Voices from Paju

2012

Research and Reflections

on the Global Economy

Voices From Paju

Voices From Paju

2

Table of Contents

About the Authors ...................................................................................................................................... 3

How the Recent Paradigm Shift in Electricity Affects the Global Economy

by Kenzo Sakamoto and Jongkwon Ham ................................................................................................ 4

Effects of Fair Trade Coffee on the Global Economy

By Katsuya Ishigaki and Hojaee Lee ........................................................................................................ 9

The Effect of Chinese Taste Change

By Toshiharu Kamada and Jongmin Kim .............................................................................................. 13

Camu Camu Fruit

By Hiroyuki Kaji and Hisami Natsume ................................................................................................. 17

The Possible Impact of Speech Recognition Technology

By Toshiharu Kamada and Hensu Jang ................................................................................................. 22

The Costs and Benefits of London Olympics 2012

By Jeongwoo Lee and So Kogahara ........................................................................................................ 28

Which One is More Proper in Korea and Japan, Big Mac Index or Starbucks Index

by Seunghyun Kim and Toru Yamashita ................................................................................................ 35

Why did “Occupy Wall Street” Demonstrators Show Up?

By Siyung Jo and Woojin Yang ................................................................................................................ 39

The Effect of Animation Outsourcing on Japan’s Economy

By Takahiro Aoki and Lee Woo Chan .................................................................................................... 44

Aging Population: Impact on the World Economy

By Jung Jaeyoon and Shoichiro Kitano .................................................................................................. 51

Chinese Luxury Shopping

By Jaewoo Kwon and Emi Yamazaki ..................................................................................................... 59

How the Chinese Economy Recovered Quickly After the Financial Crisis

By Yoshiyuki Suimon and Richie Hsieh ................................................................................................. 66

The Effect of China’s Foreign Exchange Reserves on the World Economy

By Sachiyo Urashima and Sangjae Lee .................................................................................................. 71

Free Trade Agreements

By Youngguo Seo and Ryuhei Oh ............................................................................................................ 75

The Reason why Korean Women Undergo Plastic Surgery

By Yosuke Suzuki, Youngwan Kim, and Sungmin Kim........................................................................ 82

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About the Authors

On a cold winter morning in early February 2012, business professionals from Korea,

Japan, and Taiwan descended on Gyeonggi English Village in Paju, South Korea. The 31

writers featured in this collection come from a variety of industries—electronics to automotive,

ship-building to financial—but are all among the leaders in their fields. They were accepted to

the University of Michigan’s Ross Business School Global MBA program, and have committed a

year and a half to their studies.

Their three weeks at English Village was the first step in this journey, a last chance to

fine-tune their English skills—writing, reading, speaking, and listening—before beginning an

intensive business-focused curriculum. The essays in this book represent the culmination of

their writing classes. Most of the writers—though highly intelligent and good English

speakers–came in with limited experience in writing English, especially academic papers. The

quality of the essays they were able to produce is a testament to their talent and hard work. On

a personal note and speaking as one of their teachers, they were the most energetic, focused, and

intellectually curious group I’ve seen pass through English Village. They will be missed.

-Alex Diamond, Paju, February 27, 2012

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How the recent paradigm shift in electricity

affects the global economy

by Kenzo Sakamoto and Jongkwon Ham

Introduction

A Massive 9 magnitude degree earthquake struck off Japan’s northeastern area on March 11,

2011. Because of this big earthquake, Fukushima nuclear power plant was severely damaged.

After the tragedy accident, the Japanese government implemented a variety of electricity saving

plans.

On September 15, 2011, a freak blackout plunged Korea into darkness. The sudden

power outage affected offices, baseball stadiums, and shopping malls. Korea faces a constant

threat of major power outages in the next four to five years1.

I. Saving electricity

A. Black out in Korea

1. Detail explain of Black out accident

The blackout paralyzed the entire country of Korea. The sudden power outage began

around 3 p.m. and the national emergency management agency reported 944 phone calls from

people who were trapped in elevators. Traffic lights went out and mobile phone services were

halted after power was cut from base stations in Korea2. It happened because of the sudden

demand expansion. The Ministry of Knowledge Economy in Korea put the blame of the massive

blackout on a false report by KEPCO (Korea Electric Power Corporation) about the country’s

electricity reserve level.

2. Japan Government’s policy

Tokyo electric power lost a third of its generating capacity when the earthquake struck and

power stations automatically shut down. Japan’s chief cabinet secretary said the government

1 KBS special documentary film “2011 The warning of winter blackout” broadcasted by KBS on Dec. 11.2011. 2 http://english.chosun.com / “Freak Blackout plunge Korea into darkness” Sep. 16. 2011.

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would look at the option of a power cut by rotation. The lights in office buildings and hospitals

turned off and commuter subway trains stopped.

However, the Japanese public overcame the unprecedented disaster with amazing

orderliness. The source of orderliness appears to be a deep-rooted trust in the Japanese

government. Japanese people still have confidence in what the government tells them.

B. The Cause of Power Shortage

1. Seasonal demand expanding

From 1990 to 2000 because of air conditioner supply, there was an increase in summer

electricity demands. However, recently more demand increase is due to heating system

translated from gas to electricity. In addition, the average low temperatures during winter time

are another reason3.

2. Commercial demand

Due to the industry structure changes, the service industry has an important role in the

recent global economy, and commercial demand of electricity is highly expanded. The weight of

service industry among the industrial products in Japan is almost over 38%4. Commercial

demand’s range of fluctuation is so wide that a stable supply plan is hard to establish.

3. Continuous occurrence of new power demand

The increasing demand for a convenient and comfortable life increases the use of many

home networks and well being home appliances, which also need a lot of electricity. It will

continue to expand in the future. For example, the home appliance market in Korea grew an

annual average 58.2% from 2006 to 20105. From now on society will transition an information-

oriented and environment-friendly society, and new power demand will increase.

4. Insufficiency of power plant supply plan

The power plant is lacking because government established a long-term power supply plan

3SERI (Samsung Economic Research Institute) CEO Information_2012.1.18: No.838 “The Cause and countermeasures of power shortage in winter time” page 5 4SERI (Samsung Economic Research Institute) CEO Information_2012.1.18: No.838 “The Cause and countermeasures of power shortage in winter time” page 6 5 Op. cit. page 7

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on the base of demand forecasting, but the real supply demand exceeded the prediction.

Expected demand growth in recent 3 years was about 2%, but actual demand was 5.2%6.

5. Delay of planned power plant

The disruption occurred to the planned plant because of complaints, environmental policy,

transmission line connection, etc. Until 2009, the fulfillment of the power plant establish plan is

just only 80%7.

C. Countermeasures

1. Reinforcement of seasonal demand management

The government should manage the growing demand for air conditioning and heating, so

they can secure the stable power reserve level especially for the peak time of summer and winter.

2. Systemize the response of crisis

The government should improve the power load management system in case of climate

change or power plant breakdown.

3. Expansion of basis power plant

The underlying lack of power capacity serves as a cause of power shortages and rising

electricity rates, so the expansion of basis power plants needs to avoid such a disruption of the

plan.

4. Modernization of power plant infra through technical innovation

There is a need to build a smart grid which is a fusion of IT technology and power

networks. We should take advantage of technology innovation and power grid expansion as an

opportunity for economic revitalization.

II. Electric Vehicles

A. Recent trends of Electric Vehicles

The Electric Vehicles (EVs) are automobiles which are propelled by electric motors, using

6 Op. cit. page 8 7Op.cit. page 9

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electrical energy stored in batteries or another energy storage device. Recently, to overcome the

high oil prices and the emission of the greenhouse gasses, the research and the production of the

EVs are gradually increasing. EVs, including hybrid cars, could represent as much as 15% of the

new car market by 2020.8 In this report, the analysis of the impact of the EVs on global economy

is described in terms of household impact, smart grid, and reduction of emission.

B. Impacts on the Households

The spread of the EVs would have huge impact on the car operating costs in households.

Given the average household uses a car for 50miles, the increase of the electricity cost would be

$40, and the decrease of the gasoline cost would be $180. Totally, the introduction of EVs would

be cost-effective to most of households even if the battery maintenance costs were included.9

C. Impact on the Electric Grids

1. About Electric Grids

Current electric grids were established in the 19th century. These days, the smart grid, the

concept of next generation electric grids which improve the efficiency and reliability of the

electric grid by digital and autonomiccontrol, is becoming prevalent.The smart grid is receiving

plenty of attention as the key technology to realize the expansion of the EVs as well as the

renewable energy.10

2. How it affects Electric Industry and Economy

For the prevalence of the smart grid, the comprehensive introduction of devices, such as a

8“Recharging electric cars: Bidding for volts,” The Economist online, September 6, 2011,http://www.economist.com/node/21528507, accessed February 16, 2012 9Ulrich Decher, “Economic and Emissions Impacts of Electric Vehicles,” The Energy Collective, February 15, 2011, http://theenergycollective.com/ansorg/51761/economic-and-emissions-impacts-electric-vehicles, accessed February 16, 2012 10Center for Entrepreneurship & Technology (CET) University of California, Berkeley, “Impact of Widespread Electric

Vehicle Adoption on the Electrical UtilityBusiness – Threats and Opportunities,” August 31, 2009,

http://cet.berkeley.edu/dl/Utilities_Final_8-31-09.pdf, accessed February 16, 2012

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smart meter, is necessary. In this process, not only manufacturers of power system equipment,

but also other related industries, including car makers or manufacturers of digital

communication equipment, are expected to find new markets, and this trend would have a huge

impact on global economy.

D. The Impact of the Reduction of Emission

1. How the EVs reduce the Emission

The amount of emission gases would not basically change by the introduction of EVs

according to the law of the conservation of energy, but the emissions caused by the combustion

of the oil would transfer from car engines to power plants, which reduce the effects of the

emissions to urban area.

3. The Economic Effect of the Reduction of Emissions

To reduce the emissions, the power system should be changed dramatically:one is smart

grid to enable all households to charge EVs at night, and the other is the shift of energy resources

from fossil fuels to nuclear power or renewable energy sources, such as solar, tide, and wind

powers. As the expansion of the nuclear power plants is becoming impractical after the 2011.3.11

earthquake in Japan and following nuclear accidents, mainly the shift to renewable energy

would be promoted. The renewable energies are expected to be cheaper resources for the future

and boost the creation of new jobs, stimulating the global economy.

III. Conclusion

In conclusion, the trend of saving electricity and introduction of EVs is becoming

dominant, and would be more accelerated in the future. The shift of the energy resources from

fossil fuels to renewable energy would be also promoted, and these trends generally have some

positive impacts to boost the global economy.

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Effects of Fair Trade Coffee on Global Economy

By Katsuya Ishigaki and Hojae Lee

I. I. The history of coffee

After medieval times, coffee spread through the world. The earliest credible evidence of

either coffee drinking or knowledge of the coffee tree appears in the middle of the fifteenth

century, in the Sufi monasteries of the Yemen in southern Arabia. From Mocha, coffee spread to

Egypt and North Africa, and by the 16th century, it had reached the rest of the Middle East,

Persia and Turkey. From the Muslim world, coffee drinking spread to Italy, then to the rest of

Europe, and coffee plants were transported by the Dutch to the East Indies and to the

Americas. 11 Coffee was popular by the 18th century in Europe and European colonists

introduced the crop to other tropical countries to help them supply a healthy domestic

demand.12

Coffee is the world's second most valuable traded commodity, behind only petroleum.

There are approximately 20 million farmers and coffee workers in over 50 countries involved in

producing coffee around the world. An estimated 11 million hectares of the world's farmland are

dedicated to coffee cultivation. Around the globe, the annual consumption of coffee has

expanded to 12 billion pounds.13

Coffee was traditionally developed as a colonial cash crop, planted by serfs or wage

laborers in tropical climates on large plantations of landowners for sale in colonial countries.

Coffee producers, like most agricultural workers around the world, are kept in a cycle of poverty

and debt by the current global economy designed to exploit cheap labor and keep consumer

prices low. Because of this situation, many coffee workers bring their children to help them in the

fields in order to pick the daily quota. These child workers are not officially employed and

therefore not subject to labor protections.14

11 Wikipedia, “History of coffee,” http://en.wikipedia.org/wiki/History_of_coffee, accessed 17 Feb 2012 12 facebook, “Brief Coffee History,” http://www.facebook.com/note.php?note_id=400497537218, accessed 17 Feb 2012 13 The Catholic Action Network for Social Justice, “Coffee in the Global Economy,” http://catholicactionnetwork.org/dec05/documents/FAQsfromglobalexchange.pdf, accessed 11 Feb 2012 14 Ibid

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II. The characteristics of coffee industry

Coffee beans are grown within an area known as the ‘bean belt,’ which is roughly

bound by the tropic of cancer to the north, and tropic of Capricorn to the south. The best

growing areas offer moderate sunlight and rain, steady temperatures of around 70 degrees

Fahrenheit, and rich soil.15 Top 10 green coffee producing countries in 2009 are Brazil, Vietnam,

Colombia, Indonesia, India, Ethiopia, Peru, Mexico, Guatemala, and Honduras in order of

production.16

The cultivation of coffee is a much more labor-intensive than alternative products of the

same regions such as sugarcane or cattle. Coffee beans must be picked, processed, dried and

roasted on a coffee plantation, so it is not subject to automation and requires constant attention.17

The prices of coffee beans are mainly determined by Coffee C Futures contract market

of ICE18 and NYSE Euronext.liffe.19 The factors which can affect the prices of coffee are the

weather of producing countries20, supply and demand of coffee21, and speculation22.

III. What is Fair Trade Coffee

Fair trade was introduced to help the farmers to have a better life and support their

family. The Fair Trade movement began in the late 1950s as alternative trade organizations

(ATOs) emerged in Europe and the US to promote grassroots development through direct,

equitable trade. These ATOs bought directly from Third World producers, eliminating the

middlemen, and paid the producers a fair price while providing assistance in developing

15 Coffee Producing Regions, “Coffee Producing Regions,” http://www.professorshouse.com/Food-Beverage/Beverages/Hot-Drinks/Articles/Coffee-Producing-Regions/, accessed 21 Feb 2012 16 FAOSTAT, “2010 Data,” http://faostat.fao.org/site/567/default.aspx#ancor, accessed 21 Feb 2012 17 http://en.wikipedia.org/wiki/Economics_of_coffee, accessed 21 Feb 2012 18 Coffee C Futures contract market of ICE(InterContinentalExchange): https://www.theice.com/productguide/ProductDetails.shtml?specId=14 19 https://globalderivatives.nyx.com/contract/content/29040/contract-specification 20 ezinearticles.com, “Brazil Weather Will Determine Coffee Prices, They Could Soar This Winter,” http://ezinearticles.com/?Brazil-Weather-Will-Determine-Coffee-Prices,-They-Could-Soar-This-Winter&id=6315290, accessed 21 Feb 2012 21 Kona Coffee Roasting, “Coffee Prices Rise in 2011 Due to Increased Demand, Reduced Coffee Supply,” http://www.konacoffeeroasting.com/coffee-prices-rise-in-2011-due-to-increased-demand-reduced-coffee-supply/, accessed 21 Feb 2012 22 The real news, “Speculation Drives Up Coffee Prices,” http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=7176, accessed 21 Feb 2012

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trading experience and market contacts. Such experiences helped producers raise their incomes

while reducing their dependency on commercial middlemen.23

IV. Issues of Fair Trade Coffee

There are some issues for the fair trade coffee: very strict rules to be Fair Trade Coffee

and not enough benefits from Fair Trade Coffee.

