Doing business in Korea ― going beyond ranking

First published in The Korea Herald.

A World Bank report released last week ranked South Korea as having the fifth-best business environment among 189 countries this year. Commendably, the country also topped the Group of 20 emerging and advanced countries and came in third among Organization for Economic Cooperation and Development member countries.

Between June 2013 and June 2014, “Doing Business 2015: Going Beyond Efficiency,” which measures 189 economies worldwide, documented 230 business reforms, with 145 aimed at reducing the complexity and cost of complying with business regulations, and 85 reforms aimed at strengthening legal institutions.

Only Singapore, New Zealand, Hong Kong and Denmark ranked higher than South Korea.

Not surprisingly, the Finance Ministry was elated. In an official statement, it noted that this is two notches above its rank in the previous year. What is more, all the Korean media outlets picked it up and highlighted it, without crosschecking.

The rank actually remains the same, after adjustment, the World Bank has noted. But that is just a minor issue, and we cannot really fault the Finance Ministry for glossing over the fact.

A closer look at the data, which the ministry has also ignored, suggests that not everything is as rosy as it is made out to be. The ministry has attributed this rank to “improvements in regulations and the system for starting a business, granting construction permits and protecting minor investors.”

This is not entirely true, if we take a look at what the data actually shows.

The factors that are scrutinized to compile the ranking include starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

The World Bank data reveals that South Korea has slipped in many of these parameters. In starting a business, South Korea’s rank slid from 16th to 17th this year; for registering property, it slipped from 78th to 79th; for getting credit, it dropped six notches from 30th to 36th; and in paying taxes, it slipped from 24th to 25th.

The country’s rank is stagnant is other parameters such as dealing with construction permits, trading across borders, enforcing contracts and resolving insolvency.

There is one parameter in which South Korea has shown improvement, and that is protecting minority investors. Its rank has climbed from 26th to 21st, but the country still has a long way to go.

It is only in providing electricity to businesses that South Korea is ranked first, and for that, the government can be proud.

These numbers beg the question: Has the situation really improved on the ground for investors wanting to start a business in South Korea? The figures speak for themselves.

The Finance Ministry said the improved ranking in business environment could have a “positive” impact on luring more foreign investment.

In the first half of 2014, South Korea’s FDI recorded historic highs for amounts declared and received. The amount declared was $10.33 billion, with annualized growth of 29.2 percent from $8 billion in the same period of 2013. The amount received was $7.2 billion, rising 55.9 percent from $4.62 billion on-year.

However, foreign investors do not just look at the overall rank when they explore opportunities here. They also get into the nitty gritty of all the issues outlined in the World Bank report, as well as the country’s labor market regulations.

If the government is serious about luring more investment and competing in Asia for investors, it has much left to do in terms of improving the business environment and raising South Korea’s rank in all the parameters.

As the World Bank has noted, a high overall ranking does mean that the government has created a regulatory environment conducive to operating a business. However, it added, “While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects that matter to firms and investors or that affect the competitiveness of the economy.”

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Should South Korea join China-led AIIB?

First published in The Korea Herald.

South Korea, Australia and Indonesia were conspicuous by their absence in Beijing on Oct. 24, when China, India and 19 other countries signed a memorandum of understanding to launch the Asian Infrastructure Investment Bank ― set to become one of the Asia-Pacific’s biggest lenders in the years to come.

While there is still time for the three countries to make a decision ― the AIIB will be operational only next year ― and they are keeping their options open, there is a real danger that they may not enjoy the same clout as they would have if they had joined the other Asian countries in Beijing. The case is more so for South Korea, whose economy is closely linked to other emerging Asian economies.

The Finance Ministry has officially stated that it has been speaking with China to request further consideration over details such as the AIIB’s governance and operational principles.

“We have continued to demand rationality in areas such as governance and safeguard issues, and there’s no reason not to join it,” Finance Minister Choi Kyung-hwan was quoted as saying.
Obviously, Korea is still in a dilemma on what sort of strategic choices it has to make as China and India together challenge the international economic order led by the U.S. and its Western allies.
Did South Korea do the right thing by refusing to commit itself immediately as a founding member?

