '00 '02 '04 '06
Source : ECOS Database, Bank of Korea.
Efforts to rein in excess liquidity hit a snag in the second quarter of 2006. Effects from the central bank’s benchmark rate hike were halved when overall market interest rates remained below the neutral interest rate. The influx of low-interest foreign capital also served as a factor that lowered liquidity-reducing effects from the central bank’s rate hike. Accordingly, the government faced a grave situation when it was forced to take non-price-oriented policies like curbing foreign currency borrowings and raising the cash reserve ratio. It marked the first time in 16 years that reserve ratios were used as a means to achieve monetary policy purposes. Meanwhile, as a result of the persistent excess liquidity, undesirable outcomes like rising home prices and household debt arose. In 2006, apartment prices throughout the nation increased by an average of 13%, with hikes reaching 29.8% in the so-called “bubble-seven” areas. Outstanding home mortgage loans soared by 20 trillion won in 2006, contributing to increasing household debt.
Table 2. Changes in Home Prices and Household Loans (Compared to the previous year)
2002 2003 2004 2005 2006
Price Change in the “Bubble-Seven” Areas1 - 17.4% -2.4% 20.7% 29.8%
Growth in Home Mortgage Loans 87.6% 29.8% 28.5% 44.1% 36.0%2
Note : 1. The growth rate for the “bubble seven” areas is an arithmetic average of individual growth rates for the seven areas in question. Note : 2. Household loan statistics is as of the end of September. Source : Monthly Home Prices Database, Kookmin Bank; “Household Credit Trends for 3Q 2006,” Bank of Korea, Nov. 29, 2006.
12 Samsung Economic Research Institute 4. Won Rises to the Pre-1997 Crisis Level
The Korean currency continued its strong upward trend against major foreign currencies. In 2006, the won appreciated by 8.8% against the US dollar. It was exceeded only by the 15.7% appreciation in the Thai Baht, the 13.7% appreciation in the British pound, the 11.5% appreciation in the euro, the 9.2% appreciation in the Indonesian Rupiah, and the 9.1% appreciation in the Russian ruble. Particularly noteworthy was the won’s rise against its rival currency, the Japanese yen. This change occurred because the yen, unlike the won, fell against the dollar.
Figure 6. Rates of Appreciation for Major Currencies against the U.S. Dollar Trends in the Won-Dollar, Won-Yen Exchange Rate
1800 (%) 15.7 Thai Baht 13.7 British Pound 1600 11.5 Euro 9.2 Indonesian Rupiah 1400 Won/Dollar 9.1 Russian Ruble 8.8 Korean won 8.4 Singapore Dollar 1200 8.1 Philippine Peso 3.4 Chinese Yuan 1000 0.8 Taiwanese Dollar -1.0 Japanese Yen Won/100 Yen -1.1 Argentine Peso 800 Mexican Peso -1.6 Financial Crisis (12/97) -4.6 Turkish Lira 600 -10 -5 0 5 10 15 20 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07
Note : As of the end of 2006, vis-à-vis the end of 2005. Source : Datastream; Bank of Korea.
The upward momentum of the won carried it to levels not seen since the 1997 Asia financial crisis. The won-dollar exchange rate re-entered triple-digit territory, while the won-yen rate fell below 800. On December 7, 2006, the won-dollar rate reached 913.8, the lowest since October 23, 1997, when the won traded at 913.4 to the greenback. The won-yen rate dropped to 779.8 won per 100 yen on December 22, the lowest value since October 28, 1997, when the won traded at 777.7 per 100 yen. The won’s strength reflected a weakening of the dollar against other global currencies, unlike 2005, as well as some domestic factors. The dollar weakness stemmed from the end of the US Federal Reserve’s rate-hike cycle and slow movement toward hike rates by Japanese and European central bankers. Another factor was a trend among central banks in major countries to diversify their foreign exchange reserves on concerns about the US trade imbalance and an
Samsung Economic Research Institute 13 overall business slowdown. The capital account surplus from an expanded influx of foreign capital led to a continued oversupply of dollars. As of 2006, the capital account surplus stood at $18.62 billion, thus becoming the main source of foreign currency supplies, in contrast to 2004 and 2005. This expansion in the influx of foreign currency, the major factor that caused the capital account surplus, took place as financial institutions coped with the sell-off of futures by exporters and the introduction of low-interest yen.
Korea’s Current and Capital Account Balance Korea’s Foreign Currency Borrowings
(Unit: $1 mil.) (Unit: $1 mil.)
30,000 45,000 Current account balance 40,000 25,000 Capital account 35,000 balance 30,000 20,000 25,000 20,000 15,000 15,000 10,000 10,000 5,000
5,000 0 -5,000 0 -10,000 '02'03 '04 '05 '06'02 '03 '04 '05 '06
Source : Bank of Korea.
Although the Non-Regular Workers’ Protection Act was passed by the National Assembly in November 2006, controversies remain ahead of its implementation. The passage of the law came five years after discussions on protection of irregular workers began in 2001 in a tripartite commission of representatives from labor, management, and the government. The law’s most important stipulations include a ban on discrimination against contract workers, and restrictions on the term of their use. Nevertheless, the law does not contain specific criteria on what constitutes discrimination, thus triggering concerns that disputes may continue in the workplace with regard to remedies against discriminatory conduct. In a related move, the National Assembly on December 22, 2006 decided to delay for three years the implementation of two controversial proposals to allow multiple unions at the same company, and to ban employers from paying full-time union officials. The decision was based on an agreement reached by the tripartite committee on September 11 in which the government
14 Samsung Economic Research Institute honored an accord reached between labor and management. Some have surmised, however, that the government, conveniently postponed the resolution of key issues which had already been extensively discussed, to prevent further labor unrest, leaving ample grounds for future conflict.
Main Provisions of the Non-Regular Workers’ Protection Law
Current New Legislation or Revisions
Non-discrimination ●``No stipulations ● Clear provisions banning discrimination, ● establishment of institutions to correct ● discriminatory practices
●``Fines of up to 100 million won for noncompliance ● with corrective orders
●``One year in principle ●`Temporary contracts are to be renewed as Temporary workers ● (pursuant to the Labor Standards Act) ● permanent subsequent to two years of continuous ● employment ●``No stipulations on measures taken ● for employment beyond this period
Dispatched workers ●`No stipulations on illegal dispatch ●``Illegally dispatched workers must be hired ●``Dispatched workers are to be hired as regular ● as regular workers ● employees subsequent to two years of employment ●``Sanctions against employers who use illegally ● dispatched workers will be increased
There were 138 labor actions in 2006, down 52% from 2005. Most disputes were settled amicably, but labor action that did occur was often larger in scale and more protracted. Major companies in particular were targeted. Overall, 1,200 workdays were lost to labor action, up 41.5% from 2005. In addition, disputes went beyond workplace issues to national and social concerns such as road maps to labor-management relations and opposition to free trade agreements.
Major Figures Related to Labor Disputes (Compared to the previous year)
2002 2003 2004 2005 2006
322 320 462 287 138
Number of disputes 66 29 58 16 24
Number of illegal labor actims 1,580 1,299 1,199 848 1,200
Source : Bank of Korea.
Samsung Economic Research Institute 15 5. North Korean Nuclear Test Increases National Security Concerns
North Korea conducted a nuclear test in Gilju, North Hamgyeong Province, on October 9, 2006, dramatically escalating tensions on the Korean peninsula and fomenting a crisis with neighboring countries. Five days later, the UN Security Council unanimously adopted a resolution (No. 1718) to impose sanctions on Pyongyang and to pressure North Korea into ending its nuclear ambitions. The sanctions included a ban on trade and financial transactions in areas related to weapons of mass destruction. In a related move, the fifth round of Six-Party Talks resumed on December 18 in Beijing to seek a peaceful resolution of the North Korean nuclear issue, but talks recessed without a breakthrough. A separate meeting on financial sanctions against the North was held simultaneously. It too concluded without a deal. Immediately after the North’s nuclear test, the South Korean economy suffered a temporary setback, from a plunging stock marker and a steep rise in the won, but the economy recovered swiftly shortly thereafter. On the day of the North’s nuclear test, the composite stock price index and the KOSDAQ index plunged 2.4% and 8.2%, respectively. The won’s value against the dollar also soared by 14.8 won per dollar, recording the steepest daily increase in 22 months. Yet, despite the United Nation’s resolution calling for sanctions against the North, Seoul stock prices returned to their pre-test levels by October 16, just a week after the test. Nevertheless, the North’s nuclear test did bring about fundamental changes in the security environment on the Korean peninsula. First, the North’s s nuclear test disrupted the military balance between the two Koreas. Furthermore, military controversies for South Korea intensified with regard to issues like the campaign to regain wartime operational control, and the relocation of U.S. forces stationed there. In the process of resolving the North Korean nuclear issue, instability with respect to the North’s system is also expected to grow. If the North insists on retaining nuclear weapons, it will likely face further pressure from the international community amid rising military tensions. Furthermore, the surrounding four powers will likely push for reorganization of the Northeast Asian security order. The hard-line stance of the United States and Japan will likely clash with the conciliatory stance of China and Russia, fueling further instability. Any change in the structure of the divided peninsula, which has maintained an unsteady balance of power for more than 50 years, would signify a fundamental shift in the security environment. The United States is expected to use the North Korean nuclear issue to push ahead with its military policy shift while attempting to establish a new order based on its alliances in Northeast Asia. Japan for its part will intensify its moves to achieve “normal nation” status, while China will likely try to cement its status as a world power by forming new alliances like the Shanghai Cooperation Organization as Washington acts to “contain” China. South Korea may face more serious security risks should it fail to cope effectively with these changes.
16 Samsung Economic Research Institute 6. Corporate Management Trends in 2006
On the surface, corporate revenue increased in 2006, but profitability fell significantly, with 39% of companies unable to even meet their financing costs through operating profits. Newly restructured companies appeared on the market following widespread “workouts,” This fueled “merger mania,” with some domestic companies actively engaged in overseas M&As. On the other hand, as uncertainty in the management environment mounted, companies began to increase cash reserves and grow more risk averse, on concerns of weakening future growth potential. Companies carried out different promotional measures to boost sales and secure loyal customers, as outlined below.
7. Worsening Corporate Profitability and Polarized Performance
Korean companies suffered from lagging performance despite rising sales. January-to-September sales for Korean companies rose 7.1% year on year, but operating profits fell 1.3 percentage points from 8.0% to 6.7%. Performance by industry indicated that petrochemicals and machinery performed well on rising prices and strong growth, while companies relying heavily on domestic demand suffered. Machinery, petroleum and chemicals grew, while textiles and apparel, non- metallic minerals, and metals posted negative growth. Metals, food, and machinery enjoyed high profitability, but non-metallic minerals, textiles & apparel, and transportation equipment suffered lowered profitability. Gaps between upper and lower groups in sales for listed companies also increased. Sales growth for the top-100 and bottom-100 companies from January to September rose 7.2% and 0.2%, respectively. Net profits for the top-100 companies fell 12.7% to 28.8 trillion won, while the bottom-100 companies posted losses. The percentage of companies with ordinary profit losses (among listed manufacturers) increased from 29.1% in the third quarter of 2005 to 33.9% in the third quarter of 2006, while 38.8% of companies could not cover financing costs with their operating profits.
Table 5. Corporate Performance for 2006 (%)
1Q-3Q 2005 1Q-3Q 2006
Sales Growth Rates 4.0 (3.8) 7.1 (6.6)
Operating Profits 8.0 (7.7) 6.7 (6.1)
Corporate Debt 89.3 (80.5) 87.8 (81.5)
Note : Listed companies excluding financial institutions and holding companies (parentheses indicate manufacturers). Source : Bank of Korea,“ Corporate Management Analysis for 3rd Quarter, 2006,”Dec. 15, 2006.
Samsung Economic Research Institute 17 8. Heightened Merger Mania
Recently restructured large companies became the focus of attention in 2006. Daewoo Construction Co. was acquired by the Kumho Group, while Prime Group was selected as the preferred bidder for Donga Construction Co., continuing a trend towards large corporate mergers and acquisitions. Following a fierce battle, LG Card was acquired by Shinhan Financial Holdings. Many companies expressed interest in the upcoming sale of Hyundai Construction, Hynix, Daewoo Shipbuilding & Marine Engineering, and Daewoo International.
Table 6. Large-scale Mergers and Acquisitions
Target Company Acquirer Price Tag Sale Date
Daewoo Construction Co. Kumho Asiana Group (completed) 6,426 bil. won 2006
LG Card Shinhan Financial Holdings Co. (completed) 6,677 bil. won 2006
Hyundai Construction Co. Hyundai Heavy, Hyundai Group & Doosan Group 4-6 tril. won 1H 2007
Daewoo Shipbldg. & Marine Eng. POSCO, Dongkuk Steel & Hyundai Heavy 3-4 tril. won 1H 2007
Hynix LG Group & creditor group 7 tril. won After 2007
KOREX STX, Kumho Group & CJ 1.5-2.0 tril. won 1H 2007
Mando Halla Construction Co. & Hyundai Motor Co. 0.8-1.0 tril. won After 2007
Source : Compiled by the authors from press releases.
Korean companies who had not displayed much attention to acquiring foreign companies also entered the M&A market in 2006. Several companies, including Doosan and Hyosung, executed overseas M&As to compete for market share, while some industries, including steel, sought partnerships or planned mergers to respond to the worldwide trend toward consolidations. The financial industry, regarded as a potential target of foreign companies, reversed roles while major retailers acquired the assets of foreign counterparts already in Korea. Woori Bank, for example, planned acquisitions of banks on the US West Coast, while E-Land Group acquired Carrefour Korea in April and Shinsegae obtained Wal-Mart’s Korean stores in May.
9. Rising Cash Reserves
Korean companies prepared for an uncertain future by acquiring cash and other highly liquid assets in 2006. The total cash equivalent for listed manufacturers in September of 2006 was 62.3 trillion won, a two-fold increase compared to 2000 (31.5 trillion won). Cash inflows and loan
18 Samsung Economic Research Institute repayments have improved financial stability for Korean companies, whose degree of stability exceeds that of Western corporations. Average debt ratios for manufacturers in 2005 amounted to 100.9%, lower than for the United States (136.5%) and Japan (136.1%), and these fell further in 2006 to around 86%. In September, 44% of non-financial listed corporations operated without any debt. Among 602 non-financial listed companies, 263 had more cash equivalent assets than short- and long-term loans, effectively making these firms debt free.
Table 7. Number of Debt-Free Companies
2000 2003 2006
Debt-free Companies (debt = 0) (A) 34 57 92
Cash > Debt > 0 149 177 171
De Facto Debt-Free Companies 183 234 263
Note : 1. KIS-Value for listed companies; 2006 figures are for late September; 2. Cash = cash and cash equivalents + short-term money market funds + marketable securities; and 3. Debt = short-term borrowings + current long-term borrowings + long- term borrowing.
