Tag Archive | "tourism"

Is the Hallyu Crisis with China Over?

By Jenna Gibson

Beijing has approved the broadcast of a new Korean drama that had been co-produced by a Korean and a Chinese company, according to a source in the Chinese entertainment industry, making it the first Korean show to get the green light since before the THAAD spat.

This move is good news for Korean entertainment companies, which have been lamenting the Chinese ban which had slowly pushed Korean stars out of the spotlight throughout last year and culminated in direct retaliation against tourist packages and Lotte Department stores. It also bodes well for drama co-productions, which had seen tremendous success in last year’s standout Descendants of the Sun. At the time, before THAAD derailed things, Korean-Chinese collaboration was seen as the new frontier in Hallyu, and key to the continued success of Korean creative content in the Chinese market.

What’s interesting is the impetus for China’s reversal on allowing Hallyu content. Beijing is likely trying to start off on a good foot with newly elected Korean President Moon Jae-In, himself a skeptic of the THAAD system, in an attempt to give Moon some leeway should he decide to review the deployment.

A recent op-ed in the People’s Daily-affiliated Global Times insisted that “It is likely that Moon will stop THAAD’s deployment,” saying, “The huge economic losses South Korea has suffered are a result of the Chinese public’s anger. South Korea, which relies heavily on China economically, needs to weigh its potential gains and losses carefully” and that “Both Beijing and Seoul should take Moon’s presidency as an opportunity to promote warmer bilateral relations.”

But in reality, Moon has little room to maneuver at this point. THAAD is already in place and operating at some capacity, and recent missile launches from North Korea (the second of which was detected by THAAD) have highlighted its necessity in the public eye.

Although there was a dip in approval last November, the Korean public has largely remained favorable toward the THAAD system, according to polling by the Asan Institute in Seoul.  As of March, 50.6 percent of Koreans approved of THAAD, with 37.9 percent opposed. Perhaps because of this, President Moon has softened his position from outright opposition during the early stages of the campaign to stating that he objects to the way the decision was made, not the system itself.

As Asan Vice President Choi Kang pointed out in a KEI podcast after the election, President Moon may be constrained both by domestic politics and public opinion. Moon’s Minjoo Party only has 120 seats out of 300 seats in the National Assembly, and he failed to breach 50 percent of the vote during his election.

“How he can make a coalition or compromise with opposition parties is going to be a very, very critical issue for him to handle in the early phase of his presidency,” Choi said.

This could be particularly difficult when it comes to China, which has seen a steep decline in popularity among the Korean public since they stepped up their economic pressure over THAAD. Beijing’s economic retaliation has included the ban on selling tourist packages to Korea as well as cancelled concerts and a block on Korean entertainment content being uploaded to streaming sites.

According to a new report from the Korea Institute for Industrial Economics and Trade (KIET), “China’s ban on South Korean cultural imports will amount to 5.6 trillion won (US$5.02 billion) and 15.2 trillion won (US$13.6 billion) in direct and indirect damage in the consumer goods distribution sector” if it continues for six months. New numbers from the Korea Tourism Organization show a 66 percent year-on-year drop in Chinese visitors in April, driving much of the estimated losses for industries such as clothing and cosmetics.

“It’s quite difficult for South Korea to improve its relations with China because public understanding of China has deteriorated over several months,” Choi said. “So unless there is a positive sign coming from China on this economic pressure, it is very unlikely for the South Korean government to improve drastically its relations with China.”

Now that China seems to be offering an olive branch, public opinion may begin to shift back in Beijing’s favor. But after months of panicked headlines over China’s latest crackdown, it’s unlikely that one fantasy romance drama will be enough to turn things around entirely.

At this point, Beijing may continue to roll back its content and tourism bans in the hopes of wooing President Moon to their point of view, or as a face-saving measure. Either way, though, Chinese leadership would be ill-advised to hold their breath for a THAAD removal.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Image from LG전자’s photostream on flickr Creative Commons.

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Deepening South Korea’s Relations with the Middle East

This is the sixth in a series of blogs looking at South Korea’s foreign relations in the run up to the next Korean administration taking office on May 10. The series also includes blogs on relations with North Korea, the United StatesChina, Japan, Russia, the European UnionASEANAfrica, and Latin America

By Juho Choi

The active relationship between South Korea and the Middle East Area is relatively young. Since South Korea established its government after the Korean War, most exchanges with Middle East nations had been based on oil and overseas construction. While there is significant geographic distance and cultural differences, the relationship has evolved significantly in recent years.

Korea’s active economic ties with the Middle East go back many years as Korean companies have often looked to the region for construction projects. However, ties have grown closer in the 21st century. As oil prices soared, many oil-supplying nations needed additional oil-related facilities and social infrastructure.

Middle East Blog Table

Out of the top 10 countries where Korea has construction work, 6 are in the Middle East including the top 4 countries. Under the two former presidents (Lee Myung Bak and Park Geun Hye), ties with Middle East nations were significantly expanded. Both presidents toured the Middle East and signed hundreds of memorandum of understanding (MOU) in various fields. In fact, some of them led to contracts such as plant building and operation contracts, including ones in the UAE for a $20 billion deal to build four nuclear power plants and $49.4 billion contract to operate the plants over 60 years.

Lifting sanctions on Iran also helped Korea’s economy advance and brought hundreds of millions of dollars in contracts. Daelim Industrial landed a $2 billion deal with the Esfahan Oil Refining Company and Hyundai Heavy Industries clinched a $700 million deal to build 10 ships for Iran’s state-owned shipping companies. Also, Turkey, which is called a brother nation in Korea, signed a $3 billion contract with SK E&C to construct the world’s longest suspension bridge.

