With his slicked back hair, powder blue suit and goofy horse dance, South Korean rapper Psy, who is in Hong Kong today, turned Gangnam Style into one of the musical hits of the year. With over 800 million views on YouTube Gangnam Style has become a cultural sensation, but K-Pop has been around longer than Psy and its influence has lent a hand in elevating South Korea in the consciousness of Asia and the world, with effects that go well beyond the entertainment industry. Culture is helping to bolster the country's "soft power" and build its influence. It's a success story that may offer important clues for China as it seeks to use culture to bolster its own soft power and a reminder of the halcyon days when Hong Kong's Canto-pop stars seemed destined for global fame. Psy has topped the charts in Britain and been welcomed in New York by his fellow countryman, UN chief Ban Ki-moon, who conceded with a grin that he was no longer the world's most famous Korean. Korean films are becoming more and more popular among the mainstream - Park Chan-wook's hit Oldboy is getting a US remake next year - while television shows are winning fans in unlikely corners of the world. " Huh Jun , a Korean epic historical drama is one of the most watched shows in Iraq," says Peter Kim Eyungpyo of the marketing department of the Seoul Metropolitan Government. Korean dramas, he says, are proving popular in the Middle East. But arguably the biggest influence of the Korean Wave, or Hallyu as it is called in Korean, has been in Asia. In Cambodia's capital Phnom Penh, a television station that only broadcasts the latest in Korean music is one of the most popular entertainment channels. Korean celebrities such as Rain sell cosmetic products while companies such as Samsung have been on the ground for years selling their wares to the Cambodians, including phones marketed using K-pop stars. Korean dramas beam into the homes of Cambodians, becoming a hot topic of conversation. "They tend to discuss the relations among family members, culture, lifestyle, Korea's development and so on," said Sokharo Hang a 19-year-old media student in Phnom Penh. "Korea is a developed country in the world. There are so many places to visit, many things to learn, many wonders to remember in Korea. Korea is one of the most beautiful countries in the world. That's why we want to visit Korea." It's this image of opportunity and development that Hallyu has presented to Cambodians that has translated into greater collaboration between the countries. In the past five years, thousands of Cambodians have been going to Korea as labourers and the number is expected to continue to rise. The number of Cambodians joining the Korean workforce this year is expected to increase by 40 per cent, filling jobs Koreans will not take in small-to-medium-sized enterprises. The Cambodian government expects these workers to remit up to US$80 million back to the country this year. There are also other areas where Koreans and Cambodians come together. More Cambodian women are marrying Korean men, with just a handful of marriages in 2003 going up to almost 1,000 each year now, according to the Korean embassy in Phnom Penh. In Japan, Korean dramas and groups such as Girls Generation and Kara have been a sensation. Their popularity, however, has turned into a major headache for the government as it tussles with Seoul over the sovereignty of the Dokdo islets, known to the Japanese as Takeshima. Officials from the Liberal Democratic Party even demanded a ban on Korean content and K-pop after South Korean president Lee Myung-bak set foot on Dokdo, and the airing of two dramas was postponed after actor Song Il-guk participated in a swimming protest to defend his country's rights to the islets. Despite growing political pressure, broadcasters admitted it was difficult for them to ban Korean content which is now very much a part of everyday life. There is an even more straightforward way to quantify the soft power benefits of Korean culture - it's bringing in cold, hard cash. CNN interview with Psy South Korea's music industry earned revenue of just US$120.5 million back in 2007, according to the International Federation of the Phonographic Industry, a decrease from a year earlier as a previous Korean cultural wave declined from its 2005 peak. But as K-pop's influence spread, profits increased. Revenue reached US$199.5 million last year, a 65.6 per cent increase on 2007. The country has largely outperformed China, including Hong Kong's Canto-pop industry, and Japan, which dominated the Asian music industry in the 1980s and 1990s respectively. The mainland only earned half of South Korea's music revenue last year. Japan, the world's second biggest music market after the United States, also saw sales shrink by one-fifth. The number of exported music titles - songs and albums - dropped from 9,095 in 2009 to 7,640 in 2010 amid a global decline of physical album sales, according to the country's trade association. Tourism in Korea has also had a major boost. "We had 10 million visitors from overseas last year. They bring an economic contribution to society," says Peter Kim. Tourism to the country has been growing by double digits over the past five years, around 75 per cent of it driven by Asian visitors, says Kim. While Kim says it's hard to draw a direct casual link between the spread