However, excessive cash on hand may reduce future growth potential. With management focused on stability, growth rates for tangible assets remained stagnant, from 6.3% in 2000 to 5.3% in late September 2006. Excessive cash reserves may also become a source of disputes between management and investors should growth slow or should stock performance lag. If investment plans for future growth projects are not sufficiently clear for investors, they may demand more shareholder value in the form of dividends or buybacks, exposing companies to the risk of leveraged buyouts made by taking majority shares bought with funds borrowed against their own assets.
10. Corporate Attempts to Loosen Consumer Purse Strings
In 2006, companies focused mainly on creating demand through incremental changes rather than introducing innovative products. The consumer market has become increasingly diverse and product lifecycles have shortened, making the development of breakthrough “hits” more difficult. Companies thus tried to lure more customers with “improved” and upgraded products with added functions or new designs in response to digital lifestyle and “well-being” trends. Companies also tried to develop new markets by dispensing with conventional thinking on markets and products. Skin and body-care, for example, formerly the exclusive domain of women, expanded to include male customers. Household appliance manufacturers attempted to
Samsung Economic Research Institute 19 expand their customer base to young single men and women from their traditional constituency of homemakers in their 30s and 40s. Companies also strengthened their brand strategies by introducing different varieties within the same brand, locking in loyal customers.
Use of Videos in Marketing
Samsung Electronics The company created an online community in its “Hauzen” home appliance website where people could upload videos showing off their own recipes. Recently, it also held a competition called “smart oven mission challenge.”
LG Electronics The company promoted a coed in its MP3 player commercials for creating a yoga lesson video of her own.
Interpark The online retailer provided a series of videos on its website to help shoppers make better buying decisions.
Korean companies diversified their communications channels to access different segments of the market more effectively. Along with TV, newspapers and other conventional media, companies created concurrent strategies that leveraged new media tools. Blogs, online communities, word-of-mouth marketing, and other strategies with proven records were deployed by these companies, including the use of hip video clips designed to attract young consumers.
IV. Issues for 2007 and Beyond
As in the previous three years, domestic consumption was stagnant in 2006 as the economy continued to rest largely on double-digit increases in exports. Domestic turned for the worse in the second half of 2006, dampening overall economic growth. It has become clear that balanced growth, harnessing both the domestic and overseas markets, must be achieved for an optimum economic outcome. A favorable cycle of exports and domestic consumption must be restored, and the vitality of the domestic market must be reinforced by creating more jobs, thus expanding disposable income and consumer purchasing power. To this end, household tax burdens should be reduced, and social safety nets (including the national pension fund and the national health insurance scheme) should be overhauled to reduce inefficiencies. Uncertainty about the future of the Korean economy increased in 2006 amid persistent and protracted labor disputes and alarming increases in housing prices. Soaring housing prices and mounting household debt caused many to fret about another round of collapsing bubbles. Increasingly disruptive and protracted labor disputes have already crimped corporate production activities.
20 Samsung Economic Research Institute With continued concerns about rising private education costs and increased worries about jobs and retirement benefits, 2006 was marked by uncertainty about the future. The Korean economy now needs to create a new model to escape this vicious cycle of uncertainty. A system of social agreements and norms needs to be established so that labor relations remain within reasonable boundaries. The effectiveness of government polices should also be enhanced in order to relieve widespread concerns about housing, employment, and retirement. In 2006, the Korean economy proved unable to escape the structural weaknesses that have continued to grip the nation following the 1997 crisis. Economic growth has fallen from its former heights of 8-9% to today’s 4%, and business upturns have shortened from an average of 34 months in the mid-1990s to about 12 months today. Companies are becoming more risk averse, and are unable to find promising investment outlets. Investments in developing human resources must also continue to respond to the battle for talent acguisition raging in today’s world. Public education must be strengthened, and education systems must be reformed in order to respond realistically to corporate human resource needs. Careful risk management must be undertaken in light of the internal and external risks that the Korean economy is facing today.
Samsung Economic Research Institute 21 Photo Gallery
22 Samsung Economic Research Institute SERI Activities
Research Calendar Symposium Seminar & Forum Publications Creative Solutions Top Ten Hits of 2006 Research Calendar
University Reform and Competitiveness Sluggish Corporate Investment After E-Commerce, It’s Time for T-Commerce Korea’s Economy 2006 Implications of Japan’s Growing Income Polarization on Korea Implications of Sino-Indian Economic Ties Korea’s Info-tech Industry in 2006 and Beyond More Jobs Mean More Consumption In Quest of Universal Banking Bush’s Bioenergy Initiative and Its Implications for Korea It’s the DMB Age! The Narrowing Interest Rate Gap Ten Major Issues of 2006 for Korea Seven Problems Facing Labor-Management Relations Ten Global Issues of 2006 How to Stay Ahead as a Digital Powerhouse The Global Corporate Landscape in 2006 How Can Korea Tap Petrodollars? Volatility of the Foreign Exchange Market China’s Top Ten Issues in 2006 1 2 M&A Strategies for Foreign Companies in Japan A Successful Development Model for the Ubiquitous City Outlook for Korea’s Economy in the Second Half of 2006 Economy and Inventory Trends U.S. Economy Outlook in the Second Half Rising Deposits and Declining Lending Rates The Consumer Price Conundrum The Challenge of Environmentally Friendly Development Strengthening Won and the ’Breakeven’ Exchange Rate Malaysia’s Drive for Free Trade Deals Opening up Korea’s Healthcare Industry Korea’s Fourth Local Government and Self-sustaining Regional Three Laggard Economies of Europe Development Challenges Facing Korea’s Economy How to Raise Korea’s Fertility Rate Sports Marketing How to Balance Work with Life The Internet: Reshaping Korea’s Media Industry KOSDAQ: Its Performance and Challenge Korea-US FTA: Challenges and Implications
A Reexamination of Korea’s Trade Policy 5 Trends and Characteristics in Corporate Finance 6 Ways to Boost Korea’s Birthrate TFT-LCD Parts and Materials: Problems of Market Domination Korea’s Economy in the 2H 2006 Why the Yen Is Weak Petrodollars Fuel a Building Boom What’s Next for Korea’s Current Account? Technology Challenge from China The Global Economic Outlook for 2007 Cloudy Outlook over the German Economy Implications of a Shorter Business Cycle How Gambling Affects Consumption Open Innovation Time for a Strategy on Energy Security Three Big Issues of Corporate Investment The Strengths and Weakness of Korea’s Fund Capitalism New Japanese Prime Minister Abe’s Economic Policy 9 10 24 Samsung Economic Research Institute ● Issue Paper : SERI researchers’ incisive opinions on the economy, management, industry, and policy ● SERI Focus of the Week : Weekly publication of key developments, and analysis on Korea and the global economy ● CEO Information : Current issues and hot buzzwords for top executives and policymakers
Ethics in Scientific Research How to Tap Petrodollars in the Middle East Signs of a Slowdown in the U.S. Housing Market Consumers’ Love for Brands Creating Jobs in a Time of Recovery The European Housing Bubble and Implications for Korea Japan’s Changing Monetary Policy and Its Global Impact Worrisome Trends in the Housing Market Rebooting Korea’s Cultural Content Industry Better Management of Foreign Exchange Risks Brand Love Is a Many-Splendored Thing Strengthening Industry-Academia Collaboration After the Kyoto Protocol Income Polarization in Korea How to Boost Investment The Global Wave of Mergers and Acquisitions Which Global R&D Units to Woo Corporate Efforts to Support Rural Communities Self-organizing Management in Times of Change Six Principles for Stable Industrial Relations 3 Consumption and Terms of Trade Telecom Services Firms’ Foray into Entertainment4 Content Korea and the East Asian Bond Market Provision Flat Panel Displays: Korea’s Leading Export Item Recent M&A Trends from Global Corporations The End of Japan’s Zero Rate Policy International Comparison of Banking Competitiveness Three Job Market Characteristics Income Polarization: What Causes It and What Can We Do? Apparel to Chips: Korea’s 20-year Industrial Development Raising Korea’s Flat Panel Display Industry Two Decades of Korea’s Management Reform The U.S. Economy in the Second Half of 2006 and Beyond Changes in China’s Foreign Investment Policy Korea’s Investment Trends Summer Holiday Reading List for CEOs Reduction of Global Liquidity and Its Impact Evolution of Korea’s CEO System Paradigm Shifts: A Review of Korea’s 20-Year Economic Development North Korea and Security Risks Process Innovation for Improved Service Competitiveness
Outlook for Korea’s Economy in 2007 7 The New “Culture City” Initiative and Its Implications8 How Interest Rates Affect the Housing Market Evaluation and Implications of the Validity of Korean-Type The Evolutionary Path of Korea’s Internet Businesses Biofuels How the Korean Bourse is Affected by the U.S. Economic Downturn The Won’s Climb Against the Yen Korea’s Service Sector Needs More FDI The Rise of the “Individual-Oriented Living Environment Industry” The Ecosystem of Policy-related Knowledge China and the Rise of Intraregional Trade Biofuels as Korea’s Alternative Energy Source Boosting Job Creation The Economics of English Risks Facing Korea’s Economy in 2007 The Re-emergence of Corporate Japan Ten Issues Facing China’s Economy in 2007 Korea and the Rise of the Russian Economy Top Ten Hit Products of Korea in 2006 11 Review of Korea’s Economy in 2006 12 Samsung Economic Research Institute 25 Symposium
Feb. 24, 2006 R&D Interplay in Northeast Asia: Global Corporate Strategy and National Innovation Seminar Sponsored by Systems in the Host Countries Samsung Economic Research Institute Session A: R&D Strategies for Global Corporations in Northeast Asia Moderator: Stephen BEAR, McKinsey Seoul ●`Globalization of R&D in NE Asia | Denis SIMON, Levin Institute, SUNY ●`Global Firms’ R&D Configuration in NE Asia | Max ZEDTWITZ, Tsinghua Univ. ●`Managing and Coordinating R&D in NE Asia | Kazuhiro ASAKAWA, Keio Business School
Session B: R&D Management of Global Corporations in Northeast Asia Moderator: Steven CHAI, BCG Seoul ●`GE China Technology Center | Bijan DORRI ●`IBM Japan R&D Center | Norishige MORIMOTO ●`Sony Design & Engineering Center Taiwan | Futao YAMAGUCHI ●`Siemens Korea R&D Center | Horst KAYSER
Session C: National Innovation Systems and Global R&D Strategies Moderator: Max ZEDTWITZ, Tsinghua Univ. ●`China | Jon SIGURDSON, NUS Stockholm School of Economics ●`Japan | Hiroyuki ODAGIRI, Hitotsubashi Univ. ●`Taiwan | Shinhorng CHEN, Chung-Hua Inst. for Econ. Res. ●`Korea I | Chaisung LIM, Konkuk Univ. ●`Korea II | Deukkyu BOK, Samsung Economic Research Inst.
Discussion Session: NIS & Corporate R&D Strategies: Enhancing Interplay Moderator: Denis SIMON, Levin Institute, SUNY
May 10, 2006 China-Korea Joint Forum: The Future of the China-Korea Relationship in the 21st Century Conference Sponsored by the Graduate School of China, Sungkyunkwan Session A: Speeches by Invited Dignitaries Univ., and Samsung ●`The Future of Korea-China Relations and the Role of Corporations | Yoon-Woo LEE, Vice Chairman, Economic Research Samsung Electronics Institute ●`China’s Economic Development and China-Korea Trade | Yi Fu LIN, China Center for Econ. Res., Peking Univ. ●`The Entrance of Korean Financial Institutions into the Chinese Market | Sang Hoon SHIN, President, Shinhan Bank ●`Globalizing Strategies for Chinese Corporations | Xin WEI, Chairman, Fang Zheng Group
Session B: Cooperation in Financial Areas ●`Reforms in China’s Financial Markets | Guang Hua FENG, Fin. Market Div. Head, People’s Bank of China ●`Shifting Yuan Exchange Rate and U.S.-China Trade Relations | Kwang-Soo HAN, Prof., Univ. of Incheon ●`China’s Economic Development and the Yuan | Guo Yu JU, Professor, Peking Univ.
26 Samsung Economic Research Institute (continued) ●`Appropriate Fluctuation Range for the Yuan | In-Gu LEE, Korea Inst. for Int’ l Econ. Policy ●`Financial Reform and the Quality of Economic Development | Zhi Gang YUAN, Dean, Fudan Univ.
Session C: Korea-China Cooperation in Trade and Investment ●`Competitive Dynamics Between Local and Foreign Enterprises in China | Sam PARK, Samsung Economic Research Inst. ●`China-Korea in the Context of Regional Economic Cooperation | Yun Ling ZHANG, Director, Chinese Academy of Social Sciences ●`Evolution of Korea’s FTA Policy | Kyong-Lim CHOI, FTA Director, Korean Ministry of Foreign Affairs & Trade ●`China’s Economic Development: Its Accomplishments and Problems | Shan Li ZHU, Vice Dean, Guang Hua School of Mgt., Peking Univ. ●`The Impact of Economic Integration on Industrial Relocation in the East Asian Economies | Young- Han KIM, Professor, Sungkyunkwan Univ. ●`FTAs and Functional Cooperation Agendas in East Asia | Yukiko FUKUGAWA, Prof., Waseda Univ. ●`The Shifting Landscape of the Telecom Industry | Guo Xin ZHANG, Vice Chairman, Huawei Group
May 18, 2006 KGSS Studies: An International Comparison of Generations, Work, and Trust Symposium Sponsored by the Survey Research Center, Sungkyunkwan Introduction: What Is the Korea General Social Survey? | Jong-Hoi YANG Univ., and Samsung Economic Research Session A: Koreans and Korean Society: A Generational Comparison Institute Moderator: Young-Jin YANG, Professor, Dongkuk Univ. ●`Trust and Generations: The Generation Gap in Terms of Social Trust | Byong-Jin PARK ●`The Making of Trust and the Government’s Role | Wang-Shik KIM ●`Korean’s Perception of Equity in Distributional Justice | Sung-Pyo CHUN ●`Korea’s Progressives and Conservatives | Han-Jin EOM ●`Perceptions Toward North Korea by Generation, Class, and Region | Byong-Ro KIM ●`Generational Variability in Political Attitudes | Jeong-Hwan LEE
Session B: Koreans and Korean Society Viewed from Different Generations Moderator: Han-Ho LYU, Samsung Economic Research Inst. ●`Generational Differences in Viewing Corporations | Sook-Hee CHOI ●`Three Ways to See the Economy: A Cluster Analysis | Won-Jae LEE ●`Job Satisfaction for the Self-Employed: The Effect of Voluntary Choice | Hyu-Ran KUH ●`Degrees of National Pride: A Generational Comparison | Ji-Young KOH ●`Comparison of Media Usage Patterns by Generation | Sang-Hee KWON
Jun. 29, 2006 Reflections on the Korean Economy Since 1987
Seminar Sponsored by ●`The Past, Present, and Future of the Korean Economy | Soon-Young HONG Samsung Economic Research Institute ●`Changes in the Economic System Since 1987 | In-Cheol CHOI ●`The Financial Crisis and Our Response | Soon-Woo KWON
Samsung Economic Research Institute 27 Symposium
(continued) ●`Pros and Cons of Structural Reforms | Yong-Gi KIM ●`Estimation of Growth Potential Based on Aggregate Demand | Jaechul CHANG
Jul. 6, 2006 Farm Tourism and Cultural Events
Conference Sponsored by Session A: Keynote Speeches the Korea Rural ●`The Need for Marketing Strategies in Farm Tourism | Hyong-Ki KANG Community & Agri. Corp., the Korea Green Tourism ●`The Importance of Event Organizing in Farm Tourism | Shin-Kyum KANG School, and the Regional Development Forum Session B: Success Cases ●`Farm Visits Doubling as an Art Event: The Case of Wolsun Village | Dae-Ho KIM ●`Experience History: Gaeshil Historic Village | Jun-Young LEE ●`The Pear Blossoms Concert in Hyun-Myong Farm | Yun-Hyun LEE ●`Kum-Gok Film Village’s Art Gallery | Hung-Soo HWANG ●`The Literary World of Lee Hyo-Suk | Il-Sun CHOI
Sept. 19, 2006 How to Make Your Way in the Indian Market
Conference Sponsored by Session A: The Future of the Indian Economy and Leading Corporations the Korea Trade- Investment Promotion ●`India: A New Juggernaut | Seung-Koo OH Agency and Samsung ●`Promises of India’s Consumer Market | Chan-Wan KIM Economic Research ●`Industrial Development and Leading Corporations | Bun-Soon PARK Institute
Session B: Investment Environments and Successful Case Studies ●`India’s FDI-Friendly Policies | Manab MAJUMDAR ●`Korean Companies in India and Their Motives | Se-Myong KIH ●`Case Study I: LG Electronics | Hak-Joon PARK ●`Case Study II: WiderThan | Jae-Hun KIM
Sept. 25, 2006 How to Make Korea’s Policy Information “Eco-System”
Conference Sponsored by More Accessible Joongang Ilbo and Samsung Economic Session A Research Institute Moderator: Mun-Kun CHEONG, Samsung Economic Research Inst. ●`National Strategy and the Policy Information Eco-System | Soon-Bong YOON ●`The Policy Information Eco-System in Other Countries | Sun-Bin KIM ●`The Current State of the Policy Information Eco-System | Young-Soo YOUN ●`Conditions for Developing the Policy Information Eco-System | Seung-Byung CHAE ●`Discussion: Policy Information Eco-Systems as Social Networks | Yong-Hak KIM, Yonsei Univ. ●`Discussion: Policy Information Eco-Systems from the Viewpoint of “Consilience “ | Jae-Chun CHOI, Ewha Woman’s Univ.
