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Daum and KakaoTalk merge
Getting the message
The latest tie-up between messaging apps and broader online firms
May 31st 2014 | From the print edition
[1] IN THEORY Daum, an internet portal in South Korea, is acquiring Kakao, a startup whose messaging app, KakaoTalk, is on most of the country’s smartphones. In practice, it is the other way around: the merger unveiled on May 26th gives Kakao’s shareholders the lion’s share of the new company, although Daum has more revenue, profits and staff, plus a stockmarket listing. The deal, valuing Kakao at $3 billion-odd, shows that messaging apps are still hot property.
[2] Hottest of all is WhatsApp, a Silicon Valley startup with 500m users, which Facebook bought in February for a staggering $19 billion in cash and shares. (This week Facebook asked the European Commission to review the takeover, rather than risk antitrust inquiries in several countries.) The same month Rakuten, a Japanese internet firm, paid $900m for Viber, founded by Israelis but based in Cyprus. Alibaba, a Chinese online giant, paid $215m for a slice of Tango, another Silicon Valley firm, in March. Tencent, Alibaba’s rival, owns WeChat, which has almost 400m users. It also runs QQ, an older messaging service, and has a stake in Kakao.
[3] The South Korean deal means yet another pairing of a broader internet company and a messaging startup. The youngsters seek extra heft—for instance, like Kakao, in marketing. The oldies (if you can call internet firms that) get a trendy mobile product. Daum doubtless hopes that KakaoTalk, which is installed and registered on 145m devices, will help it combat Naver, South Korea’s leading portal. South Koreans do not just use the app to chat: it is also a popular platform for mobile games, from which Kakao makes most of its money, and for sending both digital and physical gifts. Naver, too, owns a messaging app, Line, with 400m users, but it is based in Japan.
[4] The market is highly regionalised: most friendships are local, after all. Kakao has been trying to break out of South Korea, where it is running out of room. It is concentrating on Indonesia, Malaysia and the Philippines, but it faces stiff competition from Line and WeChat. Which app if any will conquer the globe is an open question—though WhatsApp, with most users and Facebook’s billions, looks the most powerful. Perhaps none will. People may end up using several—as they did with desktop messaging services in the internet’s first wave.
From the print edition: Business
Europe’s angry voters
Bucked off
Europe’s leaders need to cut the power of Brussels in many areas, but in some they need to extend it
May 31st 2014 | From the print edition
[1] “DETERMINED to lay the foundations of an ever-closer union among the peoples of Europe…” proclaims the Treaty of Rome that began the European project in 1957. When the history of the European Union is written, 2014 will very probably come to be seen as an equally significant date, for this was the year that Europe’s voters told its leaders to abandon the noble aspiration that launched the venture more than half a century earlier and has shaped its policies ever since.
[2] Even though a big anti-European vote had been expected, the scale of it still came as a shock. In France Marine Le Pen’s National Front (FN) came top with 25% of the vote. The UK Independence Party (UKIP) did better still, with 27%. Almost 40% of the vote in Greece went to broadly Eurosceptic or avowedly racist parties. As many as 30% of the seats in the next European Parliament will be held by anti-establishment and/or anti-European parties. Manuel Valls, the French prime minister, was right to speak afterwards of a political “earthquake”.
Prosperity v democracy
[3] The direct political consequences may not in themselves be hugely significant. Within the European Parliament, the populists will probably squabble so much that the pro-European 70% can continue in their usual consensual way. But the longer-term ramifications could be enormous. Europe faces the possibility that Britain—whose ruling Conservatives have promised a referendum on EU membership after the next election—will pull out. The EU might survive a British withdrawal; but if France elected an anti-European of Ms Le Pen’s ilk and pulled out, that would be the end of it.
[4] Muddling through, the typical Brussels response to crises, is not an option this time, for if the EU does not change voluntarily, voters will force change upon it. To respond to their hostility, Europe’s leaders need first to examine the reasons for it.
