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  • 노동소득분배 결정요인 분석과 정책적 시사점
    Analysis on the Determinants of Labor Share and Its Policy Implications

    The global decline of labor income share has spurred numerous studies investigating the cause of its drop. As decrease in labor share might imply aggravating income inequality, it has been used as one of the main indicators of ine..

    Yaein Baek et al. Date 2022.12.30

    Economic integration, Labor market
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    The global decline of labor income share has spurred numerous studies investigating the cause of its drop. As decrease in labor share might imply aggravating income inequality, it has been used as one of the main indicators of inequality. Not only is labor income the main source of income for low-income class including the self-employed, but its decline could disproportionately affect low-skilled workers within wage earners. This study analyzes the determinants of the changes in labor share. As technological changes such as adoption of robots, advancements in ICT and the Fourth Industrial Revolution are expected to alter the labor market, we analyze the impact of such technical changes on labor share and derive policy implications.   

    This study mainly consists of four parts. In Chapter 2, we estimated the trend of Korea’s labor income share and examined changes in its components. We addressed the measurement issue of income for the self-employed in two ways. First, we applied various methods proposed in previous studies to macro data and analyzed the adjusted series. Second, we separately estimated labor share using firm-level micro data in which measurement issues do not arise. Main takeaways from these analyses are summarized as follows. First, the level and trend of the labor share in Korea changes greatly when we adjust for the earnings from the self- employed. Most importantly, unlike the traditional measure of labor share, the adjusted series exhibit a downward trend from the mid-1990s to the period of global financial crisis. The difference arises due to relatively stagnant operating surplus of private unincorporated enterprises (OSPUE) compared to rising total employee compensation. Second, short-term changes in labor share are mainly attributed to fluctuations in capital income rather than components of labor income (employee compensation and OSPUE). In particular, fluctuations in net operating profit drive variations in the labor share across time and industries. Third, statistics from various international organizations show that Korea’s overall labor income share has been relatively higher than those of other countries, but the gap is narrowing due to declining share of self-employed workers.

    In Chapter 3, we examine whether the determinants of labor share suggested in previous studies such as technological change, globalization, population and education indicators are meaningful as predictors. We estimate a regression tree model, which is a machine learning method, for forecasting labor share and obtain variables with predictive power. There are three main takeaways as a result of analyzing the regression tree model of developed and emerging countries. First, in forecasting the labor share in the corporate sector in six developed countries, human capital and the relative price of investment goods are found to be the most important. In addition, the non-linear relationship between human capital and the relative price of investment goods can be important in predicting the labor share. Second, human capital and education are important in predicting the labor share in developed countries, whereas demographic change and ICT development play a key role in emerging countries. Third, human capital is important in 5 out of 8 developed countries, and the importance of ICT change varies across countries. In short, it was found that human capital and education are important not only as determinants, but also as predictors of the changes in labor share. In addition, changes in technology, such as ICT, are also important predictors in both advanced and emerging countries.

    In Chapter 4, we examine the impact of robots on the labor market by conducting empirical analyses with two different data sets. The first analysis estimates the effect of robots on labor share and labor productivity using panel regression on industry-country level data. We merge data from KLEMS and the International Federation of Robots (IFR) to obtain data of 15 industries from 17 countries. The second analysis studies the impact of the 4th industrial revolution, including the adoption of robots and AI, on labor share and labor productivity at the firm level. We apply panel regression using Survey of Business Activities from Statistics Korea. The results from both data sets show that the introduction of robots lowers the labor share. Also, as robot adoption increases, labor productivity tends to improve. Previous studies suggest that the introduction of robots may reduce employment by replacing labor (substitution effect) but also increase employment and productivity by lowering production costs (productivity effect). Our findings of improvement in labor productivity and decline of labor share are consistent with these observations, and suggest that the substitution effect might be stronger than the productivity effect.

    Based on the results from previous chapters, Chapter 5 discusses policy implications along dimensions of labor, education, and industry. The policy measures are focused on supporting the acquisition and management of human capital in a rapidly shifting technological environment. According to our empirical analyses, technological progress tends to benefit primarily high-skilled workers, while resulting in job losses for low-skilled workers. This calls for timely reallocation of labor in response to technological change at institutional level, so we suggest three policy directions. First, vocational training and lifelong education system improved so that workers can adapt to new environment at the workplace. Second, it is necessary to continue enhancing labor market flexibility and the dynamism of the corporate sector while maintaining a strong social safety net. Lastly, it is also important to check the overall governance of the administrative and legal system for proper implementation of these policies.

    정책연구브리핑
  • OECD DAC 평가기준 개정안 적용방안에 대한 연구
    Adapting the DAC Evaluation Criteria to the Context of South Korea

    Since first defined in 1991, the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC) evaluation criteria has been one of the most widely recognized and applied criteria for internati..

    Jisun Jeong and Aila Yoo Date 2022.12.30

    ODA, Foreign aid
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    Since first defined in 1991, the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC) evaluation criteria has been one of the most widely recognized and applied criteria for international development evaluation. While the DAC evaluation criteria is believed to have significantly contributed to improving the quality of international development evaluations, there has been increasing criticism and demands to revise the criteria so that they can better respond to the rapidly changing development environment and the core values of the Global Agenda for 2030 and sustainable development goals. Following a wide-ranging consultation with various stakeholders and public survey, the OECD DAC published the revised evaluation criteria in late 2019. 

    One of the defining features of development cooperation in South Korea is a proliferation of government ministries and agencies newly engaging in aid with relatively limited expertise and experience in development evaluation. As the officers from the newly engaging ministries and agencies function as evaluation commissioner, manager and internal evaluator, it is crucial for them to have a clear understanding of the revised OECD DAC evaluation criteria. In this context, the study aims to analyze key changes in the revised OECD DAC evaluation criteria from the previous version and to help Korean evaluators and commissioners to understand the purpose, background and intended use of the revised criteria, and to adapt the criteria to their evaluation while reflecting the institutional context of South Korea’s development evaluation. The study highlights specific aspects under each criterion that Korean evaluators and commissioners should pay special attention to, making considerations for Korea’s aid management system, instruments and policy environment.