28 Samsung Economic Research Institute (continued) Session B Moderator: Kwang-Woong KIM, Seoul National Univ. ●`Strategies to Make the Policy Information Eco-System More Accessible | Joon HAN, Yonsei Univ. ●`Challenges for the Policy Information Eco-System | Ki-Boong KWON ●`Panelist: Soo-Gil KIM (Joongang Ilbo); Jong-Ku PARK (Office of Gov’t Policy Coordination); Il-Ho Yoo (KDI School); Jong-Hoon LEE (Duksung Women’s Univ.)
Nov. 2, 2006 Improving Brand Value for Farm Goods
Seminar Sponsored by Session A: Keynote Speeches the Korea Agriculture ●` Leadership School and The Key to Regional Development Is Human Resources | Won-Soon PARK, Hope Inst. Samsung Economic ●`What Are High Value-Added Farm Goods? | Yang-Ho NAM Research Institute ●`Preconditions for Improving Brand Value for Agricultural Goods | Jun-Il CHUN
Session B: Cases Study Presentations and Discussion ●`CJ Home Shopping’s Initiative to Create a Brand for Every Village | Young-Pil LEE ●`Creating New Markets through Branded Kimchi | Ha-Yeon LEE ●`The Making of Environmentally-Friendly Foods: The Experience of Soonchun City | Duk-Lim CHOI ●`Aiming for “Killer” Products: The Case of Organic Mushrooms | Gum-Hee KIM ●`Discussion: What Farm Entrepreneurs Can Do | Seung-Kyu MIN
Nov. 17, 2006 Reflections on China in 2006, and 2007 Forecast
Conference Sponsored by Session A: Political, Diplomatic, and Social Areas the China Research Moderator: Kyung-Sup CHANG, Seoul National Univ. Center, Seoul National Univ., Samsung ●`Chinese Political Scene in 2006 | Jae-Ho CHUNG, Seoul National Univ. Economic Research ●`China’s Diplomatic and Security Policies | Dong-Ryul LEE, Dongduk Women’s Univ. Inst., Korea ●`Chinese Society and Chinese People | Jong-Ho CHUNG, Seoul National Univ. Inst. for Int’I Economic Policy, Korea Session B: Economic Forecasts Int’I Trade Moderator: Oh-Seok HYUN, Trade Research Inst. Assoc., and Korea- ●` China ThinkNet Long-Term Forecast for the Chinese Economy to 2020 | Kun LEE, Seoul National Univ. ●`China’s Macro Trends and Movements in the Yuan | In-Koo LEE, Korea Inst. for Int’ l Econ. Policy ●`Korean-Chinese Economic Relations | Seung-Shin LEE, Trade Research Inst.
Session C: China’s Corporate Sector Moderator: Chang-Kyu LEE, Korea Inst. for Int’l Econ. Policy ●`China’s Energy Conundrum | Tae-Hwan LEE, Sejong Inst. ●`China’s Changing Competitive Landscape | Sang-Eun CHUNG, Samsung Economic Research Inst. ●`China Investment Case Study I | Ki-Woo HONG, Aurora World ●`China Investment Case Study II | Ho LEE, Kumho Tire
Samsung Economic Research Institute 29 Symposium
Dec. 6, 2006 Keynote Speech | Yong-Hak KIM
Conference Held by [Tutorial Session] the Complexity ●` Network and Power Laws: An Introduction | Du-Chul KIM Complexity Sciences Center, Samsung [Interdisciplinary Session] Economic Research ●`How to Develop a Policy Information Eco-System? | Seung-Byung CHAE, et al. Institute ●`The Cause of Policy Failures ? A System-Based Analysis | Chang-Wook KIM, et al. ●`Space and Arrangement | Beom-Joon KIM, et al. ●`The Transformation of Korea’s Corporate Eco-System Since the Fin. Crisis | Young-Soo YOON, et al. ●`The Influence of Networked Structures on Diffusion | Sang-Man HAN, et al. ●`The Co-Evolution of Separation and Collaboration | Jeong-Kyu CHOI, et al. ●`Empirical Evidence for Possible Causes for Information Flows in a Financial Time Series | Chul-Joon EOM, et al. ●`The Philosophy of Creativity and Social Science Methodology | Byong-Won MIN, et al.
[External Expert Session] ●`A Discussion on Expansion of New Paradigms in Advertising Theory | Il-Chul KIM ●`The Soft-Systems Approach to Understanding Organizational Complexity: A Case Study | Jae-Un YOO ●`The Networked Structure of the Open-Source Software Community | Won-Young CHO, et al. ●`The Evolution of the International Community Since 1980 and the Formation of African Nations | Hye-Ryong CHUNG ●`Adolescent Deviant Behavior in School Gangs | Ji-Won JUNG ●`Complexity Theory and Networked Global Political Theory | Sang-Bae KIM ●`Phonology in ’Complexity’: The Contrast Between Sino-Korean and Cantonese | Sang-Uk LEE ●`Research on Military Landing Operations According to Complexity Theory | Sang-Heon LEE ●`Study on the Applicability of Complexity Theory to Vehicle Traffic | Jong-Ho LEE ●`The Interaction Between Natural Landscapes and Individual Organisms from the Viewpoint of Bird- Nesting Behavior | Ji-Hoon SONG and Ho-Sang LYU ●`Opinion Formation and Clusters in Complexity Networks | Woo-Sung CHUNG, et al. ●`A Networking Analysis on Laws Passed by the 17th National Assembly’s Health & Welfare Committee | Yoo-Shik YEOM, et al. ●`Scientific Approaches to Understanding Complex Learning Phenomena | Young-Man LYU ●`The Greatest Incident of the Millennium from the Vantage Point of Complexity Theory | Jung-Kwon KIM ●`The Behavioral Model of Labor Strikes | Woo-Suk CHUNG, et al. ●`Real Estate Speculation under Complex Conditions | Mi-Jung KIM, et al. ●`Investors’ Buy/Sell Decision Making Processes in the Stock Market-An Agent-Based Model | Hyuk- Ki YOON ●`Studies on Organizational Learning Using Complexity Theory | Daya SUNG, et al.
Dec. 13, 2006 North Korea after the Nuclear Test
Seminar Sponsored by ●`Northeast Asia’s Security Configuration after the Nuclear Test | Bong-Geun JUN, Inst. of Foreign Samsung Economic Research Institute Affairs & Nat. Security ●`North Korea’s Strategic Moves after the Nuclear Test | Marcus NOLAND, Peterson Inst. for Int’l Economics ●`Discussion: Peter BECK (Int’l Crisis Group); Dong-Ho CHO (KDI); Yong-Seung DONG (SERI)
30 Samsung Economic Research Institute Seminar & Forum
SERICEO The SERICEO Monthly Seminars invite experts to give lectures on the latest issues in economics Monthly and business, and function as a venue in which participants can obtain new knowledge while Seminars networking with fellow CEOs and executives.
Jan 24, 2006 HR Trends in 2006 CHANG Sang-Soo Director, SERI
Feb 24, 2006 Innovation Stories a CEO Should Know YOON Soon-Bong Vice President, SERI
Mar 28, 2006 Catch up with the Digital Hegemony YOON Jong-On Director, SERI
Apr 25, 2006 Overview of Financial Trends at Home and Abroad KIM Kyeong-Won Director, SERI
May 23, 2006 M&As, Keywords of Growth LYU Han-Ho Director, SERI
Jun 27, 2006 Keep an Eye on the Asian Corridor JUNG Ku-Hyun President, SERI
Jul 25, 2006 Recent Economic Trends and Prospects for the Second Half of 2006 HONG Sun-Young Director, SERI
Aug 29, 2006 Two Decades of Korea’s Corporate Management LYU Han-Ho Director, SERI
Sept 29, 2006 Conditions for Sustainable Growth YUN Jong-Yong Vice President, Samsung Electronics
Oct 31, 2006 North Korea’s Nuclear Threat and Korean Firms’ Response DONG Yong-Sueng Research Fellow, SERI
Nov 24, 2006 Catch the “Megatrends” of the 21st Century John Naisbit
Dec 22, 2006 Imagination Management KANG Shin-Jang Director, SERI
Samsung Economic Research Institute 31 Seminar & Forum
YOO Hyeon-Oh Digital President, SK Communications Mar 23, 2006 Internet Portal Sites-The Future of Communities Seminar SEOK Jong-Hoon President, Daum Communications
KIM Young-Deok Mar 30, 2006 Electronic Commerce Changes Shopping Patterns Executive Managing Director, Interpark PARK Sang-Soon Executive Director, Auction KIM Nam-Joo Apr 6, 2006 Globalization Strategies for Online Game Providers President, Webzen KIM Jae-Beom President, Widget
PARK Seong-Soo Apr 13, 2006 Who Will Lead the Portable Device Industry? Director, Samsung Electronics YOO Yeon-Sik President, DigitalCube
KIM Jong-Hyeon Apr 20, 2006 Digital Consumers and New Marketing Trends Director, Cheil Communications KIM Yoo-Sik President, Digital Inside
AN Hong-Joo Apr 27, 2006 Content in the Communications and IT Industry Director, KT KIM Jae-Hyeon Executive Director, WiderThan
SHIN Won-Soo May 18, 2006 Opportunities and Possibilities in Mobile Entertainment Director, SK Telecom AN Hoi-Kyun Director, TU Media
JEONG Byeong-Jin May 25, 2006 The Advent of the Internet Video Era and Prospects for the Future Department Manager, iMBC PARK Jong-Jin Team Manager, SBSi
CHA Seung-Jae Jun 8, 2006 Reshuffling of the Digital and Audio-Visual Industries President, Sidus FNH
LEE Jong-Hak Professor, Seoul Jun 15, 2006 Current Status of Digital Healthcare National Univ. Bundang Hospital KIM Jeong-Han Deputy Manager, Intel Korea
YEON Hae-Jeong Director of Jun 22, 2006 Talks over the U-City between IT Experts and Anthropologists U-City Planning Department, KT SONG Do-Young Urban Sociology Professor, University of Seoul JO Ook-Hee Director, Samsung Corporation Jun 29, 2006 Changing Trends in the Digital Home and New Opportunities KIM Tae-Keun President, Ubicod YOON Yong-Jip Professor, Dankook University JEONG Kook-Hyeon Executive Director, Design Management Oct 12, 2006 Prospects for the Digital Lifestyle and New Markets Center, Samsung Electronics LEE Hee-Seong President, Intel Korea
32 Samsung Economic Research Institute YOON Seok-Keum Chairman, Woongjin Group (continued) Oct 19, 2006 Secrets of Successfully Reinventing Companies LEE Hui-Seong President, IBM Korea
JEON Yong-Joo Vice President, IHQ Oct 26, 2006 The Future of Korea’s Media and Entertainment Industries CHOI Jeong-Hoon General Manager, Daum Communications
KIM Wang-Ki Director, CJ Nov 9, 2006 Commonalities of Firms Attracting Digital Consumers KIM Jong-Cheol Team Manager, NHN
LEE Hae-Seon Vice President, Amore Pacific Nov 16, 2006 The Newly Emerging Beauty & Health Market YOON Dae-Young President, GE Healthcare Korea
KIM Ook Director, Nowcom Nov 23, 2006 The Paradigm of User Generated Content KIM Do-Hyeong President, Juinjang.com
KIM Seong-Ryong Director, Kyobo Book Center Nov 30, 2006 Strategies to Converge Online and Offline Sales JIN Seong-Ho Team Manager, The Chosun Ilbo
KIM Jae-Yoon Research Fellow, SERI Dec 7, 2006 Digital Convergence & Internet Business Models KWON Ki-Duk Research Associate, SERI
Samsung Economic Research Institute 33 Seminar & Forum
Special SERI held 20 sessions of special lectures on complex systems to shed light on the dynamics of Lectures an increasingly unpredictable world and to inform the public on important underlying trends. on Complex Systems Theory (I) KIM Seung-Whan Physics Professor, Nov 3, 2005 What Are Complex Adaptive Systems? Pohang Univ. of Sci. & Tech. YOON Soon-Bong Nov 23, 2005 “Red Devils” Syndrome Vice President, SERI YOUN Young-Soo Dec 7, 2005 Outline of Complex Systems Theory Research Associate, SERI JEONG Jae-Seung Dec 14, 2005 Evolution, the Fitness Landscape, and the Edge of Chaos Biosystems Professor, KAIST JEONG Ha-Woong Dec 21, 2005 Analysis of Complex Networks and Social Networks Physics professor, KAIST KIM Chang-Uk Dec 28, 2005 Systematic Thinking and System Dynamics Research Fellow, SERI LEE Seung-Kook Jan 4, 2006 Complex Systems and Economic Systems Consultant, Booz Allen Hamilton
Jan 11, 2006 Analysis of the Economy, People, CHOI Jeong-Kyu Economics Professor, and Society Based on Evolutionary Game Theory Kyungpook National University Jan 18, 2006 Social Science Applications for Agent-based Models KIM Jae-Cheol Professor, KAIST Jan 25, 2006 Emergence of the Dangerous Society LEE Jae-Yeol Social Science Professor, and Complex Systems Networks Seoul National University Feb 1, 2006 Complex Systems Theories and Organizations CHOI Chang-Hyeon Political Science Professor, Kwandong University Feb 8, 2006 Corporate Ecosystems and Co-evolution SON Dong-Won Management Professor, Inha University Feb 15, 2006 Evolutionary Games and Empirical Psychology KIM Yong-Kwan Economics Professor, Sungkyunkwan University Feb 22, 2006 Spread of Innovation & Competition via Increasing LEE Jong-Seok Returns & Network Effects Management Professor, Hallym University Mar 8, 2006 Network and Stock Portfolio EOM Cheol-Joon Hospital Management Professor, Catholic University of Pusan Mar 15, 2006 Links Between the Micro and Macro Levels in Social Science JANG Deok-Jin Sociology Professor, Seoul National University Mar 22, 2006 Management Information Systems Based on Complexity LEE Byeong-Tae Professor, KAIST Mar 29, 2006 Domestic and International Politics Based on Complex Systems MIN Byeong-Won Professor, Seoul National University of Technology Apr 12, 2006 Methodology of Complex Systems and Relevant Tools CHAE Seung-Byung Research Associate, SERI Apr 19, 2006 Application of Complex Systems Theory YOUN Young-Soo Research Associate, SERI
34 Samsung Economic Research Institute Special “Systematic thinking” is a means to understand the underlying cause of problems arising Lectures from excess complexity, and come up with solutions. It is a paradigm to understand problems on Complex with unknown origins, including the rise and fall of corporations, and ill-considered policies Systems enacted by the government. In the U.S. and European countries, systematic thinking has been Theory (II): used as an efficient solution to deal with issues in several areas, including management Systematic strategy, corporate organization, administrative planning, and public policies. SERI’s Thinking Complex Systems Center held special lectures on systematic thinking, as already introduced in SERI’s first special lecture session, to better promote and understand this field.