On the surface ― there have been numerous media reports ― the three countries gave in to pressure from the U.S., which has raised questions about “the need for another funding agency to rival the World Bank and Asian Development Bank” as also concerns on “its governance, environmental standards and debt sustainability.”

Among the Asian countries, Japan has also kept its distance, but has not raised any eyebrows as was widely expected. It possesses the most influential and powerful voting power over the decision making of the $175 billion ADB along with the U.S., and is not rushed to support a new “rival” on the block.

Since its establishment in 1966, the ADB has played a clear complementary role to the World Bank in aiding infrastructure development and poverty alleviation in the region. Its main role is to make money available to member countries so they can implement their own development programs and provide working-level assistance in carrying them out.

In 2013, the ADB approved $10.19 billion in loans and $142 million in equity investments, and raised $12 billion in long- and medium-term funds.

However, if one looks at the shareholding pattern of the organization, it becomes clear that apart from Japan, the U.S. and its Western allies, the remaining emerging economies in Asia have very little say in the running of the organization that is meant for them. The ADB was modeled closely after the World Bank, and has a similar weighted voting system where votes are distributed in proportion to each member’s capital subscriptions.

As of December 2013, Japan had the highest percentage of shares at 15.7 percent with a voting share of 12.8 percent, followed by the U.S. with 15.6 percent (12.7 percent vote) and China, India, Australia, Canada, Indonesia, and Korea each with 5-6.5 percent of shares and a 4-5.5 percent vote. The European Union member states, if taken as a single block ― though they vote independently ― have a share of 14.4 percent with a voting share of 15.7 percent.

Since the ADB’s early days, critics have charged that Japan, the U.S. and its Western allies have extensive influence over lending, policy and staffing decisions. There is a feeling that these decisions are not always in the best interest of the other Asian countries.

It was therefore natural for China to push for the proposed $100 billion AIIB. After initial reluctance, India too has joined, along with Singapore and other regional heavyweights.

By becoming a founding member and having a greater stake in the organization, Korea could easily raise its economic clout in the region. The AIIB should not be seen as a rival to the ADB, but as a complementary organization.

As per the ADB’s estimates, developing Asian economies need to invest $8 trillion to 2020 just to keep pace with expected infrastructure needs, of which only a tiny portion is provided by the existing multilateral lenders. As such, the AIIB will be able to bridge the gap to a certain extent.

There is clearly room for a new development bank, specialized in financing large-scale economic infrastructure on commercial terms. The ADB does have the expertise to lend a lot more for infrastructure, but has moved in a different direction, focusing more on concessional lending and knowledge sharing with low-income countries, with the main goal being poverty alleviation. That leaves an important niche to be filled by the new organization.

It will also be more effective if the countries that are affected by its lending policies actually have a greater say in how it is run.

The MOU said authorized capital of the bank would be $100 billion and that the AIIB would be formally established by the end of 2015 with its headquarters in Beijing. China is set to be its largest shareholder with a stake of up to 50 percent, the remaining coming from other countries and the private sector.

If Korea has concerns about its governance, it should become a member and try to fix it. Not becoming a founding member of something like this could be a tactical blunder. This is the opportunity to grab a big stake and voting powers, before it is too late.

In any case, in a speech to delegates after the inauguration, Chinese President Xi Jinping promised the best practices. “For the AIIB, its operation needs to follow multilateral rules and procedures. We have also to learn from the World Bank and the Asian Development Bank and other existing multilateral development institutions in their good practices and useful experiences,” he said.

Refusing to take part in an effort to help Asian countries fix their infrastructure will only end up putting Korea in a very poor light ― particularly since, in the initial stages of development, it borrowed heavily from the ADB to shore up its own infrastructure.

Korea needs to continue to develop its relationship with broader Asia and be seen as a part of the development push instead of bowing to U.S. pressure. Moreover, joining the AIIB is in no way indicative of Korea’s stand on political issues in the region.

