Comparative Analysis and Implications of Developing Country Risk

Jin Young Moon, Yun Ok Kim, and Minyoung Lee

The share of emerging markets and developing countries in the global economy is growing, and the status of G20 in the international society is also being strengthened. Considering the trend, the economic and political growth of developing countries can be regarded not only as opportunities to replace domestic and developed markets, whose growth potential is declining relatively, but also as risks. Therefore, measuring and managing the risk of developing countries is essential.

Given this background, this study selected economic, political, and social indicators to measure risks, referencing the cases of professional country risk rating agencies, and developed an analytical framework to enable comparisons among countries. Furthermore, this study derived comprehensive country risk ranking by merging the economic, political, and social risk indicators together, and also analyzed the impact of weight change on the risk rating.

Regarding the more specific results of this study, economic risk of Iran, Ukraine, Kyrgyzstan, Congo, and Tanzania appears to be generally high, and that of China and some Middle East oil-producing countries, such as Qatar and Saudi Arabia, appears to be relatively low. In terms of political and social risk, member states of the European Union generally show low risks, but Afghanistan, the Congo, Zimbabwe, Myanmar, and Pakistan are recognized as higher political risk countries. Comparing the economic risk with political and social risk, the number of countries that are within economic risk score of five, the average score for this study, is relatively high. On the other hand, political and social risk appears to have greater variation by country, which means political and social conditions in each country have greater uncertainty.

In addition, this study examined the impacts of weight changes in each risk indicator sector. If weight in political and social risk is increases, then the number of countries with high-risk (whose score is higher than 8) and low-risk (whose score is lower than 3) also increases. That is, risk distribution increases among countries. In contrast, if weight of economic risk increases, then the risk of the Eastern European countries which has higher economic risk also increase generally.

Furthermore, this study classified countries into four groups by comparing country risk with investment attractiveness. As a result, Afghanistan, Cambodia, and Tanzania appear to have both high risk and high investment attractiveness at the same time. On the other hand, Singapore and the Middle East oil-producing countries(Kuwait, Saudi Arabia, UAE, etc.) show high investment attractiveness with low country risk. In contrast, Czech Republic, Argentina, and Romania are analyzed to have both low country risk and low investment attractiveness.

This study has following implications.

First, risk-rated countries should provide more transparent and accurate information regarding their own economic, political, and social situation. Results of country risk studies can vary by departments in charge or individuals who evaluate, and providing transparent information to external rating agencies can enhance the trustworthiness of said nations in international society as well. In this regard, Korea also needs to ensure internal economic stability and inform international community of its national condition.

Second, the Korean companies need to bear in mind that country risk is different depending on regions and nations. The unpredictability of business operations in countries with high political risk can be high because of political connections. For businesses that entered into regions with high economic risk should seek various instruments to hedge such risk. Furthermore, in case of businesses that are interested in regions or nations that have restrictive indicators about country risk or attractiveness, such as Myanmar, they should conduct a more thorough risk assessment and market research in advance.

Finally, research about country risk of developing countries should continue according to a long-term perspective, rather than ending in fragmentary analysis. The change in the economic condition of developing countries is more rapid than that of developed countries, so it is necessary to supplement risk assessment methodology and monitor changes regularly. Furthermore, as Korea is higher in terms of dependency on foreign trade, Korea needs not only to keep an eye on risk of major trading partner countries including developing countries but also to evaluate foreign risks of Korea to establish a foundation for stable economic growth.

The 40th anniversary of Korea-India Amity: Evaluation and Prospects for Investment Cooperation

Choong Jae Cho and Yoon Jung Choi

Korea-India diplomatic relations is entering its 40th year in 2013, and while the two countries have engaged in economic cooperation throughout the period, there has been an upsurge in bilateral economic cooperation, including Korea investment into India. This study evaluates the investment performance of Korean firms in India as part of a review of the trends and characteristics of investment flows, in addition to conducting a factor analysis of investment determinants. The results of the study will provide policy recommendations for the Korean government and enterprises to deepen the partnership between Korea and India.

As of June 2013, the cumulative investment to India from Korea has reached 30 billion dollars according to statistics by the Export-Import Bank of Korea. India has thus become the 17th largest foreign investment destination for Korea: the amount of investment has increased significantly since the Investment Promotion and Protection Agreement between the two countries went into effect in 1996. In 2006, Korean investment to India surpassed 100 million dollars, and then soared to 450 million dollars only 5 years after that.

