CEO COLUMN

Published Aug-2019
Subject [No.243] (Neighboring country) Asset called



On July 1st, Japan's Ministry of Economy, Trade and Industry announced a measure to regulate the export of three key components used in the manufacture of semiconductors, smart phones, and displays. As a result, the conflicts between Korea and Japan are deepening. While Japan argued that it was not a retaliatory action against the conviction for the compulsory manpower draft which Japan committed under Japanese imperialism, it removed Korea from its list of export preferential countries because the two countries' trust relationship was severely damaged. As a result, Korea must be screened for up to 90 days for each export. Three parts, such as etching gas (high-purity fluoride gas), used for semiconductor cleaning, are occupied by Japan with 70-90% of total production. Korea is excluded from Japan's White Country, 27 countries that are exempt from the licensing process when exporting those products to Japan, including the United States and Korea. As a result, more products are expected to be subject to its export restrictions.



The Korean government has pointed out the unfairness of Japan's retaliation to the World Trade Organization's Council for Commodities and Trade, but Japan refuses to withdraw its export restrictions and request for good consultation between the two countries. With the expectation that it will be a huge blow to the semiconductor industry, which accounts for the half of Korea's economic growth and 20% of its total exports, there is some objection that Japan's actions will lead to Korea's own development of parts and materials in the long term, and that could adversely affect Japan's economy. Apart from economic gain and loss, the escalating conflict between the two countries has provoked the anti-Japanese sentiment of the Korean people and has spread to boycotts and cancellations of Japanese products. Obviously, Japan's export restrictions are economic retaliation for political reasons, but it is difficult for the WTO to prove this and it will take many years to solve the problem. Therefore, it seems inevitable that the semiconductor industry, which is the support of the Korean economy, will be hit hard. It is also possible to deal with trade retaliation, but it is difficult to damage Japan. There are also concerns that if Japan responds with more restrictive regulations, it could be like China in the US-China trade war.



The compensation problem for the victims who were dragged to the warfield and minefield forcibly under Japanese imperialism is exacerbating the relationship between Korea and Japan so that it is getting more and more complicated and not easily solved. In 2005, President Noh Moo-hyun relinquished additional compensation, concluding that the compensation for the victims of the forced labor and the forced military service was included in the Korea-Japan Bill of Rights Agreement settled in 1965. However, in 2012, the Supreme Court of the Republic of Korea reversed the first sentence by ruling that the victims' personal right of claims do NOT become extinct because of the Korea-Japan Bill of Rights Agreement". The issue of Japan's historical brutality arose again. The process of foreclosure and sale of assets of Japanese companies in Korea which are required to pay alimony for each victim, at least ₩ 80 million and up to ₩ 150 million is in progress. Subsequent judgments of the 990 victims are pending. In addition, the current president Moon Jae-in government reviewed the Agreement on the Comfort Women which was settled by Park Geun-hye , the previous president , and her government in 2015 and it denied the agreement between the two countries, pointing out, "They sacrificed the victims for their interests." This is also interpreted as the cause of Japan's export restrictions.



Kim Young-sam, who was elected the 14th president of Korea, officially announced that "we will not ask the financial compensation on the comfort women to Japan, but to the Korean government budget." in a senior secretary's meeting in 1992. He added, We only want the truth and the apology from Japan, and declared that he would build a new Korea-Japan relationship based on the moral superiority that he would not ask for the compensation anymore. (His policy of no claim was later canceled ....) The current Korean government admitted that it is also a good idea to pay 100 billion won in compensation to the Korean government's budget first and solve the complicated equations of the two companies later. Rather, the national budget, which was 38 trillion won in 1993, has now increased to 469 trillion won. Paying the victims' compensation through the Korean national budget is even better and may be the path to save its face.



In 1972, during the normalization of diplomatic relations between China and Japan, we must recall that China gave up its right to claim damages against Japan by saying, We will repay the grudge by virtue of virtue. The Korean people's demands for Japan's conceding its brutality and guilt and the compensation are understood, but international relations can be even more complex and it is an undeniable history that the Korean-Japanese officials co-signed, on the Agreement saying that we confirm that the problem that has been claimed between the two countries is completely resolved.. It may be unfair for Lee Hae-chan, the Prime Minister (The current leader of the main party) and Moon Jae-in, the chief of the government (the current president of Korea) at that time to deny the comfort women's consultations agreed by the former president.