    For the relevance criterion, it was emphasized that in the context of South Korea, commissioners and evaluators need to pay particular attention to evaluate whether their selection of aid modalities and partner agency was appropriate. Another point stressed was that transparency and accountability in aid procurement processes should be evaluated within the relevance criterion. In times of multiple global crisis the DAC criteria encourage to assess the extent of adaptive planning and risk management. Nevertheless, the authors argue that the aid identification and budgetary process in South Korea does not allow for adaptive management. For the newly introduced coherence criterion, it was emphasized that each ministry and public agency need to assess whether their intervention is coherent with the interventions implemented by other Korean actors, not to mention external actors in the given country, region and sector. Synergies across different aid instruments and financial channels, e.g., grant and concessional loan, must be evaluated. For the effectiveness criterion, while the revised DAC criteria advise to consider inclusiveness and equity of results across different beneficiary groups, many Korean agencies lack the expertise and resources to take an inclusive approach in intervention design, implementation and results management. 

    The study provides the following policy recommendations to improve Korea’s aid evaluation system. Firstly, the Korean government needs to simplify the approval process and move away from the project-based annual budget allocation system towards sector, region and program-based multi-year budgeting. Currently, the Committee for International Development Cooperation (CIDC) of the Korean government requires all government ministries and agencies to identify development interventions two years before the project commences, and to approve the project design and budget one year before intervention starts. Budget is approved and allocated based on the project, involving a range of decision makers such as the Ministry of Foreign Affairs, Prime Minister’s Office, the Budget office under the Ministry of Economic and Finance and the National Assembly. The complicated and lengthy project-based approval process is too restrictive to allow agencies and ministries to readjust their interventions when needs arise. The current system for project identification was originally introduced to allow sufficient time to ensure coherence between policy and programming and across agencies. But it now poses challenges to adjust the intervention to changing circumstances and unexpected events such as global pandemic, conflicts and climate-induced disasters. Secondly, the Korean government should create an enabling environment to plan, collect, monitor and track the disaggregated data for different beneficiary groups by providing guidelines and resources. Ministries and agencies need to plan ahead to monitor and evaluate differential results across various target groups. Lastly, evaluation should be planned and conducted in ways that facilitate the utilization of the findings to inform policy decisions, improve programming and strengthen institutional learning. The study concludes by arguing there should be more strategic evaluations to assess long-term, higher-level transformative impacts of Korea’s development co-operations. 

  • 사회경제적 불평등 측정 방법 분석과 시사점
    Socioeconomic Inequality Measures and Implications

    With worsening inequality, the demand for inclusive policies has been continuously increasing. In particular, COVID-19 has highlighted the multidimensionality of inequality by exacerbating existing disparities while accentuating r..

    Gee Young Oh et al. Date 2022.12.30

    Economic development, Globalization
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    With worsening inequality, the demand for inclusive policies has been continuously increasing. In particular, COVID-19 has highlighted the multidimensionality of inequality by exacerbating existing disparities while accentuating relatively newer factors of inequality. As such, inequality measures have diversified, and a thorough understanding and appropriate use of measures has become a prerequisite to designing and implementing an inclusive policy.

    In this context, this report studies measures of economic, gender, and digital inequalities, dimensions that have been highlighted during the pandemic. The report compares the purpose, data, calculation methods, and strengths and weaknesses of each measure and illustrates how each measure depicts the current status of inequality. Out of various inequality measures, the report focuses on measures that are either commonly used in the international community or built for specific purposes. By doing so, the report provides useful basic information on inequality measures for policymakers or researchers for future utilizations. 

    To be more specific, Chapter 1 briefly examines the current inequality state, international community’s responses, and the impact of the pandemic. In particular, by overviewing the rising importance of economic, gender, and digital inequality due to COVID-19, Chapter 1 provides background explanations as to why Chapters 2-4 focus on measures of economic, gender, and digital inequality, respectively, and explain contributions of each chapter.

    Chapter 2 analyzes measures of economic inequality, particularly income inequality. Among numerous measures, those used as analysis tools by Korean government ministries and international organizations are selected. For example, measures based on the Lorenz curve, such as the Gini coefficient and the Hoover index, and those based on income shares, such as the Palma ratio and the quintile share ratios, are included. Also, measures focusing on welfare like the Atkinson index and newer measures like the Co-Prosperity index from the World Bank are selected for the analysis. The report lays out the basic information on the measures and compares strengths and weaknesses to show that measures are complementary to each other.

    Chapter 3 introduces indices that measure gender inequality and depicts levels of global gender inequality using each measure. Measures include the most widely used integrated indices, region-specific indices, subject-specific indices, and indices that measure factors of gender inequality. By introducing indices with various characteristics, Chapter 3 emphasizes the multidimensionality of inequality and enhances the understanding of gender inequality.

    Chapter 4 introduces indicators related to the use of digital and information and communication technologies that are frequently used to analyze digital inequality. In particular, various indices measuring differences across- and within- countries, including gaps between companies or classes, are introduced to enhance the understanding of the new dimension of inequality caused by a structural social change called digitalization.

    Finally, Chapter 5 compares the relationship among the three dimensions of inequality covered in each chapter across countries. The report finds that the correlation amongst the three dimensions is heterogeneous across countries, emphasizing the multidimensionality of inequality and the importance of understanding various measures of each dimension.

