Interview: Mr. Kwon Do-youp, Minister of Land, Transport and Maritime Affairs

In May 2011, Mr. Kwon Do-youp was appointed as the Minister of Land, Transport and Maritime Affairs (MLTM), prior to which, he was first vice minister in the ministry. The First form of MLTM, named as Mnistry of Transportation, was organized at the time of the establishment of the Korean government on August 15, 1948. Since then the Ministry has been renamed as Ministry of Construction and Ministry of Construction and Transportation and finally was recreated by the Government’s reorganization through merging with the Ministry of Maritime Affairs and Fisheries in 2008. Minister Kwon is an expert official on housing affairs who took the head-post of Housing Division and acted as Director General for Housing Affairs in Ministry of Construction and Transport (MCT). He has shown both professionalism and driving force in handling land and housing affairs, and that he is judged the right man to upgrade housing environments through stable supplies of houses and to find new solutions to the various housing problems particularly for low-income people. He started civil service, assuming an officer post in deliberation of New Town Development in the Ministry of Construction (MC), and held several key posts including Land Policy Div. Director General (DG), Housing Div. DG and Public Relation Division DG and assistant VM in MCT. And he finally made the first VM in MLTM. Starting his civil service in construction sector, he is deemed to have acquired deep experiences with transport as president of Korea Expressway Corp., state-run, before he was appointed the first VM of MLTM. As a major in civil engineering and public administration, he is highly praised as a leader of consilience versed in engineering and civil service. Following the earlier merger of other ministries with MLTM, he has done his excellent job as the first VM, so he was deemed as the right man to smoothly address the various pending issues including Four River Development Project, real estates and the move of civil service offices to Sejong City (starting this year). He has been displaying his best ability in sorting out MLTM’s most pressing problems of house shortage and of jumping house rental deposit on the strength of his diverse experiences of 30 years since 1979 in the fields of construction and transport. In an exclusive interview, Minister Kwon speak on his priorities and policy plans.

Could you please tell us your vision and policy directions for the future? Land and ocean have been the foundation for Korea's economic development, but in the future it needs to play a bigger role by being a quality place where a new culture can be created. For this reason, the following three qualities--the quality of land, the quality of its inhabitants, and the quality of the institutions on which the citizens and land are based--need to be harmonized. Going forward, in order to increase the competitiveness of the nation's land and ocean through region-specific development strategies, the following efforts will be made: ● Infrastructure such as road, railway, housing, water resources, and aviation, will be made more effective through expansion and rigorous maintenance, improving the landscape of the nation ● Also, new growth engines in the maritime sector will be cultivated through maritime tour promotion and marine resources development; while, ● Regulations pertinent to land will be streamlined to suit the convenience of the public, providing a more scenic and beautiful land environment to the public. Despite the recent cargo volume increases, the maritime industry is seeing revenue decreases; what are the government's measures to analyze the reasons for this and overcome this problem? The global maritime industry started experiencing a downturn from the second half of 2010 and this continued to 2011, reducing maritime fares. For instance, the BDI (Baltic Dry Index) on Nov. 3 was 1,817p, which is 42% of the five-year average; HRCI (Howe Robinson Container Index) on Nov. 2 was 556p, which is 64% of the five-year average. The cargo volumes, such as dry cargoes and containers, all increased but, the vessels are being oversupplied compared to the cargo volume, causing profitability erosion of maritime companies. The soon-to-be-delivered vessels account for 31%, in the case of container vessels and 41% in the case of dry cargo vessels, of the current number of vessels, respectively. The rapid oil price increase (36% increased year-on-year as of June, 2011) is eroding the profitability of companies by increasing their costs, as the fuel cost takes up 15-20% of the total costs for maritime companies. Due to the advanced countries' economic uncertainty stemming from the sovereign debt crisis of the US and Europe, the cargo volume increase is expected to slow down markedly going forward. As it seems difficult to overcome the maritime industry's economic woes in the short term, focusing on internal growth instead of external expansion should be more emphasized. First, industry-wide efforts, such as replacing old vessels, changing docks to benefit from lower fee offers, are essential; while, the government will closely consult with relevant agencies and review measures that can strengthen the foundation of the nation's vessel financing, such as expanding the guarantee scope of the vessel financing and extending operation of the KAMCO vessel funds. As of late October, 2011, 430 billion won of loan guarantees have been made to maritime companies. Restructuring Funds, which are the main funding resources for the KAMCO fund, will be maintained till the end of 2011 before being withdrawn. How is the Four Rivers Restoration Project progressing? In Korea, 70% of annual rainfall is concentrated in summer. As it causes frequent flood and drought, the government spends 3~4 trillion won every year for the recovery from flooding damages. Recent climate change is expected to cause more frequent flood and drought. In addition, investment in rivers is urgently needed as high level of economic development raised awareness about the importance of rivers and demand for using rivers and water-front areas. In the past, riverfront areas were used for farming or neglected. Pollutants accumulated downstream in waterfront farmlands and insufficient fresh water during dry seasons undermined river ecosystem. In order to prevent large-scale natural disasters occurred by climate change and improve the soundness and diversity of ecosystem by securing clean and sufficient water resources, Korea carried out the four major rivers restoration project. Neglected water-front areas turned into bicycle lanes and ecology parks where people enjoy cultural and leisure activities. The four major rivers restoration project that was initiated in 2009 is now 92% completed, and the main stream project is 92% completed. Especially, the main stream project will be completed on schedule by the end of this year. During implementation of the project, there was massive criticism from environmental groups about river dredging, etc. However, as the project is bringing fruitful outcome by securing abundant water resources and building bike paths and water-front parks, many citizens now support the project. In particular, although this summer recorded an unprecedented rainfall during the rainy season, there was no serious damage in the four rivers compared to the past. The Korean government's efforts of restoring the four major rivers, responding to climate change and improving ecosystem, will be a good example to Europe. The 1,592km-long bicycle path along the four rivers is the largest and the most beautiful lane in the world and is attracting many tourists who enjoy and give a positive response to the path. What is the reason for last year's yearly housing lease fees and what is the MLTM's plan to stabilize the housing market? The increase in Jeonse prices was mainly resulted from the imbalance between demand and supply of housing for Jeonse and monthly rent. The global financial crisis in 2008 reduced housing supply was reduced since the housing construction market significantly shrank and raised controversy whether or not to abolish the housing-price-capsystem. * Annual authorization and permission for housing construction - (’05) 46.4→(’06) 47.0→(’07) 55.6→(’08) 37.1→(’09) 38.2→(’10) 38.7 Also, stabilized housing price and the increase in redevelopment·housing reconstruction and people's migration increased demand for Jeonse rather than housing sale·purchase. The Korean government will make continuous efforts to stabilize citizens' residence and housing prices. Considering the shortage of housing quantity and quality, it will supply around 400 thousand houses every year as Korea falls short of housing quantity and quality. In addition, the government is trying to diversify housing types and ease regulation in response to changes in demography and family structure due to increasing single and two-person families, low birth rate and aging population, and changes in housing market structure including increased demand for housing for monthly rent. * single, two-person family (%) : (‘90) 22.8 →(’00) 34.6→(’10) 48.1→ (’20) 57.7 * household of aged family members(%) : (‘90) 8.5→(’00) 12.1→(’10) 17.9 →(’20) 22.7 It will also develop and implement a housing policy fit for generation and social class to supply customized housing for new university graduates, middle aged and elderly people, etc. What is the role of the MLTM in carrying out the Korean government's green growth strategies? MLTM is carrying out an important mission of taking care of land, city, housing, transportation, and maritime affairs essential to life of all citizens, and is therefore in a crucial position to lead the way for greenhouse gas reduction and green growth in Korea. Thus, MLTM is pursuing a green growth policy based on the vision of "Creating Low Carbon Green Land and Ocean." At the same time, MLTM is contributing to the alleviation of climate change damages by reducing greenhouse gases, carrying out projects aimed at increasing the adaptation level against climate change, cultivating new economic growth engines such as green technologies and industries, and providing assistance to under-developed countries in the green technology field. First, in the greenhouse gas reduction category, Buildings and transportation, which take up approx. 42% of Korea's greenhouse gas emissions, are being transformed through diverse projects aimed at reducing greenhouse gas emissions, such as revision of regulations, demand volume management, and subsidies; in particular, the President's pledge to "reduce 30% of Korea's greenhouse gases compared to BAU by 2020" is being on track to be accomplished as the government set a goal of reducing 26.9% and 34.3% of greenhouse gases in buildings and transportation sectors, respectively, implementing relevant measures. Second, in the climate change adaptation category, for the purpose of reducing damages from extreme weather conditions like floods and droughts, the Four Rivers, stream maintenance, dam construction, and sea water desalination projects are being implemented, while other programs such as maritime observation network establishment, coastal region vulnerability assessment and maintenance are underway. Lastly, in order to create new growth engines based on green technologies MLTM is focusing its efforts on securing maritime energy using solar, tidal, algae, and wave power, cultivating renewable energy like maritime bio diesel, developing various architecture technologies for saving energy, and maintaining an IT-based efficient energy management system. MLTM will do its utmost to minimize life and property damage from natural disasters caused by abnormal weather conditions by making constant development of technologies and seeking global cooperation; in particular, it will actively contribute to increasing the quality of life for all humanity on earth by carrying out its green technology support projects. Any additional comments to the European FDI companies in Korea? The Korean government is developing high potential, investment-worthy future growth centers, such as Sejong City, Innovation City, Enterprise City, Saemangeum, six Free Economic Zones and Jeju Free International City. These centers will emerge as the country's economic growth drivers; investment made in the cities will bring about benefits not just to the concerned cities themselves but also to the investment companies. The government is striving to create a conducive environment for FDI companies for their investment and business activities, by providing tax benefits, subsidies, and lease fee reductions. It is hoped that these projects will draw more attention in the years ahead *************** Current FDI company assistance system overview - Cash assistance: if 20 or more staff are hired, education and training subsidies and employment subsidies are provided - Lease fee reduction: when leasing a government-owned land, the fees will be reduced by 50-100% - Tax reductions: (1) National tax (corporate tax, income tax) ▪ High tech industry assistance companies in open FDI areas: 100% for 5 years, 50% for 2 years ▪ Complex-style FDI areas: 100% for 3 years, 50% for 2 years (2) Regional tax (acquisition tax, property tax) ▪ According to relevant ordinances, up to 15 years can be applied ***************