It should be noted that 206 Korean firms out of the 696 companies that have entered India are large corporations whose investments add up to 81 percent of total investment by Korean firms. Manufacturing appears to be the primary sector of Korean investment, accounting for 85 percent of the total investment. The concentration of investment in manufacturing is in fact a stylized pattern of Korea’s outward investment flows, as seen in the case of China (78%). However, only two sub-areas of manufacturing, namely vehicles & trailers (45.4%) and primary metal (24.9%), account for over 70% of total investments. Meanwhile, electronic components, computer, video, television and the communication equipment sector, accounting for 26% of total outward investments, does not reach even 3% in Korea’s investments to India. Investment in non-manufacturing sectors is also concentrated in a few sectors, in spite of gradual diversification since 2000. For instance, wholesale & retail trade accounted for more than 40% of non-manufacturing sector investment.

Most Korean companies in the Indian market (98%) appear to have local subsidiaries in India; yet 60 percent are wholly-owned subsidiaries. Regardless of the sectoral distinction, manufacturing or non-manufacturing, 'penetrating the local market' appears to be the most important motivation for investment.

The performance of Korean investments in India has been good compared to those in China, U.S or Vietnam. The net income of local subsidiaries has consistently ranked between the fourth and fifth since 2009, when the Export-Import Bank of Korea started publishing such statistics. In addition, net exports and trade balance improvement through subsidiaries was higher than other countries. The return on investment was four times larger than the average return on all outward investment of Korea.

Taking the above facts into account, the study analyzes the determinants of Korean investment in India through a regression analysis. The test results imply that there exists a positive relationship between the size of the Indian economy and the amount of Korean investment flows toward India. They also provide confirmation for past survey results, where the majority of Korean companies answered ‘potential gains from large market size’ as the reason for investing in India. On the contrary, the export amount and the income gap between the two countries have a negative relationship with investment inflows. Such a relationship between exports and investments suggests that the degree of inter-industry division between the two countries is still very low.

Meanwhile, the effect of Korea-specific factors such as the sheer presence of voluminous investments by large Korean conglomerates in India, specifically manufacturing-centered firms based in the country, proved rather uncertain. This implies that current investment patterns dominated by conglomerates and manufacturing should be changed, in order to improve investment performance.

With these findings, the paper presents an overall assessment of past investments and future policy recommendations to further expand bilateral investment between the two nations. Through pre-emptive investment in the 1990s, Korean enterprises in India became top market players in consumer durables, such as cars and appliances, thereby enhancing the overall image of Korea in India- its products, brands, companies, and even the country itself. Subsequently, these Korean enterprises largely benefited from their strong investment performance in India, reaping incomparable gains relative to other investment destinations.

In the 2000s, however, competition with other major investors in India has presented Korean companies with the urgent task of reinvigorating investment activity, to quickly close the broadening gap vis-à-vis other foreign competitors. Once ranked fifth among the top foreign investment sources in India, Korea plummeted to 13th place as of July 2013. For instance, Korea’s investment stock in India now stands at a mere tenth of that of Japan.

The weakening of Korean investment inflows to India calls for further involvement from industries and sector-specific private committees. The Government and investment-related agencies should support private entities in this regard. Government support should also be strengthened in areas other than manufacturing as in the case of Japan and Singapore. Location of investments should be diversified, away from existing investment hubs in Delhi and Chennai, and towards regional centers in the western and eastern regions. Likewise, financial support should be intensified. This is particularly important in order for Korea to take a more active role in burgeoning infrastructure development in the country. Furthermore, creation of more direct flights connecting major hubs of Korea and India must also come to pass.

Early realization of these goals requires a more efficient bilateral governmental consultative mechanism. In detail, summits, ministerial and private committee meetings need to be held on a regular basis and must be interconnected. In consideration of India's political and government structure, the government of Korea should gradually establish a cooperative system with state governments as well as the central government of India.

Trade Patterns and Determinants of Vertical and Horizontal Intra-industry trade between ASEAN and China

Jaewan Cheong and Ho-Kyung Bang

This research attempts to analyse composition of trade patterns and determinants of Horizontal and Vertical Intra-industry Trade between ASEAN and China. We decompose trade in goods into three parts: one-way trade, vertical intra-industry trade, and horizontal intra-industry trade based on the methodologies proposed by Fontagn and Freudenberg (1997) and Greenaway, Hine and Milner (1994).

