BusinessWeek: November 20, 1995

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 International -- Spotlight

AS SEOUL REVELS IN AFFLUENCE... (int'l edition)

The night is still young at Seoul's brand-new $5 million night spot, Pharaoh's at the Seoul Hilton. An employee checks the I.D.'s of five would-be patrons who look younger than 19, the legal age of entry into night clubs. "I'm 21," snaps a woman wearing Calvin Klein jeans and carrying a Gucci bag. The group chats with another youthful patron, Lee Jin-Yeon, who says her father owns a company that makes electronic parts. As Lee and her friends are ushered to a table, she orders a bottle of Ballantine's 21 and a platter of fruit. "My father said this is good Scotch," she remarks as she gulps a shot straight. Three hours and about $700 later, she hands $30 to a valet attendant and drives away in a sleek new white Hyundai Avante.

Across the Han River to the south, the Apkujong area has become the dining and fashion capital of Seoul. There is a wide boulevard called Unjuro, known as Rodeo Drive, with expensive European boutiques. Hundreds of fancy cafes, restaurants, and discotheques dot a four-square-mile area. In the afternoon, the primary clientele is affluent women in their 40s and 50s driving Hyundai Grandeurs, BMWs, and Mercedeses. After sundown, younger Koreans prowl.

With average per capita income approaching $10,000 this year, real economic growth rising by an average 8.7% over the past 10 years, and real wages up by 150% since 1988, Koreans have followed the lead of the Japanese and embraced conspicuous consumption with a vengeance. Liberalization of import laws since 1992 has also spawned a new preference for foreign goods. Imports of consumer products--Italian furniture, French fashion, American appliances--amounted to 10.6 billion dollars in 1994, up 78% from 1990.

The "shop-til-you-drop" mentality can be glimpsed everywhere. Buyers often wait for weeks to get a new car delivered. Domestic resorts are full year-round. Flights to vacation destinations such as Australia and New Zealand are fully booked weeks in advance. Families eat Sunday brunch in such foreign-owned upscale restaurants as Planet Hollywood, TGIF, or Benihana. Spending 120 dollars for a lunch for four in Planet Hollywood is "not so expensive," says Kim Jin-Seol, an architect, as he watches his 6-year-old son sip a $10 drink called Home Alone.

"I'M AMAZED." Despite maintaining two cars and taking frequent family outings, Kim saves a third of his $35,000 annual salary for a new house he plans to build in a few years. In fact, the average Korean household still manages to save about 35% of its income, a number comparable to savings rates in Japan and Taiwan.

For many older Koreans, who 20 years ago worked more than 60 hours a week to barely scrape by, such affluence is unimaginable. "I'm amazed to see how far we've come," says Lee Sang-Min, the owner of a Korean restaurant across the block from Planet Hollywood, as he watches a wedding reception in his restaurant. "For them, money seems to be no problem. When I got married, we couldn't afford to offer an all-rice meal to our guests."

While Korean consumers love their new access to foreign luxuries, the government and the press worry that the surge in demand for imports may spur a big trade deficit. Korea's 1995 trade gap is expected to nearly double, to 5.9 billion dollars from a year earlier. Organizations such as the Korea Housewives Assn. routinely test foreign products and find faults in them. For example, Won Ji-Eun, a consumer protection official at the Young Women's Christian Assn., says foreign cosmetics makers don't provide enough information about side effects to protect Korean consumers.

With the government calling on Korean consummers to be patriotic by resisting everything from Mars chocolate to American sausage, foreign exporters fret about losing sales, and a case-by-case struggle is under way. After a lot of pressure from the U.S., Seoul finally agreed to allow longer expiration dates on imported American sausages. Foreign frozen beef is available in Korea, but not chilled beef, which pleases local producers because Koreans prefer chilled beef. And foreign-car owners breathed a sigh of relief in September, when the government pledged to stop tax investigations of them. "I should thank Mickey Kantor for this," says Jin Ho-Sun, who owns a trading company--and drives a BMW.

By Laxmi Nakarmi in Seoul EDITED BY HARRY MAURER
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