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May 2017

Korea Intelligence Risk Management Forecast Technology

Korea Voice Jocelyn Clark Bryan Hopkins Hank Morris Steven B. McKinney


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In This Month’s Issue Founders’ Message

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KBLA Update Upcoming KBLA Events KBLA South

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Korea Intelligence 2017 Forecast

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Trade, Finance, & Industry

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Economics

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Technology

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Risk Management

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Real Estate

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Korea Voices Jocelyn Clark Potty Mouths and Empty Vessels

Hank Morris The new Moon over Korea - Potential Changes in South Korea’s Security Posture and changes regarding major chaebol groups and the foreign business community.

About the KBLA

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Bryan Hopkins

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Steven B. McKinney

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The Intersection of Data Privacy, CyberSecurity and IoT- A Wake Up Call To The Risk Management Industry and Legal Community

3 Cross-cultural Things to Know For Success

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Founders’ Message

Expectations are everything. T

hink Global. Act Glocal.

The dichotomy of local and global is no more. Are we coming or are we going? Today, no one even tries to assert that local economies, cultures, and practices (be they private or public) can survive and thrive in splendid isolation from the goings-on of the global stage. Similarly, it is a stretch to deny that we operate solely on a local stage anymore, no matter our job or role or the size of our organization, even if we intend to do so. As business leaders, it is tough to determine what parts of our products are local and what parts global, what global trends to jump on and what local trends to give a nod to. Should we endeavor to ride the wave and make the local market more globalized? Or should we shape and mold our global products toward the local taste? There is no one right answer, of course, and the usual path of least cognitive dissonance is to say that we should do both.

Satisfying stakeholders is a major task. It requires thinking about problems from many different points of view: regulatory, social, environmental, community, shareholder returns, customer satisfaction, and more. Most importantly, stakeholders are NOT local. In today’s world, stakeholders for most companies are spread out, perhaps even around the world. That means the repercussions of our local actions are global and decisions by others, perhaps far away, impact our local environment. Local has become glocal. We’re coming and going. The takeaway from all of this is that we can no longer confine our thinking to local norms if we intend to succeed in serving all stakeholders. When it comes to products, policies, hiring, partnering, and delivering on promises, thinking globally isn’t enough. We have to act glocally, too.

Glocalization is the zen of stakeholder satisfaction. The old mantra of “think global, act local” is no longer valid when there is no such place as “local.” The death of local can be attributed to many factors, including the Internet, social media, long-arm laws and regulations, increased reliance on foreign markets, lower barriers to entry, well-defined and pervasive global standards, etc. etc. But perhaps the largest influencer has been the shift in mindset from customers being the focus of an entity’s activities to stakeholders. Stakeholders is a much larger set. It encompasses not only everyone who buys our products, but everyone who is touched by the organization in any way.

Rodney J. Johnson President, Erudite Risk Co-Founder, KBLA

Steven B. McKinney President, McKinney Consulting Co-Founder, KBLA


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Upcoming KBLA Events

Friday June 2, 2017 Park Hyatt, Busan This event is limited to KBLA Members only. Register online at kbla. info or send an email to admin@kbla.info.

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Korea Intelligence | 2017 Forecast

Wage Trends in 2016, Forecast for 2017 On April 7, the Korea Labor Institute (KLI) published a report on wage trends in 2016 and forecast for 2017.

According to KLI, in 2016, the average wage of a regular, paid employee in a company with at least five employees amounted to 34.25 million KRW, up 3.8% year-on-year. The increase was attributed to increased business earnings and a boom in the construction sector. KLI forecasts wage growth of 3.5% in 2017; anticipated drop-offs in construction and economic performance will like be offset by labor negotiations, an increased minimum wage, and increases in the wages of public employees. Of note, the average employee at a company with three to nine employees consistently earns about half that of the average employee at a company with more than 300 employees.

Data MOEL via KLI, Table and Translation KBLA

Over the past ten years, the percentage of individuals classified as earning low wages* has dropped across all age groups.

Data Statistics Korea via KLI, Table and Translation KBLA

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Korea Intelligence | 2017 Forecast

KDI Economic Growth Forecast for 2017 On April 19, the Korea Development Institute (KDI) issued its economic growth forecast for 2017. According to KDI, in 2017 and 2018 economic growth rate will stay modest, in the 2-3% range, impacted by gradual export recovery and a slowdown in domestic demand. The inflation rate will stay low, while unemployment rate will increase slightly.

GDP is expected to grow at 2.6% in 2017. Additional details are as follows: - In 2017, private consumption growth will gradually decrease due to a slowdown in income growth and a slump in consumer confidence. - Exports will gradually improve impacted by recovery in global business environment, increases in oil prices, and strong foreign demand for semiconductors.

Data KDI, Table and Translation KBLA

- Investment growth will remain strong, as construction investment will grow at the satisfactory pace and facility investment will start to increase.

In 2017, the current account balance will decrease by roughly 9.3 billion USD (10.4%) due to exports increasing at a slower pace than imports. The total trade scale will increase. Data KDI, Table and Translation KBLA


Korea Intelligence | Trade, Finance, & Industry

Household Income and Media Usage in 2016 On March 23, Statistics Korea issued a report on major social indicators in 2016, including data on household income and media usage. According to Statistics Korea, 2016 saw stagnation in income and consumption growth for households with two or more individuals, 91% of the population made use of smartphones, and the average Internet user spent 14.3 hours per week online.

In 2016, the average monthly income of households with two or more individuals increased by 0.6% to 4.4 million KRW.

Data Statistics Korea, Chart and Translation KBLA

In 2016, the Internet usage rate increased by 3.2% points to 88.3%. Those 20-29 used the Internet an average of 22.8 hours per week.

Data Statistics Korea, Table and Translation KBLA

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Korea Intelligence | Trade, Finance, & Industry

Startup Investment in 2016 On March 31, the Science and Technology Policy Institute (STEPI) published a number of articles on entrepreneurship, including investment in startups in 2016. According to the STEPI, in 2016, a total of 1.0 trillion KRW was invested in 347 startups, year-on-year increases of 25.0% and 49.0% respectively.

Roughly 45% of total startup investment went to information and communication technology (ICT) services.

Data PLATUM via STEPI, Table and Translation KBLA

In 2016, out of all ICT industry startups, startups in the lifestyle services category attracted the most investment (13% of total investment).

Data PLATUM via STEPI, Chart and Translation KBLA


Korea Intelligence | Trade, Finance, & Industry

Public Rental Housing Supply in 2017 On March 14, the KB Financial Group Management Research Institute (KB) published report on the government’s housing support program including the public rental housing supply plan in 2017. According to KB, in 2017 the new public rental housing supply will amount to 120,000 housing units; 10,000 housing units more than originally planned. Out of these, 70,000 housing units will be newly constructed and 50,000 will be purchased or rented. In recent years, the Korean government increased its support in public housing and implemented various housing programs in order to help low and middle income households.*

Total public rental housing supply during 2013-2017 is forecasted to reach 551,000 housing units.

Data KB, Chart and Translation KBLA

Support for key money rent (전세) will be the most popular type of public rental housing support (28%) in 2017. *The public rental housing support policy was established in the Framework Act on Residence in December 2015.