    Understanding how to measure inequality is crucial throughout a policy implementation process, from diagnosing the status quo to setting policy goals and evaluating policy performance. Accordingly, this report enhances understanding of economic, gender, and digital inequality measures by comparing the methodologies and using them to depict the current status of inequality. Inequality will further diversify with socio-economic structural changes such as climate change and trade wars. Therefore, it is necessary to respond to not only the existing inequality problems but also the problems that will arise in the future through continuous understanding and analysis of accurate measures of inequality dimensions.

  • 인도의 농업 경쟁력과 한-인도 협력 방안
    India’s Competitiveness and Economic Cooperation between Korea and India in Agriculture

    India is one of the top five economies and the biggest agricultural producer in the world. Using the second largest arable land after the United States, India produces corn, cotton, peanuts, curry and spices, fresh fruit and veget..

    Soon-Cheul Lee et al. Date 2022.12.30

    Agricultural policy, Industrial policy
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    India is one of the top five economies and the biggest agricultural producer in the world. Using the second largest arable land after the United States, India produces corn, cotton, peanuts, curry and spices, fresh fruit and vegetables, and sugar as well as crops such as wheat, rice, and beans at scale. Recently, the Indian government’s active investment policies induce large investments in agriculture and thereby great potential for economic growth. At the same time, India has strict non-tariff measures and strengthens conformity assessment procedures in agriculture.

    Korea has the trade surplus with India in non-agriculture sectors, but the trade deficit in agriculture. Recently, Korea seizes a chance to enter into the Indian food market due to the global popularity of K-food. In addition, recent events such as global climate change and the war in Ukraine evoke the importance of food security and thereby the need for ensuring and diversifying a stable food supply. However, little is known about competitiveness, potential, limitations, and challenges for India’s agriculture because no research has dealt with them in Korea. 

    This study attempts to fill this gap by exploring competitiveness of India’s agriculture and providing policy implications for economic cooperation between Korea and India. In Sections 2 and 3, focusing on India’s domestic market competitiveness in agriculture, we adopted various quantitative methodologies to measure agricultural production, global presence, related policies, and competition level. In addition, considering the importance of productivity and efficiency for agricultural competitiveness, we measured them at firm level. Consequently, we presented opportunities and challenges for Korean exporters by providing a case study of overseas cooperation at firm level as well as performing the SWOT analysis for India’s agriculture. For this, we adopted the DEA analysis and interviewed local experts.

    In Sections 4 and 5, we focused on the level of international cooperation in India’s agriculture by analyzing the current trend of trade, overseas activities, and related policies and presented implications for Korean firms’ entering into India’s market. In Section 6, we examined protectionism in India’s agriculture by analyzing TBT and SPS which are main factors of non-tariff measures and suggested solutions.

    Accordingly, this study showed a vision for co-prosperity of Korea and India in agriculture and provided key challenges and strategies to realize it. In specific, we suggested practical tasks for economic cooperation in public and private sectors, respectively.

    Main findings of this study are as follows.

    In Section 2, we found that India’s competitiveness and opportunities in agricultural production are the world-class level. India has the second largest arable land after the United States and the largest number of rural population in large national territory and population. India is the third greatest producer after China and the United States in crops and the second greatest producer after China in vegetables, fruits, potatoes, and onions. India’s productions of livestock and dairy rank in the top 10 of the world. In specific, India produces garden products, livestock, and marine products as well as food and non-food products at large scale.

    The empirical results from the Porter’s Diamond model also showed that India’s market competitiveness in agriculture is the second highest in the world, The potential for India’s agriculture is enlarging with 1.4 billion including many young people, their future demand for processed foods, and improvements in supply chains, infrastructures, and global outsourcing. Recently, the Indian government actively adopts various policies for productivity, land management, price compensation for agricultural products, modernization of agriculture, reform for policy and governance, and construction of value chains and infrastructures. Accordingly, these policies are expected to develop India’s agriculture much more. 

    However, a portion of agriculture in the whole economy is decreasing and its investment is lower than other sectors despite such high potential for growth and competitiveness. We recognized that India still has many policy issues and challenges for driving agricultural growth.   

    In Section 3, we found that Indian agricultural firms leave room for improvement, but at the same time, have many opportunities for growth. The results from the financial analysis for Indian agricultural firms showed that both corporalization and exports are not enough for their aggregate scale. Efficiency of Indian agricultural firms is low in general: the crop industry are somewhat improved, while livestock, seed, and processed food industries are steady and forestry become worse. In general, the efficiency for technological progress is improved, but low levels of net efficiency and scale efficiency decrease aggregate productivity. The SWOT analysis showed that competitiveness of Indian agriculture comes from abundant law materials, abundant and inexpensive labor force, and massive market size, while its weakness comes from complex regulations, low quality, and low productivity. One encouraging fact is that recently K-wave induces the advancement of Korean confectionery and noodle industries in Indian market. 

    In Section 4, we reconfirmed that India has the world-class competitiveness in agricultural export. In particular, marine products, rice, spice, buffalo, and meat lead up the growth in export. The Indian government adopts overseas export bases, an export promotion forum, and a profile system for agricultural products to encourage exports. India encourages foreign investment, but offers the different degree of market openness and conditions by items. In particular, India has tighter constraints on retails of multi-brand products. India pursued international cooperation in agriculture through technological cooperation and FTA, and currently works together with FAO and WFP. However, India’s cooperation with Korea remains minimal. Accordingly, both countries require greater efforts to collaborate and thereby utilize great potentials in Indian agriculture.

    In Section 5, we found that India has strong protectionism with various non-tariff measures in agriculture. India adopts TBT and SPS to secure human health and safety, protect consumer right, and provide product information in agriculture. Recently, the issue for environmental production is on the rise, especially in processed food, dairy cream, beverage, fruit, and nuts. The theoretical and empirical results for the effects of TBT and SPS on international trade in India during the 1995-2020 period showed that India’s non-tariff measures negatively affect other countries’ exports to India and these effects are heterogeneous across exporting countries’ income level. By period, the negative effects persist for five years from first adoptions of non-tariff measures.

