Together with the global expansion of projects to realize carbon neutrality, demand for key minerals—used as raw materials for renewable energy power generation such as solar panels and wind turbines, as well as for electric vehicles (batteries)—is rapidly increasing. One major concern is that China holds a dominant position across all stages of the global critical minerals supply chain, from mining (ore and concentrate) to refining and smelting (basic and processed metals), and recycling (scrap). In particular, China’s influence in the refining and smelting sector is overwhelming, and the nation also exerts significant control over the mining stage for certain minerals. In response, major countries including the United States, the EU, Japan, and the Korean government are strategically working to establish stable supply chains in this area, aiming to reduce reliance on China (de-Chinaization) and to transition energy structures towards decarbonization. Notably, although Korea is a major manufacturer in advanced industries such as electric vehicle batteries and semiconductors, its dependence on China for refined and processed products of critical minerals like lithium, cobalt, and nickel exceeds 70%, posing significant vulnerabilities in its supply chain.

China holds a dominant position as both a major supplier and consumer within the global critical minerals supply chain, but it exhibits various strengths and weaknesses at different stages. This study divides the supply chain into the stages of mining (ore and concentrate), refining and smelting (basic and processed metals), and recycling (scrap) to analyze China’s influence and vulnerabilities. It also examines strategies on the part of the Chinese government and enterprises to fortify their supply chains, drawing implications for Korea’s stable mineral procurement.

Chapter 2 of the study analyzes China’s control measures and vulnerabilities in the global critical minerals supply chain. While China firmly dominates the refining and smelting stages of the global critical minerals supply chain, it is relatively vulnerable in the mining stage. This is because, despite holding some advantages in ore deposits and production, China’s domestic industrial demand is not fully met, resulting in a high dependence on imported raw materials. Moreover, China has an industrial structure that imports basic raw materials for refining and smelting, meaning that as metal production increases, the demand for raw material imports also rises accordingly. Additionally, our analysis comprehensively considers mineral-specific (basic raw material) reserves, production volume, external dependence, and the Trade Specialization Index (TSI) to evaluate China’s strengths and weaknesses, linking these to the strategies China pursues. China mainly enforces export controls on Group 1 minerals—such as rare earth elements, gallium, and germanium—over which it holds an absolute advantage, using these controls as tools for economic pressure or strategic leverage. For instance, in response to US semiconductor equipment export controls against China, China banned exports of gallium and germanium to the US. For Group 2 minerals (those with advantages in reserves and production but insufficient to fully meet domestic demand), export control systems are also applied, but the focus here is more on domestic supply and demand management. For example, China has tightened export controls on antimony since 2019 to stabilize domestic supply amid internal shortages and growing demand for home appliances in 2024. Meanwhile, minerals classified as Group 3 (disadvantaged minerals) such as copper, aluminum (bauxite), lithium, cobalt, and nickel show high Chinese market shares at the refining stage but suffer from insufficient domestic reserves and production, leading to heavy reliance on overseas sources for raw materials. Copper and aluminum are widely used as base minerals, while lithium, cobalt, and nickel are essential for core industries like secondary battery cathode materials. Any disruption in the supply of these raw materials could impact China’s overall industrial sector. In response, China focuses on domestic resource development, securing overseas mines, and recycling to strengthen resource security and supply chain resilience.

Chapter 3 analyzes domestic mineral resource development and recycling strategies. In the area of domestic development, China strategically manages its mineral resources based on the Mineral Resources Law and the five-year National Mineral Resources Plan. In 2024, a comprehensive revision of the Mineral Resources Law was made to explicitly link resource security with national security, strengthening the legal foundation by introducing provisions for the stable acquisition of strategic minerals and supply chain stability. The National Mineral Resources Plan includes comprehensive strategies not only for domestic resource development but also for securing overseas resources, controlling protective minerals, and stockpiling. The plan (2016–2020) officially designated 24 strategic minerals. In particular, regarding domestic mineral resource exploration and development, various policies are in motion to promote exploration, innovate technologies, and foster mining industry clusters linked with related downstream industries. As of 2023, China’s investment in geological exploration and fixed assets in mining has increased for three consecutive years. Exploration investment has been focused on base minerals, but following policies to expand exploration of strategic minerals, new deposits of lithium, rare earths, and others have recently been discovered. Consequently, China’s global lithium reserves ranking rose from 6th to 2nd in the world. Additionally, China is expanding its influence in deep-sea resource development by securing exploration rights for gas hydrates in the South China Sea and polymetallic nodules in the international deep-sea CCZ (Clarion-Clipperton Zone) area.

In the area of resource circularity, China is actively promoting recycling policies to realize a circular economy and ensure the stable supply of critical minerals. The government plans to establish waste recycling systems (collection and sorting → pre-treatment → refining and recycling) in key sectors such as waste home appliances and spent batteries by 2025, and aims to standardize these systems by 2030. This nationwide system construction and standardization is led by the China Resources Recycling Group (CRRG). The CRRG provides comprehensive solutions by integrating functions such as acquiring and merging leading industry companies, waste collection, processing, distribution, and standard setting. As of April 2025, the CRRG has established nine subsidiaries focused on areas like spent battery recycling and non-ferrous metal recovery, integrating and standardizing the previously fragmented systems across these fields. In the recycling sector, spent electric vehicle batteries have emerged as a crucial means of securing key minerals such as lithium, nickel, and cobalt. Although China has not yet fully built institutional frameworks and standardized markets for spent battery recycling, it has adopted advanced policies faster than any other country and continuously optimizes its regulations through trial and error. Major companies like CATL have already established a closed-loop recycling system and are expanding their influence across the entire supply chain through cooperation with domestic and international automakers. Accordingly, by 2050, China is projected to maintain unparalleled dominance based on the world’s largest spent battery processing capacity, raw material supply, and technological capabilities.