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Interview: Mr. Jean-Luc Valerio, President, European Aeronautic Defence and Space Company (EADS) Korea

A French National, Mr. Jean-Luc Valerio is President of European Aeronautic Defence and Space Company (EADS) Korea, and has been in the country since February 2007. EADS is a global leader in aerospace, defense and related services. The Group includes the aircraft manufacturer Airbus, the world largest helicopter supplier Eurocopter and EADS Astrium, the European leader in space programs from Ariane to Galileo. In 2010, the Group’s 10th anniversary year, it generated revenues of € 45.8 billion and employed a workforce of some 122,000. Before relocating to Korea, Mr. Valerio was Senior Vice-President, EADS International-China, and also Head of Singapore Office of EADS International. An aeronautical engineering, he graduated from the French Air Force Academy (Ecole de l’Air) and also has a military pilot licence. “I have been here in Korea for four and a half years now, having arrived in February 2007. Over the past 17 years I have worked mainly in Asia, including Taiwan, Hong Kong, Thailand, Singapore, China and now Korea. Japan is the only country in this region that I haven’t worked in,” he said. Speaking on the business operations of his company, Mr. Valerio noted that EADS has had an average 500 million euro turnover over the last 5 years, and the major part is the sale of Airbus planes to the two national carriers Korean Air and Asiana : the other part being helicopter and Satellites. We are now targeting to introduce our combat jet (the Eurofighter) and some missile systems. In January this year, Asiana Airlines placed an order for six A380s, even as Korean air already started operating the superjumbo jets. Korean Air’s second Airbus A380 started operating long-distance routes from Aug. 9 on the Incheon-New York corridor. The first A380 made its debut on June 6 and is currently employed for the Incheon-Tokyo and Incheon-Hong Kong routes. The airline will take possession of a total of fiveA380s by the end of this year for its Paris and Los Angeles routes. In fact, according to the company’s estimates, Korea would account for around 3.6 percent of the 8,014 aircraft that will be ordered from the Asian region over the next 20 years. Korean orders would amount to around $55 billion out the $1.18 trillion that Asia is expected to spend on aircraft during this period. Another lucrative business section is the defense sector. In fact, it was on his watch that EADS was able to break the stranglehold of US defense companies in the country, with the signing of an MOU, with Korea Aerospace Industries (KAI) on October 18th, 2007, to create a Joint Venture Company for the worldwide sales and marketing of the Korean Utility Helicopter (KUH). The project is aimed at producing hundreds of helicopters to replace the aging UH-1H Hueys currently in service. Not only is KUH being built on Eurocopter's latest technology to be used domestically, but is also aimed for exports into the global market, starting next year. While test flights have already been conducted, mass production will begin in March 2012, and full-scale production in June 2012. In July this year, the company also announced a multi-million euro contract from Korean Aircraft Industries to supply 24 of its AN/AAR-60 MILDS missile warning systems, with deliveries continuing until 2013. Each system uses about 4 passive sensors, which detect the ultraviolet radiation signature of approaching missiles. As for the space sector, the Astrium-built multi-mission Communications, Oceanography and Meteorology Satellite (COMS) was officially handed over to the Korea Aerospace Research Institute (KARI) in August this year. Astrium was contracted by KARI, to design and manufacture the country’s first multifunctional geostationary satellite, COMS, and was launched by Ariane 5 on 26 June 2010. A veritable ‘Swiss Army knife’ of a satellite, COMS is the first three-axis stabilised geostationary observation satellite developed and manufactured by a European company to carry three payloads dedicated to meteorology applications, ocean observation and telecommunications. The handover follows in-orbit acceptance of the satellite, which was successfully completed on March 17th, 2011. He said that his company continues to see strong business prospects in Korea in all the three segments. The advantage of being in Korea is that the relationships are quite regulated and one knows what they have to deal with. This is mostly true for all democracies. For that matter, EADS has been very successful in Asia, with the region accounting for 25 percent of the global sales. Asia Pacific is an important region for the EADS Group. China and India, in particular, show huge market potential, while Korea, Indonesia, Malaysia and Vietnam also offer significant opportunities, he said. Speaking on his role as new president of EUCCK, Mr. Valerio said he was proud and honored to be given this opportunity. In his acceptance speech at the EGM, he had pointed out three reasons for applying to run for presidency: one, to continue and build on the accomplishments achieved by Mr. Hurtiger; second, to advocate the interests of EUCCK members and improve the business environment for EU companies in Korea; and finally to promote European culture and values to Korean authorities and the local business community. He emphasized that his working experience had reinforced the commitment to European values, such as teamwork and creativity. He encouraged EUCCK members to be proud of promoting European history to their Korean counterparts. Even though Europe was currently exposed to harsh economic developments, this crisis would in retrospect prove merely to be a historical anecdote. The new EUCCK President promised to consult and work together with different stakeholder to create a positive business environment for European companies in Korea. “I have always been a pro-European and believe that Europe is stronger by being united. I do believe that differences in diversities are a positive aspect. Many see it as a liability, but I consider it as an asset and in the end the richness of different cultures will prevail,” he said. He noted that his priorities as Chamber Head will be to make sure that the Korean government is respecting their meaningful choice to open the borders to EU products, with the FTA, and there will not be any new regulation to hamper fair activity. “I will make sure that we have all the wonderful resources of business communities to create an environment for small and medium enterprises to get better access and understanding of the Korean market.” In his message to all EUCCK members, Mr. Valerio noted that even as the EU is going through the sovereign debt crisis, everyone has to keep their optimism, and not to reduce their pace or confidence in business. “We cannot be disturbed by something that will be overcome, and must be as active in promoting and innovative to prepare for exit of this crisis,” he said.

