Executive Summary

I. Introduction

II. Empirical Analysis
1. Panel VAR Model
2. Data
3. Dynamic Fiscal Multiplier

III. Empirical Results
1. Baseline results
2. Robustness checks

V. Conclusion

References

Appendix

This paper examines the role of income inequality in determining fiscal policy effectiveness by using panel data of 42 advanced and developing countries during Q1 2000？Q3 2007. Our panel VAR analysis shows that the effect of fiscal policy on output is smaller in economies with high income inequality: the 1-year fiscal multiplier for a country with relatively equal income distribution is estimated to be significant at 0.52 or greater significantly, while that for a country with relatively unequal income distribution is insignificant from zero. The responses of consumption to an expansionary fiscal policy shock show that consumption is more crowded-out for relatively more unequal economies, thus affirming that the low-income households in the economies with high inequality tend to have strong incentives to save additional income from fiscal policy for precautionary reasons.

Recently, in Korea, the role of small and medium enterprises (SMEs) is receiving emphasis as an engine for economic growth. It is a trend that figures prominently in recent policies of the United States and Japan. Furthermore, Germany, which has traditionally had strong SMEs and Finland, currently overcoming the decline of Nokia by activating SMEs, are concentrating their efforts on re-establishing the foundations for growth of SMEs. The recent policies of these countries have something in common as they recognize internationalization as an important element in SME development. Internationalization of SMEs is significant for the national economy as it contributes to export increase, job creation, and globalization and growth of companies. In case of Korean SMEs, they have recently tended to diversify their exports and investment in emerging markets, but the share of exports and FDI of SMEs is shrinking. Therefore, this study assesses recent Korean policies and analyzes the determinants of export and investment of Korean SMEs, and derives implications for Korea based on the analyses of the policies of the aforementioned four countries.
Since 2013, the new government of Korea has been expanding the budget and establishing a support system for SMEs which emphasizes collaboration among institutions to eliminate the inefficiencies with respect to such support. Aside from this, there are also moves to bolster support for entry of these companies into emerging markets. However, there are some limitations (which implies the need for improvement) such as a less-than-uniform supporting systems, lack of assistance based on their stage of internationalization, and breakup of supporting institutions. In addition, lack of industrial diversity in support measures is another important limitation, as support of internationalization of SMEs is mostly focused on manufacturing businesses. More specifically, efficiency of information provision, supporting overseas marketing, customized programs, and various forms of support for overseas expansion should be strengthened. According to the empirical analyses of this study, Korean SMEs currently show lower levels of increase in exports and investment through FTAs compared to large firms, and also more vulnerable to various obstacles such as complexity of foreign countries’ contract and taxation systems, exchange rate volatility, and the geographical distance, etc. In addition, Korean SMEs tend to avoid exporting to countries that have complex customs procedures, and are more likely to export and invest in countries that have relatively low income per capita. This is possibly due to lack of competitiveness of Korean SMEs compared to large companies.
Keeping these results in mind, this study derives policy implications by analyzing SME internationalization policies and the outcomes in the US, Germany, Finland and Japan. First, Korea needs to strengthen the status of policies for internationalization of SMEs, by forming a high-level inter-ministerial committee that determines priorities at the national level and build collaborative mechanism involving all departments. Furthermore, enactment of laws regarding internationalization of SMEs must also be considered to ensure sustainability of policy.
Second, Korea's SME policy needs to focus on expanding the number of exporting companies. It is necessary to provide intensive support to the companies that have begun to export, and to strengthen the step-by-step support starting from preparation and market study to follow-up support. Furthermore, operating countries and regions in the Export Incubator program should be expanded, and support for matching between SMEs and foreign buyers should be strengthened by taking advantage of local consulting firms and Korean Chamber of Commerce in activities abroad.  
Third, support for internationalization of diverse non-manufacturing industries should be increased. In case of the services sector, respective policies are executed by different ministries which lead not only to less uniform support but also to hindrance of connectivity among supporting policies. Furthermore, support for various forms of internationalization is necessary as there is a tendency that internationalization of the service sector is made in different forms aside from direct exports. Therefore, it is required that a collaboration system be established among organizations of each service sector and organizations that can provide internationalization support such as KOTRA and SBC, etc.
Fourth, SME support measures should be provided to companies with competitiveness and strong commitment to internationalization. In particular, technology-intensive industries require longer time to develop products and technologies at the initial stage, and thus the industry has greater needs for a consistent system of support that include a broad range of support measures including technical development, commercialization, marketing, and overseas business. In this respect, establishment of a common support program incorporating projects of related organizations including those organizations that can provide support related to internationalization, technology, and finance; is needed. Korea has recently begun establishing the Creative Economy Innovation Centers in major cities across the country. These centers could serve as an effective SME support platform by providing one-stop support measures including technical development, business startup, overseas expansion, forming business relationship with foreign enterprises, and foreign investment.
Fifth, SME support measures should aim at diversification of overseas markets. Policymakers should not only strengthen its economic cooperation strategy and restructure the system of support measures towards emerging markets in which Korean enterprises have already started doing business, such as China, but also other emerging markets with high growth potential. There are diverse barriers to entering those emerging markets including the difficulty of finding potential overseas customers or partners, developing an effective marketing strategy, securing of human resources, and communication problems due to language barriers. In particular, contacting potential buyers is an important factor in facilitating SME internationalization, thus business matching support through events inviting interested business groups from emerging markets represents an example of an effective support measure.
Another task in strengthening the support for SME internationalization is to enhance SMEs’ access to information by systematically supplying information published by diverse organizations. In addition, Korea needs to develop a mechanism for providing customized information to SMEs based on individual company profiles.
Based on the empirical findings of this study, there is growing demand for legal advisory services from SMEs doing business abroad, and establishment of an official center for support regarding legal matters and regulations could be an option to consider. Korea was designated as a leading country for civil and commercial dispute resolution at the 2009 APEC Summit. Active pursuance of capacity building projects related to creating a legal framework in developing countries will provide an enhanced legal safety net for Korean enterprises as well as harmonization with the domestic legal system.
Furthermore, emphasis should be given to the need for an enhanced overseas network. A solid overseas network could become a vital ‘infrastructure’ for internationalization of SMEs. One of the main tasks in this regard is the formation of an amicable relationship with the local business community. Also, linkage between government and private organizations located overseas needs to be enhanced. In doing so, SME-support agencies should be gathered under one roof to increase access to government support for SMEs. This would also further improve networking among the supporting agencies, thus contributing to a more effective SME supporting mechanism.
Sixth, as forms of SMEs' internationalization become diverse, an integrated support system needs to be established covering exports, FDI and others. In this regard, Korean financial organizations in export/investment need to enhance their international competitiveness. There is also a growing demand for financial support from companies making direct investments. For instance, in case of a company that chooses to invest overseas, especially in developing countries, it is often difficult to secure financial support from local financial agencies. As the legal basis for direct support of domestic company’s overseas business with limited or no domestic foundation is not easily found, we suggest establishing joint bilateral funds with major emerging countries.
Seventh, government efforts to address foreign business and trade barriers are very important in the support of internationalization of SMEs. As confirmed by the empirical analysis in this study, Korean government needs to consistently respond to issues related to foreign exchange fluctuation and make efforts to enhance FTA utilization of SMEs. International cooperation in customs is another area that demands attention. SMEs have high tendency to avoid doing business in regions where customs procedures are complex and difficult. Accordingly, Korea needs to pursue active international cooperation in customs and support emerging countries’ trade facilitation projects. For instance, Korea could lead international efforts toward cooperation on Authorized Economic Operator( AEO) and continue efforts to remove trade barriers through bilateral channels such as FTA negotiations. In addition, Korea should actively put SME related issues on the FTA negotiation table, organize a working group on SMEs to support enterprises doing business in the FTA partner country and pursue bilateral SME cooperation.