Producers need thousands of Euros to get the certificate of Fair Trade Coffee for a single

plant.24 There is an application fee, initial certificate fee, membership dues, annual audit fees and

more. Large corporate farms can often handle the paperwork and recuperate the cost of

certification more easily than small, independent farms. As a result, there are plenty of small,

independent farms that are not Fair trade certified even though they meet or exceed the Fair

trade standards.25

There is an issue that Fair Trade cannot help producers to be escape from poverty. The

ICA(International Commodity Agreement) raised prices for the consumer, but after several

decades of intervention, poverty remained a fact of life in coffee producing countries. Indeed,

studies of the ICA have shown that it had no effect on poverty reduction.26 It may become the

most of the profit goes to the middlemen.

V. Prospect of fair trade coffee

To help producers of fair trade coffee, the volume of fair trade coffee should be

increased. Nowadays, the volume of fair trade coffee is quite low compared with the volume of

other coffee. We should promote fair trade coffee and check the volume of fair trade coffee.

There are few shops or cafes which produce fair trade coffee, while a lot of people want

to buy. For increasing sales volume of fair trade coffee, more diversification of sales is necessary.

For example, cans of coffee or packs of coffee are effective options. Before selling them, sellers

may make an advertisement which introduces fair trade coffee to common people and influence

23 Ibid 24 FLO-CERT, “PRODUCER CERTIFICATION FEES,” http://www.flo-cert.net/flo-cert/65.html, accessed 21 Feb 2012 25 Wikipedia, “Economics of Coffee,” http://en.wikipedia.org/wiki/Economics_of_coffee, accessed 21 Feb 2012 26 Mercatus Center, “Does Fair Trade Coffee Help the Poor? Evidence from Costa Rica and Guatemala,” http://mercatus.org/publication/does-fair-trade-coffee-help-poor-evidence-costa-rica-and-guatemala, accessed 21 Feb 2012

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people buy more fair trade coffee.

To promote volume of fair trade coffee, tax exemptions are also effective. Tax

exemptions will encourage sellers to sell more fair trade coffee and producers to produce more.

It is necessary for related countries to negotiate each other for protecting the coffee producers.

VI. Conclusion

Historically, coffee producers suffer from their own poor wages. Fair trade coffee is

initiated to protect such poor producers, but it does not work well and there are a lot of poor

producers who still suffer. It is better to promote the volume of fair trade coffee

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The Effect of Chinese Taste Change

By Toshiharu Kamada and Jongmin Kim

Ⅰ. Introduction

“13.5 hundred million”, “960 thousand”, “300 thousand dollars”27

These numbers indicate China’s population, the number of Chinese billionaires, and the

amount of money the Chinese billionaires spend annually overseas, respectively. In the past,

many people believed that Chinese are very economical consumers and do not like to spend

their money. However, this idea is far from the truth nowadays. Chinese are spending

considerable amounts of money on shopping, eating, and traveling every year. People can easily

encounter many Chinese who travel in many sightseeing cities and look around luxury brand

shops. This large group of Chinese is starting to create changes not only in the middle priced

market but also in the luxury market all around the world. The movement to adapt to the

change is getting faster.

Ⅱ. Effects on Travel Business

A. Luxury goods for Chinese Travelers.

The change of markets is observed in travel business. First and foremost, Chinese taste’s

change has strongly influenced overseas travel business. For example, according to The

INDEPENDENT, 22.7 million Chinese tourists, out of a total of 36 million over 12 monthsin 2010,

have travelled to Hong Kong,compared tothe 7.5 million Chinese tourists had done so in

2003.28The main purpose of their travel was still shopping. However, what they wanted to buy

and actually bought had changed from cheap goods to luxury goods.Actually, Chinese travelers

to Hong Kong spent more than those who came from other countries. They spent approximately

HK$12,000 (1,100 Euros) on average every time they came to Hong Kong.29

B. Luxury Service for Chinese Travelers.

27Myungshin Kim, “Trend Report”, KOTRA(Korea Trade-investment Promotion Agency), November 17th, 2011 28“Chinese taste for luxury changes the face of Hong Kong shopping,” The INDEPENDENT, March 29, 2011, http://www.independent.co.uk/life-style/fashion/chinese-taste-for-luxury-changes-the-face-of-hong-kong-shopping-2255987.html, accessed February 2011. 29 Ibid.

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In addition, many of the companies which sell luxury goods throughout the world are

developing new products and services adequate for Chinese tourists. According to The WHERE,

one of the Canadian travel magazines, the affluent Chinese travelers sought for high-quality

Asian-style services besides European goods.30 Actually, Hilton started special hospitality

services for Chinese travelers. Specifically, it provided them with Chinese breakfast and front

desk attendants who was able to speak the Chinese language31.

Moreover, we can also observe the tendency described above, not in the overseas travel

market, but in the domestic market, that is, in the Chinese market. The changing taste of Chinese

consumers begins to focus on service qualityother than pricing. Specifically, many Chinese

people tend to seek for information such as user reviews, shipping options, or product

guarantees, other than price.According to The Wall Street Journal, we can also observe this trend

in e-commerce companies. “In China e-commerce is all about discount shopping, said Hurst Lin,

general partner at venture capital firm DCM and former COO of Chinese web portal and

microblog operator Sina, but that won’t last. Mr. Lin believes that in several years, Chinese

consumers will have more discerning taste and that online retailers with the best design and

branding will challenge the dominance of Alibaba Group’s Taobao websites.”32Alibaba Group’s

Taobao websites are the current biggestonline shopping in China. However, the top position will

not always continue in the future. Actually, the sales of Alibaba Group’s Taobao websites have

recently decreased. From now on, e-commerce companies will need to differentiate themselves

from competitors by providing customers not with cheaper prices, but with added values such

as better services or better design. As the example illustrates, Chinese taste change has strongly

influenced overseas travel business.

Ⅲ. Effects on Wine Market

A. French Wine Market

30“Travel Trends: Why Chinese Tastes Matter,” Where, September 23, 2011, http://www.where.ca/blog/check-in/travel-trends-why-chinese-tastes-matter/, accessed February 2012. 31Ibid 32 Loretta Chao, “DCM Partner: Taobao Discount Model Not the Future of Chinese E-Commerce,” The Wall Street Journal, November 2, 2011, http://blogs.wsj.com/chinarealtime/2011/11/02/dcm-partner-taobao-discount-model-not-the-future-of-chinese-e-commerce/?mod=WSJBlog, accessed February 2012.

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In addition, Chinese taste change and its effects on the market are observed in other

spheres. One of the spheres is the wine market. Recently, it is perceived that there is a big change

in the global high-end wine market. The change coming from wealthy Chinese wine collectors is

making Bordeaux wine cry and Burgandy wine smile. Until recently, French wineries have led

the high-end wine market. Many people who enjoy drinking wine have unconsciously

memorized many kinds of the names of French wines and usually ordered them in restaurants.

However, wealthy Chinese people who enjoy drinking wine have begun to pick up Burgandy.

Even though 60% of Bordeaux’s total exports are still consumed in mainland China and Hong

Kong, no one can guarantee that Bordeaux’s wine will be able to maintain its popularity.

Therefore, in the near future, it is expected that this trend will cause the price of Burgandy to

surge. According to Janicy Robinson, the British wine expert and critic, the effect that greater

Chinese interest in Burgandy could have on the broader global market would be "dangerous" for

Burgandy lovers. Because the quantities of top Burgandy produced are limited, this

phenomenon could upset the market. 33

B. Australian Wine Market

In addition, a similar phenomenon is observed in the Australian wine market.

According to Campbell Thompson, an Australian and co-owner of the wine importing and

distributioncompany, The Wine Republic, French wines have led the gift-giving and corporate

dining market until recently34. However, the demand for Australian wine is increasing

dramatically. Australia’s top wine brands, like Jacob’s Creek, have begun to have more interest

in the Chinese market. They expect that their major target will be businessmen, officials, and

young white-collar workers, who are increasing rapidly in main cities in China.35 Therefore,

many Australian wine sellers anticipate that the sales of the wine will surge and then the price of

Australian wine will reflect the change.

33Jancis Robinson, “Growing Chinese Taste For Burgundy Could Prove “Dangerous”, Jing Daily, November 22nd, 2011, http://www.jingdaily.com/en/luxury/jancis-robinson-growing-chinese-taste-for-burgundy-could-prove-dangerous/ 34 “Demand for Australian wine soars as Chinese taste change”, China Daily, December 13th, 2011, http://www.chinadaily.com.cn/bizchina/2011-12/12/content_14250015.htm 35 Ibid

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Ⅳ. Conclusion

In conclusion, many companies have tomake more efforts to establish the strategy to

reflect Chinese taste change. As the example above illustrates, Chinese people penchants for

spending money are largely changing from essential to luxury, such as overseas travel, wine, or

designer goods. Many of the economists and the economic magazines predict that theChinese

economy continues to grow for the moment. According to the Wall Street Journal, “A recent Bain

study forecast that the Chinese market would grow 11 per cent per annum for five years,

butLindit&Sprungli said it believed the market was growing by 30 per cent a

year based on research conducted for it by Nielsen.”36If companies aspire to affect the Chinese, to

obtain Chinese money, and to make profits, they shall revise their strategy to reflect new Chinese

taste. Companies will have to focuson service qualityand provide other information,such as

product guarantees, user reviews, or shipping options, and not only focus on pricing. To

summarize our interpretation of the results, we can explain that many businesspersonsneed to

endeavor to revisetheirplans of actionto reflect Chinese taste change.Last, please excuse me ifI

overemphasized my opinion more subjectively than was necessary.

36 Patti Waldmeir in Shanghai , “Confectioners bite into China’s soft centre”,THE FINANCIAL TIMES, December 23, 2011, HTTP://WWW.FT.COM/INTL/CMS/S/0/DD414766-2D6E-11E1-B5BF-00144FEABDC0.HTML#AXZZ1LRIBIRPA, accessed February 2012.

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Camu Camu fruit

By Hiroyuki Kaji and Hisami Natsume

Thesis: The Camu Camu fruit’s impact on the global economy.

I. Introduction

Recently, the number of people who are interested in health topics is growing in the world.

Along with this, many kinds of nutritious fruits have become a part of people’s lives. Camu

Camu, a specific kind of fruit made in Peru, is closely-related not only to human health but also

to the global economy. Although Camu Camu is getting more popular in Japan, Camu Camu is

not widely used in the market. There is a possibility of expanding Camu Camu market in Japan.

II. What is Camu Camu?

A. Features

Camu Camu is a small bush which grows in the Amazonian rain forest of Peru. The Camu

Camu bush produces a fruit which is about the size of a large grape and has a purplish red skin

with a yellow pulp.37Camu Camu fruit contains powerful phytochemicals with health benefits,

including the amino acids such as serine, valine, and leucine, and more Vitamin C than any

other known plant in the world. Camu Camu is energizing, mood-lifting and highly effective in

strengthening the immune system.

Camu Camu has more natural Vitamin C than any known botanical on the planet and the effects

on the human body are incomparable. Because of its food form, with bioflavonoids and other

phytochemicals, clinical evidence suggests that it is far more effective, milligram for milligram,

than synthetic Vitamin C (ascorbic acid). Many people report that just two capsules daily (1/3

tsp.) is sufficient to significantly increase their wellness.

37Wikipedia,”Myrciaria-dubia,”http://en.wikipedia.org/wiki/Myrciaria_dubia, accessed February 2012.

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Table 1: Nutrition values of Camu Camu and Lemon: 1 cup (Health Benefits of Camu Camu38,

Lemon nutrition facts39)

B. Cultivation of Camu Camu

Camu Camu planting started in 1996 in Peru as part of government funded reforestation projects

(under the Program Nacional de Camu Camu) for export to Japan. Since then Camu Camu has

become a widely cultivated fruit species in the floodplains of the Peruvian Amazon.40

The Peruvian government expects that it will become a major export when its amazing

properties are discovered in the United States. It is preparing for the expected large increase in

demand by making Camu Camu seedlings available free of charge to communities of native

people who are rain-forest dwellers for them to plant and to tend. It takes four to five years for

the Camu Camu bush to bear fruit. The growing popularity of this wild rainforest fruit is

contributing to the sustainable development of the Amazon River basin and helping the forest

dwellers to maintain their traditional way of life.41

38Life Style Lounge, “Health Benefits of Camu Camu,”http://lifestyle.iloveindia.com/lounge/health-benefits-of-camu-

camu-8860.html, accessed February 2012. 39Power your diet, ”Lemon nutrition facts,”http://www.nutrition-and-you.com/lemon.html, accessed February 2012. 40Entrepreneur’s Toolkit,”Camu Camu Cultivation,”http://www.entrepreneurstoolkit.org/index.php?title=Camu_Camu_Production_in_the_Peruvian_Amazon, accessed February 2012. 41WHOLE WORLD BOTANICALS, “Camu Camu(Myrciariadubia),

http://www.wholeworldbotanicals.com/herbal_camucamu, accessed February 2012.

Vitamins CamuCamu Lemon

Vitamin B1 0.07 mg -

Vitamin B2 0.16 mg -

Niacin 8.25 mg 0.10 mg

Vitamin C 7.49 g 0.53 g

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III. Camu Camu Fruit in Peru

A. The Economy of Peru

Being among the Pacific Rim nations, Peru has recently joined the group of emerging

nations.Despite the continuing improvements in addressing the problem of poverty, expanding

the income disparity continues to be a problem. The disparity between urban and rural areas is

severe, and there is a serious mismatch between markets. In Peru, 19% of the Peruvian people

live in "absolute poverty," meaning they survive on less than US$1 a day. Furthermore, while

31.2% of the population lives in urban areas, and 69.3% of the population lives in rural areas are

"absolute poverty." Moreover, the percentage of GDP in agriculture is 0.7%, and percentage of

labor force in agriculture is approximately 25%. 42

B. The advantages of producing Camu Camu in Peru

In Peru, by producing Camu Camu, social issues such as poverty problem, nature preservation,

and eradication of illicit drugs can be solved.

1. Poverty program

Producing Camu Camu helps farmers to raise their income. At present, farmers can earn only

small amount of money by farming, and there is no other way for farmers to earn cash. The

distribution of Camu Camu would aid in the improvement of the farmer’s livelihood. Also, this

would contribute to improve the standard of living in Peru.

2. Nature preservation

Producing Camu Camu has positive impacts on the rainforest in Amazon areas. Peru's rainforest,

which represents 20 percent of the Amazon, faces a number of environmental pressures,

42CIA-the world factbook,“ Transnational issues in Peru, ”https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html, accessed February 2012.

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including deforestation. Many kinds of fruits are not able to grow during the rainy season

because these fruits are submerged in water. On the other hand, Camu Camu can grow in the

areas even if the Camu Camu tree itself is immersed in water. Therefore, cultivation of Camu

Camu would make international contributions not only in carbon dioxid reduction but also in

nature protection.43

3. Illicit drugs

Camu Camu will be an alternative crop to the coca leaf. Peru is the world’s second largest

producer of the coca leaf, after being named number one until 1996. The cultivation of coca

in Peru was estimated at 40,000 hectares in 2009. Produced cocaine is shipped out from Pacific

ports to the international drug market, increasing amounts of base and finished cocaine.