    In conclusion, we confirmed that Indian agriculture has high competitiveness and potentials in its production and market size and thereby expect that cooperation between Korea and India will yield great benefit to each other. In particular, India has sufficient production capacities to supply major crops and thereby Korean processed food companies can stably import necessary agricultural raw materials. We conclude that India is suitable for a major partner of food security for Korea. However, a weak spot for Indian agriculture is lacks of productivity, efficiency, and globalization. We assure that India will be a significant sourcing country in agriculture for Korea if these weaknesses can be improved. 

    For this, we suggested objectives, strategies, and policy implications for co-prosperity of Korea and India in agriculture. First of all, we set up the main objective of agricultural cooperation between Korea and India to be ‘Economic Cooperation of Co-prosperity to utilize Comparative Advantage of Agricultural Competitiveness’ and the major tasks to be ‘Improvements of Productivity and Efficiency’, ‘Reduction of Transaction Cost’, and ‘Activation of International Cooperation and Globalization’.

    To make India’s massive agricultural products be a sourcing hub, we selected necessary items for food security to Korea and for domestic and overseas market expansion to India. For these items, we included food, non-food crops, and livestock products under the objective of making a massive market hub. To realize it, we draw up detailed plans, focusing on overseas advancement of private sectors  to promote international trade and investments to India.

    We suggested directions and challenges for agricultural cooperation between Korea and India in the public sector, the private sector, and international cooperation, respectively. For the public sector, we suggested to (1) designate India a strategic cooperative country in agriculture and (2) operate a working force for agricultural development and cooperation between Korea and India. For the international cooperation, we suggested to (1) promote agricultural cooperation through a revision of the Korea-India CEPA, (2) collaborate with the ODA program to India, and (3) join various activities for international regulatory cooperation. Finally, for the private sector, we suggested to contrive a strategy for (1) promoting overseas advancement of private companies and (2) strengthening participation and capacity of the private sector.
  • 한-MENA 녹색전환 협력 방안
    Korea-MENA Cooperation Strategy in Green Transformation

    In coping with the energy crisis caused by climate change and the Ukraine crisis, decarbonization policies have now become a global issue. Korea, which imports a large part of its energy, as well as major countries in the Middle E..

    SEO Jeongmin·SEO Sanghyun·KIM Kyung-ha·NOH Dasol·CHOI Eseul Date 2022.12.30

    Economic cooperation, Energy industry
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    In coping with the energy crisis caused by climate change and the Ukraine crisis, decarbonization policies have now become a global issue. Korea, which imports a large part of its energy, as well as major countries in the Middle East and North Africa, which are resource exporters, are establishing long-term renewable energy green transformation strategies to prepare for future crises. The Ministry of Environment in Korea has established a green industry classification system and is preparing standards for various new and renewable energy industries. The government and companies are also striving to increase our competitiveness in various fields such as power infrastructure, electric vehicles, finance, and hydrogen industries.

     Major countries in the Middle East and North Africa are also pursuing long-term plans to intensively foster industries suitable for their conditions, such as wind power, solar power, and hydrogen, in order to transform into a decarbonized economy. The region has also adopted a green transformation strategy as a mid- to long-term growth strategy while responding to climate change. In this situation, this study attempted to examine why major Middle Eastern and North African countries, which have relied on traditional energy such as oil and natural gas, have recently conducted intensive investment in green industries such as hydrogen and solar power, and to find out how the region is seeking cooperation. Moreover, this study selected four countries in the Middle East and North Africa through a survey, and examined the current status and policies of the green transformation industry of the selected countries. Finally, the green conversion industry capabilities of the above four countries were analyzed, and based on this, cooperation strategies with Korean companies were derived through a survey.

    Chapter 2 examines the background and current status of Korea's green conversion policy. As a new national strategy in the post-corona era, the Korean New Deal was promoted, and the green transformation became an important factor. The ultimate goal is to achieve zero carbon emissions and accelerate the transition to a low-carbon, green economy. Chapter 2 also analyzed the status and policies of green transformation in major countries, focusing on the EU, the United States, and Japan. All of these developed countries are also aiming to cope with the climate change crisis and transform themselves into a sustainable society. Moreover, it can be seen that a large-scale investment program is being implemented to promote the green economic transition.

    Section 3 of Chapter 2 explains the current status of cooperation between the three major countries above, Korea, and four countries in the Middle East and North Africa. European countries, which are adjacent to the Middle East geographically, are the most active in cooperation with Middle East and North African countries. Major Middle Eastern and North African countries are emerging as key mutual partners, especially as important suppliers for European hydrogen demand.

    The Biden administration of the United States is also strengthening cooperation with countries in the Middle East and North Africa to cope with climate change. The United States invited the leaders of Saudi Arabia, the United Arab Emirates, Turkey and Israel to discuss ways to cooperate at the 2021 U.S. climate summit. In the United States, private companies are particularly active in entering the green transformation industry in the Middle East and North Africa. Air Products, a U.S. industrial gas and chemical company, is actively cooperating with Saudi Arabia and Oman for hydrogen and ammonia production.

    Japan is also accelerating efforts to produce and transport hydrogen-free ammonia in Middle Eastern countries such as the UAE. Historically reliant on Middle East crude oil, Japan is working on a strategy to expand this relationship to green areas. Korea is also preparing various measures for cooperation with Saudi Arabia, UAE, and Egypt at the government and corporate level, and the country that is most actively promoting cooperation is UAE.