Data KB, Chart and Translation KBLA

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Korea Intelligence | Trade, Finance, & Industry

Korean Export Sophistication On March 31, the Korea International Trade Association (KITA) issued a report on changes in export competitiveness and sophistication over the past several years. According to KITA, Korea was the world’s eighth largest exporter in 2016, down two places from the year prior. While Korea’s share in world exports has decreased, China’s share has continuously increased. To counter changing world trade structure, countries should move from exports of labor intensive goods to capital and technology intensive goods. There is a large gap in export sophistication between Korea and developed economies such as those of the US, Japan, and Germany, making Korean exports the first target to be replaced by a growing Chinese economy.

In 2015, China’s share in world exports was larger than Korea in every major industry except for transport machinery.

Data KITA, Table and Translation KBLA

Between 2005-2015, Korea’s sophistication of exports index (EXPY) was much lower than Germany, the US, and Japan; Korea led China, but the gap is shrinking.

Data KITA, Chart and Translation KBLA


Korea Intelligence | Trade, Finance, & Industry

Measuring Well-Being in Korea and OECD The Korea Institute for Health and Social Affairs (KIHASA) recently published a report on well-being in Korea and OECD countries.

Per KIHASA*, Korean well-being was higher than the OECD average in areas like economic vitality, fiscal sustainability, and welfare fulfillment, but lagged behind in welfare needs and national happiness. A total of 23 socioeconomic indicators were used to measure well-being.

Data KIHASA

* The KIHASA-Chosun Welfare Index (KCWI) was developed in 2011, “in order to examine the level of well-being across 30 OECD countries, in terms of economic, social, and demographic factors.�

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Korea Intelligence | Trade, Finance, & Industry

Korean M&A Trends, 2000-2015 On March 31, the Korea Capital Market Institute (KCMI) published report on recent M&A market trends. According to KCMI, “Korea’s M&A market size has grown from a meagre 13.1 trillion won in 2000 to 96.2 trillion won in 2015, more than a 7 times increase. The number of M&A deals has also grown from 102 deals in 2000 to 493 deals in 2015. However, in terms of size, much of the growth of Korea’s M&A market has come in the past 2~3 years, driven by a spike in the size of a handful of mega-deals.” Despite a few very large deals in 2014-2015, the size of the Korean M&A market was relatively small; M&As accounted for 2.9% of GDP between 2000-2015.

Data Bloomberg via KCMI, Table and Translation KBLA

On industry characteristics, KCMI stated that: “M&As in Korea are predominantly pursued by companies in manufacturing, reflecting the structure of Korea’s economy. Acquirers in the manufacturing industry accounted for 36.2% of deal volume between 2000~2015.”

Data Bloomberg via KCMI, Table and Translation KBLA


Korea Intelligence | Trade, Finance, & Industry KCMI added that: “However, in terms of deal value, financial services industry at 33.3% of deal value was ahead of manufacturing, reflecting industry restructuring mega-deals in banking, credit-card, insurance and securities industry following the 1997 Asian Financial Crisis and 2003 credit card crisis in Korea.”

Data Bloomberg via KCMI, Chart and Translation KBLA

Regarding type of acquisition, KCMI concluded that: “Targets of M&As in Korea are predominantly of unlisted companies.”

On M&A financial advisory market KCMI stated that: “The structure of the financial advisory market appears to be bifurcated, with few but profitable mega-deals dominated by foreign investment banks and the large number of small M&A deals served mostly by accounting firms. Korean securities firms are stuck in the middle, competing with foreign investment banks for the same type of large corporate clients, while competing with accounting firms on small to medium sized deals.”

Data Bloomberg via KCMI, Table and Translation KBLA

Data Bloomberg via KCMI, Table and Translation KBLA

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Korea Intelligence | Trade, Finance, & Industry

Businesses Founded by Young People in 2013-2015 On April 10, the Hyundai Research Institute published a report on businesses founded by young people in 2013-2015. According to HRI, conditions for young people founding businesses have seriously deteriorated over recent years, despite government support policies. The number of businesses founded by young people has sharply decreased over the period 2013-2015, while less than one percent of new businesses (those less than one year old) in 2015 were founded by individuals aged 29 or younger. Retails sales and the hotel and restaurant industries remained the most popular industries in which young people started businesses.

Data SMBA via HRI, Table and Translation KBLA

The number of new businesses (those which had been in operation for one year) started by those 29 or younger dropped by 40.5% over the period 2013-2015, accounting for only 0.9% of all new businesses.

Between 2013-2015, the people in their 20s and younger were most likely to found businesses in the retail sales (39.2%) and hotel and restaurant (24.2%) industries.

Data SMBA via HRI, Table and Translation KBLA

In 2014-2015, new businesses in which the founder was 29 or younger had the smallest average number of employees (2.3 employees), while new businesses in which founder in their 40s had the largest number (3.3 employees). Data SMBA via HRI, Table and Translation KBLA


Korea Intelligence | Economics

Electronic Payment Services in 2016 On March 22, the Bank of Korea (BOK) published a report on the usage and state of electronic payment services in 2016. According to the BOK, 2016, there were an average of 20.25 million daily electronic transactions, a 4.4% increase, valued at 343.5 billion KRW, a 36.1% year-on-year increase.

In 2016, the number of electronic financial service providers increased by 30 new companies to 167.

Data BOK, Table and Translation KBLA

In 2016, use of electronic payment services increased sharply on online shopping transactions and the increased scope of usage for credit-debit cards.

Data BOK, Table and Translation KBLA

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Korea Intelligence | Economics

Real Estate Trust Companies Earnings in 2016 On March 9, the Financial Supervisory Service (FSS) issued its figures for real estate trust companies earning in 2016. According to the FSS, “Eleven real estate trust companies reported net income of KRW393.3 billion for 2016, up KRW171.1 billion or 77.0% from the same period a year earlier. Increases in operating and non-operating incomes helped send the figures to an all-time high.” Regarding operating revenues and expenses of real estate trust companies, FSS stated that: - “Operating revenues rose 40.6% to KRW786.2 billion due to sustained low interest rates and good conditions in the housing market.” - “Operating expenses came to KRW316.0 billion, 20.2% higher than the previous year. “

Data FSS

Data FSS

In 2016, assets under management (AUM) by the real estate trust companies increased by 16.4 trillion KRW (11.8%). FSS added that: “Increases in administrative-type land trusts, collateral trusts and development-type land trusts mostly led to the AUM expansion.”

Data FSS

In 2016, the aggregate assets of real estate trust companies increased by 747.9 billion KRW (36.0%), shareholders equity increased by 412.3 billion KRW (27.3%), liabilities increased by 335.6 billion KRW (65.3%), while net capital ratio (NCR) decreased by 205.5% points. Regarding NCR decline, FSS added that: “The decline was mostly because total risk has risen as dividend payouts were executed and investments in securities and corporate bonds were on the rise.”


