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A book featuring research papers from GMBA students.

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    Voices from Paju Voices from Paju Document Transcript

    • 2012Voices From Paju Research and Reflections on the Global Economy
    • Voices From PajuTable of ContentsAbout the Authors ...................................................................................................................................... 3How the Recent Paradigm Shift in Electricity Affects the Global Economyby Kenzo Sakamoto and Jongkwon Ham ................................................................................................ 4Effects of Fair Trade Coffee on the Global EconomyBy Katsuya Ishigaki and Hojaee Lee........................................................................................................ 9The Effect of Chinese Taste ChangeBy Toshiharu Kamada and Jongmin Kim .............................................................................................. 13Camu Camu FruitBy Hiroyuki Kaji and Hisami Natsume................................................................................................. 17The Possible Impact of Speech Recognition TechnologyBy Toshiharu Kamada and Hensu Jang ................................................................................................. 22The Costs and Benefits of London Olympics 2012By Jeongwoo Lee and So Kogahara ........................................................................................................ 28Which One is More Proper in Korea and Japan, Big Mac Index or Starbucks Indexby Seunghyun Kim and Toru Yamashita ................................................................................................ 35Why did “Occupy Wall Street” Demonstrators Show Up?By Siyung Jo and Woojin Yang ................................................................................................................ 39The Effect of Animation Outsourcing on Japan’s EconomyBy Takahiro Aoki and Lee Woo Chan .................................................................................................... 44Aging Population: Impact on the World EconomyBy Jung Jaeyoon and Shoichiro Kitano.................................................................................................. 51Chinese Luxury ShoppingBy Jaewoo Kwon and Emi Yamazaki..................................................................................................... 59How the Chinese Economy Recovered Quickly After the Financial CrisisBy Yoshiyuki Suimon and Richie Hsieh ................................................................................................. 66The Effect of China’s Foreign Exchange Reserves on the World EconomyBy Sachiyo Urashima and Sangjae Lee.................................................................................................. 71Free Trade AgreementsBy Youngguo Seo and Ryuhei Oh ............................................................................................................ 75The Reason why Korean Women Undergo Plastic SurgeryBy Yosuke Suzuki, Youngwan Kim, and Sungmin Kim........................................................................ 82 2
    • Voices From Paju About the Authors On a cold winter morning in early February 2012, business professionals from Korea,Japan, and Taiwan descended on Gyeonggi English Village in Paju, South Korea. The 31writers featured in this collection come from a variety of industries—electronics to automotive,ship-building to financial—but are all among the leaders in their fields. They were accepted tothe University of Michigan’s Ross Business School Global MBA program, and have committed ayear and a half to their studies. Their three weeks at English Village was the first step in this journey, a last chance tofine-tune their English skills—writing, reading, speaking, and listening—before beginning anintensive business-focused curriculum. The essays in this book represent the culmination oftheir writing classes. Most of the writers—though highly intelligent and good Englishspeakers–came in with limited experience in writing English, especially academic papers. Thequality of the essays they were able to produce is a testament to their talent and hard work. Ona personal note and speaking as one of their teachers, they were the most energetic, focused, andintellectually curious group I’ve seen pass through English Village. They will be missed.-Alex Diamond, Paju, February 27, 2012 3
    • Voices From Paju How the recent paradigm shift in electricity affects the global economy by Kenzo Sakamoto and Jongkwon HamIntroduction A Massive 9 magnitude degree earthquake struck off Japan’s northeastern area on March 11,2011. Because of this big earthquake, Fukushima nuclear power plant was severely damaged.After the tragedy accident, the Japanese government implemented a variety of electricity savingplans. On September 15, 2011, a freak blackout plunged Korea into darkness. The suddenpower outage affected offices, baseball stadiums, and shopping malls. Korea faces a constantthreat of major power outages in the next four to five years1. I. Saving electricityA. Black out in Korea1. Detail explain of Black out accident The blackout paralyzed the entire country of Korea. The sudden power outage beganaround 3 p.m. and the national emergency management agency reported 944 phone calls frompeople who were trapped in elevators. Traffic lights went out and mobile phone services werehalted after power was cut from base stations in Korea2. It happened because of the suddendemand expansion. The Ministry of Knowledge Economy in Korea put the blame of the massiveblackout on a false report by KEPCO (Korea Electric Power Corporation) about the country’selectricity reserve level.2. Japan Government’s policy Tokyo electric power lost a third of its generating capacity when the earthquake struck andpower stations automatically shut down. Japan’s chief cabinet secretary said the government1 KBS special documentary film “2011 The warning of winter blackout” broadcasted by KBS on Dec. 11.2011.2 http://english.chosun.com / “Freak Blackout plunge Korea into darkness” Sep. 16. 2011. 4
    • Voices From Pajuwould look at the option of a power cut by rotation. The lights in office buildings and hospitalsturned off and commuter subway trains stopped. However, the Japanese public overcame the unprecedented disaster with amazingorderliness. The source of orderliness appears to be a deep-rooted trust in the Japanesegovernment. Japanese people still have confidence in what the government tells them.B. The Cause of Power Shortage 1. Seasonal demand expanding From 1990 to 2000 because of air conditioner supply, there was an increase in summerelectricity demands. However, recently more demand increase is due to heating systemtranslated from gas to electricity. In addition, the average low temperatures during winter timeare another reason3.2. Commercial demand Due to the industry structure changes, the service industry has an important role in therecent global economy, and commercial demand of electricity is highly expanded. The weight ofservice industry among the industrial products in Japan is almost over 38%4. Commercialdemand’s range of fluctuation is so wide that a stable supply plan is hard to establish.3. Continuous occurrence of new power demand The increasing demand for a convenient and comfortable life increases the use of manyhome networks and well being home appliances, which also need a lot of electricity. It willcontinue to expand in the future. For example, the home appliance market in Korea grew anannual average 58.2% from 2006 to 20105. From now on society will transition an information-oriented and environment-friendly society, and new power demand will increase.4. Insufficiency of power plant supply plan The power plant is lacking because government established a long-term power supply plan3SERI (Samsung Economic Research Institute) CEO Information_2012.1.18: No.838 “The Cause and countermeasures ofpower shortage in winter time” page 54SERI (Samsung Economic Research Institute) CEO Information_2012.1.18: No.838 “The Cause and countermeasures ofpower shortage in winter time” page 65 Op. cit. page 7 5
    • Voices From Pajuon the base of demand forecasting, but the real supply demand exceeded the prediction.Expected demand growth in recent 3 years was about 2%, but actual demand was 5.2%6.5. Delay of planned power plant The disruption occurred to the planned plant because of complaints, environmental policy,transmission line connection, etc. Until 2009, the fulfillment of the power plant establish plan isjust only 80%7.C. Countermeasures 1. Reinforcement of seasonal demand management The government should manage the growing demand for air conditioning and heating, sothey can secure the stable power reserve level especially for the peak time of summer and winter.2. Systemize the response of crisis The government should improve the power load management system in case of climatechange or power plant breakdown.3. Expansion of basis power plant The underlying lack of power capacity serves as a cause of power shortages and risingelectricity rates, so the expansion of basis power plants needs to avoid such a disruption of theplan.4. Modernization of power plant infra through technical innovation There is a need to build a smart grid which is a fusion of IT technology and powernetworks. We should take advantage of technology innovation and power grid expansion as anopportunity for economic revitalization. II. Electric Vehicles A. Recent trends of Electric Vehicles The Electric Vehicles (EVs) are automobiles which are propelled by electric motors, using6Op. cit. page 8Op.cit. page 97 6
    • Voices From Pajuelectrical energy stored in batteries or another energy storage device. Recently, to overcome thehigh oil prices and the emission of the greenhouse gasses, the research and the production of theEVs are gradually increasing. EVs, including hybrid cars, could represent as much as 15% of thenew car market by 2020.8 In this report, the analysis of the impact of the EVs on global economyis described in terms of household impact, smart grid, and reduction of emission.B. Impacts on the Households The spread of the EVs would have huge impact on the car operating costs in households.Given the average household uses a car for 50miles, the increase of the electricity cost would be$40, and the decrease of the gasoline cost would be $180. Totally, the introduction of EVs wouldbe cost-effective to most of households even if the battery maintenance costs were included.9C. Impact on the Electric Grids 1. About Electric Grids Current electric grids were established in the 19th century. These days, the smart grid, theconcept of next generation electric grids which improve the efficiency and reliability of theelectric grid by digital and autonomiccontrol, is becoming prevalent.The smart grid is receivingplenty of attention as the key technology to realize the expansion of the EVs as well as therenewable energy.102. How it affects Electric Industry and Economy For the prevalence of the smart grid, the comprehensive introduction of devices, such as a8“Recharging electric cars: Bidding for volts,” The Economist online, September 6,2011,http://www.economist.com/node/21528507, accessed February 16, 20129Ulrich Decher, “Economic and Emissions Impacts of Electric Vehicles,” The Energy Collective, February 15, 2011,http://theenergycollective.com/ansorg/51761/economic-and-emissions-impacts-electric-vehicles, accessed February 16,201210 Center for Entrepreneurship & Technology (CET) University of California, Berkeley, “Impact of Widespread ElectricVehicle Adoption on the Electrical UtilityBusiness – Threats and Opportunities,” August 31, 2009,http://cet.berkeley.edu/dl/Utilities_Final_8-31-09.pdf, accessed February 16, 2012 7
    • Voices From Pajusmart meter, is necessary. In this process, not only manufacturers of power system equipment,but also other related industries, including car makers or manufacturers of digitalcommunication equipment, are expected to find new markets, and this trend would have a hugeimpact on global economy.D. The Impact of the Reduction of Emission1. How the EVs reduce the Emission The amount of emission gases would not basically change by the introduction of EVsaccording to the law of the conservation of energy, but the emissions caused by the combustionof the oil would transfer from car engines to power plants, which reduce the effects of theemissions to urban area.3. The Economic Effect of the Reduction of Emissions To reduce the emissions, the power system should be changed dramatically:one is smartgrid to enable all households to charge EVs at night, and the other is the shift of energy resourcesfrom fossil fuels to nuclear power or renewable energy sources, such as solar, tide, and windpowers. As the expansion of the nuclear power plants is becoming impractical after the 2011.3.11earthquake in Japan and following nuclear accidents, mainly the shift to renewable energywould be promoted. The renewable energies are expected to be cheaper resources for the futureand boost the creation of new jobs, stimulating the global economy. III. Conclusion In conclusion, the trend of saving electricity and introduction of EVs is becomingdominant, and would be more accelerated in the future. The shift of the energy resources fromfossil fuels to renewable energy would be also promoted, and these trends generally have somepositive impacts to boost the global economy. 8
    • Voices From Paju Effects of Fair Trade Coffee on Global Economy By Katsuya Ishigaki and Hojae LeeI. I. The history of coffee After medieval times, coffee spread through the world. The earliest credible evidence ofeither coffee drinking or knowledge of the coffee tree appears in the middle of the fifteenthcentury, in the Sufi monasteries of the Yemen in southern Arabia. From Mocha, coffee spread toEgypt and North Africa, and by the 16th century, it had reached the rest of the Middle East,Persia and Turkey. From the Muslim world, coffee drinking spread to Italy, then to the rest ofEurope, and coffee plants were transported by the Dutch to the East Indies and to theAmericas. 11 Coffee was popular by the 18th century in Europe and European colonistsintroduced the crop to other tropical countries to help them supply a healthy domesticdemand.12 Coffee is the worlds second most valuable traded commodity, behind only petroleum.There are approximately 20 million farmers and coffee workers in over 50 countries involved inproducing coffee around the world. An estimated 11 million hectares of the worlds farmland arededicated to coffee cultivation. Around the globe, the annual consumption of coffee hasexpanded to 12 billion pounds.13 Coffee was traditionally developed as a colonial cash crop, planted by serfs or wagelaborers in tropical climates on large plantations of landowners for sale in colonial countries.Coffee producers, like most agricultural workers around the world, are kept in a cycle of povertyand debt by the current global economy designed to exploit cheap labor and keep consumerprices low. Because of this situation, many coffee workers bring their children to help them in thefields in order to pick the daily quota. These child workers are not officially employed andtherefore not subject to labor protections.1411 Wikipedia, “History of coffee,” http://en.wikipedia.org/wiki/History_of_coffee, accessed 17 Feb 201212 facebook, “Brief Coffee History,” http://www.facebook.com/note.php?note_id=400497537218, accessed 17 Feb 201213 The Catholic Action Network for Social Justice, “Coffee in the Global Economy,”http://catholicactionnetwork.org/dec05/documents/FAQsfromglobalexchange.pdf, accessed 11 Feb 201214 Ibid 9
    • Voices From PajuII. The characteristics of coffee industry Coffee beans are grown within an area known as the ‘bean belt,’ which is roughlybound by the tropic of cancer to the north, and tropic of Capricorn to the south. The bestgrowing areas offer moderate sunlight and rain, steady temperatures of around 70 degreesFahrenheit, and rich soil.15 Top 10 green coffee producing countries in 2009 are Brazil, Vietnam,Colombia, Indonesia, India, Ethiopia, Peru, Mexico, Guatemala, and Honduras in order ofproduction.16 The cultivation of coffee is a much more labor-intensive than alternative products of thesame regions such as sugarcane or cattle. Coffee beans must be picked, processed, dried androasted on a coffee plantation, so it is not subject to automation and requires constant attention.17 The prices of coffee beans are mainly determined by Coffee C Futures contract marketof ICE18 and NYSE Euronext.liffe.19 The factors which can affect the prices of coffee are theweather of producing countries20, supply and demand of coffee21, and speculation22.III. What is Fair Trade Coffee Fair trade was introduced to help the farmers to have a better life and support theirfamily. The Fair Trade movement began in the late 1950s as alternative trade organizations(ATOs) emerged in Europe and the US to promote grassroots development through direct,equitable trade. These ATOs bought directly from Third World producers, eliminating themiddlemen, and paid the producers a fair price while providing assistance in developing15 Coffee Producing Regions, “Coffee Producing Regions,” http://www.professorshouse.com/Food-Beverage/Beverages/Hot-Drinks/Articles/Coffee-Producing-Regions/, accessed 21 Feb 201216 FAOSTAT, “2010 Data,” http://faostat.fao.org/site/567/default.aspx#ancor, accessed 21 Feb 201217 http://en.wikipedia.org/wiki/Economics_of_coffee, accessed 21 Feb 201218 Coffee C Futures contract market of ICE(InterContinentalExchange):https://www.theice.com/productguide/ProductDetails.shtml?specId=1419 https://globalderivatives.nyx.com/contract/content/29040/contract-specification20 ezinearticles.com, “Brazil Weather Will Determine Coffee Prices, They Could Soar This Winter,”http://ezinearticles.com/?Brazil-Weather-Will-Determine-Coffee-Prices,-They-Could-Soar-This-Winter&id=6315290,accessed 21 Feb 201221 Kona Coffee Roasting, “Coffee Prices Rise in 2011 Due to Increased Demand, Reduced Coffee Supply,”http://www.konacoffeeroasting.com/coffee-prices-rise-in-2011-due-to-increased-demand-reduced-coffee-supply/,accessed 21 Feb 201222 The real news, “Speculation Drives Up Coffee Prices,”http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=7176, accessed 21Feb 2012 10