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An ‘emotionally richer’ Templestay program

First published in The Korea Herald

If you want to experience a Templestay program in Seoul, but do not have the time to venture far, there are four popular places to do so in the area ― Myogaksa Temple and Geumseonsa Temple in Jongno-gu, Bongeunsa Temple in Gangnam-gu and the International Seon Center in Yangcheon-gu.

But not included in this list is one of the oldest temples in Seoul, Jingwansa Temple, a smaller but historically rich temple located just to the west of Seoul with a reputation for stellar temple food.

The Seoul City government is now trying to raise awareness of its historical value and its importance of being one of the four “great temples” in the city, together with Bulamsa Temple in the east, Sammaksa Temple in the south and Seunggasa Temple in the north.

To this end, they invited a dozen journalists to experience a short program Thursday.

Nestled in the expansive mountain and deep valley, the temple is not only in the foothills of the beautiful Bukhansan National Park, but also contains an impressive collection of cultural and historical properties. It provides a quiet place for city dwellers to enjoy, even as they learn about Buddhism.

As noted by Seonwoo, director of Jingwansa Templestay program, during the Joseon Dynasty, King Sejong built a library in the area for Confucian scholars to visit and read.

Foreign journalists attend the Templestay program organized by Jingwansa Temple in Seoul. (Kim Myung-sub /The Korea Herald)

“The temple was built for a monk named Jingwan by the eighth king of the Goryeo dynasty, Hyeonjong, about 1,000 years ago. At the age of 12, Hyeonjong was kicked out of the palace during a power struggle. The monk Jingwan took care of him, saving his life. After Hyeonjong became king, he built a temple named after the monk called Jingwansa to repay him for his kindness.”

The temple compound consists of the main Buddha sanctuary, or “daeungjeon,” in the middle, the monks’ living quarters to its left, the “myeongbujeon,” a place to pray for the dead spirits so they can have an easy passage into eternity to its right, and other buildings.

“During the Korean War in 1950, all the buildings in the temple compound were destroyed by bombs except for three including the ‘Nahanjeon,’ a sanctuary where Nahan’s spirit lives. The remaining buildings contain holy artifacts which were produced from the late 16th century to the early 20th century and were named cultural assets of Seoul,” she said.

During restoration work in 2009, materials related to the Korean independence movement against Japan were found ― newspapers published by independence fighters and a Korean flag from 1919. These are now on public display.

“We offer a Templestay program where visitors can experience Buddhist culture throughout the year. While some restoration work is going on, starting January 2015, visitors can get to experience the entirety of Buddhist living, including monastic food ― the ‘ultimate slow food,’ as it’s called,” she said.

“Sustainability has been at the core of the Korean Buddhist diet for centuries. The temple cuisine follows several strict rules, with no meat and fish, and almost all ingredients must be grown on or near the temple grounds.”

Korean Buddhists are prohibited from using vegetables like garlic and onions that are considered “hot” and distracting to meditation.

There are a variety of programs offered, including a “freestyle” program, a program that lets one experience the daily life of practitioners in the temple, as well as Buddhist cultural programs, and others designed for groups and those with regular jobs. The programs feature chanting services, 108 prostrations, tea and conversation with a monk, meditation, monastic formal meals and the preparation of temple food.

This is the only temple in Seoul that serves “suryukje,” a Buddhist ceremony that provides food and Buddha’s teachings to spirits and starved demons that wander the land and sea, and provides training facilities for female monks. The Jingwansa National Suryukdaeje is a royal ceremony practiced exclusively in Seoul for 600 years after the first king founded the Joseon dynasty. It is performed every leap year for 49 days between August and October, and is designated as Intangible Cultural Heritage No. 125 by the government.

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Unity in diversity: 2014 Incheon Asian Games

First published in The Korea Herald:


The 2014 Asian Games, the largest sporting event on the continent, kicked off Friday for a 16-day run in Incheon, a metropolitan city west of Seoul.