    Chapter 3 analyzed the green conversion industries in four major countries in the Middle East and North Africa. First of all, we looked at the background and current status of new and renewable energy development in Egypt, Morocco, Saudi Arabia, and UAE. The above four countries are also pursuing strategies to secure eco-friendly and sustainable industrial capabilities by breaking away from production and consumption patterns that relied on existing fossil fuels. Two North African countries, low or non-acid oil countries, are fostering inexpensive renewable energy sources such as solar and wind power as energy sources for future generations. Saudi Arabia and the UAE in the Middle East, which are rich in fossil fuel resources, are emerging as green hydrogen production sites using solar energy. The MENA area is rich in solar radiation and wind speed, presenting favorable conditions to secure competitiveness as one of the cheapest areas in the world for green hydrogen production.

    Chapter 3 also quantitatively analyzed the competitiveness of the green transformation industry in four countries in the Middle East and North Africa. The economic index utilized in this quantitative analysis was divided into the categories of growth, specialization, and potential, and the policy index was also analyzed by dividing it into legal systems and financial support. According to the analysis results, considering all aspects comprehensively, potential in the new and renewable energy industry is high in the order of Saudi Arabia, UAE, Morocco, and UAE. However, looking at the detailed index, it was found that there are strengths by region. First of all, Saudi Arabia and UAE, which are rich in domestic investment due to huge oil exports and imports, were evaluated to have a comparative advantage in economic index over Egypt and Morocco. On the other hand, Morocco and Egypt, which relatively lack domestic investment resources, seem to be actively attracting domestic and foreign investment by creating an institutional environment favorable to investment in the renewable energy industry.

    Chapter 4 analyzes surveys to select base countries in the Middle East and North Africa and to derive promising cooperation fields with statistics. To this end, a survey was conducted on experts in related fields at home. 100 survey answers were analyzed on a first-come, first-served basis. The survey adopted a analytical hierarchical process (AHP) method based on the relationship with Korea and the influence of trading partners. Considering diplomatic power, trade volume, private exchange, logistics infrastructure, location and stability, the market was subdivided. An analysis of the selection of candidates for bases using the AHP was conducted on domestic MENA and industry experts. According to the analysis results, the relationship with Korea has a weight about five times higher than that of the target country in the relationship between Korea and the influence of the target country. In other words, it can be seen that Korean MENA experts focus more on relations with Korea than on the influence of the target country. It also showed that diplomatic power weighed five times more than trade volume and private exchange, and that the logistics infrastructure was evaluated seven times more important than competitiveness, geopolitical, and political stability factors.

    In addition, based on 100 questionnaires, fields and products with high potential for cooperation with Korea were evaluated. The solar heat and light fields were evaluated as promising cooperation projects based on the geopolitical advantages of abundant sunlight and thermal energy in areas with high potential for cooperation with two North African countries. The area's most undervalued area is the bio sector. Promising eco-friendly energy products have emerged in the solar cell sector. Except for solar cells, secondary batteries, hydrogen cells, and ESSs showed normal scores in the 5-point range. In Saudi Arabia and the UAE, two Middle Eastern countries, solar and solar projects were also selected as the most promising areas of cooperation. It was investigated that products related to green transformation, which are promising to cooperate in the above two countries, are smart grids, solar cells, and ESS.

    Based on the examination of green transformation policies and environments in major Middle East and North Africa, the analysis of industry competitiveness of the major countries, and the extraction of possible fields and products of cooperation via survey questionnaires, this research has presented some suggestions which may contribute to mutual benefits towards MENA's industrial diversification efforts and our decarbonization strategy. The main suggestions are 1) forming a mid- to long-term dedicated TF in the Middle East and North Africa, 2) establishing a comprehensive win-win cooperation model with the countries, 3) seeking to advance together with advanced countries or companies, 4) expanding top-down approaches of summit diplomacy,  5) holding regular green transformation (reverse) roadshows, and 6) building networks and training professionals in the related fields.
  • 아프리카 문화콘텐츠 산업의 발전과 한국에 주는 함의
    Creative Industry in Africa from the Perspective of Korea

    Cultural and creative products are not just containers of historical and cultural identities but commercial goods tradable across borders. Simultaneously, culture is one of the primary sources of so-called “soft power,” along wi..

    Yongkyu Chang et al. Date 2022.12.30

    Economic cooperation, Industrial policy
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    Cultural and creative products are not just containers of historical and cultural identities but commercial goods tradable across borders. Simultaneously, culture is one of the primary sources of so-called “soft power,” along with political values and legitimate national foreign policy. Hence, the Korean government has been taking a leading role in building up the cultural and creative industry since the 1990s. The “Hallyu,” or craze for Korean creative products outside Korea, has been expanding across the world, from the epicenter of Asia and North America to the Middle East, Latin America and Africa. While such expansion led to interest in the mediascape of varied regions around the world, Africa has remained in the margin of academic and policy research of the creative industry. This report aims to provide information and analysis of the less studied mediascape in Africa.

    Given the growing cultural engagement between Korea and the countries in Africa, this report examines the creative industry in Africa from three distinctive perspectives of development cooperation in creative industry, cultural public diplomacy and trade in cultural and creative goods. Drawing on field research and secondary research on production, retailing and consumer environment in the creative industry, this report provides lessons for further inter-continental cultural engagement.

    Africa is a continent with 55 nations. Acknowledging the diversity in mediascape in each country, this report narrows its focus down to three representative countries. First, Rwanda, located in East Africa, provides an exemplary case of the media being used as a powerful political tool. The destructive role of radio during the genocide in the 1990s has been cited in explaining the danger of the media. The tragic experience resulted in strong government intervention in the creative industry. Second, Nigeria in West Africa is leading the production of films, particularly in the informal economy, which is better known as Nollywood. In the relative absence of government intervention, producers and retailers in Nollywood have built Nollywood into the world’s second largest movie producer in terms of the number of films produced. Third, South Africa reveals rather different roles of the creative industry in relation to most sub-Saharan African countries. Its creative industry is well integrated in the global value chain, and the South African government offers incentives to make its local creative industry more attractive to international producers and retailers. This policy direction is in tandem with reconciliation and development of the historically less-privileged by the post-apartheid government.