In addition to economic ties, cultural exchanges have dramatically increased. According to Korea Customs statistics, Korean confectionery exports to UAE and Saudi Arabia have risen 60.8 percent and 141.8 percent, respectively, compared with 2011. The popularity of Hallyu (K-Wave) is also remarkable. Starting with the success of ‘Dae Jang Geum’ which recorded a 90 percent rating in Iran, many Korean TV shows have aired successfully in the Middle East. The growing popularity of K-pop is also considerable. The first music and culture convention ‘KCON Abu Dhabi 2016’ was a huge success with 8,000 fans and many idol groups have had concerts in the Middle East. State level effort also has continued to share cultural value in depth. Two Korean Cultural Center are running in the Egypt and Abu Dhabi and different events has been offered by Korean embassies around the Middle East.

This K-Wave trend has led to a boost in tourism. According to the Korea Tourism Organization (KTO), the number of tourists from the Middle East has soared over the past few years. In 2016, nearly 200,000 tourists from the Middle East visited South Korea, double the number of tourists in 2011.

Beyond cultural exchange, South Korea has also contributed to keeping peace in the Middle East. The Cheong-hae naval unit has been deployed for international maritime security and to counter the spread of terrorism. They also carried out an operation called ‘Dawn of Gulf of Aden’ which was successfully rescued 21 crew members of a Korean ship hijacked by Somali pirates. In addition to the Cheong-hae unit, the Dong-Myung unit has been engaged in rebuilding in Lebanon and the Ake unit has helped to train soldiers of the Persian Gulf state in UAE.

However, several obstacles such as fluctuating oil prices, unstable regional security, cultural, and religious difference still remain. In particular, armed conflict and unstable political situations in the Middle East need worldwide cooperation and focus to move forward. Considering Korea’s growing interest in the regions, it’s possible to play an important role by cooperating with Middle East nations in depth. According to Korea Institute for International Economic Policy (KIEP), many oil-supplying nations are promoting economic diversification for falling oil prices, it will lead to increased investment in non-oil based industries such as medical care, tourism, finance and others. South Korea has mainly enhanced its business tie with Middle East in construction and resource related industries. South Korea is also endeavoring to follow this diversification especially medical care. However, Korea should diversify investment in accordance with this phenomenon and prepare the post-oil era with the Middle East to greet the real ‘Second Middle East Boom’

Juho Choi is an intern at the Korea Economic Institute of America and a student of the Dong-A University in Busan. The views expressed here are the author’s alone.

Photo from Gordon’s photostream on flickr Creative Commons.

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ASEAN -Korea Relations Under the Next South Korean Administration

This is the second in a series of blogs looking at South Korea’s foreign relations in the run up to the next Korean administration taking office on May 10. The series also includes blogs on relations with North Korea, the United StatesChina, Japan, the European Union, Russia, the Middle EastLatin America, and Africa.

By Patrick Niceforo

Since establishing a Sectoral Dialogue Partnership with the Association of Southeast Asian Nations (ASEAN) in 1989, South Korea has rapidly expanded its diplomatic ties, economic partnerships, and development assistance efforts in Southeast Asia. In that time, trade between South Korea and ASEAN has expanded from $26.8 billion to $118.8 billion. As ASEAN continues to develop economically, the next South Korean administration will look to build on the success of prior administrations in growing economic ties with this increasingly vibrant region.

South Korea’s diplomatic relationship with ASEAN extends beyond its bilateral relationship with the ASEAN member states. Since 2012, South Korea has maintained an Embassy in Indonesia specifically for ROK-ASEAN relations. The establishment of the ROK-ASEAN Embassy was consistent with former President Lee Myung-bak’s “New Asia Initiative,” which called for increased levels of official development assistance (ODA), expanded trade networks, and multilateral cooperation on global issues such as climate change and disaster management. In addition to having bilateral FTAs with Vietnam, Indonesia, and Singapore, South Korea is also signatory to a Free Trade Area (AKFTA) with all of ASEAN which helps to facilitate and expand economic, trade, and investment cooperation in the region. South Korea has also gradually stepped up its ODA to Southeast Asia over the years.In 2015, about one quarter of South Korea’s overall $1.9 billion in ODA went to Southeast Asia, more than twice what it provided to the region in 2010.

South Korea can look forward to developing its role in regional trade through the ASEAN-driven Regional Comprehensive Economic Partnership (RCEP). RCEP is an agreement that, in addition to ASEAN member states, includes South Korea, China, Japan, India, New Zealand, and Australia. With negotiations launched in 2012, RCEP covers areas such as trade in goods and services, foreign investment, and dispute settlement. As the next South Korean administration comes to office it will need to prioritize RCEP and its negotiation strategy, as the deal could be signed as early as mid-2017.

Tourism from ASEAN

A potential opportunity for South Korea is attracting more international tourism from Southeast Asia. The number of Chinese tourists in South Korea has plummeted as a direct result of THAAD, with a 40 percent drop in March. This is concerning given that China contributes nearly half of South Korea’s foreign visitors. According to the LG Economic Research Institute, Chinese tourists spent $13.7 billion in South Korea in 2015, over 62 percent of its foreign tourism revenue. However, because ASEAN and South Korea jointly designated 2017 as the ASEAN-ROK Cultural Exchange Year, there are already plans to increase youth exchange programs and foreign investment. South Korea could capitalize on these programs to develop and expand sustainable tourism with its ASEAN partners. Generally speaking, larger numbers of tourists from ASEAN member countries have been traveling to South Korea over time. While Southeast Asian tourists are unlikely to replace the depleted numbers of Chinese tourists in South Korea, increased tourism could at least help alleviate the problem while also contributing to South Korea’s overall mission of expanding cultural exchange.

Patrick Niceforo is a graduate student at the Middlebury Institute of International Studies and an intern at KEI. The views expressed here are the authors’ alone.