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Interview: Mr. Kim Byung-soo, Director General, Foreign Investor Support Office, InvestKorea

Invest KOREA (IK), Korea's national investment promotion agency, was established within the Korea Trade-Investment Promotion Agency (KOTRA) with the sole purpose of supporting the entry and successful establishment of foreign business into Korea. With assistance extending to comprehensive post-establishment services, IK enables foreign corporations to maximize the benefits of the Korean investment environment to ensure their rapid settlement in Korea. The agency is committed to providing unmatched, comprehensive one-stop service that allows foreign investors to join many of the world's most successful corporations who have selected Korea as an investment destination and been rewarded by high returns on the investment. The new head of the Foreign Investor Support Office in the investment promotion agency, Invest Korea, is not only experienced and proactive, but is also full of fresh ideas to help investors. As noted by Mr. Kim Byung-soo, Director General, Foreign Investor Support Office, the agency attracts foreign investment by identifying potential foreign investors, supporting investment projects, providing aftercare services for foreign investors, and building a cooperative network with related organizations. Prior to heading the office in January this year, Mr. Kim was with the Ministry of Knowledge Economy as Director, Foreign Investment Policy Division. This Division comes under the authority of the Vice Minister for Trade & Energy in MKE. It is more like a back office of foreign investment related issues. “My main role in MKE was to provide all the logistics support for needed for the implementation of the Foreign Investment Promotion Act. This Act aims to encourage foreign investment through deregulation by providing tax incentives and financial assistance; deals with foreign investment and technology, and introduces a reporting system with regard to foreign investment in Korea. However, now my main job is to implement these very same policies,” he said. In a sense, this gives him the opportunity to deal directly with foreign investors and know their problems. While trying to solve the problems faced by investors, he has to sometimes deal with uncooperative officials in various ministries and local governments. But that has not stopped him from giving his 100 percent to the job, even at the risk of “begging” lower rank officials to help foreign investors. “For me, FDI does not refer to Foreign Direct Investment. Rather, it is Frontier Development Initiative and going even further, Friendship Development Intiative. It is very important to develop friendly relations with investors inorder to understand their problems to solve them,” he said. Since relocating to Invest Korea, he has made it a point to visit the various industrial sites which have a high proportion of foreign investors, to meet with them and understand the difficulties that they may be facing. He has also been going on invesment promotion trips abroad to meet potential investors. “One has to be proactive and meet foreign investors to anticipate what problems they may face. I do not like to wait for them to come to me with their problems, but want to solve them before they become big issues.” Recalling some of the notable cases that he has encountered so far, he said that Scania Korea and Edwards Korea faced some ‘unsolvable’ difficulties. But, after persisting with the various government departments, he was able to make a breakthrough. Speaking on the main objectives of the Foreign Investor Support Office, he said the investment promotion and support capability has been considerably strengthened by the introduction of the Project Manager (PM) system, under which a PM is designated for each investment project to offer customized support throughout its entirety, from providing investment consultation and obtaining licenses and approvals to actually launching a business. “In addition to the project managers, we have a pool of experts in such fields as finance, tax, law, securities, accounting, and construction to smooth the foreign investment process and ensure that investors claim the full range of benefits available,” he said. The office provides support throughout each stage of the investment project, from international promotion of Korea's image and identification of target companies to delivery of customized assistance ranging from research and planning to implementation. The agency also provides substantive feedback from investors to policymakers in order to constantly improve the investment environment. “The range of services we offer has been significantly enhanced following the opening of the Investor Consulting Center (ICC) within Invest Korea Plaza. The center provides information and assistance on a variety of matters relating to foreign investment and daily living in Korea, from selecting plant sites and forging alliances with Korean partners, to education and accommodation.” Additional business-related assistance are provided by officials seconded from the Ministry of Justice, the National Tax Service, the Korea Customs Office, and the courts of law, all of whom offer a broad range of administrative support and respond to complaints made by foreign investors. “I prefer to call this center as Inter Cultural Communication since we provide one-stop consulting services free of charge to foreigners who wish to invest in Korea.The services include pre-investment market research, administrative support, and settlement assistance, for the successful establishment of business in Korea.” The center is staffed by consultants, comprising private-sector experts recruited from key investment-related fields, and civil servants seconded from other major government agencies and ministries, in order to provide systematic and professional consultation services. At the ICC, investors can receive one-on-one consultations on taxation, accounting, and law in the beginning of an investment, and receive administrative assistance directly from government officials for visa application, certification of the completion of investment in kind, and business registration. The center also provides personalized life settlement consultations and a one-day, on-site assistance to help investors settle successfully in Korea. “My main role is to help the foreign investors and I am satisfied only if they do not face any problems while doing business in Korea,” he said.

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Interview: Mr. Karel de Gucht, European Union Trade Commissioner

In January 2010, Mr. Karel de Gucht, took over as the European Commissioner for Trade. At the same time, in the new Commission the trade portfolio was extended to cover the coordination of industrial relations with other world powers (Transatlantic Economic Council, TEC). Previously, he had served as the development & humanitarian aid commissioner, Belgian deputy prime minister, and Belgian minister of foreign affairs. He has a law degree from the Free University of Brussels, and at the age of 26 become a member of the European Parliament. After 14 years of active experience, Commissioner De Gucht became a Belgian senator, and a year later was elected to the Flemish Parliament as a member of the Vlaams Liberaal Democraten, and served as party chairman from 1999–2003. Commissioner De Gucht is a lawyer and teaches at the Free University of Brussels. In 2002, he received the title of minister of state. In an exclusive interview, Commissioner De Gucht speaks about the EU trade policy, EU-Korea FTA and his priorities:

In November last year, the European Commission laid out its blueprint for an EU trade policy, for five years, to help revitalise Europe’s economy. What are the main elements of this strategy and what has been the progress so far? This is a time when Europe and most of the other developed economies are under the threat of economic stagnation or even decline. We are facing years of constrained demand, arising from the financial crisis and the imbalances it brought to our economies. In this context, the main objective of the EU trade policy is to be a catalyst of growth and employment. Our main tools are the multilateral Doha agenda, as well trade agreements with individual partner countries. The multilateral track is very important as, in my opinion, the WTO framework is what kept the world from sinking into protectionism throughout the economic crisis. Bilateral agreements can also play a very useful and complementary role insofar as they allow us to pursue levels of liberalisation which go beyond the Doha agenda, and to pursue them faster. The EU-Korea FTA is one big achievement of this policy so far. We hope to secure similar deals with other major EU trade partners, such as India and Mercosur. We are also renewing our efforts to ensure that European business gets a fair deal and that our rights are respected. As an example of that, we are working on a EU instrument to help secure better and reciprocal access to public procurement markets in developed countries and large emerging markets. Our studies indicate that in the EU thirty-six million jobs depend directly on indirectly on trade. By completing the already tabled trade agreements, and working together with our partners to further liberalize trade, we can increase the EU GDP by 150 billion euro. To illustrate, this is the same as the GDP of a country like Ireland. Our message to European citizens, companies and Member States is that trade is not a cause our employment problems, but part of the solution, and a vital component of the EU overall strategy for smart, sustainable and inclusive growth. It is now over 100 days since the EU-Korea FTA was implemented. From an EU perspective, do you think the results so far are satisfactory? Although it is quite early to comment on the impact of the EU-Korea FTA after only 3 months of operation, we can already see some benefits materializing: Trade flows had a positive initial response to the FTA, especially on the side of EU exports which showed well over 20% growth relative to 2010. Export sales for certain EU agricultural products such as pork, cheese, wine, chocolate or luxury products such as cars, clothes and accessories have gone up, while prices have decreased for Korean consumers. This is good for EU companies but also for Korean consumers who have wider choice and cheaper prices. At a time of increasing inflationary pressures in Korea, in particular for foodstuffs, this must be a welcome contribution. At consumer level, FTA has created more awareness among Korean consumers and people for EU products. There is also a positive "perception" effect that quality EU products are becoming a better value for Koreans, due to the lower duties. On the regulatory field, since 1st July double certification is not required anymore for most safety standards for EU cars imported into Korea. EU industrial equipment and machinery can also can be self-certified in Europe by the manufacturer for Korean electromagnetic compatibility and electric safety requirements. This is a very important achievement, for two product categories that together represent nearly 40% of the EU exports. We also now have a more solid framework for regulatory co-operation, to try to avoid that any non-tariff barriers that might jeopardize trade between the EU and Korean in the future. In order to maximize benefits from the FTA, EU businesses still need to learn more about its rules, the import procedures and the Korean market. For example, EU exporters need to undergo the necessary procedures with their national customs in order to become approved exporter and thus get the benefit of reduced duties. According to the feedback we received, there is still some work to be done in this respect. The 1st EU-ASEAN Business Summit took place in May this year. What was the outcome of the summit, and what are your views on economic ties with the block of ten countries? This Business Summit was the first experience for us in the context of the annual ASEAN-EU Economic Ministers Consultation. It was a positive experience, in which I was very happy to participate. My previous impressions about the creativity and dynamism of the business environment in South East Asia was confirmed by a full day of discussions which focused on a number of concrete examples and success stories, but also highlighted some of the regulatory barriers in this region, on which we need to focus. ASEAN is a huge market and one of the world's sources of economic growth. We in Europe realize very well that our continued welfare in the decades to come depends on forging stronger links with those sources of growth. Likewise, connecting to the European market will be crucial for ASEAN’s economic success as well. The European Union remains actively engaged with ASEAN as a region as well as with its members as individual countries. We are negotiating free trade agreements with Singapore and Malaysia and our door is open to other ASEAN partners sharing our objective to negotiate trade agreements for the 21st century. Historically, our negotiations with ASEAN have been somewhat complicated by the diversity of the ASEAN member countries. Although we now recognize that there is no 'one size fits all' agreement, our ultimate goal of a regional EU-ASEAN trade agreement remains valid. We are following with great interest ASEAN's steps towards an Economic Community in 2015. We support the ASEAN economic integration process —both politically and economically. With 60 years’ experience of building our own single market, we know both the challenges and the rewards brought by economic integration. The Doha Development Agenda negotiations within the World Trade Organisation continue to be in a state of flux. Do you think there will be any scope for progress on this front? What is the EU position? There is wide agreement on the importance and value of the global multilateral trading system; global trade rules have helped to limit the attempts to protect markets during the current crisis and should be used to roll back protectionism where it has occurred. The WTO has demonstrated its flexibility to adapt to the new realities of the world economy: as a global institution it genuinely reflects the changing balance in the global economy – emerging countries are now major players in the WTO, as demonstrated by their key role in the DDA. Its dispute settlement system is probably the most effective international enforcement body – all WTO members obey its rulings, even if sometimes slowly and imperfectly. The WTO has proven its worth. The EU remains committed to finding a way through the Doha impasse, but to do so will demand even greater political commitment and that requires business to speak up for the Doha Round if we are to succeed. Doha remains a deal worth doing, with important benefits for developing and emerging economies and we are really not so far apart that it could not be done. Today the WTO rules offer an important base line and the successful conclusion of the Doha talks will strengthen that, for example in the chapter on Rules, by addressing non-tariff barriers. The European sovereign debt crisis has rattled the global economy. What are your views on the present crisis? Do you think this will adversely affect the trade relations with other countries? We are well aware that the backlash from the financial and economic crisis has weakened our economic image throughout the world. Our economic recovery is robust but still uneven and several member states have a tough job in adjusting their public finances. But the economic fundamentals of the European Union are still strong and healthy, and the political sense of urgency and effectiveness in dealing with the challenges must not be doubted. The euro will survive the present difficulties and it will come out stronger. Trade is the fuel that powers the global economy. It has been one of the most important factors in the recovery – in Europe and elsewhere. The volume of global trade has recovered from the low point reached in May 2009. In many countries, exports are the only engine of growth, while competitively priced inputs are helping to businesses to keep down costs. The crisis reconfirmed the importance of global trade rules which had been taken for granted. Global trade rules provide an important shield against protectionism and a framework within which the recovery takes place. The WTO has been in charge of monitoring trade restrictive practices and protectionism in the context of the economic crisis and has estimated that new import restrictions introduced by G20 members overall affected a very small fraction of world imports. Significantly, the few protectionist measures we have seen either affected areas not currently covered by the WTO such as government procurement or were introduced by countries that are not yet part of the WTO system. However, the longer the economic crisis lasts, the more we will see protectionist pressures and assorted restrictive measures being introduced, whether in Latin America, in Asia or elsewhere. The current crisis underlines the significance of moving ahead with an ambitious trade agenda to deliver growth much needed to maintain the EU's welfare States. Trade is part of our strategy to exit the current economic crisis. Our agenda will reach beyond tariff barriers and address the regulatory practices that stop trade flowing, particularly between developed and emerging economies.