Up until recently, Korea has maintained a trade surplus vis-a-vis its trade with Latin America. The area accounted for a mere 7% of Korea's total exports but the surplus with Latin America stood at USD 18 billion, or about 41% of Korea's total trade surplus. However, exports to Latin America has been declining since 2011 by 4.9% annually, which is 5 times higher than Korea's average rate of export drop during the same period. Meanwhile, export to the region from other major exporters, such as the Unites States, China and Japan, have increased and Latin America's import from the world also grew by 4%. This study analyzes the factors causing drops in Korea's exports and suggests some measures to regain Korea's export competitiveness in Latin America.
Chapter 2 depicts Latin America's import structure and Korea's export to the region. For the last 10 years, the annual import growth in Latin America was 10.7%, which far outstripped the world average of 7.9%, with developing countries emerging as major trading partners. On the other hand, Korea's export to Latin America has slowed since 2011. Especially, exports to Venezuela, Brazil and Colombia have shown a clear decreasing trend. And sales of major exporting goods such as large ships, vehicles, petroleum and related products, steel and display devices declined rapidly. Korea's export to Latin America also showed overconcentration in certain products and countries. Mexico and Brazil accounted for about 54% of total exports and the top 10 exporting goods capture about 72% of exports, which makes Korea's exports vulnerable to the business cycle of trading partners. The proportion of capital and intermediate goods is higher than consumer goods. There are several obstacles that Korean firms face in export markets. According to the survey with Korean exporters, they are struggling with fierce competition, particularly with Chinese firms. They pointed out other export barriers such as complicated customs procedures, additional taxes and arbitrary tariff rates.
Chapter 3 examines the export competitiveness of Korea. The share of Korean products in Latin America's import has been declining since 2010 and the drop is noticeable regarding Chile. In general, Korean products have been losing their relative comparative advantage, with the largest drop coming in vehicle exports. The major competing countries in vehicle exports include Japan, China and the United States, and competition with China has intensified since
2011. For the last 10 years, Korea's export growth in Latin America was attributed to improved purchasing power in the region, and not to full exploitation of the growing import demand in certain products nor improved competitiveness in exporting goods.
Chapter 4 analyzes the causes of Korea's sluggish exports to Latin America. According to the vector autoregressive model, VAR, the recent drop in exports to the region resulted from diminishing import demand of the region. The real effective exchange rate did not have a meaningful impact on decreasing exports, which is consistent with the survey results. Korean exporters indicated that non-price factors, such as quality and design, are more important in maintaining their competitiveness in this market. They pointed out that  competition with other countries hindered their export growth and the VAR result also showed that the fall in Korea's export can be attributed to competition with the United States.
Chapter 5 suggests measures to restore Korea's export competitiveness in Latin America. First, Korea needs to diversify its export markets and exporting goods. There is potential to expand exports to other countries including Argentina, Bolivia, the Dominican Republic, El Salvador, Costa Rica, Paraguay and Venezuela. As the middle class grows and many governments expand investment for the development of industry and infrastructure, Korea can find export opportunities in education, health care, transportation equipment, machinery, industrial equipment and construction equipment. Cooperation in distribution with Latin American multinationals can also facilitate export activity. Second, measures to alleviate trade imbalance between Korea and Latin America should be adopted to avoid future trade conflicts. Third, free trade agreements with more countries and upgrading the current agreements and can contribute to additional export growth. Fourth, Korea can facilitate trade with the region by lowering non-tariff barriers. The successful measures that are implemented in several Latin America nations can be extended to other countries, such as the Korean e-clearance system and authorized economic operator.

