Green Climate Fund: Current Issues and Way Forward for the Successful Operationalization

Jione Jung, Jeongmeen Suh, Jinyoung Moon and Jihei Song

At the 16th session of the UNFCCC Conference of the Parties(COP), the parties reached an agreement to scale up climate finance to 100 billion dollars per year by 2020. This decision, also known as the Cancun Agreement, mandated the establishment of the Green Climate Fund, a multilateral fund designated for climate change mitigation and adaptation activities. The Green Climate Fund is expected to serve a key role in operationalizing the scaled-up climate finance. Korea entered the competition to host the Fund along with five other nations, including Germany and Switzerland. At the GCF Board Meeting in October 2012, the board decided to host the GCF Secretariat in Songdo, Incheon. The decision was approved at the COP18 in Doha the following December. Thus, the establishment of the GCF Secretariat in Songdo, Republic of Korea became official.

Considering its emergence from a recipient to a donor country in just a few decades, Korea has the potential to serve as the bridge between the developing and developed nations. In addition, by hosting the only multilateral climate fund in the Asian region, Korea seeks to pursue a more active role in the international climate change scheme.

The GCF maintains an independent secretariat as well as a legal entity. Moreover, a substantial amount of the long-term finance for climate change is expected to be channelled through the GCF. This paper seeks to provide an up-close observation of the backgrounds and characteristics of the Green Climate Fund. Based on the observations, the paper aims to analyze the potential and limits the Fund presents to Korea, and eventually to provide a policy direction for Korea.

The paper is organized in the following order. Followed by an introduction in the first chapter, Chapter Two provides a precise observation on the establishment of the GCF. The chapter reviews discussions regarding climate finance at the Convention, as well as those on the relationship between the Fund and the Conference of the Parties. To pursue these goals, the paper analyzes the financial mechanism of the Convention as well as the COP guidelines and decisions.
Chapters Three and Four review two critical issues at the GCF Board: mobilization and delivery of the Fund. Initially, the resources for the GCF was projected to be mobilized through various sources including bilateral and multilateral channels; as well as public, private, and innovative sources. Nevertheless, at the moment, no donors have made pledges to the Fund, putting the operation of the Fund at risk. Chapter Three seeks to provide a theoretical overview of factors that influence donor countries' decisions to contribute to multilateral funds. Global Environment Facility has been responsible for the financial mechanism within the Convention. The World Bank's Climate Investment Fund is also a prominent multilateral fund related to climate change. An analysis of the two funds are made, in order to explore options for the GCF. Chapter Four discusses various issues regarding the delivery of the Fund. These issues include financial instruments, access modalities, and options to facilitate private sector participation. The Chapter also provides a review of existing funds regarding critical issues. Based on the findings, the chapter emphasizes strengthened financial readiness of the recipient country, considerations for private sector participation, and mutual accountability as preconditions for the success of the Fund.

In conclusion, Chapter Five provides suggestions for the Fund and strategies for Korea, focusing on the success of the Green Climate Fund. In order to ensure the successful launch and sustainable operation of the GCF, the paper identifies three major challenges that need to be addressed. The challenges include, differentiating the Fund from other existing funds in order to draw financial resources, creating an enabling environment for effective use of the Fund, and expediting progress in the Convention negotiations regarding climate finance. Currently, the most urgent task in operationalizing the Fund is maximizing the inflow of public resources to the Fund. By highlighting country ownership, the Fund can promote distinction vis-a-vis other existing funds, thus attract donors' contributions. Furthermore, as contributions are not expected until the completion of the GCF business model, prompt creation of an enabling environment for direct access and result-based approach is crucial. Breakthrough at the climate finance negotiation which is directly related to the resource mobilization of the Fund is another pressing task.

In the second part of Chapter Five, the paper provides suggestions for Korea as the host country of the GCF Secretariat. For instance, Korea can present ideas for a more rapid operationalization of the GCF. While regular replenishment of resources is desired in terms of stable function of the Fund, ad hoc contribution is inevitable for initiating operations in the near future. Korea can consider putting forward an alternative, to provide a guideline for the phased conversion of ad hoc contribution to regular replenishment based on certain conditions, and to persuade countries to agree to the guideline. Secondly, climate finance readiness and preparatory support for developing countries will lead to creating an enabling environment for the delivery of the Fund. Government support to foster related industries, such as finance, and consulting services in climate change and green technology will largely facilitate the partnership with the GCF. Lastly, the paper presents a guiding direction for Korea in its participation in the climate talks. Durban Platform, as decided at the 17th session of the Conference of the Parties, will serve a critical role in the future climate change negotiations. Since finance, technology development and transfer, and capacity building are mentioned as the means of implementation, Korea should pursue more active participation in the climate finance negotiations so that a good sum of international climate finance is channeled into the GCF. In addition, the paper also suggests that Korea participate more actively in the discussions regarding balanced support to mitigation and adaptation, creation of an effective tracking system of climate finance, and also linking capacity building and technology transfer with the GCF support.

