>>abirached: this week on world business... >>: business in a bad neighbourhood, we look at the success story of south korea despite north korea's belligerent behaviour. >>: our potential gdp growth rate is around 4.5 to 5 per cent level >>: 200 billion dollars worth of holdings and more to invest - we meet the head of china's sovereign wealth fund gao xiqing, >>: as a sovereign wealth fund... for us, we are a much longer term investors >>: and working on the short game, golf gets a 21st century makeover for audiences with small attention spans. >>: an application of shorter form golf that can do for golf what 2020's done for cricket

>>abirached: hello and welcome. i'm raya abirached and this is world business, your weekly insight into the global business trends shaping our lives. it's been a traumatic past couple of months for south korea, what with the north korea's testing of a nuclear weapon and the suicide of a former president who had tried to bring the two countries closer together. but amid the gloomy political news, analysts are suggesting south korea's economy will do better than expected this year thanks in part to lessons learned -- and enacted -- since the 1997-98 asian financial crisis. >>reporter: neither foul weather nor the threat of nuclear

annihilation can keep bus loads of tourists away fromthe demilitarized zone separating north and south korea. >>: a visit there includes such oddities a meeting room that literally straddles the border...and gazingacross the minefields at what's supposed to be a showpiece north korean village but is actually a sparsely populated mirrage. >>reporter: the comic elements shouldn't detract from the very real concerns that north korea's actions evoke outside the peninsula. >>miyagawa: we are only 850 kilometers away from the north korean coast, quite well intimidated by the uncertainty of their attempts. >>reporter: south koreans may be used to pyongyang's threats. the same can't be said of foreigners thinking of doing business here. >>chul: it has many economic ramifications and whenever

we speak to foreign financial institutions and foreign investors, large foreign multinational firms whether they are interested in coming to korea, invest in korea then they always raise this question and they are very much concerned about the belligerent posture taken by north korea. >>reporter: south korea's economy is not as heavily dependent on foreign investment as many of its neighbors. >>: its homegrown industrial powerhouses are now world leaders in sectors such as lcd and semi-conductormaking, shipbuilding and auto making. >>: but it remains heavily dependent on exports and has been hit hard by the global slump...though nowhere near as badly as during the 1997-98 asian financial crisis. >>maelzer: south korea was among the countries hardest hit by the crisis. its currency depreciated sharply, many of its largest companies were

struggling under heavy debt loads, and its banks swamped with non-performing loans. in the end, korea's government had to turn to the imf for a bailout. >>je-kyung: our companies have learned a lot of lessons from the imf period. we have sounder financial positions, have lowered the debt ratios, have invested in r and d, and in new technologies like green industries. we have a strong degree of competitiveness which has helped us fight against the current crisis. >>reporter: the authorities have also learned plenty. unlike last time when the central bank jacked up interest rates at the prompting of the imf, the base rate is now at record lows. the government has also intervened in the economy much more forcefully. >>chul: they have been trying to make korean firms more competitive, korean exporters more competitive by cutting wages, cutting waste and improving technology so that they have

emphasized more on improving competitiveness of export oriented industries. >>reporter: the decline of the korean currency in recent months has made the country's goods more affordable than its competitors'. >>: that's helped keep south korea out of recession so far. and though its economy is expected to contract by around 2 per cent this year, that's a lot better than earlier forecasts, with the outlook fornext year promising. >>kwon: our potential gdp growth rate is around 4.5 to 5 per cent level so next year's gdp growth is slightly lower than our potential gdp growth rate, but 4 per cent gdp growth level is a very healthy. >>reporter: south korea is now the world's 15th largest economy, and gdp per person has tripled since the asian financial crisis

to around 27-thousand dollars a year. >>: the current slowdown is undermining some of those gains but it has also accelerated some positive trends, by boosting the importance of trade ties with other asian countries for instance. >>chul: we are poised to take advantage of any turnaround in the world economy and especially china has become our major export economy and china is going to grow by 8 or more per cent this year, so we are counting on our exports to china. >>reporter: unlike 12 years ago, south koreans are hopeful this time that their economy will quickly regain its former pomp. >>: they're also hopeful that this ceremonial changing of the palace guard in seoul will be as close as they get to seeing a military deployment in their half of the korean peninsula.

