Preface

 
1. Introduction

2. World and Korean Economy after the Global Recession

3. Three Structural Changes
3.1. Model
3.2. Constructing Counterfactual Scenarios
3.2.1 Aging Population
3.2.2 Rising Income Inequality
3.2.3 China’s 13th Five-Year Plan
3.3. Results
3.3.1 Aging Population
3.3.2 Rising Income Inequality
3.3.3 China’s 13th Five-Year Plan

4. Brexit
4.1. Model
4.2. Constructing Counterfactual Scenarios
4.3. Results
4.4. Appendix: Additional Figures

5. Summary and Policy Implications
5.1. Summary
5.2. Policy Implications

References 

  The Korean economy still faces severe headwinds from the weak growth recovery. Since Korea’s growth path has tended to converge to that of the global economy since 2003, Korea’s recent growth moderation partly reflects a still-weak global economy. Along with a weak growth in domestic consumption, Korea’s substantial export disruption might lead to a further slowdown in the Korean economy in the future.
  In this monograph, we suspect that there are common and structural global factors behind the convergence of Korean economy to the slow growth path of the global economy. Motivated by the recent policy-oriented works, we have analyzed the four structural, external changes of aging population, rising income inequality, the implementation of China’s 13th Five-Year Plan, and Brexit. In particular, we have quantified their effects on the Korean economy and analyzed the mechanism through which the structural changes affect the Korean economy.
  Our first finding exhibits the important role played by private domestic demand. Both rising inequality and aging population affect Korea’s GDP primarily through the private domestic demand channel. In the beginning of the implementation of China’s 13th Five-Year Plan, the external sector is the main driver of affecting Korea’s GDP. Over time, however, the channel through which private domestic demand affects Korea’s GDP outweighs external channels such as net export. Therefore, our results in Chapter 3 show that implementing policies, of which target is the domestic variables, can be more effective.
  Second, the policy to address aging population through raising the fertility rate should take into account trade-off between current employment and investment and the number of future working aged population. Our results show that an increase in fertility rate has negative consequences in current employment and investment. The result is consistent with our intuition that if women have more children, they are less inclined to supply labor. Therefore employment would decline. At the same time, because production factors, labor and capital, are complementary, a decrease in employment would lead to investment slowdown. On the other hand, raising the fertility rate implies an increase in the future working aged population. Again due to complementarity between production factors, this can boost investment and pick up growth in the future. Therefore, implementation of the policy to address aging should be based on the optimal growth of population and take into account trade-off between its short run and long run effects.
  Third, we need to deeply look into the whole income distribution to address rising income inequality. Our results show  that looking at one single index of inequality might be insufficient to analyze the consequences of inequality. Population within the different income groups might play a different role and the aggregate consequences might depend on the whole income distribution. For example, one of our results illustrate that the population within the top one percent income group tends to have positive consequences on employment and investment. In the absence of detailed data, however, we cannot tell what kinds of people among them would benefit domestic demand. Instead of targeting a single index for inequality, therefore, policy tools to address rising inequality should be grounded by further information on the whole income distribution.
  Finally, we devote Chapter 4 to the quantitative analysis of Brexit. At first glance, our results do not seem to be consistent with the standard gain from trade liberalization. For example, Korea can sometimes lose from an FTA with the United Kingdom. Instead, raising trade barriers against the United Kingdom sometimes benefit Korea's growth. Our seemingly counterfactual results would arise from the interaction between capital accumulation and market access versus the substitution effect. In particular, ending an FTA with a certain country might benefit our other trading partners if we import goods from them instead of the original exporter. Such substitution effect might be large enough to give us back the benefit especially if the other new trading partners are fast growing economies.
  Equally importantly, however, we do not argue that our results are against the general gain from trade liberalization. Instead, we argue that our results confirm the overall gains from trade liberalization again. Depending on factors such as a country’s input-output linkages with other countries, moving up and down in global value chains, and whether a country and its trading partners are growing, a country could either gain or lose from an FTA with a specific country. Given that the gain from trade liberalization may not be bilateral in practice, a careful approach to quantify the effect of trade liberalization should be necessary before the implementation of an FTA with a certain country.  

  Since the Global Europe Initiative in 2006, the EU has conducted active trade policy measures to contribute to economic growth, job creation and social cohesion in the community. One of the conspicuous features of the new trade policy is that the EU does its best to support EU companies to benefit from better market access through new trade policy tools. Comprehensive and high-leveled bilateral FTA initiatives, among others, have rapidly emerged as a major tool of the new trade policy to achieve the goals.
  The aim of the research is to illuminate how the goals of the new trade policy have been achieved through EU's FTA strategies. To do this, this research focuses on the three topics of EU standards, evaluation process of market openness and the global value chain (GVC), that is, how much EU's FTA strategies have contributed to achieving globalization of EU standards, job creation through careful evaluation processes and economic growth of the community by utilizing GVCs.
  First, the EU has made tremendous efforts to export its standards to other countries through various FTAs. Within its Community, the EU has tried to introduce unified technical and sanitary standards, but after little progress was observed, revised its standardization strategy to adopt a narrower harmonization area, leaving more flexibility in the area of general conformity. Since 1989, the EU has conducted international standardization of its community standards, and the process has been accelerated through bilateral FTAs after the new trade policy was initiated in the mid-2000s. The Korea-EU FTA was one of the best examples of EU's efforts in standard internationalization, which was also adopted in the EU-Canada CETA and the EU-Vietnam FTA. In the mega-FTAs, EU's efforts to export its standards do not seem to be so successful, not only because the EU faced big confrontation against the U.S. throughout the TTIP negotiations, but because uncertainties have grown after Brexit and a variety of standards have sprung up in the world recently.
  Second, it is utmost important that the FTA evaluation process should be carefully designed and conducted properly, in order to assess any impact of FTAs on community labor markets. EU has set out four stages for this evaluation process: impact assessment (IA), sustainability impact assessment (SIA), economic assessment of the negotiated outcome, and ex post evaluation. These assessments not only encompass aspects of quantitative economic analysis, but also qualitative economic analysis and social impacts such as broad impacts on the labor market, SMEs, competitiveness, income distribution, environment, human rights, etc.
  The trade sustainability impact assessment (SIA), among others, is particularly interesting with regards to the impacts of FTAs on employment. In the EU-Korea FTA SIA report, it is revealed that the Korea-EU FTA would bring about positive impacts on agriculture and services employment, but minor negative impacts on the manufacturing labor market. The dairy industry, with the exception of pork, would win in the case of a EU-Canada CETA, and manufacturing including automobiles would gain in employment in the case of an EU-Vietnam FTA. The TTIP may lead positive impacts on employment through a mutual investment boom, the TTIP SIA argues.
  Third, the FTAs pursued by the EU make full use of expansion of GVCs. The EU has set out global standards, prevailed competition in the services market, moved to high value-added stages in GVCs, strengthened market access not only in final goods but in the intermediate goods market. In addition, EU has increased forward linkage participation, provided better protection for IPRs, facilitated e-commerce, financial services supply and mode 4.
  Based upon the EU's FTA strategies revealed in its new trade policy, the following policy implications would follow: First, as for standard internationalization, we need to scrutinize various regulations and standards into several categories, and deal with them to the purposes. In case the standards would be helpful to globalize Korean standards, then we need to introduce them, which would help Korea lead the standard competition in East Asia. In newly emerging areas including IT, environment, and new technologies related to the fourth industrial revolution, it would be strongly recommended to lead platform competition. In this regard, we need to examine Chinese standards as they have rapidly emerged as a new competitor in the area of international standards.
  Second, Korea has its own assessment system in FTAs, but we need to cover a wider range of assessment fields such as social impacts and qualitative and institutional areas. A four-stage assessment system would be much more recommendable to conduct careful assessment of market opening. A stricter assessment process would be much helpful in maintaining public support to further FTA initiatives.
  Third, in order to make full use of GVCs, it is much desirable to upgrade value chains, and strengthen market access in East Asia in all stages of process. We need to focus more on the issues how to lift NTBs, widen services market opening, and persuade our trade partners to conduct enactment and enforcement of IPR protection. A single market for e-commerce and services must be established in East Asia. In order to harmonize different rules of origin among FTAs in East Asia, special dialogue channels must be created in RCEP or Trilateral FTA. More importantly, cooperative bodies for the East Asia Regulatory Dialogue can be utilized. 