    Drawing on analysis of the three countries, the report suggests as follows. First, Rwanda provides the potential of development cooperation in creative industry. The size of the formal economy in the creative industry is, like that of most African countries, too insignificant to attract stakeholders in Korea’s creative industry. However, an increasing number of African countries, including Rwanda, Tanzania, and Ghana, are recognizing the role of the creative industry in economic growth. These countries lack institutional experiences to build up the industry. Therefore, such countries will become effective destinations of Korea’s development cooperation in the creative industry, focusing on capacity-building through the sharing of Korea’s knowledge and experience. Cities are better equipped in providing hands-on experience in the creative industry. Here, the government agency in charge of development cooperation (KOICA) can take the role of a pilot agency. Upon the request of partner countries, KOICA can initiate partnering the countries in Africa and cities in Korea which have relevant experiences in varied sectors in the creative industry.

    On the other hand, our research in Nigeria and South Africa offers lessons in light of public-private cooperation and private sector engagement. Nigeria reveals opportunities for public-backed private sector engagement. The government’s trade agency (KOTRA) can take a leading role in understanding Africa’s active-yet-unregulated market and provide private stakeholders with pertinent consultations. For instance, Nigeria is the largest economy in Africa with a massive pool of potential consumers for varied creative goods. Additionally, its film industry is distinctively commercial-oriented. Lastly, South Africa offers significant opportunities for stakeholders in the creative industry as a gateway country to Africa. Its creative industry is well integrated with the global value chain and its broadcasting companies and telecommunications companies are operating across Africa. Its infrastructure is relatively well-established and government regulations are in place to support international producers and retailers.

    In conclusion, existing studies on Africa’s creative industry remain mere translation of studies carried out by Western researchers. This report contributes to widening the territory of our understanding of the African mediascape from Korea’s own reference point. While this report limits its scope to three representative countries, further research is necessary to understand the mediascape of Africa better.
  • 아세안 지역의 저탄소 에너지기반 구축을 위한 한-아세안 협력 방향
    A study on the direction of cooperation between Korea and ASEAN to establish a low-carbon energy system in the ASEAN region

    As energy transition to respond to the global climate crisis has emerged as an important issue not only in developed countries but also in developing countries, the Association of Southeast Asian Nations (ASEAN) region is also exp..

    Hyun Jae Kim et al. Date 2022.12.30

    Energy industry, Environmental policy
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    Summary
    As energy transition to respond to the global climate crisis has emerged as an important issue not only in developed countries but also in developing countries, the Association of Southeast Asian Nations (ASEAN) region is also expanding their efforts to build an energy system centered on low-carbon energy. The ASEAN is facing various challenges in pursuing such energy transition while responding to increasing energy demand arising from rapid economic growth and rising population. In addition, most ASEAN countries currently rely on fossil fuels such as coal and gas for 80-90% of their energy supply, urgently demanding ground-breaking but realistic alternatives for low-carbon energy transition. Therefore, the objective of this study is to identify the potential for establishing a low-carbon energy infrastructure in the ASEAN region by analyzing the current status of the region’s energy sector, greenhouse gas emission trends, and the member countries’ low-carbon policy goals, and to explore the direction of cooperation in the low-carbon energy sector between the ASEAN and Republic of Korea with focus on areas where cooperation with Korea can be further expanded.

    In the ASEAN region, as of 2020, fossil fuels account for about 83% of primary energy consumption and play a pivotal role in the energy consumption structure. In the power generation sector, despite the dramatic increase in installed solar power generation capacity from 1MW to 22.9GW during the period of 2005-2020, as of 2020, fossil fuels (coal 33%, natural gas 30%, and oil 5%) still account for more than 60% of the region’s power generation capacity. Moreover, slow investments due to high costs of clean energy projects, low reduction targets, limited readiness to accept low-carbon technologies, weak policies and regulatory frameworks, and lack of flexibility in power systems are obstacles to establishing a low-carbon energy infrastructure in the ASEAN region. However, all nine ASEAN members except the Philippines have declared to reach carbon neutrality, and most ASEAN countries are strengthening their policies to achieve each of their greenhouse gas emission reduction targets through expansion of renewable energy, energy efficiency improvement, decarbonization of transportation sector, increase of electric vehicles, and decarbonization of industrial sector. In addition, through the ASEAN Plan of Action for Energy Cooperation (APAEC), the region is conducting seven multilateral cooperation projects to build a low-carbon energy infrastructure including ASEAN power grid project, and continuously carrying out bilateral cooperative activities in joint projects, technology development, human and policy capability building, and financing in low-carbon energy area with major countries including Korea, Japan, China, the US, Germany and Denmark.

    Considering Korea’s experience in entering the ASEAN in related areas, and the low-carbon energy implementation plans and measures of ASEAN countries, this study suggests the following six areas as promising ones for low-carbon energy cooperation between the ASEAN and Korea: ① solar power, ② energy storage system, ③ clean cook stove, ④ wind power, ⑤ biomass and ⑥ hydrogen. For solar power, where the most active investments are made in both Korea and the ASEAN, various business models can be considered for all ASEAN countries from utility-level large-scale solar power generation complex to floating solar model, agricultural solar model and hybrid model with energy storage system. Energy storage system connected to renewable energy can be built in inland areas or on islands where power price is high and power supply is not reliable. For clean cook stove, a business model suitable for local circumstances needs to be developed for those ASEAN nations which have been heavily using traditional biomass fuels by utilizing Official Development Assistance (ODA), support funds for developing countries, and funds from international organizations and banks. In case of wind power, since the ASEAN region is not rich in wind resources because wind speed is slow in many areas and Korea’s domestic wind turbine manufacturing technology and cost competitiveness are somewhat lagging behind overseas countries, pursuing joint small-scale projects with companies or countries in and outside of the region which have sufficient technology capabilities and experiences in wind sector is recommended. Biomass energy needs to be considered from the perspective of forming a stable supply chain of wood pallets rather than entering markets. Lastly, hydrogen seems to have high cooperation potential in production in the region and in domestic trade sector for green hydrogen based on renewable energy as well as blue hydrogen combined with natural gas and carbon capture and storage (CCS) technology.

