“Promoting the Value of High-Tech Shipbuilding and Traditional Architecture in Korea”
Peter Bartholomew is Vice President of IRC, Ltd. in Seoul, and supporter of efforts to preserve Korean hanok and other historical assets.
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There are few people more qualified to discuss the Korean economic miracle than Peter Bartholomew. Having arrived as a Peace Corps volunteer, he has remained in Korea almost continuously since 1968. Peter worked in a Korean company for almost a decade in the 1970s, and for the last 28 years, he has run IRC, Ltd. in Seoul, specializing in the shipbuilding and construction sectors.
In this interview, Peter shares deep insights about Korean business, including techniques for negotiating with Koreans, as well as about efforts to preserve traditional hanok homes, an area on which he is particularly passionate. He believes that a modern Korea should be compatible with maintaining the natural and historical assets of the past.
Transcript of the interview by KBC’s Tom Tucker:
Tom: Hello and thank you for joining us today at KoreaBusinessCentral.com. I’m Tom Tucker, the host. I’m excited to bring you today’s discussion in our Korea Business Interview Series.
Our guest today is Peter Bartholomew. Peter came to Korea back in 1968 as a US Peace Corps volunteer and except for a few short-term overseas stints since that time, he has remained in Korea continuously for more than 40 years.
He’s the Vice President of IRC Limited, the founder of the company in Seoul. Peter is an expert in the Korean shipbuilding and construction sectors, skilled in Korean trading practices, negotiations, implementation of new ventures, and project supervision. He’s fluent in Korean and French and serves as a permanent arbitrator to the arbitration panel of Korea Commercial Arbitration Board.
I’m also pointing out that Peter Bartholomew is a colleague of Peter Underwood, one of our honored guests in last year’s 2010 Korea Business Interview Series. Peter, welcome. Thanks for joining us. It’s great to have you here.
Peter: Thank you for inviting me. It’s a pleasure.
Tom: Let’s start off by having you tell us a little bit about yourself. Give us an overview, how you came to Korea in the first place and just some quick thoughts on your life in general.
Peter: I came here January of 1968 with the Peace Corps. I was sent to the northeast coast, a fairly isolated, at that time, area of the country, but very beautiful and very traditional at that time. I was in the Peace Corps for an excessively long period of time, all of five years. Then moved to Seoul in the end of 1972 and worked for a Korean company for about eight years.
That was very interesting. It was kind of a mini conglomerate, if you will. Then started my own company in 1982 with some other business partners and still we operate that company today.
Tom: In 40 plus years in Korea you must have seen incredible changes in the country. Can you describe some highlights of the national transformation and what are some things that haven’t changed in Korea over that time?
Peter: Probably the single most obvious thing, of course, is the physical plant of Korea. When I first came here, and indeed up through the early ’70s, let’s say, in the countryside, there were virtually no paved roads, period, full stop, except the very downtown area of towns and cities. Electricity wasn’t that widespread. I don’t know what percent, but there wasn’t any in the house I lived in when I first came here.
Traffic in the streets – yeah, there were motor vehicles, but there were still a lot of ox carts and pony carts and, let’s say, oxen pulling plows in the farms.
In downtown Seoul the traffic, even in Central Seoul – yes, there were busses, which were old trucks with sheet metal thrown up over them, almost no private cars and ancient street cars. A lot of the streets in Seoul also were not paved. Indeed, the street behind my house wasn’t paved when I moved in and up to 1974.
That’s the obvious thing. There were no highways and very little manufacturing. It was primarily an agro/fisheries economy. Per capita income was way under $400 per annum. It was a very underdeveloped country. It was categorized way behind places like the Philippines or even Burma in those days. And yet, it shot up to 13th, 14th largest economy in the world with a per capita of $23,000-$25,000 per annum. It’s been a terrific change in that respect.
