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.

Executive Summary

I. Introduction

II. Background and Methodology
2.1. Historical Context and Evolution of APEC Ministerial Meetings
2.2. Data Sources and Analytical Methods

III. Changes in Sectoral Composition
3.1. Sectoral Ministerial Meeting Frequency and Trends
3.2. Evolution and Trends in High-level Meetings
3.3. Analysis of Meeting Outcomes and Depth

IV. Thematic Changes in Major Ministerial Meetings
4.1. Evolution of Themes in Annual Ministerial Meetings
4.2. Thematic Shifts in Major Sectoral Meetings
4.3. Changes in Thematic Consistency Over Time
4.4. Interrelationships and Thematic Integration Across Meetings

V. Conclusions

References

Appendix 1. List of Venues for APEC Annual Ministerial Meetings
2. Sector Abbreviations and Full Names
3. Top-terms in Joint Statements by Major Ministerial Meetings
4. Dendrogram of Document Similarity (1994~2023)

This study provides a comprehensive analysis of the thematic evolution within the Asia-Pacific Economic Cooperation (APEC) ministerial meetings from its inception in 1989 to the present, examining over 460 meeting documents. The research employs both quantitative and qualitative methods, including text mining techniques, to uncover primary themes and shifts in policy focus over time. The study is organized into three main areas: first, it investigates the distribution and evolution of agendas across different levels and sectors of APEC meetings. Second, it tracks thematic changes within sector-specific meetings, with a particular emphasis on trade, finance, and small and medium enterprises (SMEs). Third, it explores the interconnections among these meetings to reveal the dynamic relationships within APEC’s framework. The findings indicate a significant increase in the number and diversity of APEC meetings, reflecting an expanded agenda addressing more complex and emerging issues such as the digital economy, sustainable development, and inclusive growth. The study also identifies a shift from foundational economic arrangements to more diversified topics, demonstrating APEC’s adaptability to contemporary global challenges. Additionally, the research highlights the evolving hierarchical structure among meetings, with a growing focus on digital economy and sustainability. This work offers valuable insights for policymakers, scholars, and stakeholders involved in regional economic integration and cooperation, showcasing APEC’s role in addressing both traditional and emerging economic challenges in the Asia-Pacific region.

To achieve carbon neutrality and increase energy security, the international community is accelerating the energy transition to reduce fossil fuels and increase renewable energy. Solar power, in particular, has emerged as a fast-growing renewable energy source, as its generation costs have fallen to the level of fossil fuels and it is relatively easy to install. Demand is growing rapidly and is expected to exceed the cumulative installed capacity of coal by 2027. In addition, demand for energy storage systems (ESS) is growing in line with the expansion of renewable energy generation. Since the production of electricity from solar and wind power fluctuates depending on the amount of sunlight available and wind speeds, it is necessary to build an ESS to store the generated electricity and release it when it is needed. Among ESS, the demand for battery energy storage systems (BESS) based on lithium-ion batteries (LiB) is growing rapidly, as it is less constrained by location and can be easily dismantled and moved compared to pumped storage hydroelectricity, in which power is generated by utilizing altitude differences in locations such as reservoirs.

The problem is that China accounts for 74.7-96.8% of capacity at each stage of the global solar supply chain, and about 70% of capacity in the upstream and midstream of the LiB-based BESS supply chain.  

South Korea has technological competitiveness in LiB used for solar power generation and BESS. However, the domestic solar industry remains overly dependent on imports of solar products from the People’s Republic of China and struggles to compete with price-competitive Chinese products. In addition, Korea lost its leading position in the global market share of LiB for BESS to China in 2021.

This article analyzes how the US and Europe, the main markets for solar and LiB-based BESS, are responding to China’s dominance in the supply chain. We examine the Chinese government’s policies and company strategies behind the monopolization of each industry, and consider a comprehensive response that governments and companies can adopt.

Chapter 2 analyzes the US and European responses to China’s dominance in the solar industry, including import restrictions and policies to strengthen domestic supply chains, and identifies Chinese government policies to promote the solar industry and Chinese company strategies.

