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Commentary: South Korea’s next export boom won’t be chips or K-pop

South Korea is making a splash when it comes to the arms trade.

On July 27th, South Korea signed one of its biggest export contracts ever. It wasn’t for semiconductors, or ships, or Korean dramas. Instead, it focused on a little-known, yet rapidly expanding, sector of the South Korean economy: arms.

At a military base in Morag, Poland inked an agreement to buy 1,000 tanks, 600 howitzers, and nearly 50 fighter jets from Seoul, made by companies like Hyundai Rotem and Hanwha Defense. Polish Defense Minister Mariusz Blaszczak was clear about why his country made the purchase: Poland needed state-of-the-art defense capabilities, to be delivered as soon as possible. South Korea was the only country that could fulfill both conditions.

Around the same time, South Korea attended its first NATO Summit in Madrid, along with other Asia-Pacific leaders. But while Russia and China were the main focus of attention, the conversation regarding Korea had another crucial component: advanced technology.

President Yoon Suk-yeol held over a dozen bilateral meetings during the Madrid NATO Summit. At these meetings, he touted South Korea’s advanced weapons systems, nuclear power plants, and burgeoning space industry as potential export growth areas for the South Korean economy.

High-tech ‘sales diplomacy’

While the rest of the world continues to obsess about the Korean Wave or the latest smartphone or flat screen TV from Samsung or LG, the South Korean government is quietly working in tandem with leading tech firms to find the country’s next growth engine.

This is South Korea’s tried-and-tested strategy to remain globally competitive. Government investment in blue-sky research, close cooperation with the private sector to analyze and settle on future growth engines, and the development of these technologies in a way that benefits both private revenues and the coffers of the South Korean government.

This relationship takes us back to the NATO Summit. South Korean manufacturers such as Hanwha have become one of the few international weapon systems firms to gain a foothold in the NATO market. In fact, South Korea is the only Asian country exporting to alliance members, including Norway, Poland and the U.K. That’s an impressive feat for a country that, until the 2010s, was barely a player in this market. Korea is already the world’s eighth-largest arms exporter, according to the Stockholm International Peace Research Institute.

South Korea has benefited from the need to develop technologies for domestic use. In April 2021, then-president Moon Jae-in beamed as he delivered a speech in front of South Korea’s first-ever home-grown fighter jet, the KF-21 Boramae. Countries such as Thailand, the Philippines, Iraq, or Qatar have already shown interest in the jet, manufactured by a consortium involving the South Korean government, Korea Aerospace Industries, and the Indonesian government. What started as a project to deter North Korea and China is poised to bring huge economic benefits to South Korea.

The same applies to the space sector. Last June, President Yoon attended the first successful launch of a South Korean rocket to put a satellite into orbit. Developed by the government’s Korea Aerospace Research Institute, the Nuri rocket was also designed for domestic purposes, perhaps putting a surveillance satellite into orbit to check on Pyongyang and Beijing. But foreign buyers would certainly be interested as well.

Nuclear power plants are also attracting overseas interest with majority state firm KEPCO joining consortiums in Egypt or the UAE to develop the sector in these countries—which South Korea itself needs to boost to reduce dependency on oil and gas from the Middle East and Russia, and pursue energy autonomy.

So is green shipping, with heavyweights Hyundai, Samsung, or Daewoo racing to lead the way at the global level but also as South Korea seeks to limit its own carbon emissions.

South Korea is banking on two advantages as part of its high-tech sales pitch. The first, unspoken advantage is that South Korea is not China. As relations between the U.S. and China sink to levels not seen for decades, Seoul could become a trusted partner for countries and companies seeking to build supply chains with limited or no Chinese involvement.

South Korea’s high-tech products are also cheaper than its competitors in the U.S. and elsewhere. Certainly, products from Lockheed Martin and Boeing are more advanced compared to their South Korea peers. But most countries don’t need the latest gadgets. They just need something advanced enough that allows them to protect themselves. That’s what South Korea offers.