    • Voices From Pajutrading experience and market contacts. Such experiences helped producers raise their incomeswhile reducing their dependency on commercial middlemen.23IV. Issues of Fair Trade Coffee There are some issues for the fair trade coffee: very strict rules to be Fair Trade Coffeeand not enough benefits from Fair Trade Coffee. Producers need thousands of Euros to get the certificate of Fair Trade Coffee for a singleplant.24 There is an application fee, initial certificate fee, membership dues, annual audit fees andmore. Large corporate farms can often handle the paperwork and recuperate the cost ofcertification more easily than small, independent farms. As a result, there are plenty of small,independent farms that are not Fair trade certified even though they meet or exceed the Fairtrade standards.25 There is an issue that Fair Trade cannot help producers to be escape from poverty. TheICA(International Commodity Agreement) raised prices for the consumer, but after severaldecades of intervention, poverty remained a fact of life in coffee producing countries. Indeed,studies of the ICA have shown that it had no effect on poverty reduction.26 It may become themost of the profit goes to the middlemen.V. Prospect of fair trade coffee To help producers of fair trade coffee, the volume of fair trade coffee should beincreased. Nowadays, the volume of fair trade coffee is quite low compared with the volume ofother coffee. We should promote fair trade coffee and check the volume of fair trade coffee. There are few shops or cafes which produce fair trade coffee, while a lot of people wantto buy. For increasing sales volume of fair trade coffee, more diversification of sales is necessary.For example, cans of coffee or packs of coffee are effective options. Before selling them, sellersmay make an advertisement which introduces fair trade coffee to common people and influence23 Ibid24 FLO-CERT, “PRODUCER CERTIFICATION FEES,” http://www.flo-cert.net/flo-cert/65.html, accessed 21 Feb 201225 Wikipedia, “Economics of Coffee,” http://en.wikipedia.org/wiki/Economics_of_coffee, accessed 21 Feb 201226 Mercatus Center, “Does Fair Trade Coffee Help the Poor? Evidence from Costa Rica and Guatemala,”http://mercatus.org/publication/does-fair-trade-coffee-help-poor-evidence-costa-rica-and-guatemala, accessed 21 Feb2012 11
    • Voices From Pajupeople buy more fair trade coffee. To promote volume of fair trade coffee, tax exemptions are also effective. Taxexemptions will encourage sellers to sell more fair trade coffee and producers to produce more.It is necessary for related countries to negotiate each other for protecting the coffee producers.VI. Conclusion Historically, coffee producers suffer from their own poor wages. Fair trade coffee isinitiated to protect such poor producers, but it does not work well and there are a lot of poorproducers who still suffer. It is better to promote the volume of fair trade coffee 12
    • Voices From Paju The Effect of Chinese Taste Change By Toshiharu Kamada and Jongmin KimⅠ. Introduction“13.5 hundred million”, “960 thousand”, “300 thousand dollars”27 These numbers indicate China’s population, the number of Chinese billionaires, and theamount of money the Chinese billionaires spend annually overseas, respectively. In the past,many people believed that Chinese are very economical consumers and do not like to spendtheir money. However, this idea is far from the truth nowadays. Chinese are spendingconsiderable amounts of money on shopping, eating, and traveling every year. People can easilyencounter many Chinese who travel in many sightseeing cities and look around luxury brandshops. This large group of Chinese is starting to create changes not only in the middle pricedmarket but also in the luxury market all around the world. The movement to adapt to thechange is getting faster.Ⅱ. Effects on Travel Business A. Luxury goods for Chinese Travelers. The change of markets is observed in travel business. First and foremost, Chinese taste’schange has strongly influenced overseas travel business. For example, according to TheINDEPENDENT, 22.7 million Chinese tourists, out of a total of 36 million over 12 monthsin 2010,have travelled to Hong Kong,compared tothe 7.5 million Chinese tourists had done so in2003.28The main purpose of their travel was still shopping. However, what they wanted to buyand actually bought had changed from cheap goods to luxury goods.Actually, Chinese travelersto Hong Kong spent more than those who came from other countries. They spent approximatelyHK$12,000 (1,100 Euros) on average every time they came to Hong Kong.29 B. Luxury Service for Chinese Travelers.27Myungshin Kim, “Trend Report”, KOTRA(Korea Trade-investment Promotion Agency), November 17th, 201128“Chinese taste for luxury changes the face of Hong Kong shopping,” The INDEPENDENT, March 29, 2011,http://www.independent.co.uk/life-style/fashion/chinese-taste-for-luxury-changes-the-face-of-hong-kong-shopping-2255987.html, accessed February 2011.29 Ibid. 13
    • Voices From Paju In addition, many of the companies which sell luxury goods throughout the world aredeveloping new products and services adequate for Chinese tourists. According to The WHERE,one of the Canadian travel magazines, the affluent Chinese travelers sought for high-qualityAsian-style services besides European goods.30 Actually, Hilton started special hospitalityservices for Chinese travelers. Specifically, it provided them with Chinese breakfast and frontdesk attendants who was able to speak the Chinese language31. Moreover, we can also observe the tendency described above, not in the overseas travelmarket, but in the domestic market, that is, in the Chinese market. The changing taste of Chineseconsumers begins to focus on service qualityother than pricing. Specifically, many Chinesepeople tend to seek for information such as user reviews, shipping options, or productguarantees, other than price.According to The Wall Street Journal, we can also observe this trendin e-commerce companies. “In China e-commerce is all about discount shopping, said Hurst Lin,general partner at venture capital firm DCM and former COO of Chinese web portal andmicroblog operator Sina, but that won’t last. Mr. Lin believes that in several years, Chineseconsumers will have more discerning taste and that online retailers with the best design andbranding will challenge the dominance of Alibaba Group’s Taobao websites.”32Alibaba Group’sTaobao websites are the current biggestonline shopping in China. However, the top position willnot always continue in the future. Actually, the sales of Alibaba Group’s Taobao websites haverecently decreased. From now on, e-commerce companies will need to differentiate themselvesfrom competitors by providing customers not with cheaper prices, but with added values suchas better services or better design. As the example illustrates, Chinese taste change has stronglyinfluenced overseas travel business.Ⅲ. Effects on Wine Market A. French Wine Market30“Travel Trends: Why Chinese Tastes Matter,” Where, September 23, 2011, http://www.where.ca/blog/check-in/travel-trends-why-chinese-tastes-matter/, accessed February 2012.31Ibid32 Loretta Chao, “DCM Partner: Taobao Discount Model Not the Future of Chinese E-Commerce,” The Wall StreetJournal, November 2, 2011, http://blogs.wsj.com/chinarealtime/2011/11/02/dcm-partner-taobao-discount-model-not-the-future-of-chinese-e-commerce/?mod=WSJBlog, accessed February 2012. 14
    • Voices From Paju In addition, Chinese taste change and its effects on the market are observed in otherspheres. One of the spheres is the wine market. Recently, it is perceived that there is a big changein the global high-end wine market. The change coming from wealthy Chinese wine collectors ismaking Bordeaux wine cry and Burgandy wine smile. Until recently, French wineries have ledthe high-end wine market. Many people who enjoy drinking wine have unconsciouslymemorized many kinds of the names of French wines and usually ordered them in restaurants.However, wealthy Chinese people who enjoy drinking wine have begun to pick up Burgandy.Even though 60% of Bordeaux’s total exports are still consumed in mainland China and HongKong, no one can guarantee that Bordeaux’s wine will be able to maintain its popularity.Therefore, in the near future, it is expected that this trend will cause the price of Burgandy tosurge. According to Janicy Robinson, the British wine expert and critic, the effect that greaterChinese interest in Burgandy could have on the broader global market would be "dangerous" forBurgandy lovers. Because the quantities of top Burgandy produced are limited, thisphenomenon could upset the market. 33B. Australian Wine Market In addition, a similar phenomenon is observed in the Australian wine market.According to Campbell Thompson, an Australian and co-owner of the wine importing anddistributioncompany, The Wine Republic, French wines have led the gift-giving and corporatedining market until recently34. However, the demand for Australian wine is increasingdramatically. Australia’s top wine brands, like Jacob’s Creek, have begun to have more interestin the Chinese market. They expect that their major target will be businessmen, officials, andyoung white-collar workers, who are increasing rapidly in main cities in China.35 Therefore,many Australian wine sellers anticipate that the sales of the wine will surge and then the price ofAustralian wine will reflect the change.33Jancis Robinson, “Growing Chinese Taste For Burgundy Could Prove “Dangerous”, Jing Daily, November 22nd, 2011,http://www.jingdaily.com/en/luxury/jancis-robinson-growing-chinese-taste-for-burgundy-could-prove-dangerous/34 “Demand for Australian wine soars as Chinese taste change”, China Daily,December 13th, 2011, http://www.chinadaily.com.cn/bizchina/2011-12/12/content_14250015.htm35 Ibid 15
    • Voices From PajuⅣ. Conclusion In conclusion, many companies have tomake more efforts to establish the strategy toreflect Chinese taste change. As the example above illustrates, Chinese people penchants forspending money are largely changing from essential to luxury, such as overseas travel, wine, ordesigner goods. Many of the economists and the economic magazines predict that theChineseeconomy continues to grow for the moment. According to the Wall Street Journal, “A recent Bainstudy forecast that the Chinese market would grow 11 per cent per annum for five years,butLindit&Sprungli said it believed the market was growing by 30 per cent ayear based on research conducted for it by Nielsen.”36If companies aspire to affect the Chinese, toobtain Chinese money, and to make profits, they shall revise their strategy to reflect new Chinesetaste. Companies will have to focuson service qualityand provide other information,such asproduct guarantees, user reviews, or shipping options, and not only focus on pricing. Tosummarize our interpretation of the results, we can explain that many businesspersonsneed toendeavor to revisetheirplans of actionto reflect Chinese taste change.Last, please excuse me ifIoveremphasized my opinion more subjectively than was necessary.36Patti Waldmeir in Shanghai , “Confectioners bite into China’s soft centre”,THE FINANCIAL TIMES, December 23,2011, HTTP://WWW.FT.COM/INTL/CMS/S/0/DD414766-2D6E-11E1-B5BF-00144FEABDC0.HTML#AXZZ1LRIBIRPA,accessed February 2012. 16
    • Voices From Paju Camu Camu fruit By Hiroyuki Kaji and Hisami NatsumeThesis: The Camu Camu fruit’s impact on the global economy.I. IntroductionRecently, the number of people who are interested in health topics is growing in the world.Along with this, many kinds of nutritious fruits have become a part of people’s lives. CamuCamu, a specific kind of fruit made in Peru, is closely-related not only to human health but alsoto the global economy. Although Camu Camu is getting more popular in Japan, Camu Camu isnot widely used in the market. There is a possibility of expanding Camu Camu market in Japan.II. What is Camu Camu?A. FeaturesCamu Camu is a small bush which grows in the Amazonian rain forest of Peru. The CamuCamu bush produces a fruit which is about the size of a large grape and has a purplish red skinwith a yellow pulp.37Camu Camu fruit contains powerful phytochemicals with health benefits,including the amino acids such as serine, valine, and leucine, and more Vitamin C than anyother known plant in the world. Camu Camu is energizing, mood-lifting and highly effective instrengthening the immune system.Camu Camu has more natural Vitamin C than any known botanical on the planet and the effectson the human body are incomparable. Because of its food form, with bioflavonoids and otherphytochemicals, clinical evidence suggests that it is far more effective, milligram for milligram,than synthetic Vitamin C (ascorbic acid). Many people report that just two capsules daily (1/3tsp.) is sufficient to significantly increase their wellness. Wikipedia,”Myrciaria-dubia,”http://en.wikipedia.org/wiki/Myrciaria_dubia, accessed February 2012.37 17
    • Voices From PajuTable 1: Nutrition values of Camu Camu and Lemon: 1 cup (Health Benefits of Camu Camu38,Vitamins CamuCamu LemonVitamin B1 0.07 mg -Vitamin B2 0.16 mg -Niacin 8.25 mg 0.10 mgVitamin C 7.49 g 0.53 gLemon nutrition facts39)B. Cultivation of Camu CamuCamu Camu planting started in 1996 in Peru as part of government funded reforestation projects(under the Program Nacional de Camu Camu) for export to Japan. Since then Camu Camu hasbecome a widely cultivated fruit species in the floodplains of the Peruvian Amazon.40The Peruvian government expects that it will become a major export when its amazingproperties are discovered in the United States. It is preparing for the expected large increase indemand by making Camu Camu seedlings available free of charge to communities of nativepeople who are rain-forest dwellers for them to plant and to tend. It takes four to five years forthe Camu Camu bush to bear fruit. The growing popularity of this wild rainforest fruit iscontributing to the sustainable development of the Amazon River basin and helping the forestdwellers to maintain their traditional way of life.41 Life Style Lounge, “Health Benefits of Camu Camu,”http://lifestyle.iloveindia.com/lounge/health-benefits-of-camu-38camu-8860.html, accessed February 2012. Power your diet, ”Lemon nutrition facts,”http://www.nutrition-and-you.com/lemon.html, accessed February 2012.39 Entrepreneur’s Toolkit,”Camu Camu40Cultivation,”http://www.entrepreneurstoolkit.org/index.php?title=Camu_Camu_Production_in_the_Peruvian_Amazon, accessed February 2012. WHOLE WORLD BOTANICALS, “Camu Camu(Myrciariadubia),41http://www.wholeworldbotanicals.com/herbal_camucamu, accessed February 2012. 18
    • Voices From PajuIII. Camu Camu Fruit in PeruA. The Economy of PeruBeing among the Pacific Rim nations, Peru has recently joined the group of emergingnations.Despite the continuing improvements in addressing the problem of poverty, expandingthe income disparity continues to be a problem. The disparity between urban and rural areas issevere, and there is a serious mismatch between markets. In Peru, 19% of the Peruvian peoplelive in "absolute poverty," meaning they survive on less than US$1 a day. Furthermore, while31.2% of the population lives in urban areas, and 69.3% of the population lives in rural areas are"absolute poverty." Moreover, the percentage of GDP in agriculture is 0.7%, and percentage oflabor force in agriculture is approximately 25%. 42B. The advantages of producing Camu Camu in PeruIn Peru, by producing Camu Camu, social issues such as poverty problem, nature preservation,and eradication of illicit drugs can be solved.1. Poverty programProducing Camu Camu helps farmers to raise their income. At present, farmers can earn onlysmall amount of money by farming, and there is no other way for farmers to earn cash. Thedistribution of Camu Camu would aid in the improvement of the farmer’s livelihood. Also, thiswould contribute to improve the standard of living in Peru.2. Nature preservationProducing Camu Camu has positive impacts on the rainforest in Amazon areas. Perus rainforest,which represents 20 percent of the Amazon, faces a number of environmental pressures,42CIA-the world factbook,“ Transnational issues in Peru, ”https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html, accessed February 2012. 19
