KOREA/IT: Wired for wealth [FINANCIAL MAIL]

By Nick van der Leek

South Korea is one-tenth the size of SA, far removed from the largest markets and, until a couple of decades ago, was ensconced in an agricultural economy.

Yet the country is part of the trillion-dollar club and one of the world's 15 largest economies. It is projected to be the second-wealthiest economy per capita by 2050.

Korea - All connected

How is all this possible for a small peninsula that has as many citizens as SA?

The key factor underpinning South Korea's meteoric rise is that the country has over the past decade emerged as the most wired nation in the world, and is now the global leader in broadband Internet penetration.

The Internet story starts with telephone penetration, which at a teledensity of 48,8 is three times the world average.

Almost 80% of households have mobile phones, (compared with SA's estimated 50% mobile phone penetration, and exceeding the US's estimated 75%).

As recently as 13 years ago, Korea's Internet penetration levels were less than one per 100 inhabitants. In 2001 Korea emerged as the world's fifth-largest Internet market with 26m users, and today it is the world leader in broadband Internet access. Less than 10% of Americans have high-bandwidth connections, compared with more than 50% of Korean households.

Korea is piloting and deploying connections at 1 000 Mbit/s (the UK average is 4,6 Mbit/s). Koreans have the highest speeds and pay the least for broadband connections, capable of downloading movies in minutes.

How to explain Korea's exceptional Internet penetration, when these seemingly don't correlate with the country's income levels? In fact, it works the other way round: the high levels of IT access have stimulated Korea's income capacity.

Local experts list a number of reasons:

* Koreans have their own language, so there is very little "recycling" and "lifting" of content from outside sources.

* Koreans love to read newspapers, despite the increase in online news sites.
[This has been edited and doesn't quite reflect my meaning. The point is Koreans are voracious readers. Thus books, newspapersand online all do well. Part of the reason for this is a very strong focus on both education and work ethic.]

* Koreans are hard working students. Tertiary-level enrolment is almost 70%.

* Population density helps: 70% of Koreans live in the seven largest cities.

Korea's connectivity has had a huge impact on the economy, which until a decade ago rested on its chaebols, a few large family-controlled conglomerates.

Research firm Connected Nation estimates a 7% broadband adoption, such as Korea achieves in a year, would mean a US$134bn boost to the US economy.

In Korea it has allowed the corporate sector to expand globally at a faster pace than would otherwise have happened.

South Korea's largest conglomerate, Samsung, with 2006 revenues of almost $159bn, is the global market leader in more than 60 products. Samsung and other Korean groups are leaders in building electronic devices ranging from semiconductors to blu-ray players and from home cinema systems to mobile phones. And there is a whole range of traditional white goods, such as microwaves and washing machines, in which these companies first made their names and which still contribute a large portion of profits.

They are forced to adopt new technologies because their domestic market changes so rapidly and consumers adopt new technologies so quickly. Koreans replace their cellphone handsets more often than US consumers do.

Korean companies invest billions of dollars in research and development. Their home market becomes their testing ground before they expand these products to the world market.

Korea is a country of early adopters because its citizens have such a high degree of access to Internet technologies. Its companies are always the first to develop a slew of homegrown gadgets to sell to domestic consumers - via the Internet, of course.

E-commerce in Korea is already 20% of the economy, worth about $200bn.

Korea's "hit" products are identified, deployed and modified for world markets. By the time they reach the globe they have been tried and tested, and have gathered huge consumer momentum.

Korea's success holds numerous lessons for SA.

Firstly, Korea relies heavily on local content. All the top 10 websites accessed by Korean users are Korean. Local content differentiates and links local communities. Home-based portals like Korea's Daum portal, for example (a local version of Google or Yahoo), attracts 450m page impressions [per month] and is a world leader in pages per user and session time.

Daum is able to earn money because it holds a captive market that is Korean, and does not risk "diluting" its content from outside sources.

The Korean websites also keep it local by offering a wide range of services - everything from dating to chatting and gaming - which prevents users from using overseas sites like Google.

In SA, more home-grown Web portals like 24.com will attract a greater number of users to the Internet.