KIM Sang-Ook Oct 11, 2006 Outline of Systematic Thinking Professor, Chungbuk National University CHOI Nam-Hee Oct 18, 2006 Practices for Drawing Causal Loop Diagrams Professor, Chungju National University KIM Dong-Wan Oct 25, 2006 Strategy and Policy Leverage Professor, Chung Ang University SOHN Tae-Won Nov 1, 2006 Organization-Related Cases Professor, Hanyang University AN Nam-Seong Nov 8, 2006 Management Strategy Cases Management Strategy Center MOON Tae-Hoon Nov 15, 2006 Policy Cases Professor, Chung Ang University
Nov 22, 2006 Simulation Modeling KWAK Sang-Man System Mix
Regional The SERI-hosted Regional Economic Forums, in cooperation with regional chambers of Economic commerce and other entities, provide critical business information and opportunities for Forums local business people to network with each other.
JEON Young-Jae Jan 12, 2006 Ten Major Trends in 2006 Research Fellow, SERI WOO Young-Ho Jan 18, 2006 Corporate Management and Forex Risk Management Director, Korea Exchange Bank JUNG Ku-Hyun Jan 24, 2006 Sustainable Growth Strategies for Companies President, SERI YANG Jun-Ho Feb 8, 2006 Corporate Competitiveness Drawing on “Kyoto-Style Management” Research Fellow, SERI The Industrial Security Environment and Measures YOO Jin-Oh Feb 9, 2006 to Protect State-of the-Art Technologies Department Manager, SERI LYU Han-Ho Feb 15, 2006 Consumption Trends Reflected in the Hit Products of 2005 Director, SERI
Samsung Economic Research Institute 35 Seminar & Forum
IM Il-Seop Senior Fellow, Econ. Res. Inst., (continued) Feb 16, 2006 Economic Forecast for the Global Economy in 2006 Industrial Bank of Korea KIM Kyeong-Won Mar 9, 2006 Forex Market Trends and Corporate Response Director, SERI SONG Jin-Gu Mar 10, 2006 36 Strategies You Should Know Professor, Juseong College KWAK Soo-Jong Mar 16, 2006 Recent Economic Trends and Prospects Research Fellow, SERI Recent Economic Uncertainties and Prospects KWAK Soo-Jong Mar 28, 2006 from the Short- to Mid-Term Perspective Research Fellow, SERI KIM Mi-Kyeong Mar 28, 2006 Marketing to Women: Successes and Failures President, Mirae Women’s Center SOHN Byeong-Doo Mar 29, 2006 Globalization and Korea’s Economy Dean, Sogang University Creating Strong Organizations Mar 29, 2006 HAN Geun-Tae through Efficient Communications President, Hans Business Consulting KIM Kwang-Ho Apr 12, 2006 Global Leadership: Tiger Woods and Samsung Electronics President, Combi Marketing Research Center
Hisayoshi Hashimoto Professor, Apr 12, 2006 What You Can and Can’t Do in China policy studies, National Graduate Inst. JO Hyeong-Jae Apr 26, 2006 Ulsan’s Future Professor, Ulsan University KIM Kyeong-Won May 17, 2006 Overview of Financial Trends at Home and Abroad Director, SERI
LEE Moon-Soo Former Vice President, May 24, 2006 Challenges and Measures to Overcome Difficulties Hyundai Motor Company KWAK Soo-Jong Jun 8, 2006 The Management Environment after Local Elections Research Fellow, SERI
Jun 14, 2006 The Rise of Chindia PARK Bun-Soon Research Fellow, SERI Jun 14, 2006 Overview of the Past Eight Years LEE Won-Jong Governor, North Chungcheong Province Jun 29, 2006 The Future Society and Qualifications of Leaders RYU Ji-Seong Research Fellow, SERI Jul 12, 2006 Sports Marketing and Corporate Competitiveness LEE Min-Hoon Research Associate, SERI Jul 20, 2006 Recent Economic Trends and Prospects for the Second Half HONG Sun-Young Director, SERI Jul 28, 2006 Recent Developments in the Korea-U.S. FTA LEE Jang-Young Deputy Vice Governor, and Prospects for Deals Financial Supervisory Service Aug 2, 2006 How to Develop the Economy KIM Hyun-Joo in North Chungcheong Province Research Fellow, SERI Aug 10, 2006 Korea’s Strategies to Reach FTA Deals PARK Bun-Soon Research Fellow, SERI Aug 29, 2006 The Future of Daegu in the 21st Century KIM Kwan-Yong Governor, North Gyeongsang Province Sept 8, 2006 Agricultural Ventures Boost the Local Economy MIN Seung-Kyu Research Fellow, SERI Sept 14, 2006 Imagination Management KANG Shin-Jang Director, SERI Sept 15, 2006 Overview of Korea’s Management LYU Han-Ho for the Past Two Decades, and Suggestions Director, SERI Sept 22, 2006 Policies to Revive Daejeon’s Economy, and Role KIM Beom-Il of the Municipal Government and Business Leaders Mayor, Daejeon City Sept 26, 2006 Changes in Labor-Management Relations and Prospects LEE Jeong-Il Research Fellow, SERI
36 Samsung Economic Research Institute Seminar & Forum
KIM Gyeong-Seop (continued) Sept 29, 2006 Leadership for Corporate Success President, Korea Leadership Center LYU Han-Ho Oct 12, 2006 Prospects for the Management Environment in 2007 Director, SERI
HONG Young-Pyo Group Leader, Oct 17, 2006 Korea-U.S. FTA Committee to Support the Korea-U.S. FTA SHIN Won-Gi Oct 25, 2006 Workplace Innovation and Corporate Competitiveness Vice President, Renault Samsung Motors CHOI Ho-Sang Nov 9, 2006 Recent Trends in the Financial Market and Future Prospects Research Fellow, SERI
LEE Hyeon-Jae Administrator, Nov 15, 2006 Measures to Nurture Innovative SMEs Small and Medium Business Administration HAN Geun-Tae Nov 21, 2006 For Sustainable Management President, Hans Business Consulting GANG Byeong-Goo Nov 22, 2006 The Information Society and Corporate Management Professor, Korea University
RHO Byeong-Han President, Dec 8, 2006 Korea’s Fate in 2007 and Its Future Future Forecast Inst. KIM Young-Soo Dec 13, 2006 Understanding SMEs and the Blue Ocean Strategy Professor, Soongsil University
SEO Yong-Goo Associate Professor, Dec 15, 2006 Emotional Management: How to Manage Invisible Things Sookmyung Women’s University NAM Yang-Ho Dec 21, 2006 Birth of Luxury Goods and Success Factors Research Fellow, SERI
● Contacts for Regional Forum Membership
Busan Busan Chamber of Commerce & Industry 82-51-990-7068 Daegu Daegu Chamber of Commerce & Industry 82-53-755-0041 Kwangju Kwangju Chamber of Commerce & Industry 82-62-350-5861 Daejeon Daejeon Chamber of Commerce & Industry 82-42-480-3022 Ulsan Ulsan Chamber of Commerce & Industry 82-52-228-3090 Gyeongnam Changwon Chamber of Commerce & Industry 82-55-283-0606 Chungbuk Chunbuk Development Institute 82-43-220-4399 Chungnam Chungnam Bukbu Chamber of Commerce & Industry 82-41-556-7131 Gimhae Gimhae City Hall 82-55-330-6781
Samsung Economic Research Institute 37 Publications
SERI Books Samsung Economic Research Institute publishes books that emphasize cultivating the foundations of public knowledge and contributing to the overall society. SERI publications are open to outside authors as well as in-house SERI researchers.
Feb 24, 2006 Seven Strategies for University Reforms RYU Ji-Seong, et al.
Mar 21, 2006 The Paradox of Regulation KIM Young-Pyoung, et al.
Complexity Sciences Workshop June 30, 2006 Complexity Sciences Network : Application of Complexity Science to Social Sciences
Aug 14, 2006 Successful Cases of Balanced Scorecard Management BSC Research Council
Sept 11, 2006 Management Uncertainties CHOI Hee-Gab
Sept 19, 2006 Analysis of the Indian Economy KIM Yoon-Hee, et al.
Oct 17, 2006 China Rising: East Asian Responses PARK Bun-Soon, et al.
Oct 30, 2006 Reminiscing about Korea’s Economy: From 1987 to 2006 HONG Sun-Young, et al.
Nov 30, 2006 SERI’s 2007 Outlook HONG Sun-Young, et al.
SERI Essays SERI Essays are a collection of insights from Korea’s leading intellectuals that map out directions for Korea’s corporations and the society at large. Their to-the-point and thought-provoking criticisms are aimed at inspiring open discussion on issues relevant to the creation of a knowledge-based society.
Jan 6, 2006 How Will Information Technology Change Time? LEE Hee-Jin
Jan 20, 2006 Accounting From the Perspective of Incentives LEE Seok-Joon
Feb 10, 2006 In Pursuit of New Business Categories KIM Jong-Hyun
Feb 17, 2006 How Can Samsung Electronics Become the World’s Largest Chipmaker? SHIN Jang-Seop, et al.
Feb 24, 2006 Think Tanks, Korean Style KANG Won-Taek, et al.
Mar 10, 2006 The Geopolitics of Northeast China and Korea’s Reunification HONG Myeon-Gi
Mar 17, 2006 What Egalitarianism Means to Korea SONG Ho-Keun
38 Samsung Economic Research Institute Mar 24, 2006 Female Leadership and ”Feminine” Leadership KIM Yang-Hee
Apr 7, 2006 The Power of the CEO’s Words in History PARK Hae-Yong
Apr 14, 2006 Invisible Growth Engines: Design, Brand, and Reputation SEO Yong-Goo
Apr 21, 2006 Vanishing Equality in Schools KWAK Hae-Ryong
May 12 2006 King Sejong and Modern Leadership PARK Hyun-Mo
May 19 2006 Korea’s Gift-Giving Culture KIM Jeong-Ju
May 26, 2006 The Myth of the Internet as a Facilitator of Democracy KO Kyung-Min
Jun 2, 2006 Banking Reforms in North Korea and China LEE Dong-Wook
Jun 9, 2006 The Ecology of Knowledge YOU Young-Man
Jun 23, 2006 The Sociology of Waste Recycling YOU Jeong-Su
Jun 30, 2006 Lessons from the EU in East Asian Economic Integration KIM Du-Jin
Jul 25, 2006 Real Estate and the Market Economy SEO Seung-Hwan
Aug 4, 2006 Strengthening the Sensibility of Organizations PARK Dong-Geon, et al.
Aug 21, 2006 Making Sense of Korea’s Education Conundrum PARK Jeong-Su
Aug 30, 2006 Building Science as a Basis of Culture PARK Keum-Sik
Sept 4, 2006 Lessons from France’s Century of Housing Welfare KIM Young-Tae
Sept 8, 2006 Housing Policy for Japan in the Aging Society CHA Hak-Bong
Sept 22, 2006 The Film Industry in the Digital Age KIM Kun
Oct 13, 2006 “Cultural Content” and Storytelling CHOI Hye-Shil
Oct 23, 2006 The Populist Leader LEE Myeon-Woo
Nov 13, 2006 The Online Retail Market’s Evolution LEE Dong-Il, et al.
Dec 18, 2006 A Tangled Thread Shouldn’t Be Pulled AHN Jae-Wook
The Swinging Scale of Dikes: Corporate Management Dec 26, 2006 and the Law of Judges JEON Sam-Hyun
Samsung Economic Research Institute 39 ●○○○○○○○○Creative Solutions 1. Implications of Income Polarization in Korea
I. Background and Objectives
Income polarization, and possible solutions to income polarization, has become the centerpiece of public discussion in recent months. Irrespective of its actual meaning, “income polarization” has become a catch-all term to symbolize the widening gap in the domestic economy between households, companies, and industries. Income polarization does not, however, refer explicitly to the phenomenon of diverging economic performance. This study is aimed at drawing implications on how to resolve the matter of income polarization through analysis of the characteristics and structural causes of income polarization in Korea. To this end, we are first obliged to take a look at what income polarization actually means, and what are the structural causes that led to it.
Figure 1. Research Flow and Key Questions
Contents Key Questions
Presentation Why should polarization be studied? of the Issue How was polarization diagnosed in previous debates?
Definition and What is the exact definition of polarization and how does one measure it? Characteristics How is polarization generated and what are the key features of polarization in Korea? of Polarization Is Korea’s polarization more serious than that of other countries?
Causes What are the structural causes for income polarization? of Polarization What are the differences in the importance of polarization?
Related Factors? How to What are the objectives and directions for policies to resolve polarization? Cope With Polarization
40 Samsung Economic Research Institute Creative solutions
Figure 2. Strategic Directions for Alleviating Polarization
Alleviation of Polarization
Restoring of Growth Potential
Main Task Creation of effective demand
Supplementary Task 1 Supplementary Task 2 Strengthening of systematic Guarantee of equal opportunity conformity
II. Key Findings
First of all, “income polarization” per se must be distinguished from “income disparity.” What “income polarization” ultimately means is a shrinking middle class. Generally speaking, income polarization is measured by the ER (Esterban & Ray) index or the Wolfson index.