Korea Intelligence | Economics

Preliminary National Accounts Figures in 2016 On March 28, the Bank of Korea (BOK) issued its preliminary figures on national accounts in 2016. According to the BOK, the real GDP increased by 2.8% in 2016. Manufacturing and service industries grew by 2.3%, while the construction industry increased by 10.5%. Private consumption grew by 2.5%, while exports went up by 2.2%. The BOK noted that: “The growth in real GDP was mainly due to increases in private and government consumption, and the expansion of construction investment growth. The growth of facilities investment meanwhile shifted to negative.�

Data BOK

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Korea Intelligence | Technology

FSS Issues Advisory Against Increased Voice Phishing Targeting of Young Women On April 5, the Financial Supervisory Service (FSS) issued a report regarding a large increase of voice phishing cases targeting young women in 2016. Per the report, 2016 saw large increases in both the number of voice phishing cases reported by, and the amount of damages suffered by, young women, particularly cases in which scammers impersonated investigatory authorities. Per the report, in situations in which scammers impersonated authorities, women in their 20s and 30s reported almost ten times more voice phishing cases to authorities, and suffered roughly ten times the amount of damages, as did men in the same age group. According to the FSS, scammers target young women because of perceptions that young women have less social experience, are more susceptible to intimidation, and that they typically have more money saved than young men. In 2016, the amount of voice phishing damages suffered by young women amounted to 17.5 billion KRW, 71% of total voice phishing damages.

Data FSS, Chart and Translation KBLA

In 2016, the number of voice phishing cases targeting young women, when the scammer impersonated an investigatory authority, amounted to 2,152 cases, or three-quarters of such cases. Data FSS, Table and Translation KBLA

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Korea Intelligence | Technology

With Innovation Website Personal Information Leakage On April 26, the Korea Communication Commission (KCC) and the Ministry of Science, ICT and Future Planning (MSIP) issued the results of a joint public-private investigation into a personal information leakage incident involving With Innovation, the company behind the online hotel booking service, “Yeogi-Eoddae” (여기어때, “What About Here”).

According to KCC, between March 7 and March 17, 2017, hackers obtained nearly one million pieces of personal information through a structured query language (SQL) attack on We Innovation’s marketing center webpage. The investigation into the hack was initiated after over 4,800 text messages, which confronted and blackmailed users who apparently had sensitive information on their accounts, were discovered. Per the results of the investigation, We Innovation’s homepage lacked measures to detect irregular database inquiries, which constituted a vulnerability. As of yet, the report details no specific disciplinary measures taken against We Innovation, although MSIP did announce that as of April 13, it had started conducting vulnerability assessments of roughly 200 O2O service providers.

Data KCC, Table and Translation KBLA


Korea Intelligence | Technology

Mobile Phone and Email Spam Messages in 2H 2016 On March 28, the Korea Communication Commission issued survey results on mobile phone and email spam messages in 2H 2016. According to the KCC, spam text messages sent via mobile phone mass text messaging services accounted for 74.6% of all text messages sent in 2H 2016. When it comes to spam sent to mobile phones, roughly three-quarters were sent via voice (phone calls). Gambling spam continued to be the most prevalent type of spam sent to mobile phones.

Data KCC, Chart and Translation KBLA

In 2H 2016, the three major telecom carriers were able to block 83.8% of spam messages, down 3.8% points from 1H.

Data KCC, Table and Translation KBLA

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Korea Intelligence | Risk Management

THAAD Impact on Korean Industry On March 20, the Korea Development Bank (KDB) issued a report regarding the potential impacts of THAAD deployment and deteriorating Korea-China relations on Korean industry. According to the KDB, China implemented a number of pressure diplomacy measures towards Korea after the joint US/ROK THAAD deployment announcement in July 2016. In 2016, roughly 25% of Korean exports went to China, leaving Korea highly dependent on China. The cosmetics, duty free retail, and tourism industries are most vulnerable to retaliatory measures, while Korean capital goods, which are more difficult to replace with domestic Chinese production, are not expected to suffer an impact. Korean duty free stores, tourism, and manufacturing industries are forecasted to lose 20 billion USD in 2017, in the event that Korea-China relations do not improve. According to KDB, China’s retaliatory measures against Korea have consistently increased over the past several months.

Data KDB, Table and Translation KBLA

The KDB explained two future Korea-China relation scenarios, and three levels of impact, for Korean industries’ sales and exports.

Data KDB, Table and Translation KBLA

If the current status quo in Korea-China relations persists in 2017, Korean duty free and tourism industry sales are expected to decrease by 50%. Data KDB, Table and Translation KBLA


Korea Intelligence | Risk Management The cosmetics, duty free, and tourism industries are expected to be most affected by China’s retaliation measures.

Data KDB, Table and Translation KBLA

The textile and petrochemical industries export heavily to China, but the impact of China’s retaliatory measures is forecasted to be limited.

Data KDB, Table and Translation KBLA

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Korea Intelligence | Risk Management

Illegal Financial Companies in 2016 On March 31, the Financial Supervisory Service issued a report on illegal financial investment and securities companies uncovered in 2016. In 2016, the number of illegal financial investment and securities companies uncovered decreased by 58.3%, to 189 companies, due to measures taken to detect and fight financial scams. However, the reduction in fraudulent financial companies uncovered does not necessarily mean a reduced number of financial scams, as said scams have moved to online and mobile platforms. In 2016, abandoned investment brokerages for 97% of all illegal financial companies uncovered.

Data FSS, Table and Translation KBLA

Crime in 2015 On March 23, Statics Korea issued a report on major statistics indicators, including crime figures in 2015. According to Statistics Korea, in 2015, the total number of crimes increased by 4.5% to 2.02 million crimes, while the number of major crimes dropped 1.4% to 504,300.

In 2015, larceny accounted for slightly less than half of all major crimes, followed by, assault causing injury (44.5%), and sexual violence (6.2%).

Data Statistics Korea, Table and Translation KBLA


Korea Intelligence | Risk Management

Violations of Kim Young-ran Act by Public Institutions On April 11, the Anti-Corruption & Civil Rights Commission (ACRC) published figures on violations of the Improper Solicitation and Graft Act (aka the “Kim Young-ran Act�), six months after it went into effect.* According to the ACRC, between September 2016 and March 2017, 2,311 violations of the Act by public institutions were reported. Out of reported violations, roughly three-quarters regarded outside lectures, 18% were related to the taking of bribes, while the remainder related to improper solicitation. Of the 2,311 reported violations, only 2.5% (57) were referred to investigators or the courts for further action. Of reports regarding bribery, 255 cases (62%) were voluntarily reported by public officials, while 157 cases (38%) were reported by third parties. The bribes in question ranged from being as small as offered food and beverages, to as great as 20 million KRW in cash. Out of illegal requests, 97 cases (71.9%) were voluntarily reported, while 38 cases (28.1%) were reported by third parties.

Data ACRC, Table and Translation KBLA

Out of the 57 reported violations that were referred to either investigators or the courts, 38 resulted in a fine being imposed by a court - almost all of these were for accepting bribes.

Data ACRC, Table and Translation KBLA

*ACRC surveyed 23,852 public institutions; targeted period of violations is between 2016 September 28 and 2017 March 10.