    • Voices From Pajuincluding deforestation. Many kinds of fruits are not able to grow during the rainy seasonbecause these fruits are submerged in water. On the other hand, Camu Camu can grow in theareas even if the Camu Camu tree itself is immersed in water. Therefore, cultivation of CamuCamu would make international contributions not only in carbon dioxid reduction but also innature protection.433. Illicit drugsCamu Camu will be an alternative crop to the coca leaf. Peru is the world’s second largestproducer of the coca leaf, after being named number one until 1996. The cultivation of cocain Peru was estimated at 40,000 hectares in 2009. Produced cocaine is shipped out from Pacificports to the international drug market, increasing amounts of base and finished cocaine.However, produced cocaine which used to be ported into the international drug market ismoved to Brazil, Chile, Argentina, and Bolivia for use in the Southern Cone or transshipment toEurope and Africa, increasing domestic drug consumption in 2011. If Camu Camu issuccessfully used as an alternative crop to coca, it will lead to the reduction of illegal drugs. Thatcan have a great impact on a global scale.44IV. Camu Camu market in other countryA. Trade agreementThe Peruvian government has banned taking trees, seeds, and fresh fruits of Camu Camu out ofPeru. Other countries import the fruit in dehydrated, extract, flour, or powder form.Market overview in JapanThe fruit has recently become the large-scale cultivation and sale in the world. Especially,Japan is the major buyer becauseof the market which puts emphasis on the fruit nutritional Council on foreign relations,”Deforestation in Peru’s Amazon.”http://www.cfr.org/south-america/deforestation-perus-43amazon/p20968, accessed February 2012.44CIA-the world factbook,“ Transnational issues in Peru, ”https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html, accessed February 2012. 20
    • Voices From Pajuvalue.In Japan, there is significant demand for juice drinks and nectars. So, suppliers of Camu Camuproducts in Japan mainly sell such kind of products. Currently they explore the creation of newproducts such as jam, sweets, and cosmetics using the fruits essence. In order to promote abetter sale in Japan, the suppliers include the fruit’s history and a map of its origin into eachcommercial packages of Camu Camu. According to the market research, there are threefundamental requirements that Japanese buyers require: The fruit must be a 100% organicwithout the use of pesticides or chemical fertilizers. Vitamin C of the fruit must be at least 1800 to2300 MG. per 100g pulp. The fruit must pass phytosanitary standards in Japan.45V. ConclusionRecently, Camu Camu is getting more popular in Japan than in the past. However, Camu Camuis not widely used as other berries in the market. There might be two solutions to find an answerto the problem. First, Camu Camu suppliers should cooperate with major suppliers of processedfruit products such as Dole Food Company, because the company is skilled at promotionstrategy. Second, Camu Camu suppliers should create new distribution channels. Though theyonly focus on retail stores to sell their products, there might be potential distribution channelssuch as fitness centers. By strengthening marketing strategies, it would help expand CamuCamu market even more and contribute to the economic growth of Peru as well. Article directory, “Supply and demand for camu camu”http://www.centrorisorse.org/supply-and-demand-for-camu-45camu.html, accessed February 2012. 21
    • Voices From Paju The possible impact of speech recognition technology By Toshiharu Kamada and Hensu JangIntroduction Quarrels through the Siri–Man says“Tell my wife I’m gonna be 30 minutes late.”,Woman says“Tell my husband I’m not surprised.”Man says “Tell my wife if she has a problem with my work schedule she is morethan welcome to get a job of her own.”Woman says “Tell my husband that I do just as much work as he does.”Man says “Tell my wife that if watching “Ellen” is a job she should geta promotion.”Womans Siri “Message from your husband: “I appreciate you.”46The above dialogue is from the parody videos on the online humor site in the USA. The mainpoint of this dialogue is that Siri, a speech technology of iPhone 4S, tries to meditate a quarrelbetween husband and wife. This is just a parody for humor, but it is good example of the futureof speech recognition technology.47What is speech recognition technology?“Speech recognition converts spoken words to text. The term "speech recognition" is sometimesused to refer to recognition systems that must be trained to a particular speaker—as is the casefor most desktop recognition software. Recognizing the speaker can simplify the task oftranslating speech. Speech recognition is a broader solution that refers to technology that canrecognize speech without being targeted at single speaker—such as a call system that canrecognize arbitrary voices.”48Thesis statement How can the speech recognition technology affect the world in the future?46College Humor –Siri Argument, Nov 19, 2011, http://lybio.net/college-humor-siri-argument/comedy/ access Feb 201247College Humor –Siri Argument, Nov 19, 2011, http://lybio.net/college-humor-siri-argument/comedy/ access Feb 201248Wikipedia, “Speech Recognition”, Feb, 2011, http://en.wikipedia.org/wiki/Speech_recognition, accessed Feb 2012 22
    • Voices From PajuHow big will the impact of the speech recognition technology be?Siri, thanks to artificial intelligence techniques such as speech recognition services can beconnected to commerce in the future. It could analyze your preferences and characteristics, andpropose the most appropriate products and order. The speech recognition services of the futurewill search for flight schedules and show the tendency of your personal tastes like a personalassistant. It will be connected to a speech-commerce service and a new ecosystem.49 How canthe speech recognition technology affect the world in the future? How big will the impact of thespeech recognition technology be? We tried to examine these questions.I. Definition of Speech Recognition Technology A. The SiriSiri is a new application that will be included with the iPhone 4S. This application is a new wayto control your phone with your voice. Instead of just dictating a message to your phone, youcan ask your iPhone to do stuff for you.50 B. Other technologiesIn the first half of this year, the speech recognition service Mazel will be released. Mazel, similarto the Siri, a little more advanced natural language processing capabilities. Tell Me a speechrecognition service of Microsoft has competed against Siri from January 2012. Windows phonesvoice recognition service ‘Ask Ziggy presented its application this year51II. The situation of a gap between rich and poor A. The situation of povertyThere were 1.4 billion individuals living on less than $1.25 a day in 2005 and 1.2 billion49JuHuiYoo, “Smart Tech for Human”, Seoul Newspaper, Jan 13,2012,http://economy.hankooki.com/lpage/it/201201/e20120131170341117700.htm, accessed Feb 201250Josh Smith, “What is Siri?”, Oct 05, 2011, http://www.gottabemobile.com/2011/10/05/what-is-siri/, accessed Feb 201251Hui Kyung Kang, “Future of Sir”, HankookIlbo, Jan 03,2012,http://news.hankooki.com/lpage/economy/201201/h20120126211408111720.htm, accessed Feb 2012 23
    • Voices From Pajuindividuals living on from $1.25 to $2 a day in 2006. So in total, there were 2.6 billion extremelyor moderate poor individuals in the world, which represented about 47% of all population in theworld. 52 Also, based on another standard, there were 4.6 billion individuals living in thecountries where GNI per capita was under $ 8.9, which represented about 69% of the worldpopulation.53 That means there are plenty of suffering people on earth and there is a huge gapbetween the rich and the poor, and there are 2 main causes: unaffordability and illiteracy. 1. Inaccessibility(unaffordability)It is obvious that people who cannot access the Internet cannot get much information, and such asituation is called “Digital Divide.” In Japan, whether people can use broadband and the Internetor not was strongly correlated with the income level of the user.54 Also, the word “Digital Divide”means that whether people have a computer or not can expand the gap between rich and poor.In short, one possible cause of inaccessibility can be not having money. 2. IlliteracyIlliteracy can also cause the economic gap to expand. The number of illiterate adult population inthe world was 8.85 million in 1995, in which the share of individuals living in developingcountries was 99%.55 Generally, people who cannot read and write have little chance to get jobs,and if possible, they cannot get much money. In a sense, the illiterate people can be the lowestlevel of the pyramid.Ⅲ.Analysis of the possible solution52The World Bank, “People Poverty rates at international poverty lines,” World Development Indicators 2011(April2011):65.53The World Bank, “People Population Dynamics,” World Development Indicators 2011(April 2011):38.54Ministry of Internal Affairs and Communications, Japan, “White paper Information and communication in JapanOutlook Japanese ver.,”http:// www.soumu.go.jp/johotsusintokei/whitepaper/eng/WP2007/2007-index.html:40, accessed 13 February 2012.55Ken Kikumoto, A Fundamental Study on the Establishment of the ScienceofInternational Cooperation in Education asan Academic Discipline(March 1998):1. 24
    • Voices From Paju A. Possible Solution for unaffordability 1. Possible solution to unaffordability for personal computersThere were 1.8 billion people who could access the Internet at the end of 2009, whichrepresented about 26.6% of the world population.56 Intel Corporation has suggested that whenweeks of income to purchase a notebook computer falls between 4 weeks and 8 weeks, thesaturation level of the notebook can be accelerated.57The company has also estimated that thepenetration would accelerate in China, Latin America, and Eastern Europe soon, which meansthat about 1.8 billion people who currently cannot use the Internet would be able to access theinternet in the near future.58 But 40 billion individuals would still not be able to access it becauseof the unaffordable price.The number of the sales of personal computers was 1 million, and the average price was about$ 4,000 in the U.S.in 1980.59 But the number of the personal computers was 350 million in2010,60and the retail price level of personal computers was about $700 in June 2011.61In Japan, from 1996 to 2000, as the number of personal computers manufactured increased by170%, and the price fell by about 30%.62 In the U.S., during the 1990s the number of personalcomputers increased at double-digit rates, and at the same time PC prices decreased by 80%, to$500 at a rate of the time.63How much the price at a certain time would be depends on where thepoint would be on the gradual diminution curve, and it is difficult to predict the future price. Butif the price decreases, the price level would not be affordable enough for the bottom level of the56Garbagenews.com.,”The saturation level of the Internet in the world,"http://www.garbagenews.net/archives/134032,accessed 13 February 2012.57Intel Cooperation, “Investor Meeting 2011,”http://intelstudios.edgesuite.net/im/2011/live.htm, accessed 13 February2012.58Ibid.,59Sano seminar, “historical trend of PC,”http://www.sanosemi.com/wordpress/?p=122, accessed 13 February 2012.60BCN Bizline, “The map of the personal computer industry,” http://biz.bcnranking.jp/map/pc/,Accessed Feburuary 2012.61My Navi News, “Silicon valley101,”http://news.mynavi.jp/column/svalley/328/index.html,Accessed 13 February 2012.62Link general research, “The trend of Information Communication deviceindustry,”http://search.yahoo.co.jp/search?p=%E3%83%91%E3%82%BD%E3%82%B3%E3%83%B3%E3%80%80%E7%94%9F%E7%94%A3%E5%8F%B0%E6%95%B0%E3%80%80%E4%BE%A1%E6%A0%BC%E3%80%80%E6%8E%A8%E7%A7%BB&aq=-1&oq=&ei=UTF-8&fr=top_ga1_sa&x=wrt, accessed 13 February 2012.63Peter E. Carlson, “personal Computer Industry Trends” NCEE (December 2006):1. 25
    • Voices From Pajupyramid. 2. Possible solution to unaffordability for tablets and smartphonesInstead, in terms of accessibility to the internet, tablet types are better than personal computersbecause of the lower price. The sales number of the mobile tablet types was 20 million in 2010,and 66 million in 2011. Yano research institute also has predicted that the number would reach300 million in 2017, about 5 times the number in 2011.64Moreover, smart phone types are muchbetter than the others, and the sales number was 300 million in 2010 and 480 million in 2011.The institute has estimated that the number of smart phones would reach 1.5 billion in 2017,about three times the figure in 2011, and low-end models under $150 would be getting attentionmore and more.65If we apply the case of the gradual diminution of the price of personal computers to the case oftablet types and smart phones, we can predict the same phenomenon as the personal computercase. Also, technologies, competitions, and other factors can decrease the price. As a result, forexample, if the price of smart phones decreases to the level of $112, it can fall under the range inwhich individuals living on under $2 a day can afford smart phones with their 8 weeks ofincome, which means penetration can accelerate explosively. B. Possible solution to illiteracyIt would be possible in the near future that individuals living on less than $2 a day would be ableto buy some devices that enable them to access the internet. Also, the competition of speechrecognition technology would be harder. As a result of the competition, even suffering illiteratepeople would be able to access the internet by buying devices with higher quality and lowerprices.64Yano research Institute, “The summary of a new market survey on tablet,” http://www.yanoict.com/yzreport/181,accessed 13 February 2012.65Yano research Institute, “The summary of a new market survey on smart phone,”http://www.yanoict.com/yzreport/180, accessed 13 February 2012 26
    • Voices From PajuConclusionWe have seen how big the role the internet could play in the changes in politics in many Arabiancountries around 2012. Even in the Western countries, the internet is playing important roles increating new public opinions that can affect their politics and economy. But only about 30% ofthe population in the world was able to affect our society at this time. In short, people who canaccess the internet can have such power. What will happen if people who are forced to liveunder severe conditions come to be able to access the Internet? What will happen if illiteratepeople come to be able to access the Internet? Those miserable people can have the sameopportunities that richer people have. This can shorten the huge gap between rich and poor. Or,the alternate might be able to change the situation drastically. 27
    • Voices From Paju The Costs and Benefits of London Olympics 2012 By Jeong woo, Lee (John) and So kogahara1 Introduction 1.1 The Olympics will be held in London 2012.Today, we have many major events. This year, the London Olympics is carefully watched aroundthe world. Plenty of people are looking forward to watch sports games. 1.2 Londoners will get the benefits but also spend the costs before and after the Olympic periodJournalists and some media estimate the total expenses for the London Olympics is less than theBeijing Olympics. However, many people believe that the London Olympics will bringLondoners to get much profit before and after the Olympic period. The following passages showestimations about the benefits and the costs of the London Olympics 2012.2 Examples 2.1 Advantages of hosting a major event 2.1.1 Raise the profile of city and countryHosting a major event is absolutely competitive for cities and countries. If cities and countrieswere to become host places, it might contribute to their profiles. According to previous majorevents, cities which host the Olympics can be assured of a persistent increase in recognition andtourism. Barcelona, Sydney, Beijing have all seen this from hosting the Olympics. For a country 28
    • Voices From Pajulike China with a controversial human rights record, hosting a major sporting event can be a wayto gain greater international acceptance. These events’raised profile can be important for givingeconomic benefits, such as, attracting tourists and business investment. In the case of most recentmajor event, the London Olympics 2012, London already has a very strong reputation66. 2.1.2 Long Term InvestmentSome major events require long term investments to facilities for the events. The city andcountry will have a legacy of improved sporting venues. Also, cities will usually have to invest ininfrastructure and transport to ensure efficient and reliable transportation. For example, Londonhas already invested in public transport projects around London. This will leave a lasting legacyfor residents of London, especially East London1. 2.1.3 Jobs and InvestmentPlanning to long term investment of the Olympics, the host city or country needs plentyemployees before and during the major events. Also, it is able to revitalize depressed cities, suchas the East London. It is estimated the London Olympics 2012, will create 8,000 full time jobs,and also lead to a boost in economic output of close to £2bn1. 2.1.4 EnthusiasmA major sporting event brings in enthusiasm and excitement for the city orcountry. It willcontribute to the nation to get better health and lead to a rise in volunteerism which promotescivic virtues1. TejvanPettinger, “Advantages of Hosting A Major Event”, Economicshelp, January 24 66 2012.http://www.economicshelp.org/blog/4909/economics/advantages-of-hosting-a-major-event/accessed on February 13, 2012. 29