In contrast, “income disparity” indicates a situation where income distribution is uneven. Income disparity is gauged using the Gini coefficient or income distribution ratio. Widening income polarization does not necessarily aggravate income disparity. This is why an assessment of income polarization requires a different approach.
From the mid-1980s to the 1997 financial crisis, income gaps shrank thanks to robust economic growth and the expansion of the middle-income population. However, polarization worsened sharply in the late 1990s after the Asian financial crisis, which led to a decline in middle-income families and an increase in the low-income bracket of society. Polarization indices, after soaring in the wake of the financial crisis, stopped rising from 2001 to 2002, and then began rising again in 2003, after the collapse of the middle-income bracket due to poor growth in domestic demand.
Samsung Economic Research Institute 41 In Korea, income polarization is now growing faster than income disparity, indicating that the government’s policy focus should be on restoring the fortunes of the middle-class, rather than on income redistribution. Despite worsening income polarization, income disparity has not in fact worsened, and Korea’s income disparity is not very severe compared to other countries.
After analyzing the relations between the polarization indices and other relevant factors, we concluded that ‘labor market factors’ and ‘economic factors’ are the major causes of polarization. With respect to economic factors, we found that economic fluctuations have made it difficult for low-income people to protect their assets, thus lowering their incomes, while declining growth in domestic demand and widening disparities between exports and domestic consumption have further contributed to the problem. On the labor side, the increase in the share of temporary and self-employed workers in the total workforce significantly influenced polarization.
The restoration of the middle-class will be achieved by creating ‘more and better jobs.’ More consumption can inspire the middle-class to have greater confidence in the economy. The choice before the government need not necessarily be between growth and distribution, and it can clearly pursue both goals. The government can help companies to create more jobs by encouraging them to invest more in new businesses.
At the same time, the government must help affected industrial sectors and enhance their coordination. In particular, it should take a comprehensive approach to the labor, financial, and corporate governance systems to minimize their weaknesses. Last but not least, Korea needs an effective public education system that will help lift low-income citizens from the poverty trap.
III. Implications
This study found that ever since the financial crisis, income polarization has increased, largely due to the economic slowdown that led to an increase in unemployment and a decline in the middle-income population. To effectively resolve the issue of income polarization, the government’s focus should be on reviving the opportunities of the middle-class rather than on income redistribution. This will be accomplished through growth that yields more jobs and greater income expansion.
42 Samsung Economic Research Institute Creative solutions
●●○○○○○○○Creative Solutions 2. Historical Turnaround and Challenges to the Korean Economy
I. Background and Objectives
The Korean economy is going through structural changes that are quite different from those seen in the 1970s-1980s. From a macroeconomic viewpoint, its potential growth rate has slowed to the 4%-level, while domestic demand remains sluggish. The nation’s economic growth is led primarily by exports of capital and technology-intensive goods, including IT- related products, automobiles, and ships. However, since those heavy industry manufacturers rely on imports of raw material and capital goods, their exports have limited input from the domestic economy.
Since the financial crisis in late 1997, corporate restructuring and globalization have progressed too rapidly, causing a highly unstable environment for management. Worries are increasing over the ever-increasing role of foreign capital in the financial market and the growing potential for hostile takeovers.
This report looks back on the past 20 years of the Korean economy, focusing on watershed events in 1987 and 1997. In 1987, Korea ended authoritarian rule and embarked on a less government-directed economy. The 1997 financial crisis injected crucial momentum for the government to undertake rapid reforms and build a more modern economy. This study aims to analyze macroeconomic and systematic changes experienced by the Korean economy after the outbreak of the financial crisis.
II. Key Findings
“The Historical Turnaround and Challenges to the Korean Economy” is a study aimed at finding answers to the following five questions.
Samsung Economic Research Institute 43 First, 1987 was a seminal year politically and economically. Authoritarian rule ended, opening the floodgates to democratic elections, populist movements and corporate freedom. On the back of increasing democratization, labor unions and civil organizations became stronger and stronger, demanding a greater share of economic gains denied under the nation’s centralized planning. Meanwhile, the corporate sector gained greater autonomy in deciding their internal growth and export strategy. However, in the ensuing years, efforts to coordinate the conflicting interests and cope with globalization demands largely failed, setting up structural deficiencies that are mirrored in today’s issues.
Second, greater contribution from domestic consumption characterized the Korean economy from 1987 to 1997, spurring a transition from over dependency on exports. Domestic demand for durable goods and services increased, leading to expansion of mass production systems. Labor unions gained a greater voice in negotiations and the profileof exports shifted to IT and heavy chemical industries from light, labor-intensive industries. Equipment investment also grew vigorously with an annual growth rate of 12.4%, mainly led by the heavy chemical industries.
In the post-crisis period, the Korean economy witnessed a disconnect between exports and domestic consumption and between consumption and equipment investment, with the stability of its economic growth mechanism impaired. Hit hard by the bursting of the credit card bubble and rising household debt, domestic consumption fell for two straight years in 2003-2004, and is only now showing signs of a slow recovery. Facility investment grew at a mere 1.1% annually in the period 2000 through 2005, as businesses tended to avoid investment unless profitability was virtually assured. During this period, Korean economic growth was led mainly by exports of IT products, ships and automobiles. However, as these industries relied heavily on imported parts and raw materials, companies could not generate substantial jobs and spillover effects.
Third , the 1997 Asian financial crisis spread to Korea, crushing debt-laden companies who had expanded excessively and exposing government failures in supervising financial systems. Korea accepted a bailout from the International Monetary Fund, which called for major reforms and restructuring in finance, business, labor, and public policy. The response caused unexpected side effects, including erosion of the middle class and increased issuance of foreign exchange stabilization bonds to maintain the won at an undervalued rate. In particular, restructuring of the financial and corporate sectors enhanced the financial structure and
44 Samsung Economic Research Institute Creative solutions transparency of companies and asset soundness of banks and strengthened the foreign foothold in local ownership and financial markets.
Fourth, Before the 1997 financial crisis, production factors such as labor and capital increased along with rise in population, helping the nation average sustain 8% growth over decades. Since the crisis, the job market has deteriorated as companies shifted to contract employment to gain flexibility from rigid labor laws. Facility investment also slowed due to sluggish capital accumulation, weakening supply capacity. Worse, slack consumption hobbled growth, creating a one-legged economy resting on exports. Both actual and potential economic growth has fallen to 4%. To rebound to the economy’s potential growth rate, Korea needs to look for ways to expand facility investment and invigorate domestic consumption.
In sum, after years of robust growth under growth-oriented policies, the Korean economy suffered a series of blows, including the financial crisis, drastic structural reforms, and lowered growth potential due to inadequate response to changing global economic paradigms. To be well prepared for the aging of its population and to prepare itself for entry into an industrialized society and reunification, the country now needs a restoration of its growth momentum and a way to keep growth sustainable.
III. Implications
This study chronicles the Korean economy’s remarkable development over the past 20 years, focusing on the watershed events of 1987 and 1997, while providing practical suggestions for further reforms.
The main themes of this study include the process of democratization, and the resulting economic changes and market reforms achieved since 1987. It also offers a full analysis of how the Asian Financial Crisis affected Korea and the inadequate responses of different stakeholders like the government, corporations and labor unions to specific challenges.
In a practical move to keep hope for the Korean economy alive and to ensure a restoration of growth momentum, this paper calls for the government to supplement the unstable economic system in adherence with ‘market-oriented’ and ‘business-first’ principles. Measures for expanding facility investment and invigorating domestic demand are urgently needed.
Samsung Economic Research Institute 45 Figure 1. A Graphic Overview of This Study
1970-1986 : Economic Growth Rate 7.6%; Potential Growth Rate 8.1%
1987-1997 1. Diversification of economic entities (gov’t+firms)+labor union Economic Growth Rate 7.7%; 2. Excessive investment Potential Growth Rate 8.9% No mechanism in place to resolve conflicts between different economic entities Limits in restructuring marginal businesses Failure in financial supervision and exchange policy
1998-2006 : Financial Crisis Economic Growth Rate 5.8%; Potential Growth Rate 4.0%
3 Principles Practical Alternatives
Market Oriented Enhancement of corporate autonomy Sluggish Investment, polarization, Growth Focused lasting scars of the Financial Crisis Strengthening of related Business Centered financial functions Establishment of cooperative labor-management model Small and efficient government, 1. IMF stabilization policy, the reform of 4 areas market opening 2. Dogmatic adoption of global standards 3. Confusion in Korean economy’s identity 1997-2016 : 4. Risk-aversive, conservative management Facility investment up 5%; Potential Growth Rate 6.0%
46 Samsung Economic Research Institute Creative solutions
●●●○○○○○○Creative Solutions 3. Creating an Ecosystem for Policy-Related Knowledge
I. Background and Objectives
In order to deal with the increasingly complicated economic, social and political environment of contemporary society, fragmentary knowledge or the aggregation of basic research is often inadequate. Instead, we need high-quality policy-related knowledge that can solve problems and help make sound public policy decisions.
High-quality policy-related knowledge refers to a “complex body of knowledge” that can contribute to rational decision-making and problem solving. It is an intellectual infrastructure that can help maximize governance efficiency. We analyze policy-related knowledge based on the understanding that the process of production, distribution and consumption of policy- related knowledge is akin to the food chain of a natural ecosystem. Thus, the ecosystem of policy-related knowledge encompasses people and organizations that participate in the process of production, distribution, consumption of policy-related material, as well as interaction between participants.
II. Key Findings
Korea’s ecosystem for policy-related knowledge is not strikingly diverse, despite a dramatic increase in research providers. Instead of closely collaborating with local analysts, Korean intellectuals traditionally have been relied on overseas analysts. In the past, the government held a tight grip on the output and consumption of knowledge by establishing state-owned research centers that provided policy-related knowledge for official promulgation. However, government-driven knowledge creation and selection mechanisms failed to efficiently adapt to environmental changes and ultimately declined. Although sources of knowledge have diversified, a recognized mechanism to select useful policy-related knowledge has yet to materialize.
Samsung Economic Research Institute 47 In an attempt to help establish a more favorable policy-related knowledge ecosystem for Korea, this study also analyzed the current states and types of policy-related knowledge ecosystems in a handful of industrialized countries. This study functions as an overview as to how well advanced economies produce policy-related knowledge and how active the interaction is between knowledge producers and consumers there. This study further categorized the nature of policy-related knowledge ecosystems for industrialized countries into the following five types: First, the US is a private sector-oriented balanced type, while Germany is a government-oriented balanced type. Japan is a mixed type, while China is a state- led type. Finally the Netherlands is discussed as a public/private/citizen compromise type.
To develop an ecosystem for policy-related knowledge, Korea should promote diversity among knowledge producers and strengthen the role of knowledge producers as knowledge integrators. In order to promote diversity, levels of societal tolerance should be upgraded. Establishing a consultative body under supervision of the President would be a good measure. The government also needs to consider setting up a permanent government body to pursue large-scale national research projects.
In order to promote interaction, ecosystems for policy-related knowledge should be open to outsiders. If a policy-related knowledge cluster is set up in an area where consumers of knowledge are densely located, this can promote better interaction throughout the entire ecosystem. At the same time, the nation needs to take advantage of forums for debate, including the National Assembly’s hearing sessions, and non-partisan research activities.
Korea’s ecosystem for policy-related knowledge can be fostered only when there is an effective mechanism to select useful knowledge and offer rewards for the provider. In the US, many public foundations and private funds donate money to finance and reward outstanding knowledge providers. In order to emulate this system, Korea needs to create a transparent selection procedure that involves numerous stakeholders in the knowledge assessment process. Furthermore, it should establish an efficient reward system for quality knowledge providers by which such providers are given financial and career incentives, including positions in public office.
III. Implications
There are worries that Korea will stagnate in a structural low-growth cycle. To avoid this, a homegrown development model is needed to replace the nation’s catch-up model. This study analyzes the current state and problems of Korea’s policy-knowledge infrastructure by using
48 Samsung Economic Research Institute Creative solutions mathematical models for content analysis and network analysis. It then provides an ecosystem for policy-related knowledge to revitalize the economy. Through an ecosystem of knowledge creation and sharing, the nation will be better positioned to compete economically as a knowledge-based global player.
Figure 1. Conceptual Model of the Policy Knowledge Ecosystem
Figure 2. Key Conditions for Further Development of Policy Knowledge Ecosystem
More intellectual stimulus Fair selection system and opportunities for cooperation ion A 6) Reasonable reward system with knowledge producers ct de ra qu e a Production of knowledge applicable to t t in e the real world through selective rewards 3) Open independent system d s e e t l e a Enlargement of the global knowledge c r 7) Social trust Sound t o i
o base through the attraction of unbiased g
i n
n Acquisition of social trust for
v
v Policy Knowledge
n n I external knowledge providers I Ecosystem knowledge ecosystems 4) Efficient knowledge circulation Removal of exclusive barriers and closed En Specialization of professional attitudes in personnel exchange ha ity nc ers ement of div knowledge and creative integration 5) Creative relationship Fine-tuning of differences between 1) Well-structured diversity Expansion of role as a creative integrator producers, driving them toward sharing and fusing their knowledge. 2) New attempts Promotion of challenging knowledge projects
Samsung Economic Research Institute 49 ●●●●○○○○○Creative Solutions 4. M&A Trends and Strategic Implications
I. Background and Objectives
Cross-border M&As are becoming more common as multinational corporations rely on takeovers to enter markets. Even companies in India and China have jumped on the M&A bandwagon, leaving Korean companies far behind.
Most Korean enterprises have traditionally relied on organic growth to expand. A bout of attempts to acquire foreign companies before the 1997 financial crisis failed, turning sentiment toward international M&As even more negative. However, they are better positioned now to attempt international takeovers. This report examines the implications of global M&As and the ramifications on Korean corporations doing business internationally.
II. Key Findings
First, this report examines how and why multinational companies (MNCs) decide to engage in international mergers, while examining problems for Korean firms that remain reluctant to join the global trend. Second, this study is also aimed at determining characteristics for industries where global M&As have been more pronounced. To this end, the report looks at how the top- five companies in each of ten major industries have performed in M&A for the past ten years.
MNCs, it turns out, pursue expansion-by-acquisition strategies to take commanding share in the market. Most of the top-ranking global companies have been actively involved in large- scale M&A activities, and this is far more often the case compared to their smaller brethren. Moreover, companies engaged in a slew of M&A activities saw their market share soar.
Another interesting fact of note is that MNCs’ strategy to grab global market share is now spreading to emerging markets. One of the report’s findings is that global M&As occurred more
50 Samsung Economic Research Institute Creative solutions frequently when regulations were lax and industrial structure was more oligopolistic. It also found that M&As took place more in service industries than in manufacturing.