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Interview: Mr. Kim Dong-soo, Chairman, Korea Fair Trade Commission

The Korea Fair Trade Commission (KFTC) is a ministerial-level central administrative organization under the authority of the Prime Minister and also functions as a quasi-judiciary body. The Commission formulates and administers competition policies, and deliberates, decides, and handles antitrust cases. It performs its roles and duties independently without any intervention from an outside organization. The organization is committed to four main mandates : promoting competition, strengthening consumers' rights, creating a competitive environment for SMEs and restraining concentration of economic power. To that end, the Commission enforces 12 laws including the Monopoly Regulation and Fair Trade Act (MRFTA). On 3 January 2011, Mr. Kim Dong-soo was appointed as the new Chairman of the KFTC. Prior to his appointment, he served as the Chairman of the Korea Exim Bank and as the vice minister of the Ministry of Strategy and Finance. In an exclusive interview, he tells me about his priorities and plans ahead.

Could you tell us about your goals and priorities as chairman of FTC? As chairman of the KFTC in charge of competition and consumer policies, my foremost goal is to make full commitment to the essential function of the organization; promoting competition and empowering consumers. I believe such effort by the KFTC will help the value of “Fair Society", one of the administrative goals of the Korean government, is fully embraced in the market economy of Korea. With the goal of building Fair Society, the government strives to provide just reward, ensure more opportunity and fair competition and achieve social integration based on mutual trust and shared growth. In this respect, it is directly related to competition policy, whose main objective is to promote the sustained growth of the market economy based on free and fair competition. It is also consistent with the “Ecosystemic Development” President Lee Myung-bak suggested in his speech for the 66th anniversary of the national liberation as a new market paradigm to address economic bipolarization and achieve sustained growth of the economy. In that respect, the priority of the KFTC is to make unchanged effort for its essential mission of establishing free and fair market order and ensure the policy benefits are shared by those in a weaker position of our society such as the working class and small companies First, the KFTC will make proactive efforts against anticompetitive conduct such as cartel in areas closely related to ordinary people’s lives, and improve distribution structure and overhaul entry regulations so that the competition-enhancing effect can be felt by market participants. It will also come up with specific policy measures for the shared growth between small and large companies, and change the perception of the business so the business itself makes voluntary efforts toward creating an environment where they can grow together. What do you think are the main challenges that FTC faces in ensuring fair trade? Even though Korea’s history of enforcing competition law is relatively short --30 years-- compared to the EU or the U.S, the country has produced meaningful results in establishing sound market order. But, I believe there are many challenges that lie ahead for the KFTC to take a leap forward. In Korea, cartels and large companies’ unfair business practices still remain as barriers to fair trade due to a combination of historical, structural and cultural factors. First, the government-driven economic development during the 1960s and 70s created imbalance between small and large companies, and business associations have been used as a channel for participating in a cartel. Second, small companies’ heavy dependence on large companies with dominant position in the domestic market has widened the gap in bargaining power between small and large companies, and delayed the development into the competitive market structure. Moreover, influenced by the Confucianism which controls the fundamental part of Korean society, companies have maintained strong solidarity with one another, which has created the business environment occasionally misconstrued as to the formation of cartel. Furthermore, the contract culture where companies enter into a contract with counterparty on an equal footing through due process of law has not been fully established in the Korean business community. In response to those challenges, the KFTC will take legal and institutional measures as well as actively support voluntary efforts by the business community to change the corporate culture with an aim to boost corporate competitiveness and establish sound market order. What is your opinion on the central government’s pledge to foster “shared growth” between large companies and their smaller suppliers? The past government-driven economic strategy highly focused on large companies has made imbalance between small and large companies deeply entrenched in the Korean economy, causing serious problems. Small companies increasingly depended on large companies, which took up dominant share of domestic demand, and this widened the gap in bargaining power between them. Unfair business practices caused by the power gap between small and large companies still remain, disrupting the development of the business ecosystem. Therefore, for sustained growth of the Korean economy, there should be further efforts to achieve the shared growth between small and large companies so that they can compete with each other on an equal footing. To realize the shared growth of small and large companies: ① relevant laws and systems should be improved; ② corporate culture should be changed (by, for example, encouraging the signing of the Agreement on Fair Subcontract and Shared Growth); and ③ there should be active enforcement efforts against law violations. Changes in corporate values and perception through voluntary efforts by companies are particularly important for establishing fair trade practices and the environment for the shared growth. That is because fundamental improvement on this matter can be made only when large companies change their perception, practices, values and culture, and small companies strengthen their competitiveness. With this in mind, the KFTC revised the Fair Subcontract Transaction Act to improve legal grounds for the shared growth between small and large companies, and supported the signing of the Agreement on Fair Subcontract and Shared Growth between 93 large companies and their 32,000 small suppliers. The KFTC will continue such efforts in the latter half this year by improving the criteria for assessing the implementation of the Agreement so that practical benefits from the shared growth efforts (e.g., adjustment in unit prices or sales commissions) can be enjoyed also by second- and lower-tier suppliers. Recently we saw instances of uncooperative behavior or obvious interference by businesses with a Fair Trade Commission investigation. What steps are you taking to ensure that this does not happen in the future? Obstruction of the KFTC’s investigation constitutes an act of defiance of public authority that severely undermines law and order. In that recognition, the KFTC will take all the possible legal measures within its authority against such violation to maintain legal order and send a clear message that the damage incurred to the company by obstruction of an investigation would be severe. For this purpose, the KFTC applies through penalty against those who interfere with an investigation by imposing administrative fines, heightening the ceiling of aggravated surcharge and bringing a charge to the prosecution. The KFTC will continually update its investigative techniques and enhance compliance of respondent companies through valid procedures to achieve administrative objectives without causing unnecessary friction with companies subject to an investigation. As part of the effort, the KFTC set up a digital forensics team to strengthen capability for obtaining digital evidences in May 2010, and provides staff education on investigative techniques on a regular basis. Furthermore, it makes utmost efforts to minimize inconvenience caused by an investigation and ensure procedural fairness by, for instance, informing an investigated company on its rights and clarifying the purpose and scope of an investigation. Moreover, the Ombudsman Program is in operation to listen to complaints of investigated companies that may arise in the course of the KFTC’s investigation. What is your message to EU investors? The EU is a very important economic partner to Korea as the nation’s second-largest export market and the biggest foreign investor that accounts for 43% of the investment destined for Korea. Korea, the 4th-largest trading partner to the EU, also has strong presence in the EU market based on strong collaborative relationship between the two sides with around 500 companies operating there. The Korea-EU FTA that came into effect on July 1, 2010 will open up new horizons for the economic relationship between the two sides with the accelerated market opening, strong push for corporate innovation and enhanced consumer welfare. The KFTC will faithfully perform its role of establishing and enforcing fair rules as a “referee in the market” so that benefits from the open and free market can be maximized across the Korean economy. The Commission will relax regulations, such as entry regulations, to ensure that all the companies in Korea do business freely regardless of their nationality, and take strict approach to unfair business practices that disrupt the market order to protect creative entrepreneurship and consumer rights. Foreign companies operating in Korea have made a lot of efforts to keep up to date with the global standard in competition law, as shown in its active use of the Cartel Leniency Program. I hope they make continued efforts to spread the pro-competitive culture, and understand the Korean government’s firm commitment to development of the market economy. And I assure you that the KFTC is always open to all the foreign business persons in Korea who have any complaints or suggestions in the course of doing business in Korea.