Photo from Nicolas Mirguet’s photostream on flickr Creative Commons.

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Chinese Tourists to South Korea Drop 40 Percent in March Amid THAAD Row

By Jenna Gibson

It’s official – new numbers from March confirm that China’s THAAD retaliation has significantly cut into South Korea’s tourism industry.

According to new data released today by the Korea Tourism Organization, the number of Chinese tourists arriving in South Korea fell 40 percent year-on-year in March 2017.

Only 360,782 Chinese visitors came to South Korea in March, down from 601,671 in March last year.

Considering that China’s alleged travel ban only took effect on March 15, about halfway through the month, it’s possible that April’s drop could be even more dire.

South Korea’s tourism industry is heavily reliant on Chinese visitors – in 2016, they made up 47 percent of all tourist arrivals and 70 percent of sales at Korean duty free shops.

According to a previous KEI article, “Chinese tourists spent an average of $2,391 per person while visiting Korea – meaning the 8 million Chinese tourists who visited Korea in 2016 brought nearly $20 billion into the local economy.” So, if the 40 percent cut in visitors results in a corresponding drop in revenue, the Korean tourism industry could lose up to $7.7 billion as a direct result of China’s THAAD retaliation.

Chinese Tourism Graph March

There is a silver lining in the March tourism data. Despite this massive 40 percent drop in visitors from China, the total number of people entering South Korea in March was down only 11.2 percent over March 2016. This is thanks in large part to a 22 percent jump in visitors from Japan, the second-largest group of tourists in Korea after China.

Other countries such as Taiwan, Myanmar, Vietnam and Mongolia also showed significant increases. This may be a good sign for the Korean government, which is heavily targeting Southeast Asia and the Middle East to diversify the industry and decrease their reliance on tourists from China.

The Ministry of Culture, Sports and Tourism is reportedly focusing more on advertising in Southeast Asia and Japan, and Seoul has started posting signs at major tourist destinations in Bahasa Indonesia, Malaysian, Thai and Vietnamese.

In addition, the KTO has been increasing their focus on tourists from Muslim-majority countries, helping local restaurants get halal accreditation and even hosting a Halal Restaurant Week at the end of last year to highlight Korean food options for Muslim visitors.

Meanwhile, just after the ban took effect, the Korean Ministry of Trade, Industry and Energy promised to provide 400 billion ($349 million) to support businesses affected by the THAAD retaliation, including those in the tourism industry.

This is not the first crisis that the Korean tourism agency has dealt with in recent years. During the peak of the Middle East Respiratory Syndrome (MERS) outbreak in July 2015, total tourism arrivals were down 53.3 percent over the year before, including a 63.1 percent drop in arrivals from China. Later that year, the Korea Culture and Tourism Institute estimated that MERS cost the tourist industry 3.4 trillion won ($3 billion) in lost revenue. The fact that the tourism industry was able to bounce back from that significantly greater drop bodes well for its ability to deal with this crisis as well.

While it remains to be seen how deep this THAAD spat will cut the Korean tourism industry over time, it is clear from these new numbers that the Chinese retaliation should not be taken lightly. As the THAAD system continues to go through the deployment process, Korea will have to keep an eye on the immediate as well as secondary effects of China’s policies.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Graphic by Jenna Gibson. Photo from Tom Page’s photostream on flickr Creative Commons.

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What Do North Koreans Do for Fun?

By Rose Kwak

It is hard to picture what North Koreans do for fun in a country notoriously known for human rights violations against its people, where seventy percent of the population is food insecure and its people are constantly indoctrinated by the state.  However, despite many bleak and dark images surrounding North Korea, many North Koreans enjoy various forms of entertainment—ranging from taking families to dolphiariums in Pyongyang to inviting friends over for karaoke.

Behind closed doors, many North Koreans also take pleasure in watching South Korean dramas and movies, which is prohibited by the state but easily accessible through video recorders and CDs in black markets. While recreational activities and access to these entertainment venues is largely dependent on socio-economic class and regions, South Korean media is consumed by North Koreans across a wide range of socio-economic gradients. The following are types of entertainment cultures thus far known in North Korea.

Amusement parks and entertainment venues:

Since Kim Jong-Un came into power, Kim has been working toward “improving the lives of his fellow millennials” and has ordered constructions of various entertainment venues. There are quite a number of other large amusement parks across the city such as Kaeson Youth Park and Manyongdae Fun Fair, to name a few. In a power-starved country where the satellites reveal pitch black images by night, Kaeson Youth Park facilities are lit like “Times Square.” Kaeson Youth Park covers more than 400,000 square meters and holds various rides for families and friends to enjoy. Munsu Water Park is another recreational park for families and it includes about 26 pools. The Mirim Riding Club offers horse-back riding for eight dollars per hour outdoors and ten dollars per hour indoors.

In 2012, Rungra People’s Pleasure Ground was opened to the public by Kim Jong-un and his wife Ri Sol-ju at the opening ceremony. Rungra People’s Pleasure Ground offers exciting and varying options for family entertainment including a dolphinarium, water parks and a mini-golf course. There are also ice-skating rinks and ski resorts for those who could afford. Generally, these amusement parks and grounds are reserved for the ten percent of North Korea’s elites.

Drinking, Dining and Dating Culture:

When it comes down to dating and sex, North Koreans are extremely conservative. Dating is strictly forbidden on university campuses, albeit many young couples find a way to go on dates and to enjoy each other’s company. Outside of campus grounds, many young couples go to restaurants that serve tasty meat or go to jangmadang (markets) to shop for small goods, as well as to visit a nearby mountain trail, river side or beach. While average North Koreans cannot afford luxury items, in recent years, many North Korean couples have started to wear matching tokens or jewelry like the South Korean counterparts. Social clubs are another way in which young women and men meet one another. During holidays, social clubs are hosted for masses and dance parties take place in various places such as Kim Il-Sung Square.  Because North Korean men go to military for ten years after high school, most serious romantic relationships develop in the late twenties, often times through blind dates set up through relatives and close friends.