The event, governed by the Olympic Council of Asia, brings together some 10,000 athletes for a multisport spectacle second only in scale to the Summer Olympics.

Korea has had the experience of hosting the Asian Games twice before ― first in 1986 in Seoul and second in 2002 in Busan, the second-largest city.

This will be the biggest Asiad ever, with 439 events in 36 sports and disciplines, and the organizers have pledged to stage an impressive event that will showcase Asia’s unity in diversity, with all 45 participating countries marching as one.

The official slogan is “Diversity Shines Here,” which represents and highlights the significance of Asia’s diversity in history, culture and religion.

As before, the powerhouses of Northeast Asia will slug it out for the gold medals.

China is the hot favorite to top the medal count for the ninth straight Games, and is sending the biggest delegation to Incheon with 899 athletes.


Fireworks rise over the opening ceremony of the Asian Games at the Incheon Asiad Main Stadium on Friday. (Yonhap)
It hopes to use the Incheon Games as a springboard to launch the careers of future Olympic champions.

The country set an Asian Games record by scooping 416 medals in the previous edition ― 199 gold, 119 silver and 98 bronze medals.

It is likely to dominate diving, gymnastics, table tennis and badminton, while fielding big stars across many of the other sports in Incheon.

South Korea has set an ambitious target of 90 gold medals, though the host would probably settle for less, as long as it finishes above its fierce rival Japan.

South Korea has gold medal favorites in Park Tae-hwan for swimming, Son Yeon-jae for rhythmic gymnastics and Oh Jin-hyek for recurve archery.

It also has high hopes in shooting, fencing, judo and taekwondo, as well as team events such as baseball and men’s and women’s soccer.

North Korea sent around 150 athletes to the Games.

Tokyo has won the right to host the 2020 Summer Olympics but Japan won only seven gold medals at the 2012 London Games and finished third in the medal standings behind China and South Korea at the last four Asian Games.

The Japanese are sending 716 athletes, with their swimming team expected to spearhead the gold medal hunt.

India, a perennial underachiever in global sporting events, is hoping to improve on its tally of 14 gold medals clinched four years ago in Guangzhou, while Malaysia, Singapore and Thailand will battle it out for the top slot in Southeast Asia.

Among the 45 competing countries, 12 have not yet won a gold medal and three have never captured any medal.

After the Games close on Oct. 4, the memory of the fierce competitions will soon fade from people’s minds, but what will remain in the minds of many people will be the spirit that athletes from diverse cultures in Asia demonstrate in the competitions.

Also check facts and statistics on Incheon Asiad here.

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India-China Economic Relations in a Changed World Order