According to the results, one-way trade has continued to take substantial part in total trade between China and ASEAN, while the vertical intra-industry trade has been increased significantly over the past two decades. Especially, this trends appears in trade between Indonesia, Malaysia, Thailand and Vietnam and China.

Our empirical analysis shows that the intensified vertical specialization structure between ASEAN and China over the period from 1992 to 2012 is caused by foreign direct investment between the two regions as well as other variables such as bilateral distance (trade costs), common language, economic size and income differences.

The main findings of this paper provide the following implications for Korea. First, as ASEAN and China are the first and second export markets to Korea, Korea needs to put more effort to expand its export and market share in China and ASEAN by conducting policy relative to trade facilitation including the reduction in trade cost. Second, since ASEAN’s export to China is increasing especially in the electronic and machinery sectors, Korea needs to develop a strategy to diversify its relative production network. Third, to maintain and expand Korea’s proportion in the East Asian intra-trade, Korea should further develop its parts and components industry and make efforts to sufficiently benefit from the East Asian production networks. Last but not least, Korea could utilize the on-going FTA negotiations with China and ASEAN countries to develop a closer link among the structure of Korea-China-ASEAN division of labors.

A Review on a Comparative Advantage in IT Service Sector among Korea-China-Japan: Focusing on Productivity Analysis

Seung Kwon Na, Hokyung Bang, and Boram Lee

IT service sector is considered as an important industry as it could enhance the efficiency of enterprises, improve a country’s economic structure by advancing productivity of other industries. Thus, this research attempts to draw policy implication towards cooperative activities among Korea, China and Japan based on an analysis on a comparative advantage of the IT service industry, focusing on productivity analysis.

First, looking into the main features of the IT service industry in Korea, China, and Japan, the three countries commonly showed high proportion in the System Integration sector, sales concentrated in few conglomerates, low intra-trade and investment proportion within the region and low front back industry relating effect. Meanwhile the IT service sector in Korea and China has shown high growth rate.

Second, as a result of the productivity(efficiency) analysis, productivity gap between the three countries exists but the gap is narrowing between China/Korea and Japan. However it seems that the gap reduction is based on a chasing effect from the efficiency gap reduction at corporate level rather than from the technological advance effect.

Also, we have discovered that each country’s institution framework including ICT technology related domestic regulations, transparency, bureaucracy, and government policy has substantial effect on productivity in IT sector.

Based on the paper results, we attempt to draw the following implications to further enhance cooperation in IT service sector between the three countries. First, Korea need active initiatives to lower the barrier to entry for the IT service government procurement market. Korea also needs to aggregate company level data to conduct a productivity comparison. Moreover, considering the high competitive environment focused on the system integration sector among the IT service industry, Korea needs to diversity its support toward other strategic IT service industries. Last but not least, active supporting policies from the Korean government towards improving conditions for innovative small businesses and training professional manpower are also needed to maintain and advance Korea’s comparative advantage in the IT service sector.

Methods for Evaluating International Expositions in Korea


Heungchong Kim et al.




Recently, interest in hosting international events has increased, particularly amongst local governments in Korea. Acknowledging that the era of local autonomy has arrived, and taking into consideration such factors as globalization of localities and government policies for balanced land/regional development, hosting of international events by local governments cannot be dismissed as being all negative. On the contrary, successful international events can contribute to rural development and modernization of the services sector. Yet it is important also to prevent waste of government resources by limiting extravagant international events.

Hence, the Korean central government has enacted “the rule on invitation and opening of international events” in order to minimize the drain on the national treasury from indiscriminate hosting of international events. An “international event” is defined as an international conference, sports event, exhibition/show, cultural event, tourist event, etc. involving at least 5% of foreign participants from 5 or more countries. According to this rule, all international events with a total operating expense over KRW 5 billion, of which more than KRW 1 billion in financial support is required from the central government, is subject to a mandatory feasibility study. A feasibility study is designed to verify the necessity of the applied international events and reasonableness of the total plan based on facts. As this feasibility study impacts the decision of the central government whether to give or deny support to the international event a local government applied for, it is vital to establish a valid and consistent methodology.

This research suggests rational and impartial methodologies to conduct the feasibility study on international events; methodologies that will contribute to the establishment of a general guideline for feasibility study for such events.