    In addition, this study analyzes the long-term ripple effect of connecting ASEAN-Korea carbon markets through a computable general equilibrium (CGE) model. The analysis shows stronger positive effects are created in many economic indicators when Korea and major ASEAN countries cooperate jointly by connecting carbon markets rather than independently implementing their NDC. At the COP26 held in November 2021, major negotiations between the Parties to utilize international carbon market mechanism were completed, so it is expected that individual countries’ efforts to achieve their reduction goals using the international carbon market will become active in the coming years. Therefore, preemptive efforts to expand cooperative relations in carbon markets with major trading partners such as the ASEAN should be strengthened.

    Finally, in order to strengthen implementation to expand cooperation in ASEAN-Korea low-carbon energy sector, it is required to ① craft more sophisticated and specific policies and strategies for ASEAN energy cooperation; ② expand and strengthen financing support for the ASEAN and bilateral cooperation channels; ③ rebuild cooperation system to promote cooperation in the low-carbon energy sector with the ASEAN countries; and ④ consolidate efforts to expand and discover ASEAN-Korea cooperation projects by leveraging multilateral energy cooperation initiatives in which ASEAN countries participate including ASEAN+3, East Asia Summit (EAS) and Indo-Pacific Economic Framework (IPEF).
  • 북한 기후변화 적응을 위한 국제협력방안: 농업과 자연재해를 중심으로
    International Cooperation for North Korea's Climate Change Adaptation: A Focus on Agriculture and Natural Disasters

    North Korea was early to recognize the importance of responding to climate change, actively participating in international cooperation on climate change. In 1994, it joined the United Nations Framework Convention on Climate Change..

    Dawool Kim et al. Date 2022.12.20

    International politics, North Korean economy North Korea
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    North Korea was early to recognize the importance of responding to climate change, actively participating in international cooperation on climate change. In 1994, it joined the United Nations Framework Convention on Climate Change and the Kyoto Protocol and is now participating in the Paris Agreement, the current legally binding treaty on climate change. In 2000 and 2012, North Korea also submitted its National Communication on Climate Change to the United Nations Framework Convention on Climate Change, reporting on the impacts of climate change, adaptation measures, greenhouse gas emissions, and reduction plans. Internally, North Korea took steps to adjust to climate change, establishing the National Disaster Risk Reduction Strategy in 2019 and revising relevant laws and regulations. However, it still remains highly vulnerable to climate change. Moreover, sanctions against North Korea have prevented international efforts to support climate change adaptation in developing countries from reaching it.

    This study has two primary purposes. First, it analyzes the impact of climate change and North Korea’s response measures, focusing on natural disasters and agriculture, identifying the need for cooperation on climate change adaptation with North Korea. We present empirical evidence on the impact of climate change and policy performance in North Korea by using satellite data that observe North Korea in real-time, as well as domestic and foreign statistics, literature, and media reports. Second, we review the current status of North Korean international cooperation, focusing on natural disasters and agriculture, and provide suggestions for major cooperation tasks when South Korea supports North Korea’s adaptation to climate change. We emphasize the importance of cooperating with the international community in this context.

    The findings of each chapter are as follows. In Chapter 2, we reviewed the status quo of climate change and natural disasters in North Korea and evaluated the risk factors of natural disasters in North Korea. Dramatic climate change was observed in North Korea, with an increase in temperature in spring and precipitation in summer. Natural disasters occurred almost every year. Floods, which occurred most frequently, often caused large casualties. Droughts, although infrequent, affected more than 10 million people on average. Natural disasters have also been found to have far-reaching effects in delaying the achievement of the SDGs in North Korea, which might result from the high risk of comprehensive natural disasters in North Korea. Based on the INFORM risk index, frequent natural disasters and food shortages in North Korea are increasing North Korea’s vulnerability to disasters, and insufficient institutions and infrastructure are also factors that increase North Korea’s disaster risk. Farmland regions and South Hwanghae Province were found to be highly exposed to floods, raising the possibility of a vicious cycle between natural disasters and food shortages.

    In Chapter 3, we used remote sensing data to empirically analyze the impact of extreme weather on North Korea’s agricultural sector, and derive implications for food security in North Korea with the need for international cooperation regarding climate change. Our empirical analysis showed that both rice productivity and maize productivity were negatively affected by heavy rain and drought. North Korea, being a country with a very high food self-sufficiency rate but an absolute shortage of food, is in a highly vulnerable situation to external shocks such as abnormal climate change in terms of food supply and demand. Considering that the occurrence of extreme weather is gradually increasing in North Korea, additional support through international cooperation from a humanitarian standpoint is required for North Korea to respond to extreme weather.