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Korea Intelligence |

Real Estate by Cushman & Wakefield


Korea Intelligence |

Real Estate by Cushman & Wakefield

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Korea Voices

Potty Mouths and Empty Vessels Six years ago, just before the 2012 Korean presidential election, four left-leaning politicians/journalists/ amateur comedians were sitting around a rented sound studio laughing, blurting out occasional expletives, and generally making fun of President LEE Myung-bak. The weekly podcast that ensued, Naneun Ggomsuda (나는 꼼수다, literally, “I am a Weasel” or, popularly, “I am a petty-minded creep”), garnered quite a following, particularly among young people. Between April and November of that year, nearly six million netizens downloaded the Ggomsu podcast app. As reported by LEE Mi-sun, in her 2012 Kyungpook National University master’s thesis “The Frame and Discourse of the Report ‘I am KKomsu’[Ggomsu],” on December 1, 2011, MBN (an economic news network in South Korea) surveyed 1,000 adults between the ages of 19 and 59 to evaluate public sentiments on the reliability of news media. Naneun Ggomsuda received a reliability rating of 40%—more than double the 17.2% rating for major newspapers such as Chosun-Ilbo, Joongang-Ilbo, and Donga-Ilbo. Not long after the podcast’s popularity was revealed, the government banned the app among young South Korean military conscripts, and, in late 2011, one of Naneun Ggomsuda’s founding members, CHUNG Bong-ju, was arrested and charged with “spreading rumors” about former President LEE’s connections to alleged stock fraud. At the time, Chung sat on the National Assembly as a member of the opposition Democratic United Party. On the podcast, he played a character so full of himself he was given the nickname “Funnel”— because every thought that passed through his narrow mind flowed out into an exhilarated rush of self-aggrandizement. In the first

episode of the podcast, Funnel, channeling Lee, boasts, in language now somewhat familiar to most Americans, 정봉주: 잘 모르고, 공부를 안 하고, 연구를 해도 다른 사람들보다 10배는 더 잘 아니까. (폭소) Despite my lack of expertise, study, and research, I know everything 10 times better than anyone else! 정봉주: 이미 트웟에세는 정보주가 어마어마하게 유면한 인사가 돼더라고요. I have already become the most famous man on Twitter! And, in the sixth episode, 저는 가끔씩 발언하고, “주여! 과연 이 생각이 제 생각입니 까?” 어마어마하죠. 저는 깜짝 놀라는게 아니라, 깜짝깜짝 놀랍니다. (폭 소) Whenever I say something, often I ask, “Oh God, is this what I think?” It is fabulous! I even impress myself. (Translation from Kyoo Sang Jo’s 2015 master’s thesis, “Rhetorical Analysis of a Political Satire Podcast: Naneun Ggomsuda.”) It’s hard to believe how recently it was that Chung Bong-ju was thrown in jail for a year for his disrespect, PARK Geunhye was the new President, the blacklisting of artists had begun, and Korean comedy shows stopped delivering political satire. With the noise of dissension finally quieted, for not quite five years, the people of South Korea lived simple, virtuous lives—until they took to the street en masse. As I write, President MOON Jae-in’s honeymoon has begun—already, in his first week, he has authorized the collective singing of the previously banned “March for the Beloved“ (임을 위한 행진곡) at Gwangju for the May 18th commemoration of the 1980 “Gwangju Massacre.”

Professor Jocelyn Clark Pai Chai University KBLA Arts Ambassador jocelyn.clark@kbla.info

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Korea Voices He’s already cancelled the stateauthorized “official” revised high school history book, promised to give the temporary workers at Incheon airport proper full status, and adopted an abused dog and named her (quite unfortunately in terms of his brand, if one is actually thinking of global politics) Tory. With the disappearance of the Blue House’s blacklists and an anticipated more lenient interpretation of the 1948 National Security Law, satire has returned to Korea’s version of Saturday Night Live. Meanwhile, across the Pacific, the original Saturday Night Live, with its weekly caricatures of the President and his bepodiumed spokesperson, is drawing larger audiences than it has in 22 years. It’s still a bit early in the new administration for blacklists—at least those that reach down as far as artists. (At the time of this writing, the American President is still working on his list of replacements for Director of the country’s domestic spying agency (the Federal Bureau of Investigation or FBI) to replace the Director he fired for investigating him). The multimillionman marches that took place in Seoul over much of the fall, winter, and early spring of 2016 and 2017 (organizers claim over 16 million anti-Park demonstrators marched between October 2016 and March 2017) are still some time off for Washington, D.C., but conservative attacks on satirists and comedians have already begun. In a May 10th article in the American Conservative, Robert W. Merry attributes the triumph of “a vulgarian such as Trump” to “the degradation of American culture” by American comedians, starting with Lenny Bruce (Leonard Alfred Schneider, October 13, 1925 - August 3, 1966), “the raunchy comedian of the 1950s and 60s who pushed the envelope of propriety—and then kept pushing,” and ending with the mainstream CBS late-night television talk show host Stephen Colbert, who recently caught the attention of the watchdog Federal Communications System (FCC) for his profane allusions to the

President. (In fact, the FCC doesn’t regulate profanity or indecency after 10 p.m.—a child-protective remnant of pre-Internet days.) Colbert, I know (as much as anyone could who lived abroad without a TV for all of the years of his satirical Colbert Report); Bruce, I had to look up. The first thing I noted was that he, too, has a delightful “All Alone” song reminiscent of Kim Jong-Il’s hit “I’m So Ronery.” He died young, years before I was born or social media was invented. With nothing but a stage and a microphone, Bruce, in Merry’s words, “panned everything people held dear, assaulting their most delicate sensibilities and ignoring every societal no-no.” As with Chung Bong-ju, Bruce wasn’t far into his career before the police came calling. There have always been comedians cracking jokes in the FCC safeharbor wee hours. Contrary to Merry’s assertion, it was not those funny ones who brought us Trump, or Lee, or Park, or Moon, or Le Pen, or Macron. Comedians did not bring us all of what Merry describes in his article as society’s “bawdy and nasty pugilism against societal sensibilities . . . [its] raunchy language . . . [its] porn . . . [its] tumbling down of the barriers of civility.” It could be argued that Bruce, Colbert, and “The Funnel,” all have had as their objective the defense of civil society from tyrannical politicians. If you are going to blame comedians for the rise of Trump, you may as well blame the Hoover vacuum cleaner for the dissolution of the traditional American family. Confucius himself would no doubt have found the Rock ‘n Roll of the post-war generation decadent, corrupting, and anathema to the “proper form of music (雅音 야음), [which should be] refined, improving, . . . essential for selfcultivation,” and symbolic of good and stable governance. Harvard Professor Michael Sandel blames the country’s moral decline on the shift from a market economy to a market society. Already, in 1996, he was warning, in Democracy’s


Korea Voices Discontent: America in Search of a Public Philosophy, that, absent a stronger civic republican spirit, liberalism would collapse. Does this not sound like a more plausible cause of the country’s decline than the words of a few stand-up comedians? Anyone born during the previous century who watched the May 2017 televised Korean election results, reported back via dabbin’ Moon, Rocky Hong, and Aragorn Ahn, likely got the feeling that the century of our birth has passed, never to return. Korean Millennials have embraced as their own the “cute“ Japanese aesthetic of kawaii (可 愛い) that entered Korea 20 years ago, and it now extends not only to teenage relationships but the serious business of government, such that even the Korean National Police Agency is now represented by “Podori,” a cartoon character designed by one of Korea’s most famous comic book artists, LEE Hyeon Se, for “the New Police for the New Millennium!” While a certain populist fun-loving aspect has been part of Korean culture for as long as I have been here—I noted a column or two back that almost all traditional short danga songs end with the entreaty “What is there to do but play?—Koreans also value good form. Amid all of the postmodern glitz, animated paratroopers, and irreverent podcasts, people are serious about appearances here. The day after the election, my good friend and colleague Hyun Kyong Chang, a researcher at Ewha University, wrote on her Facebook page, under a photo she posted of a triumphant President Moon and cabinet walking down the stairs of a government building, “폼나네... 그래 폼도 중요하니깐. 오바마도 폼났었지”— roughly and on the literal side, “Now that’s form. Check out how [Moon] carries himself . . . Form is also important. Obama carried himself well too, didn’t he.” (More colloquially, “Dang. He’s got style!”). And then there was the headline in the May 11th Joongang-Ilbo: “‘얼굴