>>abirached: china's holding of around one trillion dollars of us treasury bonds is well known, but less well known is the new sovereign wealth fund created by china just two years ago, the china investment corporation. with $200 billion of assets and high profile investments in morgan stanley and other us firms, the new fund is making a strong debut. so how does china's sovereign wealth fund see the world economy and investment opportunities to come? our executive editor alan friedman sat down with the fund's president gao xiqing... >>friedman: of china's two trillion dollars reserves your sovereign wealth fund is a couple of hundred billion dollars. your highest profile investments have been the three billion dollar stake you invested in blackstone and then the five billion dollars stake in morgan stanley. in retrospect, do you regret that? >>xiqing: no, why should i?

>>friedman: because of the nature of prices, they have come down... >>xiqing: prices go up and down, but we still believe these are very good institutions and through the past year and a half, through our dealing with them, we met a lot of them, they are very professional firmsand we cooperate very well. >>friedman: is this a time to be more cautious or more courageous as a sovereign wealth fund? >>xiqing: as a sovereign wealth fund... for us, we are a much longer term investors, so it is very difficult to set any particular period of time, like we need to be more greedy or we need to be more cautious. no, we are looking at things in a much longer term. of course we cannot see 50 years, but we look at things 5-10 years. so for any particular talk of time, it doesn't really matter as much. >>friedman: what is your feeling about the euro versus the dollar over of the next decade in terms of role in the world economy? >>xiqing: i cannot really speculate too

much on that. at present time, typically if you ask an investor, they will say ok for the next 12 months, 18 months, but anything beyond that, is anyone's guess. at present time the dollar seems to be a little stronger than, say, half a year ago, a year ago, but i always have more confidence in the euro than a lot of friends and a lot of people i talk to and i think that the european people are going to be able to get together and function on it. the us, definitely has its own strength, it's the strongest economy in the world and at present time the us is still the only country that can do more than anyone else to pull us out of this thing, but they have their fair share of problems, and sometimes they are the source of the problems, so they have to get theiracts together and try to work with the europeans and with other people to try to have in the long run some sort of multipolar currency system so that we can all benefit

from it. >>friedman: you mentioned that the us has been in part the source of its own problems; you were regulator here in china before this current job. to what extent would you say that those americans and non americanswho feel there was insufficient regulation of the derivatives market, of the securitization, some have even suggested that mr. greenspan himself let things go to hell. they let things go too much andthat was part of the problem. do you agree with that? >>xiqing: it depends on how you look at it. from the macro point of view, it really doesn't matter that much. as a regulator, if you look at actual things, it is true, i agree with that, because there are many things that the regulator could do and could have stopped many things, but the problems are in a much larger scale. if you look at the overall spending habit, the overall financial system, then you think: well, how can

a country be sustainable by spending tomorrow's money, next year's money and the next generation's money? that will not be sustainable. that is the ultimate problem, we have to solve that; if they cannot find a way to get out of that spending habit, spending other people money, then we have a problem, because at present time china has a very high saving rate, japan has also a very high saving rate, but these people, are also getting richer and these people are getting, you know, the next generation we do not ...i never spend money really, but my children, the children of my children they are probably going to spend like americans, they would love to spend like americans, but how is it going to be sustainable for the whole globe? >>abirached: still to come on world business... >>: a pitch with passion the brands selling the italian lifestyle around the world. >>: facebook for farmers, a new online microcredit scheme

giving rural chinese workers a chance for change. >>: and the short form of golf hoping to be a big hit with the public. >>abirached: losing a few links ... and the rest in just a moment on world business >>abirached: cecil rhodes may have thought that to be born english was to have won the lottery of life, but around the world it is the italian lifestyle that many wish to emulate. the latin passion for style and innovative design is certainly appealing. italian products and lifestyle are finding devotees the world over. >>reporter: converting the world's greatest tea drinking nation to the pleasures of an espresso or a cappuccino,might at first

seem like a massive challenge. but young trendy urban indians are increasingly spending time and money at their local coffee shop. >>rawat: its ambience and the way all the friends can sit here and have our coffee and sit here for long hours. and do anything we like. >>reporter: with an estimated 400 million people now making up the middle class in india, there's plenty of money around. >>: and people seem willing to pay five times more for a coffee in a chain like coffee day or barista rather than at a traditional tea and coffee stall. >>coutinho: value for money is perceived at times as only price, but india is not so price sensitive. you have people really splurging. you've seen - if you see, you have people coming with a bundle of notes and just willing to spend that's all. >>reporter: in 2008 the family run illycaffe group, with 11 direct and indirect subsidiaries and over 700 employees, achieved consolidated sales of $386