  The Brexit referendum, which took place on 23 June, 2016, revealed the British people’s willingness for their country to leave the EU. The year 2017 will witness the beginning of Brexit negotiations between the UK and the EU taking place in a time full of uncertainties arising from the possibility of the negotiations extending beyond the originally planned duration of two years, ambiguity in EU’s competency areas leading to a complicated decision-making process in the Council, whether or not British MEPs should be given voting rights in the European Parliament, and so forth.
  One of the key issues in the relation between the UK and the EU in the post-Brexit era is whether or not the UK maintains full access to the Single Market, which is directly related to the issue of if the principle of free movement of the four factors of people, capital, goods and services still holds after Brexit. It will be a key factor to evaluate accessibility to the Single Market if British sovereignty on commercial policy and immigration is restored, and the principle of homogeneity does hold. Thinking carefully over several cases of the models of Single Market, half Single Market, or non-Single Market would lead to a pessimistic reasoning that the UK would hardly be able to maintain Single Market accessibility, and be inclined to take the non-Single Market model.
  With regard to the macroeconomic impacts of Brexit on the world and Korea, Brexit is expected to have negative impacts on the world in the short-term while having positive impacts in the longer-term. The world economic growth rate may slow down by 0.1?0.4% in 2017 and 0.1?0.7% in 2018, and Korea’s growth rate may also shrink by 0.1?0.5% in 2017 and 0.1?0.8% in 2018. Negative impacts would be spread out not only in the stock market and employment, but also in the areas of consumption and investment, with a harder hit being dealt to investment than consumption.
  In the medium-to-longer term, Brexit brings about positive impacts on the third countries including Korea in terms of economic growth and consumer welfare. Korea’s economic growth would be accelerated by 0.088% and 0.043% in the cases of Hard Brexit and Soft Brexit, respectively. Without a Korea-UK FTA, the positive impacts of Brexit on Korea’s growth rate would diminish by 0.038% (Hard Brexit) and 0.037% (Soft Brexit) from the previous positive numbers. Hard Brexit will decrease the growth rates of the UK and the EU by -1.56% and -0.18%, while Soft Brexit will do so by -0.949% and -0.133%. Establishing a new Korea-UK FTA results in a positive impact on the UK economy by 0.018% (Hard Brexit) and 0.017% (Soft Brexit).
  This study analyzes the impacts of Brexit on the production and export of Korea’s industries, too. First, Brexit leads to shrinking exports of Korea to the UK, and negative impacts would be bigger in the case of industries with stronger GVCs, such as manufacturing. Second, an elasticity analysis shows us that the automobile industry is one of the most sensitive industries in Korea’s exports to the UK, while the textile and leather industries are the least. With regard to Korea’s export to the EU, primary metals and chemicals are susceptible to GDP changes in the EU led by Brexit, while the automobile industry is less so. Third, Brexit leads to positive impacts on Korea’s industrial production in the long-term if Korea-UK preferential trade relations are established. Such a positive influence would be larger in the case of Hard Brexit than that of Soft Brexit. Automobiles and textile are estimated to be the biggest beneficiary industries. Without a Korea-UK FTA, most of industrial production shrinks in the case of Soft Brexit, while no clear signs can be observed in the case of Hard Brexit. Fourth, Brexit may lead to rather moderate impacts on the Korean banking and financial sector. The negative impacts of losing passporting rights in the European continent will be minimized at least in the short-term, as most of Korean banking and financial institutions have maintained a separate market strategy between the UK and the rest of the EU, and/or have not actively used the rights in their business. In the longer-term, it is true that rising uncertainty and costs from Brexit will be harmful to outbound activities of Korean financial companies. As for the inbound area, the most important factor that influences foreign banking and financial companies’ business activities in Korea will be the attractiveness of Korean assets in general, related to fundamental economic conditions rather than institutional changes led by Brexit.
  In the post-Brexit era, Korea-EU and Korea-UK economic and commercial relations will be heavily dependent upon various factors including the direction of revision of the Korea-EU FTA, EU-UK relations after Brexit, the contents of the Brexit agreement, economic conditions in the UK and the EU after Brexit, and so on. As both Korea and the EU have considerably benefited from the Korea-EU FTA, it is now a proper time to think about how to upgrade this FTA after five years of entry into force. Therefore, it would be utmost important to retain preferential trade relations between Korea and the UK after Brexit, which requires the initiative to embark on a new Korea-UK FTA after the Brexit agreement between the EU and the UK is concluded.
  A way to minimize the negative impacts of an institutional vacuum in the economic relations between the UK and Korea after Brexit, would be to include an interim clause of “extension of the preferential factors of the existing Korea-EU FTA to the case of Korea-UK” in a revised Korea-EU FTA.
  Based upon the analysis, we draw the following policy implications: First, the process of a sustainability impact assessment on market opening initiatives such as FTAs needs to be carefully designed and strictly implemented. Brexit is an exemplary case that symbolizes the anti-liberalization and protectionism in major developed countries. This is, in a sense, like a revolt by the ordinary people against elitism and globalization led by elites in the advanced economies. In order for market opening policies to successfully exploit foreign markets and enhance efficiency in the domestic market through strengthened competition, the general public should be brought to realize the benefits of market opening policies, which requires a more comprehensive and well-designed sustainability impact assessment process.
  Second, better communication and closer cooperation between government, private companies and related industry associations are needed to cope with the growing possibilities of negative impacts of Brexit on some industries with higher GVCs, as those industries are more susceptible to negative impacts from stronger direct effects.
  Third, Korea-UK relations need to be newly developed apart from the Korea-EU relations. Brexit will accelerate the divergence of the UK economy from the EU, which will require an independent policy towards the UK. Trade policy toward the UK needs to consider the multi-layered characteristics in the economic relations of the UK not only with the EU but also with transatlantic nations, the Commonwealth, East Asia, etc. In this regard, Korea needs to make full use of strengthening its financial network with the UK, especially for the inbound business area, as the UK’s business activities in the banking and financing sector may become more active and worldwide after Brexit.
  Fourth, the contemporary Korea-EU FTA needs to be revised in due course. The first step to revise the pact is to include any change of circumstances after Brexit. Additional protocol on the occasion of Brexit is to be developed and attached to the original text. The second step to revise the pact is to embark on a new deal for full-revision of the pact, making considerations to rebalance mutual interests, as Brexit provides the off-balance fields of interests in the existing Korea-EU FTA. The five years of entry into force of the FTA, together with Brexit, raise the necessity for revision of the pact, too. A temporary extension of the preferential provision to the case of Korea-UK needs to be reflected in the revised pact.
  Fifth, it is not too early to think about a concrete type of Korea-UK FTA. There is no reason for the Korea-UK FTA to be a duplication of the Korea-EU FTA, as the economic structure of the UK is quite different from that of the EU. A new pact between Korea and the UK should reflect careful consideration on the areas that the UK had asked for but failed to include within the EU’s request lists in the Korea-EU FTA, detailed compilation of the industries with comparative edges of the two, and strategic judgement on the change in the cumulation method between the UK and the EU after Brexit. We need to consider the issues in market opening in services and in enforcement of IPR, especially in agricultural IPR, and those in sustainable development areas.
  Sixth, as mentioned above, Brexit is a symbol of protectionism and anti-globalization, and it is not good for a small, open economy like Korea to contribute to this trend. Therefore, we should make honest efforts to set out a virtuous mechanism to spread the fruits of market opening out to all people in the society and to firmly abide by trade liberalization in international organizations such as the OECD and WTO, and multilateral fora like G20, ASEM, APEC, and so on. 