[5] Nationalism is clearly a factor. The message that voters do not want foreigners telling them what to do was broadcast loud and clear from the platforms of parties such as UKIP and the FN, and this is not the first rejectionist vote. The French and Dutch threw out the draft EU constitution in 2005 and the Irish rejected its replacement, the Lisbon treaty, in 2008 before being asked to vote again.
[6] Hostility to immigration is another motive. Most of the anti-EU parties are also against foreigners. Resentment of the EU has risen since it expanded eastwards, and workers from those poorer countries moved westwards.
[7] Finally, economics is a big driver of discontent. It is notable that the French, whose leaders have no solution to their stagnation, are far angrier than the Germans, whose economy is recovering nicely. Britain may be growing now, but the fact that its economy shrank so sharply in the aftermath of the crisis helps explain the grumpiness with its government.
[8] There are two solutions to Europe’s problems: economic prosperity and increased democracy, which basically means returning power to the states and institutions that voters trust. The two aims often coincide, but not always.
[9] There are plenty of areas of national life in which Brussels should interfere less. Much unnecessary red tape should be torn up and many regulations scrapped. Freedom to fix many detailed social and employment rules—parental leave, working time and so on—should be handed back to national governments. The European Parliament’s powers should be reduced, and national parliaments given more say in EU legislation. At least initially, such reforms can be made without the lengthy (and risky) business of treaty change.
[10] But prosperity and democracy clash in two areas. The first is immigration. Yes, countries should be freer to clamp down on “welfare tourism”, a particular source of anger: rules can be tightened to make it harder for immigrants to claim benefits. And poorer new EU applicants could be subject to even longer transition periods when free movement is limited. But the “four freedoms” of movement of goods, services, capital and labour underpin Europe’s single market. To junk any one of these would not only call into question the point of the enterprise, but also reinforce the economic stagnation that is a big reason for the current discontent.
[11] The single market provides the second set of conflicts. In some areas—labour-market flexibility, for instance—“less Brussels” will help growth. But not all. The euro crisis showed that the euro zone needs a banking union, which centralises a lot of power. And the best hope of growth lies in expanding the single market. The next commission needs to remove blockages to trade in services, energy and the digital economy. More free-trade deals, starting with America, are another priority. Opening up Europe’s economy will annoy some voters (and scare some politicians); but the alternative—years of economic stagnation—will doom the project anyway.
The quest for leadership
[12] It may be, as Eurosceptics argue, that Europe cannot change. But the initial reaction from national leaders has been encouraging. Germany’s Angela Merkel and the present commission president, José Manuel Barroso, have both called on the commission to do less. France’s François Hollande says the EU is too remote and must scale back its power. Italy’s Matteo Renzi has won backing for reform. David Cameron, Britain’s prime minister, has been demanding a reduction in the powers of Brussels for years, while campaigning for a broader single market. Europe’s other leaders would do well to adopt his ideas—and then pretend they did not come from Britain.
[13] The first job is to appoint a new president of the European Commission prepared to implement radical change. The continuity (and federalist) candidate, Luxembourg’s Jean-Claude Juncker, used to have Mrs Merkel’s support. But she seems to have realised that doing nothing is not an option. Our choice would be Christine Lagarde, the French boss of the IMF, a clever, brave outsider, who knows how to take on vested interests. With Ms Lagarde as president, Britain would be more likely to stay in. If the EU is to survive, it will need that sort of leadership. And its survival really is in question now.
From the print edition: Leaders
The Economist
Japan’s demography
The incredible shrinking country
For the first time, a proper debate is starting about immigration
May 31st 2014 | HAMAMATSU | From the print edition
[1] THE mantra since Shinzo Abe returned to office in 2012 has been about pulling Japan out of its long deflationary spiral. But that is much easier said than done when the population is ageing and shrinking more rapidly than any other.
[2] In May a think-tank predicted that within a little more than three decades some 1,000 rural towns and villages will be largely empty of women of childbearing age. The government forecasts that Japan’s overall population, currently 127m, will shrink by a third over the next 50 years (see chart below). Indeed, it predicts there will be a mere 43m Japanese by 2110. The latter forecast is unscientific extrapolation—no one can possibly know what the country will look like a century from now. Still, the forecast is a measure of the government’s mounting alarm, and it is hard to square with the prime minister’s notions of returning Japan to national greatness. In short, demography is once again coming to the fore as a hot political issue.