On the other side I must say, of course, there are many aspects of cultural psychology that have not changed. Some of that’s good, some, maybe, not so good. But that’s a fact. I think one of the sad parts of the change is the massive destruction of anything that is old, anything that is traditional, except for major monumental buildings, a palace, Buddhist temple, things like that. But there’s been a lot of throwing out the baby with the bathwater, if you know what I mean.
That’s really a rough overview, but the standard of living, the way people live today is certainly comparable with most developed countries in what they have in their homes and appliances and standard of living and healthcare, running water, sanitation, all utilities, transport. It’s just like a totally different country.
Tom: For sure, it’s been a remarkable change. We’ve had recent discussions on KBC entitled “What One Word Would You Use to Represent Korea” and words like han, jung, passion, authenticity, face, and persistence have all been suggested by our members. What words would you use to represent Korea?
Peter: I think persistence, hardworking, impatient, aggressive, hungry for knowledge. All of those, I think, would characterize the persona that you see in Korea. I think that a lot of newcomer foreigners in Korea overemphasize this han kind of thing. The jung really – han is kind of like holding a grudge for a long time. I don’t think they’re really much different from anybody else in the world really. It isn’t a special thing here.
The jung means having some kind of rapport with you, becoming a good close friend forever and ever. That is, I think, an aspect, that once you’re a friend with a Korean, really and truly, it just lasts forever. That’s really a very nice, lovely thing in this country. But certainly persistent, hardworking, aggressive, impatient.
Hardworking – and I must say my colleague Peter Underwood and I always say, “Yes. Very hardworking, work hard but not always work smart.” That’s another aspect.
Tom: I had a feeling you were going to say that.
Peter: Yeah, did Underwood say that? I wouldn’t be surprised if he did.
Tom: No, but from the conversation that I recall with him, that certainly sounds like an observation that he would certainly hold.
Peter: Yeah. He does.
Tom: Let’s talk about shipbuilding in Korea. There may not be anyone more knowledgeable about Korean shipbuilding than you. Can you give us an overview of this industry in Korea? Who are the major players? Who are the minor players? What are their niches?
Peter: The three big shipyards are Hyundai, by far the largest. They have about 35,000-40,000 workers. They put out commercial cargo ships, over 80-85 ships per annum. Daewoo Shipbuilding and Samsung Shipbuilding are the next largest and they’re both very close to each other in size with maybe 20,000 workers, something like that. They’re putting out 40-50 ships per annum each.
Then there’s STX and Hanjin. But STX’s shipyard in Korea is a very small shipyard compared to the other big players. They’ve built a new shipyard in Dalian, China. Hanjin’s shipyard is the oldest one in Korea, an old shipyard in downtown Busan (?). They built a big, huge shipyard in Subic Bay, Philippines. No, not at the American Naval Base, way across the bay, a long way away in the middle of nowhere and both of those are trying to expand in foreign countries rather than in Korea. It’s quite interesting.
I think the major aspect of Hyundai, Daewoo, Samsung is their diversification. I believe the on-commercial cargo carriers, they have expanded into the offshore oil and gas structures, way out in the ocean where there’s oil and gas coming off the seabed, producing drilling ships, producing permanent floating oil and gas production systems offshore. These are done in consortium or cooperation with major other design, engineering companies overseas.
Actually, that’s the area I’m most involved in with the shipyards, in this offshore oil and gas structure type of work.
Tom: Which leads me to the next question. Let’s talk a little bit about your main role within the industry. Who is a typical client for you and what are they trying to achieve when they call on your services?
Peter: My particular niche is putting together, organizing a shipbuilding program, a construction shipbuilding program for something that’s never been built before. Somebody comes to me with a total new concept, design, sometimes for a ship, more often for offshore oil and gas, not exploration drilling but production systems that float in the ocean.
They say, “Okay, how am I going to build this? What’s the best company or companies to construct this within budget, on time, with the qualities I want? How should I organize it?” I do that as a service with my staff, my company. We’ve done, some successful, some not, but probably over 100 such projects in the last 30 years.