First, the United States began imposing high anti-dumping and countervailing duties on Chinese solar products in 2012, significantly reducing its dependence on imports from the People’s Republic of China. However, Chinese companies set up production facilities in Southeast Asia to redirect their exports, increasing US reliance on imports of solar products from Southeast Asia to 70-90% in 2022. In response, the US government launched an investigation into circumvention exports via Southeast Asia and identified five Chinese companies in violation, but these only amounted to a portion of the major cell and module companies in China. While the US has ostensibly reduced its reliance on imports of solar products from the People’s Republic of China, it continues to make decisions that leave room for Chinese products. The US is also pursuing a policy of building its domestic solar supply chain by offering an IRA-based investment tax credit (ITC, AEPC) and per-unit production credits (AMPC) for each stage of supply. The US solar supply chain currently lacks wafer or cell production capacity, and module production capacity is insufficient to meet Biden’s carbon neutrality target. The US is therefore trying to attract competitive companies to internalize the supply chain and expand production capacity. The US’ strategy can be summarized as: the establishment of a complete supply chain for crystalline silicon solar wafers domestically, led by South Korea’s Hanwha Solution, which is currently building the largest solar farm in North America; and the ramping up of thin-film solar cell production, led by First Solar. Through this, the US will likely succeed in internalizing the solar supply chain as it intends, however it will be difficult to wholly exclude China from the supply chain.

Europe has also imposed anti-dumping and countervailing duties on Chinese solar products since 2013, but unlike the US, it discontinued the tariffs in 2018. Since then, Europe’s dependence on imports of solar modules from the People’s Republic of China has risen to more than 80 per cent in 2021. Instead of reducing its dependence on the PRC for solar products, Europe seems to be focusing more on securing renewable energy, mainly solar, by importing large quantities of cheap Chinese products. The EU Commission’s declaration in 2019 to reach carbon neutrality by 2050, coupled with Russia’s reduction of fossil energy supplies to Europe in the wake of the Russia-Ukraine war in 2022, has put Europe in a position where it needs to secure more renewable energy faster. In response, the EU Commission published the Carbon Neutral Industry Act, identifying solar power generation as one of eight carbon-neutral strategic technologies and setting a target of producing 40 per cent of the EU’s needs locally by 2030, based on the promotion of strategic projects. The EU also announced that it would extend subsidies through the Temporary Crisis and Transition Framework (TCTF) to attract private capital investment in the sector, which requires significant funding. However, the European solar industry is already struggling in the face of low-cost Chinese products and cannot afford to increase investment.

Since the early 2000s, China has provided active support to promote exports in the solar industry, support for domestic and overseas stock market listings, and investment subsidies to localize the production of equipment and technology. However, as major markets such as the US and Europe began to impose import restrictions, China began to develop its domestic market based on the Gold Sun pilot program (50 per cent of total investment in solar PV projects subsidized) and feed-in tariff (FIT) policies. Since 2017, when the industry entered into a mature stage, subsidies have been gradually reduced and the approach to strengthening R&D capacity has shifted from unconditional subsidies to selective incentives for companies with technological prowess. As a result, China’s solar industry has been reorganized around leading players, with companies lacking core competitiveness being eliminated. In August 2021, the Chinese government abolished the FIT scheme for the solar industry, entering the phase of marketization from subsidy-led growth. In addition, the policy direction for the solar industry through 2025 is expected to focus on expanding solar power application areas such as BIPV, developing next-generation solar technologies around perovskite, and protecting indigenous technologies (e.g. adding wafer technologies to the list of prohibited and restricted technologies).

The Chinese solar industry is currently oversupplied and internal competition is fierce. Chinese companies have already gained in-house production capacity and technology, and are now strengthening their competitiveness by securing unique flagship technologies and setting industry standards that other companies cannot match. In addition, Chinese solar companies are responding to US import restrictions by expanding production bases in Southeast Asia to redirect exports, and to the US IRA by building solar production facilities in the US.

Chapter 3 analyzes the Chinese-led LiB-based BESS industry, the US and European responses described in Chapter 2, and Chinese government policies and corporate strategies.