Chapter 4 addresses China’s strategies for securing mineral resources overseas. The Chinese government identified the overseas acquisition of mineral resources as a key policy direction in the National Mineral Resources Plan (2016-2020). It pledged to mobilize various policy tools, including mining cooperation based on the Belt and Road Initiative (BRI), exploring joint investment models linking mining and infrastructure, establishing multilateral and bilateral cooperation platforms, supporting Chinese companies’ overseas mineral investments, and participating in global mining governance. Looking at global mineral (metal resource) investment trends since China officially launched the BRI in 2013, several points stand out. First, investment by private enterprises in metal resources has expanded significantly. Second, the primary investment regions have diversified from a previous focus on Australia to include Sub-Saharan Africa, South America, and East Asia. And third, while investments have continued to focus on base minerals, there has been a gradual increase in investments targeting critical metals such as lithium, nickel, cobalt, uranium, and niobium. Based on comprehensive support from the Chinese government, both state-owned and private enterprises have focused on securing base minerals (iron, copper, aluminum) and critical metals (lithium, nickel, cobalt, uranium, niobium) primarily in Sub-Saharan Africa, South America, and East Asia—key regions for China’s mineral supply. All the major minerals secured overseas by China belong to its group of disadvantaged minerals (i.e., those in which China is relatively weaker domestically). While every country secures its disadvantaged minerals through key supplying nations, China is particularly threatening because it invests aggressively enough to gain control over production within supplying countries. For example, in the Democratic Republic of Congo—where about 70% of the world’s cobalt ore production (with over 50% of global reserves) is concentrated—Chinese companies currently account for over 40% of cobalt ore production. Similarly, in Indonesia, which holds 42.3% of nickel ore reserves, 50% of mining production, and 42% of refining production, Chinese companies are estimated to control about 75% of nickel refining capacity. In other words, China has not only strengthened the raw material stages (ore mining and refining) of critical minerals such as cobalt and nickel—previously its weak links—but has substantially overcome these vulnerabilities. Examining the strategies behind these achievements, first, China has built multi-layered cooperation platforms (region-state, state-to-state) with key mineral-supplying countries in Sub-Saharan Africa, South America, and East Asia, creating long-term negotiation mechanisms with local governments and conducting regular consultations. Second, China established regional funds to provide large-scale financial support (indirect financing) for domestic state-owned and private companies investing locally. Third, it has developed mineral production and processing facilities within key countries to strengthen localization capabilities.

Chapter 5 analyzes China’s export control strategies. China established its legislative plan for the Export Control Law in 2016 and began its enforcement on December 1, 2020. Subsequently, in 2024, China enacted the Regulations on the Export Control of Dual-Use Items and announced the List of Export and Import Administration for Dual-Use Items and Technologies, thereby strengthening its export control legal framework. We evaluate this as indicating China has established a complete legal foundation before the inauguration of the new US administration (Trump’s second term). Since the enforcement of the Export Control Law, China designated key mineral resources as dual-use items to reinforce resource security and, from 2023 onward, has actively used export controls on advantageous mineral resources as a strategic response card. In retaliation to US semiconductor equipment export controls, China restricted exports of major minerals such as gallium and germanium. On December 3, 2024, China implemented export bans specifically targeting the US on dual-use minerals including gallium, germanium, and antimony for the first time. Between 2023 and 2024, China implemented export controls citing the need to protect national security and interests. Some minerals, such as graphite and antimony, were controlled to address internal supply issues and to adjust the list of temporarily controlled items. However, after the inauguration of Trump’s second term in 2025, China escalated the weaponization of mineral resources more explicitly, enacting export control measures immediately upon announcement and clearly signaling these as pressure tactics against the US. For example, the export controls on seven types of Chinese rare earths directly pressured the US defense industry, a move publicly emphasized by Chinese media. Minerals designated as dual-use export control items by China generally correspond to strategic minerals in which China holds a reserve and production advantage, and many have already been designated or are expected to be listed. Coming into 2025, we see a tendency to convert minerals previously on the export licensing management list (e.g., titanium, molybdenum) into dual-use controlled items, or to expand the range of controlled items among existing controlled minerals (e.g., tungsten, rare earths). Controls have also been strengthened on minerals included in the dual-use control lists of other countries, such as indium, molybdenum, and bismuth. Going forward, additional minerals such as vanadium, fluorite (rare earth elements not yet controlled), magnesium (with an expanded control list), beryllium, and aluminum are highly likely to be added to the control list. Regarding the export trends of minerals designated as dual-use export control items between 2023 and 2024, such as graphite and antimony, China has sharply reduced exports of basic raw materials (ore and concentrate) while increasing exports of refined metals and processed metals with higher added value. This strategy is evaluated as an effort to maximize national benefits by shrinking exports of raw materials—whose end users and purposes are difficult to track due to multiple processing stages—and expanding exports of higher value-added finished products.

Chapter 6 proposes the following response measures for the Korean government and companies based on the aforementioned analysis: Since Korea lacks deep-sea mining technology and experience, cooperation with technologically advanced countries such as the United States is necessary. Korea should also actively participate in establishing rational mining regulations that consider environmental protection to secure deep-sea resources. Korea needs to secure competitiveness in the battery recycling industry through a private-sector-led ecosystem construction complemented by institutional support from the government. Cooperation with Chinese companies in refining and smelting within major mineral supplying countries is essential. Regarding minerals such as fluorite and magnesium, which China is likely to attempt to control exports of in the future, the Korean government and companies need to proactively prepare by adjusting stockpiles and diversifying import sources. As China is expected to expand export controls not only on minerals themselves but also on refining and smelting technologies, it is urgent to promote cooperation with countries that have similar demands in refining and smelting sectors.

Empowering women and achieving gender equality are not just moral imperatives-they are global development goals. As one of the United Nations’ Sustainable Development Goals (SDG 5), the issue of gender equality has long been a key priority on ASEAN’s agenda. Since the 1988 Declaration on the Advancement of Women, and more recently through the 2022 Declaration on Promoting Women Entrepreneurship and the ASEAN Community Vision 2025, ASEAN has reaffirmed its commitment to women’s empowerment. Despite the growth in female labor force participation, women remain underrepresented in leadership roles in both business and politics across the region.

Interestingly, ASEAN has a relatively high share of female-led firms compared to other regions-but here is the paradox: their performance, measured in labor productivity, tends to fall below the overall average, and even more so compared to other regions. That raised a critical question: Can digital quotient, as a measure of firms’ familiarity with and engagement in digital technologies, help close this productivity gap?

This study offers both quantitative and qualitative evidence in response. In Chapter 2, we conduct descriptive and econometric analyses using World Bank data-including Gender Statistics; Women, Business and the Law; and the Enterprise Surveys-focused on Indonesia, Philippines, and Vietnam. The data reveal that male workers are generally more active and stable in economic participation. Male managers have greater access to digital and financial tools. Firms with digital engagement (i.e., having a website or using social media) report higher sales, while female-led firms show lower sales. Notably, female-led firms that are digitally active outperform their non-digital counterparts-offering a hint that digital quotient might be part of the solution. We go on to detail the empirical modeling using the World Bank Enterprise Survey to estimate labor productivity. A Cobb–Douglas production function is specified, with digital quotient and female leadership as key variables. OLS and quantile regressions show a significant negative association between female leadership and labor productivity, and a significant positive association between digital quotient and labor productivity. Importantly, the coefficient on digital quotient is large enough to offset the negative effect of female leadership in some contexts. However, the interaction term between digital quotient and female leadership is not statistically significant-suggesting that digital quotient may compensate for, but not amplify, labor productivity in female-led firms. Robustness checks using winsorized data, and propensity score matching confirm these results.