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Interview: Mr. Lee Chae-pil, Minister of Employment & Labor

In early June this year, President Lee Myung-bak carried out a cabinet reshuffle, replacing five key ministers. Mr. Lee Chae-pil, was nominated and then confirmed as the new Minister of Employment & labor. The new minister has been vice labor minister since March 2010. His work on labor issues dates back to 1982 and was a Blue House official for labor in the early 1990s. In an exclusive interview Minister Lee outlines his policy vision and plans.

Could you please describe the Ministry’s policy priorities and objectives for 2011? The Ministry of Employment and Labor recently announced our vision and mission. Our vision is ‘to ensure employment for all and to make a happy nation through work’. To realize this vision, the Ministry is promoting policy measures to provide support for job seekers, enhance competitiveness through vocational skills development, and develop labor-management relations based on trust and harmony, etc. I and the entire staff are determined to carry out those missions. We are reestablishing our resolve to make ourselves ‘warriors for jobs’. As shown in our vision, the Ministry’s foremost priority is to provide quality employment for anyone who wants to work. After being appointed as the Minister of Employment and Labor, I pledged to focus on improving the labor market and labor-management relations so that it can contribute to creating more jobs. Private companies which create jobs lie at the center of the labor market, and these companies are also able to grow and become more innovative through quality workforce. The Ministry will spare no efforts in setting up various support schemes for employed workers and jobseekers, as well as enabling companies to hire right people to strengthen their competitiveness. The Ministry currently implements a policy on improving labor market flexibility to attract foreign investment. What policy measures are being taken? It is not easy to make a uniformed assessment of the labor market flexibility in Korea. It seems that there is a wide-spread belief that Korea’s labor market is not flexible. I believe this perception mainly stems from the lack of flexibility in certain areas of the labor market such as large companies, companies that have labor unions and full-time employees. Contrarily, some experts point out that the Korean labor market in SMEs and non-regular workers is too flexible, and raise the issue of employment insecurity. In fact, Korea turns out to have a slightly more flexible labor market than other OECD countries according to the OECD’s assessment of Employment Protection Legislation (EPL). As of 2008, Korea ranked 13th among 30 countries. The main task of the Ministry is to find balance between employment flexibility and security, which is called ‘flexicurity’. For this purpose, more efforts will be made to spread a performance-oriented wage system and create a cooperative environment between labor and management. We are also going to strengthen support and protection for SME employees and non-regular workers. In order to support an effective operation of labor market, vocational training and employment service is continuously being reshaped and reinforced to meet the needs of job seekers and firms. Recently national employment service has been strengthened in collaboration with the private services. The Ministry is also concentrating on creating blue ocean jobs by trying to increase decent part-time jobs and supporting start-ups of new businesses and jobs. I believe such policy measures will not only help reform the labor market but also contribute to improving the investment climate by enabling companies to recruit more talented workers. Korea began to display a stabilized labor-management relations following the 1998 financial crisis; of note, the smallest number of labor-management disputes occurred last year. However, the labor market continues to demand the revision of the Labor Union Act, and the labor-management relations of foreign companies (including banks) seem unstable. What are your views on this? Labor-management relations in Korea have shown stability in 2010 and this year as well. In 2010, an indicator such as number of days not worked per 1,000 employees posted figures lower than the OECD average for the first time. As of mid-July 2011, the number of labor dispute cases declined 18.9% from the previous year. I’m glad to give the news that the paid time-off system, the multiple trade unions system and the single bargaining channel are being implemented very smoothly. Those policies are keys to enhancing labor-management relations to a more sophisticated level. The time-off system, which was introduced in July of 2010, has been adopted by 92.7% of business units as of June-end 2011 and 99.2% cases conform to the time-off ceiling. The multiple trade unions system and the single bargaining channel have also been in smooth implementation starting July of this year. I would like to emphasize that the revised Trade Union and Labor Relations Adjustment Act(TULRAA) was based on agreement among the labor, management and government, taking into account actual labor-management relations in Korea whilst complying with global standards. The revised law ensures the autonomy of labor union and the right to organize of workers. Going forward, the government will work towards establishing ‘a rule of law’ and ‘a rule of autonomy’ on labor-management relations via the time-off system and multiple trade unions system. Under the new circumstances, labor unions need to work towards better representing and providing quality services for its members and companies need to develop more reasonable labor-management relations. As a minister in charge of employment and labor, it is very unfortunate to see the prolonged dispute at SC First Bank. Dispute between labor and management not only causes tangible losses for the parties involved but also inconveniences of the public. It weakens the growth capacity of companies in the long run. I hope realistic solutions acceptable to both parties are developed soon so that the dispute can be resolved harmoniously and peacefully. The employment market in the first half of this year continued to improve thanks to steady industrial output and export growth. What is your outlook and assessment of the employment market, and what measures are being taken? In the first half of 2011, the number of employed people increased 412,000 from the previous year. Based on the steady improvement in employment numbers since last year, the employment rate (between the age of 15~64) recovered to the pre-financial crisis level of 64.7% in June. In particular, it is encouraging that full-time positions increased in the manufacturing and private sectors. However, the actual sentiment people has on the employment market has yet to improve. The number of people in the vulnerable employment group in the first half of 2011 remains high at 1.97 million. Unemployment of the young people is still severe, though the unemployment rate among the young people declined slightly to 7.6% in June 2011 from 8.3% in June 2010. Also, the employment markets in certain regions have deteriorated. The economic recovery trend is expected to continue in the second half of the year, but incessant efforts are needed so that the recovery trend leads to more employment opportunities. In particular, the Ministry plans to focus on implementing customized employment policy measures that take into account the needs of the unemployed youths and the vulnerable employment group. As a part of these efforts, we kicked-off the ‘On-Site Job+ Team’ in the first half of 2011. The Team, which consists of the Ministry’s entire staff, tries to identify difficulties in running business at first hand and works to resolve them through government-wide cooperation. A total of 9,955 workplaces were visited till June in which 8,498 complaints were heard such as difficulties in finding right people, inconvenience in commuting, etc. As of July, 4,443 cases have been resolved.Further support will be provided in the latter half of the year to reduce hurdles to job creation and change inadequate regulations.