  This study examines the necessity and possibility of an inter-Korean FTA to expand inter-Korean economic cooperation and prepare for economic integration between the two Koreas. First, in Chapter 1, we conceptualize an FTA between South and North Korea as a Closer Economic Partnership Arrangement (CEPA), an FTA between two independent tariff zones in one country, reflecting the special relationship between the two Koreas. This CEPA between South and North Korea would aim at gradually liberalizing trade in goods and services, and facilitating trade and investment. Considering the current system and economic realities of North Korea, it will be necessary to approach the FTA by starting with a low or provisional FTA and gradually increasing this level according to North Korea's regime change and economic development. Therefore, a CEPA between the two Koreas represents an initial stage of economic integration between the two.
  In Chapter 2 we analyze the cases of the China-Hong Kong CEPA and China-Taiwan ECFA in terms of their respective backgrounds, process, legal status, major contents, and economic effects realized by the FTA. The China-Hong Kong and China-Taiwan FTAs ??are similar in that both specified the direction of opening and cooperating in each sector during the first round of negotiations, and then further defined the necessary regulations through follow-up negotiations. However, while the China-Hong Kong CEPA systematically opened the market through supplementary agreements once a year, the China-Taiwan ECFA has not led to specific negotiations for goods and services trade besides the EHP (Early Harvest Program). As a result, the performance of the two FTAs ??shows a marked difference. These differences are mainly attributed to differences in China’s political relations  with Hong Kong and Taiwan.
  Chapter 3 reviews the main contents of the CEPA. Already, the two Koreas have much better economic cooperation agreements than any between China and Hong Kong or Taiwan before their FTAs. Therefore, the CEPA of South and North Korea should be promoted in a way to accommodate and develop the existing economic cooperation agreements rather than starting from nothing. In this regard, Chapter 3 discusses the existing inter-Korean economic cooperation agreements and discusses the principles to be considered in the conclusion of the CEPA, such as principles of commodity trading (tariff, non-tariff barriers, and rules of origin), service trade and investment, trade and investment facilitation and dispute settlement. As a result, it becomes evident that non-tariff barriers need to be utilized appropriately in order to cope with any potential damage caused to each industry and class in the two Koreas. In addition, in the area of ??rules of origin and trade and investment facilitation measures, it is clear that there is still much need for detailed agreements between the two Koreas.
  Chapter 4 examines the problems of current inter-Korean economic cooperation from the perspective of international trade law, and suggests the necessity for an FTA between the two Koreas as a countermeasure to this problem and other related issues. Currently, the trade between the two Koreas proceeds as a “domestic transaction” based on the principle of zero tariffs. However, non-tariff transactions between the two Koreas can cause various international trade legal issues. In particular, there is the risk of violating the MFN, which is one of the basic obligations of South Korea as a member of the WTO under the GATT/WTO Agreement. Also, any preferential treatment for North Korea provided in line with the South-North Economic Cooperation Policy could also be objected to as a violation of WTO treaties. As a result, it was shown that the conclusion of an FTA or regional trade agreement between the two Koreas would be the best way to be recognized as an exception to obligations under the GATT/WTO Agreement. In addition, we also examined international trade legal issues such as those relating to North Korea's non-WTO status, meeting the requirements of Article 24 of the GATT, and the status of North Korea's non-market economy (NME) when concluding an FTA (CEPA) between the two Koreas. In conclusion, we could find no serious international trade legal issues in proceeding with such an agreement within the present situation. However, considering the scale of exchanges between North and South Korea, and the level of economic development in North Korea, the most practical way to conclude an FTA would be ??in the form of “tentative agreements” allowed by the WTO prior to concluding a formal FTA.
  Chapter 5 analyzes the economic effects of the CEPA between the two Koreas in terms of GDP change and production inducement effect. First, the GDP of North and South Korea was analyzed through the Growth Accounting Model. If a CEPA is concluded, South Korea's GDP will increase from 1,822.8 trillion won in 2020 to 3,067.5 trillion won in 2039, and North Korea's GDP will increase from 38.0 trillion won in 2020 to 308.3 trillion won in 2039. As a result, the income gap between North and South Korea will decrease from 21.4 times in 2020 to 5.2 times in 2039. The trade between South and North Korea will also rise to 2.32 billion dollars in 2020 (0.15% of South Korea's GDP, 7.2% of North Korea's GDP) to 4.93 billion dollars in 2039 (0.18% of South Korea’s GDP, 11.0% of North Korea's GDP).
  Next, we analyzed the changes in the vertical integration structure of the two Koreas and the changes in the final demand ripple effect using the production inducement coefficient of the inter-industry table. The degree of vertical integration between the two Koreas after conclusion of a CEPA shows that the proportion of intermediate goods input to South Korea in the light and heavy industries increases in the case of North Korea whereas the proportion of intermediate goods input to North Korea increases in mining and light industries in the case of South Korea. In addition, the intra-regional and inter-regional effects both increased after the CEPA according to an input-output analysis between the two Koreas. The effect within the North Korean region was 14.8 at the stage of general exchange and cooperation, but after the signing of the CEPA this increased to 16.4. In South Korea, the level of increase was from 18.77 to 19.86. As for inter-regional effects, the effect of North Korean final demand (export) on the Southern region increased from 0.2289 to 0.6394, and the effect of South Korean final demand (import) on the Northern region increased from 0.0243 to 0.0585. Meanwhile, we estimated the production inducement effect by final demand item by applying an estimation result of GDP and trade size increase before and after the signing of the CEPA between South and North Korea. The results showed the effect of the increase in South Korea's final demand (imports) to North Korea rising from 2.44 to 2.90 after the signing of the CEPA, while North Korea's dependency on South Korean production inducement increased from 2.9% to 7.4%.
  Finally, Chapter 6 explains the results and limitations of this study and suggests policy implications. Given the dynamics of inter-Korean relations, it seems important for the two Koreas to secure the “irreversibility” of agreements reached by defining as much detail as possible during the initial negotiations. In addition, the CEPA needs to be designed to minimize negative effects and ensure positive effects for economically weak sectors for a certain period of time after the conclusion of the CEPA. Lastly, it will be necessary to focus on the long-term economic integration effect rather than the short-term economic effect when proceeding with the CEPA. 