Right now we’re doing a very interesting program for the first compressed natural gas ships to build. Another company in Europe that I’m working with, we’re doing a lot of floating production, storage offloading systems for both oil and gas. They’re called FPSOs.
In fact, I just got back last night from another two-day stay in the Daewoo shipyard and next week I’ll go back again. That’s really what we do. It’s fascinating because every project is different. We do the technical as well as contractual, financial, even when it’s political. If there’s something there, the manpower.
And not just the shipyard but the affiliated other small, medium, indiscreet companies providing specialist services and products – how to pull them all together and sequence it and organize it. That’s what I’m doing.
Tom: It all sounds very interesting. What would you say are the main strengths and weaknesses of the Korean shipbuilders? What are Korea’s long-term, sustainable, competitive advantages and where do they really shine?
Peter: First of all, I believe in terms of overall management for product, they have probably a broader spectrum, diversified spectrum of products. In other words, the ordinary type container ships and bulk carriers and oil tankers and stuff, but then they have a heck of a lot of others. They do high sophisticated L&G carriers.
Then of course, in this offshore oil and gas industry, they’re doing far more sophisticated, never done before type structures for the offshore industry. They also do industrial structures. For example, let’s say a new oil refinery. They’ll build it in modular form, in sections, on big steel structure space and put it on a ship or a barge and take it overseas somewhere and install it in the other country. They’ve greatly expanded.
What this diversification does is give them a much longer term stability. In other words, if common shipbuilding for containers and stuff like that is down then hopefully one of the other areas, industrial structures or offshore oil and gas will be up. So this is a big aspect.
The other is always trying to keep a step or two or three, in terms of technology, sophistication of product, and most important, the main core specialty in Korea is production engineering, production productivity, sophistication of how to control costs, man hours, production time, monitoring. This is where I think Korea, more than any other country – certainly in Asia, and I would say competitively in the world – are darn good at this.
In many industries, the automotive and the electronics, but above all in the shipbuilding, they’ve taken shipbuilding to a level of high tech. When we think of it we think of some old iron bashing, all you do is cut steel and weld it and it gets bang, bang, bang and a bunch of sweaty guys building ships. Well that’s not what it’s about.
If you go into the Korean shipyards, you don’t see that many people. There’s a high level of automation, excruciatingly sophisticated computerized control of production, of scheduling. Constantly trying to figure out how can we use less material, get less material waste. How can we use less energy? How can we get more production out with fewer and fewer man hours and fewer and fewer energy and material resources?
This is what they are so good at. I must say, I think they are as good if not better than the Japanese and certainly miles ahead of both the Europeans and the Chinese. That’s really, in a nutshell, what it’s about.
Tom: That leads to the next question here. The Korean shipbuilding industry has really grown up behind the Japanese industry and, today, surpasses Japan. This is a tremendous achievement, but of course, the Chinese are rising quickly as well. In your opinion, what are the threats facing the Korean shipbuilding industry and what are Korean makers doing to counter them?
Peter: Certainly on the lower end of the shipyard products. In other words, the simplest, low-tech ships like bulk carriers that carry coal or iron ore or stuff like that. Even lower tech container ships and simple ships that are more labor intensive and don’t have a lot of high tech value added in them. I think the Chinese are going to take more and more of that work away from them.
The Chinese have certain disadvantages in terms of, let’s say, contractual adherence and delivery time and all that kind of thing. But that’s one aspect. They’re going to probably lose more and more of the lower end.
On the other side they’re countering that by, as I just said a moment ago, keeping that leading edge of technology. Always looking for new products with high value added and high tech aspects where they shine and the other really haven’t caught up to them yet. That’s really what’s going on. They’re always keeping a step or two ahead.