Secondly, a vast investment in SA's urban IT infrastructure is required. Korea's Internet resembles one gigantic Intranet (or local area network), where most users access only local sites.

It is also crucial that SA develops an Internet culture similar to Korea's, which has more than 26 000 Internet cafés and a lively gaming industry (65% of visitors to Internet cafés are gamers).

Almost half - 43% - of South Korea's population have blogs, and almost every Korean twentysomething uses a social network on a daily basis. It's an Internet culture that is inculcated at school, at home and at business level.

And it isn't limited to business and education. Housewives generate 45% of domestic traffic doing shopping, buying and selling shares, taking classes and just surfing. Online banking, and the adoption of other forms of technology, are well ahead of those in SA.

Also read: SA'S RESPONSE TO SOARING GLOBAL OIL PRICES

Social Media PowerPlay: Using Facebook to Win Friends and Elections

What do barrack Obama and Helen Zille have in common? Online clout. Especially Barrack.

Duncan McLeod (Financial Mail), please take the mike:

Obama's bid to secure the Democratic Party's nomination for the 2008 US presidential ticket has been notable for more than just his oratorical skills. His campaign will be remembered for something else: its exceptional use of technology, especially the Internet, to get younger audiences excited about politics.

The campaign's website is making extensive use of blogs, social networking sites such as Facebook and MySpace, video streaming, and Twitter, the fast-growing texting and micro-blogging service.

Though the Clinton campaign is also making use of the Web, her popularity online is tiny next to Obama's. Obama has 730 000 "friends" on Facebook, compared with Clinton's 141 000. Republican John McCain trails with about 100 000 "friends". On Twitter, Obama has almost 20 000 people following his updates; Clinton has fewer than 2 500.

Obama's website also has a section encouraging supporters to blog, arrange fundraising events and create groups to connect with other supporters. Voters are using the Internet to talk directly to the Obama and Clinton campaigns in online forums.

Our politicians have a lot to learn.

NVDL: Indeed. This exerpt is from a fascinating and excellent article titled: A Web of politics .
Meanwhile here's more:
Clinton Haters Outpace Obama Backers on Facebook

Facebook was deliberately designed to limit mass communication by its group organizers, so that its users cannot be spammed and then turned off by the service. That's one of the reasons the Obama campaign built its own social-networking tool, which ended up stealing momentum away from the growth of his Facebook group, Sifry says.

Talking change
Clinton denies Obama electability remark

From Yahoo News: Obama currently leads in the delegate count, 1,634-1,500, according to The Associated Press. Because of the way Democrats apportion delegates, Clinton is not projected to catch Obama even if she has a strong showing in the remaining 10 contests.

My Sentiments Exactly

SA is quota-obsessed
by Peter Macadam, North Shore City, New Zealand (letter addressed to and published in Financial Mail magazine)

Gerald Majola, CEO of Cricket SA, must be living in cuckooland if he believes cricketers and sports people in general buy into the quota-obsessed transformation policies of the ANC.

SA is the only country in the world that selects players on ethnicity for national teams. Under normal circumstances, these quota players wouldn't be selected because they're simply not good enough to represent their country.

It seems as if the country will continue its racist legacy of apartheid via the new buzzword of transformation, warmly embraced by those who now achieve greatness due to their ethnicity, not through merit. This quota madness has permeated every facet of the country and its institutions. It is social engineering aimed at unfair advantage for a select few, based on their race.

I'm sure South Africans by and large don't care who represents them at national level, as long as they are the best of the best, not quotas. Why must everything be demographically representative to be acceptable in SA?

Shame on you Majola and all your ANC mates who try to put a positive spin on transformation. It's an unworkable policy that perpetuates the failed policy of apartheid. Second-best never works in the real world, but it seems as if mediocrity rules supreme in the virtual world of Majola and others who embrace the new apartheid called transformation.

NVDL: I think what is happening is white South Africans have lost their common sense. Some black officials (in sports) keep playing the race card, and so whites overcompensate going: "Sorry, what can we do to help." "Well, just step aside and let us take over." As Macadam says, only in South Africa do we allow second best.
The problem lies both with the chancers, and those too dim-witted to realise that given in to this sort of manipulation is neither natural nor right.