  Urbanization refers to a demographic change where the population residing in urban areas increases. Africa's urbanization is happening at an unprecedented speed as its urban population is expected to increase from its current level of 40% to over 50% by 2030. Generally speaking, urbanization leads to economic development through the agglomeration of factors of production, economies of scale, reduction of transaction costs and productivity advancement, attraction of domestic and foreign investment, and technology absorption. In fact, urbanization can be seen as the cradle of industrialization and economic development. The compressed and rapid growth of Asian countries such as Korea and China is in great part due to the development of urban areas. However, the cities of Africa seem to create “a new form of poverty” rather than acting as a driving force for development. Gleaser (2011) and others determine the favorable functions of urbanization based on the development theory of Arthur Lewis and Simon Kuznets, but also mention the vicious cycle of development due to “urbanization of poverty” or “geographical concentration of poverty.” Africa is a case of the latter, where the lack of physical and institutional infrastructures is exacerbated by the population increase, thus leading to the deterioration of cities.
  Nevertheless, Africa's urbanization is gaining the spotlight as cities provide a geographical space that produces the most economic value and function as a powerhouse for economic growth. In fact, because cities create 80% of the global GDP it is difficult to find a country that has achieved attractive economic development without urbanization. Obviously urbanization itself does not necessarily mean industrialization or economic development but it certainly functions as an engine for economic growth and transformation. African states underline sustainable urban development in their national development strategies, which include urban development policies, physical and institutional infrastructure servicing, new town development, urban production base as the essentials. A Pan-African infrastructure project that connects important point cities to create a development corridor and encourage intra-economic integration is under progress. 
  As such, the cities of Africa are a space of development and growth as population expansion and national development policies are both focused on cities. This phenomenon of urbanization is an opportunity for both development and economic cooperation. Africa's urban infrastructure is severely lacking and damaged but the demand for its development has surged with the fast and continued speed of urbanization.
  In recognition of such problems, we attempted to analyze in depth the development of Africa's urbanization and discover avenues of cooperation between Africa and Korea in the area of infrastructure by examining the urbanization issue, one of the economic and social development paradigm shifts currently occurring in Africa. A brief outline of our discoveries on the characteristics of Africa's urbanization is described below.
  First is “urbanization without industrialization.” Generally, urbanization occurs through industrialization but in Africa's case the urban population is rapidly increasing in the midst of deindustrialization. Sub-Saharan Africa's manufacturing to GDP ratio has decreased from 20% in 1970 to 12% in 1980 and 11% in 2013 while the rate of urban population growth has outpaced other regions. Second is the disorderly urban expansion and ghettoism. Africa's urbanization is creating massive slum areas mainly in the city outskirts. As a result, more than 60% of the urban population live in slums. Access to basic social services such as electricity, drinking water, sewage systems and sanitary facilities is limited while the government's administrative influence remains absent.
  Third is the poor urban infrastructure. While Africa's urban population has expanded rapidly, cities are backward and have nearly lost their original function due to the lack of basic infrastructures such as roads, power, sewage systems and sanitary facilities. Lastly, although much of the population still live in absolute poverty, the consuming class or the middle class is concentrated around metropolitan areas and rising as the new consuming entities. Many western-styled malls and department stores are being built across Africa where consumers including the young generation visit regularly, a scene similar to that of a developed country.
  Meanwhile, through our calculations on the potential demand for Africa's infrastructure development we have discovered that demand for power was the highest, as expected, followed by road and health and sanitary facilities. Demand for electricity development was highest in the western and northern areas where oil-producing countries are mostly positioned, while being lowest in the southern area where the relatively well powered South Africa is located. The development demand for road and health and sanitary facilities was relatively high in western and eastern areas. We also estimated the demand for urban infrastructure development in Africa and found that 605.8 trillion dollars was in demand annually between 2016 and 2030 due to urbanization.
  Regarding the direction of Korea's infrastructure cooperation with Africa, we took a three dimensional approach: urban development policy (soft infrastructure), physical infrastructure (hard infrastructure) and an urban production base (hard/soft infrastructure). When considering the level of competence Korea possesses in entering the development cooperation market of Africa, it will be necessary for Korea to select areas to concentrate its capacities in. Priority areas and directions of cooperation were identified as follow.
  First, Korea can support urban development policies. Establishing the necessary institutional infrastructure and physical infrastructure for sustainable urban development is important. Currently only 16 countries out of 54 have a national urban development policy and even with a comprehensive policy in place the capacity of government officials implementing the policies is poor, which doubles the burden. Korea has extensive experience and comparative advantage in designing urban development policies that should be put to practical use. One of the most difficult hurdles to overcome in establishing an urban development policy is land ownership and therefore there is a need to support the reorganization of land such as through the construction of a land registration system. Land ownership is mainly divided into government, community and private ownership but conflicts over land have amplified because around 90% of the total land is unregistered and rapid urbanization is pressuring land ownership. AfDB has noted three core task areas for sustainable urbanization, which are: 1) expanding infrastructure (urban infra), 2) establishing small and medium-sized cities that organically connect farming areas, and 3) systemizing land ownership. The World Bank and other aid agencies also recognize this problem and are actively supporting the establishment of a land registration system and enhancing land management capabilities. Based on the experience and know-how gained through implementation of the Korea Land Information System (KLIS), the Korea Land and Geospatial Informatix Corporation can provide development aid on building a land administration system that includes a land database and a land registration system, as well as technological support for training land administration personnel. The corporation is currently actively engaged in building land registration systems in Latin America, Southeast Asia, Central Asia and other countries. Their activities can be expanded to Africa where an efficient land management system is in need.
  Moreover, African states underline the importance of building small and medium-sized cities that have the basis for industrial production for sustainable urban development as a consequence of rapid urban expansion. Therefore, Korea needs to take a systematic approach toward establishing a comprehensive new town master plan and then developing follow-up projects. Korea has successfully developed various new towns during its rapid urbanization and thus has accumulated various development know-hows and experience, such as in design vocabulary, space planning, land use, funding, analyzing cost effectiveness and creating an industrial base. African states have shown interest not only in the physical infrastructure but also in the contents of Korea's new town development such as industrial clusters, state-of-the-art urban industrial complexes, Free Economic Zones, special R&D zones and U-cities. Supporting the creation of comprehensive new town development plans could lead to the participation of Korean companies in development projects on a large-scale.
  Second, the extreme traffic congestion in African metropolitan areas is an issue of acute concern. There is a need to support the development of a transportation master plan through which Korea can enter the African market. A systematic and comprehensive urban traffic master plan is required to solve the fundamental problems because improvement measures at the local level alone are insufficient. A master plan that encompasses the development of a traffic demand model, traffic network plan, traffic control, state-of-the-art traffic systems and parking control systems is in high demand for Africa's development, which can be sufficiently supplied by Korea. Korea has supported the implementation of urban transportation master plans in various developing countries in Southeast Asia, Latin America and other regions. Korea should expand its expertise in Africa to lay the groundwork for entering the African infrastructure market. Korea could suggest building the Intelligent Transport System (ITS) as a short-term cooperation project within the master plan. Such a system would combine ICT and other frontier technology to the core areas of the traffic system to ease the flow of the traffic. Korea has extensive experience and competitiveness in this area with its own comprehensive traffic information management system that contributes to road safety. The demand for such systems is high in Africa. Officials in charge of transportation policies in Kenya, Tanzania, Nigeria and others have shown interest in Korea's high tech transportation management system and wish to benchmark the system.
  Third, the increase of population flow into cities without appropriate sewage systems and sanitary facilities in place has deteriorated the state of cities and calls for the establishment of basic social infrastructure through consultations on environmental policies and establishment of sanitary facilities. Korea has experienced rapid urbanization in the process of its rapid economic growth and thus has experience and knowledge in building policies to solve such issues. Urban areas suffered from various problems regarding wastewater and waste in the 1970s as industralization and urbanization occurred simultaneously. The government responded by creating an environmental management system that included setting up new government offices and enacting new laws.
  With the exception of South Africa, many states in Africa do not have appropriate administrative or legal systems related with the environment and therefore Korea should focus on supporting capacity building through the organization of administrative systems and policies and legal and institutional tools. Korea also has developed technology in the treatment and reuse of waste, treatment and management of wastewater and water quality improvement, areas which can be utilized in development cooperation projects for the strategic expansion of Korean companies to Africa.
  Fourth, building a market base for Korean companies through various financial cooperation projects such as co-financing with foreign development credit institutions is necessary. Although Korean companies recognize the rapid urbanization of Africa and subsequent rise in demand for infrastructure development as a new opportunity, they are unable to enter the market due to financial limitations. Even in cases where profits are promising, independent financing by domestic policy financing agencies is difficult because of the various risks posed by the African market. Therefore, co-financing between Korean policy financing institutions such as the Export-Import Bank of Korea and European bilateral development financing institutions and other multilateral development banks such as the African Development Bank is needed to aid Korean companies in entering the African market. With China sweeping the African infrastructure market with massive amounts of development financing, Korea needs to consider entering the market in partnership through financial cooperation. In addition to grants and loans, Korean companies should also enhance their financial competitiveness by connecting their export credits with grants from the EDCF in the case of international competitive bids for large scale development projects. For example, in the case of water supply projects, building purification plants could be aided through grants while exporting equipment that has high yields could be aided with export credits. There is also the indirect way of entering the market through grants first, followed by the supply of export credits. Once Korea's technology and capability is recognized through such grants and companies are able to bond with African states, they will naturally gain an advantage in obtaining contracts for follow-up projects. In this case, Korea can support its companies through export credits.
  Lastly, Korea can establish an urban production base by constructing industrial complexes. The need for Korean companies to enter the African market is growing while African states seek to advance manufacturing by constructing industrial complexes, thus providing good opportunities for Korean companies. Industrial complexes can be built either by securing an area within an already established industrial complex or by taking responsibility over the entire process of selecting the site, creating the complex and operating it. In the latter case, under the condition that Korea works in partnership with the relevant ministry of the partner country, the relevant ministry should also assume a certain amount of responsibility over the formation and operation of the complex. In the case of Korea, aid organizations such as KOICA and EDCF in cooperation with private and public companies should be the leading agents in creating the complex while SME entities such as the Korean Federation of SMEs should be the leading agents for the operation of the complex. The eastern states of Africa such as Ethiopia and Kenya are promising areas as they are relatively stable from a political standpoint and gaining attention as the new axes of economic growth. In May 2016, Korea and Kenya signed an MOU on the creation of a Korean industrial complex on an area of 800 thousand square meters, during a visit by the Korean president to Kenya. The city of Mekelle in the northern area of Tigray should be considered as a candidate for the creation of an industrial complex in Ethiopia because this area is geographically close to Djibouti, the logistic hub of the Red Sea and therefore has many merits as an exporting ground. Many influential politicians are also from this area in Ethiopia, which makes business licensing and operations easier. China and India have already built a substantial base in the existing industrial complex in Ethiopia, meaning that Korea must seek a new strategic site.
  The aim of this research was to analyze Africa's urbanization issues from a variety of viewpoints and seek methods of cooperation in the infrastructure sector. However, policy recommendations remain at the theoretical level and therefore require further research. 