South Korea Inc. now competes at the technological frontier, not just in consumer technology, but strategic technologies as well. The U.S., Japan, and Europe better get used to this new competition.

Ramon Pacheco Pardo is a Professor of International Relations at King’s College London and the KF-VUB Korea Chair at the Brussels School of Governance. He is the author of Shrimp to Whale: South Korea from the Forgotten War to K-Pop.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not reflect the opinions and beliefs of Fortune.

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The 4-day workweek has detractors but research shows employees get more sleep—and that could reduce ‘bad work outcomes’ 

Just as not every CEO buys into remote work, not every business leader thinks a four-day workweek is right for their company. Employees do appear to get more sleep, though, when given the extra day off—and that could help the bottom line.

“Sleep and work are sort of in competition with each other,” Christopher Barnes, a University of Washington management professor, told Bloomberg this week. “When you trade sleep for work, it’s problematic. You sacrifice your health and have bad work outcomes.”

Juliet Schor, a sociologist and economist at Boston College, is tracking organizations across the globe as they experiment with a four-day week. “Employers are realizing that if they can rethink where people work, they can also rethink how many days they’re on the job,” she said in a TED talk this year.

Among workers who switched to four days, according to her, the percentage getting less than 7 hours of sleep each night dropped from 42.6% to 14.5%, and they registered 7.58 hours per night of sleep, nearly a full hour more than they did before the change.

“I wasn’t surprised that people are getting a little more sleep, but I was surprised at how robust the changes were,” Schor told Bloomberg.

In survey results released this month by the 4 Day Week Campaign in the U.K., 46% of respondents said their business productivity has “maintained around the same level,” while 34% reported that it had “improved slightly,” and 15% said it has “improved significantly.”

But skeptics remain, and the four-day week isn’t for all, including companies that have otherwise shown flexibility by embracing remote work. FleetCor Technologies, for instance, lets certain employees work from anywhere, or use a hybrid model, which it says hasn’t led to a drop in productivity, according to TechTarget.

But the Atlanta-based firm, which processes workforce payments, isn’t considering a four-day workweek. “Our customers need us seven days a week,” chief HR officer Crystal Williams told TechTarget.

In Congress, progressive California lawmaker Mark Takano introduced the 32-Hour Workweek Act in July. The legislation wouldn’t penalize companies for not adopting the four-day workweek, but it would incentivize them to do so, as they’d be required to pay workers overtime after 32 hours.

“There’s economic, political, social upheaval,” he told the New York Times in March. Americans don’t “want to return to the same old normal.”

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Con Edison to sell U.S. renewable energy units to RWE in $6.8B deal (NYSE:ED)

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Consolidated Edison (NYSE:ED) announced Saturday it agreed to sell its wholly-owned Con Edison Clean Energy Businesses to German utility RWE (OTCPK:RWEOY) in a transaction valued at $6.8B.

Con Edison (ED) said the deal will allow it to “sharply focus on our core utility businesses and the investments needed to lead New York’s ambitious clean energy transition.”

RWE (OTCPK:RWEOY) said the acquisition will nearly double its renewables portfolio in the U.S. to more than 7 GW.

In light of the pending deal, Con Edison (ED) said it will forego its previously announced plan to issue up to $850M of common equity in 2022 and withdraw its equity guidance for 2023 and 2024.

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For European pharmas, poor Q3 performance makes the quarter one to forget (NYSE:GSK)

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Like most of the rest of the stock market, the third quarter is one to forget for major European pharmaceutical companies.

In Q3 2022, the S&P 500 was down ~5%. The SPDR MSCI Europe Health Care UCITS ETF, whose primary listing on Euronext Paris (ticker: STW), fared even worse, down 8% for the quarter. Its top 10 holdings are among the largest European pharmas based on market cap.

Europe’s biggest drug company, Roche (OTCQX:RHHBY)(OTCQX:RHHBF), was also the best pharma performer of the quarter, down only 2%.