May I just comment here that the Japanese made a fundamental tactical mistake, I think, in their planning overall strategy many, many years ago by deciding to emphasize pre-designed standardized ships. You want a container ship? Okay. Do you want size A, size B, or size C? You want a product carrier? Do you want an oil tanker? Do you want an L&G ship? Okay. We’ve got model S, Q, and Z for you. Just pick one and tell us how many you want and we’ll produce them. Gosh, they’re good at that.
They produce it in record time with reasonably good pricing and all the rest. But as a result, they’ve lost that creativity. They’ve lost that leading edge concept. So if you go to the Japanese shipyards with a design of some ship or offshore oil and gas structure that’s never been built before, they struggle with it. They really can’t quite produce it anywhere near the time or cost that the Korean yards do.
The few times in the last ten years they tried this, the yard that tried it lost their shirt in terms of money and were late on delivery. Or if they made delivery it was just a huge loss. So the Chinese have not yet caught up on that and I think it will be many years before they do. The Japanese, for the reasons I just stated, have blocked themselves in a corner of the shipbuilding market.
The Koreans, I think, have got a really good thing going for them now and I think they’re on the right track in that respect for the future.
Tom: Looking forward, in the future, say 10-20 years, how do you see Korean shipbuilding evolving?
Peter: I think there’s going to be more and more diversification of product. Already they’re expanding into green energy industrial structures. For example, very large turbine windmills. All three shipyards are getting into that. The Chinese also are doing some of that on the side. I think they’re going to get more and more into cruise ships, which they haven’t been in.
STX even bought yards in Europe, Finland, and they’re trying to buy that ready-made capability in Europe, whether they’ll build in Korea or not. Secondly, I think you’ll see more and more expansion of new shipyards overseas, such as STX’s Dalian, China shipyard, Hanjin’s Philippine shipyards.
I think expansion of product type, more diversification in shipbuilding. A nd don’t forget, what is a shipyard? It’s a huge, multi, multidiscipline industrial structure manufacturing facility. Among those structures, some of them float and some of them don’t float. That’s what’s to be understood, that a shipyard doesn’t just produce ships that carry cargo. I think the Koreans have taken that concept to a good extreme.
Tom: Let’s talk about Korean business in general. Having discussed Korean shipbuilding specifically, I’d like to broaden the scope a bit and talk about business in general. It seems that the Korean chaebol are going from strength to strength. Samsung has surpassed Sony. Hyundai/Kia reports US sales that exceed those of Nissan for the first time.
Is there any stopping this juggernaut of Korean business? What’s your take on this current golden age of Korean business?
Peter: I think that what you say about these big conglomerates or in the Korean word chaebol, you’re 100% correct. However, on the other side of it, I think they will continue to grow. They will continue to take leading edge and major scale control in certain areas, and that’s great, as the Japanese did, and that’s great too.
But what the Japanese have that the Koreans don’t is a very strong medium and small industry community. Too large a portion of Korea’s overall economy export GDP/GNP is chaebol or conglomerate-generated. Small and medium businesses are significantly behind in management capability. They don’t have anything near the management knowhow, capability for operations, for production.
They’re much too dependent upon the chaebol as their, pretty much, single-source buyer. This is, in the opinion of a lot of Koreans themselves, a major weakness in the Korean economy –how you break that and get the small/medium industry to break away from only relying on the chaebol.
There’s a phrase in Korea. There’s a powerful wine called soju. The way you get the business is you go out drinking with friends and colleagues in the big chaebol and try to get them to buy their components or substructures, whatever, from you, services from you on a long term contract. It’s called soju marketing and they don’t mean marketing of soju. It’s marketing through soju.
That’s really kind of how it’s running. That’s a big problem. It’s a day and night difference, light year difference in management sophistication and capability between the conglomerates and the small/medium industry. That really has got to be addressed.
Where does Korea go from here is what we hear all the time. They’ve achieved this level. Now they’ve got to reinvent themselves. Of course it’s not a cheap labor country and they’ve got these certain product areas.