Although the US has imposed a 7.5 per cent tariff on Chinese LiBs under Section 301 from 2019, in addition to the existing 3.5 per cent tariff, the share of US imports of LiBs from the PRC has continued to grow, reaching a 10-year high of 70 per cent in 2022. This is because, with the exception of the key mineral mining and refining stages of the US LiB-based BESS supply chain, the four core materials and cell stages already have formed domestic supply chains, but production capacity is far from sufficient to meet demand. In addition, refined products (such as lithium compounds) and cathode materials (graphite) for core materials are dominated by China. Therefore, the US seems to have adopted a realistic strategy of strengthening domestic production capacity at each stage of the supply chain, based on the IRA, and not imposing discriminatory rules on LiB for BESS. The IRA provides an investment tax credit (ITC) for BESS investment costs and a manufacturing tax credit (AMPC) for LiB cells and modules, core materials and minerals. This is a win-win situation as LiBs for BESS are almost entirely produced by Chinese and Korean companies, but the AMPC incentives will favor Chinese companies as they already have a competitive price and technology advantage over Chinese-made lithium-ion batteries (LFPs).

Europe’s LiB-based BESS supply chain is also facing a supply shortage in the region relative to demand at the upstream and midstream levels. Unlike the US, Europe has not adopted regulatory measures such as anti-subsidies for LiB in China. As a result, the share of LiB imports from China has increased proportionally, reaching 45 per cent in 2022, in line with the growing demand in the European market. The low price and volume of Chinese LiB in Europe is under increasing pressure. Along with solar, the EU Commission has included battery and storage technology as one of the eight strategic technologies in its Carbon Neutral Industry Act and aims to produce at least 40% of the annual demand for battery and storage devices in the region by 2030. It also announced the Critical Raw Materials Act (CRMA), under which China aims to achieve 10% local mining, 40% local refining (processing and treatment) and 25% local production of recycled raw materials in terms of annual consumption by 2030, and to diversify its raw material imports to avoid relying on any single source for more than 65%. In addition, a battery law will come into force in 2024, imposing high environmental standards on the battery supply chain and preventing non-compliant batteries from entering the market. Taken together, Europe’s strategy reflects concerns about over-reliance on China, as seen in the solar power section. The focus is on diversifying sources, particularly upstream in the LiB supply chain, to spread risk. However, there appears to be no movement to exclude China from the supply chain. Of course, the implementation of the EU battery legislation will make it more difficult for foreign battery companies to enter the European market by giving LiB a higher exchange rate, but this is not a discriminatory measure as European companies will also have to comply.

On the other hand, by 2020, China’s new ESS (BESS, compressed air energy storage, flywheel energy storage, etc.) will have moved from the R&D demonstration stage to the early commercialization stage. In addition, internally, BESS and compressed air ESS technologies, led by LiB, have reached world-leading levels. The Chinese government sees 2021 as the pioneering year of the new ESS industry and aims to develop it to the scale-up stage, as stated within the 14th Five-Year Plan for 2021-25. For LiB in particular, the focus is on improving productivity through technology upgrades and reducing operating costs, as well as strengthening cohesion in the domestic supply chain. The government will focus on encouraging upstream and downstream companies in the LiB supply chain to develop closer cooperation, including signing long-term contracts and clarifying quantities and prices at each stage of the supply chain to ensure stable supply.

Internally, Chinese LiB companies have formed their own alliances between upstream and downstream companies to stabilize their supply chains. In response to the US IRA, they are also building local production bases in the US, cooperating with US FTAs, expanding into Europe, and increasing investment in LiB recycling in anticipation of the European Battery Directive.

In Chapter 4, based on the above analysis, we suggest responses for the Korean government and companies. First, it is time to develop a comprehensive solar industry policy for Korea. Specifically, it is necessary to: (1) expand solar applications and subsidize production to revitalize the domestic market; (2) provide government support for exports and financing; (3) provide funding for solar companies that are expected to expand into the North American market through the US IRA; and (4) provide government R&D support to maintain the super-gap technology of perovskite solar cells and pre-emptively promote commercialization. Second, it is necessary to consider developing LiB recycling technology and increasing investment to respond to the European battery legislation and to secure key minerals. Third, Chinese upstream companies and Korean midstream and downstream companies in both the solar and LiB-based BESS industries should urgently sign long-term supply contracts in the short term, and focus on securing proprietary technologies in the long term. 