A major overhang for the company is the impending launch of generics of one of its best selling drugs, Lucentis (ranibizumab), for age-related macular degeneration. In Q2, Roche (OTCQX:RHHBY) reported US sales of the treatment of CHF 316M ($320.1M), a decline of ~4% from the year-ago period.

On Monday, Coherus BioSciences (CHRS) will launch Cimerli, its biosimilar to Lucentis, in the US. In September, the European Medicines Agency’s recommended approval of Stada’s Ximluci biosimilar in the EU.

Roche is hoping that its follow-in to Lucentis, Vabysmo (faricimab), will blunt some of the blow from Lucentis generics. In Q2, it brought in sales of CHF 109M ($110.4M).

The second best performer of the month was fellow Swiss pharma Novartis (NYSE:NVS), which was down ~9%. While Novartis (NVS) benefitted earlier this year from several US drug approvals — such as Vonjo (pacritinib) and Pluvicto (lutetium Lu 177 vipivotide tetraxetan) — Q3 was much quieter on that front.

In the US in the quarter, the FDA approved a combination of the company’s Tafinlar (dabrafenib) + Mekinist (trametinib) for solid tumors with a certain mutation while in the EU, Scemblix (asciminib) was approved in August for chronic myeloid leukemia.

Novartis (NVS) just hit a 52-week low of $52.10 on Sept. 26. A major lingering concern for the pharma is the potential launch of generics of its blockbuster multiple sclerosis drug, Gilenya (fingolimod). It had 2021 sales of ~$2.8B. On Sept. 29, the US Supreme Court issued a stay on a mandate from an appeals court that would have allowed Gilenya generics.

Just behind Novartis (NVS) was Danish pharma Novo Nordisk (NVO), which was off ~10% in the quarter. A key highlight for the diabetes treatment company was its $1.1B acquisition of Forma Therapeutics (FMTX), which is focused on sickle cell disease.

In September, the company was buoyed by data from a late-stage trial showed that showed once-weekly insulin icodec led to better results compared to its own once-daily Tresiba (insulin degludec).

Novo Nordisk has benefitted immensely since the June 2021 approval of Wegovy (semaglutide) as a weight-loss treatment. In Q2, however, revenue of 1.2B Danish Krone (~$158.2M) compared to 1.4B ($184.5M) in Q1.

Wegovy will also likely soon have competition from Eli Lilly’s Mounjaro (tirzepatide). Although currently only approved for diabetes, Lilly is pursuing approval Mounjaro as a weight-loss treatment. In a head-to-head trial, Mounjaro beat Wegovy in terms of A1C and body weight reductions.

AstraZeneca (NASDAQ:AZN) lost 17% in the quarter. It hit a 52-week low of $52.65 on Sept. 26. The company did have some positive catalysts in the quarter in terms of readouts from several trials looking at expanding indications for several of its oncology treatments. Last month, however, Credit Suisse cut its rating to neutral saying that AstraZeneca’s (AZN) current stock price reflects its oncology potential.

The bottom two large European pharmas, GlaxoSmithKline (NYSE:GSK) and Sanofi (NASDAQ:SNY), lost, respectively, ~18% and ~26% in the quarter. GSK’s (GSK) major event in Q3 was the July spinoff of its consumer healthcare unit into a separately traded company, Haleon (HLN), which is also down significantly since it began trading.

Sanofi (SNY), as well as GSK (GSK) and Haleon (HLN), were also impacted in the quarter by worries over potential legal exposure to lawsuits over the heartburn drug Zantine (ranitidine) and apparent links to unacceptable levels of potential human carcinogen, N-nitrosodimethylamine. The companies have said there is no evidence that Zantac is linked to cancer.

One closely watched European pharma, BioNTech, was down 14% in the quarter. The company, which along with Pfizer (PFE) developed the COVID-19 vaccine Comirnaty, has been dealing with declining sales of the shots.

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