Hallyu Splash
As Psy’s song “Gangnam Style” (2012) and the drama “My Love from the Stars” (2013) have gained huge popularity, Hallyu, or the Korean Wave, seems to have entered a golden age. Central government departments and local governments are spending a lot of money on the Hallyu business. However, the practical effectiveness and economic influence of Hallyu must be accurately examined, instead of being blindly overwhelmed by a “Hallyu Drive” based on the culturally-strong nation theory.
Since 2012, the Korean government has declared the “3.0 Hallyu Generation” and promoted “K-Culture” projects to expand Hallyu culture previously led by dramas (1.0 generation) and pop music (2.0 generation). Last year, the government budget related to Hallyu increased by 27.3 percent, equivalent to 70.4 billion won (US$68.7 million), making the total budget 327.9 billion won (US$319.9 million) in 40 business areas. Both in the private and public sectors, numerous associations and organizations, including two Hallyu graduate schools, have been opened. Hallyu now includes not only mass culture but also arts, fashion, traditional culture, and sports. Various kinds of forums, expositions, culture centers, and schools for infrastructure, concert towns, and Hallyu tourist complexes are mushrooming.
Since the Hyundai Research Institute assessed the economic effects of Hallyu Star Bae Yong-joon at 3 trillion won (US$2.9 billion) in 2004, the economic ripple effects of Hallyu have been standing out even more. The theory goes that an improved national image thanks to Hallyu leads to increasing exports, and therefore leads to the growth of the manufacturing industry.
When exports of cultural products increase by 1 percent, exports of all consumer goods increase by 0.03 percent (export elasticity). Based on this, it has been concluded that the economic effects of Hallyu-related businesses, including production, added value, and employment, reach 5 trillion won (US$4.87 billion) per year.
Then, did exports of Hallyu-related products actually grow? Five product groups have been classified as Hallyu products by the Korea Customs Service: culture, living, food, clothing and accessories, home appliances, and computers. However, the exports of these product groups have either declined or remained the same for the past 15 years of the Hallyu golden age.
The export portion of Hallyu consumer goods was 22.8 percent in 1998 and 25.2 percent in 2001, the beginning of Hallyu. This drastically dropped to 11.7 percent in 2007, and to 12.5 percent last year, staying near the lower 10 percent region of the chart for the past seven years. In terms of amount, exports of Hallyu products only increased to US$11.03 billion in 2013 from US$8.34 billion in 1998. During the same period, the growth rate of Hallyu products was 2.0 percent, while all consumer goods grew by 6.1 percent. Especially with clothing and accessories, which are known to be mostly influenced by Hallyu, the export portion in five Hallyu product groups declined to 26.5 percent in 2005 and 18.8 percent in 2012, from 56.8 percent in 1998. Cultural products directly affected by Hallyu were only 4.4 percent in 2012.