Figure 1. Global Oligopolistic Process by MNCs in the West
Facility oversupply in western market Emergence of new markets System change Neoliberalism
Int’l West Int’l Global West MNCs M& As Oligopolists M& As Oligopolists
Globalization in the West Globalization of the World
MNCs’ global M&A strategies can exert a huge influence on Korean companies. First, in today’s industries where increasing trend toward oligopoly is underway globally, advantage in price and quality of products is no longer enough to gain the upper hand in international competition. No matter how good a product’s quality may be, it is still possible for Korean firms to have no venue to sell their products if MNCs block the channel with superior brands and distribution prowess. Second, MNCs are using international M&As to build global networks, propagating their culture and standards to other regions. This means that local firms can lag behind in global reach, cost savings, and proximity to consumers.
Leading global companies leverage M&As, as a strategic tool in situations where the scope of competition has widened to include competition over management resources, as well as competition based on price and product quality. Management resources include organizational know-how and customer relationships, as well as raw materials, plants and equipment, capital, human resources, and technology. Most Korean enterprises have traditionally relied on organic growth as their main expansion strategy. These companies should be aware that other global corporations relying on M&A strategies have been successful in increasing the scale and scope of their business, and it is therefore incumbent on Korean companies to consider merger and acquisition strategies as a means for growth in domestic and international markets.
Samsung Economic Research Institute 51 Figure 2. Comparison of MNCs’Competition Strategies and Those of Korean Firms
Competition TypeMajor Weapons of Competition Instruments of Globalization
MNCs Goods Market Competition Quality and Price Export, Greenfield Factor Market Competition Absorption of Other Firms’ Resources, Investment, Brownfield Technology and Customers Investment
Local Goods Market Competition Quality and Price Export, Greenfield Companies Cooperation Among Affiliated Firms Investment
III. Implications
There is high potential for M&A deals to be made in Korea, especially in the home appliance and computer industries, where industrial characteristics are becoming more service oriented, as well as the increasingly oligopolistic steel industry. Even in other industries, similar trends toward consolidation will be in store as free trade deals motivate companies to join forces.
Moreover, along with the ever-increasing retained earnings of local companies, coupled with the hike in the won’s value, home-grown companies have more chances to make profits from international M&As. Korean companies should be able to acknowledge the importance of M&As as part of a corporate strategy toolkit. They should learn from the experience of M&A deals at home and make effective use of such experiences in future M&A deals overseas.
52 Samsung Economic Research Institute Creative solutions
●●●●●○○○○Creative Solutions 5. India and the ‘Asian Corridor’
I. Background and Objectives
Surging growth in India and the pursuit of free trade agreements by Southeast Asian Nations
●●●●●○○○○has laid the groundwork since 2000 for corridor of dynamic economic exchanges from South Asia to Northeast Asia. As India is integrated into Northeast Asia’s emerging division-of-labor structure, an “Asian Corridor” is being created, leading to a consumption and production zone that links Northeast Asia, Southeast Asia and India.
II. Key Findings
This report is the result of a joint study by Samsung Economic Research Institute, Singapore University and the Indian Council for Research on International Economic Relations (ICRIER). SERI examined trade and investment relations between Northeast Asia and India and the effect of signing free trade agreements with New Delhi. Singapore University reviewed FTAs carried out by members of the Association of Southeast Asian Nations. ICRIER provided analysis of the Indian economy and looked at economic relations under FTAs.
ICRIER predicted that the Indian economy would be able to sustain its robust economic growth over the long term while FTAs would operate smoothly, enabling an increasing number of multinational companies to enter the Indian market. Chances are high that India’s labor- intensive industries will have a competitive edge over those in Northeast Asia, according to ICRIER.
Singapore University forecast that Southeast Asia will serve as a bridge between Northeast Asia and India, thus emerging as a core part of the Asian Corridor. The Northeast Asian side found that despite growing corporate interest in India, the division-of-labor relationship is not fully established due to fragmented relations among Northeast Asian countries and between Northeast Asia and Southeast Asia. Given that India’s manufacturing competitiveness is weaker
Samsung Economic Research Institute 53 than that of China, an FTA between India and China is not likely to be formed within the next 10 years.
III. Implications
The researchers engaged in this study on behalf of India, Southeast Asia and Northeast Asia, represented different short-term evaluations of the Asian Corridor. India is optimistic about the Asian corridor and the Indian economy, while Southeast Asia is focused on the role of ASEAN. Northeast Asia believed that it may take some time for economic cooperation between Northeast Asia and India to reach a meaningful level. However, all of them agreed that given the huge growth potential of India, the Asian Corridor will emerge as a vast production and consumption market, playing a key role in facilitating the growth of the Asian economy as a whole.
Asian Corridor
Northeast Asia
India
ASEAN
54 Samsung Economic Research Institute Creative solutions
●●●●●●○○○Creative Solutions 6. The Age of Convergence
I. Background and Objectives
Convergence has entered the lexicon of discussions on national technology strategies and corporate strategies. It is influencing the way business models, organizations and competition is organized. In Korea, convergence remains on a superficial level, despite its national significance. Worse, there is confusion about the definition of convergence. This study aims at providing a progressive convergence strategy through a systematic and objective analysis of the essence and mechanics of convergence.
II. Key Findings
This study is divided into two parts. The first part, “Convergence: Concepts and Economic Issues,” analyzes what convergence is through case studies on convergence of products and services.
The second part, “The Current State of Technology Convergence and How to Respond to the Trend,” focuses on combinations that are proliferating in the IT industry, including state-of-the- art technologies like bioscience, or more traditional industries such as machinery and automobiles.
The pattern of convergence drawn from these parts was verified empirically using the US patent data in the section “An Analysis on Convergence Between Technologies and Industries by Using Patent Data.”
Although ‘convergence’ is commonly used in a way that implies “approaching a definite point,” its meaning is far more diverse. In many cases, converged objects initially undergo a process of disaggregating into multiple elements and then re-aggregating into the final form. Second, convergence occurs when other objects have similar variables, including functions,
Samsung Economic Research Institute 55 applications and customer habits. Third, overlap between patents that were once classified as different technologies is getting larger, indicating that convergence is neither a transitory phase nor exaggerated hype. Overall, convergence is a real phenomenon that is gaining more meanings as IT facilitates convergence between state-of-the-art technologies and traditional ones.
III. Implications
This study sheds light on the concept of convergence using a variety of cases and patent information, thus drawing up strategies like ‘Platform Preoccupation,’ the ‘Transformation of the Value Chain,’ the ‘Maintenance of Balance Between Convergence and Design,’ the ‘Facilitation of Convergence Using IT’ and ‘Alliances with Hub R&D Centers.’
56 Samsung Economic Research Institute Creative solutions
Figure 1. Convergence Concepts and General Mechanisms
Convergence + Disaggregation & Re-aggregation
Economic Motives
Platform Feedback
Three basic factors for convergence
Individual Items / Services / Disassembled Into Function / Created New Products / Idea / Systems Technologies / Elements Services / Systems
Convergence Re-creation
Figure 2. Convergence Patterns Between Biotech, Nanotech and IT
Combination Patterns
Bio-informatics
Applicable Industries
NT-Based BT NT-IT Source Technology
Bio Model-Employed NT
Samsung Economic Research Institute 57 ●●●●●●●○○Creative Solutions 7. European Corporate Strategies Since the Euro Introduction
I. Background and Purpose
When the European Economic and Monetary Union (EMU) began in 1999, it was considered a catalyst to boosting economic growth and advancing entrepreneurial spirit. Indeed, some member countries have benefited greatly since EMU members unified their currencies with the euro. Large European corporations especially have adapted and delivered robust growth. Accordingly, research on how European corporate strategies responded to changes in their business environment brought on by the euro and the future of the European market is of critical significance.
II. Key Findings
This research analyzes legal and institutional changes in the European business environment as well as macroeconomic developments, including market integration and trade flow. It also studies European companies’ current and future strategies to tackle challenges rising from shifts in the managerial atmosphere. The study can be summarized as follows:
1) The EMU has spurred major macroeconomic changes, including foreign exchange and financial institutions. There have been a variety of shifts among industries and markets. Among them are stimulation of intra-European trade and investment, capital-market integration, and commercial environment change. As a result, the competitiveness of European companies has improved greatly.
2) Continental economic integration has recharged national economies and accelerated market integration. This is allowing a wider range of strategic options in changing the European Union’s economic environment. For example, more manufacturing will likely move to eastern Europe while service market integration helps put western Europe on the
58 Samsung Economic Research Institute Creative solutions
path to faster growth. At the same time, as political integration rapidly proceeds, Pan- European organizations are expected to exert greater influence on the politics, economy, society and culture of the rest of the world.
3) Competing interests and demands persist despite integration efforts. Korean companies keen to enter the huge EU market, with its 520 million strong population, will need to be astute in allocating their resources effectively and in devising strategies that target individual localities and classes.
Research Framework
Analysis of the Management Environment Company Strategies (Chapter 2) (Chapter 3)
Organization Macroeconomy
Investment & Production Industry Euro-System Regulatory & (Electronic Industry) Institutional Marketing ( 1999-present) Changes Markets (Distribution, Labor, Finance) Finance Commercial Environment Consumption Patterns Labor & HR
EU integration (Best Practice) Deepering & Enlargement
Prospects for the Management Environment Deduction of strategies (Chapter 4-1) (Chapter 4-2)
Organization Macroeconomy
Investment & Production Industry Organization Institutions (Electronic Industry) Pan-European & Marketing Economic Bloc Policies Markets (Distribution, (2010 - ) Labor, Finance) Finance (EMU 15 Member Countries, 30+EU Commercial Environment Member Countries) Consumption Patterns Labor & HR
Samsung Economic Research Institute 59 4) Korean companies should intensify their efforts to localize their businesses in Europe. Large conglomerates for their part should improve their management skills in organization, manufacturing, marketing, and HR. Higher market penetration in the European market will require European-style manufacturing, flexible production lines, and strategic relations with pan-European distributors built up through appropriate pricing plans. Small-and mid- sized companies should proactively use opportunities provided by the Korea-EU FTA agreement and European companies’ expansion of global outsourcing. Korean companies also need to consider establishing production bases in Eastern Europe targeted towards new business opportunities and new platforms for growth.
III. Evaluation
From the standpoint of macroeconomic, industrial, and business management, this research details changes in the European business environment with the arrival of the euro, as well as companies’ strategies to cope with such changes. In this sense, the research will serve as a guide for CEOs and strategists planning to establish businesses in the Euro zone.
60 Samsung Economic Research Institute Creative solutions
●●●●●●●●○Creative Solutions 8. LCD Production in East Asia and Cooperative Measures
East Asia (Korea, Japan, China and Taiwan) is the only region where liquid crystal display (LCD) panels are being developed and produced. Recently, the business environment of the LCD industry has deteriorated due to rapidly declining prices, lower profitability, monopoly or oligopoly of core parts and materials, and competing display standards. Furthermore, each East Asian country has focused on expanding its own market share and enhancing performance, intensifying competition. Samsung Economic Research Institute and Japan Research Institute jointly analyzed the industry, in part to promote mutual cooperation in the development of the LCD industry and to improve competitiveness. Special emphasis was placed on the study of the regional LCD cluster.
I. Key Findings
To find the answers, this paper adopted the following research framework:
Research Framework
The Deduction of the Examination of The East Asia LCD Cluster’s East Asia LCD Industry’s Suitability Structural Form Current Tasks (Chapter 6) (Chapter 2-3)
Mutual Cooperative Measures (Chapter 5)
Samsung Economic Research Institute 61 Pursuant to this framework, the second and third chapters explore the technological characteristics of the LCD industry and the current status and developments of the industry in each country. The research concluded that the causes for the LCD industry’s location in East Asia are: (1) Japan was first to succeed in commercializing the LCD; (2) Korea and Taiwan supported massive investment in the LCD industry as a strategic business for their countries; and (3) Geographical proximity to Japan offered neighboring countries advantages in technological cooperation. Along with these causes, the research analyzed such matters as sharply falling prices for LCD panels, the necessity of developing technologies suitable for larger equipment boards, oligopoly in the parts and material industries, the rise of alternative display standards, and the requirement to create new markets.
In the analysis of the network structure, this research paper conducted a survey on the LCD cluster for Japan and Korea, as well as patent analysis. The patent analysis and cluster survey concluded that each country had its own structure, and that the structural form of the East Asian LCD cluster is disparate and dispersed among countries and companies. To make matters worse, few effective channels for exchange of knowledge and information are available, hampering joint innovation and cooperation. This research suggests the following cooperative measures in order to address these concerns:
First, countries must promote connections and mutual cooperation in the East Asian LCD cluster. By doing so, they can establish channels that connect the fragmented networks of the LCD cluster.
Second, a region-wide effort to nurture highly trained workforce should be sought. This workforce will solidify the basis of the labor supply for the LCD industry, and at the same time, establish regional networks.
Third, each country must make concerted efforts to expand and improve profitability for the LCD industry by supplying materials more efficiently and launching digital TV services as early as possible.
Finally, East Asian countries should ease customs and non-customs barriers for the LCD industry, and strengthen protection of intellectual property. These measures for strengthening market mechanism will support an effective structure for division of labor over the long term.
62 Samsung Economic Research Institute Creative solutions
II. Evaluation
This research examined the networking structure of the East Asian cluster of LCD industries and suggested cooperative measures among the East Asian nations engaged in the industry. Unlike previous research, which analyzed the industry structure itself, this study assessed the suitability of the structure. It also focused on the importance of establishing a network of “gateways” in a myriad of forms that can connect disparate networks among countries and companies to create more favorable market conditions.
Samsung Economic Research Institute 63 ●●●●●●●●●Creative Solutions 9. Causes and Patterns of Government Policy Malfunctions
I. Background and Purpose
There has been comparatively little research on why government policies malfunction. This research aims at uncovering the disconnected reasoning underlying failed government policies. Such policies produce unexpected outcomes due to lack of awareness on the part of policymakers of the relevant structures and systems for establishing and enforcing policies. This research analyzes the causes for negative externalities from government policy by applying “Systems Thinking” and then suggests a variety of structures to resolve the malfunctions. It also speculates as to how such side effects arise based upon previous examples and policy measures.
II. Key Findings
This research used “System Archetypes” to apply “Systems Thinking” to government policy malfunctions. Using this theoretical approach, the research categorized governmental policy pitfalls into a number of distinct categories. The research then applied the framework to previous cases like the Special Law Against Prostitution, the credit guarantee schemes for small companies, the agricultural and industrial areas policy, credit card abuse prevention policy, and exchange rate protection measures. It also analyzed current policies, including policies intended to address the real-estate issue, low birth-rates, and urban crowding.
Conclusions were as follows: First, feedback loops lead to unexpected outcomes, or policy pitfalls. In other words, policies entail unintended policy loops that then result in policy malfunctions. Such loops can be divided into two categories—the first where policy implementation produces side effects through an unpredictable course, and the second where entities within the system produce unintended outcomes through counteractions. Policymakers often fail to recognize such unintentional feedback loops prior to execution because their scope of recognition is limited and confined to a fixed way of thinking.
