Archives for June 2008

Two More Korean Law Firms Merge

by Brendon Carr

On the heels of last month’s merger between Horizon Law Group and Jisung Law Group, today I get news that two more mid-sized Korean law firms have decided their hope for survival and prosperity in the marketplace lies in achieving greater mass. DeRyook International Law Firm and AJU International Law Group have announced their own mergers as well.

DeRyook and Aju in total have 90 attorneys, plus a few dozen allied professionals including foreign legal consultants, patent attorneys, and advisors (former government officials). Thus, this can be seen as part of the larger trend in the marketplace toward size. For several years now, it’s been obvious that 100 has become the smallest size firm considered credible by Korean business, the Korean power elite, and many foreign investors. So 100 has been the target toward which so many firms have built their merger activity.

But as more firms achieve the century mark, not all of whose members can actually do the kind of sophisticated business work which used to be the exclusive province of the 100 Club (but I’m not commenting here on the skill levels at Horizon, Jisung, DeRyook, or AJU), one can expect that size will continue to stand as a proxy for quality—with the new cutoff falling somewhere around the 200 level.

And smart consumers of legal services know that size doesn’t guarantee quality at all. Sadly, very few Korean enterprises are smart consumers of legal services, although it is definitely much better now than when I started my career in 1997. But that’s for another day.

June 20, 2008 | Filed Under Legal Market | 6 comments

Seoul Housing Bubble Deflating: Hope For Soft Landing

by Brendon Carr

It looks as if the bubble is popping, or at least deflating somewhat, in the Seoul housing market. I don’t know if that’s a good thing or a bad thing. Prices are definitely too high, but of course as a homeowner (thankfully, not a highly-leveraged homeowner) I’d rather the prices remained steady.

The Maeil Kyungjae reports that while I’ve been bleating about Korean apartment prices being too high, they’ve started falling. At least, in neighborhoods better than mine.

Here’s some select bits I’ve translated from Korean to English for the benefit of Korea Law Blog readers:

Where is the “Floor” for Expensive Apartment Prices in the “Bubble Seven”?
Medium- to Large-Size Kangnam Apartments Projected to Drop Another 10-20%

Chart:

[Prices compared Nov. 2006 to June 2008]

Daechi-dong Mido 2-cha Apts (181.8 sq. m.): W3.05 billion -> W2.45 billion (-W600 million)

Daechi-dong Gaepo Woosung 1-cha Apts (214.8 sq. m.): W3.7 billion -> W3.15 billion (-W550 million)

Bundang Geumgok-dong Athena Rex (218 sq. m.): W1.55 billion -> W1.29 billion (-W260 million)

Mok-dong Shinshi Gaji #4 Complex (181.8 sq. m.): W2.05 billion -> W1.625 billion (-W420 million)

“It is difficult to foresee price increases unless there is some striking news like a change to the debt-to-income ratio regulations,” said UNR Consulting Representative Director Sang-Eon Park. “Shrinking demand means an additional 10-20% price decline seems possible for medium- to large-sized apartments.”

I have to believe that eight-buck-a-gallon gas (W2000 per liter)—and Koreans’ inexplicable preference for bloated black sedans that get 15 mpg—has something to do with these falling housing prices. The “Bubble Seven” story reports that satellite-city apartments in Bundang and Yongin are off 15-20% in June. My law partner Doil and I have had a project that has required us to drive out to the Kyeonggi Province city of Kwangju, and the roads have been oddly clear—Doil says it’s like being Will Smith in “I Am Legend” (except that we’re in an Equus—blech).

The Doctor Housing Bubble blog has already examined how gas prices and the stark increase of commuting cost has ravaged California’s exurbs. And that’s at just four bucks a gallon. It’s my belief that the Korean housing bust will be felt most acutely in Bundang, Yongin, Ilsan, Pangyo, and the other satellite cities of Kyeonggi Province, whose residents must commute to Seoul.

Anyway, back to Seoul… Strangely, though, while the prices of these “large” (which is, of course, a relative term—181.8 sq. m. probably yields only 1500 sq. ft. of usable living space, assuming a 75% ratio) apartments apparently drop by such large amounts, the cost of renting in Kangnam—and other areas perceived to have good “neighborhood facilities” (i.e., cram schools)—is going up:

In particular, in the Kangnam’s Daechi-dong and Dogok-dong, which are swimming in hagwon, there has been a rush of inquiries from apartment hunters in advance of the summer school holidays.

Chonsei lease price for a 112 sq. m. apartment in the Daechi-dong Mido 1-cha apartments has gone up by W10 million to the W305-375 million range, while an 85 sq. m. “A"-type apartment at Dogok-dong’s Dogok Rexle has gone up by W5 million to between W325 million and W340 million.

It’s much the same in Nowon-gu’s Chunggye-dong, which is said to be the “Daechi-dong” of the Kangbuk area.

The Konyeong 2-cha apartments, where the neighborhood is chockablock with hagwon, the popular 92 sq. m. apartment lease price has advanced by W22 million to reach the W155 million level.

Furthermore, the 105 sq. m. apartments, which share popularity with the 92 sq. m. size, are also transacting W15 million higher, at W170 million.