Fuel levy also fuels high prices

Hopes that 2008 will bring a respite from soaring international food and energy prices have been dashed in the past few weeks. The oil price refuses to retreat markedly from its US$100 level and international market prices for wheat, maize and dozens of other commodities continue to surge. On Monday alone the price of wheat futures rose by 22%.

The consequences for SA consumers are severe. Bread prices look set to increase by at least 50% over the next few months while motorists will pay around R8,50 a litre - an increase of about R1/litre - when the fuel price changes next month.

More.

Opportunity Stops/Knocks

On Thursday last week I had a conversation with an ex-South African now living in Rochester New York. She's married an American, see, but she said, entering OR Tambo that she burst into tears. Soon after part of the ceiling scaffolding caved in not far from her and her companion, which, one presumes, soothed her somewhat that being out of the country isn't as bad as it seems.

Over dinner with friends she told us about what is sleg about the States (60% suffer from obesity). She said one of the nice things was a service called NETFLIX. You go on the net, choose what you want (for a monthly subscription), and then it gets delivered to your door. You exchange your last DVD for the next set etc. Great idea! Except it would never work in South Africa, because our postal service is...well, fucked up. (See email below from Gunther Linzer to Financial Mail).

It's easy to then get caught up in the whining and whinging about why we can't do what we could do. I remember thinking a few times subsequently what a great idea it was but that ultimately it wouldn't work...and then found out that not only is it possible, it's already been done by a Cape Town based cmpany called PUSHPLAY. See what's possible? I know this because I came upon this article in Financial Mail (what a great magazine):

Pushing people's buttons

Hilary Prendini Toffoli with PushPlay online DVD rentals founder Darren McLean at Col'Cacchio, Cape Town

It's everyone's dream: a constant flow of your personally selected DVDs delivered to your letter box without your ever having to enter a video store. For as little as R89/month.

Not a proposition in a country whose post is notoriously unreliable? On the contrary, says Darren McLean (36), the Capetonian who launched PushPlay online DVD rentals in October last year. In 14 months he's lost fewer than 1% of his DVDs and now has 3 000 subscribers.

For more on this article, go here.
Günther Linzer, via e-mail
Last week's FM had as its centrepiece the SA Post Office (Sapo) blowing its own trumpet about its "successful" conversion from a government albatross to a modern business (Corporate Report November 30).

What is of concern to every South African, though, is the rampant theft that takes place unabated while that old-fashioned commodity called mail is entrusted into the organisation's care. Mail theft appears to be getting worse as time goes by. I have been on the receiving end (if you pardon the pun) of several registered items "going astray", particularly from the UK, where the Royal Mail calls registered post "signed for" mail. The tracking numbers can always be traced up to the point where the items get handed over to Sapo, where they are meant to be checked into the local tracking system with newly allocated numbers. In all instances - and I have proof via my UK contact of several other items that have vanished on their way to SA in the recent past - the mail disappears before it gets scanned into the SA postal system and obviously during the process of being handed over.
All representations have proven to be fruitless and only mealy mouthed replies with some vague declarations have been forthcoming.
In one instance I have been promised reparation(s), which I am still waiting for. In another, recent case, priceless and irreplaceable documents have gone missing and no-one appears to be very concerned about this at the post office.
Since my cases are emanating just from one single source in the UK, I wonder how other "clients" of Sapo have fared of late, and whether their senses have been blunted to such a degree that South Africans are now accepting mail kleptomania as part of our local service delivery - or lack thereof.

Update: Financials Right Now

All Share 29503.690 (DOWN) 0.13%
Gold $803.35 (UP)0.14%
Brent Crude Oil: $96.05

I Had A Dream

The last thing I did before I went to bed was glance through October 26's Financial Mail article (we get them a day before everyone else) that I'd left specifically on my pillow. The article was on page 75, UP TO NO GOOD; a feature on oil prices. I know I talk a lot about Peak Oil. I'm used to people saying I'm being 'negative' or 'pessimistic' or 'doomsaying'. It's reassuring in a way to hear this, because people aren't dumb, and if they need further convincing, it must mean there's a lot of contradictory evidence out there. Believe me, I'd love to be wrong. It will be better for you, me, everyone.