    • Voices From Paju 2.1.5 Short Term economic benefitsMany people will gather together at London in the London Olympics period. This will providean increase in spending and injection of money into the local economy1. 2.2 Economic impacts of 2012 London Olympics 2.2.1 Benefit from ticket salesThe Olympics require much cost to prepare. For instance, the estimated cost of the LondonOlympic 2012 would be between $15 to 18 billion. This number is the second most expensiveOlympics below the 2010 Beijing Olympics with the cost of $40 billion. However, The Telegraphestimated that the London Olympics has already sold $470 million on the ticket sales. This ticketrevenue guarantees to grow the economy by 0.1%. It is also expected that overseas visitors willspend$1.1 billion during the Olympic Games67. 2.2.2 Expectation of London Olympics 2012The whole of the UK’s economy will get some sort of benefits from the London Olympicsbecause British companies have contributed to the project mostly. The London Olympics acquire30,000 employees for the project. Also, 98% of facilities have been built by British companies andgenerated $9.5 billion value2. 2.3 Costs and benefits of London Olympics Atsushi Sawa, “Economic Impacts of 2012 London Olympics”, World Sports Today,February 2 2012. 67 http://world-sports-today.blogspot.com/2012/02/economical-impact-of-2012-london.htmlaccessed on February 20,2012. 30
    • Voices From PajuAll the various costs and benefits of the London Olympics include both the monetary costs andbenefits and the non-monetary costs and benefits.68 2.3.1 Costs of London OlympicsThere are many monetary and non-monetary costs of the London Olympics. Therefore, manypeople worry about the negative impacts of the costs.The first negative effect of monetary costs is for the facilities.England will spend plenty of money to build facilities, which may only be used to their fullpotential for a short time during the Olympic Games.Second, the investment is short term.Many facilities can only be used for the 3 week duration of the Olympics. After that there is adanger of ‘white elephant projects’ – facilities that cannot be effectively reused such as theMillennium Dome.Third, the opportunity cost.Many reports showed that the cost of the Olympic village could cost up to £1billion. This£1billion cannot be spent on alternative investment schemes like transport and education inLondon.Fourth, the credit crunch is coming. That means the private sector investment has dried up.This increases the cost for the tax payers. Spending of government is already under strainbecause of the bank bailouts and recession.Last but not least, the London Olympic logo is truly awful.They alreadyspent too much money to produce it.However, according to the Sun newspaper itcould trigger epilepsy3. TejvanPettinger, “Costs and Benefits London Olympics 2012”, Economicshelp, March 11, 2011. 68 http://www.economicshelp.org/blog/1390/economics/costs-and-benefits-london-olympics-2012/accessed onFebruary 13, 2012. 31
    • Voices From Paju 2.3.2 Benefits of the London Olympics.On the contrary, hosting the Olympics also hasmany positive effects.The first positive effect ofhosting the Olympics is providingjobs and economic activities.Whenthe time is in recession, the private construction sector is going down. Thegovernment’sexpense can be seen as part of an expansionary fiscal policy.Second, hosting the Olympics boosts the prestige of the country.It may be a ‘once in a lifetime’opportunity to show a greatest festival to the world. Not all things can be reduced to simpleaccounts. This is a good example of non-monetary benefits.The third positive effect of hosting the Olympics is to boost tourism and travel to London,during the Olympics period and after.The fourth one is a lasting legacy of the Olympics. East London has a new rail line (Docklandlight railway extension) and improved public transport, such as improved international railstation at Stratford. This will help to reduce congestion and to increase productivity.Last, many venues will be used after the event;for example, Olympic stadium will remain notonly an athletic track, but also will be used by West Ham F.C. Other venues like the Velodromeprovide a much needed international standard track in the capital3. 2.4 The false economy of the London 2012 Olympics 2.4.1 Economic impact of the London OlympicsFrom the time when the London’s Olympic bid was accepted in 2005, every economistall overthe world has been debating how this short but big event will affect the UK’s economy.Following theglobal recession of the year 2008, more still have been speculating on its impacts.The general consensus shows that the British economy has been intensified by activity in andaround the Olympic Village. Price of houses in Stratford and the surrounding areas have beenincreased significantly (in some cases they have increased by 10 per cent), and almost 40,000 jobshave been created as a direct result of the Games. Stratford City has seen a major revampitself, 32
    • Voices From Pajuwith the construction of the new Westfield which is the largest shopping centre in Europe,constantly drawing trade from tourists and locals alike. In fact this new supermall has proved sopopular, that it saw 160,000 customers on the first day alone4. 2.4.2 The Olympicsis the hope for many people to bring England out of its current slump.Now that the event draws ever closer, and the Olympic hype reaches new heights, what effectwill the 2012 Games really have on the UK’s economy? One thing is for certain; in the midst ofthe Eurozone crisis, many people are wondering, and hoping, that London 2012 will be enoughto bring England out of its current slump for good.We feel that between July and September this year, Britain’s economy will indeed be boosted4. 2.4.3 Olympics’boom is not a continual phenomenonThis short boom cannotbe a sustainable phenomenon. When the Olympics are over,unfortunately, the two months of economic growth that wediscussed above is unlikely to besignificant enough to lift England out of recession in the long term.The London Organizing Committee for the Olympic Games and Paralympics Games (LOCOG)has to make plans to convert the Olympic Village into 3,600 new apartments and homes for thelocal community. The area which is underdeveloped now, this may well prove to be theregeneration needed to attract workers and businesses to the region.However, whether this will be enough to impact the rest of the UK’s economy is something thatremains to be seen4 Daniel Fox, “The false economy of the London 2012 Olympics”, The independent, January 30. 2012. 4 http://blogs.independent.co.uk/2012/01/30/the-false-economy-of-the-london-2012-olympics/accessed on February13, 2012. Michael Carty, “Economic prospects for 2012: Will an Olympic bounce help the UK skirt a double-dip 5recession?”Xpert HR, January 9. 2012. http://www.xperthr.co.uk/blogs/employment-intelligence/2012/01/economic-prospects-for-2012-wi.htmlaccessedon February 13, 2012. 33
    • Voices From Paju 2.5 Economic prospects for 2012 (Potential uplifts to 2012 GDP growth)Before and after the Olympics period, London would get much economic growth in 2012. In thefirst quarter of 2012, the Bank of Englands October 2011 extension of quantitative easing aidedLondon’s economy. Martin Weale estimates that the current program of asset purchases boostgrowth by up to 0.5%,in line with the Banks official calculations.In the second quarter of 2012, London might benefit from an Olympic bounce. Revenue fromadvance Olympic ticket sales have been deferred. ING estimates that Olympic ticket sales areworth £400 million in total, which could have created a 0.2% "Olympic bounce" had they beenincorporated into GDP data for Q2 2011.In the third quarter of 2012, the Olympic will boost their GDP5.3 Conclusion 3.1 Londoners should think about the cost of the Olympics.The Olympics may well make an economic loss in the short term. Some people will say it’s betterto spend the money on health care and education. 3.2 Benefits of the Olympics will make big profit to Londoners.However, there are also many benefits of hosting the Olympics. Furthermore, it is a once in alifetime opportunity to host the most important sporting event on the calendar.Let’s enjoy andtake pride in the London Olympics. 34
    • Voices From Paju Which one is more proper in Korea and Japan, Big Mac Index or Starbucks Index? By Seunghyun Kim (Aeron) and Toru YamashitaThere are many tools and measurements which can evaluate the appropriateness of currencyrates. The Big Mac Index and the starbucks index could be two of famous things however thereare some differences between them caused from change of social concept toward the products.These differences are making the starbucks index much more proper one to adjust advancedcountries such as Korea and Japan.The Big Mac Index was developed in September1986 as a relatively simple way to calculate theover- and under-valuation of currencies againstthe dollar.69 The index is based on the theory ofpurchasing-power parity (PPP). It means that adollar should buy the same amount in allcountries. Therefore the exchange rate betweentwo currencies should move towards theequalized rate. For example, identical productssuch as big Mac hamburgers should haveequivalent prices in every country.70The Big Mac Index has maintained its position asa popular measurement to support analysis of currency rate for several years. Especially inKorea it showed dramatic accuracy during Korea’s economic crisis period from 1997 to 2000.Before the crisis began, the real exchange rate was 850 KRW per 1 USD compared to 950 KRW69 “Ten years of the Big Mac index” The Economist, April 9, 1998,http://www.economist.com/node/397291?story_id=E1_PJSNJT&CFID=5300954&CFTO=, accessed February 2012.70 “Big Mac Currencies” The Economist, April 9, 1998, http://www.economist.com/node/159859, accessed February 2012. 35
    • Voices From Pajuper 1 USD according to the Big Mac index. This over-estimationof Korean won was cleared right after the crisis was started.71However, some economists have tried to develop another indexfor several years. They have argued that the Big Mac index isimproper for some reasons. Most importantly, they haveinsisted that the Big Mac does not have the same value in allcountries because although the Big Mac is considered a delicacyin many countries but people in advanced countries startregarding it as a junk food.72 This is especially true in Korea andJapan. As a result, some economists tried to choose alternativeoptions such as the Starbucks’ Tall Latte Index. In fact, themagazine that introduced the Big Mac Index, The Economist latersuggested the Starbucks Index as a better alternative.73The tables below shows price trends and Index of Big Mac and Starbucks Tall Latte. the measureis USD.The Big Mac Index (2004, 2008, 2011) Index (%)(Year) 2004 2008 2011 2004 2008 2011USA 2.90 3.50 4.07 0.0% 0.0% 0.0%South Korea 2.72 3.10 3.28 -6.2% -11.4% -19.4%Japan 2.33 3.60 4.02 -19.7% 2.9% -1.2%Phillippines 2.02 2.08 2.19 -30.3% -40.6% -46.2%71 “The Usage of Big Mac Index” The imail newspaper, July 28, 2008,http://www.imaeil.com/sub_news/sub_news_view.php?news_id=34623&yy=2008, accessed February 2012.72 “Fast food for thought “The Economist, Jul 30, 2011, http://www.economist.com/node/21524873, accessed February2012.73 “Burgers or beans?” The Economist, Jan 15, 2004, http://www.economist.com/node/2361072, accessed February 2012 36
    • Voices From PajuThe Starbucks Index (2004, 2008, 2011) Index (%)(Year) 2004 2008 2011 2004 2008 2011USA 2.80 3.08 3.00 0.0% 0.0% 0.0%South Korea 2.97 3.01 3.64 6.1% -2.3% 21.3%Japan 3.16 3.48 4.48 12.9% 12.9% 49.3%Phillippines 3.50 3.85 3.60 25.0% 25.0% 20.0% GAP Big Mac vs Starbucks 2004 2008 2011 0.0% 0.0% 0.0% 12.3% 9.2% 40.7% 32.5% 10.0% 50.6% 55.3% 65.6% 66.2%As above table shows, although the indexs of philippines had been stable, but the Big Macindex indicated that the currency value of Korea has been underestimated from -6% in 2004 to -19% in 2011. The index of Japan is similar condition. However the Starbucks index has showndifferent situation especially the currency value of Japan is highly overestimated in 2011. It’s verysimilar conclusion comparing to most of economists’ opinion that Japan’s currency wasoverestimated in 2011.Why the big mac index mismatched to the starbucks index and economists’ common consensusabout the currency value of Korea and Japan? One of possible reasons is that McDonald’s haslots of sales promotions. For example, McDonald’s in Japan has tried to sell a set with a muchcheaper price than before, which will Japan’s rating in the Big Mac Index.74 On the other hand, itis able to assume that the Starbucks Tall Latte’s pricing strategy has kept stability.7574 “Fast food for thought “The Economist, Jul 30, 2011, http://www.economist.com/node/21524873, accessed February2012.”75 “The Usage of Big Mac Index” The imail newspaper, July 28, 2008,http://www.imaeil.com/sub_news/sub_news_view.php?news_id=34623&yy=2008, accessed February 2012. 37
    • Voices From PajuFor analyzing this kind of gap , the most important factor which has led declining of the BigMac’s price is a change of social concept. Especially to fast food, people start regarding it asunhealthy, junk food. They don’t want to spend their money to buy it anymore, so sellers areforced to reduce the price of their product. This means their product drops in value whencompared with Big Macs in other countries. This change has especially happened in advancedcountries.76 For this reason, we can assume that the starbucks index is more proper than the bigmac index in Korea and Japan. In addition, the starbucks index also have strength in the point ofcultural reason, For example, Hindi people view beef as sacred animal. Instead of beef, Big Macsin Hindi countries are made with chicken and heep’s meat. Therefore, it is difficult to preciselycompare Big Macs around the world because their materials are different in different countries.On the other hand, the Starbucks Tall Latte Index is not affected by such cultural reasons orchanges in social concept. The material—and social concept— of the Tall Latte is standardizedaround the world.In conclusion, the Big Mac index is very well known. However, it’s concept is flawed because itsmaterial isn’t standardized around the world. Additionally, the ways the Big Mac’s social concepthas changed in some countries is also very important to explaining the shortcomings of the BigMac Index. The Starbucks Tall Latte Index is more reliable because it is made out of standardizedmaterial and has a standardized social concept in every country it’s sold..76 “Business and human capital-Mc Donalds” The imail newspaper, July 28,2008http://morrisseyhr.wordpress.com/2011/05/10/mcdonalds/http://www.pugetsoundoff.org/blog/erino/15540, accessed Feb. 2012 38
    • Voices From Paju Why did "Occupy Wall Street" demonstrators show up? By Siyung Jo and Woojin Yang“Occupy Wall Street” demonstrators appeared for the first time in September 17, 2011. Theyjustified that major banks and multinational companies are threatening democracy and have thepower related to corruption.77 They also point out that severe economic recession was caused byWall Street. So they desperately opposed the rich who made the unfair global economic order. Let’s go back to 2008 when the global economic crisis broke out by Lehman Brothers’bankruptcy. The US government saved the financial institutions which were on the verge ofbankruptcy by using $900 billion paid by 99% of the US citizens. However, what happened inWall Street? Bankers had a bonus party instead of self-reflections. There was an attempt tointroduce a bill called “the Buffet Tax”. But the bill making the richest pay more taxes did notpass through Congress. In 2011, another global economic crisis hit the world. At that time, 99%of the US people started to lose their temper. On the behalf of 99%, “Occupy Wall Street”demonstrators shouted “why are the innocent 99% of the US citizens taking responsibility for themistakes of the greedy 1% people?” It was not long before “Occupy Wall Street” spread out tomore than 100 cities in the US and 1,500 cities worldwide.Ⅱ. Causes of increasing the gap between the rich and the poor and solutions for reducing thegap 1. Causes of ‘the rich get richer, the poor get poorer’ phenomenonParticipants at “Occupy Wall Street” demonstrations insisted that ‘the rich get richer, the poorget poorer’ phenomenon spread all over the world. Why did the trend happen? A. Deregulation spread over all industries First, Neo Liberalism which has dominated the world economy for the last 30 years OccupyWallSt.org, “About Us”, http://www.occupywallst.org/about/, Accessed February 10, 201277 39