  This study puts its purpose to considering present condition of uncertainty of politics, economics, and social culture in Turkey and the cause of the uncertainty. To analyse actual proof about the economic uncertainty, daily and monthly data of physical indicators and financial market indicators of Turkey offered by Thomson Reuters Datastream was used, also to study uncertainty of politics and social culture, 1,016 questionnaires which were taken in Turkey were gathered. In the case of survey which was conducted in Turkey, usable 503 questionnaires among 1,016 questionnaires were selected to analyse the uncertainty. To raise reliability of the survey, the questionnaires was based on face to face and self-administering method, but collecting of the questionnaires was from 2016.08 to 2016.11 for four months. Basic data, which is cross section data, is concluding 142 questions which are measured by 7 point Likert type scale. To verify robustness of the data, World Value Survey data which is investigated in world main country every 5 years and survey data that was taken by KONDA, which is an authoritative Turkish survey institute, were compared and considered. As an analysis tool, PLS(Partial Least Square) applied structural equation model was used.
  In detail, current situation of uncertainty of politics, economics, and social culture in Turkey was introduced in chapter 2. In the field of politics, pessimism in credit rating and political degree of risk development coexists with optimism in the progress of conflict between Islamism and secularism which is the spirit of the national foundation. In the field of social culture, high level of social heterogeneity and social conflict indicators are found because of ethnic and cultural diversity in Turkish society. In the field of economics, indicators that represent sovereign credit risk are increasing over depreciation of the currency and variability of market indices and macro economic indicators which are interest rate and stock index, et cetera. Among the causes, some market indicators make precise determination impossible, so careful consideration about the cause of uncertainty occurrence is needed.
  Chapter 3 describes Turkish political landscape as a base work which is assembling various aspects which identity, political life, national vision, and so on contain by considering Turkish political uncertainty determinant. Also, we analysed main determinants of politics uncertainty by exploiting World Value Survey data and obtained data by carrying out a survey in Turkey. A concern about the field of Turkish politics was developing from conflicts between Turks and non-Turks, between Turkish and immigrants, and diplomatic problems with surrounding nations. Especially, uneasiness of the nation in Turkey is increasing and various diplomatic problems are occurring because of a long-lasting conflict between Turks, who are absolute majority, and Kurdish, who are minority, also a rapid increment of refugees and terrorism due to the outbreak of regional conflict containing Syria, and Islamic State. In addition, the present Erdogan’s Government claiming to advocate democratic regime at the beginning of launching is showing aspects of somewhat agreed solidity nation in the becoming restless situation because of a occurrence of domestic coup. To resolve the politics uncertainty, intertribal unity to construct social, political order and stability is needed fundamentally, apart from social unity as Turkish. Statistically, civic identity has the same effect as political communication(confidence), also the civic identity enhances a stability of the system.
  However, conflict among pro-Western, pro-Islamic, and pro-Rusian ideologies is unavoidable potentially in the case of continuous national emergency as it is. Government should suggest national future and vision, and promote value congruence among members of society, but the result of statistic analysis shows that national value sharing in the present Turkish society has no effect in the function of decreasing political uncertainty. It means that political uncertainty cannot decrease without national vision which makes the public not a ideological confrontation group but a united community in the circumstance of the expanded civic political participation along with progressing of an optimum level of democratic society.
  Chapter 4 represents uncertainty of the field of social culture. Identity, multiple cultures, and the unity of society are the subjects to consider conflicts among the groups in the multi-cultural society and influencing factors to receptiveness of multiple cultures. Identity is divided into ethnic identity and civil identity, multiple cultures is contemplated with social sense of distance against the other group, particularly immigrants and refugees, receptiveness of multiple cultures, experience of multi-culture education, and understanding. The unity of society is divided into attitude and behavior. Based on the data of Turkish native research institute, domestic and foreign preceeding studies, the social sense of distance against immigrants, ethnic(tribal) identity, civil identity, the recognition of unity, the understanding of multi-cultural receptiveness are classified as a predictors, and the experience of multi-culture education is a moderating variable, so we can observe the relationship with receptiveness of multiple cultures.
  To sum up the result of the study, civil and ethnic identity(0), identity(+), Social distance(-), multi-cultural education(0), the recognition of the unity1, 2(+) are the determinant of Turkish receptiveness of multiple cultures. Especially, the essence of Turks ethnic identity is becoming vague, also Turks nationalism has no positive effects on receptiveness of multi-culture because of no accepting attitude to the multi-culture. We can conclude that social distance and exclusiveness against immigrants and refugees are due to economic loss and burden of welfare/taxes. Also, multi-cultural education is positioning at the insufficient phase, and the effect of the education is insignificant, so there are no effects on the receptiveness of multi-culture. Turkish people are understanding the need of the social unity, but they are lack of cognizance to actual activity or the other groups.
  Chapter 5 shows the main reasons of Turkey economical uncertainty. Principal component data extracted from factors constituting economical uncertainty is a dependent variable, and exchange rate, interest rate, stock market, economical atmosphere, counterparty risk, risk of developing nations(discount), strategical dependency on import, and so on are independent variables in this study of research model. Daily analysis data from 2004 to 2016 was used for the study, and markov situation turnover model which explores determinants depending on the variability phase by dividing variability phase into high variability and low variability as an analysis tool.
  To sum up the result of analysis, the factors which are exchange rate, economic climate, counterparty risk, strategic dependency on import, and so on have a crucial impact on the economic uncertainty in Turkey. Also, bond market, risk of emerging markets, stock market and so on represented low level of effects on economic uncertainty in Turkey. Meanwhile, in the case of high volatility phase and low volatility phase, the factors which are exchange rate, economic climate, counterparty risk, risk of emerging markets, strategic dependency on import and so on, determine high volatility phase of economic uncertainty in Turkey in the high volatility phase. On the other hand, the factors which are bond market, counterparty risk, risk of emerging markets, strategic dependence on import and so on are the determinants of the economic uncertainty in Turkey in the low volatility phase.
  Also, phase turnover of the economic uncertainty in Turkey happened frequently, and the factors which make turnover to low volatility phase are bond market, economic atmosphere, strategic dependence on import and so on have effects. When the past time delay value is applied, the factors which are volatility of exchange rate, economic climate, counterparty risk, strategic dependence on import and so on are the main determinants that makes the economic uncertainty in Turkey turnover to the low volatility phase.
  By considering above analysis, we estimated capacity of uncertainty management in Turkey, inspected possible scenarios, and examined the impact-reaction between the economic uncertainty in Turkey and South Korea in chapter 6. Also, we anticipated the economic uncertainty in Turkey, deduced strategic and political implication for the corporations and the government. As a ultimate purpose of this study, we concisely put forward policy and business strategy for Korean government and Korean corporations which have got through to Turkey or have a plan to expand in Turkey. Above all, we are suggesting counter-strategy of corporations. First, the corporations should evade the risks with real option strategy by learning the local market with spacing out between initial investment and sequential investment when they get through to uncertainty inherent Turkey. Second, the corporations need to pursue not only exploitation entry strategy which is based on market and resource seeking type but knowledge-seeking based exploration entry strategy, and they need to diversify risk by selecting entry mode as a joint venture which is forming existing trend with establishing a new branch. Third, the corporations have to prepare multiple-layered risks from real assets, finance, politics, management and so on with real option grounded thought.
  First in political aspect, government should keep their eye on the economic policy uncertainty, prepare for the situations to obtain the expected effect. Second, government has to decide policies carefully by considering situational, circular factors caused by uncertainty along with duplicity of political error, reproducing problems of political error, and the attribute/degree of uncertainty. Third, government should take defensive strategy to resolve the structural risk and coordinate microscopic policy in the long term perspective. However, solving the vulnerability and retrievability problems in Korean economy, and recognizing variability phase between Korea and Turkey are the urgent priority. Also, supplementing momentum and analysing trade-off relationship based on real option approach, gradual developing of economic cooperation relationship, and preventing policy making authority from degrading prediction power are crucial. Especially, financial authorities need to examine exposers against Turkey, and monitor the cash flow. 