Since 2011, Timor-Leste has prioritized ASEAN membership as its highest diplomatic agenda. Although Timor-Leste had obtained the ‘in-principle’ membership and observer status, the time for the full membership has not yet been confirmed. This report analyzes the conditions and capabilities for the Timor-Leste’s accession to ASEAN and examines the support strategies and cases of major donor countries. Based on these analyses, this report aims to suggest the Korea’s plans for the development cooperation and support plans for Timor-Leste’s accession to ASEAN.

In chapter 2, the conditions for development cooperation of Timor-Leste on various perspectives including politics, diplomacy and society, are examined. We also analyzed the Timor-Leste’s general capacity such as economic conditions, Sustainable Development Goals (SDGs) implement status, etc. Timor-Leste has the unique political systems, such as dual executive system and four separations power (president, executive, legislative and judiciary). In the field of diplomacy, Timor-Leste has a identity of the Community of Portuguese-Speaking Countries (CPLP), and has been adapting an active diplomacy in the form of “Comprehensive and Collective Engagement” with ASEAN and Pacific island countries. Based on these, Timor-Leste has been strategically utilized the geopolitical importance and adopted the accession to ASEAN as its top diplomatic priority. Timor-Leste has a pyramidal population structure typical of developing countries, with Tetum and Portuguese as official languages, and Indonesian and English as working languages. Timor-Leste is a least developed country with a nominal GDP of $2.2 billion a per capita of $2,491 as of 2022. Due to the weak agriculture and manufacturing industries, it has been highly dependent on the Petroleum Wealth generated by the Bayu-Undan oil field. Recently, the economic growth rate has been gradually recovering from the impact of Covid-pandemic, but there is a concern about the loss of growth momentum due to the end of Bayu-Undan oil field development. Oil and gas takes more than the 90% share of the total export. Excluding the oil and gas, coffee can be considered as the only export commodity which accounts about 7% share of the total export. There is an urgent need to attract FDI for industrial development. However, little FDI is taking placed other than investment on oil-field development due to the weak manufacturing base and domestic demand. The working-age population of Timor-Leste is approximately 800,000 with a low labor force participation rate of 30.5%, and the education level is only about the 48.8% with primary education or less. Bayu-Undan oil field is considered as a representative natural resource. As the reserves are nearing depletion, the development of Greater Sunrise oil field as an alternative is urgently needed. The Sustainable Development Goals (SDGs) implementation status has remained at “challenges”, “significant challenges” and “major challenges” in various sectors.

The chapter 3 analyzes the Timor-Leste’s readiness and capacity to join ASEAN, especially the membership requirement stated in the ASEAN Charter and the level comparison with ASEAN member countries using key indicators. Regarding the fulfillment of the requirement of the ASEAN Charter Article 6, Timor-Leste has been considered positively. However, there are concerns about “ability” such as the weak economic development and financial situation, lack of physical infrastructure and low diplomatic capacity. Regarding the obligation of ASEAN Charter Article 5 paragraph 2 (Domestic legislation), we have monitored the legislation status to meet the obligations of ASEAN communities and other sectoral agreements based on Timor-Leste ASEAN Mobilization Plan (TLAMP) and Critical Elements for Accession (CEA). However, it is not easy to confirm whether Timor-Leste meets the requirements for ASEAN membership due to the difficulty of quantitative evaluation by the difference and wide range of membership requirements for each ASEAN communities and ‘Non-disclosure approach’ of ASEAN and Timor-Leste. Regarding the ASEAN Economic Community (AEC) 2025 Blueprint, Timor-Leste could not meet a series of requirements such as legal regulations and global trade order excluding a few trade and people movement related requirement. In comparative analysis on the capacity with ASEAN countries by key indicators, such as income level, human development index, finance, communication, urbanization, literacy rate, Timor-Leste has scored the similar level to ASEAN latecomer countries. However, in democracy index which measures democracy development, Timor-Leste has ranked on 44th among 167 countries, higher than most of the ASEAN countries. This high ranking is believed to be due to the stable establishment and operation of democratic regime without any military coup or dictatorship after the independence in 2002.