    • Voices From Pajuemphasized competition and effectiveness. As a result, both domestic and international divisionof labor has become common. For example, Apple designs their products at R&D centers in theU.S.A, purchases the electronic parts from companies in Korea, Taiwan and Japan, andassembles them at factories in China. By help of the international division of labor, Apple hasearned historically high profits in the last several years. However, Apple’s subcontractors inChina still struggle to make ends meet. In a pyramidal structure of manufacturing, a topcompany takes most of the profits but a myriad of companies in the bottom always has troublein survival. It is not difficult to witness similar cases happening in one country.During the dominance of Neo Liberalism, the gap between the rich and the poor has beengetting bigger. In the world, 29.7million people have assets worth more than $1million.78 Thereare 6,000million people in the world. Therefore, only 0.5% of the global population takes 38.5%of the total gobal assets. In the U.S. while the top 1% households’ income soared by 275% from1979 to 2007, the bottom 20%’s increased only by 18%.79 The former took 9% of the nationalincome in 1979 but the number recorded 24% in 2007.80 B. Decrease of regular jobsSecond, enterprises seeking high profits to win decreased regular jobs. For example, the revenueof the Hyundai Heavy Industries in 1999 was ₩6,330billion. It was increased to ₩ 45,700billionin 2010. However, regular jobs of the company decreased by an 8% point in the past 11 years.From an employees’ standpoint, there is a huge gap between the regular jobs and irregular jobs.The average salary of the regular jobs in Hyundai Heavy Industries doubled in the past 11 years.But, that of the irregular jobs is the same as the money that regular workers earned 11 years ago.The situation of decreasing regular jobs has made many people think that their social status is Credit Suisse, “Global Wealth Report 2011”(Oct. 2011), p.478 Congressional Budget Office, “Trends in the Distribution of Household Income Between 1979 and 2007”(Oct. 2011),79p12, http://www.cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.pdf, accessed Feb. 2012 William Domhoff, “Who Rules America”,80http://www2.ucsc.edu/whorulesamerica/power/wealth.html, accessed Feb. 2012 40
    • Voices From Pajudeteriorating. According to a survey by Korea Statistics in 2011, 45.3% of households in Koreaanswered that they are lower level of the socioeconomic status and only 1.9% said that they areupper level of that. The middle level was 52.8%.81 If we compare the 2011’s result to the surveyconducted in 2009, the lower level increased by a 2.9% point. Otherwise, the upper and middlelevel decreased by a 0.8% point and a 2.1% point, respectively. In addtion, the global economic crises in 2008 and 2011 hammered the world economy,therefore, the poor got seriously poorer. Financial institutions, which earned much money fromthe Neo Liberalism, suddenly faced the crisis of the Lehman Brothers. If one bank bankrupts, therest of banks which lent money from the bank fall into big trouble. This ‘domino phenomenon’has affects on ordinary people. Because the banks struggled during crises, the poor could notborrow money at lower interest rates. All the governments acted to save the endangered banks.Naturally, the ordinary people became very angry at the situation, which the major beneficiariesof the Neo Liberalism like banks tried to recover and maintained their status using tax ordinarypeople paid. 2. Solutions for the problemsHow can we solve ‘the rich get richer, the poor get poorer’ phenomenon? Are there any solutionsfor this kind of historically complicated problem? Yes, we have to be positive, otherwise, therewill be a disaster in our future. A. Need for another way of economic system instead of Neo LiberalismOne possible solution is to find another way of an economic system instead of Neo Liberalism.Professionals are still struggling to look for a new economic system. Paul Krugman, who is oneof the Nobel Prize winners for economics and a liberal originating from Capitalism itself,insisted that governments should nationalize the financial institutions. It was surprising that Statistics Korea, “the social survey”,81http://kostat.go.kr/portal/korea/kor_nw/2/1/index.board?bmode=read&aSeq=252361 February 16, 2012 41
    • Voices From Pajusuch a kind of harsh criticism about the Neo Liberalism appeared in Wall Street. The new systemcould be located in between Neo Liberalism and Keynesism. But, many people agree with theargument that the new system needs to care for the social stability of ordinary people. If peoplein lower and medium level of social status feel their lives are more stable, not only will theythink that the economic gap between the rich and the poor is disappearing, but they also canspend more money on consumptions. Increase of household consumption can be good news tothe economy as a whole.In addition to strengthening the social stability of people, introducing new regulations forgreedy entrepreneurs is discussed as a good care system for the failure of Neo Liberalism. As“Occupy Wall Street” demonstrators argued, greedy executives of large financial institutionswere designated as main culprits of the 2008 global crisis. They made their employees ignore therisks of their jobs like trading high risk financial derivatives. Not to experience similar cases, thenew economic system needs to equip strong instruments to suppress the greed of someentrepreneurs. B. Making enterprises to reduce part time job What could be a solution to create stable jobs? There can be two ways for this issue.First of all, setting up new guidelines for job security is important. “Job Sharing Movement” inKorea is a good example. When working in “Job Sharing” company, two or three workers canshare the same position in a company, each doing a part of the work. Compensation isapportioned between the workers, thus leading to a net reduction in per-employee income.82Supporters of the movement argue that “Job Sharing” will not reduce the regular jobs. Generally,most companies layoff the irregular workforces in downturn and rehire them during theeconomic boom. By “Job Sharing”, the causes of reducing the regular jobs will disappear.Secondly, promoting medium and small sized enterprises is reasonable method to create moreregular jobs. It is not easy to expand the regular jobs for global conglomerates, since they operate Wikipedia, “Job Sharing”, http://en.wikipedia.org/wiki/Job_sharing February 20, 201282 42
    • Voices From Pajuthe R&D sectors in advanced countries and the production departments in underdevelopedcountries. Instead of the conglomerates, it is easier to increase the regular jobs for small andmedium sized companies. Additionally, raising the level of salaries of those companies willdecrease dissatisfaction of the poor class and enlarge the home market gradually. There will besome positive efficacy if we invigorate small-scale enterprises and tiny ventures.Ⅲ. Worldwide and nationwide efforts are necessary‘The rich get richer, the poor get poorer’ phenomenon threatens the future of Capitalism. WithNeo Liberalism dominating the world for the last 30years, deregulation strengthened the‘winner takes all’ situation and regular jobs have gradually disappeared. Now, worldwide andnationwide efforts are necessary to solve the problem of increasing the gap between the incomeof the rich and that of the poor. We should not only think of another way of the economic systeminstead of Neo Liberalism, but also care for the social stability of the lower and medium socialclasses. The possible solutions are introducing new regulations for greedy entrepreneurs,making enterprises reduce part time jobs, setting up new guidelines for job security, andpromoting medium and small sized enterprises to create more regular jobs. 43
    • Voices From Paju The Effect of Animation Outsourcing on Japan Economy By Takahiro Aoki and Lee Woochan1. Introduction : Outsourcing may destroy the Japanese animation industryOutsourcing has financial advantages. Animation productions can reduce their producing costs.But in the long run, outsourcing may destroy the Japanese animation industry in the future.Prior to the study of the effect of outsourcing on theJapanese animation industry itself, it is necessary tocheck out the basic structure & current situation ofJapanese animation outsourcing. It is well knownthat the industry is struggling to overcomeproblems with production cost cutbacks, whileJapanese animation has been in the spotlightoverseas.Production has increasingly been outsourced inrecent years due to the matter of its cutbacks. Whileplanning, directing and other processes requiringadvanced expertise have remained in Japan, animating,coloring and other simple operations are being shifted toother countries. 8383 Japanese Economy Division, “Japan Animation Industry Trends”, JETRO Japan Economic Monthly (June 2005) : 3. 44
    • Voices From Paju [ Exhibit 1 ] 842. - (1) Current Statuses & Scale of the IndustryIndustry experts estimate that major Asian countries such as Philippines, Taiwan, South Korea andChina are the preferred outsourcing destinations for 2D Animation, Canada and UK are the leaders in 3DAnimation.85 l Global DemandThe continued demand in the global animation market has allowed the Asia-Pacific region tofurther emerge as a premier destination for animation outsourcing. [ Exhibit 2 ] 8684 Ibid. : 3.85 TATA Strategic management group, “Animation and Gaming Industry in India” (Feb 2010)86 Tholons Inc., “The Philippine Animation Industry Landscape” (May 2008) : 3. 45
    • Voices From Paju l JapanThe Japanese animation industrys main business is selling the video program rights,merchandising rights, film distribution rights, broadcasting rights and video distribution rightsto foreign countries. Because DVD sales of Japanese animation in the United States havedeclined, the branch offices of video program manufacturers in Japan have been forced towithdraw. In the industry in 2006, right license revenue was 20 billion yen in size in 2010, has fallen toabout 13 billion yen, overseas market size is estimated to 195 billion yen in 2010.87[ Exhibit 7 ] Japans domestic animation sales(2010) Video Software Sales 246 149 TV animation advertisement sales 1,013 VOD 780 Animation Movie Sales(Top 20)87 http://humanmedia.co.jp/database/PDF/5-1.pdf, accessed Feb 2012. 46
    • Voices From PajuA famous animation director, Yoshiyuki Tomino, thinks the current situation of Japaneseanimation industry is not good. Because more and more individual products are appearing one afteranother and there is a trend that is making light of “studio work.”88 l IndiaThe Animation Entertainment segment in India is estimated at USD 122 Million (2009) and is expectedto show a CAGR (Compound Average Growth Rate) of 20% (2009-2013) to reach USD 253 million by2013. 74% of the animation entertainment work in India is outsourcing work for overseas clients. It isonly 26% of the overall animation entertainment in India, which is for domestic clients. 89[ Exhibit 3 ] 90 [ Exhibit 4 ] 91(Unit : USD Mil.) (100% = USD 122 Mil.)2. - (2) Expected Effects of Outsourcing l Positive Effects88 http://bizmakoto.jp/makoto/articles/0907/08/news035_3.html, accessed Feb 2012.89 TATA Strategic management group, “Animation and Gaming Industry in India” (Feb 2010) : 13.90 Ibid. : 13.91 Ibid. : 13. 47
    • Voices From PajuBasically, the prime-contractors can expect the positive effects of cost-cutback on their producionthrough their outsourcings. At the same time, the subcontractors may anticipate the creation ofnew jobs and development of their skills and techniques.The positive effects of animation outsourcing seem more favorable to the prime-contractors suchas Japan and USA in short term. As a prime-contractor, there is no doubt outsourcing must bethe most attractive method for the cost-cutback, because its main expenses come from labor cost.Therefore, outsourcing is an essential factor to accelerate the base of the animation industry.In addition, it is well known that the animaiton industry is strongly inclined to expand its areasrelated to other parts of industries such as characters, movies, and distribution. Moreover, it isalso a good way for countries to spread out their own cultures elsewhere. Therefore, it isabolutely true that animation outsourcing has been playing a positive role for both companiesand countries. l Negative effectsOutsourcing, the creative work to foreign countries, has negative effects.First, the fear of hollowing out of the animation industry is a serious matter. Japanese animationstudios are outsourcing relatively simple labor works, but to become skilled and creativeanimators, beginners should experience those simple labor works. If the number of skilledanimators continue to decrease, it will lead to land subsidence of the Japanese animationindustry.Moreover, there are problems beyond that, namely the fact that animation production, which shouldbe a team effort by the production staff, has become divided into a relationship between theplanning/development/design stage (production including planning, script, and storyboards), and 48
    • Voices From Pajuproduction that takes place in a factory (animation onward).92 This is more remarkable in overseasoutsourcing than domestic production.Second, quality is a problem. Japanese animation industry has a long history over 50 years. Butthose outsourcing countries such as India and the Phillipines, China, South Korea do not haveenough history. Because of this background, animators in outsourcing countries tend to haveinferior technics. Therefore, outsourced animation films have a quality problem in some cases. Case review of negative effect of outsourcing There are some cases that some of the Japanese animation films are produced in Japan in spiteof expensive production cost. The main purpose to produce in domestic way is to keep product’squality. In this sense, some production companies realize potential risks of outsourcing.Therefore, those companies maintain intergrated production system and do not chooseoutsourcing.[Case 1] Studio GhibliStudio Ghibli is one of the most famous animation production companies in Japan. It has manyhit titles such as “Princess Mononoke” and “Spirited Away.” Studio Ghibli has a uniqueemployment system. Unlike other animation production companies, Studio Ghibli hires full-time employees. Studio Ghibli is trying to improve the quality of its products and keep excellentstaffs, educate human resources by improving the treatment of employees.Moreover, Studio Ghibli has an integrated production system93 which enables all the productionprocess from planning to shooting inside Studio Ghibli.[Case 2] Kyoto AnimationKyoto Animation is also a famous animation production company in Japan. Since the late 2000s,it has many enthusiastic fans. Kyoto Animation has a similar production system. Thanks to theproduction system, staffs have maintained close communication.942. Conclusion92 http://www.japanator.com/the-japanese-animation-industry-is-going-straight-to-hell--6130.phtml, accessed Feb 2012.93 http://www.smrj.go.jp/keiei/dbps_data/_material_/common/chushou/b_keiei/keieichosa/pdf/h18con_2.pdf, accessedFeb 2012.94 http://www.kyotoanimation.co.jp/company/outline/, accessed Feb 2012. 49
    • Voices From PajuAs mentioned above, animation industry needs its outsourcing because of its limited budget. Infact, more and more Japanese animation production companies are outsourcing their work toforeign countries. There is economic rationality and international division of labor seems to bevalid. But this is shortsighted. Actually, animation pruduction companies could reduce theproduction cost by outsourcing. Though, there are some risks such as hollowing out of theanimation industry and degradation of quality in the long run. Therefore, Japanese animationindustry should consider those risks of outsourcing and find a better cooperation with foreignanimation production companies. 50
    • Voices From Paju Aging Population: Impact on the World Economy By Jung Jaeyoon and Shoichiro KitanoI.INTRODUCTIONThe world is entering substantially uncharted waters in terms of the size of its elderlypopulations. Recent declines in fertility rates and increases in life expectancy, combined with thedynamic evolution of past variations in birth and death rates are producing a significant shift inthe global age structure. The number of people over the age of 60 is expected to reach 1 billion by2020 andalmost 2 billion by 2050 (representing 22 percent of the world’s population). Theproportion of individuals aged 80 or over (the so-called “oldest old”) is projected to rise from 1percent to 4 percent of the global population by 2050.95II.SOCIAL IMPACT: DEMOGRAPHIC TREND TO 2050A. DEMOGRAPHIC CHANGEIn 1950, there were 205 million persons aged 60 or over throughout the world. At that time, only3countries had more than 10 million people aged 60 or over: China (41 million), India (20million), and the United States (20 million). By 2009, the number of persons aged 60 or over hadincreased three and a half times to 737 million and there were 12 countries with more than 10million people aged 60 or over, including China (160 million), India (89 million), the UnitedStates (56 million), Japan (38 million), the Russian Federation (25 million) and Germany (21million). By 2050, the population aged 60 or over is projected to increase again nearly threefoldto reach 2 billion.95 David E. Bloom, David Canning and Günther Fink, “Population Aging and Economic Growth”, The Commission onGrowth and Development, Working Paper No.32,The International Bank for Reconstruction and Development / TheWorld Bank, 2008, p.11, http://www.growthcommission.org/storage/cgdev/documents/gcwp032web.pdf accessedFebruary, 2012 51
