In this paper, we try to draw notable implications and find ways to improve Korea's ODA policy by analyzing the system of European countries, who have accumulated experience and knowledge over a long period of time.
Chapter 2 examines the variation of EU Member States' ODA spending and studies the factors that determine the size of ODA. According to the results of the analysis, we were able to conclude that the impact of temporal changes in political and economic state on ODA size is insignificant. For this reason, it is likely that the decline in ODA following recent European recession and contraction is temporary. On the other hand, if we take into account that income level and long-term paradigm of government operations are significant factors, the pressure within Europe to achieve 0.7% ODA/GDI target ratio can be expected to continue. Thus, it can be said that an increase in Korea's ODA reflects country's economic, political, and social advancement. However, we still need to check whether abrupt quantitative expansion corresponds to general economic and political factor or not. An integrated ODA policy that pursues not only a simple quantitative increase in ODA but also an internal maturity such as enhancing country's stature, political and economic democracy, and civil society is required.
In Chapter 3, we carry out a comparative analysis on aid management system of European countries and find implications for Korea. Through studying France, Austria, and Portugal's case, we realized that assistance enforcement integration brings in enhanced ability to enforce and synergy effect via improving cost-efficiency, preventing overlapping businesses, and combining similar ones. Hence, according to such finding, it seems advisable to reform Korea's ODA policy to "division of policy and integration of implementation" form. This seems to be the most feasible and segmentation problem solving measure considering Korea's ODA size, operating system, and characteristics of aid types.
Chapter 4 is about drawing political direction and improvement method for promoting ODA efficiency from the application of EU's experience. European countries' Country Partnership Strategies (CPS) course of actions are closely linked in the following order: general plan, enforcement plan, and budget plan. And its' multi-year plan is established considering mid- to long-term characteristics of ODA project. Therefore, in order to increase the effectiveness of ODA as European countries and manage the ODA projects systematically, we need to establish mid-to long-term ODA rolling plan through performance-based budget allocation and we should also take a step to allow rolling over residual budget.
In Chapter 5, we try to find lesson for Korea by studying the system transformation case of Europe (EU's support to East Germany, the EBRD 's assistance for the system transformation of East-European bloc, and the support for East-European bloc to join EU.) Among these cases, support for East-European bloc to join EU, in specific, suggests implications on how South Korea can provide assistance to North Korea in case it ultimately aims for the unification. The most fundamental task of unification is to narrow down the gap between the two countries' productivities and institutions to a certain level. However, we should not forget that the satisfying of convergence condition does not depend only on North Korea but that both sides of Korea need to take a responsibility.

During the seven years from 2002 to 2008, Japan had experienced economic boom and expected that it could recover from the so-called “lost two decades”. Japan’s hope, however, was dashed when the global financial crisis disrupted the entire global economy in 2008. Since the global financial crisis, the Japanese economy has suffered from economic downturn and the Japanese government has been trying to come up with policy responses to maintain economic growth. This paper provides some information as to the efforts the Japanese government has made to fight against the economic turmoil caused by the global financial crisis.
In the paper, we have reviewed Japan’s five urgent policy issues. First, we examined the continuously diminishing competitive edge in Japan’s manufacturing sectors. Second, we have surveyed negative effect of the downsizing domestic market and the government’s efforts to expand domestic demand by developing new growth industries, such as green and life industries. Third, we have reviewed Japan’s efforts to reform the tax system and social security system simultaneously to attain fiscal sustainability and institutional soundness in each system. Fourth, we have analyzed Japan’s trade and FDI policy and assessed it. Finally, we have reviewed Japan’s new energy policy which is being given form after the Fukushima nuclear power accident. We especially focused on Japan’s nuclear power policy, new and renewable energy policy and structural reform in the electric power industry. In the paper, we have also suggested some policy implications for Korea in each policy issue.

