Looking beyond Gangnam to see economic style

Wearing sunglasses and a suit, a man horse-dances his way into saunas, parking lots, and elevators. Across the globe, Psy somehow captivated audiences, albeit (very) temporarily. He became the ubiquitous symbol for a modern South Korea.
Although this may be the extent of our knowledge of K-culture, in reality, it has been rapidly growing in popularity across mainly Asia, the Middle East and Latin America for the last twenty years, as exemplified in Figure 1. Through music, television shows, and movies, the Korean government has encouraged an entertainment industry that now has an international following.

Figure 1: Search volume for the word ‘K-pop’ on Google between 2008 – 2012, Google Trends, 2015  (# of ‘K-pop’ searches relative to total # of searches over time)
It sounds like a niche market. But the remarkable rise of South Korea’s “soft power” through cultural exports is actually stimulating growth in the tourism sector. Indeed, tourism is shaping up to be one of the unexpected strengths of the Korean economy to have emerged in recent years.
In a strange yet appropriate twist, some of this success can be attributed to a television show about the love between a 400-year-old alien and a famous actress. After over 2.5 billion views of last year’s wildly popular ‘My Love from the Star’ on various Chinese streaming websites, China is currently experiencing a Korean culture boom. Even through geopolitical conflict, there has been a sharp surge in numbers of Chinese tourists and how much they spend as they buy into the specific cultural practices portrayed on the show. It is a good example of the Hallyu Wave – the proliferation of Korean cultural exports to other countries. Figure 2 shows this positive correlation between Hallyu and tourism in Korea.

Figure 2: Spread of Korean culture and the number of tourists to arrive each year, Korea Tourism Organisation
But a television hit does not merely lead to an increase in the number of tourists. It also changes how they spend; going to Korea off the back of the show entails a few must-have experiences and souvenirs.
It involves buying the earrings, coats, and beauty facial masks worn by the actors. An Yves Saint Laurent lipstick sold out internationally after an episode aired featuring it. It also means tours of the filming locations. And it even encompasses trying the combination of Korean fried chicken and beer – colloquially termed chimek – portrayed on the screen.
Currently heavily reliant on trading ships and cars, occupying one third of the commercial services trade, the South Korean government seems prepared to make the most of this tourism opportunity. After all, they have experienced it before with the influx of Japanese tourists to Korea following another television offering, ‘Winter Sonata’, in 2002.
The impact of a successful cultural crossover product cannot be overstated. It reinforces the existing strong ties between two countries: 26.1% of Korea’s total exports in merchandise trade is sent to China and its chief source of imports remains China.

Figure 3: Money spent by Chinese tourists to South Korea, Korea Institute for Industrial Economics & Trade, 2010 – 2013
As seen in Figure 3, South Korea is clearly popular with Chinese tourists. Though tourism has risen to new heights, the return rate of Chinese visitors in the last three years is very low, at 30% (shown in Table 1).
Table 1: Country of origin of tourists and how many return, Naver News 2014.

This may be due to the narrow focus of the tourist experience in Korea. Of late, it has relied heavily on shopping while there is less interest in traditional tourist hubs, like experiencing historic Korean culture by visiting palaces, local markets, and nature parks. If the purpose of traveling to Korea becomes the purchase of its products, then it is expected that there will come a time when tourism reaches its limit. The country therefore needs its own something that gives it a competitive advantage to sustain this momentum.
The answer may unbelievably lie in the chimek mentioned before.
In the month after the show ended, there were over 3.7 million online posts about chimek and Korean beer exports rose to $1.04 million, up 201 per cent from a year earlier. There was a huge demand for this dish in China, with many new Korean restaurants opening: they offer a mix of traditional and fusion style creations. Stepping away from tourism, this is an example of how an indirect flow-on effect not only diversifies exports, but can also make them much more profitable.
In general, more and more Chinese consumers are buying Korean brands. This is partially due to the perception of a lack of safety regarding their own products, especially following the 2008 baby formula scandal. Buyers also reported a preference for Korean food goods over European because of their Asian cultural familiarity. These trends may indicate that the export of these indirect cultural products may outlast tourism’s impact on the economy.
The carefully crafted plans of the South Korean government are evidently playing out effectively. According to the South Korean Culture and Information Service, cultural content exports have grown from around US$500 million in the early 2000s to over $4 billion by 2011. 1% of the national budget is spent on subsidies and low-interest loans to cultural industries – a $1 billion investment fund to essentially foster culture, a total 20 to 30 times larger than other countries. And today, the Ministry for Culture, Sport, and Tourism estimates Hallyu’s economic asset to amount to $83.2 billion.
South Korea’s image has changed drastically in the last sixty years. Left devastated after the Korean War, it had scarce natural resources, overpopulated territory, and threatening neighbouring countries. But by rebranding itself as a creator of cultural content, it has found its niche. The Gangnam Style way.

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