However, produced cocaine which used to be ported into the international drug market is

moved to Brazil, Chile, Argentina, and Bolivia for use in the Southern Cone or transshipment to

Europe and Africa, increasing domestic drug consumption in 2011. If Camu Camu is

successfully used as an alternative crop to coca, it will lead to the reduction of illegal drugs. That

can have a great impact on a global scale.44

IV. Camu Camu market in other country

A. Trade agreement

The Peruvian government has banned taking trees, seeds, and fresh fruits of Camu Camu out of

Peru. Other countries import the fruit in dehydrated, extract, flour, or powder form.

Market overview in Japan

The fruit has recently become the large-scale cultivation and sale in the world. Especially,

Japan is the major buyer becauseof the market which puts emphasis on the fruit nutritional

43Council on foreign relations,”Deforestation in Peru’s Amazon.”http://www.cfr.org/south-america/deforestation-perus-amazon/p20968, accessed February 2012. 44CIA-the world factbook,“ Transnational issues in Peru, ”https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html, accessed February 2012.

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value.

In Japan, there is significant demand for juice drinks and nectars. So, suppliers of Camu Camu

products in Japan mainly sell such kind of products. Currently they explore the creation of new

products such as jam, sweets, and cosmetics using the fruit's essence. In order to promote a

better sale in Japan, the suppliers include the fruit’s history and a map of its origin into each

commercial packages of Camu Camu. According to the market research, there are three

fundamental requirements that Japanese buyers require: The fruit must be a 100% organic

without the use of pesticides or chemical fertilizers. Vitamin C of the fruit must be at least 1800 to

2300 MG. per 100g pulp. The fruit must pass phytosanitary standards in Japan.45

V. Conclusion

Recently, Camu Camu is getting more popular in Japan than in the past. However, Camu Camu

is not widely used as other berries in the market. There might be two solutions to find an answer

to the problem. First, Camu Camu suppliers should cooperate with major suppliers of processed

fruit products such as Dole Food Company, because the company is skilled at promotion

strategy. Second, Camu Camu suppliers should create new distribution channels. Though they

only focus on retail stores to sell their products, there might be potential distribution channels

such as fitness centers. By strengthening marketing strategies, it would help expand Camu

Camu market even more and contribute to the economic growth of Peru as well.

45Article directory, “Supply and demand for camu camu”http://www.centrorisorse.org/supply-and-demand-for-camu-camu.html, accessed February 2012.

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The possible impact of speech recognition technology

By Toshiharu Kamada and Hensu Jang

Introduction

Quarrels through the Siri–

Man says“Tell my wife I’m gonna be 30 minutes late.”,

Woman says“Tell my husband I’m not surprised.”

Man says “Tell my wife if she has a problem with my work schedule she is more

than welcome to get a job of her own.”

Woman says “Tell my husband that I do just as much work as he does.”

Man says “Tell my wife that if watching “Ellen” is a job she should get

a promotion.”

Woman's Siri “Message from your husband: “I appreciate you.”46

The above dialogue is from the parody videos on the online humor site in the USA. The main

point of this dialogue is that Siri, a speech technology of iPhone 4S, tries to meditate a quarrel

between husband and wife. This is just a parody for humor, but it is good example of the future

of speech recognition technology.47What is speech recognition technology?

“Speech recognition converts spoken words to text. The term "speech recognition" is sometimes

used to refer to recognition systems that must be trained to a particular speaker—as is the case

for most desktop recognition software. Recognizing the speaker can simplify the task of

translating speech. Speech recognition is a broader solution that refers to technology that can

recognize speech without being targeted at single speaker—such as a call system that can

recognize arbitrary voices.”48

Thesis statement

How can the speech recognition technology affect the world in the future?

46College Humor –Siri Argument, Nov 19, 2011, http://lybio.net/college-humor-siri-argument/comedy/ access Feb 2012 47College Humor –Siri Argument, Nov 19, 2011, http://lybio.net/college-humor-siri-argument/comedy/ access Feb 2012 48Wikipedia, “Speech Recognition”, Feb, 2011, http://en.wikipedia.org/wiki/Speech_recognition, accessed Feb 2012

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How big will the impact of the speech recognition technology be?

Siri, thanks to artificial intelligence techniques such as speech recognition services can be

connected to commerce in the future. It could analyze your preferences and characteristics, and

propose the most appropriate products and order. The speech recognition services of the future

will search for flight schedules and show the tendency of your personal tastes like a personal

assistant. It will be connected to a speech-commerce service and a new ecosystem.49 How can

the speech recognition technology affect the world in the future? How big will the impact of the

speech recognition technology be? We tried to examine these questions.

I. Definition of Speech Recognition Technology

A. The Siri

Siri is a new application that will be included with the iPhone 4S. This application is a new way

to control your phone with your voice. Instead of just dictating a message to your phone, you

can ask your iPhone to do stuff for you.50

B. Other technologies

In the first half of this year, the speech recognition service 'Mazel' will be released. Mazel, similar

to the Siri, a little more advanced natural language processing capabilities. 'Tell Me' a speech

recognition service of Microsoft has competed against Siri from January 2012. Windows phones

voice recognition service ‘Ask Ziggy' presented its application this year51

II. The situation of a gap between rich and poor

A. The situation of poverty

There were 1.4 billion individuals living on less than $1.25 a day in 2005 and 1.2 billion

49JuHuiYoo, “Smart Tech for Human”, Seoul Newspaper, Jan 13, 2012,http://economy.hankooki.com/lpage/it/201201/e20120131170341117700.htm, accessed Feb 2012 50Josh Smith, “What is Siri?”, Oct 05, 2011, http://www.gottabemobile.com/2011/10/05/what-is-siri/, accessed Feb 2012 51Hui Kyung Kang, “Future of Sir”, HankookIlbo, Jan 03, 2012,http://news.hankooki.com/lpage/economy/201201/h20120126211408111720.htm, accessed Feb 2012

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individuals living on from $1.25 to $2 a day in 2006. So in total, there were 2.6 billion extremely

or moderate poor individuals in the world, which represented about 47% of all population in the

world.52 Also, based on another standard, there were 4.6 billion individuals living in the

countries where GNI per capita was under $ 8.9, which represented about 69% of the world

population.53 That means there are plenty of suffering people on earth and there is a huge gap

between the rich and the poor, and there are 2 main causes: unaffordability and illiteracy.

1. Inaccessibility(unaffordability)

It is obvious that people who cannot access the Internet cannot get much information, and such a

situation is called “Digital Divide.” In Japan, whether people can use broadband and the Internet

or not was strongly correlated with the income level of the user.54 Also, the word “Digital Divide”

means that whether people have a computer or not can expand the gap between rich and poor.

In short, one possible cause of inaccessibility can be not having money.

2. Illiteracy

Illiteracy can also cause the economic gap to expand. The number of illiterate adult population in

the world was 8.85 million in 1995, in which the share of individuals living in developing

countries was 99%.55 Generally, people who cannot read and write have little chance to get jobs,

and if possible, they cannot get much money. In a sense, the illiterate people can be the lowest

level of the pyramid.

Ⅲ．Analysis of the possible solution

52The World Bank, “People Poverty rates at international poverty lines,” World Development Indicators 2011(April 2011):65. 53The World Bank, “People Population Dynamics,” World Development Indicators 2011(April 2011):38. 54Ministry of Internal Affairs and Communications, Japan, “White paper Information and communication in Japan Outlook Japanese ver.,”http:// www.soumu.go.jp/johotsusintokei/wh itepaper/eng/WP2007/2007-index.html:40, accessed 13 February 2012. 55Ken Kikumoto, A Fundamental Study on the Establishment of the ScienceofInternational Cooperation in Education as an Academic Discipline(March 1998):1.

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A. Possible Solution for unaffordability

1. Possible solution to unaffordability for personal computers

There were 1.8 billion people who could access the Internet at the end of 2009, which

represented about 26.6% of the world population.56 Intel Corporation has suggested that when

weeks of income to purchase a notebook computer falls between 4 weeks and 8 weeks, the

saturation level of the notebook can be accelerated.57The company has also estimated that the

penetration would accelerate in China, Latin America, and Eastern Europe soon, which means

that about 1.8 billion people who currently cannot use the Internet would be able to access the

internet in the near future.58 But 40 billion individuals would still not be able to access it because

of the unaffordable price.

The number of the sales of personal computers was 1 million, and the average price was about

$ 4,000 in the U.S.in 1980.59 But the number of the personal computers was 350 million in

2010,60and the retail price level of personal computers was about $700 in June 2011.61

In Japan, from 1996 to 2000, as the number of personal computers manufactured increased by

170%, and the price fell by about 30%.62 In the U.S., during the 1990s the number of personal

computers increased at double-digit rates, and at the same time PC prices decreased by 80%, to

$500 at a rate of the time.63How much the price at a certain time would be depends on where the

point would be on the gradual diminution curve, and it is difficult to predict the future price. But

if the price decreases, the price level would not be affordable enough for the bottom level of the

56Garbagenews.com.,”The saturation level of the Internet in the world,"http://www.garbagenews.net/archives/134032, accessed 13 February 2012. 57Intel Cooperation, “Investor Meeting 2011,”http://intelstudios.edgesuite.net/im/2011/live.htm, accessed 13 February 2012. 58Ibid., 59Sano seminar, “historical trend of PC,”http://www.sanosemi.com/wordpress/?p=122, accessed 13 February 2012. 60BCN Bizline, “The map of the personal computer industry,” http://biz.bcnranking.jp/map/pc/, Accessed Feburuary 2012. 61My Navi News, “Silicon valley101,”http://news.mynavi.jp/column/svalley/328/index.html, Accessed 13 February 2012. 62Link general research, “The trend of Information Communication device industry,”http://search.yahoo.co.jp/search?p=%E3%83%91%E3%82%BD%E3%82%B3%E3%83%B3%E3%80%80%E7%94%9F%E7%94%A3%E5%8F%B0%E6%95%B0%E3%80%80%E4%BE%A1%E6%A0%BC%E3%80%80%E6%8E%A8%E7%A7%BB&aq=-1&oq=&ei=UTF-8&fr=top_ga1_sa&x=wrt, accessed 13 February 2012. 63Peter E. Carlson, “personal Computer Industry Trends” NCEE (December 2006):1.

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pyramid.

2. Possible solution to unaffordability for tablets and smartphones

Instead, in terms of accessibility to the internet, tablet types are better than personal computers

because of the lower price. The sales number of the mobile tablet types was 20 million in 2010,

and 66 million in 2011. Yano research institute also has predicted that the number would reach

300 million in 2017, about 5 times the number in 2011.64Moreover, smart phone types are much

better than the others, and the sales number was 300 million in 2010 and 480 million in 2011.

The institute has estimated that the number of smart phones would reach 1.5 billion in 2017,

about three times the figure in 2011, and low-end models under $150 would be getting attention

more and more.65

If we apply the case of the gradual diminution of the price of personal computers to the case of

tablet types and smart phones, we can predict the same phenomenon as the personal computer

case. Also, technologies, competitions, and other factors can decrease the price. As a result, for

example, if the price of smart phones decreases to the level of $112, it can fall under the range in

which individuals living on under $2 a day can afford smart phones with their 8 weeks of

income, which means penetration can accelerate explosively.

B. Possible solution to illiteracy

It would be possible in the near future that individuals living on less than $2 a day would be able

to buy some devices that enable them to access the internet. Also, the competition of speech

recognition technology would be harder. As a result of the competition, even suffering illiterate

people would be able to access the internet by buying devices with higher quality and lower

prices.

64Yano research Institute, “The summary of a new market survey on tablet,” http://www.yanoict.com/yzreport/181, accessed 13 February 2012. 65Yano research Institute, “The summary of a new market survey on smart phone,”http://www.yano ict.com/yzreport/180, accessed 13 February 2012

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Conclusion

We have seen how big the role the internet could play in the changes in politics in many Arabian

countries around 2012. Even in the Western countries, the internet is playing important roles in

creating new public opinions that can affect their politics and economy. But only about 30% of

the population in the world was able to affect our society at this time. In short, people who can

access the internet can have such power. What will happen if people who are forced to live

under severe conditions come to be able to access the Internet? What will happen if illiterate

people come to be able to access the Internet? Those miserable people can have the same

opportunities that richer people have. This can shorten the huge gap between rich and poor. Or,

the alternate might be able to change the situation drastically.

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The Costs and Benefits of London Olympics 2012

By Jeong woo, Lee (John) and So kogahara

1 Introduction

1.1 The Olympics will be held in London 2012.

Today, we have many major events. This year, the London Olympics is carefully watched around

the world. Plenty of people are looking forward to watch sports games.

1.2 Londoners will get the benefits but also spend the costs before and after the Olympic

period

Journalists and some media estimate the total expenses for the London Olympics is less than the

Beijing Olympics. However, many people believe that the London Olympics will bring

Londoners to get much profit before and after the Olympic period. The following passages show

estimations about the benefits and the costs of the London Olympics 2012.

2 Examples

2.1 Advantages of hosting a major event

2.1.1 Raise the profile of city and country

Hosting a major event is absolutely competitive for cities and countries. If cities and countries

were to become host places, it might contribute to their profiles. According to previous major

events, cities which host the Olympics can be assured of a persistent increase in recognition and

tourism. Barcelona, Sydney, Beijing have all seen this from hosting the Olympics. For a country

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like China with a controversial human rights record, hosting a major sporting event can be a way

to gain greater international acceptance. These events’raised profile can be important for giving

economic benefits, such as, attracting tourists and business investment. In the case of most recent

major event, the London Olympics 2012, London already has a very strong reputation66.

2.1.2 Long Term Investment

Some major events require long term investments to facilities for the events. The city and

country will have a legacy of improved sporting venues. Also, cities will usually have to invest in

infrastructure and transport to ensure efficient and reliable transportation. For example, London

has already invested in public transport projects around London. This will leave a lasting legacy

for residents of London, especially East London1.

2.1.3 Jobs and Investment

Planning to long term investment of the Olympics, the host city or country needs plenty

employees before and during the major events. Also, it is able to revitalize depressed cities, such

as the East London. It is estimated the London Olympics 2012, will create 8,000 full time jobs,

and also lead to a boost in economic output of close to £2bn1.

2.1.4 Enthusiasm

A major sporting event brings in enthusiasm and excitement for the city orcountry. It will

contribute to the nation to get better health and lead to a rise in volunteerism which promotes

civic virtues1.

66TejvanPettinger, “Advantages of Hosting A Major Event”, Economicshelp, January 24

2012.http://www.economicshelp.org/blog/4909/economics/advantages-of-hosting-a-major-event/accessed on February 13, 2012.

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2.1.5 Short Term economic benefits

Many people will gather together at London in the London Olympics period. This will provide

an increase in spending and injection of money into the local economy1.

2.2 Economic impacts of 2012 London Olympics

2.2.1 Benefit from ticket sales

The Olympics require much cost to prepare. For instance, the estimated cost of the London

Olympic 2012 would be between $15 to 18 billion. This number is the second most expensive

Olympics below the 2010 Beijing Olympics with the cost of $40 billion. However, The Telegraph

estimated that the London Olympics has already sold $470 million on the ticket sales. This ticket

revenue guarantees to grow the economy by 0.1%. It is also expected that overseas visitors will

spend$1.1 billion during the Olympic Games67.

2.2.2 Expectation of London Olympics 2012

The whole of the UK’s economy will get some sort of benefits from the London Olympics

because British companies have contributed to the project mostly. The London Olympics acquire

30,000 employees for the project. Also, 98% of facilities have been built by British companies and

generated $9.5 billion value2.