    In Chapter 4, we analyzed North Korean laws, regulations, and policies relevant to natural disasters and agriculture. We found that North Korea has a dual disaster control system at the national level and the local level. In order to prevent disasters, North Korea has primarily pursued massive mobilization projects for its national land management. Although the overall degree of deterioration of water resource facilities in North Korea is considerable, analysis based on satellite data confirms that new water resource facilities have been constructed and the massive mobilization project has achieved limited success. In the agricultural sector, North Korean authorities are aware of the impact of climate change on agriculture, and various laws and regulations include provisions to prevent and prepare for natural disasters. However, the provisions of these laws all focus on prevention. These approaches have limitations in that they do not provide the legal basis necessary for disaster risk reduction or when recovering from damages. In response, North Korea has continuously emphasized that the agricultural sector is a core pillar for North Korea within the 5-year national economic development strategy, the 5-year national economic development plan, and the rural development strategy. The authorities have presented tasks to increase production throughout the entire agricultural sector. It is worth nothing that these agricultural policies mention climate change-related factors that hinder agricultural production, such as catastrophic extreme weather, but the specifics of the strategies and plans to practically reduce the impact of climate change are nearly absent.

    In Chapter 5 we reviewed discussions regarding climate change in the international community and analyzed trends in cooperation between the international community and North Korea regarding climate change adaptation, agriculture, and natural disasters. The concept of “adapting to climate change” was established at the 16th COP, and was reflected in the most recently adopted Paris Agreement, the New Climate Framework, and the Glasgow Climate Agreement. The NAP-Ag program harmonizing agriculture to the National Adaptation Plan (NAP) is supported by the UNDP and FAO in the agricultural sector. Regarding natural disasters, countries were urged to reduce disaster risk and strengthen disaster resilience centering on the Sendai Framework. North Korea has actively participated in discussions related to climate change and the environment in the international community by joining major international agreements and strengthening its efforts to adapt to climate change. Aid to North Korea continued at a steady pace even after the sanctions leveled against it, with the Humanitarian Country Team (HCT) taking the lead and working closely with North Korean counterparts. International organizations and NGOs affiliated with the HCT have put forth major efforts in areas such as food security, natural disaster response, nutrition, and agriculture. However, they are also facing multiple issues due to North Korea closing its borders, as well as external conditions such as COVID-19 and economic sanctions.

    In Chapter 6, we emphasized the need for cooperation with the international community in climate change adaptation cooperation with North Korea and derived primary cooperation tasks for natural disasters and agriculture. Although adaptation to climate change is an urgent issue, the current internal and external environment, such as sanctions against North Korea and rising military tensions on the Korean Peninsula, is not favorable to promoting inter-Korean cooperation. Although this is an inevitable effort for denuclearization of the Korean Peninsula, it is not desirable for the so-called “Green Détente,” i.e. peacemaking through environmental cooperation on the Korean Peninsula. Under these circumstances, cooperation with North Korea through the international community can be an effective way to support North Korean adaptation to climate change and strive for a Green Détente. International organizations and many European countries urged the implementation of sanctions against North Korea, condemned North Korea for armed provocations, but at the same time, continued cooperation with North Korea. It is necessary to seek ways to cooperate with the international community to help North Korea adapt to climate change through various channels, such as international environmental agreements and joint cooperation projects with international organizations, NGOs, etc. This study seeks to enhance the understanding of disaster risk, contribute to disaster risk governance, promote investment in disaster risk reduction, improve disaster preparedness and recovery, and reduce agricultural damage caused by extreme climates.

  • Regulatory Similarity Between APEC Members and its Impact on Trade
    Regulatory Similarity Between APEC Members and its Impact on Trade

    This paper examines the regulatory similarity between APEC economies by NTM types and sectors. We calculate the regulatory distance proposed by Cadot et al. (2015) and identify which industries or NTM type needs further cooperatio..

    Bo-Young Choi and Inae Heo Date 2022.12.16

    Barrier to trade, Free trade
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    Executive Summary

    I. Introduction

    II. The SPS and TBT Chapter of CPTPP and RCEP
    III. Trade Barriers in APEC

    IV. Data and Methodology
    4.1. Data
    4.2. Regulatory Distance of APEC members
    V. Main Results
    5.1. Country-level analysis
    5.2. By-sector analysis
    5.3. Further analysis: by technology level
    5.4. Further analysis: by product differentiation
    VI. Policy Implications and Conclusion

    References

    Appendix
    Summary
    This paper examines the regulatory similarity between APEC economies by NTM types and sectors. We calculate the regulatory distance proposed by Cadot et al. (2015) and identify which industries or NTM type needs further cooperation through the Free Trade Area of Asia-Pacific (FTAAP). We refer to the two pathways of FTAAP, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) and analyze how FTAAP may incorporate the existing mega FTAs to reduce regulatory disparities among APEC economies. We find that regulatory distance differs across industries and thus focusing on specific industries like CPTPP may be an effective way to mitigate unnecessary trade costs attributed to the heterogeneity of regulations. We also argue that including provisions related to technical assistance and capacity building is essential as regulatory distance is especially big between developed economies and developing economies.
  • Are Taxes Drivers of House Prices? : Cross-Country Evidence from (Advanced) Eco..
    Are Taxes Drivers of House Prices? : Cross-Country Evidence from (Advanced) Economies in APEC

    This paper investigates the determinants of house prices in APEC countries. We focus our analysis on the role of property related taxes as well as other important macroeconomic variables. Tax is one of direct tools of government f..

    Yeo Joon Yoon and Woong Lee Date 2022.12.16

    APEC, Tax
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    Summary
    This paper investigates the determinants of house prices in APEC countries. We focus our analysis on the role of property related taxes as well as other important macroeconomic variables. Tax is one of direct tools of government for influencing housing market. Therefore, analyzing how these taxes affect house prices provides direct policy implications. Our result suggests that the property tax is negatively associated, while the acquisition tax is positively related with the house prices. In shaping this outcome, the force from demand side as well as that from supply side are working at the same time. A higher tax usually increases costs of acquiring and maintaining houses which exerts upward pressures on house prices. On the other hand, a higher tax suppresses demand for houses because less people purchase houses as the costs increase. These two opposing forces interact with each other to yield qualitatively different results regarding the acquisition and property tax.

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