The aim of this research is to suggest policy implications for industrial cooperation in the ICT sector between Korea and the Maghreb countries including Morocco and Tunisia, with an investigation of ICT industrial structure, market situation and industrial policies of those countries.
As the two countries have shown high potential for ICT industry development with their open door policy related to the ICT market, Korean companies are attempting to enter the market to realize those business opportunies. They should, however, identify market risks stemming from cultural and language barriers and fierce competition between market players. For successful performance of Korean companies in the market, some implications for corporate strategy and government policy should be considered as follows.
First, joint investment with foreign capital is needed to minimize the market risks mentioned above. As they lack business experience in the region, Korean companies should seek co-investment partners in Europe and the Middle East with abundant knowledge of and experience in the North African market. As a matter of fact, the number of joint investment between European and Middle Eastern companies are increasing in the market after the mid-2000s.
Second, Korean companies should focus on their advanced goods and services utilizing their comparative advantage including high speed internet networks and services. In addition, differentiated goods and services should be developed for new consumers in the market while considering their income level and preferences in using the ICT machines. This will help Korean companies to occupy emerging innovative markets and expand their market share at the initial stage of market entry.
Third, a wider market entry strategy for Europe, Sub-Saharan Africa and the Middle East should be prepared from the long-term perspective when they enter the Moroccan and Tunisian markets. Despite relatively low income levels and population sizes, Morocco and Tunisia can become footholds for making inroads into neighboring countries, by utilizing their economic, political and cultural relations with those countries.
Fourth, the role of the government should be emphasized in promoting ICT industry cooperation with the Maghreb countries at its initial stage in order to  establish government-to-government cooperative network and support Korean companies' market entry. In particular, public institutions like KOTRA can provide Korean companies with information about government-initiated projects and changes of regulations and laws in the sector. This can be helpful especially for small and medium enterprises since they often experience difficulties obtaining such information due to lack of human network and financial resources.