After years of agonizing negotiations, Iran and P5+1(US, Russia, China, France, UK) & Germany finally reached a Joint Comprehensive Plan of Action(JCPOA) in July 2015 to resolve the dispute over Teheran's alleged nuclear development program. Thanks to the agreement, in January 2016 years of a tough economic sanctions imposed on Iran started being lifted. Since then, tremendous attention from the global community has been pouring into this natural resource rich and strategically located country of 80 million population with enormous economic, political, and diplomatic potential. This report tries to provide a way to build sustainable relationships between South Korea and Iran based on firm understanding of the historical, geostrategic, and economic essentials of this important country.

 We first lay out theoretical foundation of this country by providing historical background of Iran focusing on her interaction with global and regional changes mainly caused by the great power balance of power. We argue that neorealist framework and middle power theory are extremely useful to comprehend the complex relationships between Iran and some of the chosen great powers and Iran's foreign policy behaviors.
 The relationships between Iran and the US has been relatively short and cozy until WWII. Yet after the US assumed the leadership position from the UK after WWII, and the Cold War competition with the Soviet Union intensified, the US interest in Iran became more intrusive and coercive. Washington did not hesitate to overthrow a democratically elected government of Iran in 1953 and replaced it with pro-US Pahlavi regime. Despite severe criticism due to the Shah's autocratic policy, the US supported it unconditionally as a bulwark Cold War ally in the Middle East. Yet the Iranian Revolution dashed the US hope of maintaining a foothold in the region against Moscow and the ensuing Hostage Crisis caused unending deep animosity and mistrust between the new regime in Teheran and Washington. Several attempts and opportunities to bring rapprochement between the two were missed. Finally, Obama and Rouhani were able to agree to improve relationships between the US and Iran, and it contributed to the signing of the JCPOA. Yet the surprising election victory of anti-Iran stance Trump in the US has brought new uncertainty regarding their relationships.
 Russia's strategic perception toward Iran is based on the concept of the sphere of influence. In comparison of it, Iran's political response to Russian influence is to strategically balance great powers. Iran has attracted competing powers in Russia to offset Russia’s influence.  

Geopolitically, the strategic interests of Iran and Russia can overlap in the Middle East, Caucasus, and Central Asia. Iran and Russia share five strategic interests in Central Asia and the Caucasus region: ①prevention of regional conflicts; ②opposition to military intervention by offshore countries; ③antiterrorism-regional cooperation; ④development and cooperation for energy resources; ⑤regional economic and security community.
 After the Cold War, Iran's trade and economic cooperation with Russia has been in a state of underdevelopment. The most notable area of economic cooperation between Iran and Russia is the energy sector. If Iran's natural gas production increases in the long term after the economic sanctions are lifted and the natural gas production gap between the two countries narrows sharply, their competition in the downstream markets in Europe is likely to increase.
 It can be said that bilateral relations of Iran and Russia are sensitively linked to changes in US-Russian relations. If the US-Russia relationship has improved and is cooperative(consensual), the Russian-Iranian relationship has temporarily cooled down, and on the contrary, the cooperation between the two countries has been restored.
 Domestic political changes in Iran and Russia have played an important role in bilateral relations. Since the Islamic Revolution, Iran has been more favorable to Russia than the United States. Domestic political changes in Russia due to the dissolution of the Soviet Union also played an critical role in the formation of cooperation and conflict patterns of the two countries. In the early post-Cold War era, pro-Westernist Atlanticism of Yeltsin administration was negative for its relationship with Iran. Putin administration’s Eurasianist policy(or ‘Pivot to the East’) provided favorable strategic environment for Iran.