of Hallyu and the increasing number of tourists, since 2008 the Seoul government has been branding the city as the "Hub of Hallyu," much like Memphis sells itself as the home of Elvis Presley, and plans to spend US$1 million to promote this image to overseas visitors. The Korean government as a whole has been actively providing funding and support to its creative industries, listing culture as a pillar industry since as far back as 1998. In 2005 it set a clear aim of making the country one of the world's top five cultural exporters. It's the kind of investment music veterans in Japan can only envy. "The Korean government has continuously funded exports of Korean content overseas for over 12 years, which [has resulted in] the recent successes of Korean TV dramas, films and K-Pop [around] the world," said a spokesman for the Recording Industry Association of Japan. "On the contrary, in Japan the only government support for the music industry is that for organising the Tokyo International Music Market [a trade event]." For its part, Beijing has identified culture as a pillar industry in the nation's 12th five-year plan and Culture Minister Cai Wu expects culture to represent 5 per cent of national GDP by 2016. "PSY performs Gangnam Style at MAMA" Video by Hedy Bok But one lesson the mainland may need to learn from Korea is that for all the government support, it's been the private sector that has driven growth. The push overseas has largely been an initiative of Korean entertainment giants such as CJ Entertainment, SM, YG and JYP - profit-driven and calculated. SM Entertainment has been testing the waters in the overseas market for over a decade. Its artist BoA debuted in Japan in 2001 and her fan base grew from 35,000 in 2003 to 170,000 a year later, according to a Hyundai Securities report. BoA's first English album was released in 2009. SM is busily pushing its "idol groups," which include TVXQ and the ever-popular nine-member group Girls Generation. The company's revenue is expected to hit 169.9 billion Korean won (HK$1.21 billion) this year, four times what it was in 2007. Overseas revenue will represent 71 per cent of the total, up from one third five years ago. The boom is also a product of the times as Korea has benefitted from exposure on the internet, Kim says. "It's a life-cycle matter. In the mid-80s, early 90s Chinese music was really popular. Andy Lau [Tak-wah] was a really famous guy," says Kim. In the middle of the nineties, J-pop took the place of Canto-pop when audiences became bored with the slower tempos. Every decade or so the audience needs something new, Kim says. It's a view echoed by Hyundai Securities analyst Kevin Jin, who monitors the Korean entertainment market. Websites such as YouTube have lowered barriers for overseas expansion. "The forays into the new markets were not spurred by any promotions or investments, but by simply posting videos on the internet. That is, the entertainment industry has begun to take on a low-cost, yet high-return business model, which is unprecedented across all industries," he said. The United Nations describes the creative industries as increasingly important components of modern economies: they account for higher than average growth and job creation, and are vehicles of cultural identity that foster cultural diversity. "It's the global trend to promote creative industries, as traditional manufacturing is more expensive and polluting," said Dixon Wong Heung-wah, head of the global creative industries programme at the University of Hong Kong. "There should also be content creation to go along with the development of electronic devices such as iPhone and iPad. "Marketing and branding are what transforms creativity into cash, and that is what South Korea excels in," he says. "Idols are also commodities." Through exports of consumables countries can revamp their image, he says. One challenge for K-pop may offer clues to Beijing's development. "The problem is the government tries only to develop the content itself, but they don't know how to build the brand," says Kim, adding that the Seoul government is trying to do precisely that and build an emotional connection with people. "We want to be seen as rich in spirit ... that we have soul," he says. The freedom and democracy portrayed in Hollywood movies and rock songs are perceived to have melted the hearts of people in communist countries during the Cold War era. But it is debatable if exports of Asian culture - which does not have a clearly defined, underlying message - will represent soft power on the same magnitude as that of the west. The effect of soft power is not down to the action of the expert. It depends on the perception of the audience, according to a theory put forward by Joseph Nye, a former US assistant secretary of defence and chairman of the US National Intelligence Council. Although China has the ambition to conquer the world with its culture, its soft power campaign is undermined by its bad human rights records, he wrote in The Wall Street Journal . "The 2008 Olympics was a success abroad, but shortly afterward China's domestic crackdown on human rights activists undercut its soft-power gains. The Shanghai Expo was also a great success, but it was followed by the jailing of Nobel Peace Laureate Liu Xiaobo . His empty chair at the Oslo ceremony was a powerful symbol."