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Social Media Explained

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Interview: Mr. Tang Jun, Chairman, YangGuang Co. Ltd.,

YangGuang Co., Ltd. is a public company listed on the Shenzhen Stock Exchange since 1996. In 2006, YangGuang signed an investment agreement with Reco Shine Pte Ltd., which is a subsidiary of GIC Real Estate Pte Ltd., and became the first A-share listed real estate company in China with a foreign investor being its major shareholder.

Mr. Tang Jun, Chairman, Yangguang, tells us bout his company plans and the Chinese real estate market.

Could you give us some background about your company?
YangGuang focuses on holding, investing, leasing and managing the operations of commercial real estate, while at the same time being involved with the development and management of high-end apartments, hotels, office buildings, and urban complexes. In order to establish a competitive advantage in the commercial real estate industry, our company strives to integrate commercial resources to create a model that covers investment, planning, development, and the business operations of the entire process. The company is committed to maximizing returns for investors, providing the best benefits for its tenants, and creating enjoyable shopping experience for consumers. With more than ten years of professional experience in real estate development operations, the company has set up a business scale that focuses on development around the Bohai Sea region, while at the same time emphasizing nationwide development and expansion. As of December 2010, the company owned and managed a total of 26 large-scale commercial real estate projects, covering a total floor area exceeding 1.5 million square meters. Taking into account all these accomplishments and plans, YangGuang is steadily marching towards the ultimate goal of “becoming China’s leading commercial real estate group”.Transformed from a residential housing real estate dealer to a commercial real estate dealer, YangGuang is endowed with competitive advantages that are lacking in traditional commercial real estate dealers, for instance, concept of innovative capital operation, whole value-chain operating mode, rich product development and operation, sound partnership resources, and professional real estate development team etc.As far as capital operation is concerned, YangGuang actively explores and develops new financing channel and establishes “finance + real estate” business mode, which provides commercial real estate operation with abundant fund guarantee. The company has already established long-term successful project cooperation with GIC RE, and will still expand the scale and scope for future cooperation. At the same time, the company has also established commercial real estate funds and is actively developing financing channel.With regard to business operation, YangGuang exerts itself to build the entire value-chain operating modes, covering investment, planning, development, leasing and operation. Through the entire value-chain system management and effective key aspect control and organic inter value-chain synergy, the company has formed core competitiveness. Meanwhile, YangGuang selects retail commercial real estate as its main business orientation, for among numerous commercial real estate classifications, retail commercial real estate has relatively convenient for redevelopment and improvement. If also supported by appropriate operation management, its long-term return will be quite considerable.After many years of development, YangGuang has accumulated rich product development experience; the three product brands, namely, the “Life Square” (阳光新生活广场), the “Shine City” (新业广场), and the “YangGuang Center” (阳光新业中心), which have been created through standardization process, cover the main types of commercial projects, and will be improved and upgraded continually in the process of product replication. The current successful commercial real estate development case in places, such as Beijing, Tianjin, Qingdao, Chengdu, and Shenyang etc., enabled the enterprise to have accumulated mature product development experiences.
Moreover, YangGuang has established strategic cooperative partnership with numerous international and domestic well-known brands, such as Carrefour, Wal-Mart Stores, Watsons, Ito Yokado, Gome, and Suning etc., and the stable and quality customer resources have ensured completion of investment promotion of commercial real estate projects in advance, endowing the company therefore with a complete operation system.Like all successful enterprises, YangGuang has a powerful team of commercial real estate management. At present, YangGuang owns a management team with several hundred members, and it will continue to grow along with increase of the number of commercial projects. Relying on its own professional team of commercial real estate management, YangGuang itself controls all aspects from development and investment promotion to later stage operation management. This is also the whole value-chain representation and preparation for output of future commercial real estate management operation.
Where to invest in China? Does the biggest potential lie in second – and third-tier cities rather than in first-tier cities?As far as commercial real estate is concerned, the best region for investment in China is still concentrated on cities, and whether in the first tier cities or the second and third tier cities, they all have opportunities. As early as in 2007, YangGuang developed a Bohai rim region strategy, while at the same time paying close attention to the balanced development in the national market. After carrying out an in-depth assessment in key areas, and taking expansion from one single project to more opportunities which cover the entire area as our layout strategy, we have currently mapped out and identified 10 cities covering the four major areas of China, and developed complete strategies for steadily expanding our projects. The layout cities include: Beijing, Tianjin, Qingdao, Shenyang, Chengdu, Xi’an, Zhengzhou, Yantai, Shijiazhuang, and Tangshan. In the future, in regions such as the Bohai rim region, North China, Central China, Northwest China, and Southwest China etc. where branch companies have already been set up with also project establishment, we will further strengthen and consolidate our basis. With respect to the Yangtze River Delta, Zhujiang River Delta, the Southwest Region and the Northeast Region of China, we will also actively search for quality resources conforming to our corporate strategy, and wait for opportunity for expansion.With respect to potentials, though the second and the third tier cities have indeed enormous opportunities for development, the first tier cities have also great space and opportunity for development. Even though the first tier cities have relatively less opportunities and a relatively higher threshold, with growth of population, they will certainly form many “emerging urban districts”, and these urban sub-centers are precisely where the potentials of the first tier cities lie, such as one of our commercial projects in Tongzhou District, Beijing (Tongzhou Life Square). In 2006 when we purchased this project, though it had advantageous geographical location and consumption potentials at that time, as a commercial real property, it had problems in architectural structure, retail format planning, brands level etc., which made it unfavorable for business operation. After purchase, the company re-planned its retail format, making it more reasonable. With these improvements, performance of this project has realized steady growth, and the sales volume of the anchor tenants and secondary anchor tenants also achieved steady increase. Within just a short period of three years after redevelopment, the rental income for the two years, namely 2008 and 2009, increased by 43% and 11% respectively on a year-on-year basis, and with impact of the 2009 financial crisis, it still achieved a steady growth.While making its layout in the suburbs of the first tier cities and in the second and the third tier cities, YangGuang hasn’t given up its steps of overall arrangement in the first tier city urban core areas. At present, the company has already been entrusted with the management of certain large-scale business project located in the Beijing core CBD area (Beijing International Center). At the same time, in the core area of Tianjin, a landmark “Tianjin YangGuang Center” is also in planning.As China’s real estate market is a typical “policy market”, one should pay attention to policy orientation. It is clear from the 12th five-year plan that, in the next 4-5 years, the second and the third tier cities will be the focus of national development. Adapting to the general background of the times, YangGuang had already started to gradually make overall arrangement in the second and the third tier cities as early as several years ago. With mega cities as support, small and medium cities as focus, the company has been vigorously developing the second and the third tier cities, helping to build some urban commercial centers with sustainable operation ability, building commercial ecological circle, and bringing harmonious local economic and social development. For instance, not long ago, YangGuang had reached an intent of cooperation with Beiguan Village of Xi’an city concerning reconstruction of the old marketplace of the urban village, and the project will be reconstructed into a local large-scale commercial complex.
What are the best market entry strategies as a foreign investor, developer, and retailer?At the early period of their market access, overseas investors, developers and retailers may consider finding a domestic cooperative partner in China and, through cooperation with local enterprise, steadily develop their business.With respect to the mode of operation, investors and developers may consider participating in cooperation with domestic enterprises by means of project cooperation or capital injection. For instance, the cooperation between YangGuang and GIC RE, in 2006, YangGuang entered into a strategic investment agreement with Reco Shine Company, a subsidiary of GIC RE, becoming the first domestic A-share market listed real estate company that has introduced international strategic investment into China. In 2007, after completion of private offering of additional shares, we conducted large-scale, extensive and in-depth cooperation with GIC RE. For instance, in 2008, we together completed large-scale overall acquisition towards 18 projects of the Home World (家世界), and both parties jointly held commercial property assets, which became a typical case of cooperation between overseas investors and domestic developers in the commercial real estate market.For access to the China market, overseas retailers may borrow lessons from the cooperation between YangGuang and Ito Yokado. YangGuang implements order-type of thought for commercial real estate development. In its very beginning of cooperation with Ito Yokado, YangGuang first defined its intention of shop setup and location requirements, and carefully examined and recommended appropriate projects. In its very beginning of design, construction and investment promotion, YangGuang “customized” the projects in strict accordance with the advanced Japanese concepts of shopping center and the spatial layout, architectural structure, public support, fire fighting arrangement, as well as traffic and people flow of commercial complex per requirements of Ito Yokado, and realized the maximum and perfect harmony and unity between the shopping environment and customers, and between customers and the architectural structure, thereby ensuring operation of the moved-in tenant in accord with their wishes and convenience and comfortable shopping of consumers. This kind of mode of commercial customization of YangGuang can ensure quick opening by overseas retailers of the China market and, at the same time, retain the local features and characteristics of overseas enterprises, it is therefore highly welcomed by various leading domestic and overseas retail enterprises and brands. At present, YangGuang has already established long-term strategic cooperative partnership with a number of large-scale domestic and overseas retailers, such as Ito Yokado, Carrefour, Vanguard, The Home Depot, and Wal-Mart Stores etc.
What are the major challenges as a foreign investor? How do you manage risk?In recent years, with continuous deepening of the opening-up of China’s business market, foreign capital business enterprises have landed in China one after another, and while bringing bout opportunities, the China’s market is also hidden with enormous challenges.Failure to adapt to the local circumstances and conditions is a major trouble for foreign capital. First of all, from the policy environment point of view, although a series of new policy measures to promote mutual investment have already been launched in recent years, for instance, the gradual lessening of restrictions on the percentage of shares of foreign investment and allowing domestic market listing of foreign enterprises etc., China nevertheless still has certain restriction policies on foreign investment and acquisition etc., and relative to local enterprises, foreign investors have certain threshold to cross. At the same time, many relevant policies and evaluation systems in China are somehow different from that of foreign countries. Moreover, with respect to market space, industrial support, and labor quality of China etc., there are still certain differences from that of foreign countries, and many overseas business models are not applicable to China at all.With respect to control of risks, overseas investors may search for reliable partners to gradually adapt to the rule of the game of the China market. For instance, GIC, the strategic investor of YangGuang and also one of the world largest fund management companies in the world, manages over USD 100 billion assets in the world, and its steady and robust investment style makes it select global-wide partners with deliberation, and at present, YangGuang is its only strategic cooperative partner in the field of retail real estate in China. As far as YangGuang is concerned, GIC is its financial investor on the one hand, and on the other hand, it also brings about the most advanced international project management and operation experience for YangGuang, and dissolved many worries in project development and operation. This multi-dimensional mode of cooperation can reduce risks of overseas investors and obtain stable investment return and, at the same time, enable fast development of local enterprises.From another point of view, as a local developer with certain basis, in the “policy market” environment of China, YangGuang is endowed with unparalleled advantages of foreign enterprises. We can, with sound government relations, maintain and get quality project resources; through control of project startup and completion schedule, ensure the time of project opening; through scientific mode of retail format planning and the accumulated investment promotion resources, ensure overall project business benefits; and through strengthening business operation ability and extent of promotion, ensure enhancement of business project operation and increase of rental income; and through whole value-chain control of the whole commercial real estate industry, minimize its own and investor’s return risks.Moreover, as far as overseas investors are concerned, if they are not interested in direct enterprise investment or worried about the withdrawing system, they may consider searching for inland powerful cooperative partners to access the domestic commercial real estate market by way of commercial real estate funds or commercial real estate trust through help in financing. For instance, YangGuang has also set up its own fund company, and it has had already some attempt in this type of business operation. The fund company is now in sound operation, and in the future it will be the focus of our business development.