Chapter 2 discusses the base analysis in order to determine the feasibility of international events. This chapter states why and how to present the outline of an event, analysis on the base data of the event area, significance of hosting the event, domestic and foreign case analysis, and SWOT analysis. Chapter 3 covers the economic analysis of the international event. Particularly, cost-benefit analysis is introduced along with other various methods to estimate the benefits of a given international event. In addition, the contingent valuation method (CVM) is introduced with concrete examples. Chapter 4 deals the political analysis of the international event. If the international event is determined from an economic perspective only, it runs the risk of completely neglecting political necessity. Therefore, this chapter highlights the importance of considering the distinctiveness of each event. Chapter 5 looks at how the analytic hierarchy process (AHP) can be applied to the feasibility study of international events. This method will integrate experts’ opinions into the feasibility study in a most reasonable and quantitative way. Quantitative results will enable comparing events with greater certainty and to enhance efficiency in decision-making.

Feasibility study on international events is different from other general feasibility studies on public investment undertakings. Since many international events are intended as one-time events, quantifying its concrete long-term benefits is complicated. Thus it is important to supplement the economic evaluation with an appropriate political assessment. Amongst various methodologies, this research suggests the most relevant method for setting a general guideline in assessing the feasibility of different international events. Henceforth our main task is to develop a feasibility study methodology of international events for impartial assessment, by making improvements through a priori approach and by linking the process with post-evaluation systems.

Myanmar: Development Challenges and Opportunities

Yoon Ah Oh and Nari Park

Although Myanmar has currently one of the lowest per capita incomes in Southeast Asia, the country has great potential for economic development. It has a population of 60 million; abundant natural resources including petroleum, timber, and gems; and a geostrategic location that connects the large economies of China and India. If supported by the right policies and institutions, the country should be able to see a substantial increase in living standards in the near future.

Myanmar has a wide range of development challenges. It has a high poverty rate, and its social development indicators are among the lowest in the region. Fortunately, the current Myanmar government has launched major efforts to put the country on the path for development and set inclusive growth and poverty reduction as the major development goals. In view of Myanmar’s development needs, industrialization and rural development have been chosen as the principal tools to reduce poverty and increase standards of living. To support these efforts, massive investments will be needed in hard infrastructure and human capital. Although foreign direct and domestic investments will be the major sources of development in the long run, foreign aid can play a vital role in providing basic services and technical assistance in the immediate term.

After five decades of authoritarianism and isolation, Myanmar has finally been reconnected to the international community. The swift and far-reaching reforms introduced by the Thein Sein government brought about normalization of its external relations and notably led to the end or suspension of economic sanctions on Myanmar. Without restrictions imposed by sanctions, most Western governments and major international donors have reinstituted their aid programs for Myanmar.

Foreign aid to Myanmar is still small relative to its development needs but expected to grow significantly over the next few years. The donor environment is becoming competitive, and geopolitical considerations are playing an important role. China had increased its influence on Myanmar during the sanctions period and will continue to be an important economic cooperation partner in the post-reform era. China’s development assistance to Myanmar is largely concentrated in physical infrastructure and closely linked to promoting Chinese business interests in the country. Japan, which is deeply conscious of China’s influence in Myanmar and Southeast Asia, has promised to offer large and wide-ranging aid. In fact, Japan has quickly established itself as a major development partner to Myanmar. On the other hand, the US and the West focus their aid to Myanmar on social programs and political reform, including governance improvement and civil society capacity building.

Korea has keen interests in expanding its economic ties with Myanmar and has offered development assistance in infrastructure improvements, rural development, and technical assistance, most notably in development policymaking, drawing from its own experiences in industrialization. Although Korea’s aid resources are limited compared to the major donors, it has two unique characteristics. First, because it has no geopolitical agenda harbored by countries like China, Japan, and or even the US, it can be used as a counterweight to major donors/powers by Myanmar. Second, although Korea’s aid is limited in size, it is often linked to larger bilateral economic engagement involving Korean businesses. Korea’s foreign direct investment in Myanmar is likely to be concentrated in manufacturing, and this can contribute to industrialization and job creation, which Myanmar desperately needs for inclusive growth.

The Economic Impact and Application Plan of the Visa-Free Regime between Korea and Russia


Yeo-Cheon Jeong, Soonchan Park, and Boo Gyun Kang



Korea and Russia, for years, have had informal discussions in both government and private sectors on the need for an introduction of visa-free regime between two countries. And at the 9th bilateral consular affairs talks held in March 2010, two countries finally started an official dialogue to establish mutual visa-free travel. In particular, during the 2012 APEC summit, leaders from both countries agreed to open negotiations for mutual visa-waiver agreement (VWA), and then at the 12th bilateral consular affairs talks held in May 2013, the both sides reached agreement on general contents of the agreement.