This is why this article on oil prices was a tremendous shock. The pull quote is from Barclays Capital: 'The course is set for the market to take out US$90, &100 and $110 in fairly quick succession.' They see a $300 price happening overnight if the US attacks Iran. $300 a barrel is essentially R27 per litre of petrol.

The same article shows how rapidly things have changed. Between 1970 and August of this year, says the article, oil prices average $32/bbl. In the 1985 to 2003 period, 'they breached $30/bbl only once.' The article assers that 'real acceleration started in 2003.

The good news is, although South Africa is not immune to these energy changes, we are far more so than say the USA, Australia and the United Kingdom. We also have SASOL, which ameliorates our exposure somewhat, and fantastic amounts of coal. But before we start opening up the champaigne, it's prudent to note that many other countires are less fortunate, and will jealousy look on as we get a party styarted, and their's come to an absolute dead end. What is to prevent the US, for example, from annexing our resources, as it has in Iraq. I should qualify that though. For now the US has just, as Jim Kunstler puts it, built a large police station in Iraq to 'protect and ensure access to oil'.

Meanwhil a $1 Brent crude price change translates, the article goes on, to a 6c change. Not a lot at small increments, but these are starting to add up now. You can feel it in food prices, in the energy bill, and soon, we'll see air travel start to feedback these costs and many other industries.

Kak

What really burst my bubble though, late last night, was reading about Jeremy Wakeford of ASPO - yes, this bunch of alarmists and fringe soap box broadcasters are now making it into mainstream magazines. My Peak Oil article in HEARTLAND was published almost 18 months ago (I may get paid for all that this month), and although some people raised an eyebrow, most - including my dad - were dismissive. And then there was this front page headline in the UK paper; The Independent. But to see even the likes of Peak Oil's mascot, M King Hubbert quoted in this magazine, and the admission that oil is a 'finite reserve', I don't know...I felt chills. Because it means we are there. And that means kak.

Crunch

Wakeford puts the post-Peak depletion rate (the total amount of oil supplied to the world after peak) at a 3% year on year decline. Consensus has been coming in from all over - believe me, I have trawled the web - that we're right at, or just past Peak. Some writers feel we hit peak last year. Meanwhile the International Energy Agency forecasts boldly that we'll go to 88 million barrels oil supply a day (worldwide). It seems as though world oil supplies weren't able to go over 85 last year. We're already down from that figure. So what we're essentially seeing, is Crunch Time.

The Dream

But let me share the dream I had. I was driving in my car along a seaside, and was attempting to turn up a road that climbed along a series of steep cliffs. Except, the road had fallen into the sea. I slowed down, and parked on the side of the road, my car immediately getting stuck in thick beach sand.

I followed a flock of people who were enjoying the new coastline. Their children were boogey boarding in impressive surf. I watched from the rocky edge, with the parents. I admired the courage of these children, because some of the waves were truly monsters. It made me get a sense of the incredible potential of our species; that small children had the strength to battle and swim and have fun in the powerful muscles of bending seawater.

But then something happened. The waves got a little bigger, and the kids decided to come in. The problem was, because the shore was a jagged edge, it wasn't a matter of just strolling onto the beach. Once again I was impressed that the kids were able to control their motion as a giant wave rolled towards the cliffs, them crumbled to roiling foam. I watched them grope for purchase. They came close, but then sank down into the churning waters.

Even in my dream I remembered: "I'm an excellent swimmer", and I've swum between rocks and breakers before. The thought flickered through my mind to 'save them', except, as I saw them struggling now, descending again and again under the bending ribs of blue then snowy water, that it was impossible in such a powerful sea. And that's where it ended; with these enormous waved filled with children, rising up higher and higher, breaking and chisseling against the cliffs we were standing on, while the children in them fought for air. It was a battle you implicitly knew they would lose.

And then I woke up.