    • Voices From PajuAlso by 2050, 32 countries are expected to have more than 10 million people aged 60 orover,including five countries with more than 50 million older people: China (440 million), India(316 million), the United States (111 million), Indonesia (72 million) and Brazil (64 million).96Already by 1950, developed countries as a whole had a higher proportion of their populationaged 60 years or over than developing countries (12 per cent vs. 6 per cent). In 2009, developedcountries continue to be at a more advanced stage of the demographic transition and havepopulations that are already showing strong signs of ageing. Furthermore, their populations areprojected to remain considerably older than those of developing countries as a whole. Currently,21 per cent of the population in the more developed regions is aged 60 years or over, whereasabout 8 per cent of that in the less developed regions is in that age group. By 2050, almost 33 percent of the population of the more developed regions is projected to be 60 years or over, whereasthe equivalent proportion will likely be 20 per cent in the less developed regions.97B. THE CHANGING BALANCE AMONG AGE GROUPS AND “DEPENDENT” RATIOIn most populations, the increasing proportions of older persons have been accompanied bysteadyreductions in the proportion of young persons. At the world level, the proportion ofchildren (that is,persons under 15 years of age) dropped from 34 per cent in 1950 to 27 percent in2009. By 2050, the proportion of children is projected to decline by over one fourth and theproportion of persons aged 60 years or over (22 per cent) will, for the first time in history, exceedthat of children (20 percent). During 2009-2050, the proportion of persons whose ages range from15 to 59 will change slightly, passing from 62 percent in 2009 to 58 percent in 205098.The old-age dependency ratio is the ratio of the population aged 65 or over to the population96The Population Division of the Department of Economic and Social Affairs of the United Nations, “World PopulationAgeing 2009”, December 2009, p.26,http://www.un.org/esa/population/publications/worldageing19502050/ accessedFebruary, 201297Ibid., p.2798Ibid., p.31 52
    • Voices From Pajuaged 15 to 64 expressed per 100 population. Although the current differences among major areasin the old-age dependency ratio are expected to persist until 2050, all major areas will experienceremarkable increases in that ratio. From 2009 to 2050, the ratio of persons aged 65 or over tothose of working age is projected to grow from 6 per 100 to 11 per 100 in Africa, from 10 to 27 inAsia, from 10 to 31 in Latin America and the Caribbean, from 16 to 30 in Oceania, from 19 to 36in Northern America and from 24 to 47 in Europe.99Currently, Japan has the world’s highest old-age dependency ratio of 34 older persons per100persons of working age. It is followed closely by Italy and Germany, with ratios of 31. Overthe nextfour decades, the old-age dependency ratio is projected to increase substantially in mostcountries ofthe world. By 2050, Japan, with an old-age dependency ratio of 74, will still have theworld’s highestlevel of old-age dependency, followed by Macao SAR China (64), the Republic ofKorea (63) and Italy (62). In another 16 countries, most located in Europe, the old-agedependency ratio is projected to be higher than 50 older persons per 100 persons of working age.At the same time, in 29 countries or areas, most located in Africa, the population aged 65 years orover is expected to be less than one tenth the size of the working-age population.100III.INFLUENCE ON THE ECONOMIC GROWTHEconomic growth in Brazil, Russia, India and China, the countries so called BRICs, hasbeen adriving force of world economy since the end of cold war in 1989. This trend will continue formore than ten years.After the economic crisis in 2008, these countries play important role to theworld economy. Since the start of the economic crisis in 2007, the BRICs’ contribution has risenand about 45% of global growth has come from the BRICs, up from 24% inthe first six years ofthe decade. The contribution from all emerging marketsas a whole was over 80% (vs. the 2000-2006 average of 45%). The G7 (developed countries including the United States, Japan, Germany,99Ibid., p.36100Ibid., p.36 53
    • Voices From Pajuthe United Kingdom, France and Italy) has onlycontributed 20% between 2005 and 2007.101A.ECONOMIC GROWTH FORECAST1. DEVELOPED COUNTRIESAccording to the report by Dominic Wilson and Anna Stupnytska in 2007, growth of the GDP(Gross Domestic Products) of all the G7 countries and Korea is comparatively low.102 In 2006,sum of the GDP in these 8 countries was $28.9trillion, whereas the figure of 2050 is estimated$70.1 trillion. During 44 years, GDP will be only 2.4 times in these countries. US$ GDP Projections (G7+Korea) 2006 Canad German US$ bn a France y Italy Japan Korea UK US Total 2006 1,260 2,194 2,851 1,809 4,336 887 2,310 13,245 28,892 2010 1,389 2,366 3,083 1,914 4,604 1,071 2,546 14,535 31,508 2015 1,549 2,577 3,326 2,072 4,861 1,305 2,835 16,194 34,719 2020 1,700 2,815 3,519 2,224 5,224 1,508 3,101 17,978 38,069 2025 1,856 3,055 3,631 2,326 5,570 1,861 3,333 20,087 41,719 2030 2,061 3,306 3,761 2,391 5,814 2,241 3,595 22,817 45,986 2035 2,302 3,567 4,048 2,444 5,886 2,644 3,937 26,097 50,925 2040 2,569 3,892 4,388 2,559 6,042 3,089 4,344 29,823 56,706 2045 2,849 4,227 4,714 2,737 6,300 3,562 4,744 33,904 63,037 2050 3,149 4,592 5,024 2,950 6,677 4,083 5,133 38,514 70,122 2050 to 2.5 2.1 1.8 1.6 1.5 4.6 2.2 2.9 2.4 2006101 Jim O’Neill and Anna Stupnytska, “The Long-Term Outlook for the BRICs and N-11 Post Crisis”, Goldman Sachs Global Economics Paper No: 192, December 4, 2009, pp.6-8, http://www2.goldmansachs.com/our-thinking/brics/brics- reports-pdfs/long-term-outlook.pdf, accessed February 17, 2012102 Dominic Wilson and Anna Stupnytska, “The N-11: More Than an Acronym”, Global Economics Paper No: 153,March 28, 2007, p.19, http://www.chicagobooth.edu/alumni/clubs/pakistan/docs/next11dream-march%2007-goldmansachs.pdf, accessed February 17, 2012 54
    • Voices From PajuBased on the data from Dominic Wilson and Anna Stupnytska, 20072.DEVELOPING COUNTRIESOn the contrary, economic growth in developing countries will continue. In 2050, estimated GDPof China is $70.7 trillion,compared with that of $2.7 trillion in 2006, the amount is more than 26times. Also in India, GDP will be $37.7 trillion in 2050 and the figure is 41 times of 2005, which isonly $909 billion.US$ GDP Projections (BRICs)2006US$ bn Brazil China India Russia Total2006 1,064 2,682 909 982 5,6372010 1,346 4,667 1,256 1,371 8,6402015 1,720 8,133 1,900 1,900 13,6532020 2,194 12,630 2,848 2,554 20,2262025 2,831 18,437 4,316 3,341 28,9252030 3,720 25,610 6,683 4,265 40,2782035 4,963 34,348 10,514 5,265 55,0902040 6,631 45,022 16,510 6,320 74,4832045 8,740 57,310 25,278 7,420 98,7482050 11,366 70,710 37,668 8,580 128,3242050 to 10.7 26.4 41.4 8.7 22.82006Based on the data from Dominic Wilson and Anna Stupnytska, 2007 55
    • Voices From PajuDominic Wilson and Anna Stupnytska, 2007Dominic Wilson and Anna Stupnytska, 2007Dominic Wilson and Anna Stupnytska, 2007 56
    • Voices From PajuB.PROMISING INDUSTRIES1. MEDICALThe population of India is projected to reach 1.6 billion by2050. India will become the world’smost populated countryby 2025. 189 million Indians will be 60 or older up from about 63 millionin year 2004. Thisprojection shows the global demand of pharmaceutical drugs will rise in thefuture.1032. HEALTHCAREIn addition, related industries such as medical machineries, skincare, and health foods are alsoprojected to expand their market growthbecause of aging and economic growth in thedeveloping nations. For example, according to the DrAkash S Rajpal, a head of HOSMAC IndiaPrivate Ltd,India presently has a bed deficit of approximately 30 beds as per the WHOrecommendation of four beds per 1000 population. Considering even a 250 bedded hospital onan average, the country would need 12000 hospitals in the near future.104 It means that there is ahuge market for healthcare industries.IV.POLITICAL INFLUENCEIn Japan, where society is aging so rapidly, there are many concerns to be solved immediately.On Japanese newspapers, it is easy to find questionssuch as 1) Howcan thecountry support thepension system? 2) How would Japan deal with the upward expense trend of healthcare system?3) How would Japan maintain the labor force?These questions are not only limited in Japan, butalso applied to the world. Globally, the impact of aging population is so huge, it is necessary tofind solutions as soon as possible, learning from Japan.A. POLICY MAKING PROCESS103Corporate Catalyst India PVT, Ltd. “Report Indias PharmaceuticalIndustry”,p.11,www.cci.in/pdf/surveys_reports/indias_pharmaceutical_industry.pdf, accessed February 19, 2012104 Express Healthcare, "Future Trends in Healthcare Industry in India",http://www.expresshealthcare.in/201101/anniversaryspecial09.shtml, accessed February 23, 2012 57
    • Voices From PajuThe impact of aging on the policy making process, which will expand year by year, must also beconsidered.1.DIFFERENT NEEDS AND DIFFERENT BEHAVIORSThere is a huge gap between elder people and young people. It is important to recognize theirdemands and behaviors. In the aging society, those who have paid for pensions and who arepaying for them might have different opinions and it is sometimes difficult to adjust.Furthermore, in most countries, election systems are comparatively easily accessiblefor elderpeople. In Japan, it is not an easy task to force young people to vote. Consequently, most politicalparties reflect senior people’s needs and young people’s opinions are sometimes put off.2.MORE FOCUSION ON INTERNAL AFFAIRSEven in the United States, its policy would more focus on internal affairs in the future by theaging population. As a consequence, it is possible that the country might cut its defenseexpenditures. The superpower may lose its ability to deal with international conflicts.V.CONCLUSIONIn conclusion, as the shift of global age structure, along with the increasing population andeconomic growth in developing countries, the world as a whole is facing inexperiencedcircumstance in this century. Currently, there is no international organization to deal with thissituation. These issues are dealt by each nation states. Therefore, it is time to establish specializedinternational organization to deal with aging world and make cooperative, borderless policies. 58
    • Voices From Paju CHINESE LUXURY SHOPPING Jaewoo Kwon and Emi Yamazaki According to The European Business Review,“China recently became the world’ssecond largest market for luxury goods with an annual increase of more than 30% in 2010, evensurpassing Japan.Further estimates predict that China will become the largest upscale productand consumer goods market in the world.”105 Current Chinese economic growth is quite rapidand strong, so it seems to make sense that Chinese people buys such luxury goods. However,GDP per capita does not show strong increase because of growing population. Chinese cultureand tradition reveal three reasons to support Chinese luxury shopping enthusiasm.1. Current situation1-1. Comparison of China, the United States, Japan, andSouth Korea The World Bank tracks current data of gross domestic product (GDP) per capita. GDPper capita shows not only a country’s productivity but also its consuming power. According tomacroeconomics theory, basically, all products made in the country are divided to employeesand consumed asinvestments. The products which divided and consumed are same amount ofproducts made in the country, vice versa. Thus, GDP is almost equal to gloss domesticexpenditures.Table1 is a comparison of China’s GDP per capita (constant 5 years)with three other countries:Japan, South Korea and United States.Table 1106GDP per capita (constant 2000 US$) (2006 to 2010)105The European Business Review,Luxury consumer behavior in mainland China: What exists behind the facade of newwealth?,http://www.europeanbusinessreview.com/?p=2418[Accessed February 2012]106The World Bank,2011,GDP per capita (constant 2000 US$),http://data.worldbank.org/indicator/NY.GDP.PCAP.KD[Accessed February 2011] 59
    • Voices From Paju Country Name 2006 2007 2008 2009 2010 China 1,641 1,864 2,033 2,208 2,425 Japan 39,772 40,707 40,254 37,766 39,310 Korea, Rep. 14,469 15,158 15,458 15,463 16,372 United States 38,342 38,699 38,336 36,677 37,527This data suggests that China shows a high growth rate, but the amounts are below the othercountries.Table2 is a line graph which shows GDP per capita change from 1970 to 2010, a long-term data.Table 2107 GDP per capita (constant 2000 US$) (1970 to 2010)This graph indicates that Japan, the United States and South Korea has been increased their GDPper capita since 1970. The three countries’ trends are almost same. On the other hand, China’schange is quite slow and slight. Google PublicData,2012,GDP per capita(constant 2000107US$),http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_kd&scale_y=lin&ind_y=false&rdim=country&idim=country:CHN:KOR:JPN:USA&ifdim=country&hl=en&dl=en [Accessed February 2011] 60
    • Voices From Paju These data suggests one interesting fact. China is not richer than the other threecountries. GDP per capita has increased, but much less than that of the United States, Japan, andSouth Korea. Therefore, not all Chinese people became wealthy enough to enjoy luxuryshopping.Neither the population structure norgrowth is the reason China is a large market forluxury goods.1-2. Advanced Analysis Louis Vuitton Moet Hennessy(LVMH) which has one of the most famous luxury brands,Louis Vuitton, shows the interesting data. It suggests the steep growth of Asian Market(excluding Japan). See this chart below;Table 3Revenue by geographic region (2009-2011):108 Region 2009 2010 2011 France 2,478 2,725 2,866 Europe(excluding France) 3,664 4,236 4,797 United States 3,840 4,611 5,237 Japan 1,683 1,784 1,970 Asia(excluding Japan) 3,850 4,991 6,430 Other 1,538 1,973 2,359 Total Revenue 17,053 20,320 23,659(Unit: EUR million)Table 4 Revenue by geographic and the number of stores:109108LVMH, 2012, Investor Relations Documentation, 2011 Financial documents,http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Reports/Reports_2011/Documentsfinanciers31122011VA.pdf P.2 [Accessed February 2012] Ibid., P2109 61
    • Voices From Paju Region 2011 Stores Sales per a store France 2,866 396 7.237 Europe(excluding France) 4,797 883 5.433 United States 5,237 621 8.433 Japan 1,970 360 5.472 Asia(excluding Japan) 6,430 621 10.354 Other 2,359 165 14.297 Total Revenue 23,659 3,046 7.767(Unit: EUR million)The data indicates Asia is strong market for LVMH luxury goods, more than its base, France.In addition, Daimler AG which provides Mercedes-Benz has succeeded by focusing on ChinesMarket.Table 5 Revenue by region (2009-2011):110 Revenue by region 2009 2010 2011 Western Europe 36,458 38,478 39,387 United States 16,569 20,216 22,222 Other American Countries 3,366 9,112 10,232 Asia 12,435 19,659 22,643 thereof China 4,349 9,094 11,093 Other countries 10,096 10,296 12,056 Total 78,924 97,761 106,540(Unit: EUR million)Both LVMH and Daimler have developed their business by focusing on Asia region, includingChina market.1-3. Related News Chinese enthusiasm on luxury shopping seems to be a good impact for the economy,especially under this hardrecession. However, the impact has negative sides. Daimler AG. Annual Report1102011,http://www.daimler.com/Projects/c2c/channel/documents/2125319_Daimler_2011_Annual_Report.pdf P245[Accessed February 2012]Annual Report2012,http://www.daimler.com/Projects/c2c/channel/documents/1985489_Daimler_Annual_Report_2010.pdfP2[Accessed February 2012] 62
    • Voices From PajuIn January 2012 in Hong Kong, apopular place to shop, there was a protest which showscomplicated feelingsabout Chinese tourists coming to luxury shop. Wall Street Journal Blogreported: “People in Hong Kong went to the streets on Sunday, but unlike previous mass ralliesin the city, this one wasn’t about politics or democracy. The cause: The right to take photos infront of luxuryretailer Dolce &Gabbana. More than 1,000 people showed up outside the Italianbrand’s flagship store on Canton Road after the retailer reportedly prevented people takingpictures of its store front earlier in the week. The protest forced the store to shut at 3 p.m. as thecrowds swelled.”111This news spread via Facebook and made Hong Kong natives lose their temper. The incidentshows the frustration of Hong Kong natives with mainland Chinese visitors, who are playing anincreasingly significant role in the city.Anyway, one big question comes to mind. Why do some of Chinese people want to buysuchextravagantluxury goods?2. The reason for the surge in Chinese luxury shoppingRapid economic development has encouraged Chinese luxury shopping.However, why does acountry with an average GDP per capita of 2,425 USDhave such a strong propensity forconsuming luxury goods and products?112We can find hidden reasons for the mass consumption of luxury goods in Chinese culturalbackgrounds.First,China is found to be a high power-distance culture.113A power-distance culture means thathigh levels of social hierarchy are present in a culture. Therefore, the Chinese are motivated toshow off their power in every possible way. In a consumer context, consumers are motivated to111The Wall Street Journal Blogs, Dolce &Gabbana Photo Ban Sparks Protest 2012, http://blogs.wsj.com/scene/2012/01/09/dolce-gabbana-photo-ban-sparks-protest/ [Accessed February 2012]112The World Bank,2011,GDP per capita (constant 2000 US$),http://data.worldbank.org/indicator/NY.GDP.PCAP.KD[Accessed February 2011]113International Journal of Retail & Distribution Management Volume 38, Issue 6 pp423-442 ISSN 0959-0552 63