A Study on the Governance of the Global Commons

Jin-young Moon et al.

The global commons are resource domains or areas which no nation exert sovereignty over. Three typical global commons refer to the deep seabed, Antarctica and, outer space. They have been said to be important due to not only abundant resources but also mankinds’ security. However, these have been free of any national or international regulation. The absence of exclusive property right could lead to economic inefficiency and international conflicts. This inherent problem is put forth by Garrett Hardin in his famous article, The Tragedy of the Commons. In order to avoid these problems, many theories or principles are postulated. One of these principles is the principle of the common heritage of mankind (CHM). It has been accepted and applied to the global commons since it was incorporated into the United Nations Conventions on the Law of the Sea (UNCLOS). With improving technology and developing countries’ growing, the application of the CHM has been a source of controversy. Consequently, it is necessary to suggest the new principles for the governance of the global commons. This research investigates not only the common properties of global commons but also their existing governance.

First, we investigate issues of the deep seabed. For a long time the open access doctrine or mare liberum (free sea for everyone) of the high seas had ruled the governance of the deep seabed. But, UN adopted UNCLOS in 1982, and the CHM has been incorporated in the governance of the deep seabed. Based on UNCLOS, International Seabed Authority (ISA) was founded to manage the exploration and the development of mineral resources in the deep seabed. There have been conflicts between the leading countries which insist on their priority of natural resources they explored and found and the following countries which insist on suspension of development of natural resources in the deep seabed. ISA still suspends the development of mineral resources in the deep seabed, but it admits the priority of the leading countries if they explored two sector of the deep seabed and waive the one sector.

Second, this study analyzes the current issues of antarctica. Antarctica is facing rapid environmental degradation due to human pressures such as pollution, and the effects of global warming. Compared to the deep seabed, however, the governance of Antarctica has been stable and good at handling the major concerns of the protection of Antarctica. The governance of Antarctica works based on the Antarctic Treaty and related agreements, collectively called the Antarctic Treaty System (ATS). The reason of the stability of the governance of Antarctica is that all the participating countries agreed to the protection of Antarctica with no development of its resources. In addition, ATS has prohibited any country from claim to the sovereignty over Antarctica.

Third, outer space is interesting to investigate since there has been no organized governance. Since its inception after the launch of Sputink in 1958, the governance of outer space has been created and modified. The five principal space law treaties had been signed between 1967 and 1981. The initial establishment of the governance was not difficult, and the United Nations Committee on the Peaceful Uses of Outer Space (COPUOS) has been responsible for managing the governance. However, the governance of outer space underwent a more controversial development than the deep seabed and Antarctica. With fast growing technology of spaceship and its related parts, the governance should have been modified. but the conflicts between the leading countries and the following countries hinder from the development of the governance of outer space. Shortage of orbits of satellites and space debris created major problems in the use of outer space, but all the countries participating in the governance had not agreed to the management system of handling these new problems yet.

I . Introduction

II. Literature Review
1. Definition and concepts of CSR
2. CSR practices in global supply chains
3. The challenges facing SMEs in APEC

III. Current APEC Approach to CSR

IV. Review of CSR Policies and Approaches
1. Regulatory approaches
2. Capacity building approaches
3. Integrated approaches

V. Building a Framework for Joint Integrated CSR Initiative in APEC
1. Guiding approach and principles
2. Developing a joint integrated CSR initiative

VI. Concluding Remarks

The last decades have witnessed profound changes in the nature of production in the Asia-Pacific region as multinational corporations (MNCs) have pursued complex, cross-border production and distribution systems. This process has precipitated the integration of the APEC region through the emergence of global supply chains and global value chains. Increasingly connected global supply chains have created new opportunities for businesses, especially for small and medium-sized enterprises (SMEs) in developing economies of the region, as they become important suppliers for MNCs. However, the development of unprecedented levels of cross-border production sharing has also brought new challenges for both business managers and public policymakers.