The biggest weakness, really, is in the services area and I must say, in many aspects of management. There’s a high productivity on the shop floor as I said before, but there’s a very low productivity in office work and in software.
Tom: What’s the answer to all this? What’s the solution?
Peter: I think that area is being addressed, but not really frontally addressed. How could I say? The software area, even in Japan, is not really up to snuff with a lot of western companies. Take a simple, simple thing, computers and all that. They can produce hardware like mad and mobile phones, but the software that goes into it is usually not too good. So they’re using western software in it.
One aspect in Korea’s economy that I mentioned, there are these shortcomings. Don’t forget that Japan started industrializing from the 1870s, 1880s. Korea started in the late 1960s at the latest, really not till 1970s. It’s almost 100 years difference.
I’ve always said that Korea’s economy is like a cake that grows too fast in the oven. It’s all full of holes. Now they’re plugging the holes, one by one. I think it will happen. What’s interesting is that more and more young Korean students are going overseas for exam study, to the United States, Canada, Australia, New Zealand, the UK, other places in Europe. Even to China to learn about that. That’s good because they’re coming back with new and innovative ideas.
I think when the generational shift kicks in and this new generation of Koreans who have major international exposure, experience, and education, start to become the people in the position of power, I think there’s going to be more and more of a shift to, perhaps, a stronger small/medium industry and in software and management capability.
Tom: Koreans have been talking about globalization for decades and one of the latest forms these efforts have taken is the hiring of foreign executives into high positions of responsibility within the Korean multinationals.
However, in the last year we’ve seen this trend going into reverse. Indeed, on Korea Business Central, we’ve interviewed both Dr. Linda Myers, former vice president at SK Telecom and Didier Chenneveau, the former executive vice president at LG Electronics.
Neither of their cases finished on a high note and they don’t appear to be exceptions either. As someone who has seen Korean business from the inside for a very long time, what do you see as the core factors behind the challenges that Korean companies are having as they globalize their boardrooms? What is your recommendation to them in this process? Can they ever achieve globalization at an international level?
Peter: As I just said, I believe that it’s going to happen in an evolutionary, incremental way. I think just bringing in a few foreigners and popping them in the middle of this already well-established, well-running – yeah, in many aspects, stuck in its ways – system is not going to really get the job done.
The internal shortcomings are really not understood by the foreigner and the Koreans themselves don’t really understand and they’re not facing what the core problems are, core issues are within their own system because they don’t understand the more international system.
Again, it has to be an internal evolutionary way, developed within the crucible of their own cultural persona and their own cultural psychology. Just coming in with a bunch of foreigners and trying to impose a French, American, British or whatever, way of operating based on Judeo-Christian/Greco-Roman philosophy and thinking, it’s not going to work.
When these Koreans, as I said, have the international experience, overseas education, in many cases even employment experience come back, permeate into the infrastructure and then generationally get into positions of power, then there will be probably more and more of a shift. But I don’t think just popping a few foreigners in, except to solve certain individual products, service, or management issues on a consulting basis.
But I don’t think putting them in control because they’re not ever going to be able to totally shift the system because of the way management is structured, how people are hired, the criteria upon which they’re hired, the criteria upon which they’re evaluated for their work and employment and the rest. It’s just too complex to really have an impact by just popping somebody in.
Tom: Let’s talk about negotiating with Koreans. Koreans have a reputation for negotiating hard. You’ve engaged in plenty of these with Koreans. Could you describe the typical Korean negotiation style and what approaches foreign companies can take to achieve good results in their negotiations with Koreans?
Peter: I just got through with two days of that, negotiating a new contract with a shipyard. If you’re dealing with a top-end chaebol company, you’re going to have people there who have this broad, international exposure and experience. Especially the area I’m in, in shipbuilding, where 98% of the buyers are foreign, not domestic Korean or Asian. So you can negotiate on the same terms and conditions.