This study analyzes the competitiveness of the Indian cultural industry with emphasis on film, broadcasting and animation; and provides suggestions for further cooperation between Korea and India. Mutual cooperation in the cultural industry has been included in the form of co-production agreements in Chapter 9 of the Korea-India CEPA which went into force in 2010. Furthermore, the leaders of two countries adopted an MOU to include discussions on an implementation plan for cultural exchange in their meeting of early 2014.
India’s cultural-content industry, centered on film and broadcasting, already ranks14th in the world. It is anticipated to expand by more than 10% in the next five years, and grow into a powerhouse on a global scale in the near future. In particular, India is a promising partner country in the global value chain, as it is highly competitive in certain parts of each sector, and is likely to provide a huge market for Korean companies.
In Chapter 3, the relative competitiveness of the Indian culture industry compared to China and South Korea was analyzed. Four major sources of the competitiveness of culture industry, namely production factors, demand conditions, business environment, and related and supporting industries, were ranked by their respective scores. In terms of production factors, composed of capital, labor and technology, India is slightly ahead of China and behind South Korea. In particular, if Korea's advanced technology and planning ability is combined with India’s highly skilled labor, it would increase the competitiveness of both countries. Regarding demand conditions, with a population of 1.3 billion and a continually expanding economy, India shows significant potential as a consumer market. Though the business environment of India was far from competitive and innovative, India is ahead of Korea with respect to overseas experience of its professionals. It would be a win-win strategy for Korea to enter the innovative fields through collaboration with experts from India. Finally, the competitiveness of India’s related and supporting industries was very low, especially due to the absolute shortage in the number of screens. Entering related and supporting industries of India, centered on the establishment of multiplex cinemas, would represent an efficient strategy for Korean companies.
In Chapter 4, in view of the relative competitiveness between the two countries outlined in Chapter 3, a cooperation strategy vertically classified by a short, medium and long-term time periods was presented within the framework of value chains in their respective sectors. In this classification, a relatively effective field with low input costs and risk of market failure led to giving higher priority to the short-term scheme .Suggestions for the short term focused on cooperation without the added cost or market failure while being relatively effective in the short-term guarantee scheme. In the medium term, full-scale cooperation projects could be pursued that reflect the competitiveness of the two countries. They include implementing Korea-India co-production by providing funds and incentive schemes, in addition to participation from the planning stages, conducting hardware businesses(cinema, broadcast network) in related and supporting industries, and expanding exchanges of India’s skilled workforce that possess a high degree of expertise and international exposure. As for long-term cooperation, it should be expanded across the entire value chain. The two countries can establish a common strategic plan targeting the global market by leveraging India’s competitiveness in audiovisual exports.
Chapter 5 presents the policy challenges and suggestions for substantive cooperation measures introduced in the previous chapters. The most effective way is to use the CEPA audio-visual co-production agreement as a starting point for cooperation between the two countries. The study proposed provision of incentives to producers such as guarantee in common release and co-production fund to encourage mutual co-production. The cooperation agreements may also provide support for local language dubbing for the elimination of the language barrier. Second, we may consider establishment of departments and agencies dedicated to cooperative projects under the cooperation agreement signed in the FTA. It is essential to utilize relevant organizations, as most companies in the cultural industry are mostly small scale businesses and they lack of information and networks for local delivery. The study also proposes that the two countries cooperate in developing a professional knowledge workforce, a key component of the creative industries.