Chinese Foreign Minister Wang Yi was one of the first prominent visitors to make a trip to India after the new Indian government was sworn in, showing how much China values its economic partnership (maybe for its own self-interest) with India.
While it is true that economic cooperation between the two Asian giant markets is still hampered by unresolved disputes, there is plenty of scope for advancing economic relations; something that is rattling USA and the European Union.
It should be kept in mind that China and India have yet to agree on sovereignty over an area along the shared Himalayan border (Arunachal Pradesh), the subject of a brief war 52 years ago. Other problems include tension over how to manage over a dozen rivers that the two countries share.
Many Indian security experts also worry that China is trying to encircle the country with a string of ports and naval bases.As many news reports in the Indian media have pointed out, a growing trade imbalance with China has contributed to a current account deficit that pushed the rupee lower last year. While India’s current account deficit has narrowed recently, Indian officials are still pushing for a larger piece of the trade between the two countries. Although India and China have pledged to increase bilateral trade to $100 billion by 2015, right now it appears that there is still quite a long way to go.
News reports suggest that the foreign ministers of both countries discussed ways to increase Chinese investments in India through setting up industrial parks and infrastructure projects. They also discussed ways to address India's concern of huge trade deficit.
Until the end of 2013, the accumulated foreign direct investment from China to India had amounted to $ 0.94 billion. Hardly satisfactory.
There are several institutional mechanisms for economic and commercial engagement between both sides. India-China Joint Economic Group on Economic Relations and Trade, Science and Technology (JEG) is a ministerial-level dialogue mechanism established in 1988 during the visit of former Prime Minister Rajiv Gandhi to China. A Joint Study Group (JSG) was set up after former Prime Minister Vajpayee’s visit to China in June 2003 to examine the potential complementarities between the two countries in expanded trade and economic cooperation. As per its recommendation, a Joint Task Force (JTF) was set up to study the feasibility of an India-China Regional Trading Arrangement. JTF Report was completed in October 2007. There are also Joint Working Groups on Trade, Agriculture and Energy. In Dec 2010, both countries agreed to set up the India-China Strategic and Economic Dialogue (SED). The first SED took place in Beijing on September 26, 2011.
During Chinese Premier Wen Jiabao’s visit to India in December 2010, India and China agreed to set up the Strategic and Economic Dialogue mechanism. "It is a forum for both sides to discuss strategic macro-economic issues impacting both nations as a result of the changing international economic and financial landscape, to share their individual best practices and in handling challenging domestic economic issues and to identify specific fields for enhancing cooperation, learning and experience sharing."
As one news report pointed out- with the growth in bilateral trade between India and China in the last few years, many Indian companies have started setting up Chinese operations to service both their Indian and MNC clientele in China. Indian enterprises operating in China either as representative offices, Wholly Owned Foreign Enterprises or Joint Ventures with Chinese companies are into manufacturing (pharmaceuticals, refractories, laminated tubes, auto-components, wind energy etc.), IT and IT-enabled services (including IT education, software solutions, and specific software products), trading, banking and allied activities. While the Indian trading community is primarily confined to major port cities such as Guangzhou and Shenzhen, they are also present in large numbers in places where the Chinese have set up warehouses and wholesale markets such as Yiwu.
"Most of the Indian companies have a presence in Shanghai, which is China’s financial centre; while a few Indian companies have set up offices in the capital city of Beijing. Some of the prominent Indian companies in China include Dr. Reddy’s Laboratories, Aurobindo Pharma, NIIT, Bharat Forge, Infosys, TCS, APTECH, Wipro, Mahindra Satyam, Dr. Reddy’s, Essel Packaging, Reliance Industries, SUNDARAM Fasteners, Mahindra & Mahindra, TATA Sons, Binani Cements, etc. In the field of banking, ten Indian banks have set up operations in China. State Bank of India (Shanghai), Bank of India (Shenzhen), Canara Bank (Shanghai) and Bank of Baroda (Guangzhou), have branch offices, while others (Punjab National Banks, UCO Bank, Allahabad Bank, Indian Overseas Bank, Union Bank of India etc.) have representative offices. Apart from PSU banks, private banks such as Axis, ICICI also have representative offices in China."
According to information available with the Embassy of India in Beijing, close to 100 Chinese companies have established offices/operations in India. Many large Chinese state-owned companies in the field of machinery and infrastructure construction have won projects in India and have opened project offices in India.
"These include Sinosteel, Shougang International, Baoshan Iron & Steel Ltd, Sany Heavy Industry Ltd, Chongqing Lifan Industry Ltd, China Dongfang International, Sino Hydro Corporation etc. Many Chinese electronic, IT and hardware manufacturing companies are also have operations in India. These include Huawei Technologies, ZTE, TCL, Haier etc. A large number of Chinese companies are involved in EPC projects in the Power Sector. These include Shanghai Electric, Harbin Electric, Dongfang Electric, Shenyang Electric etc. Chinese automobile major Beijing Automotive Industry Corporation (BAIC) has recently announced plans to invest US$ 250 million in an auto plant in Pune. TBEA a Xinjiang-based transformer manufacturer has firmed up plans to invest in a manufacturing facility in Gujarat.  During the visit of Premier Wen to India, Huawei announced plans to invest in a telecom equipment manufacturing facility in Chennai."
I welcome this new development. If China and India join hands, the economic powers of the past, who still strut around with a 'big brother' attitude will get a very good humbling lesson- the future is more important!

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