If you’re selling or even buying, Koreans are price buyers or, of course, price sellers if you’re on the other side of it. If you’re trying to sell to the Koreans, once the qualifications are set for which companies are qualified and which products are accepted as acceptable, then it’s only price, really, only price.
The logic of certain terms and conditions that you say, “But those terms are there for your benefit,” in terms of whatever, liquidated damages or some kind of quality penalties or, let’s say, guarantees, counter-guarantees to each other that you’re providing, bank guarantees, and the rest. Understanding how they view that and see it, the more unsophisticated small/medium industry companies get upset when they see a western contract.
Contracts between Koreans, especially for buy/sell are so cursory, so short, that it just shocks the heck out of a westerner if he ever saw it. They don’t even believe it if I show it to them, a one-page thing naming, generally, what the product is and how much and that’s it. So it’s a totally different concept towards documentation, towards legal contracting, in the traditional concept and the total local Korean to Korean buying, especially at the medium industry level and international practice. It’s just a total different world, different dimension.
I think what the foreigner has to do to try to achieve his ends and negotiate with the Korean entities is to do his research in advance. Where is the Korean party with whom he’s negotiating now? Where is his mentality? How much experience does he have? What previous contracts or negotiations have been accomplished? Which are successful and why? Which are not successful and why?
You’ve got to do some advanced homework and then, based on that, prepare how you present your case, how you form a contract, what sequencing do you present your case in, what issues do you address? You can’t just come in with a standard, preset concept of, “Oh, business is business and that’s the way it’s done everywhere in the world.”
Sorry, it’s a long subject. I won’t go on anymore on that one.
Tom: If you could, maybe just briefly, if you’d like, how about a particular noteworthy negotiation that you were involved in and maybe a lesson or two that you learned that our listeners can benefit from.
Peter: Mostly the contracts that I’m doing are consortium, joint bidding, cooperation contracts with the Korean shipyards. Indeed you’re selling to or buying from. But of course, these are mega projects. The minimum that we’re doing is $10-$20 million US per project. This is for my clients. I wish it were for me, but it’s not. That would be great.
Of course we come in with a standard contract dealing with the major companies. I must say, with the Kemdai, Daewoo, Samsung, STX, these guys, they are totally professional. But when I have to, then, deal with a small/medium industry to produce something at the lower end of the food chain of only a few hundred thousand dollars building a modest-sized field (?) structure, frankly there’s no way I could come in with the full-blown 25-page, massive contract with all the legal boiler plate that’s in there.
You have to boil it down to very basic, fundamental, can’t live without it terms and conditions. You have to rephrase the more complex language. Anyway, most of the time they don’t read and write English anywhere near a competency that you would normally expect. So everything has to be done in Korean or in English through translation with some kind of legal assistance or consultant assistance to help you in it.
The recent contract that we just signed was the sale of major product and services to a Korean major shipyard. I must say, the final compromises – when you get down to the final thing of they’re trying to pay you $2 million less or get $2 million more worth of products and services out of you. And you’re trying to do the opposite.
When it comes down to the bottom line, it seems to always work if you say, “Tell you what guys. We’ve been bashing each other over the head for the last three days. Let’s split the difference 50/50.” The number of times that works is incredible, when you boil it down.
I want to add one piece of significant advice. Constantly have your radar up and be evaluation/judgmental, do what extent do they really understand the points that I’m trying to get across? Continuously summarize, not in long block verbal form, but perhaps either in bullet point form or a simple matrix chart table form. What are the pros and cons? This is option A. This is option B, option C – in really short, anybody can look at it and understand it format. Constantly phrase, restate in that kind of a visual, easy to understand form.
You’ve got language problems. You’ve got cultural psychology difference problems. I would say 60 -70% of the time the major arguments are because of a failure to mutually understand what each party is really asking for and you explained the benefits in long, rapid-running, English language that went right over their heads.