The Greater Tumen Initiative (GTI) is an intergovernmental cooperation mechanism with four member countries, all in Northeast Asia: China, Mongolia, Republic of Korea and the Russian Federation. Because of the lackluster performance of the GTI in the past, member countries have shown little interest in actively participating in GTI. Only recently has more attention been directed towards GTI by member countries, as the growth potential of the Russian Far East and the Northeast provinces of China were realized by policy makers. Korea also has been actively participating in GTI activities as the GTI can be a stepping stone for pushing ahead with the Park administration’s Eurasia Initiative. Furthermore, developing the Greater Tumen Region (GTR) provides an opportunity for the two Koreas to prepare for eventual unification. Although there exists some studies in trade facilitation in the GTR, little work has been done using empirical methodology along with analysis based on survey results. To our knowledge, our proposal represents the only work using both empirical and descriptive approaches to analyze trade facilitation issues of GTR.
Unlike other economic cooperation mechanisms such as ASEAN or EU, the inter-regional trade concentration ratio has fallen recently, implying that there is room for economic integration in the GTR. Also, we find that some GTI member countries have poor transportation infrastructure and lack appropriate trade facilitation measures. The current status of implementation of the trade facilitation in the GTR thus highlights the necessity of economic cooperation, to facilitate trade in the region. The empirical result of the proposal implies that trade partners, both the exporting country and the importing country, should improve their trade facilitation measures to fully benefit from trade. We considered a set of policy variables and logistic performance variables that affect the volume of trade of GTI member countries. We find that among the policy variables, logistical infrastructure has the greatest impact on trade, followed by custom procedures and logistics service capacity. Among logistic performance variables, timeliness has the most impact on trade, followed by international shipments and tracking and tracing.  
We complement our empirical analysis by conducting interviews with customs and traders working in the GTR. The 4-steps custom procedures are common to the member countries; document preparation & custom declaration, physical inspection, duty collection, out approval. However, required documents and other regulations for each step varied among the GTI member countries. For instance, the e-payment system is not fully implemented in the Russian Federation and Mongolia while Korea and China allow duty payments through the Internet. GTI member countries also had issues in common regarding custom transparency and high levels of physical inspection rates, hampering the efficient movements of cross-border trade.
The level of implementation of trade facilitation measures varied in many aspects. Korea was the only country to fully implement paperless trade. Other countries have partially introduced paperless trade, but for some countries the partial implementation has actually become burdensome to traders as the legal framework has not changed accordingly. Advance ruling is a measure that could help prevent disputes of classification and issues related to valuation, but Mongolia has yet to introduce such a policy. Also, even though risk management, AEO and AEO MRA are recommended for countries with high physical inspection rates, these trade facilitation measures were also not fully implemented for some countries.
Based on our analysis, we propose short-term and long-term goals for trade facilitation in the GTR. Publication of laws, regulations and procedures is pointed out as our top priorities and objectives, as it relates to timeliness which has been verified to have the greatest impact on GTI countries’ trade among logistics performance measures. We also discuss the possibilities of securing the funds to obtain this goal. For trade capacity building in Mongolia, we may consider utilizing the WTO TFAF or using a bilateral aid fund from Korea. The second short-term goal we propose is to evaluate regularly the non-tariff policy measures of GTI countries using either the OECD trade facilitation index or following the APEC Supply-chain Connectivity Framework Action Plan.
The following goals are classified as long term. As Russia and Mongolia lacks the AEO system consistent with WCO, only after these countries have fully implemented the AEO program could we expect to conclude AEO MRAs with all GTI member countries. The results of the pilot study of the Korea-China AEO MRA prove that the completion of AEO MRAs of all GTI member countries could contribute to trade facilitation in the GTR significantly. Although a significant impact from the implementation of the Single Window in GTR trade facilitation is expected based on our empirical study, securing the considerable amount of funds required to complete this task may not be easy. Thus, as a second-best plan, we propose to support the developing countries of GTI in the form of sharing knowledge for ICT and custom automation. Lastly, we also consider the possibility of constructing a common classification system at a disaggregate level. As the classification is based on domestic industry and involves politics, unifying the system may take time. However, as we know that the common classification of ASEAN and EU has contributed to trade facilitation in the region, starting a discussion on this issue may be meaningful in the long run.