 Regarding Iran's nuclear program, bilateral relations of Iran and Russia show a typical pattern of cooperation and conflict. Russia has been working with Iran on its civil nuclear program, but has strongly opposed the military nuclear program. Russia has proposed two critical alternatives to the Iranian nuclear program: the nuclear swap deal and the ‘step-by-step’ approach. This proposal became the basis of the 'Lausanne Agreement', the turning point for negotiating the Iranian nuclear issue, and became the main operating principle of the JCPOA.
 The relationship between the EU and Iran has shown their cooperation and conflicts repeatedly. It can be said that the EU’s external policy towards Iran during the Cold War was similar with the US policy of preventing the expansion of communism. In the early period of European integration, member states such as the UK, France and Italy instead of the Community had their own policies towards Iran. It was the Iranian Revolution of 1979 that was the turning point in the relationship between the EU and Iran.
 Since the Islamic Revolution, the EU has faced various situations in its relations with Iran, but the EU has recently shown its willingness of developing relationship with Iran by active involvement in the resolution of Iran’s nuclear programme. Various factors such as Iran’s importance in terms of geopolitics, trading partner, energy security, and Iran’s domestic situations have also influenced the EU’s relationship with Iran.
 In particular, the EU has kept its different policy and stance from the US in the resolution of Iran’s nuclear programme, which eventually made the EU play a leading role. Even if the EU has the structural limitation in its foreign policy, the EU since its pivotal role for Iran’s nuclear issue could expand its international role as a civilian power which focuses on reconciliation. Therefore, the EU could have more advantages to develop its relationship with Iran after lifting the ban on Iran.

 With the complete conclusion of the nuclear talks in 2015, the economic and financial sanctions on the Iran by the western countries have been lifted. There has been growing interest in the Iran whose population is up to 80 million. Recently, the macroeconomy of Iran has improved compared to the past economic sanctions period, but there are still downside risks such as falling oil prices and the global economic downturn. In other words, there are complex problems such as stagflation where high inflation rate and unemployment rate occur at the same time, weak financial structure of banking sector and corporate sector, and delays in national taxation. In addition to the in-depth understanding of the macroeconomic, industrial structure and financial situation of Iran's economy, we need a comprehensive diagnosis of Iran's development strategy and characteristics of the oil-producing economy.
 In recent years, Iran has been suffering from a number of negative externalities. Now, after the conclusion of the nuclear deal, economic sanctions have been loosened and economic development has been spurred. Unlike other oil producing countries in the Middle East, Iran's tax revenue accounts for half of the total revenue. Other than oil and gas industries, the proportion of other manufacturing industries is high, and the domestic sector is also large, and the tax revenue base is wide. However, Iran also shares common characteristics of oil-producing countries such as subsidies and the deficit in the non-oil sector. It is also exposed to external market shocks, such as a drop in international oil prices. Therefore, in the face of economic sanctions that are expected to act as a positive external environment factor for Iranian economy and instability of international oil prices, which is a negative factor, a fiscal sustainability in the mobilization of economic development is an important policy variable. In this study, we presented the fiscal reforms required for Iran.
 Having considered the economic cooperation between Korea and Iran, previous research and policies have been focused upon two issues, namely trade and energy. After the international community started to lift the ban on Iran, however, a new form of cooperation with the consideration of the change of Iran’s economic structure needs to be considered. Iran’s economic development plan is the reduction of dependence on oil industry and diversified industrialisation. Therefore, the new formula of Korea’s economic cooperation with Iran could be promoted by way of industrial cooperation such as joint venture and technology transfer in the area of manufacturing industries. This could allow Korean companies to access Iran’s market directly and more effectively which still keeps high tariffs and its own trade policies.

  This report examines the characteristics of Indian firms in various sectors such as primary, secondary, and tertiary industries; financial and non-financial companies; domestic and foreign companies; and regions, by using firm-level data.
  The characteristics of firms include firm size, cost, profit, and risk. For firm size, total income and total assets are used. For cost, total expenses and total compensation are utilized. Profit before tax, return on assets, and gross fixed investment are adopted as proxies for firm’s profit. To measure firm’s risk, total liabilities as well as liquidity ratio are drawn from income statements of Indian firms. In addition to the characteristics of Indian firms, total factor productivity is analyzed through the estimation of production function. In particular, this study analyzes the characteristics of Korean firms that operate in India. This study also examines industrial structure of the Indian economy with the use of macro- and industry-level data and explores industrial policies of the Indian government.
  The results of this report show that the fundamental reason why the Indian economy grew slowly and was stagnant for long time, despite multifaceted and continuous policy reforms by the Indian government, could be found in the failure of privately led economy. It is shown that large firms and public enterprises are dominant in most areas in the Indian economy. On the other hand, high performance of foreign firms in India indicates that the Indian government’s policies to attract foreign investment have been successful.
  The results from regional analysis demonstrate that there is a high degree of regional heterogeneities, suggesting that the government’s industrial policies have not covered evenly all regions, and differentiated policies by state government deepened regional differences over time. Lastly, it is remarkable that Korean firms’ high performance in the Indian market, implying that the Korean firms’ entry into the Indian market is effective. 