64 Samsung Economic Research Institute Creative solutions
Second, policy-making side-effects can be categorized into four types. Based upon the attributes of anticipated loops, policies can be classified into two categories: adjusting and promotional policies. In accordance with the unanticipated traits of loops for each policy, adjusting policies can be further subdivided into either control-failure or original condition recovery types, whereas promoting policies can be divided into intensifying imbalance and limited growth types. Most policy malfunctions fall into one of these four divisions, or a compound type linked to two classifications. Recognition of these characteristics can prompt solutions that can prevent unintended consequences a priori.
Third, in order to preempt undesirable adverse effects, policymakers should review all related feedback loops, come up with comprehensive remedies, and evaluate and improve thought structures and methodologies on a continuous basis. To this end, they should introduce all-out systematic thinking systems, integrate various points of view from related subjects, evaluate effects generated by simulations, and institutionalize policy evaluation and learning.
III. Evaluation & Suggestions
This research paper brings to light general causes for adverse policy effects and their structures using the methodology, ‘Systems Thinking.’ Under this theory, it proposes guiding points and suggestions necessary for preventing such effects in advance. First, this study offers analytic standards for policy evaluation and problem solving. Second, the research provides preventive measures, defining reasons, structures, and divisions for policy pitfalls. Third, the paper proves the possibility of applying analysis to the policymaking process and, in effect, uses the theory to evaluate real policies. This paper is a significant step towards an introduction of systematic methods when discussing comprehensive and general analysis in policy malfunctions.
Samsung Economic Research Institute 65 Research Content & Flow
Policies in Korea ●`Frequent policymaking mistakes and insufficient preventive systems
●`Causes & Structures: Unexpected Loops Understanding of Policy ●`Classifications: Control-Failure / Original Condition Recovery Pitfalls Based on Intensifying-Imbalance / Growth-limit Systematic Thinking ●`Past Examples
Analysis of Current ●`Real-estate Policies Matters Based on ●`Low Birth-rate Policies Systematic Thinking ●`Urban Crowding Policies
Deduction of Preventive ●`Recognition of various feedback loops Measures for ●`Comprehensive solutions to problems
Policy Mistakes ●`Continuous evaluation and improvement of thinking structures Top Ten Hits of 2006
Top Ten Samsung Economic Research Institute has published a list of its top-ten ‘hit’ products and Hits of 2006 services for many years. By selecting these items and explaining the factors that made them popular, SERI has become the leading expert on the nation’ s upcoming consumer trends.
Consumption Keywords
Luck and Fortune Slim & Light Marriage Boom Apartments (the 2006 lunar year has two in Pangyo springs and is believed to be a lucky year) Slim Mobile Phones Bottled Tea Products Global Lingering “Wellness” Economic, Flat Panel TVs Low-Alcohol Liquors Trend Social Identity TV Miniseries Featuring Skinny Fashion Vinegar Drink Products Instabilities B-Boys the Goguryeo Dynasty iPod Nano Anti-Atopy Products The King and the Lee Seung-Yeop Clown, The Host
World Cup Germany Pop Singer “Rain”
●`Slim and Light
●`Luck and Fortune
●`Discovering New Fun Sources ●`Identity
●`Searching for a Utopia ●`Nostalgia for Analog ●`Online 'Buddy' Culture ●`돈과 부(富) ●`Reality Bites ●` ` Stress-Relief Means ● Getting Rich Quick >>> ●` ●`Digital Lifestyle ●`High-End,답답한 현실로부터의 Luxury Products 탈출 ●`Escape from Reality ●●`Conspicuous`뉴 디지털 라이프 Consumption 스타일 ●`New Digital Lifestyle >>> ●` ●`Pursuit of Healthy Life 건강과 지식 추구
>>> Consumption Keywords 1. Apartments in Pangyo
>>> 1. The Chonggyechon Stream 2. Slim Mobile Phones 1. Cyworld 2. "Blue Ocean Strategy" 3. Low-Alcohol Liquors 1. Digital Photos 2. Multi-Functional Mobile Phones 3. Satellite DMB 4. Korean Movies 2. Lotto 3. Vita 500 the Vitamin Drink 4. Indirect Investment Vehicles 5. TV Miniseries Featuring the 3. Multi-Functional Electronic 4. "Yonsama" Syndrome and the 5. K-1 Goguryeo Dynasty 3. Appliances 4. Korean Wave 6. TV Drama Series 6. Bottled Tea Products 4. 'Well-Being' Goods 5. High-Capacity MP3 Players 7. Kart Rider 7. Lee Seung-Yeop 5. Contemporary-Version History 6. Low-priced cosmetics 8. Car Navigation System 5. Dramas 8. B-Boys 7. TV drama: "Lovers in Paris" 9. "Welcome to Dongmakgol" the 9. Skinny Fashion 6. Books on Personal Finance 8. Bestselling Comicbook: 9. Movie 10. Flat-Panel TVs 7. Import Cars 8. "The Magical Way of Learning 10. Blogs 8. Free-for-All Subway Tabloids 8. Chinese Ideographs" 9. Naver's Knowledge Search 9. Long-Term Mortgage Loans 10. Immigration Boom 10. Spicy Foods
Top Ten Hits 2003 2004 2005 2006
Samsung Economic Research Institute 67 Other Activities About SERI
History Mission & Vision Research Areas Consulting Areas About SERIChina SERI@Net Organization History
1986Foundation 1998Korea’s SERI
Jul 1986 Established as an affiliated center of Samsung Life Dec 1998 Established the IMF database Jul 1986 Lim Dong-Sung inaugurated as the first president Apr 1999 Hosted the Knowledge Management Symposium Apr 1999 Started the Cyber SERI Club Feb 2000 Published the World Report Mar 2000 Hosted the Venture Symposium 1990Growth Era Apr 2000 Hosted the first Digital Symposium Jul 1990 Started management consulting business May 2000 Hosted the Partnership Economy Symposium Apr 1991 Incorporated as Samsung Economic Research Institute Sep 2000 Opened the English Website koreaeconomy.org Sep 1993 Established a subsidiary, Samsung Earth Environment Center Oct 2000 Hosted the second Digital Symposium Oct 1993 Started “SERI Club“ Member information business Nov 2000 Hosted the Korea-China-Japan Industry Cooperation Symposium Jan 2001 Opened ebitzone.org May 2001 Selected as the No.1 global think-tank site by Alexa May 2001 Hosted the Industry Competitiveness Symposium 1995Recognition Building Jul 2001 Published the 15th anniversary company yearbook May 1995 Cho, Woo-Suk inaugurated as the second president Oct 2001 Opened SERICEO.org Aug 1995 Started the Regional Economy Forum Nov 2001 Hosted the Labor Welfare Policy Symposium Aug 1995 Published a weekly issue report, “CEO Information“ Dec 2001 Hosted the Women’s Work-force Symposium Jul 1996 Published the 10th anniversary company yearbook Feb 2002 Opened SERI CEO to the public Sep 1996 Moved to Kukje Center Mar 2002 Hosted the China Symposium Oct 1996 Opened SERI.org Apr 2002 Hosted the Recent Economy and Industry Symposium Jul 1997 Opened research & information database to the public Apr 2002 Hosted the Venture Crisis and Growing Companies Symposium Dec 1997 Spun-off the Samsung Earth Environment Center Aug 2002 SERI.org grows to 300,000 members Oct 2002 Hosted the Industrial Cluster Development Strategy Symposium Apr 2003 Co-Hosted The Korean Economy after the War in Iraq Symposium with the Korea Herald Jun 2003 Hosted the “Korean Competitiveness, Is it Alright?” Symposium
70 Samsung Economic Research Institute 2003Global SERI 2005Towards a Globally Competitive Research
Apr 2003 International symposium ‘The Korean Economy after the War Institute in Iraq’ held in cooperation with the Korea Herald Sep 2003 Jung Ku-Hyun inaugurated as the third president May 2003 SERI.org launched on Single TOPIC, the Samsung group Sep 2003 Hosted the Reviving the Farming Sector and Rural Amenity Intranet Development Seminar in response to the Doha Round Seminar Jun 2003 ‘Korea’s national competitiveness’ symposium held Oct 2003 Opened the museum information site SERIMuse Sep 2003 JUNG Ku-Hyun inaugurated as third SERI president Oct 2003 Hosted the Outlook on the Korean Economy 2004 Symposium Sep 2003 ‘Reviving farming sector and rural amenity development in Oct 2003 Hosted the Future of Korea’s Agriculture Seminar response to the Doha Round’ seminar held May 2004 Opened the farm tourism site Tourlab.com Oct 2003 Museum information site SERIMuse launched Jun 2004 Hosted the International Comparison of National Values Oct 2003 ‘The outlook of the Korean economy 2004’ symposium held Seminar Nov 2003 ‘The future of Korea’s agriculture’ seminar held Jun 2004 Hosted the Korea Entrepreneurship Symposium May 2004 Farm tourism site Tourlab.com launched Jun 2004 Hosted a Seminar on the Role of Foreign Ownership in the Jun 2004 ‘International comparison of national values’ seminar held Financial Service Industries of Korea, Japan & China Jun 2004 ‘Korea’s entrepreneurship’ symposium held Jun 2004 Hosted the Future of Farm Tourism Seminar Jun 2004 ‘The role of foreign ownership in financial service industry of Sep 2004 Hosted the Rise of China and Responses from East Asia’ Korea, Japan & China’ seminar held International Symposium Jul 2004 ‘The future of farm tourism’ seminar held Sep 2004 Hosted Ten Suggestions for Economic Recovery Symposium Sep 2004 ‘The rise of China and responses of East Asia’ international Sep 2004 Opened the learning site for military officers MKiss, with the symposium held sponsorship of the Military Mutual Aid Association Sep 2004 ‘Ten suggestions for economic recovery’ symposium held Sep 2004 Hosted the Financial Reform Experience in Korea and China Sep 2004 The learning site for military officers MKiss opened, with Symposium sponsorship of Military Mutual Aid Association Oct 2004 Hosted the Reform in Korea’s Management Education Seminar Sep 2004 ‘Financial reform experience in Korea and China’ symposium Oct 2004 Hosted the In Pursuit of $20,000 Per-capita GDP Symposium held Oct 2004 SERI.org grows to 850,000 members Oct 2004 ‘Reform in Korea’s management education’ seminar held Oct 2004 Opened customized knowledge sites (Samsung Life, Samsung Oct 2004 ‘In pursuit of $20,000 Per-capita GDP’ symposium held Fire & Marine, Samsung Card & Hana Bank) Oct 2004 SERI.org membership surpassed 850,000 Nov 2004 Opened ‘The Window to the World’ SERIWorld.org
Oct 2004 Customized knowledge sites launched (Samsung Life, Samsung Nov 2004 Hosted ‘In Search of a CooperativeModel for Large & Small Fire & Marine, Samsung Card & Hana Bank) Businesses’ Seminar Nov 2004 ‘The Window to the World’ SERIWorld.org opened Dec 2004 Hosted the Benefits and Challenges of Korea-Japan FTA Nov 2004 In search of a cooperation model for large & small businesses’ Seminar seminar held Dec 2004 Hosted the Defining the US-Korea Alliance: Economic & Dec 2004 ‘The benefits and challenges of Korea-Japan FTA’ seminar held Security Challenges Symposium
Dec 2004 ‘Defining the US-Korea alliance: economic & security Jan 2005 Hosted the 2005 Exchange Rate Forecast and Currency Risk challenges’ symposium held Management Symposium
Samsung Economic Research Institute 71 History
Feb 2005 Started the open research project ‘Digital II’ 200620th Anniversary Apr 2005 Hosted the Challenges of the 21st Century US-Korea Jan 2006 Redesigned SERI.org to function as an open knowledge Relationship Symposium ecosystem May 2005 Held a press conference with Foreign Correspondents’ Club Launched the SERI Knowledge Management System members Feb 2006 Digital Research Center and Complex Systems Center May 2005 SERI.org grows to 1 million members established May 2005 Hosted the International Comparison of Civic Duty Seminar Research cooperation concluded with the Japan Research Jun 2005 Hosted a knowledge link between Korea and Japan, Institute SERIJapan.org launched Economic Security Team incorporated into the Global Economy Jun 2005 Launched the open research space Digital 2 Department (www.digital2.or.kr) International symposium “Northeast Asian R&D Strategy for Jun 2005 Hosted Global Trading Kingpin Chang Pogo Seminar Global Corporations” held Jun 2005 Hosted the University Reform and Pursuit of Excellence Mar 2006 SERI Volunteer Center launched Seminar Samsung Economic Research Institute Beijing Office (SERIChina)’s official website www.SERIChina.org opened Jun 2005 Hosted Making Korea a Good Country to Live: The G10 in Y10 Project Symposium Apr 2006 Expanded charity activities by signing a donation agreement with Community Chest Korea Jul 2005 Samsung Economic Research Institute Beijing SERIJapan.org receives a special jury award from AllAbout of Office (SERIChina) approved for business Japan Jul 2005 Hosted the Advent of Farm Tourism: How to Maximize Value May 2006 Korea-China International Forum held Seminar Korea General Survey Symposium (KGSS) Aug 2005 Opened the Six Sigma research site SERI6sigma.org “Generations, Work and Creditability: Nov 2005 Opened the complexity theory site Complexity.or.kr An International Comparison” held Nov 2005 Held a press conference with Foreign Correspondents’ Club Jun 2006 SERI’s 20th Anniversary Symposium held on “Historical members Transitions in the Korean Economy and Challenges” Nov 2005 Hosted the Stay Small but Strong: Korea’s Farming Seminar Jul 2006 Jul.1; SERI’s 20th anniversary Nov 2005 Hosted the BRICs Redux: Threats and Opportunities “Agricultural Tourism Meets Culture” symposium held Symposium Sep 2006 “What are the Potentials of the Indian Market” symposium held Nov 2005 Hosted the Digital Renaissance: Technology, Business, “Strategies to Vitalize Korea’s Policy-Knowledge Ecosystem” and Culture Symposium symposium held SERIWorld.org redesigned and reopened, with in-depth information on East Asia Nov 2006 “High-end Strategy for the Agriculture Industry and the Farm Society” symposium held “Review and Prospects for China” symposium held Dec 2006 The first Complexity Conference held SERICEO sales top 10 billion won (in terms of subscription income)
72 Samsung Economic Research Institute Mission & Vision
Mission＿Samsung Economic Research Institute is dedicated to developing our society as a knowledge powerhouse by providing access to innovative business information
A Private Think Tank on the Frontline of Leading Opinion Maker Business Intelligence
●`Publishes timely analytic reports on business trends ●`Drafts policy proposals for national economic
●`Suggests strategies for sustaining competitive advantage development ●`Presents recommendations for a more market-friendly ●`economy
Vision2010＿ A Knowledge Hub for Creative Solutions
● SERI systematically creates knowledge to enable the nation’s economy Knowledge and its business community to quickly adapt to change.
● SERI intends to become a center for knowledge networks in which all members Hub can exchange ideas and generate insights.
Creative ● SERI seeks to find new, challenging research topics that go beyond conventional thinking.
● SERI provides policy and strategy recommendations for the government and Solutions corporations to prepare for an era of increasing global interconnectedness.