Due to a huge economic gap that opened up between South and North Korea after nearly seven decades of division in the Korean peninsula, it is expected that economic integration between South and North Korea would naturally give rise to a number of issues in political, economic, social, and cultural areas. Therefore, to analyze those issues and the path of economic integration between South and North Korea with regard to reunification of the Korean peninsula, this research aims to propose strategies for gradual economic integration between the two Koreas, by analyzing the major issues in economic integration, such as trade and investment, currency integration, and utilization of human resources; and assess their impact on the regional production networks and the economic cooperation process in Northeast Asia.
In Chapter 2, we theoretically prove that the current situation in the Korean peninsula, where many political barriers to trade exist, is Pareto-inefficient; and that it can achieve a Pareto-efficient situation by attaining institutional economic integration enabled by mutual agreement between South and North Korea. Based on the theoretical analysis and case studies on Germany, China and Hong Kong, China and Taiwan, Vietnam, Yemen, and the European Union, we proposed basic directions that economic integration between South and North Korea needs to follow: gradual approach to economic integration, separation of economic cooperation and integration from military and security issues, construction of an institutional framework for the economic integration, role of the private sector, gradual integration of currencies of South and North Korea, and establishment of a mechanism of political ties and stable decision-making process.
In Chapter 3, we prove that peaceful inter-Korean relations will boost trade and investment between South and North Korea. However, the pattern of expansion of trade and investment through economic integration is dependent upon differences in economic systems and industrial structures; and on competitiveness of companies of South and North Korea. Also, maintaining peace between South and North Korea is a prerequisite for them to improve efficiency of economic transactions. After that, it is necessary to build an institutional and practical framework in support of a market-oriented system, creation of dispute settlement procedures, and operation of special economic zones in order to facilitate trade and investment between South and North Korea.
In Chapter 4, we proposed a concrete plan to gradually integrate currencies of South and North Korea, by introducing the OKU (One Korea Indexed Unit of Account) linked with real values. Based on previous cases in Germany and the EU, it is necessary for South and North Korea to gradually integrate two currencies and hence introduce a new unit of account, such as the OKU, so that problems such as the timing of introducing a single currency and the ratio of converting two currencies, can be solved in market-oriented fashion. Therefore, we can minimize the uncertainty of the conversion ratio that may come from the process of integrating two economies, and ultimately lead the real economies to a soft landing following the process of economic integration.
In Chapter 5, this study analyzes how human resources in transition countries have responded to the direction and pace of economic transition, focusing on income, productivity, firms’ utilization, and so on. Human resources in North Korea would be positively evaluated due to a lower linguistic barrier and higher productivity compared to China and Vietnam. Therefore, we expect North Korea to be fairly well- endowed with human resources in terms of productivity and vitality of its population. However, it also has limitations, such as difficulty in understanding a market-oriented system and overcoming work intensity and technological gaps after the economic integration. Therefore, it is necessary to consider the following preconditions to effective utilization of human resources in North Korea and maximization of benefits from the economic integration: make visible progress in economic integration by setting clear goals, design concrete plans and gradually integrate the economies; achieve consensus on minimum wage levels and conditions for wage increases based on effective market-oriented coordination; consider plans to expand global cooperation among countries in East Asia to enable the North Korean work force to better understand the market system; and establish special economic zones in various areas, where influence of established powerholders are circumscribed, in North Korea.
In Chapter 6, it turns out that China's impact on production activities will decrease but the impact of Korea will increase, and hence the global impact will decrease by US$ 330 million. Based on this analysis, we need to consider two strategies for the economic integration as follows: initially focus on industries where North Korea has a comparative advantage over countries in Northeast Asia; and secure enough budget and funds to meet the costs of economic integration, and consider South Korea’s foreign direct investment in Northeast Asia as a private fund and official development assistance (ODA) and Inter-Korean Cooperation Fund as the public fund.
In Chapter 7, we analyzed how the economic integration between South and North Korea will affect economic cooperation in Northeast Asia. It turns out that economic integration between South and North Korea will benefit the two economies, and real GDP in North Korea will increase by 5.9%. In addition,  economic integration will have minimal impact on neighboring countries like China and Japan. However, North Korea will be worse off when North Korea does not integrate with South Korea and does not participate in economic cooperation in Northeast Asia. In addition, in the scenario where South and North Korea integrate with each other and China, Japan, South Korea, and North Korea form a regional trade agreement, all countries involved will be better off.
In Chapter 8, after summing up all analyses conducted in the study, we propose a Comprehensive Economic Integration Agreement (CEIA or One Korea Agreement) as an institutional framework for gradually integrating South and North Korea. In addition, we suggest a carry- forward ‘Ten-Year Economic Integration Plan’ for gradual economic integration between South and North Korea. It is expected that we can minimize the adverse effects and disorder from the economic integration through the CEIA and ‘Ten-Year Economic Integration Plan’ as proposed in this research. In addition, even though this research has focused more on the gradual economic integration rather than a rapid one, it would be impossible to rapidly integrate the two economies over all sectors when the economic integration proceeds in a rapid way. Therefore, some findings of this research would be applicable to rapid economic integration between South and North Korea.