The chapter 4 analyzes the ODA and support for Timor-Leste’s accession to ASEAN from major donor countries and institutions. For the ODA analysis of Timor-Leste, we used the OECD Creditor Reporting System (CRS). We also adapted the case studies of the major donor countries and institutions regarding supports for Timor-Leste’s accession to ASEAN. The bilateral ODA had taken the major share of ODA for Timor-Leste from international community. By donors, Australia (31.3%), and Portugal (13.2%) have taken the largest share, and socialinfrastructure (60.9%) and economic-infrastructure (13.1%) have accounted for a large portion by sectors. For the case studies of the support for Timor-Leste’s accession to ASEAN, we adapted the cases of Japan and Australia for country cases, also ADB’s support for the institutional case. Japan has been supporting Timor-Leste’s accession to ASEAN by the Country Assistance Policy for Timor-Leste (2017) and by the supports through institutions such as JICA and ADB. Australia, the largest donor country of Timor-Leste, has been operating a series of mid to long-term development cooperation programs on various fields such as human development, village development, public administration, bio, agriculture & rural development, police-capacity building, etc. Australia had established a funding package (6.6 Mil AUD) in a period of 2022-2026, which supports Timor-Leste’s accession to ASEAN by capacity and infrastructure building projects such as government & private capacity building project, workshop for the partnership with ASEAN secretariat and member countries, etc. ADB has been supporting Timor-Leste by the 5-year mid-term strategy, Country Partnership Strategies (CPS) since 1999. During the period of Timor-Leste’s independence, ADB had it's focus on recovery & maintenance of infrastructure, but the support area has gradually expanded to pandemic, climate change, SDGs, etc. ADB’s supporting strategy for Timor-Leste’s accession to ASEAN has its main focus on the capacity building projects by Capacity Development Technical Assistance (CDTA). The results of analysis of supporting case studies of major donor countries and institutions implies that Korea also needs to actively prepare the support plans in the area of capacity building for Timor-Leste’s accession to ASEAN, national system building, infrastructure, etc.

The chapter 5 provides the forecast of Timor-Leste’s full membership to ASEAN, and policy recommendations for Korea’s supporting plans. Although Timor-Leste has been granted the ‘in-principle’ accession and observer status at the ASEAN summit in November 2022, the formal accession to ASEAN has been delayed due to reasons including the concerns about Timor-Leste’s lack of preparations and capacity, disagreement among ASEAN member countries, etc. The majority of the ASEAN countries have a positive stance on Timor-Leste’s accession to ASEAN, but there is uncertainty that the situation may change depending on a certain moment or political situation. For Timor-Leste, accession to ASEAN has great significance, including economic benefit, participation to regional economic integration, establishment of security and collective identity, national growth and advancement, geopolitical interest as well as ‘the second founding of the nation’. From ASEAN’s perspective, Timor-Leste’s accession to ASEAN has implications such as ASEAN’s expansion, peace and stability in Southeast Asia, and containment of China’s influence. To support Timor-Leste’s accession to ASEAN, Korea needs to establish strategies focused on capacity building to implement the roadmap, the Korea-ASEAN Solidarity Initiative (KASI), and its strengths and competitiveness, as follows. First, Korea needs to support Timor-Leste in enhancing the foreign trade capacity and trade law experts. Second, human resource development and training, and third, support for the construction of digital infrastructure is required. To expand development cooperation with Timor-Leste, Korea should expand its ODA focused on the industrial restructuring & diversification, rural development, economic infrastructure development, etc.

Korea should prioritize the foreign trade capacity and trade law expert of Timor-Leste, and promote the its support for Timor-Leste’s accession to ASEAN and development cooperation plans as outlined in Chapter 5. At the same time, Korean government needs to stipulate the supports for Timor-Leste’s accession to ASEAN in the Country Support Plan (CP) for Timur-Leste. In addition, there is a need to consider tripartite cooperation with Indonesia, Vietnam and ASEAN Secretariat, ways to link with the approaches to WTO accession, and select & focus strategy based on the Korea’s competitiveness.