In Chapter 3, we turn to real-world voices-via expert consultations and interviews with business leaders-to understand how digital quotient affects female-led firms. Motivations for digitalization ranged from surviving the COVID-19 downturn to expanding sales and strengthening innovation. Many firms relied on support from governments, NGOs, and donor programs. Most leveraged social media and e-commerce platforms, reporting increased sales, wider product portfolios, and better customer engagement. However, digital quotient was also associated with certain challenges, including technical issues, cybersecurity risks, and even unintended shifts in business models.

Finally, this study offers policy implications tailored for ASEAN. Governments should promote digital literacy and quotient, support inclusive digital tools, and amplify success stories to inspire others. Regional efforts should aim to build localized digital quotient indicators and foster programs that reflect ASEAN’s unique entrepreneurial landscape.

As the competition for technological hegemony intensifies between the U.S. and China, major advanced countries around the world, including the U.S., are increasingly strengthening their strategies to protect and foster their technologies and industries in core science and technology fields. The governments of individual countries are expanding R&D investment, reorganizing legal and institutional foundations for technology protection and fostering, and aiming to strengthen national security and industrial ecosystems as well as securing technological competitiveness.

Major advanced economies, such as the U.S., the UK, and the EU, are formulating sophisticated policy frameworks aimed at promoting the growth of core science and technology fields. These frameworks involve easing unnecessary regulations while introducing new measures to safeguard critical technologies. Accordingly, it is essential to conduct a comparative analysis of these countries’ strategies for science and technology development, their approaches to fostering innovation ecosystems, and their industrial policy directions by examining the legal, institutional, and policy innovation strategies in major advanced countries.

Amid intensifying competition for technological hegemony between advanced countries, each country is focusing on securing technological independence and sustainability. The U.S. is intensively fostering high-tech industries such as semiconductors, AI, quantum technology, and biotechnology through its “America First” strategy, and is also restricting foreign investment and controlling technology transfer. The UK is strengthening its strategic choices to overcome the problem of low economic growth following Brexit and improve the UK’s global competitiveness in core technologies, while pursuing R&D investment and regulatory reform in fields such as AI and quantum technology. The EU is working to convert its technological innovation policy, which used to be centered on individual member states, into a more common strategy at the EU level, and is carrying out large-scale R&D investment and regulatory reform to secure the EU’s global competitiveness.

In addition, China has made science and technology independence its top priority in the face of U.S. countermeasures and is accelerating its own technology development in fields such as semiconductors, space-technology, biotechnology, and high-tech manufacturing. As such, major advanced countries are implementing strategic policies to strengthen their technological sovereignty and secure leadership in the global technology competition, underscoring the need for Korea to respond quickly and systematically. Korea also needs a strategic approach to respond to the intensifying global competition in technology, particularly by overcoming the limitations of existing systems and by innovating regulatory reforms tailored to the evolving technological landscape. There is a growing demand for the need to remove institutional barriers that hinder the development of science and technology and to establish a flexible regulatory framework that can accommodate new emerging technologies. In particular, as the perception that regulatory innovation is directly connected to national competitiveness spreads, now is the time for Korea to take active policy measures in response.

In the fields of science and technology, changes in the R&D, production, delivery, and transaction methods of new technologies are leading to conflicts with existing laws and systems, as well as the emergence of new regulatory issues. The phenomenon of “regulatory delay”—caused by the absence of appropriate laws or regulatory gaps—is becoming increasingly severe, posing obstacles to the commercialization of new technologies by companies and research institutions. To address this, major advanced countries are making continuous and focused efforts to promote regulatory innovation. Analyzing these strategies can help us better understand how regulatory innovation is being implemented in the fields of science and technology in major advanced countries.

By investigating and analyzing the implications, promotion strategies, detailed focus areas, and key characteristics of regulatory innovation strategies pursued by major advanced countries to achieve global technological leadership and foster innovative growth in related industries, this study aims to present effective response strategies for Korea to prepare the rapidly evolving future regulatory environment in the fields of science and technology, through a multifaceted analysis of regulatory innovation strategies by areas—that has not been fully addressed in existing research areas.

The first step in investigating and analyzing regulatory innovation strategies in the fields of science and technology in major advanced countries is to select three advanced countries to be studied. The U.S. was selected for its leadership in science, technology, and industrial ecosystems, as well as its global influence on national regulatory innovation strategies. The UK was chosen for its pioneering role in regulatory innovation strategies in the fields of science and technology, and the EU was selected for its role in driving innovative demand in new industrial sectors. These three entities were identified as the major advanced economies to be included in the study.

The next step is to select some fields to be investigated among the various fields of science and technology. In 2024, the Ministry of Science and ICT announced three major game changer technologies (AI-semiconductor, advanced bio, quantum), on the basis of which a total of four science and technology fields were selected: semiconductors, advanced biotechnology, AI, and quantum technology.

The final step is to categorize various areas—such as institutions, governance, standards and certification, ethics, international cooperation, subsidies and tax incentives, experimental testing and scientific-technological capabilities, hostile response policies and strategies, and public/private protection (safety and security)—into three major groups; ① system and governance, ② Fostering and advancing the science and technology ecosystem and ③ technology security. Based on this classification, the study systematically analyzes the regulatory innovation strategies of major advanced countries in the fields of semiconductors, advanced biotechnology, AI, and quantum technology the perspective of these three categories.

Subsequently, the findings of major studies that have investigated and analyzed regulatory innovation strategies in core science and technology fields - such as semiconductors, advanced biotechnology, AI, and quantum technology in the U.S., UK, and EU are summarized as follows.

In the field of semiconductor, the three major advanced economies are working to promote semiconductor production and innovation within their borders, execute export control regulations, and respond to a supply-crisis caused by semiconductor shortages in order to protect their respective technological advantages. Each country is promoting innovative policies that include subsidies, tax incentives, and R&D policy funds in its innovative regulatory framework. The UK is strengthening its strategic choices to maintain and expand its strategic advantage in this sector based on its strengths in semiconductor design and intellectual property, compound semiconductors, and the world’s best research and innovation systems, with a relatively smaller amount of support than the U.S. and EU. In Korea, the so-called “K Chips Act” (amended by the Restriction of Special Taxation Act) was passed at the National Assembly plenary session in February 2025 to strengthen tax incentives for investment, such as the expansion of semiconductor companies’ factories. In addition, special laws for strengthening the competitiveness of the semiconductor industry and innovative growth are being discussed by the relevant committees of the National Assembly.