2.3 Costs and benefits of London Olympics

67Atsushi Sawa, “Economic Impacts of 2012 London Olympics”, World Sports Today,February 2 2012.

http://world-sports-today.blogspot.com/2012/02/economical-impact-of-2012-london.htmlaccessed on February 20,

2012.

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All the various costs and benefits of the London Olympics include both the monetary costs and

benefits and the non-monetary costs and benefits.68

2.3.1 Costs of London Olympics

There are many monetary and non-monetary costs of the London Olympics. Therefore, many

people worry about the negative impacts of the costs.

The first negative effect of monetary costs is for the facilities.

England will spend plenty of money to build facilities, which may only be used to their full

potential for a short time during the Olympic Games.

Second, the investment is short term.

Many facilities can only be used for the 3 week duration of the Olympics. After that there is a

danger of ‘white elephant projects’ – facilities that cannot be effectively reused such as the

Millennium Dome.

Third, the opportunity cost.

Many reports showed that the cost of the Olympic village could cost up to £1billion. This

£1billion cannot be spent on alternative investment schemes like transport and education in

London.

Fourth, the credit crunch is coming. That means the private sector investment has dried up.

This increases the cost for the tax payers. Spending of government is already under strain

because of the bank bailouts and recession.

Last but not least, the London Olympic logo is truly awful.

They alreadyspent too much money to produce it.However, according to the Sun newspaper it

could trigger epilepsy3.

68TejvanPettinger, “Costs and Benefits London Olympics 2012”, Economicshelp, March 11, 2011.

http://www.economicshelp.org/blog/1390/economics/costs-and-benefits-london-olympics-2012/accessed on

February 13, 2012.

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2.3.2 Benefits of the London Olympics.

On the contrary, hosting the Olympics also hasmany positive effects.

The first positive effect ofhosting the Olympics is providingjobs and economic activities.

Whenthe time is in recession, the private construction sector is going down. The

government’sexpense can be seen as part of an expansionary fiscal policy.

Second, hosting the Olympics boosts the prestige of the country.It may be a ‘once in a lifetime’

opportunity to show a greatest festival to the world. Not all things can be reduced to simple

accounts. This is a good example of non-monetary benefits.

The third positive effect of hosting the Olympics is to boost tourism and travel to London,

during the Olympics period and after.

The fourth one is a lasting legacy of the Olympics. East London has a new rail line (Dockland

light railway extension) and improved public transport, such as improved international rail

station at Stratford. This will help to reduce congestion and to increase productivity.

Last, many venues will be used after the event;for example, Olympic stadium will remain not

only an athletic track, but also will be used by West Ham F.C. Other venues like the Velodrome

provide a much needed international standard track in the capital3.

2.4 The false economy of the London 2012 Olympics

2.4.1 Economic impact of the London Olympics

From the time when the London’s Olympic bid was accepted in 2005, every economistall over

the world has been debating how this short but big event will affect the UK’s economy.

Following theglobal recession of the year 2008, more still have been speculating on its impacts.

The general consensus shows that the British economy has been intensified by activity in and

around the Olympic Village. Price of houses in Stratford and the surrounding areas have been

increased significantly (in some cases they have increased by 10 per cent), and almost 40,000 jobs

have been created as a direct result of the Games. Stratford City has seen a major revampitself,

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with the construction of the new Westfield which is the largest shopping centre in Europe,

constantly drawing trade from tourists and locals alike. In fact this new supermall has proved so

popular, that it saw 160,000 customers on the first day alone4.

2.4.2 The Olympicsis the hope for many people to bring England out of its current

slump.

Now that the event draws ever closer, and the Olympic hype reaches new heights, what effect

will the 2012 Games really have on the UK’s economy? One thing is for certain; in the midst of

the Eurozone crisis, many people are wondering, and hoping, that London 2012 will be enough

to bring England out of its current slump for good.

We feel that between July and September this year, Britain’s economy will indeed be boosted4.

2.4.3 Olympics’boom is not a continual phenomenon

This short boom cannotbe a sustainable phenomenon. When the Olympics are over,

unfortunately, the two months of economic growth that wediscussed above is unlikely to be

significant enough to lift England out of recession in the long term.

The London Organizing Committee for the Olympic Games and Paralympics Games (LOCOG)

has to make plans to convert the Olympic Village into 3,600 new apartments and homes for the

local community. The area which is underdeveloped now, this may well prove to be the

regeneration needed to attract workers and businesses to the region.

However, whether this will be enough to impact the rest of the UK’s economy is something that

remains to be seen4

4Daniel Fox, “The false economy of the London 2012 Olympics”, The independent, January 30. 2012.

http://blogs.independent.co.uk/2012/01/30/the-false-economy-of-the-london-2012-olympics/accessed on February 13, 2012.

5Michael Carty, “Economic prospects for 2012: Will an 'Olympic bounce' help the UK skirt a double-dip

recession?”Xpert HR,

January 9. 2012. http://www.xperthr.co.uk/blogs/employment-intelligence/2012/01/economic-prospects-for-2012-wi.htmlaccessed

on February 13, 2012.

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2.5 Economic prospects for 2012 (Potential uplifts to 2012 GDP growth)

Before and after the Olympics period, London would get much economic growth in 2012. In the

first quarter of 2012, the Bank of England's October 2011 extension of quantitative easing aided

London’s economy. Martin Weale estimates that the current program of asset purchases boost

growth by up to 0.5%,in line with the Bank's official calculations.

In the second quarter of 2012, London might benefit from an Olympic bounce. Revenue from

advance Olympic ticket sales have been deferred. ING estimates that Olympic ticket sales are

worth £400 million in total, which could have created a 0.2% "Olympic bounce" had they been

incorporated into GDP data for Q2 2011.

In the third quarter of 2012, the Olympic will boost their GDP5.

3 Conclusion

3.1 Londoners should think about the cost of the Olympics.

The Olympics may well make an economic loss in the short term. Some people will say it’s better

to spend the money on health care and education.

3.2 Benefits of the Olympics will make big profit to Londoners.

However, there are also many benefits of hosting the Olympics. Furthermore, it is a once in a

lifetime opportunity to host the most important sporting event on the calendar.Let’s enjoy and

take pride in the London Olympics.

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Which one is more proper in Korea and Japan,

Big Mac Index or Starbucks Index?

By Seunghyun Kim (Aeron) and Toru Yamashita

There are many tools and measurements which can evaluate the appropriateness of currency

rates. The Big Mac Index and the starbucks index could be two of famous things however there

are some differences between them caused from change of social concept toward the products.

These differences are making the starbucks index much more proper one to adjust advanced

countries such as Korea and Japan.

The Big Mac Index was developed in September

1986 as a relatively simple way to calculate the

over- and under-valuation of currencies against

the dollar.69 The index is based on the theory of

purchasing-power parity (PPP). It means that a

dollar should buy the same amount in all

countries. Therefore the exchange rate between

two currencies should move towards the

equalized rate. For example, identical products

such as big Mac hamburgers should have

equivalent prices in every country.70

The Big Mac Index has maintained its position as

a popular measurement to support analysis of currency rate for several years. Especially in

Korea it showed dramatic accuracy during Korea’s economic crisis period from 1997 to 2000.

Before the crisis began, the real exchange rate was 850 KRW per 1 USD compared to 950 KRW

69 “Ten years of the Big Mac index” The Economist, April 9, 1998, http://www.economist.com/node/397291?story_id=E1_PJSNJT&CFID=5300954&CFTO=, accessed February 2012. 70 “Big Mac Currencies” The Economist, April 9, 1998, http://www.economist.com/node/159859, accessed February 2012.

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per 1 USD according to the Big Mac index. This over-estimation

of Korean won was cleared right after the crisis was started.71

However, some economists have tried to develop another index

for several years. They have argued that the Big Mac index is

improper for some reasons. Most importantly, they have

insisted that the Big Mac does not have the same value in all

countries because although the Big Mac is considered a delicacy

in many countries but people in advanced countries start

regarding it as a junk food.72 This is especially true in Korea and

Japan. As a result, some economists tried to choose alternative

options such as the Starbucks’ Tall Latte Index. In fact, the

magazine that introduced the Big Mac Index, The Economist later

suggested the Starbucks Index as a better alternative.73

The tables below shows price trends and Index of Big Mac and Starbucks Tall Latte. the measure

is USD.

The Big Mac Index (2004, 2008, 2011)

Index (%)

(Year) 2004 2008 2011 2004 2008 2011

USA 2.90 3.50 4.07 0.0% 0.0% 0.0%

South Korea 2.72 3.10 3.28 -6.2% -11.4% -19.4%

Japan 2.33 3.60 4.02 -19.7% 2.9% -1.2%

Phillippines 2.02 2.08 2.19 -30.3% -40.6% -46.2%

71 “The Usage of Big Mac Index” The imail newspaper, July 28, 2008, http://www.imaeil.com/sub_news/sub_news_view.php?news_id=34623&yy=2008, accessed February 2012. 72 “Fast food for thought “The Economist, Jul 30, 2011, http://www.economist.com/node/21524873, accessed February 2012. 73 “Burgers or beans?” The Economist, Jan 15, 2004, http://www.economist.com/node/2361072, accessed February 2012

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The Starbucks Index (2004, 2008, 2011)

Index (%)

(Year) 2004 2008 2011

2004 2008 2011

USA 2.80 3.08 3.00

0.0% 0.0% 0.0%

South Korea 2.97 3.01 3.64

6.1% -2.3% 21.3%

Japan 3.16 3.48 4.48

12.9% 12.9% 49.3%

Phillippines 3.50 3.85 3.60

25.0% 25.0% 20.0%

GAP Big Mac vs Starbucks

2004 2008 2011

0.0% 0.0% 0.0%

12.3% 9.2% 40.7%

32.5% 10.0% 50.6%

55.3% 65.6% 66.2%

As above table shows, although the indexs of philippines had been stable, but the Big Mac

index indicated that the currency value of Korea has been underestimated from -6% in 2004 to -

19% in 2011. The index of Japan is similar condition. However the Starbucks index has shown

different situation especially the currency value of Japan is highly overestimated in 2011. It’s very

similar conclusion comparing to most of economists’ opinion that Japan’s currency was

overestimated in 2011.

Why the big mac index mismatched to the starbucks index and economists’ common consensus

about the currency value of Korea and Japan? One of possible reasons is that McDonald’s has

lots of sales promotions. For example, McDonald’s in Japan has tried to sell a set with a much

cheaper price than before, which will Japan’s rating in the Big Mac Index.74 On the other hand, it

is able to assume that the Starbucks Tall Latte’s pricing strategy has kept stability.75

74 “Fast food for thought “The Economist, Jul 30, 2011, http://www.economist.com/node/21524873, accessed February 2012.” 75 “The Usage of Big Mac Index” The imail newspaper, July 28, 2008, http://www.imaeil.com/sub_news/sub_news_view.php?news_id=34623&yy=2008, accessed February 2012.

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For analyzing this kind of gap , the most important factor which has led declining of the Big

Mac’s price is a change of social concept. Especially to fast food, people start regarding it as

unhealthy, junk food. They don’t want to spend their money to buy it anymore, so sellers are

forced to reduce the price of their product. This means their product drops in value when

compared with Big Macs in other countries. This change has especially happened in advanced

countries.76 For this reason, we can assume that the starbucks index is more proper than the big

mac index in Korea and Japan. In addition, the starbucks index also have strength in the point of

cultural reason, For example, Hindi people view beef as sacred animal. Instead of beef, Big Macs

in Hindi countries are made with chicken and heep’s meat. Therefore, it is difficult to precisely

compare Big Macs around the world because their materials are different in different countries.

On the other hand, the Starbucks Tall Latte Index is not affected by such cultural reasons or

changes in social concept. The material—and social concept— of the Tall Latte is standardized

around the world.

In conclusion, the Big Mac index is very well known. However, it’s concept is flawed because its

material isn’t standardized around the world. Additionally, the ways the Big Mac’s social concept

has changed in some countries is also very important to explaining the shortcomings of the Big

Mac Index. The Starbucks Tall Latte Index is more reliable because it is made out of standardized

material and has a standardized social concept in every country it’s sold..

76 “Business and human capital-Mc Donalds” The imail newspaper, July 28,

2008http://morrisseyhr.wordpress.com/2011/05/10/mcdonalds/

http://www.pugetsoundoff.org/blog/erino/15540, accessed Feb. 2012

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Why did "Occupy Wall Street" demonstrators show up?

By Siyung Jo and Woojin Yang

“Occupy Wall Street” demonstrators appeared for the first time in September 17, 2011. They

justified that major banks and multinational companies are threatening democracy and have the

power related to corruption.77 They also point out that severe economic recession was caused by

Wall Street. So they desperately opposed the rich who made the unfair global economic order.

Let’s go back to 2008 when the global economic crisis broke out by Lehman Brothers’

bankruptcy. The US government saved the financial institutions which were on the verge of

bankruptcy by using $900 billion paid by 99% of the US citizens. However, what happened in

Wall Street? Bankers had a bonus party instead of self-reflections. There was an attempt to

introduce a bill called “the Buffet Tax”. But the bill making the richest pay more taxes did not

pass through Congress. In 2011, another global economic crisis hit the world. At that time, 99%

of the US people started to lose their temper. On the behalf of 99%, “Occupy Wall Street”

demonstrators shouted “why are the innocent 99% of the US citizens taking responsibility for the

mistakes of the greedy 1% people?” It was not long before “Occupy Wall Street” spread out to

more than 100 cities in the US and 1,500 cities worldwide.

Ⅱ. Causes of increasing the gap between the rich and the poor and solutions for reducing the

gap

1. Causes of ‘the rich get richer, the poor get poorer’ phenomenon

Participants at “Occupy Wall Street” demonstrations insisted that ‘the rich get richer, the poor

get poorer’ phenomenon spread all over the world. Why did the trend happen?

A. Deregulation spread over all industries

First, Neo Liberalism which has dominated the world economy for the last 30 years

77OccupyWallSt.org, “About Us”, http://www.occupywallst.org/about/, Accessed February 10, 2012

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emphasized competition and effectiveness. As a result, both domestic and international division

of labor has become common. For example, Apple designs their products at R&D centers in the

U.S.A, purchases the electronic parts from companies in Korea, Taiwan and Japan, and

assembles them at factories in China. By help of the international division of labor, Apple has

earned historically high profits in the last several years. However, Apple’s subcontractors in

China still struggle to make ends meet. In a pyramidal structure of manufacturing, a top

company takes most of the profits but a myriad of companies in the bottom always has trouble

in survival. It is not difficult to witness similar cases happening in one country.

During the dominance of Neo Liberalism, the gap between the rich and the poor has been

getting bigger. In the world, 29.7million people have assets worth more than $1million.78 There

are 6,000million people in the world. Therefore, only 0.5% of the global population takes 38.5%

of the total gobal assets. In the U.S. while the top 1% households’ income soared by 275% from

1979 to 2007, the bottom 20%’s increased only by 18%.79 The former took 9% of the national

income in 1979 but the number recorded 24% in 2007.80

B. Decrease of regular jobs

Second, enterprises seeking high profits to win decreased regular jobs. For example, the revenue

of the Hyundai Heavy Industries in 1999 was ₩6,330billion. It was increased to ₩ 45,700billion

in 2010. However, regular jobs of the company decreased by an 8% point in the past 11 years.

From an employees’ standpoint, there is a huge gap between the regular jobs and irregular jobs.

The average salary of the regular jobs in Hyundai Heavy Industries doubled in the past 11 years.

