‘PC Bang’ Helps S. Koreans Embrace Net

Several months ago, Ko Byoung Sam, 27, quit his job after nine years at Samsung Group to join a “dot-com” start-up.

The result: His future is less secure, the job less prestigious, his family enjoys fewer benefits and work is more chaotic. But he gets stock options, has far more responsibility and a chance to strike it rich if the company takes off.

“You have to change with the times,” he said. “I wanted to take more of a risk.”

With Ko and thousands of young South Koreans like him at the vanguard, Asia’s second-largest economy has embraced the Internet with a speed and enthusiasm matched by few countries anywhere--in some categories surpassing the United States.

In the process, a rapid shift of people, money and markets into the new economy is transforming South Korea’s old conglomerate-led economy in ways that have long eluded government planners and blue-ribbon reform panels.

And the exuberant creativity and wealth of new jobs is showing up Japan, South Korea’s powerful neighbor, economic rival and longtime model, which has been far slower to change.

In Seoul, the signs of change are everywhere. Billboards, subway ads and peel-off stickers on lampposts promote a flood of new start-ups. Old companies struggle to keep employees as entire departments flee to dot-coms.

The online auction, stock trading, banking and game software industries are exploding. Government agencies trip over each other to build infrastructure and pass venture-friendly regulations.

Foreign venture-capital firms descend on Seoul waving fists of cash even as South Korean start-ups spread their tentacles into China, Taiwan and Hong Kong.

Behind the buzz are a number of impressive statistics. South Korean investment in information and telecommunications surpassed China last year and is on track to overtake Germany, France and Italy this year.

Internet use has spiked 50% in just the last six months to number 15 million people. South Korea now is second only to the U.S. in the number of domain names registered each year. And in online stock trading, it suddenly leads the world.

One reason for the rapid spread of the Internet in South Korea may be a particular home-grown innovation known as the “PC bang,” a local colloquialism for public-access computer rooms. At least 15,000 of these service centers blanket the country, up from just 100 in 1998, bringing high-speed access to your average Kim for as little as $1 an hour.

In Seoul’s Upgujung district, Kim Hong Jin, 30, ambles into V-Net, a no-frills PC bang. As he settles into a chair in front of one of the 25 high-end computers that line both walls, several friends yell at him to hurry it up. For the next two hours, the group plays battle and strategy games over a local network, oblivious to the damaged ceiling panels and unpainted walls. Nearby, other customers are trading stocks or researching school projects.

“I have a computer at home,” Kim said. “But the [telephone] lines here are faster, they’re networked and the chairs are more comfortable.”

The government has also pushed hard to spread the wealth. Like many countries, South Korea is worried about the so-called digital divide between those with Internet savvy and those without. Unlike many countries, however, South Korea is doing something about it.

Government classes on using the Web are targeting up to 2 million homemakers and mandatory primary school instruction starts next year.

Seoul has also set aside $84 million for several Internet backbone projects, including high-speed access for 196 smaller towns around the country. Tax breaks are steering private investment to nine target regions and five secondary cities. And small islands and remote mountain villages will be served by Internet plazas in local post offices and town halls.

S. Korean Innovation Is Showing Up Japan

In the process, the Internet is transforming dramatically the way Koreans communicate, socialize, wage political campaigns and do business. A citizen’s Web page that identified corrupt candidates in April’s general election put the political establishment on warning: Of 86 candidates blacklisted, 56 were defeated.

Young people now socialize in PC bangs the way many American kids hang out in malls. And unique South Korean social needs are finding new expressions on the Web, including sites planned to let worried mothers watch their sons stationed in faraway military barracks.

Old-line companies have been forced to respond to the Internet and its pressures to globalize. Korean blue-chips Samsung Electronics, Hyundai Electronics and Daewoo Telecom all lost between 8% and 25% of their research staffs this year to start-ups, forcing them to introduce greater work flexibility and more incentives.

South Korea’s creative fervor stands in sharp contrast to Japan, its larger and wealthier neighbor, where an entrenched bureaucracy, weak antitrust laws, cultural biases and high entry costs work against innovators.

“Korean business is following America rather than Japan,” said Kang Dong Jin, director of Paxnet, a leading South Korean financial information Web site. “Korea has seen America enjoy a decade of prosperity and Japan the opposite, so in some ways the choice is easy.”

A case in point: South Korea’s rapid privatization of the former monopoly phone company has meant lower rates and stronger antitrust safeguards, spawning a flood of new telecom providers and some of the lowest Internet costs in the industrialized world. Japan, by contrast, has shown a continuing bias toward subsidies and regulations that protect high-cost, old-line players, making Internet use prohibitively expensive for many.

Leading by example, the South Korean government has put 78% of its offices online. In one of the latest examples, all draft procedures for South Korea’s mandatory military service can now be done from the convenience of the nearest computer. And President Kim Dae Jung has pushed young South Koreans to learn English as the language of the Internet.

The mirror image in Tokyo is Prime Minister Yoshiro Mori, who just got around to sending his first e-mail in May, and who named to his Cabinet a telecommunications minister who admitted to never before touching a PC.

He is supported by legions of bureaucrats who still use multicolored Post-its to earmark their giant regulatory books. Relatively little Japanese government information is online.

Temperament Suited to the Information Age

Behind South Korea’s rapid embrace of the Internet, experts say, is a combination of structural shock, culture and luck. When the South Korean economy hit the wall in 1998 in the wake of the Asia crisis, it jolted many traditional assumptions and put the chaebol, or conglomerates, in survival mode, opening the field to new competitors.

“The . . . crisis was a godsend in disguise,” said Ra Young Ho, president of Daishin Economic Research Institute. “We got hit by a stick when we badly needed it. Otherwise, government and business never would have changed.”

South Koreans also say two cultural attributes often seen as negative--impatience and a love of gambling--are ideally suited to the rapid-fire Information Age where speed and risk are valued. South Korea is now registering 500 new dot-com start-ups a month, and with more than 6,500 total has now surpassed Israel and Taiwan.

“Koreans are very quick-tempered and want to do everything immediately,” said Paxnet’s Dong. “That impatience fits perfectly with the computer age.”

To be sure, South Korea’s early momentum is no guarantee that all its ambitious plans will be realized. And it remains to be seen whether South Korean impulsiveness will lead to poor, ill-conceived strategic decisions. Critics fret that the country is relying too heavily on the government for leadership instead of on the private sector.

That said, the pace of change in South Korea remains impressive, both from an Asian and a global context.

South Korea’s most dramatic Internet progress is in trading stocks. More than 56% of all trading in South Korea is now done online--the highest level in the world. By comparison, the U.S. figure is about 40%. Online commissions can be as low as $1 for a $3,000 trade, versus four times that level for conventional brokers.

“I cyber-trade while I’m at work,” said Yun Choon Ho, a consultant taking a break in Seoul’s financial district. “But I can’t spend that much time since I’m at the office. So a couple of times a week I go to a brokerage trading center at lunch hour.” These centers, run by stock houses, attract customers looking for a more serious environment than the PC bangs.

Yun said he’s made a few hundred dollars buying shares of a leading chemical company at their recent low. “I trade online because it saves time and money,” he said.

For all its enthusiasm, South Korea maintains very traditional roots, and some look askance at these developments. For older generations, walking away from a job at one of South Korea’s blue-chip chaebol for a flier with a dot-com is still highly suspect.

“My mother is very afraid that I changed jobs,” Ko said. “Samsung is a very famous company and she told me I should stay there. Even my wife is concerned. But I’m sure it’s the right thing to do.”