You say, “No, I explained it to you guys.” Yeah, but they didn’t really understand it. That’s really, I think, 60-70 maybe 80% of the major misunderstandings in negotiations are because of a failure to get mutual understanding on those points.
Tom: Let’s move onto another subject. I understand that you’ve lived in the same hanok style house in Seoul for more than 35 years, but that it hasn’t been easy to protect your home from the Korean wrecking ball, and that your efforts in this area have even gained you some notoriety in the media lately. Tell us that story.
Peter: As I mentioned, when I was in the Peace Corps they stuck me out in the countryside. Of course, I lived in traditional Korean style houses there. When I moved to Seoul I wanted to live in the same, so I did. I moved into that house in 1974 and lived there ever since.
There’s a lot of development, which I already described, and the city government made a plan that our neighborhood would be totally demolished and they would build new apartments in that neighborhood. Not just me, but a lot of the other neighbors said, “No, you won’t. This is my house. This is my land and I’ll develop it as I want, not as the city government wants. So buzz off.” It was a big, big fight.
It wasn’t just hanok, but that was my major fight of course. To make a long story short, about 20-some odd neighbors and I engaged in a class action lawsuit against the city hall on this and we won, I must say. But that wasn’t the end of the story. They started up again and we’ve been fighting and fighting. We’re still fighting.
But I think the era of these mega demolition of anywhere from 200 to 1,500 homes, kicking everybody out, giving them really not very satisfactory compensation and building apartments, this era is drawing to a close. That was for places where people were living in shacks and die of poverty.
Now they’re trying to go in and do this in neighborhoods that are in perfectly good shape where the land is very valuable. They just want to make money, basically. I’ve told people that really developed countries don’t do this. When it comes to hanok, the traditional style houses that I live in… Again, in the developed world like the United States, eastern half especially, and above all Europe, United Kingdom and France and Germany and the rest, developed countries, they don’t demolish buildings just because they’re old. It’s the opposite way. The older the building it is, the more valuable and precious it is.
There’s an automatic, kneejerk reaction, let’s say, negative, towards any old building – not only in Korea, but in most of Asia – that old buildings are bad and the solution to it being old and run down is not to remodel it, fix it up, and upgrading the heating, the plumbing, the electricity, and that. No, no. It’s knock it down and build something new. This is just a total different concept.
I told Koreans, “Well gosh, you talk about the United States being modern. I’m sorry, but The Empire State Building is now 80 years old. Did you know that?” “No.” Victorian houses built in 1880s, 1890s are among the most expensive, highly -valued houses. Whereas in Korea, and I’m sorry to say in Japan as well, any house that becomes 20 years old, the building has no value.
I know that sounds incredible. No matter how well you maintain it, after 20 years the building has no more value. It’s just bizarre. My house also has no value on the market, the building. Only the land has a value.
There’s a big fight about that and should that continue. Indeed today, they’re demolishing the main gate to the city of Suwon, to the city walls. It was built in 1795 and they’re going to build a new one.
There’s a lot of conflict in terms of preservation of traditional buildings, monumental as well as residential, that I’m deeply involved in and I hope we have some positive effect.
Tom: We’ve had some heated discussions on Korea Business Central lately about the Korean land development model and how it’s playing itself out along the west sea south of Seoul and with Songdo being the latest in a series of big land developments. What are your feelings about the destruction of natural spaces in and near Korean urban areas in order to create these new cities?
Peter: That’s interesting you say that because that’s very much in line with what we were just discussing. The whole structure of development of the country being, in many ways, still dirigist, led by government plans, such as these big centers like Songdo and industrial zones is one thing. But a lot of people are saying, “Well, isn’t the era for that finished?”
That was an era of what we call “developing country syndrome.” And shouldn’t we leave that up to the market, the people, to do themselves? That’s one aspect. The second is a very valid point – destroying natural beauty and swamps and wetlands and forests and seaside areas. This is becoming, finally, an issue because the country has become prosperous and they think they can afford this now and they should.