But, that of the irregular jobs is the same as the money that regular workers earned 11 years ago.

The situation of decreasing regular jobs has made many people think that their social status is

78Credit Suisse, “Global Wealth Report 2011”(Oct. 2011), p.4 79Congressional Budget Office, “Trends in the Distribution of Household Income Between 1979 and 2007”(Oct. 2011),

p12, http://www.cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.pdf, accessed Feb. 2012 80William Domhoff, “Who Rules America”, http://www2.ucsc.edu/whorulesamerica/power/wealth.html, accessed Feb. 2012

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deteriorating. According to a survey by Korea Statistics in 2011, 45.3% of households in Korea

answered that they are lower level of the socioeconomic status and only 1.9% said that they are

upper level of that. The middle level was 52.8%.81 If we compare the 2011’s result to the survey

conducted in 2009, the lower level increased by a 2.9% point. Otherwise, the upper and middle

level decreased by a 0.8% point and a 2.1% point, respectively.

In addtion, the global economic crises in 2008 and 2011 hammered the world economy,

therefore, the poor got seriously poorer. Financial institutions, which earned much money from

the Neo Liberalism, suddenly faced the crisis of the Lehman Brothers. If one bank bankrupts, the

rest of banks which lent money from the bank fall into big trouble. This ‘domino phenomenon’

has affects on ordinary people. Because the banks struggled during crises, the poor could not

borrow money at lower interest rates. All the governments acted to save the endangered banks.

Naturally, the ordinary people became very angry at the situation, which the major beneficiaries

of the Neo Liberalism like banks tried to recover and maintained their status using tax ordinary

people paid.

2. Solutions for the problems

How can we solve ‘the rich get richer, the poor get poorer’ phenomenon? Are there any solutions

for this kind of historically complicated problem? Yes, we have to be positive, otherwise, there

will be a disaster in our future.

A. Need for another way of economic system instead of Neo Liberalism

One possible solution is to find another way of an economic system instead of Neo Liberalism.

Professionals are still struggling to look for a new economic system. Paul Krugman, who is one

of the Nobel Prize winners for economics and a liberal originating from Capitalism itself,

insisted that governments should nationalize the financial institutions. It was surprising that

81Statistics Korea, “the social survey”, http://kostat.go.kr/portal/korea/kor_nw/2/1/index.board?bmode=read&aSeq=252361 February 16, 2012

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such a kind of harsh criticism about the Neo Liberalism appeared in Wall Street. The new system

could be located in between Neo Liberalism and Keynesism. But, many people agree with the

argument that the new system needs to care for the social stability of ordinary people. If people

in lower and medium level of social status feel their lives are more stable, not only will they

think that the economic gap between the rich and the poor is disappearing, but they also can

spend more money on consumptions. Increase of household consumption can be good news to

the economy as a whole.

In addition to strengthening the social stability of people, introducing new regulations for

greedy entrepreneurs is discussed as a good care system for the failure of Neo Liberalism. As

“Occupy Wall Street” demonstrators argued, greedy executives of large financial institutions

were designated as main culprits of the 2008 global crisis. They made their employees ignore the

risks of their jobs like trading high risk financial derivatives. Not to experience similar cases, the

new economic system needs to equip strong instruments to suppress the greed of some

entrepreneurs.

B. Making enterprises to reduce part time job

What could be a solution to create stable jobs? There can be two ways for this issue.

First of all, setting up new guidelines for job security is important. “Job Sharing Movement” in

Korea is a good example. When working in “Job Sharing” company, two or three workers can

share the same position in a company, each doing a part of the work. Compensation is

apportioned between the workers, thus leading to a net reduction in per-employee income.82

Supporters of the movement argue that “Job Sharing” will not reduce the regular jobs. Generally,

most companies layoff the irregular workforces in downturn and rehire them during the

economic boom. By “Job Sharing”, the causes of reducing the regular jobs will disappear.

Secondly, promoting medium and small sized enterprises is reasonable method to create more

regular jobs. It is not easy to expand the regular jobs for global conglomerates, since they operate

82Wikipedia, “Job Sharing”, http://en.wikipedia.org/wiki/Job_sharing February 20, 2012

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the R&D sectors in advanced countries and the production departments in underdeveloped

countries. Instead of the conglomerates, it is easier to increase the regular jobs for small and

medium sized companies. Additionally, raising the level of salaries of those companies will

decrease dissatisfaction of the poor class and enlarge the home market gradually. There will be

some positive efficacy if we invigorate small-scale enterprises and tiny ventures.

Ⅲ. Worldwide and nationwide efforts are necessary

‘The rich get richer, the poor get poorer’ phenomenon threatens the future of Capitalism. With

Neo Liberalism dominating the world for the last 30years, deregulation strengthened the

‘winner takes all’ situation and regular jobs have gradually disappeared. Now, worldwide and

nationwide efforts are necessary to solve the problem of increasing the gap between the income

of the rich and that of the poor. We should not only think of another way of the economic system

instead of Neo Liberalism, but also care for the social stability of the lower and medium social

classes. The possible solutions are introducing new regulations for greedy entrepreneurs,

making enterprises reduce part time jobs, setting up new guidelines for job security, and

promoting medium and small sized enterprises to create more regular jobs.

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The Effect of Animation Outsourcing on Japan Economy

By Takahiro Aoki and Lee Woochan

1. Introduction : Outsourcing may destroy the Japanese animation industry

Outsourcing has financial advantages. Animation productions can reduce their producing costs.

But in the long run, outsourcing may destroy the Japanese animation industry in the future.

Prior to the study of the effect of outsourcing on the

Japanese animation industry itself, it is necessary to

check out the basic structure & current situation of

Japanese animation outsourcing. It is well known

that the industry is struggling to overcome

problems with production cost cutbacks, while

Japanese animation has been in the spotlight

overseas.

Production has increasingly been outsourced in

recent years due to the matter of its cutbacks. While

planning, directing and other processes requiring

advanced expertise have remained in Japan, animating,

coloring and other simple operations are being shifted to

other countries. 83

83 Japanese Economy Division, “Japan Animation Industry Trends”, JETRO Japan Economic Monthly (June 2005) : 3.

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overseas.






other countries. 83


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overseas.






other countries. 83


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[ Exhibit 1 ] 84

2. - (1) Current Statuses & Scale of the Industry

Industry experts estimate that major Asian countries such as Philippines, Taiwan, South Korea and

China are the preferred outsourcing destinations for 2D Animation, Canada and UK are the leaders in 3D

Animation.85

l Global Demand

The continued demand in the global animation market has allowed the Asia-Pacific region to

further emerge as a premier destination for animation outsourcing.

[ Exhibit 2 ] 86

84 Ibid. : 3. 85 TATA Strategic management group, “Animation and Gaming Industry in India” (Feb 2010) 86 Tholons Inc., “The Philippine Animation Industry Landscape” (May 2008) : 3.

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l Japan

The Japanese animation industry's main business is selling the video program rights,

merchandising rights, film distribution rights, broadcasting rights and video distribution rights

to foreign countries. Because DVD sales of Japanese animation in the United States have

declined, the branch offices of video program manufacturers in Japan have been forced to

withdraw. In the industry in 2006, right license revenue was 20 billion yen in size in 2010, has fallen to

about 13 billion yen, overseas market size is estimated to 195 billion yen in 2010.87

[ Exhibit 7 ]

87 http://humanmedia.co.jp/database/PDF/5-1.pdf, accessed Feb 2012.

1,013

780

149246

Japan's domestic animation sales(2010)

Video Software Sales

TV animation advertisement sales

VOD

Animation Movie Sales(Top 20)

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A famous animation director, Yoshiyuki Tomino, thinks the current situation of Japanese

animation industry is not good. Because more and more individual products are appearing one after

another and there is a trend that is making light of “studio work.”88

l India

The Animation Entertainment segment in India is estimated at USD 122 Million (2009) and is expected

to show a CAGR (Compound Average Growth Rate) of 20% (2009-2013) to reach USD 253 million by

2013. 74% of the animation entertainment work in India is outsourcing work for overseas clients. It is

only 26% of the overall animation entertainment in India, which is for domestic clients. 89

[ Exhibit 3 ] 90

[ Exhibit 4 ] 91

(Unit : USD Mil.) (100% = USD 122 Mil.)

2. - (2) Expected Effects of Outsourcing

l Positive Effects

88 http://bizmakoto.jp/makoto/articles/0907/08/news035_3.html, accessed Feb 2012. 89 TATA Strategic management group, “Animation and Gaming Industry in India” (Feb 2010) : 13. 90 Ibid. : 13. 91 Ibid. : 13.

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l India





[ Exhibit 3 ] 90

[ Exhibit 4 ] 91



l Positive Effects


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l India





[ Exhibit 3 ] 90

[ Exhibit 4 ] 91



l Positive Effects


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Basically, the prime-contractors can expect the positive effects of cost-cutback on their producion

through their outsourcings. At the same time, the subcontractors may anticipate the creation of

new jobs and development of their skills and techniques.

The positive effects of animation outsourcing seem more favorable to the prime-contractors such

as Japan and USA in short term. As a prime-contractor, there is no doubt outsourcing must be

the most attractive method for the cost-cutback, because its main expenses come from labor cost.

Therefore, outsourcing is an essential factor to accelerate the base of the animation industry.

In addition, it is well known that the animaiton industry is strongly inclined to expand its areas

related to other parts of industries such as characters, movies, and distribution. Moreover, it is

also a good way for countries to spread out their own cultures elsewhere. Therefore, it is

abolutely true that animation outsourcing has been playing a positive role for both companies

and countries.

l Negative effects

Outsourcing, the creative work to foreign countries, has negative effects.

First, the fear of hollowing out of the animation industry is a serious matter. Japanese animation

studios are outsourcing relatively simple labor works, but to become skilled and creative

animators, beginners should experience those simple labor works. If the number of skilled

animators continue to decrease, it will lead to land subsidence of the Japanese animation

industry.

Moreover, there are problems beyond that, namely the fact that animation production, which should

be a team effort by the production staff, has become divided into a relationship between the

planning/development/design stage (production including planning, script, and storyboards), and

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production that takes place in a factory (animation onward).92 This is more remarkable in overseas

outsourcing than domestic production.

Second, quality is a problem. Japanese animation industry has a long history over 50 years. But

those outsourcing countries such as India and the Phillipines, China, South Korea do not have

enough history. Because of this background, animators in outsourcing countries tend to have

inferior technics. Therefore, outsourced animation films have a quality problem in some cases.

Case review of negative effect of outsourcing

There are some cases that some of the Japanese animation films are produced in Japan in spite

of expensive production cost. The main purpose to produce in domestic way is to keep product’s

quality. In this sense, some production companies realize potential risks of outsourcing.

Therefore, those companies maintain intergrated production system and do not choose

outsourcing.

[Case 1] Studio Ghibli

Studio Ghibli is one of the most famous animation production companies in Japan. It has many

hit titles such as “Princess Mononoke” and “Spirited Away.” Studio Ghibli has a unique

employment system. Unlike other animation production companies, Studio Ghibli hires full-

time employees. Studio Ghibli is trying to improve the quality of its products and keep excellent

staffs, educate human resources by improving the treatment of employees.

Moreover, Studio Ghibli has an integrated production system93 which enables all the production

process from planning to shooting inside Studio Ghibli.

[Case 2] Kyoto Animation

Kyoto Animation is also a famous animation production company in Japan. Since the late 2000s,

it has many enthusiastic fans. Kyoto Animation has a similar production system. Thanks to the

production system, staffs have maintained close communication.94

2. Conclusion

92 http://www.japanator.com/the-japanese-animation-industry-is-going-straight-to-hell--6130.phtml, accessed Feb 2012. 93 http://www.smrj.go.jp/keiei/dbps_data/_material_/common/chushou/b_keiei/keieichosa/pdf/h18con_2.pdf, accessed Feb 2012. 94 http://www.kyotoanimation.co.jp/company/outline/, accessed Feb 2012.

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As mentioned above, animation industry needs its outsourcing because of its limited budget. In

fact, more and more Japanese animation production companies are outsourcing their work to

foreign countries. There is economic rationality and international division of labor seems to be

valid. But this is shortsighted. Actually, animation pruduction companies could reduce the

production cost by outsourcing. Though, there are some risks such as hollowing out of the

animation industry and degradation of quality in the long run. Therefore, Japanese animation

industry should consider those risks of outsourcing and find a better cooperation with foreign

animation production companies.

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Aging Population: Impact on the World Economy

By Jung Jaeyoon and Shoichiro Kitano

I.INTRODUCTION

The world is entering substantially uncharted waters in terms of the size of its elderly

populations. Recent declines in fertility rates and increases in life expectancy, combined with the

dynamic evolution of past variations in birth and death rates are producing a significant shift in

the global age structure. The number of people over the age of 60 is expected to reach 1 billion by

2020 andalmost 2 billion by 2050 (representing 22 percent of the world’s population). The

proportion of individuals aged 80 or over (the so-called “oldest old”) is projected to rise from 1

percent to 4 percent of the global population by 2050.95

II.SOCIAL IMPACT: DEMOGRAPHIC TREND TO 2050

A. DEMOGRAPHIC CHANGE

In 1950, there were 205 million persons aged 60 or over throughout the world. At that time, only

3countries had more than 10 million people aged 60 or over: China (41 million), India (20

million), and the United States (20 million). By 2009, the number of persons aged 60 or over had

increased three and a half times to 737 million and there were 12 countries with more than 10

million people aged 60 or over, including China (160 million), India (89 million), the United

States (56 million), Japan (38 million), the Russian Federation (25 million) and Germany (21

million). By 2050, the population aged 60 or over is projected to increase again nearly threefold

to reach 2 billion.

95 David E. Bloom, David Canning and Günther Fink, “Population Aging and Economic Growth”, The Commission on

Growth and Development, Working Paper No.32,The International Bank for Reconstruction and Development / The

World Bank, 2008, p.11, http://www.growthcommission.org/storage/cgdev/documents/gcwp032web.pdf accessed

February, 2012

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Also by 2050, 32 countries are expected to have more than 10 million people aged 60 or

over,including five countries with more than 50 million older people: China (440 million), India

(316 million), the United States (111 million), Indonesia (72 million) and Brazil (64 million).96

Already by 1950, developed countries as a whole had a higher proportion of their population

aged 60 years or over than developing countries (12 per cent vs. 6 per cent). In 2009, developed

countries continue to be at a more advanced stage of the demographic transition and have

populations that are already showing strong signs of ageing. Furthermore, their populations are

projected to remain considerably older than those of developing countries as a whole. Currently,

21 per cent of the population in the more developed regions is aged 60 years or over, whereas

about 8 per cent of that in the less developed regions is in that age group. By 2050, almost 33 per

cent of the population of the more developed regions is projected to be 60 years or over, whereas

the equivalent proportion will likely be 20 per cent in the less developed regions.97

B. THE CHANGING BALANCE AMONG AGE GROUPS AND “DEPENDENT” RATIO

In most populations, the increasing proportions of older persons have been accompanied by

steadyreductions in the proportion of young persons. At the world level, the proportion of

children (that is,persons under 15 years of age) dropped from 34 per cent in 1950 to 27 percent in

2009. By 2050, the proportion of children is projected to decline by over one fourth and the

proportion of persons aged 60 years or over (22 per cent) will, for the first time in history, exceed

that of children (20 percent). During 2009-2050, the proportion of persons whose ages range from

15 to 59 will change slightly, passing from 62 percent in 2009 to 58 percent in 205098.