In recent years, there seems to be an increase in demand for restaurants and bars. For average North Koreans, meals usually consist rice and a few side dishes. However, the elite few in Pyongyang tend to revel in lifestyles that poses stark contrast with those of the rest. One journalist reflecting upon this flashy lifestyle explained that this small privileged class known as the “donju”(translated as “masters of money”) are living a cosmopolitan life in “Pyonghattan.” They would spend ten to fifteen euros equivalent per meal to indulge in expensive prime steak or Wiener schnitzel and wear clothes from brands like Zara and H&M.

Another prominent aspect of North Korean recreational life is “eumjugamu.” “Eumjugamu” in Korean is a combined word for “drinking, music, and dancing.” While most North Koreans can’t afford hard liquor like tequila, about eighty to ninety percent of North Korean men drink on daily basis. Average North Koreans drink state-produced alcohol such as Yangdok-sul or Taedonggang beer. Many North Koreans in the countryside brew their own beer with corn or fruits (known as nongtaegi) despite the fact that this is illegal. Unlike their South Korea counterparts, house parties are also fairly common in North Korea. Wealthier elites have karaoke machines to enjoy.

South Korean media consumption:

Consumption of South Korean media is a form of entertainment not just exclusively reserved for the elites. The reason is that many North Koreans are able to obtain video recorders and DVDs illegally through black markets. Especially in Chinese bordering provinces like North Hamgyong, people are able to watch South Korean broadcasts through their television. In other areas, North Koreans are able to obtain South Korean entertainment CDs and DVDs. A defector who lived in Yanggang Province explained that people rent CDs that contain popular South Korean dramas. Many North Koreans also watch South Korean dramas through video recorders that are sold by Chinese merchants or at black markets. Within trusted circles of friends or relatives, many even watch dramas together. The impact of South Korean media consumption is great enough to have affected people’s lingo as North Koreans began to adopt words only used in South Korea.

According to an InterMedia survey of North Korean refugees, approximately 33 percent of North Korean defectors claimed that they had access to and listened to foreign radio. About 47 percent were able to obtain free-tuning radio from the black market and about 23 percent through Chinese merchants. A survey of North Korean defectors revealed that approximately 98 percent of USB owners kept South Korean dramas and/or music. Through “passive dissemination” and “inter-personal distribution,” South Korean TV is becoming rather popular in North Korea.

Kim Jong-un recently launched a North Korean Netflix-style service called Manbang that enables people to re-watch documentaries about their leaders as well as to learn Russian and English. Manbang supposedly offers five channels that show state-sanctioned news and educational programs.

Rose Kwak is an intern at the Korea Economic Institute of America and a graduate of Davidson College in North Carolina. The views expressed here are the author’s alone.

Photo from Stefan Krasowski’s photostream on flickr Creative Commons.

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The Year of the Unexpected: A Look Back At the Korean Peninsula in 2016

By Troy Stangarone

In the Chinese zodiac, 2016 is the year of the Fire Monkey. Fire Monkeys are said to be ambitious and adventurous, as well as irritable. Despite Donald Trump’s not having been born in the year of the Monkey, looking back, his victory in the U.S. presidential election that year may yet seem fitting. However, rather than being a year reflective of the characteristics of the Fire Monkey, 2016 might be better known as the year of unexpected events around the world and on the Korean peninsula. Whether it was the British vote to leave the European Union in June or the impeachment of the South Korean President Park Geun-hye in December, 2016 will be remembered for a series of unexpected events and the questions they have raised about how they may shape the future.

As we take our annual look back at the events that helped to shape the Korean peninsula during the past year, it is also an opportunity to review the events we highlighted on The Peninsula in our annual 10 Issues to Watch For on The Korean Peninsula in 2016 blog. For a year that was dominated by such a large number of unexpected events, our annual look ahead to the events of the coming year holds up surpassingly well. However, while our look ahead was correct on the importance of many events in 2016, those same events also often played out in surprising ways that will have significance beyond what we expected earlier this year. One example of this is the U.S. presidential elections. While U.S. elections always hold significance for the Korean peninsula, few foresaw the election of Donald Trump and the implications his presidency could have for the peninsula early in 2016.

With that said, here’s a brief look back at the 10 issues we highlighted and what happened:

  1. No Significant Progress with North Korea – After North Korea began 2016 with a nuclear test, the international community moved towards placing greater pressure on Pyongyang. This included sanctions at the UN, which would later be strengthened, to cut off North Korea’s trade in minerals such as coal, and bilateral sanctions by the United States to cut North Korea off from the global financial system. As was expected at the time little progress was made with North Korea on resolving the nuclear issue, but the one surprising element was that rather than try to find a way to engage North Korea after a new round of sanctions, South Korea went all in on pressuring the North with the closure of the Kaesong Industrial Complex and lobbying countries to cut their ties with Pyongyang. While we were right on the broader element of there being little progress with North Korea and how structural issues such as the U.S. elections and sanctions would inhibit progress, the strength of South Korea’s stance was one of the unexpected turns of 2016.
  2. If There Will Be Another Round of Family Reunions – If there was going to be progress in relations between North and South Korea it was going to require both countries to separate the nuclear issue from other issues in their relationship. Neither side was able to do so in 2016, which is regrettable for both the humanitarian burden that it places on the divided families and for the reality that family bonds will be one of the important ingredients for unification if it takes place at some point in the future. The longer that families remain divided the further apart the two Koreas are likely to drift.
  3. Could a China-North Korea Summit Still Happen? – This is one issue that was fairly straight forward. While there had been suggestions in late 2015 that Chinese President Xi Jinping might finally meet Kim Jong-un thanks to improving relations, the nuclear test in January ended what little chance there may have been for a China-North Korea summit.
  4. Korea-Japan Relations – When looking at Korea-Japan relations heading into 2016, clearly there had been prior progress. At the same time, it seemed unlikely that there would be the type of progress that the U.S. might have liked and the prospect for backsliding existed. While Japan did approve money for the comfort women fund, the agreement itself remains controversial in South Korea and may face pressure under the next administration. As for the comfort woman statue near the Japanese Embassy, it remains an issue for the local government of Seoul. While progress was made in relations, unsurprisingly, much work remains.
  5. How the U.S. Elections Could Impact Policy – Here we were right about how the political parties viewed the situation in Korea, but wrong about the overall impact of the elections. While we foresaw the critiques of the Obama administration’s policy and the push back on issues such as the Trans-Pacific Partnership (TPP), the degree to which then candidate Donald Trump would shift the debate with his repeated push on the question of South Korea’s contributions to U.S. troops on the peninsula, and suggestions that the U.S. might withdraw those troops and allow South Korea to develop its own nuclear weapons, and that a candidate with these views would win the presidency, were clearly unforeseen. The ultimate result of the election is potentially much more significant for the peninsula than anyone might have imagined at the beginning of the year.
  6. South Korean National Assembly Elections – Here we saw the fairly divided electorate give the opposition Minjoo Party a slim majority and a display of surprising strength by Ahn Cheol-soo’s new People’s Party. However, the impeachment of Park Geun-hye likely means that any signals the National Assembly elections may have had for the presidential election in 2017 no longer matter.
  7. Cooperation Between Korea and China in the G20 – At the G20 in China, South Korea worked with China as expected to help advance the agenda, but IMF quota reform and global safety nets played less of a role than expected during 2016.
  8. K-Pop’s Next U.S. Breakthrough – While K-Pop and Hallyu more generally remained popular in much of the world, especially with the release of Descendants of the Sun, K-Pop continued to have difficulty breaking into the U.S. market. The English language debut of CL, Lifted, was expected to give K-Pop its first breakout in the U.S. since Psy, but the album has yet to produce a chart single in the United States.
  9. South Korea’s Trade Policy – Events on the trade front have played out largely as expected. While TPP, should it be revived, will be an issue for the next Korean administration, there has been significant progress on the Regional Comprehensive Economic Partnership (RCEP) talks that include the ASEAN, China, India, Australia, New Zealand, Japan, and South Korea.
  10. Has Samsung Turned the Corner? – After two difficult years Samsung had turned the corner in 2016 with the successful launch of the Galaxy 7 and the new Edge. However, all of Samsung’s progress melted down with the battery issues of the Galaxy Note 7. As a result, next year will again be a key year for Samsung as it once more looks to turn another corner and rebuild consumer confidence after the issues with the Note 7.

Beyond the events that we expected, here is a look at some of the unexpected events that helped to shape 2016:

  1. Multiple Nuclear Tests and the Advancement of North Korea’s Nuclear Program – Before we even published our look ahead to 2016, North Korea had conducted its first nuclear test of the year. It would go on to break with its pattern of only conducting a single test in a year by conducting a second nuclear test in September. While much attention has focused on the significant increase in North Korean missile launches and tests in 2016, the most significant step may have been in the advances the program took in developing a second strike capability. Though initial tests of a submarine launched ballistic missile failed, North Korea had made progress before the year’s end.
  2. The Closure of the Kaesong Industrial Complex – South Korea took the unexpected step of closing the Kaesong Industrial Complex in response to North Korea’s first nuclear test in 2016. The closure was significant for several reasons. Not that long beforehand South Korea had been pushing to internationalize the complex to avoid the prospect of the complex being shut down after North Korea had withdrawn its workers in 2013 for political purposes. Kaesong also held symbolic importance as the last remaining connection between North and South Korea, as well as the last vestige of the prior sunshine policy. While closing Kaesong was a significant step it may have played a role in encouraging the international community to take stronger steps against North Korea.
  3. International Sanctions on North Korea – While there is nothing necessarily surprising about the international community sanctioning North Korea over its nuclear test, what is significant about the current round of sanctions are the steps that they take to try and limit North Korea’s ability to continue its nuclear program. There are now requirements to inspect North Korean cargo, even that of North Korean diplomats, and caps have been placed on North Korean exports of coal while bans have been placed on other mineral exports. The United States has moved to cut North Korea off from the international financial system and has set in place steps to use secondary sanctions to go after those who enable North Korea. While sanctions are unlikely to resolve the North Korean nuclear issue on their own, they were significantly strengthened in 2016.
  4. The Political Crisis in South Korea – The corruption and influence peddling scandal surround Choi Soon-sil, a longtime confidant of President Park Geun-hye, engulfed South Korea is a political scandal that has seen millions of South Koreans protest in the streets and the impeachment of Park Geun-hye by the National Assembly. As a result of the scandal, South Korea faces an uncertain political future in 2017. Even before the new year begins, there has already been a split within the conservative Saenuri Party with 29 members leaving to form the New Conservative Party for Reform.
  5. THAAD and Dispute with China – Beyond sanctions, one of the steps being taken by the United States and South Korea to deter aggression by North Korea is the deployment of the Thermal High Altitude Arial Defense, or THAAD. This is a step that has been strongly opposed by China which sees it as undermining Beijing’s own interests in the region. While the evidence seems thin to date that China has actually done anything more than complain, there have been concerns that China will retaliate economically against South Korea by restricting its exports of Hallyu to the China and Chinese tourism in South Korea.  Taking such steps would harm Chinese as well as South Korean interests.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Gage Skidmore’s photostream on flickr Creative Commons.