In the field of advanced biotechnology, the U.S. has been continuously implementing innovation policies to improve the regulatory environment through the Coordinated Framework for the Regulation, the federal government’s basic guidelines for regulating biotechnology products. The UK is pushing for the government’s smart regulatory program to remove regulatory barriers and prepare for the future of regulatory frameworks by explaining regulatory issues related to engineering biology through RHC(Regulatory Horizons Council). In addition, the regulatory sandbox for engineering biology is being promoted through the EBRN. The EU is focusing on simplifying regulatory pathways through a series of measures to promote biotechnology and bio manufacturing in the EU, and is implementing measures to further promote the establishment of regulatory sandboxes to quickly launch them in the market. Korea has enacted and is currently implementing the Biotechnology Promotion Act, which aims to efficiently foster and develop biotechnology by establishing a solid research foundation and promoting the industrialization of biotechnological advancements. In January 2025, the National Bio Commission was launched, and the government unveiled the “Korea Bio Great Transformation National Strategy,” which aims to position Korea among the world’s top five biotechnology leaders by 2035 through sweeping transformations in infrastructure, R&D, and the bioindustry.

In the field of AI, although the US has long led the world in AI technology and scientific advancement, its AI regulatory framework only began to take full shape in 2024. That year, President Joe Biden issued a new executive order titled the “AI Executive Order on Safe AI.” This executive order establishes new standards for the safety and security of AI, protects privacy, promotes civil rights, fosters innovation, and introduces stronger regulations to prevent the misuse of AI.

The UK, through its National AI Strategy, has proposed short-, medium-, and long-term measures aimed at achieving three core priorities: investment in the AI ecosystem, ensuring that the benefits of AI are distributed across all sectors and regions, and establishing effective AI governance. Furthermore, to lead responsible innovation in artificial intelligence (AI) and maintain public trust in the technology, the UK became the first country in the world to publish an AI regulatory white paper titled A Pro-Innovation Approach to AI Regulation, which provides guidance on the use of AI. The UK government subsequently published a Government Response that compiled and addressed questions from various relevant institutions regarding the white paper, thereby presenting a foundational regulatory framework for AI. In addition, the UK is building its AI governance structure by establishing the world’s first government- supported AI Safety Institute and forming a Regulator Ecosystem composed of multiple regulatory bodies. The EU finally approved the “AI Act,” the world’s first comprehensive AI technology regulation, on May 21, 2024. The EU AI governance system has been established as a separate AI Board consisting of the EU Commission, its AI Office, and delegations from EU member states.

Recently, Korea became the second country in the world, following the European Union, to enact an “AI Basic Act,” which is scheduled to take effect in January 2026.

Korea’s AI Basic Act includes provisions for the establishment and implementation of a national AI master plan every three years, the formation of a national-level AI governance structure and support for the innovative development of the AI ecosystem through measures such as securing professional talent, designating AI industrial clusters, building AI testbeds, promoting AI data center policies, and facilitating international cooperation. The Act also addresses AI technology standardization, the establishment of ethical principles, the expansion of financial resources for AI industry promotion, and the prevention of AI-related risks, including administrative fines. It defines “high-impact AI” as a target for regulation and outlines obligations for transparency, safety assurance, and provider responsibility. However, generative AI is largely exempt from the major regulatory provisions.

The US has adopted a strategic and agile approach to AI governance by issuing sector-specific guidelines and recommendations, executive orders, and fostering collaboration with companies and research institutions. This allows for a rapid and flexible response to the fast-evolving AI landscape. Similarly, the UK is pursuing a pro-innovation and flexible regulatory approach, introducing measures to address the misuse of AI and establishing regulations tailored to specific AI use cases. In contrast, the European Union has implemented a risk-based regulatory framework that classifies AI systems into categories such as “unacceptable risk/high risk/limited risk/minimal risk.” It imposes explicit regulatory obligations on AI systems falling under the “unacceptable/high-risk” categories, and includes provisions for general-purpose AI models. Korea, for its part, defines “high-impact AI” and outlines obligations related to transparency, safety, and provider responsibility. However, generative AI remains largely outside the scope of major regulatory provisions.

In the field of quantum technology, the U.S. has developed a comprehensive and broad-based regulatory framework to maintain and develop global leadership. In particular, the U.S. seeks to enhance national security and economic competitiveness through a strategic regulatory framework for quantum research, development, and science and technology. The UK has outlined 13 Priority Actions under its National Quantum Strategy and established the Office for Quantum within the Department for Science, Innovation and Technology (DSIT), which regularly reports to the National Science and Technology Council chaired by the Prime Minister.

In February 2024, DSIT’s RHC released a report recommending a regulatory policy for nurturing the UK’s innovation-friendly quantum ecosystem. The report is based on four core principles—proportionality, adaptability, accountability, and balance—and was prompted by the growing need for proactive discussions on the timing, scope, and form of regulations to ensure stable investment and development in quantum technology. The RHC made 14 recommendations emphasizing the need to establish strong governance, including the development of a quantum technology regulatory framework and the need for a regulatory framework based on standards, guidelines, and responsible innovation practices. DSIT is working on ways to identify regulatory requirements in the future, such as conducting horizon scanning for future regulatory requirements and adjusting proportional regulatory initiatives.

The EU launched its Quantum Technology Flagship in 2018, following the issuance of its Quantum Manifesto in May 2016. This flagship initiative brings together research institutions, industry players, and public funding bodies to consolidate and expand Europe’s scientific leadership and excellence in quantum technologies.

In the Strategic Research and Industry Agenda (SRIA) 2030 roadmap, the EU emphasizes the need to develop independent capabilities in quantum technology development and production to secure global leadership, protect strategic interests, ensure autonomy, and strengthen security—while avoiding dependence on third countries. The EU aims to establish the world’s leading ecosystem that translates lab-scale research into mass production across various scientific and industrial applications. Moreover, the EU highlights the importance of leveraging the economic and societal potential of quantum technologies to strengthen its position as a global player in this transformative field, ultimately positioning Europe as the world’s “Quantum Valley.” Korea’s Quantum Technology Industry Act, along with the National Quantum Strategy and various quantum initiatives, represents a set of innovative policy measures aimed at establishing a research foundation for quantum’s science-technology and systematically fostering the quantum industry. These efforts reflect the pursuit of multi-faceted innovation strategies across the key domains identified in this study. However, concrete strategic initiatives focused on identifying regulatory challenges in the quantum science and technology sector and anticipating future regulatory environments remain limited.