패권주의’ 신조어 등장하게 한 문재인 대통령 경호원”—again, loosely, “Newly coined phrase ‘Facial Hegemony’ applied to one of Moon Jae-in’s bodyguards.” The man’s good looks and the rest of what’s now been dubbed the “handsome brigade” are being thought by more than a few to “lead the way”—that is, to represent the new direction of Korea under the new President. While it may be tempting to make light of “hegemonism” during this week’s landslide euphoria by pointing to all of the young good looking stylish politicians (and bodyguards) situated around President Moon, if we look up the definition of “hegemony“ (패권 | 覇權) in Korean, as I did while translating the passages above, it is interesting to note that there is a second part to its etymology (from Naver) that we don’t find in the English. Koreans don’t think of “hegemony“ alone, but as part of a moral and philosophical binary: “中國에서는 傳統的으로 나라를 다스리는 데 두 가지 방법을 제시하였는데, 그중 하나는 仁義 道德을 중요시하는 王道 政治 思想으로, 孔子나 孟子의 儒家 思想이 있다. 다른 하나는 전 백성을 군사화하고 무력을 증강하여 패권을 차지하려는 覇 道政治로 법가 사상이 이에 속한다.” That is, in China, there were two traditional ways to rule the country. One was the wangdo, the “righteous way” (왕도 |王道), through ren and li (historically translated variously as humanity and ritual, or reciprocity and “the optimally appropriate,” or kindheartedness and righteousness . . . ) and dao and de (the “Way” and morality/virtue/charismatic power) emphasized by Confucius and Mencius. The other was through dominance or hegemony, the paedo (패도| 覇道), which aimed to rule via strong military—the way championed by the Legalists. In other words, in popular thought in Korea and China, and in the rest of the sinosphere, “the rule of right and the rule of might” represent a clear, dualistic choice. Those who study Asian cultures, philosophies, and traditions tend to see themselves as followers of the wangdo, “the righteous path,” even

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Korea Voices if they are conservative. If you study Chinese history, you find rulers, such as the “first emperor” of Qin, QIN Shihuang, known for building the Great Wall, and his prime minister, LI Si, famous for instigating his boss to “burn the books and bury the scholars” beginning in 213 BC, often to have allied with the Legalists. Thus, one of the few Park Geunhye supporters in my orbit, seemingly not overly bothered by the blacklists, history books revisions, and censorship of comedians, told me she liked Park because of her dignity and carriage—characteristics she thought Park picked up in the Blue House, perhaps not so much as the daughter of former President PARK Chung-hee, but, later, after the assassination of her mother, as first lady. For my friend, Park’s underlying appeal had in large part to do with aesthetics—she was a righteous figure who could model proper form for the nation. Curious if anyone agreed, I floated this premise among other friends. Sure, they said, she had outward dignity. She carried herself well, said one acquaintance, but it was all empty form, like a perfect vase with no flowers or water—“a kind of lie filled with air.” Anglophiles might remember the patina of the paternalistic conservative ruling class’s manners being stripped away following the Suez crisis of 1956 and the Profumo affair of 1963, after which such airs suddenly were no longer to be emulated but instead mocked on late night stages around England. The May election, perhaps, marked that moment in Korea. That said, older Koreans still remain hyper aware of form and everything that has to do with class. Americans, with their stubborn creation myth of a classless society and even more stubborn continuing myth of individualism, are less interested in conforming to old systems of etiquette that still smell to them of British repression. But Americans and Koreans do intersect on the topic of sincerity—진심 | 眞心—or, in American slang, “keeping it real.” For Koreans, this is expressed through

form; that is, through manners and through the expression of jeong 정 | 情—something like deep affection. The song “Sarangga” (love song) from the pansori Chunhyang-ga is a study in jeong— each line ending in jeong describing a different kind of love or affection. Trump won because people thought he was keeping it real—that he had jeong for them. Bernie Sanders, even with the word “socialism” written all over his platform, almost won the Democratic nomination for the same reason. He was “telling it like it is.” He had jeong for the people. Park lost because her perfect form was devoid of sincere content. Jeongless etiquette. Recently, I revisited one of the required readings for any undergraduate East Asianist: Herbert Fingarette’s The Secular as Sacred. In it, he looks at Confucian ritual through a 1970s American secular lens, at one point contemplating the American ritual handshake: I see you on the street; I smile, walk toward you, put out my hand to shake yours. And behold—without any command, stratagem, force, special tricks or tools, without any effort on my part to make you do so—you spontaneously turn toward me, return my smile, raise your hand toward mine. We shake hands—not by my pulling your hand up and down or your pulling mine but spontaneous and perfect cooperative action. . . . [W] e who shake hands . . . must have (but not think about) respect and trust. Otherwise we find ourselves fumbling awkwardly or performing in a lifeless fashion, which easily conveys its meaninglessness to the other. The simple American handshake was where it started going wrong for Trump after the election. Cable news reminded us every day of President Trump’s consistent inability to follow the decorum Americans have come to associate with the oval office especially that having to do with this Western handshake ritual— from his full-bodied, endless jerky


Korea Voices power shakes with Japanese Prime Minister Abe to his failure to take German Chancellor Angela Merkel’s outstretched hand. One comedy writer couldn’t resist referring to Trump’s clumsy handling of Israeli Prime Minister Netanyahu as a “twoshake solution.” According to Fingarette, there are two ways to fail at ceremony: the ceremony may be awkwardly performed for lack of learning and skill; or the ceremony may have a surface slickness but yet be dull, mechanical for lack of serious purpose and commitment. Beautiful and effective ceremony requires the personal ‘presence’ to be fused with learned ceremonial skill. ... Confucius characteristically and sharply contrasts the ruler who uses li [ritual ceremony] against the ruler who seeks to attain his ends by means of commands, threats, relations, punishments and force.

vote for him?’” American working class pride, once so dearly held, has been eroded and mocked by Clintonian globalization and the rise of Goldman Sachs— and both major political parties’ dependence on these post DoddFrank, post Citizens United players. Trump promised to empower those who were not at the top of the class system—the masses of Americans comedian George Carlin was no doubt thinking of when he quipped, “That’s why they call it ‘the American Dream’: because you have to be asleep to believe it.” But Trump doesn’t actually know how to fix their problems. I don’t know how to fix anything either, but I can do a much more sincere handshake. While comedians have the power to insult, Presidents have the power to injure in lasting ways. Writes Michael Sandel:

The only way of reining in the uncritical embrace of markets is to revitalize public discourse by Cracks are starting to appear in engaging in questions of values Trumps vase of public affection more directly. Social democracy for the same reasons they did has to become less managerial in Park’s. With every Wall Street and technocratic and has to return cabinet appointment and tax break to its roots in a kind of moral and for the wealthy, his “keeping it civic critique of the excesses of real” campaign’s rhetorical form capitalism. At the level of public reveals itself to be but a flowerless, philosophy or ideology it has to work waterless vessel. His constituency of out a conception of a just society, working class voters who, mistaking it has to work out a conception of his Moroccan Magic Spray Tan #2 for the common good, it has to work red-dirt prairie dust, were counting out a conception of moral and civic on their outsider to ride in and education as it relates to democracy rescue their town from the economic and empowerment. That’s a big and cultural villains are beginning project and it hasn’t yet been to see that, while Clinton may still realized by any contemporary socialbe the enemy, Trump is far from a democratic party. true friend. A May 13th article in the Washington Post quoted a Trump This may be as good a description supporter with a cracked molar who as any of the task that lies before showed up at a stadium of dentists MOON Jae-in. One day, the from five states to be one of the first Americans may get back around to 1,000 people in line to get her tooth it, too—if the comedians are allowed pulled for free: “I am hearing about to keep up their good work. a number of people who will lose their coverage under the new [health care] plan,” the supporter lamented. “Is Trump the wolf in grandma’s clothes? My husband and I are now saying to each other: ‘Did we really

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The Intersection of Data Privacy, Cyber-Security and IoT- A Wake Up Call To The Risk Management Industry and Legal Community The recent global cyber-attack emphasizes the growing risk of cyberattacks around the world and the issues facing the risk and resilience community. Not only do cyber-attacks threaten businesses and organizations on a daily basis but the addition of ransomware to the mix underlies the threats facing organizations, businesses and governments on a worldwide basis. However, companies and organizations need to realize that it’s not just about cyber-security vulnerabilities they should be concerned with but also data privacy issues and IoT matters as well. Data privacy, though not always about cyber-security, involves cybersecurity when personal data is hacked. IoT also concerns itself with cyber-security when it is hacked, allowing the unauthorized access to data or unauthorized use of products connected by IoT. In fact, companies face unheard of liabilities now due to IoT breaches. It is now time that the risk management industry as well as legal community realize the impact that cyber-attacks have not only upon data privacy requirements but IoT based products also. 1. Cyber-Security Concerns As cyber-security has been placed on the front burner due to the global hack as well as recent credit card hacks, etc., more and more emphasis has been placed on data protection by various authorities. For instance, the European Union or EU has passed the General Data Protection Regulation (GDPR) which comes into effect in 2018. Many Asian jurisdictions, such as Korea, Singapore and Hong Kong have also updated their data privacy laws and regulations. The US however, has left cyber-security standards for

data protection less clear as common law negligence, HIPAA, Gramm-Leach -Bliley and FTC regulations are all used in a haphazard way to safeguard personal data and protect people from cyber-attacks. Unlike the US with its many fractured laws, the GDPR will be used as the definitive source of data privacy law in the EU. The GDPR will set out specific methods that companies will be required to use to secure personal data and requires companies to evaluate how much cyber security they need to safeguard such data. In essence, companies falling under the jurisdiction of the GDPR as well as other jurisdictions will have to carefully consider what data should be protected and even collected and what reasonable cyber-security efforts should be undertaken to protect data. Companies will also have to reassess their cyber-security and data protection efforts on a regular basis. 2. Data Privacy Concerns It has become obvious to many, that despite best efforts. Companies may still face a hack and suffer a breach. Personal data may be still stolen. Some jurisdictions have data privacy laws in place that mandate the disclosure of the breach to authorities. Companies must also consider if and when to report the breach and/or unauthorized access of personal data to investors and even the media or public. Under the GDPR, companies that have suffered a hack, must report a personal data breach if the breach is likely to have resulted in a risk to the rights and freedoms of natural persons. Personal notification may be necessary too though it can be avoided if the

Bryan Hopkins Special Counsel, Lee & Ko bryan.hopkins@leeko.com


Korea Voices company can show that it took measures (such as encryption) to prevent the personal data from being read by unauthorized persons. In the US, no uniform federal law or statute mandates or requires a notification to authorities of a data breach but a number of states have data notification statutes that cover certain kinds of data such as social security numbers and credit card information, etc. The following summarizes the elements common to these statues and some of the variations from state to state, and emphasizes the need for comprehensive company-wide data protection and management programs. Personal Information: companies with records of consumers’ identifying information must take steps to safeguard the information or be exposed to liability. FL, CA, CT, DE, IL, LA, MN, MT, NE, NJ, RI, TN, TX, WA: first name or initial + last name + Social Security or Driver’s License or State ID or Bank Account/Credit/Debit Card Number with access code. AK: adds medical information. GA, ME: any information that puts individual at risk for ID theft. ND: adds Employer ID, DOB, mother’s maiden name, digital signature. NY: Any identifying information together with ID/Credit Card number and access code. HI, MA, WI: include written as well as electronic data. Breach of the Security System: any suspected unauthorized acquisition of compromising personal data mandates investigation and may require notification of affected individuals. CA, DC and 19 states: “unlawful and unauthorized acquisition” of even a small amount of data that “materially compromises, the security, confidentiality, or integrity of personal information.” AZ, ID, NE, OR, TN, FL: any breach that “materially” compromises personal info. CT, IN, ND: any “unauthorized access to” or “acquisition of” computerized data. LA, HI, MA, MT, NY, NC, OH, PA, WY: “unauthorized acquisition” of data that “creates a substantial risk of identity

theft”. NY: lists specific factors to determine if personal info has been acquired by unauthorized persons, such as a lost computer. Investigating the Data Breach: the company must determine if a breach has occurred. FL, LA, AK, OR: Business must document “appropriate” investigation to “reasonably” determine that no breach occurred; Documents must be maintained for 5 years; Failure to document or to maintain documentation: $50,000. Ten states: require a “reasonable investigation” to determine misuse of personal info. Providing Notice: if the company cannot reasonably determine that no harm has occurred, it must notify the affected individuals. FL, similar in 22 states without specific time frame: “notification shall be made without delay, consistent with the legitimate needs of law enforcement . . . . [M]ust be made no later than 45 days following the determination of the breach”. 28 states: notice in “the most expedient time possible,” and “without unreasonable delay”. Penalties: for data breach or failure to comply with Data Breach Statute. FL: Failure to provide required notice: $1,000/day for 30 days, $500,000 if no notice in 180 days. Other states: penalties range from $500 (ME) to $750,000 (MI). CA, HI, NH, NC, WA, DC: residents have private right of action. 21 states: Attorney General may sue for damages and injunctive relief. Past Representative Enforcement and Litigation of Data Breach Statutes: Florida Attorney General investigated Certegy for inadequacy of notice to 2.3 million people, after records stolen by former employee and sold to data brokers. Multistate civil investigation into breach at TJX Companies and failure to protect consumers’ personal ID in