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Tourism in Korea Projected to Reach Record High in 2016

By Jenna Gibson

After a rough 2015 marred by a major health scare, tourism to South Korea has bounced back and then some.

In newly released data from the Korea Tourism Organization (KTO), 8.1 million tourists entered South Korea so far in 2016, a 21 percent increase over the same period in 2015. If the pattern holds for the rest of the year, Korea could break 16 million tourist entries for the first time in its history. In fact, the KTO is targeting 16.5 million tourists by the end of 2016.

Fear surrounding an outbreak of the Middle East Respiratory Syndrome (MERS) in early 2015 depressed tourism to South Korea, causing tourist entries to fall for the first time since 2003. However, this 2016 jump seems to put the growth back on track, showing a 16.2 percent increase over 2014 levels, before the MERS scare.

Korea Tourists Graph 2016

Chinese visitors are by far the largest group, making up nearly 50 percent of visitors to Korea thus far in 2016. The next highest is Japanese visitors, who make up just 12 percent of tourist arrivals. Americans remain a small piece of the pie at only 5.4 percent of tourist arrivals, but this number did increase 13.5 percent year-over-year in May 2016.

KTO also highlighted the increase in group tour arrivals. People arriving as part of a large tour group increased by 35 percent this year so far, reaching 140,000. This method is particularly popular among Chinese tourists, and includes those who are awarded trips as a benefit through their employer.

Meanwhile, sales at duty free shops have seen a similar jump. In the first half of 2016, duty free shops racked up 5.77 trillion won ($5.1 billion) in sales, a 26.1 percent increase over the same period in 2015. According to the Korea Herald, if these numbers keep up they could reach a record 12 trillion won ($10 billion) for 2016. This would mean duty free sales doubled in the five years since 2011.

This increase is not entirely thanks to foreign visitors, but the increase in tourists has certainly helped. In the newly released 2016 data, Korean customers made up 57.1 percent of customers to those stores, but only accounted for 41.6 percent of sales. The average foreign national who shopped at a duty free store spent $345.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Gustavo M’s photostream on flickr Creative Commons.

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Is Trouble Bubbling Under the Surface of South Korea’s Tourism Boom?

By Jenna Gibson

Walking down one of Seoul’s many shopping streets, sandwiched between food carts and two-story portraits of the latest k-pop phenom, store clerks hover, calling out to the crowds as they pass by in various foreign languages. “Ohayo gozaimasu! Nihao! Hello! Come in! Big sale today!”

They know their audience – tourists in South Korea, especially those from nearby Japan and China, are spending a huge chunk of their time – and money – stocking up on popular Korean products. According to new numbers from the Korea Culture and Tourism Institute, tourists visiting South Korea spent 5.5 trillion won (around $4.8 billion) on shopping in 2015. That’s 52.8 percent of the total 10.4 trillion won foreigners spent on travel in Korea last year. This was followed by lodging at 23 percent, food at 8 percent, and medical at 3.9 percent.

Korea Tourists Graph

Interest in Korean products, especially in the cosmetics industry, can be directly attributed to the popularity of the popular actors and singers who smile out from nearly every shop window. According to a recent survey of foreigners in Seoul’s busiest shopping neighborhoods, more than two thirds said they became interested in Korean cosmetics products after “getting to know Korean dramas or K-pop stars.” This led the study’s author to conclude that “Interest and affection for Korean culture, or hallyu, has a direct correlation to growth in the cosmetics industry.”

According to the Gangnam District Office, which oversees the k-pop mecca of Seoul, use of Chinese UnionPay cards in the Cheongdam-dong neighborhood jumped from 5.2 billion won in 2012 to 26.3 billion won in 2014, a five-fold increase.

In a more shocking example, after a Korean boy band member mentioned Ryeo Shampoo on a Chinese reality program, the brand’s sales skyrocketed 630 percent. The shampoo’s domestic sales also increased by 300 percent at the time – its manufacturer, AmorePacific, attributed this increase to Chinese tourists stocking up while in Seoul.

But this reliance on the whims of hallyu fans, coupled with some recent scandals about shoddy tour services, indicate that trouble may be bubbling under the surface for the Korean tourism boom.

Doubling Down on Hallyu

To fully capitalize on the influx of k-culture fans visiting South Korea, the government is trying to introduce new ways to connect with their favorite songs and TV shows – and spend more tourist dollars in the process.

Gangnam, a neighborhood in southern Seoul, is leading the charge. Gangnam’s Cheongdam-dong area is home to the headquarters of many of the major entertainment companies, and is notorious among for hallyu fans for celebrity spotting. “This place is packed from morning to night with foreigners who want to spot K-pop stars,” a worker at a Cheongdam-dong café told the Korea Joongang Daily.

The Gangnam District Office aims to capitalize on this interest through several new projects – from renaming a major street “K-Star Road” to unveiling a gargantuan statue in the shape of Psy’s hands that automatically plays “Gangnam Style” when visitors walk by.

All of this is about bringing hallyu tourists – and their wallets – to Gangnam. “Every fourth Friday of the month we plan to block a part of 79 Apgujeong Road that passes the JYP Entertainment building to host K-pop concerts and souvenir pop-up stores, developing the region into a ‘K-pop special economic zone,’” Park Hee-soo, head of the tourist industry department at the Gangnam District Office, told the Korea Joongang Daily.

Gangnam is not alone. Paju, a city north of Seoul, has announced that they will be turning Camp Greaves, a former U.S. military facility where parts of the ultra-popular drama “Descendants of the Sun” was filmed, into a tourist destination. This move is likely trying to repeat the success of Namiseom, a small island that experienced a spike in visits after being featured in the k-drama classic “Winter Sonata.” Even now, more than a decade after the show aired, the island gets 3 million visitors a year (up from 270,000 in 2001, prior to the Winter Sonata craze).