Summer “vacation”, what a cruel, cruel lie that is! In Korea, it’s just eight extra hours of cram school education.

I don’t send my children to hagwons (other than a taekwondo class, which is mainly just for health) because I think Korea’s cram school environment is cruel to children. Also, since I spend so much on tuition at the Yongsan International School of Seoul, I don’t actually have any money left over to send them to hagwon even if I wanted to do so.

Still, based on this weekend’s reports, I know what to do to help maintain or increase the price of my own (thankfully close-in) apartment: Open a hagwon—or, better yet, open two of them right next door to each other.

June 15, 2008 | Filed Under Economic News, Real Estate | 11 comments

Korea Left Out of Condi’s List of American Allies in Pacific

by Brendon Carr

American media may have missed it, but you can bet your sweet bippy the Korean press—particularly the conservative press like the Chosun Ilbo—noticed the subtle way Secretary of State Condoleezza Rice described the Republic of Korea as somewhat less of an ally to the United States than Asia-Pacific stalwarts Japan and Australia:

U.S. Secretary of State Condoleezza Rice calls South Korea a “global partner” but Japan and Australia “allies” in an article in the July-August issue of bimonthly journal Foreign Affairs, in what appears the latest manifestation of a subtle shift in America’s regional focus.

In a cover story entitled, “Rethinking the National Interest, American Realism for a New World,” Rice writes, “Democratization is also deepening across the Asia-Pacific region… This is expanding our circle of allies and advancing the goals we share.”

“We enjoy a strong, democratic alliance with Australia, with key states in Southeast Asia… and with Japan—an economic giant that is emerging as a ‘normal’ state, capable of working to secure and spread our values both in Asia and beyond.”

As for South Korea, it “too, has become a global partner whose history can boast an inspiring journey from poverty and dictatorship to democracy and prosperity,” she adds.

America’s great friends Russia and China are usually described as US “partners” in this kind of diplospeak, so Rice’s description ought to send a chill down the spine of everyone in Korea who cherishes the “alliance forged in blood” and the special treatment—in military affairs and in trade affairs too—that Korea has received for 50 years as a result.

I wonder how the latest beef protests may figure into US policymakers’ evaluation of the relationship. I don’t think Rice would have been writing for Foreign Affairs with knowledge of the late May events in Seoul. Yes, the Korea-US Free Trade Agreement is dead, dead, dead (good job, guys!), but is the dysfunctional ROK-US “alliance” also dead? Korea is in a bad neighborhood with China, Russia, and North Korea. If the US is ready to wash its hands of the Republic of Korea as an ally, the tax burden for Korean taxpayers is about to spike higher—because the free US defense umbrella is worth a hell of a lot to this country.

A factor leading up to the Korean War was Secretary of State Dean Acheson’s January 1950 speech where he left Korea out of the description of the American defense perimeter in Asia—his list of Asia-Pacific allies, if you will. These are interesting times indeed.

June 10, 2008 | Filed Under Free Trade Agreement, Hub of Hubs | 8 comments

Angry Car Critic Reads Kia the Riot Act

by Brendon Carr

Apparently not everyone is as pleased with their consumer experience as I am. Just got finished reading UK motor critic Jeremy Clarkson (Top Gear)’s scathing review of the Kia Sedona. I wonder if the guy has a drinking problem or something. I got halfway through the meandering article before coming to anything to do with the Sedona.

June 3, 2008 | Filed Under Personal | 3 comments

A Decent Economy Class Experience on Korean Air—Go Figure

by Brendon Carr

On this latest trip to San Francisco, since I’m working against my own marketing-expense budget, I booked economy class and used accrued frequent-flyer mileage (30,000) to upgrade to business (on Korean Air, “Prestige Class”) for the SEL-SFO leg. Coming back today, I flew economy because it’s “high season” in the States and they wanted 45,000 miles for the upgrade. I’ve got a lot of miles accrued, but that’s rich for my blood.

Anyway, as it turns out my experience in economy class was surprisingly better. The airframe for both legs of the flight was the Boeing 777-200. The seats in business are excellent, allowing full recline for sleep. Ordinarily I need the legroom, and find economy to be way too cramped—especially given that Koreans generally are not that tall. Take a knee-knocking ride on a Korean inter-city bus sometime and see what I mean.

On the Korean Air 777-200, they’ve adopted a seat pitch that leaves enough legroom for a 6’ 1” American male like me. Each seat has its own video screen in the seat-back, and—and—a power port for laptop power adapters as well as an Ethernet port. (Sedgwick, if you read this, you’re right—I wasted W50,000 on that MacBook airline power adapter.) Internet service was not active on my flight, but the existence of the Ethernet port points to a future welcome development. (Will Internet be free on KAL? Korea is the “world’s most wired” country, after all.)

The business class flight from Seoul to San Francisco last week was made miserable by the fact that I was seated next to a gassy Korean businessman whose ceaseless farts were eye-wateringly foul. Twelve hours turned away from that dude with my palm cupped over my nose and I was in no shape for my meetings. He also took his shoes off, and those socks were no treat either.

June 2, 2008 | Filed Under Personal | 6 comments