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Korea Voices credit/debit card sales; numerous class action and individual suits nationwide. Federal class action lawsuit in CA against Cardsystems, Merrick Bank, Visa and Mastercard for negligence and failure to notify consumers following data breach. 3. IoT Issues and Concerns In the US, regulators have noted security concerns that consumers face when using IoT devices. Such security concerns include unauthorized access and misuse of personal data, safety risk s and even facilitating cyber-attacks on other systems. This is because IoT devices connect to the internet via sensors which send environmental and activity information to data storage centers that in turn allow for and provide analytical feedback and control. Basically, IoT devices are consumer oriented or industrial oriented devices which have been turned into smart devices allowing for information gathering and management of such devices via software, etc. Consider this- even cars are now IoT devices. Though the majority of people have a favorable impression of IoT devices, manufacturers of such products are not discussing the risks inherent in such technology. It has recently been estimated that 70% or all IoT devices subject to attack. Though the number of devices that could be hacked is astounding, the IT industry is not warning society in general about the potential dangers of using such devices. To make matters worse, those involved in the risk management industry are not raising the alarm that they should, whether for lack of understanding or not, as IoT dangers are about to collide with the global desire for the protection and safeguarding of personal data. It is therefore urgent that society as well as corporations and organizations involved with data privacy as well as the IoT have broad based discussions on the benefits and risks of IoT devices. Risk managers, CIOs, software engineers, in-house counsel and BOD members all must take the data privacy risks inherent in IoT technologies seriously and must take steps to minimize the risks posed by

cyber-attacks and the misuse of data. Though society in general may benefit from IoT applications, it must also consider the issues posed by such devices and weigh the benefits against the risks. Recommendations A. Prevention of data breaches and conducting a “reasonable� investigation of suspected breaches is best done by professional digital forensics experts or Information Technology (IT) professionals. Inhouse Legal and IT departments should work together to create a data map to identify the locations of all company data, so as to identify lost or compromised information after a suspected breach. Importantly, companies should prepare their IT systems as a source of evidence to support effective handling of future incidents. B. Cyber-Attacks and resulting data breaches are not just a problem for the risk management industry but the legal community too. The loss of personal data. IP theft and other data loss associated with cyber-risks, such as the IoT issue can result in investigations, audits, lawsuits, class action litigation as well as reputational harm and brand risk issues. The fallout from a cyber-attack can be enormous. Therefore, the legal community in general and in-house lawyers in particular must team up with the IT folks and risk management community to adequately address all of the issues organizations face from the intersection of data privacy, cybersecurity and the IoT. C. With the advent of data privacy laws and regulations, companies must think in terms of not only cyber-security, but data privacy and IoT issues too. Reporting obligations, data encryption, cyber-security processes, and IoT applications all must be addressed as a whole. The risk management industry as well as the legal community must take action to come to grips with the magnitude of threats these issues present.


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The new Moon over Korea Potential Changes in South Korea’s Security Posture and changes regarding major chaebol groups and the foreign business community The recent special election in South Korea resulted in a convincing win for the candidate of the Democratic Party of Korea, Mr. Moon Jae In. He was elected on 9 May and sworn in on 10 May for a five year term. During the election Moon addressed both national security and economic issues and both issues are highly relevant for the business community in Korea. On the national security side Moon stressed in his campaign that he is open to holding talks with the North Korean leadership in a bid to turn the regime there away from its focus on developing nuclear weapons and resetting its objectives to a new focus on economic development that should eventually lead to the reunification of North and South Korea. Moon also said that he would like to be the sort of Korean leader ‘who can say ‘no’ to the USA’, and the implication here was that he might well be open to rejecting the leadership of the US on issues such as the missile defense of South Korea that uses the US anti-ballistic missile system known as THAAD.

by a vote of the National Assembly) in the next few weeks. As of now, the week after the election, Moon has yet to dismiss any of the ministers who were in office when Park was president, but he is expected to announce the names of his appointees soon and then the National Assembly will have the right to hold committee hearings to question the appointees prior to the time when they are appointed by the president. In practical terms that may mean that some or nearly all of the previous ministers may remain in office for anything from a few more days to a few more weeks.

Once Moon has assembled his administration and all of his appointees have taken office at the various ministries, he will then look to making moves that may upset some traditional allies such as the USA, while making others such as China more pleased. On the defense side Moon said repeatedly during the election campaign that if he were elected then he would look at the THAAD system carefully, while his major opponents from the Liberty Korea Party The initial THAAD system was and the People’s Party both accepted introduced into the southern part of the argument advanced by the USA that South Korea during the recent election having the THAAD system deployed in campaign by the acting president, Mr. South Korea makes the country safer in Hwang Kyo An, who was the last prime light of the increasing threat perceived minister under the former president by the on-going development of nuclear Park Geun Hye, who rejected talks weapons and missile delivery systems with the North and was a supporter in the North. That does not mean that of installing the THAAD system in he will ask the American government South Korea. Moon accepted Hwang’s to remove the THAAD system, but that resignation and then appointed the is an option open to Moon and if he governor of South Jeolla Province, Mr. did do so then it would be a popular Lee Nak Yon but Mr. Lee will not be decision with many of Moon’s followers able to take office until he is confirmed as well as with the governments of by the Korean National Assembly China and Russia. (other ministers of government can be appointed directly by the president, but The Chinese have said repeatedly that the prime minister must be confirmed they view the THAAD and its radar

Hank Morris Argentarius hank@argentarius-group.com


Korea Voices system as an unnecessary intrusion into their defensive posture, and the Russians have opposed THAAD on similar grounds. But only the Chinese have taken steps to cause problems in China for major Korean chaebol companies such as Hyundai Motors and Lotte group, the Korean retail leader in China. Now that the North has gone ahead with yet another long range missile test just a few days after Moon took office, an action which touched off a critical rebuke of the North’s government by Moon, it remains to be seen whether the Moon administration will continue to exercise patience and offer talks to the North’s leadership, or whether it will join the chorus of other countries calling for more sanctions against the North. Moon has some carrots to offer if the North’s leadership does want to have the Kaesong Industrial Zone reopened in the North. This is an industrial production zone just north of Seoul but inside North Korea’s southern border near the town of Kaesong, where South Korean managers supervised the work of about 50,000 North Korean production workers at plants set up by the South Koreans. The South Koreans were told to evacuate the facility by Park’s government a couple of years ago, and since then no production has taken place there. While it was in operation the North Korean workers were paid in local North Korean currency while the North Korean government accepted the wage payments from the Southern companies in hard currencies such as Euro dollars or yen. This was a considerable benefit to the North’s government as the foreign currency could be readily used by North Korean officials to buy foreign products for their own use or for their government’s use. Shutting down the zone was one way of cutting off the North’s access to foreign exchange as part of a more general program of sanctions. Whether Moon finds it advisable to reopen production and thus offer a monetary carrot to the North’s leadership is a major question as a reopening may not be possible under current UN sanctions against the North. The new Moon government also has some major economic goals that will have a considerable influence upon the business climate in Korea, and in particular to the major conglomerates, the chaebol groups, as well as upon

foreign business. One of Moon’s campaign pledges was the commitment that if elected, he would add 810,000 new workers to the workforce of the Korean government. This staggering addition to the current level of government employment of perhaps half a million with another 300,000 employed by local governments in South Korea. To employ that many in government jobs would require a huge increase in the South Korean budget and that in turn would have to be approved by the South Korean National Assembly where Moon’s Democratic Party does not have a majority. Aside from the increase in government employees, the other economic pledges made by Moon during his campaign involve the chaebol and the business community in general. He said that he would increase the authority of the Fair Trade Commission to counter unfair business practices of the chaebol and also to enhance the audit powers of the FTC, which is the entity in South Korea that has brought most of the criminal and civil charges of recent years against various chaebol groups. Moon also said that he wants to reform employment practices at the chaebol to curb their ability to take advantage of workers on temporary contracts and as well he indicated that he would like to see a system where chaebol were forced to be more fair in their contracts with small companies that have traditionally been suppliers to the chaebol. The objective in the latter case would be to reduce the discrepancy in pay rates between the major chaebol companies and subcontractors. Aside from these goals, Moon is also expected to look at taxes, both personal and corporate in a bid to lessen the growing disparities in income between the wealthy in Korea and the lower income levels. Most of Moon’s goals will involve working with the opposition parties to be achievable and that will take some doing since his party would be heavily reliant upon the cooperation of one or two of the opposition parties to put Moon’s ideas into law. That means of course that there will be time for local and foreign business leaders to register approval or disapproval of Moon’s plans on a case by case basis. Major changes may be coming to Korea, but they will take time to be put into effect if indeed they are approved by the National Assembly.