Quality over Quantity?

But some have been overzealous in their efforts to attract tourists. A recent scandal exposed the background of some Korean travel agencies that target Chinese tourists. Because of the intense competition to serve the increasing number of Chinese visiting Korea each year, some agencies have resorted to paying Chinese travel agencies a commission to secure customers while slashing prices. This results in tour packages that include cheap hotels, low-quality restaurants…and plenty of trips to the mall.

To make up for lost costs from tour packages, these tour companies make deals with shop owners to get a commission from sales. In some cases, the Joongang Daily discovered, Chinese tourists were brought to six shopping malls in just two days.

These issues have the serious potential of souring Korea’s reputation as a tourist destination. One local newspaper in China covered the issue in an article titled “Korean tourism Ends up Being Pathetic,” telling the story of a travel guide who wouldn’t let the tour bus leave a shopping center because the passengers didn’t spend enough money.

“The cheap group tours are not only unprofitable but also hamper the national image, which could cause damage in the long-term. We have to change the tourism paradigm to focus on value-added programs,” an official from the culture ministry told Yonhap News.

The Korean government is working to address this issue. The Ministry of Culture, Sports and Tourism has started cracking down on these tour package programs, dealing with 6,175 complaints in 2015 and revoking the license of 68 tour operators for “offering unreasonably cheap tour programs and hiring unqualified tour guides.”

It’s possible the industry can ride high on the Korean Wave for quite some time – skeptics have been predicting the death of hallyu almost since its inception and it has only continued gaining strength. However, rather than investing so much in a potentially fleeting trend, the Korean government needs to take a serious look at diversification. As Lee Hun, a professor at Hanyang University, told Yonhap News, “It is time for the tourism industry to shift priority from quantity to quality.”

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Rolf Venema’s photostream on flickr Creative Commons.

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North Korea Allows Internet Access (For Foreigners)

By Chad O’Carroll

On Friday the Associated Press Pyongyang bureau reported that North Korean authorities will allow foreign visitors to access the internet using cellular devices from March 01. Predictably, the news was published with the caveat that access conditions will not change for local citizens, who will remain cut off from internet access and remain unable to make calls to foreign countries for the foreseeable future. As such, the news triggered skepticism in some quarters that the step was undertaken simply to encourage tourism and increase revenue for the North Korean government. But even if that is the case, there are nevertheless several reasons why we should be encouraging the relaxation in North Korean telecommunications.

Just four weeks ago, rules that prevented tourists bringing their cell phones in to North Korea were finally relaxed, a development that meant foreigners would no longer have to surrender their devices upon arrival in Pyongyang. Coming just weeks after Google Chairman Eric Schmidt’s recent trip to North Korea, many may now be wondering if his visit was behind the cellphone and internet access developments. But while some might see the recent news as evidence that Pyongyang took heed of Schmidt’s pronouncements, comments made by Orascom staff to Xinhua News suggest these changes had been long planned and were not consequently related to the Google trip.

Over the past four years Egypt’s Orascom Telecom Company has been working closely with North Korea to develop and expand the KoryoLink cell phone network. Run as a joint venture based on 75% Orascom and 25% North Korean ownership, the Cairo based tech firm put a strong focus on ensuring the DPRK cell network would use the latest 3G cell tower technology from the outset. As a result of this step, the North Korean network was always going to be ready for internet access, provided of course there was sufficient political will in Pyongyang. Now, with 92.9% of population areas covered by KoryoLink’s network, as a result of today’s news it seems that foreigners should be able to access the net wherever they go.

While only 30,000 tourists visit North Korea per year, their potential to access the internet could prove to be the first step towards a gradual opening up of the DPRK telecommunications infrastructure. North Koreans already comprise some two million KoryoLink subscribers, though currently they can only use their devices to communicate internally. However, some of these subscribers can already access limited domestic data services, to find weather reports or local news, for example. Looking to the medium to long-term future, it’s therefore quite possible that this latest move could pave the way for North Korea to roll out a limited internet service (perhaps similar to Iran) to its own citizens as a logical next step.  The same thing has already happened in Cuba, where tourist based access paved the way for increasing domestic access and even the emergence of blogs written by Cubans, but published via USB keys passed to foreigners who have net access in international class hotels.

Another benefit of foreigners being able to access the internet while in North Korea is that it could seriously catalyze the speed at which important world news gets to the country. While those coming into regular contact with foreigners tend to come from the top tiers of North Korean society, that foreigners will now theoretically be able to spread news as it happens means the development will lead to a new and credible addition to the country’s infamous “bush telegraph”. And though little is known about how the North Korean government intends to prevent local citizens from ever using approved devices to access the internet, we can bet that some will find a way. To be sure this will be a tiny fraction of people, but given North Korea’s history of an impermeable iron curtain, it is meaningful in any case.

It will be particularly interesting if foreigners will be able to access South Korean news and information websites through the KoryoLink infrastructure. Even if these and other websites do turn out to be blocked, it won’t take long for crafty visitors to get around the rules using VPN and other IP proxy technologies. As such, the only way Orascom will really ever be able to assure its North Korean hosts of absolute control will be to shut off access for everyone, completely.  Such a move can’t be discounted, with cell usage having been dramatically curtailed in a u-turn policy change on made by Pyongyang in 2004, the year an explosion took place allegedly near to Kim Jong Il’s passing train.

Another benefit of the move will be that it will be easier for visitors to share with the world the reality of life in North Korea. With photography having long been restricted and visitors subject to random photo deletions by over-zealous border guards, the latest development should theoretically allow foreigners to upload pictures straight to the internet, as quickly as they take them. Naturally, it is likely that access will be monitored to some degree, but the more widespread access becomes, the harder it will be for DPRK authorities to track use.