I believe that really and truly, be it the Songdo project – and some of them, I think, cancelled recently as you probably are aware, some of these projects. To what extent they’re make-work programs, to what extent they really think that there’s a market for it. Should the government be the determining party that there is a market for such a huge, new infrastructure? Shouldn’t it be the private industry that determines that?
If they want to build a huge, new area then they apply to the government for it versus having the government officials themselves deciding if this is an area. I think both aspects are there. I’m very saddened by the destruction of a lot of Kunsan, which is on the west coast south of Songdo, but not that horribly far in Cholla-Bukto, right on the border between Chungchong province and Cholla province.
That was a major estuary for migrating birds from Siberia, Manchuria, going south, very important area. That’s just been totally ripped up, land filled. Also, the sea ecology there has been thrown into – Samnang Jin is the area.
There’s a lot of controversy on this and I think that there’s not that much left, frankly. The country has been so developed and torn up. Perhaps it’s time to sit back and reevaluate and slow down on these big, major government-inspired projects.
Tom: We’ve had a chance to talk about so many things. We’ve covered a lot of territory. But as we do wrap up, briefly, what are your plans with RIC over the next five to ten years? Where do you see the opportunities arising for you and your company?
Peter: We’re definitely going to keep going in our area with the shipbuilding. We feel that there is still a major market for western companies. Not just the US, but also Canada, Europe, Australia, New Zealand, the rest, to come to Korea and to set up some kind of a center for providing their services. Not only to this country, but the neighboring countries.
It’s true what the government says, that the position to Korea between China and Japan in northeast Asia, which is really the powerhouse of Asia as you well know, is absolutely ideal. On that tide, both Peter Underwood and I are actively seeking companies whose services and/or products would be very valuable here, putting them together with, perhaps, existing Korean companies or setting up their own new structure in Korea.
Certainly acting as the interface representing foreign companies for building not just ships by any means, but in the shipyards and the larger heavy industrial community in Korea. It’s that interface for which there is not only an existing market, but a growing market. More and more development in needing these structures for the oil and gas industry, for production industry, for material processing industry, throughout Asia and throughout the world.
There are not that many places in the world that do it. Korea’s shipyards and industrial community are the only such in the world that produce these major, megalith, type of structures on time, within budget without major, major hassles. Seriously, there’s almost no competition for it.
The foreign entity, be the buyer or another company that’s got major technology, the yard needs and equipment together, they need a company here to manage these projects, especially in the initial developmental phases on their behalf. We think we’re going to continue to grow in that area.
Tom: Sounds like you’re certainly well-positioned to do that. Any final thoughts, words of advice, other words, comments you’d like to leave our listeners with today?
Peter: I think the key factor to doing business in Korea and in Asia, but especially here, is do your homework about the companies or government entities with whom you need to interface to achieve whatever business aim you have. Don’t come in assuming that business is done everywhere the same. Don’t come in assuming there is a magic bullet.
You’re going to get one guy who has got all the contacts for you and he’s just going to go in and tell the top guy how it should be done and it will all be done that way. It doesn’t work that way. You have to come in and do some research, find out how the system works, your counterparts. There is a system here and it works and you just have to make the system work for you and you work within the system. Basically that’s it.
Tom: It certainly sounds like some great advice based on a tremendous amount of experience. Peter, it’s been great speaking with you today. I certainly enjoyed it and I think our listeners will enjoy it much as well.
Peter: Thank you very much. It’s been a pleasure.
Tom: Thanks again to Peter Bartholomew the Vice President of IRC Limited for participating in this KBC interview. This has been the latest in our ongoing Korea Business Interview series. I’m your host, Tom Tucker, inviting you to improve your business results in Korea by joining KoreaBusinessCentral.com today.
Thanks for listening and have a great day.