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Interview: Mr. Kim Young-hwan, Chairman, National Assembly's Knowledge Economy Committee

The Standing Committees of the National Assembly examine bills and petitions falling under their respective jurisdictions, and perform other duties as prescribed by other Acts. There are 16 standing committees of which the Knowledge Economy Committee is quite important. The chairman of each Standing Committee represents the Standing Committee, regulate its proceedings, maintain order, and supervise its affairs.

Mr. Kim Young-hwan, Chairman of the National Assembly's Knowledge Economy Committee was born in Goesan, North Chungcheong Province. Graduating from Yonsei School of Dentistry, he got a master’s degree in economy from the same university. In 1996, he was first elected to enter the National Assembly. He was reelected in 2000 to serve for the second term, yet failed in his third attempt in 2004. In 2009, he was elected.

Under the Kim Dae-jung administration in 2001, he was appointed as the minister for education, science and technology, which he stayed for one year. He was the youngest in the ministry’s history, and was recognized again by his book entitled, “Will fart spark the fire.”

He assumed the chairman of the National Assembly’s Knowledge Economy Committee in 2009, for which he still serves.

In an exclusive interview to Infomag, Mr. Kim speaks on various issues under his mandate.

What is the first and foremost principle of the Knowledge Economy Committee?There are three. The first is laying the foundation for sufficient discussion and communication. We try to create an environment in which committee members can hold in-depth discussions and exchange views. The second is keeping our eyes and ears open. The committee welcomes companies, including small retailers and traders, to express their opinions. We would also like to meet with European business leaders to directly hear from them on challenges and difficulties in doing business in Korea. The third is keeping up to date with the latest industry-related news and issues. For this, we encourage government officials, businessmen and experts to come together and openly discuss issues whenever they arise.
What is your view of the government’s green growth policy?The government is working on meeting the target of reducing CO2 emissions by 20%, such as increasing R&D and encouraging businesses to save energy and increase the use of renewable energy. There are efforts being made to foster green industries (e.g. renewable energy) and develop the carbon capture & storage technology (CCST) to reduce CO2 emissions.
What advice do you have for the government in regards to realizing energy independence?We need to prepare for the post-Fukushima era. However, the government maintains the same energy mix and nuclear energy policy stance as it did prior to the explosion at the Fukushima nuclear plant. Unlike Germany and Switzerland which decided to shut down its nuclear power plants, the Korean government seems to have shifted its policy to focus more on nuclear energy. From a personal standpoint, I believe that there needs to be focus on other sources of power generation other than nuclear energy. What is needed is a roadmap for reducing nuclear energy use and concentrating on R&D and business support. Careful and meticulous planning is required as Korea is not abundant in natural resources. The government should aggressively pursue policies aimed at energy saving and renewable energy development.
Do you think the current policy is sufficient to promote small and medium-sized enterprises?In Korea, there are 304 small and medium-sized enterprises (SMEs), accounting for 99.9% of total number of companies, with relevant workers representing 87.7% of total employment. Although SMEs are a pivotal part of the economy, there seems to be a serious imbalance between large-sized companies and SMEs. Polarization is seen amid the turbulent economic environment, in which large companies posted record-high earnings whereas small and medium businesses saw operating margins decline. Moreover, large enterprises are aggressively moving into sectors that are led by SMEs and taking away their source of income. In order for SMEs to strengthen competitiveness, they need to concentrate on five areas: 1) increasing R&D investment 2) limiting sectors to prevent large companies from taking over 3) building infrastructure to foster small and medium-sized export companies 4) recruiting additional workers to address workforce-workplace mismatch 5) supporting one-man businesses and start-ups by young people. A structural system needs to be in place for SMEs to develop into larger and successful businesses. SMEs need strong foundations in order to grow and thus contribute to Korea’s economic growth.
What would you like to tell foreign investors?Korea following the 1997 Asian financial crisis has been striving to improve the foreign investment environment. In 2010, despite the challenging economic climate at home and abroad, Korea achieved economic growth rate of 6.1% (the highest among OECD member countries), exports amounted to $470 billion (seventh largest in the world), and per capita income re-entered the $20,000 level. Foreign investment companies played a key role in Korea overcoming the financial crisis of 1997 and the global financial crisis of 2008.
I consider Korea to be an island rather than a peninsula. Surrounded by the ocean on three sides and bordered to the north by China, Korea has remained an isolated island for thousands of years. It is time to decide whether to remain isolated or move forward. Korea will continue to open its doors to foreign investors going forward. As the chair of the Knowledge Economy Committee, I will also do my best to create a foreign business-friendly environment.

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Interview: Ms. Sandra A. Urie, Chairman & CEO, Cambridge Associates

Cambridge Associates is a privately held independent consulting firm that provides investment consulting and oversight services to more than 900 clients worldwide. The company strives to help global institutional investors and private clients meet or exceed their investment objectives by offering proactive, unbiased advice grounded in intensive and independent research.
In this interview, Ms. Sandra A. Urie, Cambridge Associates’ Chairman and Chief Executive Officer tells us more.