Korea and Japan have long had economic development in an interdependent system, and they feel that they are valuable partners, perhaps valuable neighbors and our assets, who have cooperated in the security of Northeast Asia. Just as neighbors can be friendly and useful friends, Japan can be a good neighbor if Korean people's perception toward their history is changed. Japan has the most similar lifestyle to Korea, and has almost the same diet as rice, fish, and miso soup. That is why 8 million Koreans travel to Japan every year. Do you think that the next generation should be punished for the crimes committed by the previous generation?



There are three things that we Koreans don't really know: how abundantly we live, how severe the threat of war with the North Korea becomes, and how strong China and Japan are. If the trade conflict with Japan expands, it can predict how much damage will be between the two countries. However, the impact on Korea is expected to be even greater, and an economist once said it was like a compact car crashing in to an 11-ton truck. The characteristics of Japan's industry are that it possesses basic and original technology, and the improvement of activities from the bottom is active by receiving opinions of the field staff. Japan has produced 25 Nobel Prize winners in science. Therefore, there is a prediction that the score result of the trade conflict will be 25: 0.



If Koreans focus more on the time since their independence from Japan than Japanese occupation, Japan and Korea will be good neighbors and friends. As the South Korea says, We are good friends, even if negotiations with Kim Jong-un from the North Korea and Xi Jinping from China are completely broken, Korea should approach Japan not emotionally, but strategically and use it well for the development of domestic industries.



First, Korea should regard Japan as a precious country that can share value with Korea. We can make friends and get married by choices but geopolitical neighbors cannot be selected. The two countries have to work together, perhaps a liberal democratic country, a market economy and security cooperation, and perhaps go to a symbiotic stage. Since China, Russia and the North Korea surrounding the Republic of Korea are both communist and dictatorships, it is difficult for the South Korea to share the values of human rights, democracy and market economy with them. In the past, the friction between Korea and Japan was limited to the history matter, such as colonial rule, but it is convincing that the Moon Jae-in government is convincing not only the basic values but also the security field and the collapse of trilateral cooperation. Unfortunately, Korea's defense white paper no longer has the ____expression____ sharing basic values of liberal democracy and market economy with Japan, and Japan's National Defense Plan does not state that As an ally of the United States, Korea is the nation that persues the same interests with Japan. anymore.




Second, Korea has used Japan very well and Japan has been very helpful in its economic development and industrialization. Korean companies with little technology and experience was able to grow rapidly with technology alliances and support with Japanese companies. New Nippon Steel helped POSCO, NEC and Sanyo Electric helped Samsung Electronics, Mitsubishi Motors helped Hyundai Motor, and so many japanese companies helped LG Electronics. They were able to obtain manufacturing knowhows and various technologies from the Japanese companies, thus improving their quality and price competitiveness as domestic and export companies. Not only large companies but also small and medium-sized companies in various industries are running to Japan to learn and benchmark quality management, 5S and JIT. Samsung's semiconductors are considered to be ahead, and its steel, shipbuilding, and automobiles are regarded as almost equivalent to finished products, not the parts industry. Japan is located within 100km of Korea, Japanese is in Chinese character culture, and even though the fundamental values are different, it is a seemingly similar ritual structure, so it is able to learn quickly and grow rapidly.



Third, Korea has effectively used Japan far ahead in the modernization process. The judicial and administrative systems of Korea are mostly imported from Japan, and the names and terms of management, economics, sociology, and statistics are translated from Japanese into Korean. Japanese translations of foreign literature and scientific books were performed first, and we translated them back into Korean. Korea has achieved modernization by efficiently utilizing what Japan introduced to Korea from the West such as TV programs, cartoons, movies, etc, and the value of Japan in neighboring countries is very high.



Fourth, Korea can easily find out what to obtain and throw away using Japan's economic and social perspectives. The Korean economy has entered a low-growth period due to the government's economic policy, which emphasizes distribution rather than growth, and the social structure of aging and low birth rates is changing rapidly. Korea can get the solution from the Japanese case. Korea can find a solution by benchmarking Japan, which runs 10-20 years ahead in corporate management and national operations, as well as stocks, real estate policies and various career choices. Since Korea can find its past in China and see the future in Japan, Korea will have to find a way forward through Japan.



Korea should learn about Japan's cleanliness, its sense of public order, its law-abiding spirit, and the kindness and consideration of Meiwaku. In particular, Korean entrepreneurs must learn Japanese honesty, trust with customers, and thorough quality. Maybe, by benchmarking their corporate management minds and values, not the sales and profits of product exports, one day, we must move forward to become a global company with a competitive edge. Samsung is Korea's best and the world's best company, and its 3rd generation owners, Lee Byung-chul, Lee Kun-hee and Lee Jae-yong, all graduated from the universities in Japan. In order to run their company, they may have learned the above things while studying in Japan.



CEO BAIK, SUNGCHUN 

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