Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Dressing Classy But Dancing Cheesy (Dec. 17, 2012)

           Last September 16, 2012, I flew to Incheon airport in South Korea for what would be my twelfth visit to Seoul over a period of twenty seven years.  On that Sunday, there was a strong typhoon that was heading from the Philippines directly to South Korea.  Thus, I was expecting a lot of turbulence in the flight.  Luckily, the storm veered towards Okinawa and the only weather problem I experienced was moderate rains (using Manila standards) on September 17.  During the three days I spent in Seoul, I did not miss a single appointment in the very tight schedule prepared by our hosts: lunch with Philippine Ambassador to South Korea Luis Cruz and his staff; non-deal investment road show with small and medium-scale South Korean business people; informal get-together with university students from Seoul National University; lecture on the ASEAN Economic Community to business students at the Yonsei University; lunch with former Prime Minister Lee Hong-koo; business meeting with top executives of Woori Bank; lecture and dinner also on the ASEAN to South Korean alumni of the IESE Business School in Barcelona, Spain; and meeting with an official of the Korean International Trade Association (KITA).  The ease with which I could travel from one part to another of this vast metropolis without being late to any appointment was a testimony to the impressive infrastructures that characterize this Northeast Asian industrial nation that was transformed from a Third World country in the middle of the last century to a First World member of the OECD, attaining a per capita income of close to $30,000 in record time from less than $100 in the early sixties.   I am fortunate to have witnessed physically this transformation that is often referred to as "the miracle on the Han River."

          It so happened that I stayed in a hotel just a few blocks from the Gangnam district, which according to a report of the Associated Press by Foster Klug and Youkyung Lee on September 19, the day I returned to Manila, is now the most coveted address in Korea, "but less than two generations ago was little more than some forlorn homes surrounded by flat farmland drainage ditches."  The Gangnam district is very symbolic of the miraculous growth of South Korea over the last thirty or so years.  Its name means "south of the river," in contrast with north of Han River where the seats of business and government power have been located, in the neighborhoods of the royal palaces.  Many old-money families still live in the north.  Gangnam represents new money, the beneficiaries of the development boom.  It is believed that many of the new rich who live in Gangnam today got wealthy, not on the basis of the hard work and perseverance typical of most South Koreans, but through real estate speculations.  As the AP report states:  "The notion that Gangnam residents have risen not by following the traditional South Korean virtues of hard work and sacrifice, but simply by living on a coveted piece of geography, irks many.  The neighborhood's residents are seen by some as monopolizing the country's best education opportunities, the best cultural offering and the best infrastructure, while spending big on foreign luxury goods to highlight their wealth."

          Enter new South Korean rock star PSY--aka Park Jae-sang whose "Gangnam-style" dance and song videos have been viewed 280 million times, already deserving Ripley's acclaim as the  most watched video in YouTube history.  The song and dance routine of PSY, already popularized in leading television shows in the U.S., is actually a parody of the lifestyle of the new rich in Gangnam district.  As he said in a show in which he taught Britney Spears his dance steps, his approach is to "dress classy, but dance cheesy."  Those from outside the district perceive the Gangnam residents as exactly the opposite of PSY:  "good-looking because of plastic surgery, stylish because they can splurge on luxury goods, slim thanks to yoga and personal trainers."  This tension between the haves and the haves more is indicative of what David Pilling wrote in the Financial Times, just few days after my trip to Seoul, as the existential angst in which thriving South Korea is wallowing.

          In a commentary in the FT (September 27, 2012), Mr. Pilling observes that "despite the impressive macroeconomic data, more Koreans feel poor, overworked and weighed down by social pressures."  Actually, the description sounds very familiar as applied to other developed countries like the United States, the United Kingdom, Spain and Italy.  As a student of economic development over the last fifty years, I am not at all surprised at the following words of Mr. Pilling:  "But something curious is happening.  Just as South Korea is growing more confident on the world stage--culturally, economically and diplomatically--it is going through something of an existential crisis at home.  Suicides are drastically higher, fertility is perilously low and the electorate is flirting with the idea of jettisoning traditional presidential candidates in favour of an untested IT entrepreneur. It seems an odd moment to be having a national nervous breakdown.  Samsung and Hyundai have established themselves as premier consumer brands from Canberra to Cupertino.  Korea's per capita income of $30,000 is closing in on the EU average of $ 33,000..."

          Its high per capita income has already brought with it the usual downside associated with rich nations.  On the day I flew back to Manila, September 19, The Korea Times carried an editorial entitled "Low-growth era."  The writer announced that South Korea is already expected to experience the least desired quality of an advanced nation:  low economic growth.  On September 17, the Korea Development Institute slashed its GDP growth forecast for South Korea for the whole of 2012 to 2.5 percent, way below the average in Asia and closer to the G7 level.  The problem is that this growth rate may become the norm, not the exception.  South Korea may be bidding goodbye forever to growth rates of 6 per cent or more, which is still being seen in some of its Asian neighbors, like China, India, Indonesia and the Philippines. 

          There may be a way that South Korea can avoid the low-growth era in the same way that it was able to escape the middle-income trap that was the bane of numerous middle-income countries in Latin America and Asia over the last thirty years.  After all, South Korea is the only one among the "tiger economies" of the last century that is still included in the list of emerging markets of this century.  A major reason for this is that its domestic market of 50 million consumers can partly insulate it from global recessions as the world is experiencing now.  Among the tiger economies, it is the least dependent on exports at 53% of GDP as compared with Singapore (211%), Hong Kong (223%) and Taiwan (74%).  More than any country suffering from demographic winter, South Korea must address its low fertility rate.  As David Pilling wrote in his FT commentary:  "Whatever the impressive macroeconomic data suggest, more Koreans feel poor, overworked and weighed down by social pressures.  Chief among their concerns is the stress and expense of putting their children through 'exam hell', even in the knowledge that there are too many graduates chasing too few well-paid jobs.  No wonder Korea's birth rate has plummeted--to 1.23, well below the 2.2 replacement rate and lower even than Japan, at 1.4."

           As I discussed with former Prime Minister Lee Hong-koo, one of the most influential intellectuals in the country, there must be an effort to revitalize family values grounded on the love for children; work-life balance that must be struck by both husbands and wives who may be working; bright and cheerful homes; and especially a reversal of the contraceptive mentality among the women in particular. The South Koreans can harness the spiritual strengths of their two most predominant beliefs, Buddhism and Christianity, to reject consumerism, reminding themselves that happiness in this life is not determined by what one possesses but by one's virtues and values.  This task is easier said than done.  Who knows, the slogan of PSY could be a clue to the solution.  South Koreans may still choose their well deserved status as a First World country by "dressing classy."  After all, they have conquered the entertainment world with the "Korean wave" of telenovelas, superstars like Rain and the Girls' Generation and now the Gangnam stlyle.  At the same time, they should "dance cheesy," that is, take themselves less seriously, discard a little their "palli-palli" obsession with quick and instant results and learn how to laugh at themselves. For those 300,000 or so South Koreans who are in the Philippines, they should learn from us Filipinos how to have more fun in these trouble times.  My Korean friends agree with me that "it is more fun in the Philippines."  Hopefully, when some of them go back to their country, they will teach their fellow Koreans how to relax and to cope with the pressures of modern living.  For comments, my email address is bernardo.villegas@uap.asia