As a strategic response to such regulatory innovation policies in advanced major countries, the following approaches can be considered.

First, it is necessary to establish governance that support innovation across the broader economy while providing recommendations on the prioritization of regulatory reform in alignment with the regulatory environment in the fields of science and technology. Next, it is essential to proactively establish systems and strategies for scanning anticipatively regulatory environments and requirements in the fields of science and technology, and to strengthen integrated regulatory approaches starting from the R&D stage. Next, it is important to establish robust regulatory frameworks for core fields of science and technology and to advance innovation strategies—such as large-scale financial support—in order to secure technological leadership and foster a resilient and competitive ecosystem.

Furthermore, there is an increasing need to enhance global cooperation strategies aimed at ensuring alignment and harmonization with international regulations, grounded in active participation in the development of global technical standards and regulatory frameworks. Additionally, enhancing regulatory sandbox systems in core fields of science and technology will be essential for promoting timely and flexible responses to technological innovation.

As a final consideration, the rapid advancement of technology is increasing the need to redesign anticipative regulatory innovation roadmaps in established fields, and the cycle of these rolling plans is expected to become shorter. It is also a time to initiate discussions on setting the cycle of these rolling plans, establishing clear procedures, and defining the legal basis for their implementation.

In December 2023, the Houthi rebels in Yemen launched attacks on commercial vessels in the Red Sea, escalating the Israel-Hamas conflict into a broader geopolitical risk encompassing the Red Sea region. This development disrupted the logistics supply chain between Asia and Europe, which had previously relied heavily on the Suez Canal. As maritime routes shifted from the Suez Canal to the Cape of Good Hope, countries worldwide, including South Korea, faced increased shipping and insurance costs. This situation posed the dual challenges of weakened export competitiveness and rising inflation.Simultaneously, the Red Sea crisis underscored the need for alternative land and maritime logistics networks to ensure supply chain stability. This led to heightened international interest in establishing new logistics hubs. Notably, discussions surrounding the Indo-Middle East-Europe Economic Corridor (IMEC), announced at the 2023 G20 Summit, and the Development Road project, actively promoted by Turkiye and Iraq, gained traction following the Red Sea crisis. For South Korea, an export-driven economy, the continued geopolitical uncertainty around the Red Sea presents significant threats. Rising logistics costs and decreased reliability in maritime shipping could undermine export competitiveness. Consequently, there is an urgent need to explore alternatives beyond the Cape of Good Hope, including expanding overland logistics via China’s transcontinental high-speed rail.

This study aims to address two key questions: (1) What impact has the Red Sea crisis had on South Korea’s logistics network and trade? (2) What implications do the economic corridors, actively pursued by Western countries, India, the Middle East, and Turkiye, hold for South Korea in terms of supply chain connectivity and logistics hub development?

Chapter 2 focuses on the background of the Red Sea crisis and its impact on maritime logistics. The crisis began after the Houthi rebels declared solidarity with Hamas, launching attacks on key commercial vessels using a range of weapons. In response, major shipping companies diverted routes from the Suez Canal to the Cape of Good Hope, leading to increased transit times and costs. This shift has expected to contribute to global inflationary pressures. The crisis significantly reduced vessel traffic and cargo volumes through the Suez Canal and Bab-el-Mandeb Strait. Notably, shipping companies continue to prefer the Cape of Good Hope route, raising concerns that maritime trade through these chokepoints may not recover in the mid-to-long term. Major global ports also experienced temporary declines in vessel traffic and cargo volumes, with reductions lasting up to six months compared to the same period in the previous year. Focusing on South Korea’s external trade, the volume of trade with Europe declined from January to September 2024 compared to the previous year. In contrast, trade volumes with the U.S. remained relatively stable, indicating that the Red Sea crisis negatively impacted Korea-Europe trade beyond mere logistical delays. Key export items, including automobiles, electronics, chemicals, steel, and mineral fuels, all showed declines in the European market. Conversely, exports to North America and Asia increased, suggesting that South Korean companies may have diversified their export markets, considering the U.S., Oceania, and Asia as alternative destinations. While overall exports to the Middle East decreased, imports of mineral fuels, such as petroleum, rose, leading to an increase in trade volume. Considering the impact of the crisis on ports beyond Jeddah, such as Jebel Ali and Salalah near the Strait of Hormuz, the decline in exports to the Middle East appears to result more from changes in maritime logistics networks than from risk- averse corporate behavior.

Chapter 3 explores South Korea’s potential for logistics diversification, focusing on the Development Road and IMEC as alternative routes. Both corridors aim to reduce dependency on the Suez Canal. The Development Road project focuses on connecting Al-Faw Port in southern Iraq to Europe via Turkiye through highways and railways, driven primarily by the geopolitical interests of Iraq and Turkiye. In contrast, IMEC consists of an eastern corridor linking India with Gulf countries and a northern corridor connecting the Gulf with Europe. IMEC reflects broader global objectives, including countering China, maintaining the Arab-Israeli detente momentum, and facilitating the energy transition. A SWOT analysis of both corridors reveals that weaknesses and threats outweigh strengths and opportunities, suggesting low feasibility in the short term. External factors, such as interference from China, Iran, and ISIS, pose significant risks to both projects. Despite limited immediate incentives for South Korean participation, it is advisable for the government and businesses to actively consider engagement in these corridors. Diversifying logistics routes is crucial for managing geopolitical risks, especially given the potential for escalating instability in the Middle East. Furthermore, with the inauguration of a second Trump administration in the U.S., there may be increased pressure for South Korea to expand into new markets such as India and the Middle East. Participating in emerging economic corridors in the Middle East could also deepen Korea-Middle East economic relations by extending cooperation into manufacturing and logistics sectors.

Chapter 4 summarizes the research findings and proposes short- and long-term policy recommendations to enhance the resilience of South Korea’s maritime logistics industry. In the short term, the government should: (1) Develop public-private partnerships (PPP) and investment-driven projects for port construction and operations, and (2) Establish logistics cost support funds for small and medium-sized shippers to build new logistics networks and manage crises effectively. In the long term, participation strategies should differ based on each corridor’s characteristics. For IMEC, cooperation should focus on PPP models based on existing intergovernmental MOUs. In contrast, South Korea should pursue multinational consortiums and Official Development Assistance (ODA) initiatives for the Development Road project.

This study analyzed the impact of the Red Sea crisis on the global economy, South Korea’s maritime logistics, and trade from December 2023 to October 2024. The analysis primarily covered broad categories of goods and regions, lacking detailed assessments. Additionally, as the Development Road and IMEC are still in preliminary stages, their specific impacts on global and domestic logistics systems remain unassessed. Future in-depth studies are needed to address these limitations.