The old-age dependency ratio is the ratio of the population aged 65 or over to the population

96 The Population Division of the Department of Economic and Social Affairs of the United Nations, “World Population Ageing 2009”, December 2009, p.26,http://www.un.org/esa/population/publications/worldageing19502050/ accessed February, 2012 97Ibid., p.27 98Ibid., p.31

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aged 15 to 64 expressed per 100 population. Although the current differences among major areas

in the old-age dependency ratio are expected to persist until 2050, all major areas will experience

remarkable increases in that ratio. From 2009 to 2050, the ratio of persons aged 65 or over to

those of working age is projected to grow from 6 per 100 to 11 per 100 in Africa, from 10 to 27 in

Asia, from 10 to 31 in Latin America and the Caribbean, from 16 to 30 in Oceania, from 19 to 36

in Northern America and from 24 to 47 in Europe.99

Currently, Japan has the world’s highest old-age dependency ratio of 34 older persons per

100persons of working age. It is followed closely by Italy and Germany, with ratios of 31. Over

the nextfour decades, the old-age dependency ratio is projected to increase substantially in most

countries ofthe world. By 2050, Japan, with an old-age dependency ratio of 74, will still have the

world’s highestlevel of old-age dependency, followed by Macao SAR China (64), the Republic of

Korea (63) and Italy (62). In another 16 countries, most located in Europe, the old-age

dependency ratio is projected to be higher than 50 older persons per 100 persons of working age.

At the same time, in 29 countries or areas, most located in Africa, the population aged 65 years or

over is expected to be less than one tenth the size of the working-age population.100

III.INFLUENCE ON THE ECONOMIC GROWTH

Economic growth in Brazil, Russia, India and China, the countries so called BRICs, hasbeen a

driving force of world economy since the end of cold war in 1989. This trend will continue for

more than ten years.After the economic crisis in 2008, these countries play important role to the

world economy. Since the start of the economic crisis in 2007, the BRICs’ contribution has risen

and about 45% of global growth has come from the BRICs, up from 24% inthe first six years of

the decade. The contribution from all emerging marketsas a whole was over 80% (vs. the 2000-

2006 average of 45%). The G7 (developed countries including the United States, Japan, Germany,

99Ibid., p.36 100Ibid., p.36

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the United Kingdom, France and Italy) has onlycontributed 20% between 2005 and 2007.101

A.ECONOMIC GROWTH FORECAST

1. DEVELOPED COUNTRIES

According to the report by Dominic Wilson and Anna Stupnytska in 2007, growth of the GDP

(Gross Domestic Products) of all the G7 countries and Korea is comparatively low.102 In 2006,

sum of the GDP in these 8 countries was $28.9trillion, whereas the figure of 2050 is estimated

$70.1 trillion. During 44 years, GDP will be only 2.4 times in these countries.

US$ GDP Projections (G7+Korea)

2006

US$ bn

Canad

a France

German

y Italy Japan Korea UK US Total

2006 1,260 2,194 2,851 1,809 4,336 887 2,310 13,245 28,892

2010 1,389 2,366 3,083 1,914 4,604 1,071 2,546 14,535 31,508

2015 1,549 2,577 3,326 2,072 4,861 1,305 2,835 16,194 34,719

2020 1,700 2,815 3,519 2,224 5,224 1,508 3,101 17,978 38,069

2025 1,856 3,055 3,631 2,326 5,570 1,861 3,333 20,087 41,719

2030 2,061 3,306 3,761 2,391 5,814 2,241 3,595 22,817 45,986

2035 2,302 3,567 4,048 2,444 5,886 2,644 3,937 26,097 50,925

2040 2,569 3,892 4,388 2,559 6,042 3,089 4,344 29,823 56,706

2045 2,849 4,227 4,714 2,737 6,300 3,562 4,744 33,904 63,037

2050 3,149 4,592 5,024 2,950 6,677 4,083 5,133 38,514 70,122

2050 to

2006 2.5 2.1 1.8 1.6 1.5 4.6 2.2 2.9 2.4

101 Jim O’Neill and Anna Stupnytska, “The Long-Term Outlook for the BRICs and N-11 Post Crisis”, Goldman Sachs Global Economics Paper No: 192, December 4, 2009, pp.6-8, http://www2.goldmansachs.com/our-thinking/brics/brics-reports-pdfs/long-term-outlook.pdf, accessed February 17, 2012

102 Dominic Wilson and Anna Stupnytska, “The N-11: More Than an Acronym”, Global Economics Paper No: 153, March 28, 2007, p.19, http://www.chicagobooth.edu/alumni/clubs/pakistan/docs/next11dream-march%20'07-goldmansachs.pdf, accessed February 17, 2012

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Based on the data from Dominic Wilson and Anna Stupnytska, 2007

2.DEVELOPING COUNTRIES

On the contrary, economic growth in developing countries will continue. In 2050, estimated GDP

of China is $70.7 trillion,compared with that of $2.7 trillion in 2006, the amount is more than 26

times. Also in India, GDP will be $37.7 trillion in 2050 and the figure is 41 times of 2005, which is

only $909 billion.

US$ GDP Projections (BRICs)

2006

US$ bn Brazil China India Russia Total

2006 1,064 2,682 909 982 5,637

2010 1,346 4,667 1,256 1,371 8,640

2015 1,720 8,133 1,900 1,900 13,653

2020 2,194 12,630 2,848 2,554 20,226

2025 2,831 18,437 4,316 3,341 28,925

2030 3,720 25,610 6,683 4,265 40,278

2035 4,963 34,348 10,514 5,265 55,090

2040 6,631 45,022 16,510 6,320 74,483

2045 8,740 57,310 25,278 7,420 98,748

2050 11,366 70,710 37,668 8,580 128,324

2050 to

2006 10.7 26.4 41.4 8.7 22.8

Based on the data from Dominic Wilson and Anna Stupnytska, 2007

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Dominic Wilson and Anna Stupnytska, 2007



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B.PROMISING INDUSTRIES

1. MEDICAL

The population of India is projected to reach 1.6 billion by2050. India will become the world’s

most populated countryby 2025. 189 million Indians will be 60 or older up from about 63 million

in year 2004. Thisprojection shows the global demand of pharmaceutical drugs will rise in the

future.103

2. HEALTHCARE

In addition, related industries such as medical machineries, skincare, and health foods are also

projected to expand their market growthbecause of aging and economic growth in the

developing nations. For example, according to the DrAkash S Rajpal, a head of HOSMAC India

Private Ltd,India presently has a bed deficit of approximately 30 beds as per the WHO

recommendation of four beds per 1000 population. Considering even a 250 bedded hospital on

an average, the country would need 12000 hospitals in the near future.104 It means that there is a

huge market for healthcare industries.

IV.POLITICAL INFLUENCE

In Japan, where society is aging so rapidly, there are many concerns to be solved immediately.

On Japanese newspapers, it is easy to find questionssuch as 1) Howcan thecountry support the

pension system? 2) How would Japan deal with the upward expense trend of healthcare system?

3) How would Japan maintain the labor force?These questions are not only limited in Japan, but

also applied to the world. Globally, the impact of aging population is so huge, it is necessary to

find solutions as soon as possible, learning from Japan.

A. POLICY MAKING PROCESS

103Corporate Catalyst India PVT, Ltd. “Report India's Pharmaceutical Industry”,p.11,www.cci.in/pdf/surveys_reports/indias_pharmaceutical_industry.pdf, accessed February 19, 2012 104 Express Healthcare, "Future Trends in Healthcare Industry in India", http://www.expresshealthcare.in/201101/anniversaryspecial09.shtml, accessed February 23, 2012

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The impact of aging on the policy making process, which will expand year by year, must also be

considered.

1.DIFFERENT NEEDS AND DIFFERENT BEHAVIORS

There is a huge gap between elder people and young people. It is important to recognize their

demands and behaviors. In the aging society, those who have paid for pensions and who are

paying for them might have different opinions and it is sometimes difficult to adjust.

Furthermore, in most countries, election systems are comparatively easily accessiblefor elder

people. In Japan, it is not an easy task to force young people to vote. Consequently, most political

parties reflect senior people’s needs and young people’s opinions are sometimes put off.

2.MORE FOCUSION ON INTERNAL AFFAIRS

Even in the United States, its policy would more focus on internal affairs in the future by the

aging population. As a consequence, it is possible that the country might cut its defense

expenditures. The superpower may lose its ability to deal with international conflicts.

V.CONCLUSION

In conclusion, as the shift of global age structure, along with the increasing population and

economic growth in developing countries, the world as a whole is facing inexperienced

circumstance in this century. Currently, there is no international organization to deal with this

situation. These issues are dealt by each nation states. Therefore, it is time to establish specialized

international organization to deal with aging world and make cooperative, borderless policies.

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CHINESE LUXURY SHOPPING

Jaewoo Kwon and Emi Yamazaki

According to The European Business Review,“China recently became the world’s

second largest market for luxury goods with an annual increase of more than 30% in 2010, even

surpassing Japan.Further estimates predict that China will become the largest upscale product

and consumer goods market in the world.”105 Current Chinese economic growth is quite rapid

and strong, so it seems to make sense that Chinese people buys such luxury goods. However,

GDP per capita does not show strong increase because of growing population. Chinese culture

and tradition reveal three reasons to support Chinese luxury shopping enthusiasm.

1. Current situation

1-1. Comparison of China, the United States, Japan, andSouth Korea

The World Bank tracks current data of gross domestic product (GDP) per capita. GDP

per capita shows not only a country’s productivity but also its consuming power. According to

macroeconomics theory, basically, all products made in the country are divided to employees

and consumed asinvestments. The products which divided and consumed are same amount of

products made in the country, vice versa. Thus, GDP is almost equal to gloss domestic

expenditures.

Table1 is a comparison of China’s GDP per capita (constant 5 years)with three other countries:

Japan, South Korea and United States.

Table 1106GDP per capita (constant 2000 US$) (2006 to 2010)

105The European Business Review,Luxury consumer behavior in mainland China: What exists behind the facade of new wealth?,http://www.europeanbusinessreview.com/?p=2418[Accessed February 2012] 106The World Bank,2011,GDP per capita (constant 2000 US$),http://data.worldbank.org/indicator/NY.GDP.PCAP.KD [Accessed February 2011]

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This data suggests that China shows a high growth rate, but the amounts are below the other

countries.

Table2 is a line graph which shows GDP per capita change from 1970 to 2010, a long-term data.

Table 2107 GDP per capita (constant 2000 US$) (1970 to 2010)

This graph indicates that Japan, the United States and South Korea has been increased their GDP

per capita since 1970. The three countries’ trends are almost same. On the other hand, China’s

change is quite slow and slight.

107Google PublicData,2012,GDP per capita(constant 2000 US$),http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_#!ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_kd&scale_y=lin&ind_y=false&rdim=country&idim=country:CHN:KOR:JPN:USA&ifdim=country&hl=en&dl=en [Accessed February 2011]

Country Name 2006 2007 2008 2009 2010China 1,641 1,864 2,033 2,208 2,425 Japan 39,772 40,707 40,254 37,766 39,310 Korea, Rep. 14,469 15,158 15,458 15,463 16,372 United States 38,342 38,699 38,336 36,677 37,527

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These data suggests one interesting fact. China is not richer than the other three

countries. GDP per capita has increased, but much less than that of the United States, Japan, and

South Korea. Therefore, not all Chinese people became wealthy enough to enjoy luxury

shopping.Neither the population structure norgrowth is the reason China is a large market for

luxury goods.

1-2. Advanced Analysis

Louis Vuitton Moet Hennessy(LVMH) which has one of the most famous luxury brands,

Louis Vuitton, shows the interesting data. It suggests the steep growth of Asian Market

(excluding Japan). See this chart below;

Table 3Revenue by geographic region (2009-2011):108

(Unit: EUR million)

Table 4 Revenue by geographic and the number of stores:109

108LVMH, 2012, Investor Relations Documentation, 2011 Financial documents,http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Reports/Reports_2011/Documentsfinanciers31122011VA.pdf P.2 [Accessed February 2012] 109Ibid., P2

Region 2009 2010 2011France 2,478 2,725 2,866 Europe(excluding France) 3,664 4,236 4,797 United States 3,840 4,611 5,237 Japan 1,683 1,784 1,970 Asia(excluding Japan) 3,850 4,991 6,430 Other 1,538 1,973 2,359

Total Revenue 17,053 20,320 23,659

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(Unit: EUR million)

The data indicates Asia is strong market for LVMH luxury goods, more than its base, France.

In addition, Daimler AG which provides Mercedes-Benz has succeeded by focusing on Chines

Market.

Table 5 Revenue by region (2009-2011):110

(Unit: EUR million)

Both LVMH and Daimler have developed their business by focusing on Asia region, including

China market.

1-3. Related News

Chinese enthusiasm on luxury shopping seems to be a good impact for the economy,

especially under this hardrecession. However, the impact has negative sides. 110Daimler AG. Annual Report 2011,http://www.daimler.com/Projects/c2c/channel/documents/2125319_Daimler_2011_Annual_Report.pdf P245 [Accessed February 2012] Annual Report 2012,http://www.daimler.com/Projects/c2c/channel/documents/1985489_Daimler_Annual_Report_2010.pdfP2 [Accessed February 2012]

Region 2011 Stores Sales per a storeFrance 2,866 396 7.237Europe(excluding France) 4,797 883 5.433United States 5,237 621 8.433Japan 1,970 360 5.472Asia(excluding Japan) 6,430 621 10.354Other 2,359 165 14.297

Total Revenue 23,659 3,046 7.767

Revenue by region 2009 2010 2011Western Europe 36,458 38,478 39,387 United States 16,569 20,216 22,222 Other American Countries 3,366 9,112 10,232 Asia 12,435 19,659 22,643

thereof China 4,349 9,094 11,093 Other countries 10,096 10,296 12,056 Total 78,924 97,761 106,540

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In January 2012 in Hong Kong, apopular place to shop, there was a protest which shows

complicated feelingsabout Chinese tourists coming to luxury shop. Wall Street Journal Blog

reported: “People in Hong Kong went to the streets on Sunday, but unlike previous mass rallies

in the city, this one wasn’t about politics or democracy. The cause: The right to take photos in

front of luxuryretailer Dolce &Gabbana. More than 1,000 people showed up outside the Italian

brand’s flagship store on Canton Road after the retailer reportedly prevented people taking

pictures of its store front earlier in the week. The protest forced the store to shut at 3 p.m. as the

crowds swelled.”111

This news spread via Facebook and made Hong Kong natives lose their temper. The incident

shows the frustration of Hong Kong natives with mainland Chinese visitors, who are playing an

increasingly significant role in the city.

Anyway, one big question comes to mind. Why do some of Chinese people want to buy

suchextravagantluxury goods?

2. The reason for the surge in Chinese luxury shopping

Rapid economic development has encouraged Chinese luxury shopping.However, why does a

country with an average GDP per capita of 2,425 USDhave such a strong propensity for

consuming luxury goods and products?112

We can find hidden reasons for the mass consumption of luxury goods in Chinese cultural

backgrounds.

First,China is found to be a high power-distance culture.113A power-distance culture means that

high levels of social hierarchy are present in a culture. Therefore, the Chinese are motivated to

show off their power in every possible way. In a consumer context, consumers are motivated to

111The Wall Street Journal Blogs, Dolce &Gabbana Photo Ban Sparks Protest 2012, http://blogs.wsj.com/scene/2012/01/09/dolce-gabbana-photo-ban-sparks-protest/ [Accessed February 2012] 112The World Bank,2011,GDP per capita (constant 2000 US$),http://data.worldbank.org/indicator/NY.GDP.PCAP.KD [Accessed February 2011] 113International Journal of Retail & Distribution Management Volume 38, Issue 6 pp423-442 ISSN 0959-0552

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seek higher quality products that represent higher status.