    • Voices From Pajuseek higher quality products that represent higher status.Second, the Chinese culture is represented by high-uncertainty avoidance.114 Individuals in ahigh-uncertainty avoidance culture generally hold a higher level of anxiety and lower level oftolerance on any risk when they deal. Therefore, Chinese consumers tend to be attracted by thehigh reliability of foreign products, which offers a guarantee of quality.Third, Chinese Confucian culture still plays an important role in influencing consumerspurchasing behavior.115 “Face saving” is one of the most important factors Chinese consumersconsider during decision-making. The Chinese feel comfortable in the knowledge that productsthey buy give out a desirable image to others.For these reasons, Chinese are willing to pay a lotof money to purchase luxury items.Of course, China’s rapid economic growth has been necessary to make the recent Chinese luxurybuying possible.3. Future expectations for Chinese luxury shoppingChina’s cultural background explains why Chinese consumers are willing to spend a lot ofmoney to purchase luxury items. This Chinese propensity to consume will continue in the futurefor several reasons.First, an open market and the culture of hierarchy will combine to boost the consumption ofluxury items. Since China adopted a free market economy, the imbalance of wealth has grownsteadily. In 2010, the wealthiest 1% of the Chinese population had 41.4% of all nationalwealth.116Hierarchy in China has reinforced.Second, the Chinese high-uncertaintyavoidance tendency will promote consumption of luxurygoods in the near future. This is because it will be very hard for Chinese companies to make114International Journal of Retail & Distribution Management Volume 38, Issue 6 pp423-442 ISSN 0959-0552115Journal of Technology Management in China Volume 3, Issue 3 pp292-306 ISSN 1746-8779116Seoul Economy, Chinese income polarization, http://economy.hankooki.com/lpage/worldecono/201005/e2010052517023469740.htm[Accessed 21 February 2012] 64
    • Voices From Pajubrand-name products such as Chanel in the foreseeable future.Third, global brands bring their users an international image and young Chinese consumerstend to use global brands to impress their peers.117 Young Chinese people follow the latestfashion with the widespread use of the internet. This trend is added to Chinese Confucianculture.Lastly, continuing rapid Chinese economic growth will accelerate the consumption of luxurygoods. Young Consumers Volume 10, Issue 2 pp98-109 ISSN 1747-3616117 65
    • Voices From Paju How the Chinese economy recovered quickly after the financial crisis By Yoshiyuki Suimon and Richie Hsieh1. IntroductionThe financial crisis happened in late-2000s because of the collapse of the complicated financialproducts’ markets. This financial crisis caused a worldwide recession. In that time, manycountries’ economic growth stopped and the bad condition damaged many kinds of industries.However, the Chinese economy quickly recovered relative to the other countries. In this report,we introduce the background of financial crisis and focus on high-tech industry in China.2. Financial crisis in Late-2000s2.1What happened in Late-2000sThe Late-2000s recession was caused by severe global economic problems that began inDecember 2007 and took a particularly sharp downward turn in September 2008. It is said thatthe emergence of “credit derivatives” was one of the causes of the financial crisis.118 It was a kindof derivatives and made from mortgaged backed securities. Such derivatives made the financialsystem complicated and accelerated speculative investment of commercial banks, insurancecompanies, and pension funds. Generally, these corporate investors do not need to take thefinancial market’s risk. However, they started to invest such speculative assets. To make mattersworse, after the bankruptcy of Lehman Brothers on September 15, 2008, a major panic broke outon the financial markets. As the credit derivatives’ prices declined, many large and wellestablished financial firms suffered huge losses and even faced bankruptcy.At the financial crisis, first, the world economy was breaking down primarily because of a lack offinancing. Second, a global recession has resulted in a sharp drop in international trade, risingunemployment and slumping commodity prices. Trade flows collapsed, and companies and Wikipedia, "Late-2000s recession," http://en.wikipedia.org/wiki/Late-2000s_recession, accessed February 2012118 66
    • Voices From Pajuindividuals stopped spending. It seemed clear that halting the slide was critical. The recessionhas affected the entire world economy. A recession is "a period of reduced economic activity".Paul Volcker, former United States Federal Reserve Chairman, asserted that speculativeinvestment played a key role in the financial crisis. After the crisis, he made a rule in order torestrict these speculative activities.119Fig1. HANG SENG Index recovered relative to NKY225 Index[Note] Hang Seng is Hong Kong’s and NKY 225 is Japanese stock market index2.2 Changes of the world economy after the crisisNot only financial systems but also the world economy has changed since the crisis. In therecession caused by the financial crisis, the worldwide economic growth stopped and the badcondition damaged many kinds of industries.120. However, as Figure2 shows, in terms of GDPgrowth, the Chinese economy quickly recovered relative to the other countries. As for stockmarkets, the Hong Kong stock prices obviously rose much relative to Japanese market’s priceeven though both of these are Asian countries.Fig2. GDP Real Growth after the financial crisis Wikipedia, "Volcker Rule," http://en.wikipedia.org/wiki/Volcker_Rule, accessed February 2012119 Floyd Norris, "Crisis Is Over, but Where’s the Fix?," Now York Times, March 2011,120http://www.nytimes.com/2011/03/11/business/economy/11norris.html, accessed February 2012 67
    • Voices From Paju[Note] World map showing real GDP growth rate after the financial crisis (for 2009)3. High-Tech industry in China3.1 National High-Tech zonesIn spite of the global financial crisis, the High-Tech industry in China maintained a sustainedgrowth. Although the growth of National High-Tech zones dropped slightly in 2008, comparedto the international situation, the growth was still very stable. Figure3 shows China’s High-Techexports from 1995 to 2009. After the global financial crisis, in 2010, China’s High-Tech industryhad an output value of 58 trillion Yuan, an increase of 141% over that in 2009.121 The localgovernment now plans to build an ‘Internet Cloud Zone’ with no firewall filter, in order to gaininternational market share in cloud computing. The well-known online payment company,Paypal, has agreed to establish an International electronic commerce center in China, which willboost exports from the nation by helping hardware manufacturers from Taiwan or any otherworldwide internet companies to conduct faster cross-border trade. High-Tech zones havealready marked the sign of technology spot in China. China has been trying to build its SiliconValley for the High-Tech industry. In the global financial crisis, China’s national High-Tech zonesdemonstrated the advantages of making their positions even more important. Therefore,strengthening the role of High-Tech zones and further development and expansion of High-Tech Liumingliang, “The development of China’s high-tech industry contrarian,” http://www.builderrors.com/tech-121news/2011/10/16/the-development-of-chinas-high-tech-industry-contrarian/, accessed February 2012 68
    • Voices From Pajuindustries became a focus of China’s industrial restructuring.Fig3. China’s High-Tech exports from 1995 to 20093.2 Intertwined “Chaiwan”Almost all Taiwanese computer makers as well as hundreds of component producers havefactories in China, making it the most important computer production base in the world. As theIT industry in China and Taiwan became intertwined, some tech types already fuse the pair into“Chaiwan.”122 Although many companies were hit by the 2008 global financial crisis, businesswas back just half a year later. Major personal computer brands, such as HP, Acer, Dell, and Asusare made by Taiwanese companies and manufactured in China. During the period of the globaleconomic slowdown after the financial crisis, these companies continued to thrive with variousforms of financial assistance offered by the Chinese government. The authorities offered manyincentives such as direct charter flights, cross-border Chinese Yuan’s trade settlement services,10-year subsidies on income taxes, and export tax rebates. As IT is becoming a more and moreimportant part of the Chinese economy, the investments in the High-Tech industry have been thelargest in China for three consecutive years. They are now the home of most world’s largestmakers of computers and associated hardware, which produce more than 50% of all chips, 70%of computer displays, and more than 90% of all portable computers.122 “Hybrid vigour,” The Economist, May 27,2010, http://www.economist.com/node/16220584, accessed February 2012 69
    • Voices From Paju4. ConclusionFrom the statistic data and information mentioned above, we can find that the economicsituation of the world is changing. Emerging economies such as the High-Tech industry in Chinaare no longer waiting for the developed economies to take concerted action. They are nowcommitted to sustaining economic growth even during an obvious slowdown of mostdeveloped countries. 70
    • Voices From Paju The Effect of China’s foreign exchange reserves on the World Economy By Sachiyo Urashima and Sangjae LeeChina’s Foreign Currency Reserves Have Been Growing“Foreign exchange reserves are the foreign currency deposits and bonds held by central banksand monetary authorities”123. In 1978, Chinas foreign exchange reserves were minimal, butenough to cover the requirements for its small import bill. However, in 1980s, the export amountrapidly increased and it contributed to a rise in reserves to a peak of US$17.4 billion. However,the economic slowdown at the beginning of the 1990s produced a sharp fall in imports, whileexports continued to rise, producing a merchandise trade surplus of approximatelyUS$9.2billion. Although the trade and current accounts were in deficit in 1990s, the accelerationin inward FDI flows kept foreign exchange reserves rising. After China joined the World TradeOrganization (WTO) in 2001, imports recorded rapid growth, but exports also expandedat a fast pace, while FDI inflows became over US$60 billion a year by the middle of the 2000s. In2006, Chinas foreign exchange reserves reached USD trillion for the first time. After 2 years, thereserves topped USD 1.9 trillion. The rapid growth tendency has continued with someopposite periods and in 2011 foreign exchange reserves had reached USD 3.2 trillion.124Now these reserves have made many problems in China. For example, China cannot effectivelyuse this huge amount of money in investment and they have been strongly criticized.Furthermore China has received high pressure from abroad to reduce its foreign exchangereserves because the current Renminbi Yuen has purchasing power parity equal to othercountries. With this huge amount of foreign currency, China could bring big economicopportunities to itself and also other countries125.123 Wikipedia, “Foreign-exchange reserves,” http://en.wikipedia.org/wiki/Foreign_exchange_reserves, accessed Feb2012124 CIA "The World Factbook" CIA websit, “Chinas Foreign Exchange Reserves and its Effect onthe Global Economy,” http://marketsandculture.blogspot.com/2010/11/under-construction.html, accessed Feb 2012125 柯 隆, “世界一となった中国外貨準備、その意味と問題点性,”http://jp.fujitsu.com/group/fri/downloads/report/economic-review/200610/05-4.pdf, accessed Feb 2012 71
    • Voices From PajuBackground and Impacts of Foreign Currency ReservesThe main source of growth of China’s foreign currency reserves are the Foreign DirectInvestment (FDI) and trade surplus. Until 2004, many other countries established factories orinvested in China to dominate the huge Chinese market. Each year, plenty of companies fromother countries invested more than 5 billion dollars each year126. However, FDI was surpassed bythe trade surplus from 2005. China had exported its products and services explosively. Therefore,the trade surplus led the growth of foreign exchange reserves. At the end of 2008, foreignexchange reserves of China were reaching USD 2 trillion127. Finally, it passed foreign exchange reserves of Japan in Feb 2006 for the first time and kept 1st place up to now. (Graph source: www.seri.org) With its USD 2 trillion foreign exchange reserves, China’s central bank has managed its reserves with ‘stability’ and ‘liquidity’ bases. By diversifying its reserves currencies, it can reduce exchange fluctuation risk. As a way of diversification, China used the US currency as the primary asset. It is possible because the U.S. has low degree126 Analysis of time series of ‘Data stream’ in 2008127 International Economy team, Bank of Korea, ‘Inspection of China’s foreign exchange reserves change’(09.02) 72
    • Voices From Pajuof dependence on foreign trade and also has less possibility of currency changes. In brief, Chinahas focused on stability and liquidity, with considering profitability. To be specific, China has 70%of its foreign exchange reserves with U.S assets, especially with 36% of U.S treasure bonds128. Asof 2008, China became the number 1 country possessing U.S treasure bonds.With possessing proper foreign exchange reserves, there are plenty of controversies. Actually,there is no international standard scale of foreign exchange reserves. Each nation decides it onthe base of the economic scales of the nation, forms of international trade or foreign liabilities.When considering dependence on the high trade, sufficient foreign exchange reserves areneeded. When comparing it to the GDP basis, China has 47.3% higher percentages,compared to that of 27% of Korea, 22% of Japan, 23.5% of India, 37% of Russia etc.Especially compare it with foreign liability, which are generally rated 1 or 2 multiples,China has 4.8 multiples of the ratio. The problem is low profitability of the U.S bond. Even though the U.S bond prices were dropping, China Central Bank insisted on buying them129. Investment of Money Abroad Is Being Expected Now China’s foreign reserve is almost the same as the 2011 GDP of Germany, which is rankedfourth in 2011 GDP all across the world. Furthermore, as mentioned before, they receive strongpressure about using them. They should use the money for investing abroad because of thefollowing two reasons. One reason is that by using the money, China can avoid other countriesaccusations and also they could earn money. Another important reason is that the money can be128 International Economic Team, Statistics of Korea, ‘Treasury International CapitalSystem(TIC, 09.02)129 Excerpted from U.S Treasury Department Reoprt, International Financial Center (www. Kcif.or.kr) 73
    • Voices From Pajuused to support financially weak European countries from default. Even though other Europeancountries, the U.S, and Japan are expected to support them, they had spent their money onhuge companies in serious danger of collapsing to recover from the Lehman Shock’s damages.Therefore, they are short of enough money to do that.However, at the same time, that kind of investment would prove to include critical risk for othercountries. As China’s foreign reserves are huge amounts of money, if China intentionally usesthem to manipulate other country bonds’ rate, the market all over the world would be fatallydamaged. In addition, China could use its position to take advantage in the political field and itcould bring various kinds of distortion and confusion all over the world. Therefore othercountries should carefully watch its activity and continuously discuss these issues with China.From the end of 1978, Chinas foreign exchange reserves had been increasing, and by 2011 theyhad reached US $3.2 trillion. The main sources of growth for them are the Foreign DirectInvestment (FDI) and trade surplus. Also China’s focus on stability and liquidity whileconsidering profitability has enhanced the growth. With this huge amount of reserve, a lot ofproblems have been brought to China. Now China should use the money. By doing this Chinacan avoid other country’s accusations, it can earn money, and also it could also supportfinancially weak countries. However, at the same time, those kinds of investments would proveto bring critical risks for other countries because of their amount. Therefore, China shouldmorally act as a responsible country and other countries should carefully watch its activity andcontinuously discuss these issues with China. 74