This study analyzes the impact of the 2015 Nepal earthquake on economic growth and evaluates the effectiveness of humanitarian aid in mitigating the damage caused by the disaster. In the aftermath of natural disasters, emergency relief funds are quickly allocated to support victims, particularly in developing countries that face challenges in responding to such crises. These funds help with immediate survival and recovery efforts while also contributing to societal stability and long-term reconstruction. As the frequency of environmental disasters increases due to climate change, the demand for humanitarian aid has grown significantly.

The economic impact of natural disasters varies depending on the affected country’s capacity and the scale of financial assistance it receives. Developing nations, with limited disaster response capabilities compared to developed countries, tend to experience more severe consequences. Emergency relief funds are designed to address this disparity, and their effect on economic growth can vary based on the scale of the funding provided. This study investigates the effects of the 2015 Nepal earthquake and assesses the role of emergency relief funds in mitigating the damage.

Chapter 2 of this study examines the concept and definition of emergency relief funds, provides examples of their application, and outlines their operational mechanisms. Emergency relief funds are established to provide rapid humanitarian assistance during emergencies such as natural disasters, wars, and accidents. These funds, sourced from contributions by international organizations, governments, and NGOs, are used for the provision of emergency supplies, recovery efforts, and medical assistance, ensuring the protection of lives and safety. One key example is the UN Office for the Coordination of Humanitarian Affairs (OCHA), which manages the Central Emergency Response Fund (CERF). This fund mobilizes resources during crises and issues Flash Appeals to the international community. Allocation plans are determined through discussions within the UN OCHA’s cluster system, where sector-specific agencies collaborate, exchange information, and make decisions.

Chapter 3 explores the economic impact of the 2015 Nepal earthquake, investigates potential resource allocation distortions, and analyzes the role of emergency relief funds. The study begins by identifying the earthquake’s impact on economic growth. According to the literature on natural disasters and economic growth, four hypotheses exist: the “trend recovery hypothesis,” where the economy temporarily declines but eventually returns to its original trajectory; the “irreversible loss hypothesis,” where the economy fails to recover; the “sustainable recovery beyond the trend hypothesis,” where the economy grows beyond its original trajectory due to disaster-induced reforms; and the “creative destruction hypothesis,” where the destruction of outdated capital leads to increased productivity. The findings of this study align with the “irreversible loss hypothesis,” as the affected regions in Nepal failed to return to their original economic trajectory, showing a relative decline compared to unaffected regions.

The economic impact of the earthquake was more severe in areas with a lower proportion of upper-caste populations compared to regions with higher proportions. Possible explanations for this discrepancy include imbalances in resource allocation or differences in disaster recovery capabilities. Upper-caste populations are more likely to have connections with groups responsible for resource distribution. However, this study finds no significant differences in the amount of emergency relief funds allocated between regions with higher and lower upper-caste populations. This suggests that the internal processes of UN OCHA, which assess sector-specific funding needs and priorities, minimize the potential for caste-based bias in resource distribution.

The disparity in disaster recovery capabilities could account for the differences in economic impact. In Nepal, caste-based differences in income levels, asset ownership, and access to information contribute to varying recovery capacities. The study further examines the effects of emergency relief funds, revealing that in regions with lower upper-caste populations, emergency relief funds positively affected economic growth, unlike in areas with higher upper-caste populations. This is attributed to diminishing returns on resources in regions with relatively lower human and physical capital. By focusing support on regions with lower upper-caste populations, more efficient and equitable outcomes can be achieved.

Cybersecurity can be defined as a state where national and citizen safety is guaranteed by defending against cyber attacks or threats, thereby ensuring proper functioning of cyberspace. Cyberspace is composed of ‘information systems’ and the ‘information’ stored within them.

International discussions on cybersecurity norms have continued, showing a standoff between Western liberal democratic countries led by the United States versus Russia and China. The United States and other Western nations recognize cyberspace as a separate domain and argue that international law can be directly applied to it. Non-Western countries like Russia and China contend that cyberspace is not a separate domain, and that domestic laws of the location of systems or information should apply.

The United States adopted an active defense strategy and strengthened collaboration with the private sector, considering that a significant portion of infrastructure is owned or operated privately. The EU implemented various voluntary certification systems and mandated labeling. Japan’s active cyber defense strategy is similar to the United States’, and it established a voluntary conformity assessment system for IoT products. South Korea also adopted an offensive cyber defense strategy in 2024. However, unlike major countries, we do not have a unified cybersecurity law.

The potential application of international trade law to cybersecurity measures is as follows. Even when arguing that cybersecurity measures do not apply to like products, such actions will likely be found by the panel as violations of WTO agreements. All WTO precedents addressing national security exceptions relate to wartime or emergency situations in international relations. There is a view that for measures during peacetime to be recognized under national security exceptions, there must be subjective evidence of understanding the purpose at the time of the measure and evidence of indirect supply to military facilities. Panels can assess whether parties have made good faith judgments about measures necessary to protect their essential security interests. A similar conclusion was reached in the international investment arbitration case of Seda v. Colombia.

Implications for South Korea’s cybersecurity policy are as follows. First, self-defense cannot be exercised for cyber misuse or cyber attacks that do not reach the level of armed cyber attacks. Second, offensive defense strategies must be pursued cautiously. While there is a view that preemptive self-defense targeting imminent armed attacks is permitted under international customary law, there are controversies regarding specific criteria for determining imminence. Third, the legal principle of state responsibility for domain management or due diligence in cyberspace can be usefully applied in responding to cyber threats from North South Korea. Fourth, there is a need to establish a unified cybersecurity law.

Implications for South Korea’s trade policy are as follows. First, South Korea Government must continuously observe cybersecurity measures introduced by major countries to minimize negative impacts on our export companies. Second, the government should support our companies to gain a competitive advantage regarding cybersecurity labels and certifications when competing with third countries in markets like the United States or EU. Third, when implementing cybersecurity measures, precise institutional design and operation are necessary to avoid conflicting with trade norms. Fourth, even when a country claims national security exceptions in trade agreements, review will be conducted in accordance with the principle of good faith.

This study aimed to comprehensively analyze China’s advanced semiconductor innovation capabilities, focusing on policy support systems, High Bandwidth Memory (HBM), and third-generation semiconductors, and suggest response strategies for South Korea.

The analysis revealed the following characteristics of China’s advanced semiconductor innovation. First, China’s research in high-bandwidth memory has shown rapid growth since 2015, with strong research groups centered around Huazhong University of Science and Technology and Tsinghua University. Research topics have expanded from application technologies like GPU computing and system performance optimization to fundamental technologies such as hardware acceleration and architecture design.