Second, the Chinese culture is represented by high-uncertainty avoidance.114 Individuals in a

high-uncertainty avoidance culture generally hold a higher level of anxiety and lower level of

tolerance on any risk when they deal. Therefore, Chinese consumers tend to be attracted by the

high reliability of foreign products, which offers a guarantee of quality.

Third, Chinese Confucian culture still plays an important role in influencing consumers'

purchasing behavior.115 “Face saving” is one of the most important factors Chinese consumers

consider during decision-making. The Chinese feel comfortable in the knowledge that products

they buy give out a desirable image to others.For these reasons, Chinese are willing to pay a lot

of money to purchase luxury items.

Of course, China’s rapid economic growth has been necessary to make the recent Chinese luxury

buying possible.

3. Future expectations for Chinese luxury shopping

China’s cultural background explains why Chinese consumers are willing to spend a lot of

money to purchase luxury items. This Chinese propensity to consume will continue in the future

for several reasons.

First, an open market and the culture of hierarchy will combine to boost the consumption of

luxury items. Since China adopted a free market economy, the imbalance of wealth has grown

steadily. In 2010, the wealthiest 1% of the Chinese population had 41.4% of all national

wealth.116Hierarchy in China has reinforced.

Second, the Chinese high-uncertaintyavoidance tendency will promote consumption of luxury

goods in the near future. This is because it will be very hard for Chinese companies to make

114International Journal of Retail & Distribution Management Volume 38, Issue 6 pp423-442 ISSN 0959-0552 115Journal of Technology Management in China Volume 3, Issue 3 pp292-306 ISSN 1746-8779 116Seoul Economy, Chinese income polarization, http://economy.hankooki.com/lpage/worldecono/201005/e2010052517023469740.htm[Accessed 21 February 2012]

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brand-name products such as Chanel in the foreseeable future.

Third, global brands bring their users an international image and young Chinese consumers

tend to use global brands to impress their peers.117 Young Chinese people follow the latest

fashion with the widespread use of the internet. This trend is added to Chinese Confucian

culture.

Lastly, continuing rapid Chinese economic growth will accelerate the consumption of luxury

goods.

117Young Consumers Volume 10, Issue 2 pp98-109 ISSN 1747-3616

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How the Chinese economy recovered

quickly after the financial crisis

By Yoshiyuki Suimon and Richie Hsieh

1. Introduction

The financial crisis happened in late-2000s because of the collapse of the complicated financial

products’ markets. This financial crisis caused a worldwide recession. In that time, many

countries’ economic growth stopped and the bad condition damaged many kinds of industries.

However, the Chinese economy quickly recovered relative to the other countries. In this report,

we introduce the background of financial crisis and focus on high-tech industry in China.

2. Financial crisis in Late-2000s

2.1What happened in Late-2000s

The Late-2000s recession was caused by severe global economic problems that began in

December 2007 and took a particularly sharp downward turn in September 2008. It is said that

the emergence of “credit derivatives” was one of the causes of the financial crisis.118 It was a kind

of derivatives and made from mortgaged backed securities. Such derivatives made the financial

system complicated and accelerated speculative investment of commercial banks, insurance

companies, and pension funds. Generally, these corporate investors do not need to take the

financial market’s risk. However, they started to invest such speculative assets. To make matters

worse, after the bankruptcy of Lehman Brothers on September 15, 2008, a major panic broke out

on the financial markets. As the credit derivatives’ prices declined, many large and well

established financial firms suffered huge losses and even faced bankruptcy.

At the financial crisis, first, the world economy was breaking down primarily because of a lack of

financing. Second, a global recession has resulted in a sharp drop in international trade, rising

unemployment and slumping commodity prices. Trade flows collapsed, and companies and 118Wikipedia, "Late-2000s recession," http://en.wikipedia.org/wiki/Late-2000s_recession, accessed February 2012

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individuals stopped spending. It seemed clear that halting the slide was critical. The recession

has affected the entire world economy. A recession is "a period of reduced economic activity".

Paul Volcker, former United States Federal Reserve Chairman, asserted that speculative

investment played a key role in the financial crisis. After the crisis, he made a rule in order to

restrict these speculative activities.119

Fig1. HANG SENG Index recovered relative to NKY225 Index

[Note] Hang Seng is Hong Kong’s and NKY 225 is Japanese stock market index

2.2 Changes of the world economy after the crisis

Not only financial systems but also the world economy has changed since the crisis. In the

recession caused by the financial crisis, the worldwide economic growth stopped and the bad

condition damaged many kinds of industries.120. However, as Figure2 shows, in terms of GDP

growth, the Chinese economy quickly recovered relative to the other countries. As for stock

markets, the Hong Kong stock prices obviously rose much relative to Japanese market’s price

even though both of these are Asian countries.

Fig2. GDP Real Growth after the financial crisis

119Wikipedia, "Volcker Rule," http://en.wikipedia.org/wiki/Volcker_Rule, accessed February 2012 120Floyd Norris, "Crisis Is Over, but Where’s the Fix?," Now York Times, March 2011,

http://www.nytimes.com/2011/03/11/business/economy/11norris.html, accessed February 2012

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[Note] World map showing real GDP growth rate after the financial crisis (for 2009)

3. High-Tech industry in China

3.1 National High-Tech zones

In spite of the global financial crisis, the High-Tech industry in China maintained a sustained

growth. Although the growth of National High-Tech zones dropped slightly in 2008, compared

to the international situation, the growth was still very stable. Figure3 shows China’s High-Tech

exports from 1995 to 2009. After the global financial crisis, in 2010, China’s High-Tech industry

had an output value of 58 trillion Yuan, an increase of 141% over that in 2009.121 The local

government now plans to build an ‘Internet Cloud Zone’ with no firewall filter, in order to gain

international market share in cloud computing. The well-known online payment company,

Paypal, has agreed to establish an International electronic commerce center in China, which will

boost exports from the nation by helping hardware manufacturers from Taiwan or any other

worldwide internet companies to conduct faster cross-border trade. High-Tech zones have

already marked the sign of technology spot in China. China has been trying to build its Silicon

Valley for the High-Tech industry. In the global financial crisis, China’s national High-Tech zones

demonstrated the advantages of making their positions even more important. Therefore,

strengthening the role of High-Tech zones and further development and expansion of High-Tech

121 Liumingliang, “The development of China’s high-tech industry contrarian,” http://www.builderrors.com/tech-news/2011/10/16/the-development-of-chinas-high-tech-industry-contrarian/, accessed February 2012

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industries became a focus of China’s industrial restructuring.

Fig3. China’s High-Tech exports from 1995 to 2009

3.2 Intertwined “Chaiwan”

Almost all Taiwanese computer makers as well as hundreds of component producers have

factories in China, making it the most important computer production base in the world. As the

IT industry in China and Taiwan became intertwined, some tech types already fuse the pair into

“Chaiwan.”122 Although many companies were hit by the 2008 global financial crisis, business

was back just half a year later. Major personal computer brands, such as HP, Acer, Dell, and Asus

are made by Taiwanese companies and manufactured in China. During the period of the global

economic slowdown after the financial crisis, these companies continued to thrive with various

forms of financial assistance offered by the Chinese government. The authorities offered many

incentives such as direct charter flights, cross-border Chinese Yuan’s trade settlement services,

10-year subsidies on income taxes, and export tax rebates. As IT is becoming a more and more

important part of the Chinese economy, the investments in the High-Tech industry have been the

largest in China for three consecutive years. They are now the home of most world’s largest

makers of computers and associated hardware, which produce more than 50% of all chips, 70%

of computer displays, and more than 90% of all portable computers.

122 “Hybrid vigour,” The Economist, May 27,2010, http://www.economist.com/node/16220584, accessed February 2012

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4. Conclusion

From the statistic data and information mentioned above, we can find that the economic

situation of the world is changing. Emerging economies such as the High-Tech industry in China

are no longer waiting for the developed economies to take concerted action. They are now

committed to sustaining economic growth even during an obvious slowdown of most

developed countries.

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The Effect of China’s foreign exchange

reserves on the World Economy

By Sachiyo Urashima and Sangjae Lee

China’s Foreign Currency Reserves Have Been Growing

“Foreign exchange reserves are the foreign currency deposits and bonds held by central banks

and monetary authorities”123. In 1978, China's foreign exchange reserves were minimal, but

enough to cover the requirements for its small import bill. However, in 1980s, the export amount

rapidly increased and it contributed to a rise in reserves to a peak of US$17.4 billion. However,

the economic slowdown at the beginning of the 1990s produced a sharp fall in imports, while

exports continued to rise, producing a merchandise trade surplus of approximately

US$9.2billion. Although the trade and current accounts were in deficit in 1990s, the acceleration

in inward FDI flows kept foreign exchange reserves rising. After China joined the World Trade

Organization (WTO) in 2001, imports recorded rapid growth, but exports also expanded

at a fast pace, while FDI inflows became over US$60 billion a year by the middle of the 2000s. In

2006, China's foreign exchange reserves reached USD trillion for the first time. After 2 years, the

reserves topped USD 1.9 trillion. The rapid growth tendency has continued with some

opposite periods and in 2011 foreign exchange reserves had reached USD 3.2 trillion.124

Now these reserves have made many problems in China. For example, China cannot effectively

use this huge amount of money in investment and they have been strongly criticized.

Furthermore China has received high pressure from abroad to reduce its foreign exchange

reserves because the current Renminbi Yuen has purchasing power parity equal to other

countries. With this huge amount of foreign currency, China could bring big economic

opportunities to itself and also other countries125.

123 Wikipedia, “Foreign-exchange reserves,” http://en.wikipedia.org/wiki/Foreign_exchange_reserves, accessed Feb 2012 124 CIA "The World Factbook" CIA websit, “China's Foreign Exchange Reserves and its Effect on the Global Economy,” http://marketsandculture.blogspot.com/2010/11/under-construction.html, accessed Feb 2012 125 柯隆, “

世界一となった中国

外貨準備、その意味と問題点性,” http://jp.fujitsu.com/group/fri/downloads/report/economic-review/200610/05-4.pdf, accessed Feb 2012

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Background and Impacts of Foreign Currency Reserves

The main source of growth of China’s foreign currency reserves are the Foreign Direct

Investment (FDI) and trade surplus. Until 2004, many other countries established factories or

invested in China to dominate the huge Chinese market. Each year, plenty of companies from

other countries invested more than 5 billion dollars each year126. However, FDI was surpassed by

the trade surplus from 2005. China had exported its products and services explosively. Therefore,

the trade surplus led the growth of foreign exchange reserves. At the end of 2008, foreign

exchange reserves of China were reaching USD 2 trillion127. Finally, it passed foreign exchange

reserves of Japan in Feb 2006

for the first time and kept 1st

place up to now.

(Graph source: www.seri.org)

With its USD 2 trillion

foreign exchange reserves,

China’s central bank has

managed its reserves with

‘stability’ and ‘liquidity’ bases.

By diversifying its reserves

currencies, it can reduce

exchange fluctuation risk. As a

way of diversification, China

used the US currency as the

primary asset. It is possible

because the U.S. has low degree

126 Analysis of time series of ‘Data stream’ in 2008 127 International Economy team, Bank of Korea, ‘Inspection of China’s foreign exchange reserves change’(09.02)

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of dependence on foreign trade and also has less possibility of currency changes. In brief, China

has focused on stability and liquidity, with considering profitability. To be specific, China has 70%

of its foreign exchange reserves with U.S assets, especially with 36% of U.S treasure bonds128. As

of 2008, China became the number 1 country possessing U.S treasure bonds.

With possessing proper foreign exchange reserves, there are plenty of controversies. Actually,

there is no international standard scale of foreign exchange reserves. Each nation decides it on

the base of the economic scales of the nation, forms of international trade or foreign liabilities.

When considering dependence on the high trade, sufficient foreign exchange reserves are

needed. When comparing it to the GDP basis, China has 47.3% higher percentages,

compared to that of 27% of Korea, 22% of Japan, 23.5% of India, 37% of Russia etc.

Especially compare it with foreign liability, which are generally rated 1 or 2 multiples,

China has 4.8 multiples of the ratio. The problem is low profitability of the U.S bond. Even

though the U.S bond prices were

dropping, China Central Bank

insisted on buying them129.

Investment of Money Abroad Is

Being Expected

Now China’s foreign reserve is

almost the same as the 2011 GDP

of Germany, which is ranked

fourth in 2011 GDP all across the world. Furthermore, as mentioned before, they receive strong

pressure about using them. They should use the money for investing abroad because of the

following two reasons. One reason is that by using the money, China can avoid other countries

accusations and also they could earn money. Another important reason is that the money can be

128 International Economic Team, Statistics of Korea, ‘Treasury International Capital System(TIC, 09.02) 129 Excerpted from U.S Treasury Department Reoprt, International Financial Center (www. Kcif.or.kr)

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used to support financially weak European countries from default. Even though other European

countries, the U.S, and Japan are expected to support them, they had spent their money on

huge companies in serious danger of collapsing to recover from the Lehman Shock’s damages.

Therefore, they are short of enough money to do that.

However, at the same time, that kind of investment would prove to include critical risk for other

countries. As China’s foreign reserves are huge amounts of money, if China intentionally uses

them to manipulate other country bonds’ rate, the market all over the world would be fatally

damaged. In addition, China could use its position to take advantage in the political field and it

could bring various kinds of distortion and confusion all over the world. Therefore other

countries should carefully watch its activity and continuously discuss these issues with China.

From the end of 1978, China's foreign exchange reserves had been increasing, and by 2011 they

had reached US $3.2 trillion. The main sources of growth for them are the Foreign Direct

Investment (FDI) and trade surplus. Also China’s focus on stability and liquidity while

considering profitability has enhanced the growth. With this huge amount of reserve, a lot of

problems have been brought to China. Now China should use the money. By doing this China

can avoid other country’s accusations, it can earn money, and also it could also support

financially weak countries. However, at the same time, those kinds of investments would prove

to bring critical risks for other countries because of their amount. Therefore, China should

morally act as a responsible country and other countries should carefully watch its activity and

continuously discuss these issues with China.

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Free Trade Agreements

By Youngguo Seo and Ryuhei Oi

Thesis:FTAs are mutual agreements between countries that eliminate or reduce tariffs and trade

barriers. All countriesattemptto build strong relationships with each other, since these days the

world is globalized rapidly. All countries should form mutual free trade agreements (FTAs) since

FTAs will help all countries to develop their economies without tariffs.

Introduction

In recent years, all countries, including Japan, and Korea, have interested in FTA negotiations.

When FTAs are conducted in the near future, what influence will be caused onKorea and

Japanese economy?

In the creation of an FTA in Korea and Japanese companies obtainmanyadvantagesfrom trade

facilitation, tariffelimination, and so on. However, toobtain such benefits, these companies

should also reorganizetheir organization, supplychain management, utilization of human

resources, etc. On the other hand, companies maysuffer great disadvantagedue to the

occurrenceof a seriouscompetitive condition, through tariffelimination, deregulation, and other

measures taken by thecountry in the area.