The political-economic judgement takes a main role in promoting Korea-Russia visa-waiver agreement. Since the establishment of diplomatic ties in 1990, Korea-Russia relationship has been steadily moving forward. At the 2008 summit, the two leaders agreed to upgrade bilateral ties from the status of a comprehensive partnership to that of a strategic cooperative partnership. And in 2012, Korea's trade volume with Russia amounted to 22.5 billion dollars, an increase of 117 times over 20 years. The number of mutual personal exchange between both countries also increased up to 280 thousand people in 2012.

The purpose of this study is to analyze the background and economic impact of the Korea-Russia VWA, and come up with propositions for its efficient application plan. The study is consisted of five chapters. The first chapter introduces background and purpose of the study and previous research. Then, an overview on the background and contents of the agreement is presented in the second part. In the third chapter, the status and charateristics of visa-waiver agreements that are already in existence discussed.

In the fourth chapter, the economic impacts of the Korea-Russia VWA are analyzed. In particular, this study evaluates the economic benefit that the VWA brings to the Korea, including increased tourist-business trips and reduced expenditure on visa issuance. In order to capture the net effect of the VWA – the increased tourism and business trips due to VWA – the author uses the difference-in- differences method as well as random effect and fixed effect model based on statistics of inbound and outbound visitor trends for 64 countries, which with Korea made a VWA. Also the author calculates the trade stimulating effect between Korea and Russia using gravity model and conducts input-output analysis for Korean tourism. However, the results of this study show minimum riffle effect of Korea-Russia VWA, as it is based on average indicators of VWA already achieved between Korea and 64 individual countries.

The chapter five summarizes previous parts and presents challenges and measures to enhance cooperation between Korea and Russia, by VWA as a momentum. The visa-waiver agreement can be either an opportunity or an instrument for boosting economic cooperation, but it is hard to be an immediate factor. Therefore, comprehensive policy tools needs to be prepared to maximize its effect.

Companies have set up global value chains by fragmenting the production processes including product design, outsourcing, assembling, and marketing to subsidiary and cooperative firms since the 1990s. As a result, recent trade patterns have been transformed from trade in goods to trade in tasks.
The rise of global value chains has changed the trade and investment patterns in East Asia. The East Asian intra-regional trade and investment has increased substantially in recent years. Specifically, the intra-regional trade of intermediate goods in East Asia turned out to increase compared to the EU and the US, and East Asian value chains have grown rapidly in recent years.
This paper calculates the indicators to show how the global value chains have deepened in each region by using the World Input-Output Tables which cover 41 countries and 35 sectors during 1996~2009. The indexes of global value chains have been proposed by Fally(2011), Fally(2012), Antras and Chor (2011), Antras et al.(2012), Koopman et al. (2010), OECD(2012), Meng et al. (2006). We calculated international downstreamness and upstreamness indexes based on the international input-output tables. The international downstreamness index in case of East Asia turned out to be relatively high compared to the EU and NAFTA. It is notable that the East Asian international upstreamness index also increased substantially during the same period.

This study also decomposes the trade in value added into domestic and foreign contributions in order to analyze the effects of global value chains on the East Asian intra-regional value added. It uses the data for the 41 countries and the 35 industries contained in the World Input-Output Tables. This study investigates the shares of intra-regional value added for the East Asian countries by FTA scenarios, applying the methodologies developed by Koopman et al.(2010) and Hummels et al.(2001). It is not surprising to see that the shares of intra-regional value added turn out to be dependent on the number of countries joining FTAs, which implies that the positive effects of global value chains will be magnified with the deepening regional integration.
This study also analyzed the economic effects of value chain structure in East Asia by various FTA scenarios. We used the recursive dynamic computable general equilibrium(CGE) model to analyze the value chain structure in trade and industrial linkages. The policy simulations based on rules of origin are expected to provide more realistic results and meaningful implications consistent with previous research. According to the results, the economic growth effect of a KC FTA is greater than other FTAs regardless of strictness of rules of origin. The simulation results also indicate that the effects of FTAs decrease as rules of origin become stricter and relative decreases in ratios of economic integration are less than those of bilateral FTAs. The value chain structures turn out to magnify the effects of KC FTA and RCEP, but decreases those of the KJ FTA because Korea’s trade dependency on China and ASEAN are relatively intense.
The results from this study provide some policy recommendations as follows. Global trade liberalization is needed to maximize the positive effects expected from the global value chains. East Asian countries also need to harmonize the border measures including standards, SPS, and TBT which are expected to facilitate global value chains in the region. The liberalization of services such as distribution, finance, and business services among others are also expected to contribute to efficient movement of goods and materials in the intra- and inter-region trade. Specifically, the East Asian countries need to harmonize the intra-regional bilateral FTAs to reduce the so-called noodle bowl effects.