million with net profits of $11 million. >>: exports represented 54% of total sales, so india, with a population of around a billion people, is important. >>tavcar: for us it's a crucial key market, first of all because all the big international hotel chains are facing off, and they're coming to the market, all the luxury brands are entering to the market and also because there are a lot of local people which are getting more and more demanding the quality. >>reporter: keeping ahead of the game - and the competition - in harsh economic times, is vital. >>illy: in illy we are very much about innovation for the sake of improving quality. as a matter of fact ourmission, which is also our passion and obsession, is to do the best coffee existing. >>reporter: and that passion for innovation also plays

a central role at other italian companies like plastic furniture manufacturer kartell. >>: sixty years on plastic is still holding its own, partly because of new materials such as crystal-clear polycarbonate and technological advances that allow for new shapes and styles without compromising strength and support. >>: taking advantage of this, kartell has this year even launched a new range of shoes. >>: but as important as change is - heritage also plays a role. >>luti: we're very proud to produce everything in italy. everything is made 100% around milan in the northern part of italy. it's important for us to control the quality. but also our know-how is italian - wemake everything in italy but, for example, all our team of designers comes from all over the world.we export all over the world

so we are also very international in that sense. >>reporter: for lighting company, artemide, who also take a pride in everything being designed and made in italy, staying on top of technology is also vital. >>gismondi: it is fundamental ... both technology and innovation are ... because our consumers, the clients purchasing a lamp for their homes, offices or hotels need to have a product that is guaranteed. the real guarantee lies in the product being technologically well-made, in terms of quality, life of the product, efficiency, certainty that the product will last.

>>reporter: it's a belief held by many economists that luxury goods are the last to be affected by a financial crisis and the first to come out of it. >>: by concentrating on quality, in design, innovation and construction, italy's high-end manufacturing sector is betting that those economists are right. >>abirached: they may lack pcs, let alone internet connections. but cash strapped farmers in china are now getting a leg-up - thanks to a micro-credit scheme, with a difference >>reporter: market day in zhouhe, rural sichuan, traditional social networking. the only twitters here are in a basket ! >>reporter: but this roadside office is, in fact, a cog in a hi-tech hub - one that's trying to connect the likes

of offline chinese pig farmers with a new online community of global micro-financiers. >>pinjin: right now, we don't have enough money to lend . we're actually waiting for repayments to come in so that we can re-lend. the demand is big ! >>reporter: demand is growing across the country as tens of millions of unemployed city factory workers are returning to the hinterland. >>mackie: but china's micro credit industry is underdeveloped. and under current legislation, lenders can only work with donations. in this global economic crisis, however, donor fatigue abounds. plus china, with its growing economic clout, is no longer regarded as a country in need - which, away from the cities, is simply not the case. >>reporter: this dilemma wasn't lost on development economics graduate casey wilson. while studying chinese in beijing back in 2006, the idea for wokai, or i start, was born after brainstorming with a fellow us student. facebook was clearly an inspiration.

>>wilson: technology allowed us - instead of having ideas of these large concepts of china and the rest of the world - really breaking it down to that end-individual and connecting people that were from diverse backgrounds, all around the world, that had opportunities to kind of help those have-nots on the other end. >>reporter: down on the farm with the have-nots, wokai mu work with government registered local field partnerswhich administer the funds. the partners' costs are covered by the interest payments of between 16 to 20 percent. >>shibing: he majority of our funds come from projects of international organizations and government donations. when the farmer pays backs a loan, we'll lend it out again, immediately. >>reporter: here, back in march, the loan officers from zhouhe make their first visit to a potential wokai borrower in nearby shenxi village. >>reporter: xu guiqiong has spent her savings on building a rabbit breeding compound nearby - and she now needs 450