Problem Definition ● SERI approaches problems with a long-term, structural view while suggesting workable solutions to problems at hand.
Problem Solving ● SERI sets policy agendas for future problems well before they become a serious issue, thereby enabling society and businesses to anticipate and respond proactively to future challenges.
Samsung Economic Research Institute 73 Research Areas
Path-Finding Research Samsung Economic Research Institute generates reports Open Research on business, the economy, and public policy, that contribute to the Field-Based Research community through knowledge creation.
Economic Research >>> ● To help Korean companies become globally competitive, SERI provides strategic intelligence on the present and future business environment, deriving readily applicable management lessons from detailed analysis of real-world business cases.
● SERI suggests practical solutions to challenges faced by Korean businesses in labor management and personnel issues.
● SERI proposes appropriate policy and strategic responses for government policy makers and corporate leaders in an environment of constant technological change.
Management Research >>> ● SERI produces reports on macroeconomic trends and major issues, providing indispensable information on the public sector and the corporate world.
● SERI investigates global macroeconomic issues of critical importance, including international finance, international business, and human and material resources, and suggests strategic responses for the nation.
● SERI examines ways for Korea’s financial services industry to adapt to a rapidly changing environment.
Public Policy Research >>> ● SERI supports government decision makers by providing analytical reports and examining public policy issues at national and local levels. To realize a business-friendly environment, SERI recommends policies conducive to creating a full-fledged market economy.
● SERI contributes to the community by doing research on local infrastructure investment, regional development, and specialized local industry promotion. In addition, SERI performs research on other important issues, including education, population imbalances, and welfare reform.
74 Samsung Economic Research Institute Consulting Areas
Samsung Economic Research Institute provides management consulting services to clients in diverse areas, including corporations, banks, and government agencies at the national and local levels.
Management ●Global management strategy ●Business process reengineering ●e-business strategies ●Market-entry, competition strategies ●Future growth studies ●Restructuring strategies Strategy ●Vision-building strategies ●New business development strategies ●M&A strategy Consulting
Human ●Strategic total personnel system ●e-HRM in e-business ●Compensation schemes Resources ●management ●Strategies to hire and ●Reward system design Management ●Organization design ●retain core talent ●Corporate culture design ●Leadership development Consulting
●Industry forecast ●Analysis of technology ●Industry policy making Technology ●(trends in supply & demand, prices) ●trends ●Feasibility studies Consulting ●Technology policy and strategy making ●Global R&D strategies ●Market research on international & ●domestic markets
Policy & ●Financial policies ●Small business policies ●Education, welfare reform & Regional ●Regional development strategies ●Tourism ●gender policies Development ●For-profit businesses for public ●organizations Consulting
●Consulting projects for nurturing six-sigma exports (DMAIC & Black Belts) Six-Sigma ●Education programs for effective six-sigma implementation (executive training programs & implementation strategy sessions) Consulting ●In-depth research on six sigma methods
Samsung Economic Research Institute 75 About SERIChina
I. Mission & Vision “A Leading think-tank for practical knowledge about China”
The four missions of SERIChina
1. Support the Samsung Group on strategic matters with respect to expansion of business in China Analysis and monitoring of business conditions In-depth study on issues relevant to the Group and its local affiliates Provision of logical and detailed guidelines for the Group’s business operations in China
2. Participation in the fulfillment of SERI’s vision to develop a global presence Development and improvement of core competencies in China-related studies Participation in SERI-wide research on China, Japan, and Korea to improve SERI’s status as a distinctively competitive, leading global research institute Laying of the groundwork for the knowledge industry
3. Professional networking to establish a comprehensive relations (guanxi) in China for exchanges with key Chinese figures Construction of a comprehensive network connecting key figures and institutions in Chinese academia, media and government
4. Development into the best economic/management information resource for overall information on Korea, China and Japan, and development as a for-fee consultancy Contribution to SERI’s earnings and contribution to the attainment of SERI’s global vision
2010 Vision for SERIChina
Development into the best regarded private-sector knowledge source for sustained growth of the Group within the Chinese economy
Ⅱ. SERIChina Organization
Research Head/SERIChina Director
Macroeconomy Industry/Tech. Mgt./Corporate Editor/ Sino-Korea Team Team Team Strategy Team Admin. Staff
Macroeconomy Team Analyzes trends and prospects for the macroeconomy and studies issues related to the Chinese economy and the financial sector
Industry/Technology Team Analyzes trends and issues in the development of China’s major industries and technologies
Management/Corporate Strategy Team Studies the management, corporate, and HR strategies of foreign affiliates and local companies
Sino-Korean Team Studies main issues in Sino-Korean relations and Chinese political issues
76 Samsung Economic Research Institute Ⅲ. Performance of SERIChina in 2006
Regular Reports
China Business Focus (weekly report)
Provides background, development, and prospect analysis, and implications for a variety of timely topics regarding the Chinese economy, Chinese business & industry, and Sino-Korean relations
43 issues published (including 34 issues bearing the name China Weekly Review) -“China Starts to Manage Outstanding National Debt” and five other topics (2006. 1st issue) -“The Emerging Bancassurance in China” and five other topics (2006. 2nd issue) -“2005 China’s Most Valuable Brand Ranking Released” and five other topics (2006. 3rd issue) -“Chinese Local Companies Suffer Severe Brain Drain” and five other topics (2006. 4th issue) -“China Cracks Down on Illegal WCDMA Networks” and five other topics (2006. 5th issue) and - 220 thematic reports in total.
SERIChina Review (bi-weekly report)
Every two weeks, Macroeconomy, Mgt./Corporate Strategy, Industry/Tech. and Sino-Korean Teams take turns to produce in-depth reports on the hottest issues in China. Each team studies and explains the background of the issue and provides its implications based on each team’s analysis model. -Cultural Factors for Successful Localization in China (2/2006) -Shifts in China’s Economic Growth Model (3/2006) -Changes in China’s Pro-Foreign Capital Policy and Responses of Korean Companies (3/2006) -Distribution Channel Strategies for 3C Products (Consumer Electronics, Communications and Computer) (3/2006) -Unequal Income Distribution in China (4/2006) -Industrial Concentration in China (5/2006) -A Korea-China FTA and Its Impact on Korea’s Electronics Industry: FTA Negotiations as Assessed -by Korea and China (5/2006) -China’s M&A Market (6/2006) -Bubble in China’s Property Market (7/2006) -The Entry of Foreign Banks into the Chinese Banking Sector (7/2006) -Multinational Corporations in China and Their Corporate Social Responsibility (8/2006) -China’s Financial Market Opening and Its Implications (8/2006) -China’s Monopolistic Industry Faces Reforms (9/2006) -China’s Retail Market Opening and Its Implications (10/2006) -Foreign Takeover of Chinese Companies (10/2006) -Analysis of Korean Companies in China (10/2006) -Operations Strategy for Foreign-Invested R&D Centers (11/2006) -Crisis Management for Multinationals (12/2006) -Ten Issues Facing China’s Economy in 2007 (12/2006)
Quarterly Reports (Economy Watch/CEO Information)
Analyzes the Chinese economy based on movements of major macroeconomic indicators and predicts future trends
Publishes CEO Information (SERI’s main report) every quarter on critical issues for China -Ten Issues Facing China in 2006 (2/2006) -China’s Foreign Investment Policy (7/2006) -Ten Issues Facing China’s Economy in 2007 (12/2006)
Samsung Economic Research Institute 77 Forum & Seminar and Networking Activities
SERIChina Strategy Seminar
Bi-monthly seminar with Beijing’s major universities to enhance research capabilities for SERIChina and identify new research topics
Presentations and discussions on diverse topics by Chinese experts on the economy, management, and industry -Peking University Seminar: Competition Strategy for 3G Telecommunication Standards (3/31/2006) -SERIChina Seminar: Two Strategy Management Research Projects and Some Personal Reflections (9/22/2006) -Renmin University Seminar: Strategic Response & Institutional Constraints (11/3/2006) -Joint Forum by the Embassy of Korea in China and SERI
Bi-annual forum where Chinese experts in the economy, management and industry, businessmen and the media have presentations and discussions on international issues, serving as an opportunity for SERIChina to influence not only academic research but also practical business management. -Theme: Corporate Social Responsibility for Multinationals (12/5/2006, Kempinski Hotel Beijing)
Board Members
Eight leaders from academia, business, and the media (as of March 2007) who meet every quarter and advise on China’s economy, management and government policy, and set mid- and long-term management directions for the Samsung Group to become a respected corporate citizen in China.
SERIChina Advisory Board
Name Affiliation Title
Zhang Weiying Guanghua School of Business, Peking Univ. Dean
Hu Shuli Caijing Magazine Chief Editor
Liu Shijin Development Research Center, State Council Deputy Director
Xue Lan School of Public Administration and Management, Tsinghua Univ. Exec. Associate Dean
Yu Yongding Institute of World Economics and Politics, Director Chinese Academy of Social Sciences
Chen Guoqing School of Economics and Management, Tsinghua Univ. Exec. Associate Dean
Fan Gang Foundation of China’s System Reform General Secretary Director Institute of National Economy
Fu Jun School of Government, Peking Univ. Vice Dean
Faculty Members
This is a research advisory group consisting of 11 professors (as of March 2007) who meet regularly and advise on research agendas and reports for SERIChina and help SERIChina improve the quality of its research.
78 Samsung Economic Research Institute SERIChina Faculty Advisory Group
Name Affiliation Title
Li David Department of Finance, Tsinghua Univ. Director
Zhou Dongsheng China Europe Int’I Business School Professor
Hong Chen Cheung Kong GSB Deputy Dean
Zeng Ming Cheung Kong GSB Professor
Wu Changqi Guanghua School of Business, Peking Univ. Deputy Dean
Gau Xudong Tsinghua Univ. Deputy Director
Chang Chun China Europe Int’I Business School Professor
Li Ling China Center for Economic Research, Peking Univ. Associate Dean
Zhang Wenkui Development Research Center, State Coucil Deputy Director
Xu Erming Graduate School of Management, Renmin Univ. Deputy Dean
Li Xiangyang Institute of World Economics and Politics, Deputy Director Chinese Academy of Social Sciences
External Activities of SERI’s China Research Department -Investment in China and Successful Strategies (Joint Research and Symposium with KOTRA) - Assessment of China in 2006 and Prospects for China in 2007 (Joint Symposium with Seoul National University) -Chinese Risk Monitoring System (operated by the Ministry of Commerce, Industry and Energy and advised -by SERI and others) -Strategy Council for Advancing into the Chinese Market (the Ministry of Commerce, Industry and Energy) -2006 International Forum: The Future of Korean-Chinese Economic Cooperation in the 21st Century -for Northeast Asia (Joint Symposium with Sungkyunkwan University Graduate School of China)
Others University Student Paper Contest
The ‘Chinese University Student Research Idea and Paper Contest’ is an annual event to raise visibility of SERIChina and encourage more Chinese intellectuals to access data from SERI -1st contest in 2006: 1,532 students (undergraduates 54%, graduates 31%, doctorals 15%) from 141 universities -including Peking University, Tsinghua University, and Renmin University submitted 710 research papers. - -On December 18, 2006, the presentation and award ceremony was held at the main conference hall -of Samsung China Headquarters.
Community Service
Quarterly visits to community children’s homes and nursing homes
Samsung Economic Research Institute 79 SERI@Net
SERI@Net Samsung Economic Research Institute is dedicated to generating knowledge to enable the Korean economy to find new ways to prosper in a constantly changing world. The institute publishes reports and other materials through a number of online channels.
SERI.org The Knowledge Portal for Korea’s Business and Economy
SERI.org is Korea’s No. 1 knowledge ecosystem, with 1.3 million members interacting and exchanging ideas on a wide array of issues.
Main Features
●`SERI@Net knowledge exchange space is where SERI.org members and SERI researchers join forces to create informative content
●`SERI@Net ranks at the top among Korea’s economic institutes, with a 78% share in terms of visitors (according to web traffic research firm Rankey.com)
●`The best knowledge community in economy and business
●`Two-way communication through SERI forums
No. of Members: 1,275,903 (February 2007) No. of Forums: 2,200
SERICEO.org The Knowledge Source for Business Leaders
Through its innovative content and attractive design, SERICEO provides essential insights to corporate leaders searching for fresh ideas to surmount a host of business challenges.
No. of Individual Members: 6,403 (February 2007) No. of Corporate Members: 264
Inquiry:
●`Internet Business Center
●`Tel: 82-2-3780-8200/8300
●`Fax: 82-2-3780-8380
●`Email: [email protected]
80 Samsung Economic Research Institute SERIChina.org The Knowledge Bridge Linking Korea and China
SERIChina seeks to become a bridge for information exchange between Korea and China, providing information on major economic, management, and industry trends and issues in both countries.
Main Features
●`The Knowledge Bridge linking Korea and China
●`Launched in March 2006
●`Offers economic and industrial information on Korea and China through video clips and reports
●`Available in Chinese, English and Korean
No. of Members: 3,252 (February 2007) Content: 51 Reports; 624 Video Clips
SERIWorld.org The Business & Economic Information Portal for Global Audience
As a global window on happenings in the Korean economy, SERIWorld provides high- quality information on Korean business through reports, briefs, and video clips.
Main Features
● The best English website for Korea-related economic news ● A major site redesign was completed in September 2006, greatly expanding the breadth and depth of access to business knowledge on East Asia ● SERIWorld is dedicated to fulfilling its role as a ‘networking platform’ for foreign company executives, policymakers, academics, and area specialists
No. of Members: 13,273 (February 2007) Content: 1,277 Reports; 624 Video Clips
SERIJapan.org The Knowledge Bridge between Korea and Japan
SERIJapan functions as a conduit for Korea and Japan to exchange knowledge and information, enabling people and businesses in both countries to grow together as true partners.
No. of Members: 3,500 (February 2007) Content: 450 Full Reports; 600 Summary Reports; 850 Video Clips (including economic statistics, company financial databases, M&A data, book summaries & symposium information)
Samsung Economic Research Institute 81 Organization
●Structure
Online Business Macroeconomic Management & Strategy Public Policy Research Strategy Department Department Department Department
●Finance Team ●Complex Systems Center Research ●Senior Fellow on Planning & Managerial Innovation Coordination Department Global Studies Marketing Policy Department Strategy Development ●Director of Personnel Department Department ●Advisor to Overseas Strategy ●Economic Security Team ●Senior Fellow on Asian ●Regional Development Economies Team Human Resource Management Department China Research Department ●Education Reform Center ●HR Strategy Team
Technology & Industry Department
●Staff JUNG Ku-Hyun President/CEO [email protected] 82-2-3780-8331
KIM Byung-Ki CHUNG Ki-Young President Executive Vice President Chief Domestic Affairs Advisor Director of Research Planning & [email protected] Coordination Department 82-2-3780-8051 [email protected] 82-2-3780-8500
CHEONG Mun-Kun LEE Eon-Oh Executive Vice President Senior Vice President Director of Public Policy Director of Policy Development Research Department Department [email protected] [email protected] 82-2-3780-8100 82-2-3780-8101
82 Samsung Economic Research Institute