Second, China’s HBM research has been developing through systematic research networks. Co-author network analysis revealed close collaboration systems between major universities, companies, and research institutes. Notably, Chinese researchers affiliated with overseas institutions, particularly in the United States, are actively conducting joint research with domestic researchers, transferring global-level research capabilities.

Third, in terms of future fundamental technology research, systematic support is being provided through the National Natural Science Foundation. Between 2019-2022, 474 semiconductor-related projects were supported, with general projects and young scientist fund projects accounting for about 45%, indicating a focus on nurturing next-generation research personnel. Additionally, according to the State-owned Assets Supervision and Administration Commission’s analysis of state-owned enterprise performance, among 49 advanced semiconductor-related products, core electronic components were the most numerous with 18 items, and 14 products were evaluated to have reached international leading levels.

Fourth, in the third-generation semiconductor field, systematic technology independence is being pursued through the National Semiconductor Technology Innovation Center and China Advanced Semiconductor Industry Innovation Strategic Alliance (CASA). Through the ‘1+N+X’ open joint construction and collaborative innovation operating model, they are promoting organic linkages between basic research, applied research, and industrialization, while focusing support on the localization of core materials such as SiC and GaN and linkages with demand industries like electric vehicles and renewable energy.

In response to these Chinese innovation trends, Korea needs the following strategies. First, to maintain its current competitive advantage in the HBM field, there needs to be a shift from manufacturing-centric to design-manufacturing integrated innovation. As shown in the research network analysis, while Korea is concentrated on hardware manufacturing technology, China shows a comprehensive approach at the system level, making it urgent to secure comprehensive technological capabilities through strengthening design capabilities. Second, diversification of global research networks is necessary. Co-author network analysis showed that while Korea actively researches with traditional partners like the US and Japan, collaboration with emerging research entities like India and Singapore is limited. New innovation opportunities need to be created through diversifying research collaboration partners.

Third, in the third-generation semiconductor field, a comprehensive strategy encompassing fundamental technology development, applied technology acquisition, and market expansion is needed. Particularly, as China provides many incentives for the spread of products based on domestic technology in addition to technical support, Korea also needs to introduce policies supporting market demand creation and technology diffusion along with technology advancement.

Finally, to enhance the effectiveness of these strategies, systematic government support including industry development stage-specific support policies, strategic R&D investment considering technological characteristics and timeliness, and talent development is necessary. In particular, policy focus should be placed on building an innovation ecosystem connecting basic research to commercialization and strengthening global cooperation networks.

Executive Summary

I. Introduction: Motivation

II. Possible Reasons for Falling Birth Rates

III. Data and Methodology

IV. Per Capita GDP and Fertility

V. Labor Market Considerations

VI. Did APEC Contribute to Falling Fertility?

VII. Policy Implications and Conclusion

References

Appendix

In the last ten years, fertility rates for advanced and developing economies have been falling faster than expected. Korea has been leading the decline, but almost all advanced and developing economies have experienced accelerated decline in birth rates. Some researchers now expect the world to start experiencing falling global population as quickly as in 2030s.

Even more surprising is that fertility rates for APEC economies have been falling even faster. APEC economies with the highest fertility rates are only slightly above the replacement rate of 2.1; with most economies, even developing members, in the 1% range. This paper is intended to be an exploratory dip into looking at correlations between birth rates and various economic data. We try to examine some of the popular reasons behind the falling birth rates, to see whether they have validity based on data, and see whether APEC economies are special in the sense that the birth rates are falling faster for APEC economies. The paper looks at economic data using panel data regressions to see why birth rates are falling overall, and why they are falling faster for APEC economies. We will concentrate more on trying to find correlations between variables in the data than coming up with theoretical reasons, which will require a much richer data set.

In Section II, the paper lists some of the popular reasons often cited for declining birth rates; Section III is a short general discussion on the data used. Sections IV and V examines whether the data backs some of these popular reasons for the decline. Section IV looks at the relationship between some basic economic growth variables and fertility rates, and serves as a base for further analysis. Section V looks at the relationship between employment data and fertility rates, Given the faster fertility decline for APEC economies, Section VI looks at whether the formation of APEC had a role in the faster decline of fertility rates. Appendix A looks at the relationship between gender education disparities and fertility rates, and Appendix B is a short exploration on whether there is a case to be made that gender disparities in housework is a factor in lower fertility rates.

In this paper, we used panel data of more than 180 economies to examine some factors affecting fertility rates. The factors examined included economic growth factors such as per capita GDP and GDP growth rates; gender based labor and employment factors such as male and female labor participation rate, and the ratio of male and female workers working in various industries. We also considered how some gender based disparities in education, and time spent doing housework for men and women affected fertility rates, though the results are less definite for these cases due to irregular nature of data available. We ran regressions on the global data set, and then for some regressions, only on data for APEC member economies.

Where we used global panel data, we re-confirmed some results that researchers had found before – namely, the higher the per-capita GDP, the lower the fertility rate; the higher the growth rate, the lower the fertility rate. So more income is not always the answer for fostering fertility rates. However, we did find that current growth variables predicted fertility rates better than past growth rate variables, showing perhaps that the trend of falling fertility rates is a more powerful force than a good economic environment fostering more births. These regressions also showed that APEC economies are qualitatively similar to the global group, but with a faster decline. Given similar situations, APEC economies experience a lower fertility rate than global group as a whole.

Using the economic growth variables as controls, we added labor market data to the regressions, and we found that, for the global group, increases in male and female labor participation increased fertility rates. However, perhaps somewhat against expectations, the effect of male labor participation rate had greater effect than female labor participation. Again, given similar situations APEC economies had lower fertility rates. When we used only APEC economy data, female labor force participation had no significant effect on fertility rates. Only the male labor force participation mattered, and higher the male participation rate, higher the fertility rate.

Then we used the shares of male and female labor force on agriculture, industry (manufacturing) and service industries. For the global data set regressions, as expected, a rise of the share working in agriculture would raise the fertility rate, and a rise of the share working in industry would lower fertility rate, as expected. Service industry participation came in between – the effect on fertility rate higher than industry and likely a positive effect, but lower than the effect from agricultural industry participation. The results were same for males and females.