us dollars for pig feed to see her through until october when they'll be fat enough for the market. the lenders take notes. but they'll also ask around the hamlet to see if ms. xu can be trusted. >>jin: for sure, some will speak good and some will speak bad. then we can make our own opinion. basically,in every village we can find someone who knows everybody. >>reporter: the loan approved, xu guiqiong's photo and profile is emailed to wokai in beijing - where they're posted with others on the site to attract contributions. it's important to underscore that neither wokai or the contributors make a cent from micro finance. all donations go to borrowers. wokai relies on other donations and sponsorship to cover its, current, 15,000 dollars per month running costs. down at her rabbit compound, ms. xu is also thinking about her owns costs. since she borrowed 450 dollars

for pig feed in march, meat has plummeted - a kiloof pork is now cheaper than a kilo of apples. >>guiqiong: the piglets now sell for between 14 to 16 yuan per kilo. when you came last time, we were getting 30to 32 yuan per kilo. but i'm not that worried. if i can't make a profit, that's life. >>reporter: in the meantime, she's paying back her wokai loan as promised. wokai's plan, by 2012, is to grow 60 fold - to fund over 6,000 projects - raising some 2 million dollars from 17,000 online donors. to achieve this, wokai needs to attract strong management talent - not to mention, establish sustainable revenue streams of its own. >>abirached: when the game of 20/20 cricket was introduced to the world...no-one could have predicted what a success it would be. but both fans and players have embraced 20/20 with a passion, and it's pumped new life into

the sport. now, a group of entrepreneurs are putting a great deal of energy, and cash, intoa new, shortened form of the game of golf...confident it will have the same results. >>reporter: nine holes. two flags per green...a game that's done and dusted in 2 hours........this is powerplay golf....a high speed form of the sport, for hackers and pros alike, which some believe could be the next big thing.... >>kinnings: i mean it has to have potential. the idea that there has to be an application of shorter form golf that can do for golf what 2020's done for cricket, has to be entirely on script with the way modern lives are. >>reporter: the game basically works like this. each of 9 holes, players

pick up points by shooting as low a score as possible. on three holes they can select a powerplay where they'll score extra points by goingfor the black flag...which is in the more difficult position on the green...it's fast. scores can change very quickly....and advocates say its perfectly suited to television.... >>croxton: it definitely has potential in professional tournaments at the televised stage or spectator stage because you're guaranteed a finish at the time you want it and you know its close. >>hardy: we see this as a stadium finish. some broadcasters have recommended playing the 9th hole under lights...so yes, it'll be the full dry ice, dancing girls, music sort of 2020 feel to it if you like. >>reporter: but to truly succeed, a game that's been around for 2 years also needs to convince club

golfers of its worth...till now powerplays staged around 3000 events, and about 100 thousand golfers have given it a go... >>hughes: we do it every friday. it started off slowly, but its really picked up. we get between 20 and 40 players every friday. >>reporter: powerplays directors have poured around half a million dollars of their own money into developing the game...however marketing has been restricted to just a website and so far, clubs haven't been charged a licensing fee to host powerplay golf, although eventually it'll cost them around 800 dollars. >>hardy: but we have almost 500 clubs who have come to us and said can we have a license please. ...so virally the game has spread...such that its being played in 23 countries around the world without us marketing. >>reporter: now we all know everyone's short on time these days...take this chap in the light blue shirt for example walked off before i even had the chance to ask him a question. >>:

we've lost him already. >>reporter: ...but surely there are lots of other short format ideas out there for golf? >>kinnings: we get a lot of different ideas, and some of them are good and some of them aren't. this is clearly the best one. >>reporter: powerplay is all about taking chances...assessing the opposition...backing yourself to score big...and your gamble to pay off....although sometimes, trust me...it doesn't... >>: but when it comes to powerplay itself...its backers are very bullish about the game's prospects. >>hardy: we're absolutely sure about the format now, having tested it in 10 pro tournaments in ireland, the uk and south africa last year and its with img that we'll bring on board the larger players. >>kinnings: we are for sure talking to players that may be relevant for this. we're looking at potential events that could be staged as early as this year, next year. >>reporter: by 2012 powerplay aims to have 2.5m golfers registered, and 45% of the world's courses

under license. nothing is guaranteed, but if all goes to plan, powerplay, could well be a short game, with a longfuture... >>abirached: >>abirached: that's it for this week's world business. thanks for watching. we'll see you again at the same time next week.