Cities are now home to half of the world's population. The United Nations predict world urban population to reach over 60% by 2050. Such trend is expected to intensify in the developing regions of Asia and Africa. While urban development as well as population increase in urban area are deemed as indices for development, unplanned urban expansion undermines urban growth, threatening the global pursuit of sustainable development.
Currently, the global community is contemplating Sustainable Development Goals with the termination of the Millennium Development Goals at the end of 2015. Unlike the MDGs, urban issues are set as a stand-alone target in the SDGs. Target 11 of the SDGs includes improving the urban environment, protecting urban vulnerable population, controlling air pollution, and so on. Especially, the target highlights urban response to climate change, such as greenhouse gas emission reduction and improved climate resilience in the urban areas.
Urban areas are large contributors of global climate change. However, agglomerated population in the urban areas make cities also vulnerable to climate change. According to the World Bank, cities produce approximately 2/3 of the world's GHG emission generated from energy production. Newly developing countries produce greenhouse gas emission which surpasses the developed countries. Traditionally cities often sit near rivers and oceans due to the advantage in connectivity and transportation. However, this makes cities vulnerable to climate related hazards such as sea-level rise and floods. Urban area in the developing areas are especially vulnerable to climate change due to the lack of social and economic infrastructure.
This study reviews main issues regarding urban response to climate change. Also, by reviewing the activities of major donors, the study seeks to draw implications for Korea in building urban climate change strategy.
A major challenge in urban climate change is the lack of consensus in urban definitions. Also, current indices in urban development are insufficient to fully comprehend the state of cities and their response to climate change. Discussions on the post-2015 development framework highlight tackling these limits as essential to further promote urban development goals. The global community is likely to expand discussing development goals according to national and regional circumstances when a universal global development agenda is finalized. Without a global consensus on the definition of a city, indices for monitoring the results are likely to be incomplete. Without adequate indices for development result monitoring, the purpose of setting a global development goal is subsided. Therefore, it is highly relevant for individual development agencies to thoroughly survey the status of target cities and share the result between partners. Developing a database for the status of cities can also be an appropriate measure.
UN-Habitat has been conducting surveys on the state of world cities and develops database with cooperation from other UN agencies. It is also working developing and improving a global urban index. The organization has also developed a framework for assisting cities to respond to climate change. This framework includes comprehensive reviews of the current status, seeking alternatives, implementation and results reviews. Adequate index setting as well as monitoring and evaluation of the results are indispensible elements of the framework. The World Bank has maintained urban development as one of its programs. The organization recently noted climate change mitigation and adaptation as a core issue and is currently expanding its activities regarding the issue. A distinctive feature of the World Bank program is that it support urban government competitiveness in attracting private finance. By enhancing city governments' financing capacity, the World Bank seeks to support an effective low carbon city development plan. It is noteworthy that the World Bank promotes local capacity building activities, building on its own experience on financial cooperation and understanding on large-scale financing for low carbon urban infrastructure.
With its urban division in place in the 1990s, Swedish International Development Agency (SIDA) has long been the sole bilateral actor in urban development. Sida has provided systematic support on urban environment and climate change issues in the development countries. SymbioCity is a bilateral cooperation program which stems from the Swedish experience of tackling environmental issues. Sweden provides advices and suggests detailed programs for sustainability to municipalities in developing countries through this program. Korea has accumulated experience in urban development through its rapid development since the 1970s. Furthermore, Korea seeks to bolster its ODA for climate change. Increased support for urban climate change mitigation and adaptation in the developing countries are deemed as highly adequate. Low carbon urban development was included as an element in the East Asia Climate Partnership program during 2009-2012. Unfortunately, substantial improvements were invisible. Taking account of the Swedish experience, it is important to develop programs, building on the Korean experience yet applicable to an international context.