In particular, the rise of corporate social responsibility (CSR) standards has created a new set of challenges for SMEs linked to global supply chains. A complex, multi-layered set of CSR standards concerning socially and environmentally sustainable business practices have been developed at international, national and local levels. An increasingly large number of MNCs have also started to demand that suppliers comply with corporate codes of conduct. The proliferation of CSR standards, global buyers’ requirements of supplier codes of conduct throughout their supply chains and various monitoring and audit mechanisms have created challenges for SMEs which tend to lack the capacity and resources to comply with new requirements. As the uptake of CSR has become a prerequisite to enter global supply chains in the region, SMEs which are unable to adopt CSR practices have been excluded from global supply chains.

SMEs are drivers of sustained economic growth in APEC economies. Building CSR capacity of SMEs for their effective participation in global supply chains is thus an important challenge many APEC members face. The objective of this paper is to examine and propose the ways in which APEC can assist SMEs in the region to build the capacity to adopt CSR practices and to improve linkages with regional and global supply chains. CSR has emerged as an APEC agenda only recently and has not been given top priority so far. Furthermore, the initiatives of APEC so far have largely relied on CSR capacity building in a narrow sense. While capacity building of enterprises to adopt CSR is essential, its effectiveness can be limited without a supporting policy or regulatory environment.

The paper reviews three strands of CSR policies and approaches – regulatory approach, capacity building approach, and integrated approach – with a view to drawing lessons and implications for a new framework for CSR initiatives in APEC. The regulatory approach highlights the importance of the legal and regulatory framework, which comprises of: 1) CSR guidelines and standards as ‘soft law’ instruments, and 2) binding, mandatory ‘hard law’ instruments such as national laws and regulations concerning human rights, labor standards and environment. The capacity building approaches focuses on assisting SMEs to implement CSR-based practices through various training and other capacity building programs and projects. There has been a more innovative approach to foster sustained improvement in CSR for enhanced competitiveness of a sector or region by integrating these two approaches. By addressing both the capacity of actors as well as the enabling environment in which they operate, the integrated approach has the potential to bring about a substantial change at a large scale.

Drawing on the lessons learned from previous initiatives, the paper proposes a comprehensive, multi-sector capacity building initiative for SMEs to be implemented across the APEC region. The initiative highlights the need to reconnect CSR and the public policy framework by adopting the integrated approach. The national policy framework with appropriate regulatory measures is needed to ensure that enterprises integrate CSR into their operations and core strategy. A key characteristic of this initiative is that it is based on the principle of shared responsibility of public and private sectors through public-private Partnership (PPP) which combines complementary capabilities and resources of both sectors. It should also be in line with international principles or norms concerning development assistance and partnerships, including the OECD DAC guidelines on strengthening trade capacity for development.

The joint integrated CSR initiative in APEC would consist of three parts: 1) legal and regulatory frameworks and national policies, 2) capacity building of managers, government officials and other stakeholders, and 3) promote innovation in CSR through partnerships. CSR is a relatively new agenda within APEC and thus a great deal of learning, innovation and creativity is necessary to generate new ideas, strategies and policies which will bring about genuine development outcomes for SMEs and other stakeholders. Therefore, it is important to provide incentives for innovative practices through multi-stakeholder partnerships.

Executive Summary
  
I. Introduction 

II. Literature on Determinants of International Migration

III. International Labor Migration to Korea 
1. Trends and Characteristics 
2. Labor Migration Policy 
3. Source Area Composition and Trade Links 

IV. Data and Model 
1. Data 
2. Empirical Model 

V. Empirical Results 

VI. Conclusion 

References 

Appendix 

Since the 1990s Korea has emerged as one of the major migration destinations in Asia. This paper represents one of the first attempts to examine the determinants of bilateral labor migration to Korea across source countries and over time. We analyze the effects of economic, demographic, and policy factors. We also examine the role played by trade between Korea and origin countries. The results suggest that economic fundamentals, including income level in Korea, as well as demographic factors both in origin countries and Korea, play an important role, while different patterns are observed for skilled and unskilled migrant workers. We also found that trade is an important predictor of the size and composition of foreign migrant population in Korea. We speculate that trade influences migration to Korea through the information effect and foreign labor policy channel.