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3 Cross-cultural Things to Know For Success Accepting an overseas assignment, or work in a country other than one’s home country can be both exciting and daunting. Usually, the move preparation time is short, and that can add tension to the process of relocation. Then, there is the new job, in a new market to think about. Starting a new position provides the opportunity to start fresh, and perhaps even reboot the way that we think about our personal work performance. This pause or change allows us to download new concepts, consider different ideas, and new approaches to how we work and lead. However, there is more to add to this equation. The nuances of a move to a new country, a different culture, and limited knowledge of the new work environment all have an impact on our work performance. Everyone wants to get started off on solid ground. First impressions are important and lasting. Mistakes should be minimalized in the new role.

done in these circumstances. Successful leaders on a foreign assignment should avoid making these three mistakes, Resisting Change, Not Communicating Effectively, and Not Understanding Cross-cultural Differences. In an earlier article, entitled “One Mistake Country Managers Should Avoid to Be Successful,” I focused on the first of these three mistakes, “Resisting Change.” In that article, I described “How to Lead Change Effectively in 4 Steps”. Leading a multinational organization in South Korea or any country

Leaders typically do not make mistakes on purpose. More times than not, they make errors of judgment, rather than errors of intent. Most honestly believe that they are making the right decisions and that their actions are justified. That makes sense. However, their errors can be predictable if they are based on past experiences alone with no consideration for the new culture they have just been assigned to.

outside your home country poses unique obstacles. But, you are not alone as many expatriates share the same challenges. In this article, we will focus on the mistake of not recognizing cross-cultural differences.

What happens when a leader is parachuted into a new country? Do the same norms exist? Some maybe yes, and some maybe not. What they know, may actually hurt them. In some cultures, their commands could be 180 degrees in the wrong direction from what actually needs to be done to be successful. Yet, they are just doing what they have always

For comparison’s sake, I will contrast how the typical North Americans culture is described, (since I am an American) versus the Korean society, (where I live) generally speaking. First, North Americans are considered individualistic societies, and focus is on the individual. In contrast, Koreans are a collectivist society and focus is in the group.

Steven B. McKinney McKinney Consulting Inc. steve.mckinney@kbla.info


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Korea Voices Simply put, it is “I” versus “We.” Knowing these differences, one might expect some resistance to different ideas, methods or ways of thinking. In collectivism, there is a sense of belonging to a group. Friends and workers do lunch together, and usually, one person pays for the group. Think about it, if four coworkers go to lunch often together and take turns paying, you are being treated 3 out of the 4 times. Nice. Also, group activities are encouraged, rather than individual pursuits. The success of the group is more important than the success of a single individual. The bad part about this is outsiders can sometimes be excluded or feel left out. There is another interesting article that you will see on our blog entitled “In or Out” by former professor Horace Underwood which describes this point very well. Secondly, the structure of Korean society is still largely based on Confucius’s hierarchy principles., although it seems to be diminishing. Confucius placed particular emphasis on the three values which were essential, being filial piety, humaneness, and ritual. Age and social status influence all areas of Korean life. When speaking the Korean language, one must first determine who is older or more senior so that they can adjust their conversation appropriately and with respect. They actually use different words when conversing with each other based upon which is the senior of the two. Thirdly, decision making is concentrated mostly in the hands of a few people. However, managers on the lower rungs typically work through the issues, and their concerns rise to the top for consideration. There is typically a low degree of autonomy afforded in decision making and opinions at the lower ranks. For example, in a traditional Korean team meeting setting, those in attendance only speak up when asked a question.

This is changing as more and more foreigners (anyone not Korean) influence the leadership, especially in multinational company settings. Leading a multinational organization outside your home country poses unique obstacles. However, expecting cultural differences and learning how to respond to them are critical to success. Steven B. McKinney is the founder & President of McKinney Consulting Inc. (IRC Korea) a partner firm of IRC Global Executive Search Partners (Top 3 Globally) with over 17 years of experience as a consultant in executive search and leadership consulting placing 100’s of executives of multinational companies in Korea and Asia-wide. Mr. McKinney is also the co-founder of the Korea Business Leaders Association (KBLA). He earned the distinction of Certified Master Coach from Behavioral Coaching Institute and a certificate in Leadership Coaching Strategies from Harvard University. Previously he managed global footwear R&D efforts for Adidas International and oversaw manufacturing production and R&D duties for Reebok International in Korea.


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About the KBLA Korea Business Leaders Alliance Our mission is to serve leaders in Korea, primarily business leaders, but also academics and arts leaders. We bring peer leaders together, help them build relationships, expose them to new ideas and best practices, give them opportunities to interact, publish, demonstrate expertise, and just spend time getting to know one another. We provide information tools and channels for them to interact online and to be informed.

The KBLA also serves business leaders around the world who have a stake in the Korean business environment through our business intelligence reporting service: Korea Intelligence Package.

Partners of the KBLA


About the KBLA Value Chain Advertisers Index EDITOR IN CHIEF Rodney J. Johnson

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MANAGING EDITOR Alixe Trang

Korea International School www.kis.or.kr

CONTENT EDITOR Kyle Johnson

Seoul Foreign School www.seoulforeign.org

CONTRIBUTORS Kyle Johnson Jocelyn Clark Bryan Hopkins Hank Morris Steven B. McKinney Arthur Sabalionis

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ADVERTISING Julia Kim (김주희) PUBLIC RELATIONS Jennifer Kim (김잔디)

Value Chain is published monthly by the Korea Business Leaders Alliance on the ground, in Seoul, Korea. Value Chain is a digital-only publication available in PDF and online forms. For advertising and distribution inquiries contact us at admin@kbla.info.

Lee & Ko www.leeko.com Marsh & McLennan Companies http://www.mmc.com Asian Tigers Mobility www.asiantigers-korea.com KEB Hana Bank hanafn.com/main.do Top Cloud http://www.topcloudcorp.co.kr/ Agility Korea www.agility.com Grand Hyatt Seoul http://seoul.grand.hyatt.com/en/hotel/home.html Taejon Christian International School http://www.tcis.or.kr/ United Airlines www.united.com Erudite Risk www.eruditerisk.com McKinney Consulting www.mckinneyconsulting.com

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It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. -- Charles Darwin

Value Chain May 2017 Edition  

Value Chain is the monthly magazine of the Korea Business Leaders Alliance.