However, when we used only APEC economy data, the qualitative results were significantly different. Male labor force industry share behaved the same as the global group, but for females, share of workers in services had a higher positive effect on fertility rate than agriculture. Industry, as expected had the lowest and negative effect. The effect of female workers participation in different industries on fertility rates seems to be significantly different for APEC economies compared to global group as a whole. Which may be the reason why APEC economy fertility rates fell faster than the global group, but it may also imply that if APEC economies give more flexibility to female workers in service industries, fertility rates may pick up. Further and deeper studies should be taken to see whether the pattern of female employment in APEC economies differ significantly compared to other economies, especially the possible differences between developing APEC economies and other developing economies.

Analysis looking at gender disparities in education for primary and secondary education showed that it is the disparities in secondary education which may be the key to differences in fertility rates, but the results should be taken carefully, since the data for gender disparity in education was available irregularly, so an unbalanced panel data was used, and gender disparities for primary and secondary education seems to be highly correlated. Also, the time disparity between men and women doing housework was also examined, but there were no results that led us to believe that the disparity in doing housework affected fertility rates, contrary to many popular media reports in Korea and elsewhere. But again, data was only available irregularly, so an unbalanced panel data was used, so results may not be as credible as regressions using labor force variables. For these regressions, a separate APEC economy regressions were not attempted due to paucity of data.

These regression results show that declining fertility rate is a strong trend based on rising wealth and growth rates; but the trend may be partially reversed if appropriate labor market adjustments can occur. For APEC economies, encouraging women to go into the services sector which perhaps offer an urban living coupled with flexible labor time schedule may partially offset the declining fertility rates.

Drawing some policy implications from the analyses, while Korea and other APEC economies may be able to keep fertility rates from falling “too low,” it will not be able to raise the rates to the replacement rate of 2.1. Thus, when designing welfare policies, the policymakers must keep the declining population and demographic implications in mind. Over-promising benefits for post-retirement public pension will become a critical problem, and governments should encourage private measures to the public to get them ready for post-retirement.

Second, for would-be mothers, encouraging employment in the service sector may alleviate some of the rapid decline in the fertility rates. Encouraging employment in the services sector, making services job for women available in small and large cities may do better in raising fertility for APEC economies. Women who work for the public sector tend to have more children, in part due to more flexible schedules and consideration for pregnant mothers.

Also, for fertility rates, male employment seems to be as important or perhaps more important than female employment. So, while more flexible time scheduling may be warranted for the would-be mother, any income implications should be approached from the point of view of the entire household.

While the Korean media often cites complaints that men do not do enough housework, as a contributor to low fertility, using global data, this study did not find any particular evidence for that explanation. While the complaint may be valid for Korea, there seems to be little reason to believe that it is a major reason globally, but because of data deficiency, the results may not be clear cut.

Of course, more research is needed. During the modernization and development process, the economic position of husband and wife in the family seems to change from being complementary to more of substitutes – where in the olden days, women specialized in housework aspect of the household and men specialized in wage earning or outside work, now men and women have similar work characteristics, and the global group regressions in this study did not consider such changes in characteristics about husband and wives; but the results that we have derived may be showing the effects of such changes.

Critical minerals are essential for advanced industries like semiconductors, electric vehicles, and batteries, as well as for clean energy infrastructure. Major countries are actively pursuing trade agreements to ensure stable supplies of these minerals. This study analyzes key countries’ trade agreements related to critical minerals and derives insights for Korea’s policies and trade negotiations. The study narrows its focus to binding trade agreements between countries.

Traditionally, mineral and energy regulations in trade agreements were declarative, but recent agreements by the U.S., EU, and Japan have introduced specific obligations and linked these to environmental and labor standards. The EU includes energy and raw materials (ERM) chapters in its trade agreements, while the U.S. tends to establish stand-alone agreements on critical minerals. The EU’s proactive engagement with resource-rich countries aims to reduce price volatility and promote fair trade, while U.S. agreements, such as with Japan, are primarily driven by the Inflation Reduction Act (IRA) electric vehicle subsidies and focus on establishing supply chains with allied nations. The U.S.-Japan Critical Minerals Agreement, for example, emphasizes the management of environmental and social risks within supply chains through well-defined environmental and labor provisions.

Based on these international trends, this study proposes the inclusion of a Raw Materials Chapter in Korea’s future Free Trade Agreements (FTAs), bench-marking the critical minerals agreements of the EU and the U.S. Specifically, this proposal aligns with the “Critical Minerals Security Strategy” announced by the Korean government in 2023, which advocates for expanded bilateral and multilateral cooperation and enhanced collaboration on critical mineral supply chains in FTA negotiations. When pursuing critical minerals agreements, Korea must carefully consider various elements such as the selection of partner countries, contents and types of agreement to pursue, and the order in which to conduct negotiations, as these factors are intricately interconnected and can influence the outcomes of other aspects.

In negotiating critical minerals agreements, several key provisions should be considered, including the definition of minerals, trade facilitation, exploration and production permits, environmental protection, labor rights, and cooperation clauses. For example, trade facilitation provisions might include prohibitions on export quotas, export tariffs, and price caps to mitigate financial risks and price volatility for companies.

The environmental and labor provisions evident in the EU-Chile FTA and the U.S.-Japan Critical Minerals Agreement are essential to aligning with the global trend of enhancing supply chain ESG standards and emphasizing responsible sourcing. It is necessary that Korea incorporates these provisions into its agreements, thereby ensuring mineral procurement is conducted in accordance with international standards. However, the adherence to international environmental and labor standards and the associated monitoring may impose additional costs on companies. Thus, a balanced approach is necessary, in hand with dialogue and coordination between the government and businesses to achieve consensus before negotiations.

Executive Summary
I. Introduction
II. Theory and Hypotheses
III. Data and Methodology
IV. Empirical Results
V. Policy Implications
References

While prior research has highlighted digitalization as a potential avenue for enhancing domestic revenue mobilization—a crucial component for the long-term economic and political development of economies—the relationship between digitalization and domestic revenue mobilization remains underexplored. This working paper contributes to the existing literature by examining how the interplay between digitalization and the government’s capacity to tax is influenced by governance quality, an aspect largely overlooked in previous studies. Empirical findings based on a time-series cross-sectional dataset including up to 159 economies from 2004 to 2021 show that a higher level of digitalization alone does not necessarily translate into a higher non-resource tax revenue-to-GDP ratio. However, when digitalization is coupled with sound governance—specifically in terms of voice and accountability or regulatory quality—it significantly boosts domestic revenue mobilization. The study also finds that the interaction effects between digitalization and these governance variables vary according to the levels of digitalization and development across economies. The findings and case studies presented in this paper underscore the importance of strengthening institutional frameworks alongside digitalization efforts to ensure enduring success in mobilizing domestic revenue, offering valuable insights especially for developing APEC economies where the potential for improvement is most pronounced.