[3] The chief problem is that a fast-shrinking working population will struggle to support a growing proportion of the old. In part, the government is trotting out time-worn ideas: Japan must raise its birth rate (but that can be hard, see article); to cope with labour shortages, it must develop robots to work on factory floors and in care homes for the elderly. The head of a special panel advising Mr Abe, Akio Mimura, said the government must act quickly if it is to keep the population from falling below 100m. To prevent that, the panel’s report points out, the average Japanese woman should have 2.07 children over her lifetime, up from the current level of 1.41. The panel, with plenty of greyheads on it, seemed to be itching to intrude into the bedroom to urge women to get going.
[4] Population experts, however, say a wholesale redesign of Japan’s social architecture is needed. Mr Abe has announced plans to provide more publicly-run child care, to help mothers get back to work. But a big obstacle to working mothers is Japan’s corporate culture, with its long office hours and late nights out bonding with colleagues. The culture could take years to change. So might the stigma attached to children born out of wedlock. Meanwhile, recent measures to boost the birth rate, such as assigning gynaecologists to remind young women of their biological clocks, smack of desperation.
[5] Yet signs suggest Mr Abe’s government is now considering another obvious solution that Japan has usually shunned: immigration on a big scale. Less than 2% of the population is of foreign origin, a proportion far below that of other rich countries. Even this low figure includes large numbers of permanent residents with roots in Japan’s former colony of Korea, as well as China, whose families have been in Japan for generations.
[6] More recent arrivals include legions of Chinese students. They seldom stay for long, but without their labour, Japan’s myriad urban convenience stores would soon struggle. And during the 1990s thousands of Brazilians were recruited to work in car and related factories, notably in Hamamatsu in Shizuoka prefecture south-west of Tokyo and in Aichi prefecture around Nagoya. Japan gingerly opened the door to such workers when it desperately needed cheap labour, says Kimihiro Tsumura of Hamamatsu Gakuin University, only to slam it shut when the economy slowed after 2008, even paying many to go home. Hamamatsu’s Brazilian population has fallen from some 20,000 to around 9,000. Those who stayed have struggled to integrate. It does not help that the government has made next to no provision for the educational and other needs of the children of immigrants.
[7] Nonetheless, in February the government released a report recommending that Japan accept 200,000 new permanent immigrants a year from 2015 onwards. Perhaps predictably, officials issued denials that this scale of immigration was government policy. Mr Abe himself has insisted that recent moves to give longer temporary visas to foreigners working in construction and the like are “not an immigration policy”. Such workers, he said, would have to return home afterwards.
[8] In reality, an adviser to Mr Abe says, the report marks the start of a move towards opening the door to a lot more permanent immigrants, even if Mr Abe cannot say so. The usually xenophobic right-wing media are coming around to the idea, says Hidenori Sakanaka, a former Tokyo immigration chief who is now head of the Japan Immigration Policy Institute. These days, he predicts, the mainstream media’s reporting on the issue will sway public opinion in favour of more immigration.
[9] Yet Hamamatsu highlights the challenges. Even though the Brazilians had to have some Japanese blood as a visa qualification (many Japanese emigrated to South America in the early 1900s), they struggled to speak and read Japanese. What is more, says Yasuyuki Kitawaki, who was mayor of Hamamatsu from 1999 to 2007 and oversaw the city’s attempts to assimilate the newcomers, locals were not ready for a blast of multiculturalism. The vast majority of Japan’s Gastarbeiter are law-abiding, but Japanese associate them with crime and antisocial behaviour. Hiroyuki Hashimoto, committee chairman of a block of Hamamatsu flats, said Brazilians at first wanted to barbecue on their balconies and—nossa!—samba inside their flats; they were obliged to quieten down. One sign for the better, he says, is that Japanese and Brazilian children now skateboard noisily together outside. Yet immigration is still far from an easy option.
From the print edition: Asia
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