We study the welfare implications of a bilateral free trade agreement. The model is based on the recent trade literature that considers search and matching frictions
in the labor market. We extend the model by incorporating country-level heterogeneity in terms of production technology, population, and productivity endowment.
Model simulation results show a simultaneous tariff cut between symmetric countries to reduce unemployment rates and increase prices in the product market
due to higher long run demand, while nevertheless benefiting the economy owing to a more rapid rise in consumer income. In the case of asymmetric countries,
we find that larger gains from greater openness to trade accrue to a country with (relatively) more elastic supply occasioned by capital-intensive production
technology that accommodates more flexible adjustments to output in response to increased demand. We calibrate the model to Korean and Japanese data in
order to assess the expected outcome of the potential trade liberalization between those countries. With a scenario of symmetric level of trade liberalization (in
terms of trade cost reduction), when we assume the same population size in a counterfactual way, we find Japan to receive greater benefits from the opening
because its relatively more capital intensive production allow for quicker output adjustment upon trade liberalization. When we presume, however, that Japan’s
population is 2.5 times that of Korea, the results show Korea to enjoy a slightly more surplus due to the market size effect.

Prospects and Implications of the Pacific Alliance


Taekyoon Lim and Siun Yi

The Pacific Alliance, which was officially launched by four Latin American countries on the Pacific coast (Chile, Colombia, Mexico, Peru) in June 2012, has been making fast progress and is expected to open up new horizons in economic integration in Latin America. Under the circumstances that existing regional communities such as MERCOSUR and ALBA are faltering, the Pacific Alliance is drawing attention from the world as it advocates Open Regionalism.

According to our quantitative analysis on prospect of the Pacific Alliance based on the macroeconomic indicators of the member countries, the Pacific Alliance shows a positive but somewhat limited prospect. When it comes to various qualitative aspects, however, the future of the Pacific Alliance is quite positive. In terms of institutional aspect, the Pacific Alliance avoids institutionalization and bureaucratization. Given that existing regional communities in Latin America focused on institutionalization and failed to produce practical outcomes, the minimal institutionalism of the Pacific Alliance is expected to achieve pragmatic development as a new model of regional integration. From the approach of natural market, the Pacific Alliance has a high level of socio-cultural homogeneity. Though the member countries are located somewhat spread out, this potential geographical disadvantage has not been an issue. In terms of economic aspects, the member countries of the Pacific Alliance have relatively good business environment and high economic freedom in Latin America, and this well supports the characteristics of its Open Regionalism pursuing Asia-Pacific markets. Still, the very high percentage of agricultural products in exports may be a potential issue when the Pacific Alliance tries to abolish tariffs completely. In political terms, the member countries of the Pacific Alliance has rightist or center-leftist, liberal dispositions and a high level of democracy. It has little concern about security within or outside the Pacific Alliance, and the external hegemon, the United States, is quite in favor of the Pacific Alliance. Also, the political will of each member government is very strong, which makes the prospect of the Pacific Alliance very positive.

It might be too early to discuss concrete cooperation with the Pacific Alliance at the moment since it is currently focusing on the deepening of its internal consolidation. However, it is necessary to make the foundations for future cooperation as the Pacific Alliance begins serious discussion about cooperation with the Asia-Pacific in the near future. Thus, we will have to have a medium- and long-term rather than a short-term view. In the first place, we will have to reduce the gap in interests between the Pacific Alliance and us, and we will have to pursue investment in the member countries of the Pacific Alliance in the areas that they want FDI such as mining, transportation infrastructure, and renewable energy. Through gradual and steady efforts to improve the relationship with the Pacific Alliance, we will have to take a better position in future cooperation than our competitors including China and Japan.