  Traditionally Korean construction firms have actively invested in Middle Eastern countries. However, the centralization of investment in the region is not sustainable for Korea since the economy of the region is vulnerable to oil price fluctuations and keen competition among Korean firms is being witnessed in the market. Korean construction enterprises are faced with the challenge to find a new investment destination to replace the Middle East. Latin America has emerged as an alternative. The purpose of this study is to suggest policy and business recommendations for Korean companies to identify investment opportunities in Latin America, especially in Public Private Partnership (PPP) projects. This study focuses on four countries ? Chile, Mexico, Peru and Columbia ? where PPP laws and institutions are relatively well developed.
  Chapter 2 depicts the features and the development potential that the Latin American infrastructure market possesses. In Latin America, the investment in infrastructure has been led by governments. However, the importance of PPP is growing, as fiscal revenues are decreasing in many countries due to the fall of commodity prices. Private investment in infrastructure in Latin America is outpacing other emerging economies. Latin America accounts for about 43% of the total private investment in infrastructure among developing economies. PPP is especially active in Brazil, Colombia, Chile and Peru. Among foreign firms, Spanish companies have the strongest presence in the PPP market of Latin America. Yet the competitive landscape is changing; while Spanish and European firms are losing their market share, Chinese and American enterprises are broadening their presence. Traditionally, investment in infrastructure has been concentrated in the ICT and electricity sectors but investment is being diversified into other sectors such as airports, railway, road, water and sanitation. In Latin America, the share of investment in total GDP is about 3%. However, this share should be raised to 5% for the region to maintain an economic growth rate of at least 3%. Thus the development potential of infrastructure is high in Latin America and many countries demonstrate a strong political will to implement their development plan. When considering each country’s need for economic development, there is a high demand for investment in such economic infrastructure sectors as water and sanitation, roads, urban transportation, and social infrastructure sectors such as trade, and health and medical treatment.
  Chapter 3 analyses the environment and institutions for PPP in Latin America. Latin America has a less favorable PPP environment compared to other regions such as Asia. However, Chile, Brazil, Peru, Mexico and Colombia show promising conditions for PPP and hold a high rank among all developing countries. This is because these five countries have clear laws and institutions regarding PPP, and abundant experience with PPP projects. This study focuses on Chile, Peru, Mexico and Colombia and finds some similarities among them: 1) they have exclusive organizations for PPP, 2) projects with private initiatives are encouraged, 3) risks are transferred more to private sectors and subsidies from government are decreasing, 4) and there are growing projects in social infrastructure.
  Chapter 4 examines whether PPP opportunities are open to foreign firms, which foreign firms invested successfully, and what lessons Korean firms can learn from them. We select some subsectors of infrastructure which have high demand for PPP projects. We also study several cases of foreign investment in each subsector: electricity in Mexico, transportation in Peru, health and medical treatment in Chile, and water and sanitation in Colombia. In the first case we examine Iberdrola, a Spanish electricity company operating in Mexico, and its success factors. Iberdrola built up a network with CFE (Federal Electricity Company) by conducting technical cooperation, anticipating demand in renewable energy and development-related projects, winning contracts by offering low prices and then recovering its loss through re-negotiation. The second case is a Spanish-Italian consortium in Peru which was awarded the Metro Line 2 Project in Lima. The consortium attained world-level competitiveness with ample experience in metro projects in other countries. It carried out a feasibility study for the Lima Metro Line 2 and this experience gained it a favorable position at the bidding competition. The third case is the San Jose Group in Chile, which won the project of establishing hospitals. The success factors for this company are localization and risk diversification. The company localized itself in Chile and continuously participated in bidding projects. The developer, investors and Chilean government worked closely together and successfully dispersed the investment risk among themselves. The fourth case is a Spanish firm in Colombia which engages in water and sanitation projects. Finding itself with insufficient funds to carry out a project to expand water treatment facilities, the Spanish firm successfully negotiated with the local government to attain a subsidy. The case shows the importance of government subsidies.
  Chapter 5 describes the role of multilateral development banks (MDB) in PPP projects and the implications they hold for Korean firms. Latin America has several regional MDBs, such as the Inter-American Development Bank (IDB) and Latin American Development Bank (CAF). They play a crucial role for PPP projects: they finance projects, support member countries to improve their PPP environment, and provide PPP-related information. IDB manages an infrastructure fund to finance projects and feasibility studies. CAF places more of an emphasis on infrastructure projects than other MDBs. The bank has high potential for collaboration with Korean firms since it allows access to firms from non-member countries, such as Korea, should they conduct projects in Latin America.
  Chapter 6 suggests recommendations for the Korean government and for Korean firms to participate in PPP projects in Latin America. We offer four suggestions for firms: 1) firms need to understand the change in the infrastructure market toward more projects being planned by PPP rather than solely financed by the government, 2) the development level of the PPP environment differs by country, and thus firms need to prepare a customized strategy by country, 3) strategic alliance with local or foreign companies is crucial since they understand the local market well, 4) collaboration with regional MDBs, such as the IDB, CAF and CABEI, is recommended. This study also suggests the following policy recommendations for the Korean government: 1) The government can establish a government-business council and support Korean firms to win PPP contracts; 2) Incentives need to be provided to promote joint overseas business between conglomerate and small and medium-sized firms (SMEs); 3) ODA projects can be planned to identify infrastructure development demand in Latin America, and then the projects can be developed into PPP projects later, or feasibility studies for privately initiated PPP projects can be financed by ODA funds; 4) A formal cooperation system can be built between the Korean government and MDBs to facilitate Korean firms’ access to MDBs; 5) Exchange of personnel from PPP-related institutions from Korea and Latin America can support Korean firms to acquire information and win projects. 

  In June 2016, China, Mongolia and Russia confirmed the “China- Mongolia-Russia Economic Corridor Construction Program,” which includes 32 projects. Through the implementation of the program, first, modernization of transportation infrastructure including Mongolia, TMGR, modernization of border logistics passing point, improvement of customs affairs and quarantine management will be done in order to develop transportation and logistics infrastructure. Second, from the viewpoint of industrial development, based on the signing of industrial cooperation agreements of three countries and China’s Border Economic Cooperation, it is expected that activation of regional economic cooperation, improvement of power infrastructure of Mongolia, expansion of export of livestock products in Mongolia, cooperation of environmental protection, and development of transboundary sightseeing items will be promoted.
  The most influential factor in the implementation of the economic corridor construction program in China, Mongolia, and Russia is the strong commitment of the three governments. In fact, China is implementing “One Belt, One Road” strategy for building its own Eurasian traffic and logistics network. And Russia is attempting to accelerate “Look East Policy” for Far East and Siberia development and to expand EAEU for Eurasian economic integration. And Mongolia is advocating the “Steppe Road” initiative, which takes advantage of its geographical location between China and Russia’s two major powers. In view of the ideal convergence of these three countries’ Eurasian strategies, the “China-Mongolia-Russia Economic Corridor” is likely to be realized.
  However, because the levels of the 32 projects are so diverse, there are some risks like the possible conflict between the participating countries in the process of the project, and the fact that the efficiency of investment and logistics infrastructure cooperation is still low due to the characteristics of the region with a large population for its territory, so it is not easy to combine it with industrial cooperation.
  Meanwhile, the Korean government’s “Eurasia Initiative” has not been actively promoted because of the increasing uncertainty in the global economic environment, increasing private investment risks, economic sanctions imposed on Russia by the West, worsening economy of Russia, and the deterioration of relations between South Korea and North Korea, and the suspension of the trilateral cooperation projects in South Korea, North Korea and Russia. In this situation, the linkage with the “China-Mongolia-Russia Economic Corridor” could be an alternative cooperation model to realize the basic idea of “Eurasia Initiative” and “Eurasia Cooperation Roadmap.” This is because the “China-Mongolia-Russia Economic Corridor” is being pursued by Russia, Mongolia, and China, which are the main cooperative partners of Korea’s Eurasia Cooperation and cooperating countries, adopting minilateral cooperation format and have a potential to expand its business in case of improvement of relationship between South Korea and North Korea.
  As a result of reviewing the major projects presented in “China- Mongolia-Russia Economic Corridor Construction Program,” the following linkages could be drawn. First, the development of transport and logistics routes that are favorable to Korea as a means of linking infrastructure with transportation and logistics; the development of transport infrastructure in China, Mongolia, and Russia in connection with the Tumen traffic corridor; the linkage of railway networks in the eastern region of Mongolia and Rajin Port; Joint development and support of information systems, and participation in the development of international logistics complexes across borders. Secondly, it is necessary to construct oil refinery facilities, to utilize economic cooperation zone beyond borders, to build and respond to electric power infrastructure, and to take countermeasures against supply of livestock products in Mongolia.
  In order to realize such a linkage plan, it is necessary to establish the following cooperation base. First, it is necessary to show the will to participate through close contact with the governments of China, Mongolia and Russia, and to propose contribution plans for each project. In other words, in the situation where the cooperation between the three countries has already been embodied, Korea should have a clear logic of participation, clear financing, and new ideas. In this process, it is essential to cooperate with Mongolia, which is the main stage of construction of “China-Mongolia-Russia Economic Corridor,” and is trying to cooperate with China and Russia and check against them at the same time. Second, action plans should be developed that take into account not only short- term economic feasibility but also longer-term strategic value. There will not be many opportunities for Korea to participate in projects that have great economic relevance right now. Therefore, it is desirable to use longer-term strategic values ？？such as the possibility of creating new growth engines and expanding the scope of inter-Korean relations. Third, it is necessary to include the “China- Mongolia-Russia Economic Corridor” cooperation in the EPA/FTA negotiations with Mongolia and EAEU, which Korea is currently pursuing, and make a positive use of it.