The Korean conundrum - Editor's Note - Editorial

Chief Executive, The, April, 2003 by William J. Holstein

With so much attention focused on the Middle East, an American CEO could be forgiven for being confused by the headlines coming out of a different part of the world--the Korean Peninsula. There have been anti-American demonstrations in South Korea even though we have 37,000 troops protecting the country. The South Koreans have elected a president, Roh Moo Hyun, who displays skepticism about the U.S. role. North Korea, for its part, has restarted its nuclear weapons program, lobbed missiles into the sea and intercepted a U.S. aircraft.

I've been traveling to South Korea for 15 years and recently moderated a panel discussion about the Korean situation at the Asia Society in New York. Here's a distillation of what I think you, the CEO, should know.

South Korea is very much open for business. Korean technological strength is surging and the country boasts the highest broadband penetration rate in the world. Economic growth this year will be a healthy 5 to 6 percent. The Koreans are giving the Japanese fits in semiconductors, electronics and autos. And the Koreans are hungry for U.S. corporate links to help them move up the ladder.

One key for the American CEO, however, is not to rely on executives or advisers who have had experience only in Japan or China. The Korean mindset and emotionality are so intense that sending in an executive from Tokyo is about as effective as sending one in from Tallahassee. Japan's physical proximity doesn't mean that executives based in Tokyo understand Korea.

In many cases, you should probably manage Korean operations directly from the United States. Because language capability is important, Korean-Americans or Koreans with U.S. educations are helpful.

An American CEO needs execs who understand why the Koreans are so highly nationalistic. They've had to be that way to survive in the face of conquests from China and Japan. Today the South Korean sense of confidence is surging because they are enjoying a sharp recovery from the 1997-1998 Asian economic crisis. Their dream is to gradually establish an economic confederation with the North and unify over a period of decades.

The people in Seoul leading the charge want to redefine their relations with the Americans from one in which we're big brothers and they just take orders. Wanting a more balanced relationship, however, isn't necessarily "anti-American."

The South Koreans believe the North can be managed. In their view, a desperate North is trying to use saber rattling to win money, food and fuel from the Americans. Along with the Chinese and Japanese, the South Koreans see no chance that the North will actually use its nukes.

So, incongruous as it may seem, it's possible that the South Korean economy can continue to flourish despite all the headlines. The South Koreans are still comers in the world. That's what American CEOs need to understand about what is happening in the Land of the Morning Calm.