This report analyzes the trends and characteristics, and the impact of migrant remittances to Southeast Asian development. Remittances, money transfers sent by international migrants to their kin at home, are increasingly recognized as a new source of development finance by the international community. Remittances to developing countries are large in volume, increasing steadily, and less volatile than other types of external financial inflows. Transferred directly to the households in need, remittances are widely credited for their contribution to poverty reduction in developing countries. This is why remittances have become a focus of great attention for the Post-2015 Development Agenda. In conducting the analysis, this report focuses on Southeast Asia, an important remittance-recipient region and a major economic partner for Korea.
Remittances to Southeast Asia show patterns similar to those of other developing regions. Remittances are a major source of external financial flows to the region, and they have been rising steadily over the past decades. And remittance inflows have been stable. Southeast Asia may not be on par with other regions including South Asia or Latin America in terms of the size of remittances, per capita remittances, or remittances as a share of GDP, but it ranks high in terms of the share of remittances in overall external financial flows and volatility of remittances in Southeast Asia are relatively low among the regions.
Among Southeast Asian countries, the Philippines accounts for the most of the remittances flowing into the region although its share has been on a gradual decline. Other countries in the region, especially populous countries of Indonesia and Vietnam, are receiving increasing volumes of remittances, as their migration outflows are on a steady rise. The level of remittances from smaller, more underdeveloped countries of Cambodia, Laos, and Myanmar is also rising fast. It should be noted that remittances per capita exceed Official Development Assistance per capita in most Southeast Asian countries except Cambodia and Laos, which are aid-intensive countries. This suggests that remittances may have development potential that could complement foreign aid.
This report also performs statistical analysis using cross-country panel data with an aim to investigate whether development impact of remittances differ between Southeast Asia and other developing regions. The empirical results indicate that Southeast Asia does not differ from the others with respect to impact of remittance outcomes on poverty reduction and investment. However, remittances does appear to raise inequality in Southeast Asia to a greater extent, which indicates remittances may be concentrated into higher income groups than other regions. The relationship between remittances and growth is stronger in Southeast Asia. Finally, although appearing to strengthen financial development outside Southeast Asia, remittances have a negative impact on financial development in the region. This suggests that the receiving countries in Southeast Asia need to improve institutions to enable greater contribution of remittances to domestic financial development.
The government of Korea should continue to make an effort to reduce transaction costs of remittances and consider utilizing its foreign aid tools to enhance the development impact of remittances. It should also consider institutionalizing remittance sender surveys in the country to develop an effective research infrastructure for better understanding remittance outflows from Korea and their development impact in the receiving countries.

As discussions on the importance of trade as a driver of growth and development of developing countries moved forward around the globe, the role of Aid for Trade (AfT) has been given renewed emphasis. Since the AfT Initiative was launched at the 6th WTO Ministerial Conference held in Hong Kong, December 2005, the international community has expanded its support and assistance for developing countries, to facilitate trade by providing proper infrastructure and build productive capacity.
This study aims to provide policy implications for establishing policies or strategies regarding AfT based on analysis of recent trends and major issues in AfT. In 2012, the international community provided USD 3.87 billion in AfT, which represented an increase of approximately threefold compared to 2002 and this accounted for 26 percent of total ODA. While it is positive that the volume of AfT steadily increased, newly emerged priorities in AfT for donors and partner countries have been expanded, considering the rapidly changing trade environment. Furthermore, since the AfT initiative was launched 10 years ago, there have been increased concerns and attention on the part of the global community on the results and impact of AfT and thus OECD Development Assistance Committee (DAC) has led the discussion on establishment of monitoring and evaluation framework.
Korea, which has achieved economic growth through active participation in international trade, has supported developing countries consistently to promote their trade. Case in point, Korea provided USD 780 million in support of AfT. Korea was 16th among DAC member countries in total ODA volume, but was 8th in volume of AfT.
The report suggests following policy implications for enhancing the effectiveness of AfT programs and projects, which accounts for 40 percent of total ODA. First, Korea should improve consistency and connectivity among AfT programs and projects, implemented by diverse ODA executing agencies, based on national AfT strategies and policies. Especially, when the government establishes a Country Partnership Strategy (CPS) for priority countries, Korea should include trade as one of the priority areas where national AfT strategy should be merged with the assistance strategy, as to maintain consistency among AfT and ODA programs.
Second, when the government sets up the AfT programs, it should take care to recognize the changes in the global trade environment and have the changes reflected in the programs in a timely manner. For example, the global value chains (GVCs) has recently received significant attention among the international community. Reflecting this trend, Korea ought to develop AfT programs to help developing countries effectively take advantage of GVCs to promote their trade.
Third, the effectiveness of diverse official flows excluding ODA has also received much attention, in addition to efforts to broaden development finance. Therefore, Korea needs to develop an interest in diversification of sources of development finance such as equity investment or guarantees when it implements AfT programs. In addition, AfT could be utilized as leverage to mobilize private funds.
Lastly, one of the most urgent issues is the establishment of a performance framework for AfT programs because the AfT accounts for a significant portion among bilateral ODA of Korea. Korea should implement its AfT programs based on such performance framework. Objectives, outcomes and indicators, which are reflected into the AfT program, should be designed and included in the program identification and formulation phase. Furthermore, the performance framework should be utilized in the monitoring and evaluation, which would help to increase aid effectiveness as well as to enhance accountability and transparency of the AfT programs.