Could you give us a brief background about your organization?
Cambridge Associates was formed in 1973. The concept for our firm grew out of work done for Harvard University by our two founders, James Bailey and Hunter Lewis, who are still involved in overseeing the firm today.
Over our nearly forty years in business C|A has expanded into a global investment consultancy. Our mission has remained constant: we strive to help institutions and private investors around the world meet or exceed their investment objectives by providing proactive, unbiased advice grounded in intensive and independent research.
Cambridge Associates currently has over 1,000 employees based in London, Singapore, Sydney, Arlington, Boston, Dallas, and Menlo Park, with an office to be opened in Beijing in the summer of 2011. Our professionals are dedicated to serving over 900 clients globally including colleges and universities, charitable foundations, medical institutions, museums, Sovereign Wealth Funds and other government agencies, pension funds and families. Our clients represent aggregate assets of more than US$2.5 trillion.
Our only line of business is investment consulting and its supporting functions (i.e., research and performance measurement). One-hundred percent of our revenues are derived from providing these services to our clients, the owners of the assets we advise.
• Investment Consulting: Consulting is our core business, and we advise clients on a broad range of investment issues such as portfolio strategy and policy, asset allocation, manager selection, and performance evaluation across all asset classes, including alternatives (hedge funds, private equity and private hard assets). In addition, currency hedging has been a key issue in many countries where we have clients, including Korea. We also have significant experience in providing advice on investment operations, corporate governance, risk management, and best practices in institutional investing. These are all topics that should be of interest to Korean institutional investors as they contribute to superior investment returns.
• Research: Our high-quality, independent investment and capital markets research provides the foundation for all client recommendations. We currently have more than 190 research professionals working across four continents, bringing a global perspective to our work. Our research efforts are supported by our proprietary manager database, which currently tracks over 7,000 managers and 22,200 funds across all asset classes and geographical regions. This means our clients have access to a large and global opportunity set when considering implementation strategies for their portfolios.
• Performance Measurement and Reporting: As part of the consulting relationship with our clients, we undertake performance monitoring for both marketable (e.g. public equities, fixed income, hedge funds) and private investments (e.g. private equity, real estate, venture capital, infrastructure, energy, timber). Our reports include investment returns and regular analyses of fund performance. These reports help our clients analyze their performance results, how the results were achieved, and how they compare to customized benchmark statistics.
What is your view on the current investment strategies of Korean pension funds? Should they allocate more resources to Alternatives?
Korean institutions are certainly considering expanding their policy portfolios to include more exposure to alternatives and we would certainly support that move. Depending on the alternative classes included, they can provide the potential for higher returns and also, in the case of edge funds, lower volatility. However, implementation is critical, and requires a rigorous approach to due diligence and manager selection. Few institutions, including some in Korea, have the requisite in-house experience to effectively identify, complete the due diligence on, and gain access to the best alternative asset managers on a global basis. As a result, many investors have had less than positive experiences with hedge funds during the financial crisis and find themselves under-allocated relative to their original plans.
Fear of a potential Madoff repeat looms large and reinforces the need for disciplined and comprehensive due diligence, both before making an investment and on an ongoing basis once the investment is made. The Korean investment community was hit hard by exposure to Madoff. This has caused many investors to step back and examine their investment decision-making process. For many, around the world and not just in Korea, it was a fiduciary wake up call. One of the key oles we play at Cambridge Associates is to protect investors from mistakes by working alongside internal investment professionals to provide rigorous due diligence and a global perspective on manager selection. If Korean pensions want to build out their allocation to hedge funds, they must be prepared to invest in the process of researching, selecting, and monitoring managers.
This issue is also relevant to private investments (i.e., private equity, venture capital, real estate, energy, infrastructure, and timber). Given the significant dispersion of returns among managers and their funds, manager selection and rigorous due diligence are critical. Building a private investment portfolio can significantly enhance returns, but also requires a commitment to building the resources necessary to implement and monitor managers and the patience to build out the program over time to minimize so-called vintage year risk. Based on our observations, many Korean institutional investors are looking at a narrow subset of the universe of available private investment opportunities globally, which will likely limit their ability to generate good risk-adjusted returns.
We have also seen a tendency in Korea to focus on capital preservation in nominal terms. Protecting a portfolio against nominal losses can hide the effect of ongoing inflation and can expose the portfolio to inflation-adjusted capital losses. Such an approach requires an even more vigilant focus on due diligence and manager (or asset) selection. When perceived risk is low (i.e. because of a government guarantee) nominal returns are also generally lower. We like to think in terms of risk-adjusted returns: how much incremental upside could investors receive from an additional unit of risk, and where do asymmetries exist that investors can benefit from?
What are the real estate investment intentions of global investors?
At a very basic level, many people like investing in real estate because it is a “real” asset – something you can see and touch – it typically generates both an income return and a capital return. For people who are skeptical about securitized and less tangible assets, physical real estate can bring a sense of comfort to investors. We see this particularly in Asia. Real estate can also offer investors some inflation protection through exposure to the potential for rising rents and capital appreciation when financial assets are being hurt by inflation. Public and private real estate investments can also provide valuable diversification as well as equity-like returns over the long term. Private real estate offers greater prospects for active managers to exploit opportunities and add value. On the other hand, private real estate is illiquid and more expensive. Public portfolios provide the most immediate source of diversification, whereas private real estate requires time to build. REITs generate cash flow, are liquid, and have lower fees. However, they are subject to the supply, demand, and pricing pressures of the public equity markets. The correlation of REITs to the broad equity markets would likely increase during periods of stress within the market and historically, REITs have been highly correlated to small cap value stocks.
We advise global investors to invest in real estate through a diversified set of public and private fund opportunities and to consider relative value at the time of implementation. The other interesting trend is global investors’ portfolio mix of investments in limited partnership vehicles and direct investments in properties. Large institutional investors have typically first built a portfolio of limited partnership investments, allowing them to build relationships with the fund managers over time. This can then provide a foundation for co-investments alongside these managers, as well as eventually for a portfolio of direct investments, where a sufficient in-house resource with appropriate direct investing experience exists. In the context of a large, diversified portfolio, such direct investments may be appropriate. However, smaller institutional investors might be taking unnecessary risk with direct property investments, sized too large relative to the size of their asset pool. More often, these types of institutions build exposure to real estate through limited partnership vehicles, more appropriate to their size and diversification needs. The risk in Korea is that smaller institutions, in particular those without appropriate in-house investment resources, seek to emulate the leading investors when they do not have the internal resources to implement and replicate those strategies.
Are Asia and Korea an important part of their strategy?
Yes, Asia, including Korea, is definitely considered in the opportunity set in a global portfolio. Many of our North American clients travel regularly to the region and a few have opened up offices in Asia for the very purpose of analyzing Asian investment opportunities. They are gradually increasing their exposure to alternative assets in Asia, while paying close attention to relative value at a time when a great deal of capital is flowing into emerging markets. Investors should be careful to diversify by vintage year, strategy, geographic location, property type, and manager.
What asset classes and markets are favored by global investors?
Right now it is challenging for global investors, as we are not seeing many obvious, attractive opportunities from a valuations perspective. That means we are encouraging our clients to be defensively positioned.
What does that mean?
Within equities, overweight high-quality or mega-cap growth stocks and long/short equity hedge funds. Both strategies may under-perform in a rising market, but they should prove more defensive when market corrections occur. We are also encouraging allocations to managers with flexible mandates who can respond quickly to opportunities that arise in a rapidly shifting landscape. Of course, greater selectivity and ongoing oversight is required when hiring managers with more flexible mandates. These managers should have a depth of experience in the markets they participate in and a proven record of adding value through tactical moves. We continue to be cautious on most Western developed market sovereign bonds in light of weak fundamentals and expensive valuations. Both of these factors suggest that an allocation to sovereign bonds should not be expected to provide as much defense as it has historically, and that it should be supplemented by cash when yields are very low.
In terms of markets, we are recommending that our clients stay neutral on developed market equities. Equity valuations in developed markets are generally not excessive, although U.S. equities are currently overvalued. In emerging markets, while valuations are still somewhat stretched, maintaining exposure and building a strategic overweight are important from our perspective. For those with relatively large allocations to emerging markets, we would consider a more diversified exposure utilizing a multi-asset class approach, incorporating equity, local currency debt, hedge funds, and private investments if appropriate.

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