One potential hurdle to the above advantages relates to costs.  To date foreign residents and business people have been able to access the internet access using satellite technology, but the costs have been so exorbitant that it has significantly reduced the potential for the internet to have many of the positive effects described above.  Unfortunately, figures obtained by the Wall Street Journal suggest that for its part, the new mobile internet service will not be cheap, with a set up fee of around 150 EUROS for the SIM card, then data fees of around 150 euros for 2GB of bandwidth. Prices this high mean it will be expensive for people to get the type of access required to create the various impacts detailed above, but it’s a start nonetheless. And while the high fees reflect that access is currently aimed more at long term residents than tourists, a KoryoLink technician said that his team was working to persuade the North Korean government to get permission to introduce cheaper and short-term tourist focused services. Time will tell how significant Friday’s development is, but it seems clear that any opening, no matter how small, should be welcomed and encouraged vigorously.

Chad 0′Carroll is the Director of Communications for the Korea Economic Institute. The views expressed here are his own.

Photo from djking’s photostream on flickr Creative Commons.

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Selling Korea

By Ben Hancock

South Korea made an appearance in this past Sunday’s New York Times list of 45 must-visit travel destinations for a surprising reason — golf courses. No one could quibble with the fact that Korea has churned out more than its fair share of club-wielding pros (Pak Se-ri and K.J. Choi come quickly to mind). But is playing 18 holes in Songdo New City really the nation’s hottest selling point for 2012, the final year of its official “Visit Korea” campaign? Especially for U.S. readers, for whom a trip to the peninsula involves a long-haul flight of anywhere from nine to 13 hours, I can’t imagine that has much appeal.

Korea has long had trouble putting a finger on how to sell itself to Westerners — a fact that has been embodied by its frequent slogan changes (“Dynamic Korea,” “Korea Sparkling,” and the latest, “Korea: Be Inspired”). This fortunately doesn’t appear to have stopped a steady inflow of travelers from the West. My analysis of figures from the Korea Tourism Office shows that in the prime vacation months of July and August, Korea enjoyed year-on-year growth in 2010 of 2.84 percent in visitors from the United States who said their primary reason for visiting was tourism. That number increased in 2011 by 3.85 percent to 83,500 summer visitors from the U.S. The story is even brighter when one looks to Europe — growth from summer 2009 to 2010 of 13.44 percent, with notably weaker but still impressive growth in 2011 of 6.01 percent.

But we should ask whether it could do better. The “2010-2012 Visit Korea Year” — which is inexplicably three years long — doesn’t seem to have brought exceptional tourism growth from the West, for example. Looking at full years in terms of tourism-oriented trips (as opposed to business travel or official visits), the growth in visitors from the U.S. has been moderate: roughly 444,000 in 2009; 476,000 in 2010; and 451,000 between January and November of last year.

By comparison, the growth from China has been remarkable, though we should take into account some conflicting factors — it is of course much closer in proximity, but does not have a visa exemption agreement with Korea (which the U.S. has). China also obviously is much larger population-wise than the U.S. All that in mind, the numbers are still surprising. Tourists from China nearly doubled in 2010 to 1.01 million from 581,000. This figure appears on track for even more growth; in the first 11 months of last year, there were 1.2 million visitors from China.

The reasons other Asians visit Korea are different than those for Westerners. While visitors from China or Japan are likely to focus on shopping, an American may be more interested in doing a temple stay or seeing the DMZ. The boom in Kpop’s popularity Stateside may finally mean that the “Korean Wave” is now a common attraction in both Asia and the West. But for the large majority of Westerners, Korea has fallen down in distinguishing itself from its neighbors. And getting back to my original point, I think luxury golf is probably the wrong way to go.

Coming up with the right selling point for Korea is not an easy proposition. Korea has gorgeous and unique temples, striking mountains, and metropolises that become awash in neon at night. And so do China and Japan. It’s perhaps not surprising that many travelers from the West I have talked to tack visits to Korea onto longer journeys that also hit Tokyo or Hong Kong.

Korean food is something the tourism authorities have rightly latched onto, but I would argue that this is not enough to really bring travelers in droves. The “Peace & Life Zone (PLZ)”– a nature trail that takes its name from the adjacent DMZ — is another interesting idea as green tourism becomes increasingly popular. In order to really become a nation that even the uninitiated will want to visit, however, Korea needs to promote what is probably most difficult to wrap one’s hands around: its history and culture. It needs to be an idea. Instead of trying to contrive one aspect or another as the reason to visit Korea, tourism promoters should approach the task holistically.

There are many ways to do this. One idea would be to promote homestay or exchange experiences for high-school and college students in the U.S. Levying for more Korean language teachers in schools or private academies is yet another possibility that could increase cultural interchange. Helping to plan more Kpop concerts (like the one last fall) or working with publishers to translate potentially attractive Korean novels are still more ideas. Of course, these are not the end goals in and themselves, but instead are methods aimed at slowly raising the profile of Korea in the West — giving it gravity as a destination.

Ben Hancock is a journalist who has studied Korean language and culture since 2004, and who lived in Korea most recently from 2008 to 2010. His views are his own.

Photo from Jongho Won’s photostream on flickr Creative Commons.

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The Peninsula blog is a project of the Korea Economic Institute. It is designed to provide a wide ranging forum for discussion of the foreign policy, economic, and social issues that impact the Korean peninsula. The views expressed on The Peninsula are those of the authors alone, and should not be taken to represent the views of either the editors or the Korea Economic Institute. For questions, comments, or to submit a post to The Peninsula, please contact us at ts@keia.org.