Russia is important not only as one of the four major powers in Northeast Asia but also as a strategic economic partner for strengthening “Eurasia Cooperation.” The total trade volume between Korea and Russia is continuously growing. In 2012, it reached $ 22.4 billion, an all-time high level despite the global slowdown. However, given the size of the two economies, there are more rooms for cooperation though direct investment and diversifying trade structure.
In a bid to enhance Korea-Russia economic cooperation both in quantitative and qualitative ways, the authors selected electricity infrastructure and medical services industries as promising sectors considering interests of Korean investors and Russia’s recent industrial policies. The study carries out an in-depth analysis on the two industries and suggests ways to extend cooperation in the fields between Russia and Korea.
The study is consisted of five chapters. The first chapter introduces background and purpose of the study and previous research. Then, an overview on the Russian economy, industries and policies is presented in the second part.
In the third chapter, the structure, related policies and growth potential of the electricity infrastructure industry in Russia are discussed. Russia is no. 4 in the world in terms of electricity production and consumption. However, dilapidation of relevant facilities are lowering efficiency Responding to this, the Russian government has released “electricity modernization policy” and actively adopting measures to improve the situation. In the meantimes, international cooperation is also likely to be activated, which can be a chance for Korean companies.
In the fourth chapter, the structure and features, major industrial policies, international cooperation trends, and growth potential of the medical services sector are analyzed. The private medical services sector is growing rapidly in recent years. After the collapse of the Soviet Union, Russia suffered with deterioration of medical services and population decline. With the government’s policies and the middle-class’s pursuit for better medical services, international cooperation is going to be one of key factors for improvement. These recent trends can be an opportunity to Korean counterpart. For better collaboration, comprehensive strategy for the medical sector in Russia needs to be prepared.
The chapter five summarizes previous parts and presents challenges and measures to enhance cooperation in the electricity infrastructure and medical services sectors between Korea and Russia.

Microfinance and Financial Inclusion: Focusing on the Analysis of ODA Support Cases and Poverty Reduction Effects

Sungil Kwak and Ju Young Lee


The activities of Microfinance Institutes (MFIs) have important meanings in developing countries because MFIs not only serve as suppliers of financial service, such as savings, loans, remittance, and insurance, mainly to the poor and small and medium enterprises(SMEs) that cannot obtain credits from formal financial institutions because of lack of collaterals, but also make effort to increase financial demand through the provision of non-financial services, such as various capability building programs: letter education, fund management, and income earning. Therefore, ESCAP (2006) emphasizes that MFIs are a major tool for financial inclusion and a core element to the development of finance in an inclusive way. This study analyzes “ODA for microfinance” cases supported by Germany and Australia, and finds empirical evidence that the access to microfinance reduces poverty. Finally, the results from the study provide some policy implications when provision of ODA for microfinance sectors is considered.

We can summarize the results as follows. First, the aim of German's ODA support for microfinance sector is to promote developing countries' balanced economic growth by comprehensively fostering the financial sector. Most activities are performed in a macro perspective. On the other hands, Australia's supports are based on a micro perspective, since the supports are given after establishing the systematic aid strategies, such as introducing performance management systems considering financial/social aspects. Second, according to the results of the estimation, when the average MFI loan amount per person increased by 10%, the poverty rate defined as a headcount significantly decreased by 0.463%. This result is consistent with that of Imai et al. (2012). When the sizes of total MFI loan amounts compared to GDP which indicate the sizes of microfinance markets by country increased by 1%, the poverty rate defined as a head count significantly decreased by approximately 3.4%. Therefore, it can be concluded that increases in the number of MFI users contribute to poverty reduction.

The results from this study provide evidence that microfinace deserves to be supported by ODA. However, Korea has no experience of support for the area. Hence, Korea should evolve ODA policies considering the following risk factors. First, since most ODA recipient countries do not have the capability to promote financial development, “master plans for financial development” should be prepared for them based on Korea's experience. The experience in operating cooperative unions, such as agricultural cooperatives and the National Credit Union Federation of Korea, will give many implications to developing countries. Second, to enable MFIs to support more various non-financial services than before, not only simple ODA provision, but also technology provisions and even measures to link private businesses' participation in CSR should be considered. Through the foregoing, Korean financial institutions' advancement into developing countries may also be considered. Finally, although this study highlighted relatively more positive aspects of microfinance, poverty problems are not solved just by improvement of financial access. Since not only the improvement of financial access is a necessary condition-not a sufficient condition-for poverty reduction, but also negative effects of MFIs are reported as some MFIs have been commercialized, ODA support for microfinance should be appropriately determined considering these conditions. In particular, to avoid negative effects, the subject countries of the support should be carefully reviewed and assessed in advance.