Only five countries — Mexico, Chile, Morocco, Jordan and Israel — have concluded FTAs with

both the United States and the EU. In addition, Korea and Japanare one of the world’s largest

economiesin terms of trade, forming FTAs will help to develop their economics and achieve

many benefits ofgreater significance. The following diagramshows the increase of exports and

imports after FTAs in five sample regions:

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130

In this sense, FTAs are indispensable to the attainment of success in economy

Economic effect of Korea – U.S. FTA

1. Intro (current situation of Korea)

FTAs have helped Korea, which is country with scarceresources.The economy is raised to rank

as the world’s ninth largest trading country. The effect of FTAs has a greater significance fortwo

huge economies. Without FTAs, exporters and farmers face high tariffs and other non-tariff trade

fencesin foreign markets. FTAs enable exporters to continue a level playing field with foreign

companies in foreign markets.

This article will provide the advantages and disadvantages of FTAs especially on Korea using

examples to support my ideas.

2. Advantages and disadvantages of FTA concluded with U.S.

The Korea-U.S Free Trade Agreement would create huge Korean jobs and opportunities for

economic growth by immediately removing fencesto Korea services and goods in U.S., which is

an important market for manufacturers, Korean workers,and farmers

2.1. Create new-Korean jobs and growth

America, the largest economy in the world, is Korea’s largest trading partner and export market.

130Tae-Hoon Lee, “What benefits will FTAs bring to Korea?”, The Korea Times, July 11, 2011, http://www.koreatimes.co.kr/www/news/nation/2011/11/116_98295.html, accessed Feb, 2012

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Trade and investment between Korea and U.S. supports tens of thousands of Korean

jobsincluding the manufacturing, agricultural, and servicesdivisions. This agreement would help

expand Korean jobs across every divisionof the economy by increasing Korea exports and

pullingnew investment into Korea, which will also create new jobs in Korea.

2.2. Level the playing field for Korea business

The agreement would also create new opportunities for Korean businesses and workers. Korea

exports to U.S. currently face an average applied tariff of 54% for agricultural products and 6.2%

for nonagriculturalproducts. 95% ofthese tariffs will be eliminated within 3 years, and nearly all

of the remaining tariffs will be eliminatedover 10 years.131

The agreement eliminatessignificant market access and non-tariff fencesin Korea to American

goods and chattels, investment, and servicesincluding strong foodson transparency,

competitionthat would make Korea businesses more competitive in U.S.

2.3. Advance global Korea competitiveness

Implementing the agreement would guarantee that Koreanbusinessesand workers are not left

behind as U.S. economies move forward with preferential trade deals that do not include Korea.

2.4. Strengthen animportantpartnership

Korea is a one of important U.S. alliance and a strong partner in enhancingglobal security.

Implementing the FTA willimprovethe strategic partnership by increasing the relationsbetween

thetwo countries as theyworktogether to encourageshared goals and values around the world.

FTAs are the most important tool for encouraging fair competition. They force foreign

governments to adoptopen and transparent rulemaking systemsthat would protect Korean

exporters againstunfair discrimination. FTAs also include processesto imposeinternationally

acceptedstandards that would help promote consumer safety and foster a

expectabletradingenvironment.According to the World Trade Organization, there are 283 FTAs

in force around the globetoday132.

131“What is a Free Trade Agreement (FTA)?”, , The U.S.-Korea FTA Business Coalition, http://www.uskoreafta.org/, accessed Feb, 2012 132Kozo Kiyota and Robert M. Stern, “Economic Effects of a Korea-U.S. Free Trade Agreement”, April, 2007, http://www.fordschool.umich.edu/rsie/workingpapers/Papers551-575/r557.pdf, accessed Feb, 2012

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133

Economic Effect of Japan – Asian countries FTA

1. Intro (current situation of Japan)

There are advantages and disadvantages on Japanese companies attributed to FTA in the near

future. The surveys show Japanese companies have much interesting tariff ratesbecause there

are some advantages of FTA. But there are still high tariff rates around the world, and tariff rates

seem to be a large barrier for many companies.

2. Advantages and Disadvantages of an FTA betweenJapan and Asian countries.

On the subject of Japanese FTA with East Asian countries, the survey inquired if a company’s

business occasions would expandwith boosted sales or improved profits, in East Asia when

133Tae-Hoon Lee, “What benefits will FTAs bring to Korea?”, The Korea Times, July 11, 2011, http://www.koreatimes.co.kr/www/news/nation/2011/11/116_98295.html, accessed Feb, 2012

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Japan successful negotiated a FTA with any country in East Asia, such as ASEAN, Korea, and

China, individually or widely (see Chart below).

“A 16.4% share of the respondent companies answered “Expand greatly” to this question, and

44.1% of the companies answered “Expand a little.” The companies that answered both “Expand

a little” and “Expand greatly” represented 60.5% of all responses. The overall ratio for “Expand”

for those industries is above 70%. Conversely, only 2.0% of the companies answered “Decrease a

little” and “Decrease greatly.” “No particular change (or with no change by a setoff)” was given

as an answer by 25.8% overall, and “No relation with business” was given by 6.6%.”134

The table below shows the Contents of Business Merit and Demerit of FTA135

134Akira Kajita, “The Influence on Japanese Companies by East Asian FTAs, and an Overview of East Asian Countries’ Tariff Rates” IDE APEC STUDY CENTER Working Paper http://202.244.105.132/English/Publish/Download/Apec/pdf/2003_05.pdf, accessed Feb 2012 135Industrial Structure Council, METI “2003 Report on the WTO Consistency of Trade Policies by Major Trading Partners”,http://www.apec-iap.org/, accessed Feb 2012

M/D Contents Share

(%)

Merit By tariff abolition of a partner country, the competitive power of

the company's goods in a partner country market increases, and 54.5

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The results above made it clear that the respondent companies’ concern is focused on the

elimination of tariff rates, which is a primary agreement of FTA. The company obtained a tariff

eliminationadvantage from not only a partner country but also from Japan. “Adding these two

advantages, it will come to no less than a total share of 76.8%. Furthermore, there were many

answers that improvement of customs formalities is aadvantage of FTA, apart from tariff rate

elimination itself. It turns out that Japanese companies have high prosepectregarding the tariff

issue, such as tariff elimination, and customs-formalities improvement, when an FTA is

concluded with countries in East Asia.”136

Conclusion

The conclusions of this paper are as follows. 136Akira Kajita, “The Influence on Japanese Companies by East Asian FTAs, and an Overview of East Asian Countries’ Tariff Rates” IDE APEC STUDY CENTER Working Paper http://202.244.105.132/English/Publish/Download/Apec/pdf/2003_05.pdf, accessed Feb 2012

sale is expanded (or sale is started newly).

By simplification and facilitation of customs formalities, cost

reduction becomes possible and leads to an improvement of

profitability.

42.7

By tariff abolition of Japan, import costs fall, such as a product,

parts, etc. from a partner country to Japan and it leads to an

improvement of profitability.

22.3

By improvement in the transparency of the investment related

rule of a partner country, smooth business becomes possible and

the incentive of investment expands.

20.4

Demeri

t

Inflow of the competition goods from a partner country and

entry of a competition company increase, price competition

intensifies, and the profit of its company falls in a Japanese

market.

19.4

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First, most companies have a positive view of FTA and expect their business to expandaround

the world if FTA are agreed in the future. So FTA should be agreed upon through the world as

soon as possible.

Second, companies think that tariff elimination with partner country by FTA is most important

for their business advantage. It is also important for companies to make easyclearness of custom

procedures, in order to decrease their business costs.

Finally, in spite of several efforts at tariff reduction in APEC and the WTO, the tariff rates of East

Asian countries generally are still high, except for a few developed countries. Continuous effort

at tariff cut in the area is critically expected for the formulation of East Asian FTA in the future.

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The Reason why Korean Women undergo Plastic Surgery

By Yosuke Suzuki, Youngwan Kim (Johann), and Sungmin Kim (Leo)

Plastic surgery is so popular in Korea because of a combination of four different reasons: social

pressure around appearance, social acceptance, ease and cost, and the focus on education.

Korean people regard plastic surgery as an ordinary, not a special practice; eight out of 10

Korean women over the age of 18 feel they need cosmetic surgery, and a survey found that one

out of two has undergone cosmetic surgery at least once,.137 So what is the reason that so many

Korean women undergo plastic surgery? One reason could be some sort of stress coming from

society such as job seeking or pressure to marry. One survey revealed that 69.9 percentof the

respondents aged 18 and over living in Seoul and Gyeonggi are suffering stress because of their

appearance.138 In addition, 55 percent agreed that "external factors, rather than internal factors,

are more important in defining a person's beauty.”139 There are similar problems in other

countries, but why in Korea are the numbers of people who get plastic surgery higher?

First of all, parents’ view of plastic surgery plays a big role. In most countries, parents normally

teach their children to love themselves as they are and do not think of plastic surgery as a

positive practice. However, in Korea, parents not only allow their children to get the surgery but

even encourage it.140 . There is one interesting reason for Korean parents to encourage their

children to undergo plastic surgery: self-satisfaction for mothers. Sometimes people can see

mothers with perfect features who have undergone plastic surgery walking with small-eyed

plain-faced children who have completely different features from their mothers. These mothers

undergo trauma because their children’s looks are completely different from their own. In order

to overcome this trauma, Korean mothers encourage their children to undergo plastic surgery at

137 “Half of Korean Women Have Had Cosmetic Surgery,” Feburary 22, 2007, The Chosunilbo, http://english.chosun.com/site/data/html_dir/2007/02/22/2007022261030.html, accessed February 2012. 138 Ibid. 139 Ibid. 140 “Plastic-Surgery-Happy in Korea,” July 11, 2011, LifeAfterCubes, http://www.lifeaftercubes.com/2011/07/11/plastic-surgery-happy-in-korea/, accessed February 2012.

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as early an age as possible.141 Once this cycle begins, it is difficult to stop unless “DNA Surgery,”

rather than plastic surgery, become available.

Secondly, the cost and ease of plastic surgery in Korea make it popular. In Korea, plastic surgery

is cheaper and more readily available than other countries.142 It is easy to recognize the signs of

authentic surgery clinics in Apgujeong area, which contains almost half of the 627 certified

plastic surgery clinics in Korea.143 In addition, not only Korean women but also foreign women

visit Korea to get plastic surgery. More than 50,000 foreign women came to Korea for cosmetic

surgery in 2009 and the number is increasing every year.144 For example, a New Zealander Jacky

Ng, 21 years old and interviewed by the Korea Joong Daily, said, “Korea is the safest place for

plastic surgery and the price is also affordable.” 145 Because of this, about 30 percent of Korean

women from 20 to 50 years old, or 2.4 million people, have experienced cosmetic surgery.146

Thirdly, lots of Koreans believe that finding a good job happens by being beautiful (wide eyes,

high and long nose, pale skin, no fat, etc.). In order to get a nice job, they often try to undergo

plastic surgery wishing to be western looking which most Koreans think cool and nice. The

following survey carried out by Saram-In, one of the most popular job sites in Korea, shows the

reasons for plastic surgery among job seekers:

[Survey chart]147

141 “Is Korea Mecca of Cosmetic Surgery?,” August 14, 2009, The Korea Times, http://www.koreatimes.co.kr/www/news/opinon/2011/04/196_50131.html, accessed February 2012. 142 Ibid. 143 Economy Blunts Korea’s Appetite for Plastic Surgery, January 1, 2009, The New York Times, http://www.nytimes.com/2009/01/02/business/worldbusiness/02plastic.html 144 Chinese Make Beeline for Korean Plastic Surgery Clinics http://english.chosun.com/site/data/html_dir/2010/04/13/2010041300537.html 145 Coming to Korea to see the doctors, Korea Joong Daily, February 26 2011, http://koreajoongangdaily.joinsmsn.com/news/article/html/945/2941945.html 146 Ibid 147 Survey on Plastic surgery for jobseeker http://hipretty.tistory.com/tag/%EC%82%AC%EA%B0%81%ED%84%B1

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According to the result of the survey, 67.2% of job seekers think that plastic surgery is one of the

most important factors when they try to get a job. Because a better appearance makes them more

confident they will be better able to show their ability without being nervous.

The authors carried out another survey carried out in Gyeonggi English Village of female

university students, preparing for a career as flight stewardesses. The survey shows they are

highly interested in plastic surgery:

[Survey chart]

● How do you think of plastic surgery?

Positive 16 (88.9%)

Negative 2 (11.1%)

● Have you/your friend ever had plastic surgery?

Yes 17 (94.4%)

No 1 (5.6%)

● Does appearance affect your life a lot?

Yes 12 (66.7%)

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[Survey chart]


Positive 16 (88.9%)

Negative 2 (11.1%)


Yes 17 (94.4%)

No 1 (5.6%)


Yes 12 (66.7%)

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[Survey chart]


Positive 16 (88.9%)

Negative 2 (11.1%)


Yes 17 (94.4%)

No 1 (5.6%)


Yes 12 (66.7%)

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No 6 (33.3%)

● which part of your body do you want to undergo plastic surgery?

Eyes 3 (16.7%)

Nose 9 (50.0%)

Body-Shape 5 (27.8%)

Others 1 (5.6%)

● If you noticed your friend is an artificial beauty and more beautiful than you, how do you

feel?

Positive 11 (61.1%)

Negative 7 (38.9%)

According to the results of the survey, most respondents (88.9%) think plastic surgery is positive.

In addition, it is obvious that plastic surgery is very common in Korea. Korean people think that

appearance has a strong influence on their lives. Especially, female university students who are

looking for a job think plastic surgery is very important to be able to improve their chances for a

more attractive job.

Fourth, plastic surgery is also encouraged by an excessive focus on education. Korea is packed

with students who are rewarded with cosmetic surgery treatments for the hard academic work

they put in.148 Korean parents are famous for their eagerness for educating their children, and

spend $20 billion per year to educate and motivate their children to improve their exam scores.149

About 94% of the respondents from the English Village survey also answered that the right age

to start to undergo plastic surgery is in their teens or 20s. Moreover, 78% of the respondents said

they would spend $1,000~$5,000 on plastic surgery. Even young female students who do not

have a job can easily get cosmetic surgery with their parents’ support.

148 “Know Your Limits – Parents Reward Child's Good Grades with Plastic Surgery,” March 04, 2011, Articlesbase, http://www.articlesbase.com/plastic-surgeries-articles/know-your-limits-parents-reward-childs-good-grades-with-plastic-surgery-4347827.html, accessed February 2012. 149 Ibid.

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[Survey chart]

● How much money should be the appropriate for the plastic surgery?

~1 mil. KRW 5 (27.8%)

1mil.~3mil. 9(50.0%)

3mil.~5mil. 4(22.2%)

5mil.~ 0 (0%)

● When do you think is appropriate age to get plastic surgery?

Teens 3 (16.7%)

20s 14(77.8%)

30s 1(5.5%)

40s~ 0 (0%)

An attractive appearance has a positive impact on a person’s career. Korean parents want their

children to have more opportunities and therefore think plastic surgery will help them to have

better future.

Plastic surgery is incredibly popular in Korea due to, its social acceptance, ease and cost, parents’

passion about their children’s education, and pressure to be good looking. Having an attractive

appearance is important not only for people to achieve a good career but also to be confident in

their daily lives. The young Korean girls surveyed at Gyeonggi English Village saw plastic

surgery as a positively accepted way to develop themselves. However, it is dangerous if people

stick only to outward appearance because they can lose their identity. Being a beautiful person

means developing inner beauty as well as having a better outer appearance .