    • Voices From Paju Free Trade Agreements By Youngguo Seo and Ryuhei OiThesis:FTAs are mutual agreements between countries that eliminate or reduce tariffs and tradebarriers. All countriesattemptto build strong relationships with each other, since these days theworld is globalized rapidly. All countries should form mutual free trade agreements (FTAs) sinceFTAs will help all countries to develop their economies without tariffs.IntroductionIn recent years, all countries, including Japan, and Korea, have interested in FTA negotiations.When FTAs are conducted in the near future, what influence will be caused onKorea andJapanese economy?In the creation of an FTA in Korea and Japanese companies obtainmanyadvantagesfrom tradefacilitation, tariffelimination, and so on. However, toobtain such benefits, these companiesshould also reorganizetheir organization, supplychain management, utilization of humanresources, etc. On the other hand, companies maysuffer great disadvantagedue to theoccurrenceof a seriouscompetitive condition, through tariffelimination, deregulation, and othermeasures taken by thecountry in the area.Only five countries — Mexico, Chile, Morocco, Jordan and Israel — have concluded FTAs withboth the United States and the EU. In addition, Korea and Japanare one of the world’s largesteconomiesin terms of trade, forming FTAs will help to develop their economics and achievemany benefits ofgreater significance. The following diagramshows the increase of exports andimports after FTAs in five sample regions: 75
    • Voices From Paju 130In this sense, FTAs are indispensable to the attainment of success in economyEconomic effect of Korea – U.S. FTA 1. Intro (current situation of Korea)FTAs have helped Korea, which is country with scarceresources.The economy is raised to rankas the world’s ninth largest trading country. The effect of FTAs has a greater significance fortwohuge economies. Without FTAs, exporters and farmers face high tariffs and other non-tariff tradefencesin foreign markets. FTAs enable exporters to continue a level playing field with foreigncompanies in foreign markets.This article will provide the advantages and disadvantages of FTAs especially on Korea usingexamples to support my ideas. 2. Advantages and disadvantages of FTA concluded with U.S.The Korea-U.S Free Trade Agreement would create huge Korean jobs and opportunities foreconomic growth by immediately removing fencesto Korea services and goods in U.S., which isan important market for manufacturers, Korean workers,and farmers 2.1. Create new-Korean jobs and growthAmerica, the largest economy in the world, is Korea’s largest trading partner and export market. Tae-Hoon Lee, “What benefits will FTAs bring to Korea?”, The Korea Times, July 11, 2011,130http://www.koreatimes.co.kr/www/news/nation/2011/11/116_98295.html, accessed Feb, 2012 76
    • Voices From PajuTrade and investment between Korea and U.S. supports tens of thousands of Koreanjobsincluding the manufacturing, agricultural, and servicesdivisions. This agreement would helpexpand Korean jobs across every divisionof the economy by increasing Korea exports andpullingnew investment into Korea, which will also create new jobs in Korea. 2.2. Level the playing field for Korea businessThe agreement would also create new opportunities for Korean businesses and workers. Koreaexports to U.S. currently face an average applied tariff of 54% for agricultural products and 6.2%for nonagriculturalproducts. 95% ofthese tariffs will be eliminated within 3 years, and nearly allof the remaining tariffs will be eliminatedover 10 years.131The agreement eliminatessignificant market access and non-tariff fencesin Korea to Americangoods and chattels, investment, and servicesincluding strong foodson transparency,competitionthat would make Korea businesses more competitive in U.S. 2.3. Advance global Korea competitivenessImplementing the agreement would guarantee that Koreanbusinessesand workers are not leftbehind as U.S. economies move forward with preferential trade deals that do not include Korea. 2.4. Strengthen animportantpartnershipKorea is a one of important U.S. alliance and a strong partner in enhancingglobal security.Implementing the FTA willimprovethe strategic partnership by increasing the relationsbetweenthetwo countries as theyworktogether to encourageshared goals and values around the world.FTAs are the most important tool for encouraging fair competition. They force foreigngovernments to adoptopen and transparent rulemaking systemsthat would protect Koreanexporters againstunfair discrimination. FTAs also include processesto imposeinternationallyacceptedstandards that would help promote consumer safety and foster aexpectabletradingenvironment.According to the World Trade Organization, there are 283 FTAsin force around the globetoday132.131“What is a Free Trade Agreement (FTA)?”, , The U.S.-Korea FTA Business Coalition, http://www.uskoreafta.org/,accessed Feb, 2012132Kozo Kiyota and Robert M. Stern, “Economic Effects of a Korea-U.S. Free Trade Agreement”, April, 2007,http://www.fordschool.umich.edu/rsie/workingpapers/Papers551-575/r557.pdf, accessed Feb, 2012 77
    • Voices From Paju 133Economic Effect of Japan – Asian countries FTA 1. Intro (current situation of Japan)There are advantages and disadvantages on Japanese companies attributed to FTA in the nearfuture. The surveys show Japanese companies have much interesting tariff ratesbecause thereare some advantages of FTA. But there are still high tariff rates around the world, and tariff ratesseem to be a large barrier for many companies. 2. Advantages and Disadvantages of an FTA betweenJapan and Asian countries.On the subject of Japanese FTA with East Asian countries, the survey inquired if a company’sbusiness occasions would expandwith boosted sales or improved profits, in East Asia when Tae-Hoon Lee, “What benefits will FTAs bring to Korea?”, The Korea Times, July 11, 2011,133http://www.koreatimes.co.kr/www/news/nation/2011/11/116_98295.html, accessed Feb, 2012 78
    • Voices From PajuJapan successful negotiated a FTA with any country in East Asia, such as ASEAN, Korea, andChina, individually or widely (see Chart below).“A 16.4% share of the respondent companies answered “Expand greatly” to this question, and44.1% of the companies answered “Expand a little.” The companies that answered both “Expanda little” and “Expand greatly” represented 60.5% of all responses. The overall ratio for “Expand”for those industries is above 70%. Conversely, only 2.0% of the companies answered “Decrease alittle” and “Decrease greatly.” “No particular change (or with no change by a setoff)” was givenas an answer by 25.8% overall, and “No relation with business” was given by 6.6%.”134The table below shows the Contents of Business Merit and Demerit of FTA135 Share M/D Contents (%) By tariff abolition of a partner country, the competitive power of Merit 54.5 the companys goods in a partner country market increases, and134Akira Kajita, “The Influence on Japanese Companies by East Asian FTAs, and an Overview of East Asian Countries’Tariff Rates” IDE APEC STUDY CENTER Working Paperhttp://, accessed Feb 2012135Industrial Structure Council, METI “2003 Report on the WTO Consistency of Trade Policies by Major TradingPartners”,http://www.apec-iap.org/, accessed Feb 2012 79
    • Voices From Paju sale is expanded (or sale is started newly). By simplification and facilitation of customs formalities, cost reduction becomes possible and leads to an improvement of 42.7 profitability. By tariff abolition of Japan, import costs fall, such as a product, parts, etc. from a partner country to Japan and it leads to an 22.3 improvement of profitability. By improvement in the transparency of the investment related rule of a partner country, smooth business becomes possible and 20.4 the incentive of investment expands. Inflow of the competition goods from a partner country and Demeri entry of a competition company increase, price competition 19.4 t intensifies, and the profit of its company falls in a Japanese market.The results above made it clear that the respondent companies’ concern is focused on theelimination of tariff rates, which is a primary agreement of FTA. The company obtained a tariffeliminationadvantage from not only a partner country but also from Japan. “Adding these twoadvantages, it will come to no less than a total share of 76.8%. Furthermore, there were manyanswers that improvement of customs formalities is aadvantage of FTA, apart from tariff rateelimination itself. It turns out that Japanese companies have high prosepectregarding the tariffissue, such as tariff elimination, and customs-formalities improvement, when an FTA isconcluded with countries in East Asia.”136ConclusionThe conclusions of this paper are as follows. Akira Kajita, “The Influence on Japanese Companies by East Asian FTAs, and an Overview of East Asian Countries’136Tariff Rates” IDE APEC STUDY CENTER Working Paperhttp://, accessed Feb 2012 80
    • Voices From PajuFirst, most companies have a positive view of FTA and expect their business to expandaroundthe world if FTA are agreed in the future. So FTA should be agreed upon through the world assoon as possible.Second, companies think that tariff elimination with partner country by FTA is most importantfor their business advantage. It is also important for companies to make easyclearness of customprocedures, in order to decrease their business costs.Finally, in spite of several efforts at tariff reduction in APEC and the WTO, the tariff rates of EastAsian countries generally are still high, except for a few developed countries. Continuous effortat tariff cut in the area is critically expected for the formulation of East Asian FTA in the future. 81
    • Voices From Paju The Reason why Korean Women undergo Plastic Surgery By Yosuke Suzuki, Youngwan Kim (Johann), and Sungmin Kim (Leo)Plastic surgery is so popular in Korea because of a combination of four different reasons: socialpressure around appearance, social acceptance, ease and cost, and the focus on education.Korean people regard plastic surgery as an ordinary, not a special practice; eight out of 10Korean women over the age of 18 feel they need cosmetic surgery, and a survey found that oneout of two has undergone cosmetic surgery at least once,.137 So what is the reason that so manyKorean women undergo plastic surgery? One reason could be some sort of stress coming fromsociety such as job seeking or pressure to marry. One survey revealed that 69.9 percentof therespondents aged 18 and over living in Seoul and Gyeonggi are suffering stress because of theirappearance.138 In addition, 55 percent agreed that "external factors, rather than internal factors,are more important in defining a persons beauty.”139 There are similar problems in othercountries, but why in Korea are the numbers of people who get plastic surgery higher?First of all, parents’ view of plastic surgery plays a big role. In most countries, parents normallyteach their children to love themselves as they are and do not think of plastic surgery as apositive practice. However, in Korea, parents not only allow their children to get the surgery buteven encourage it.140 . There is one interesting reason for Korean parents to encourage theirchildren to undergo plastic surgery: self-satisfaction for mothers. Sometimes people can seemothers with perfect features who have undergone plastic surgery walking with small-eyedplain-faced children who have completely different features from their mothers. These mothersundergo trauma because their children’s looks are completely different from their own. In orderto overcome this trauma, Korean mothers encourage their children to undergo plastic surgery at137 “Half of Korean Women Have Had Cosmetic Surgery,” Feburary 22, 2007, The Chosunilbo,http://english.chosun.com/site/data/html_dir/2007/02/22/2007022261030.html, accessed February 2012.138 Ibid.139 Ibid.140 “Plastic-Surgery-Happy in Korea,” July 11, 2011, LifeAfterCubes,http://www.lifeaftercubes.com/2011/07/11/plastic-surgery-happy-in-korea/, accessed February 2012. 82
    • Voices From Pajuas early an age as possible.141 Once this cycle begins, it is difficult to stop unless “DNA Surgery,”rather than plastic surgery, become available.Secondly, the cost and ease of plastic surgery in Korea make it popular. In Korea, plastic surgeryis cheaper and more readily available than other countries.142 It is easy to recognize the signs ofauthentic surgery clinics in Apgujeong area, which contains almost half of the 627 certifiedplastic surgery clinics in Korea.143 In addition, not only Korean women but also foreign womenvisit Korea to get plastic surgery. More than 50,000 foreign women came to Korea for cosmeticsurgery in 2009 and the number is increasing every year.144 For example, a New Zealander JackyNg, 21 years old and interviewed by the Korea Joong Daily, said, “Korea is the safest place forplastic surgery and the price is also affordable.” 145 Because of this, about 30 percent of Koreanwomen from 20 to 50 years old, or 2.4 million people, have experienced cosmetic surgery.146Thirdly, lots of Koreans believe that finding a good job happens by being beautiful (wide eyes,high and long nose, pale skin, no fat, etc.). In order to get a nice job, they often try to undergoplastic surgery wishing to be western looking which most Koreans think cool and nice. Thefollowing survey carried out by Saram-In, one of the most popular job sites in Korea, shows thereasons for plastic surgery among job seekers:[Survey chart]147141 “Is Korea Mecca of Cosmetic Surgery?,” August 14, 2009, The Korea Times,http://www.koreatimes.co.kr/www/news/opinon/2011/04/196_50131.html, accessed February 2012.142 Ibid.143 Economy Blunts Korea’s Appetite for Plastic Surgery, January 1, 2009, The New York Times,http://www.nytimes.com/2009/01/02/business/worldbusiness/02plastic.html144 Chinese Make Beeline for Korean Plastic Surgery Clinicshttp://english.chosun.com/site/data/html_dir/2010/04/13/2010041300537.html145 Coming to Korea to see the doctors, Korea Joong Daily, February 26 2011,http://koreajoongangdaily.joinsmsn.com/news/article/html/945/2941945.html146 Ibid147 Survey on Plastic surgery for jobseeker http://hipretty.tistory.com/tag/%EC%82%AC%EA%B0%81%ED%84%B1 83
    • Voices From PajuAccording to the result of the survey, 67.2% of job seekers think that plastic surgery is one of themost important factors when they try to get a job. Because a better appearance makes them moreconfident they will be better able to show their ability without being nervous.The authors carried out another survey carried out in Gyeonggi English Village of femaleuniversity students, preparing for a career as flight stewardesses. The survey shows they arehighly interested in plastic surgery:[Survey chart]● How do you think of plastic surgery? Positive 16 (88.9%) Negative 2 (11.1%)● Have you/your friend ever had plastic surgery? Yes 17 (94.4%) No 1 (5.6%)● Does appearance affect your life a lot? Yes 12 (66.7%) 84
    • Voices From Paju No 6 (33.3%)● which part of your body do you want to undergo plastic surgery? Eyes 3 (16.7%) Nose 9 (50.0%) Body-Shape 5 (27.8%) Others 1 (5.6%)● If you noticed your friend is an artificial beauty and more beautiful than you, how do youfeel? Positive 11 (61.1%) Negative 7 (38.9%)According to the results of the survey, most respondents (88.9%) think plastic surgery is positive.In addition, it is obvious that plastic surgery is very common in Korea. Korean people think thatappearance has a strong influence on their lives. Especially, female university students who arelooking for a job think plastic surgery is very important to be able to improve their chances for amore attractive job.Fourth, plastic surgery is also encouraged by an excessive focus on education. Korea is packedwith students who are rewarded with cosmetic surgery treatments for the hard academic workthey put in.148 Korean parents are famous for their eagerness for educating their children, andspend $20 billion per year to educate and motivate their children to improve their exam scores.149About 94% of the respondents from the English Village survey also answered that the right ageto start to undergo plastic surgery is in their teens or 20s. Moreover, 78% of the respondents saidthey would spend $1,000~$5,000 on plastic surgery. Even young female students who do nothave a job can easily get cosmetic surgery with their parents’ support.148“Know Your Limits – Parents Reward Childs Good Grades with Plastic Surgery,” March 04, 2011, Articlesbase,http://www.articlesbase.com/plastic-surgeries-articles/know-your-limits-parents-reward-childs-good-grades-with-plastic-surgery-4347827.html, accessed February 2012.149 Ibid. 85
    • Voices From Paju[Survey chart]● How much money should be the appropriate for the plastic surgery? ~1 mil. KRW 5 (27.8%) 1mil.~3mil. 9(50.0%) 3mil.~5mil. 4(22.2%) 5mil.~ 0 (0%)● When do you think is appropriate age to get plastic surgery? Teens 3 (16.7%) 20s 14(77.8%) 30s 1(5.5%) 40s~ 0 (0%)An attractive appearance has a positive impact on a person’s career. Korean parents want theirchildren to have more opportunities and therefore think plastic surgery will help them to havebetter future.Plastic surgery is incredibly popular in Korea due to, its social acceptance, ease and cost, parents’passion about their children’s education, and pressure to be good looking. Having an attractiveappearance is important not only for people to achieve a good career but also to be confident intheir daily lives. The young Korean girls surveyed at Gyeonggi English Village saw plasticsurgery as a positively accepted way to develop themselves. However, it is dangerous if peoplestick only to outward appearance because they can lose their identity. Being a beautiful personmeans developing inner beauty as well as having a better outer appearance . 86