Korea, the first OECD DAC member who had prior experience of the benefits of ODA, also witnessed the dramatic effects of trade on economic growth and poverty reduction. In other words, Korea is the only official donor country that experienced the impact of ODA’s from a recipient’s perspective as well as the effects of trade on poverty reduction. Such experience sets Korea apart from other advanced donor countries, and an increasing number of less developed countries regard Korea's experiences as an attractive benchmark in their efforts for economic development and poverty reduction. However, it should be kept in mind that Korea’s experiences do not necessarily guarantee the effectiveness of Korea’s aid for trade (AfT). Up to now, it is hard to say that Korea’s AfT has met the needs and expectations of partner countries and the international aid community.
In the 2000s, Korea’s AfT has increased very rapidly, and the AfT/ODA ratio has turned out to be very high compared with those of other donor countries. However, these accomplishments do not result from Korea’s well-established AfT policies and strategies. Korea’s AfT has not been in line with the Aid Effectiveness Principles in many respects. The first challenge for Korea in enhancing the effectiveness of its AfT, is to establish frameworks and strategies for its AfT policy .
This study draws out priority areas and programs for Korea's AfT in formulating Korea’s AfT strategy paper. A survey of Korean experts in international economic issues was carried out, and ‘building private production capacity’ and ‘trade development’ were identified as Korea’s  AfT priority areas, while 8 AfT programs were marked out as Korea’s priority programs. Out of the 8 AfT programs, this study looked at 4 programs in detail including: ① Special economic zone for export promotion ② Trade promotion organization ③ Trade finance system and ④ Customs system. How to design and implement each program is investigated in this study. Great emphasis was put on program-based approaches and the program as a ‘package’ of related projects.

 

Indonesia government announced ｢Acceleration and Expansion of Indonesia Economic Development (2011-2025): MP3EI｣ in 2011 and has actively implemented this plan. The implementation strategy of MP3EI integrates 3 main elements: ① Developing the regional economic potential in 6 Indonesia Economic Corridors, ② Strengthening national connectivity locally and internationally, ③ Strengthening human resource capacity and national science & technology to support the development of main programs in every economic corridor.
Among 6 economic corridors the GDP share of Java corridor was 57.6% in 2010. The portion of manufacturing sector of Java is much higher than GDP share. Food and beverages, textile, transportation equipment, shipping, ICT and defense equipment are selected as the key industries of Java corridor in MP3EI. Java is regarded as a driver for national industry and service provision. However, the infrastructure and electricity supply of Java is poor even though it is better than the other corridors. Considering the size of cooperation fund, there is not enough room for infrastructure supporting cooperation between Korea and Indonesia. The economic cooperation between these two countries should focus on investment and trade.
Unlike Korea, Japan has supported the construction of Indonesian infrastructure through massive amount of official development assistance (ODA). Many Japanese firms have involved in this process, hence the assistance of Japanese government is rather indirect support for investment. Japan has established long-term and comprehensive cooperations with Indonesia, which is hard to catch up in the short run. Korea needs to take a different approach from Japan. It is necessary that Korea should consider the alignment with Indonesia's national development plan for manufacturing sector. Also, cooperation area needs to be consistent with the areas in which Korea has comparative advantages.
This study suggests specific industrial cooperation areas and directions based on the analysis of Indonesian economy and her national development plan. For this purpose Java corridor is selected because most of the Indonesian manufacturing sectors are located in Java. Among the strategic manufacturing sectors of Java corridor in MP3EI, textile, automobile, shipping, and ICT sectors are comprehensively analyzed. The possible cooperation areas of these 4 sectors are as follows.
For textile industry ① Korea needs to cooperate with Indonesia to establish textile cluster in Central Java through technical assistance and FDI, and ② Korea needs to cooperate with Indonesia to upgrade/replace textile machineries. For shipbuilding industry ① Korea should increase trade of shipbuilding equipments and ship parts, ② large shipbuilding companies of Korea need to increase joint venture with Indonesian companies and provide technical assistance, and ③ medium sized Korean shipbuilding companies need to move shipbuilding facilities to Indonesia for structural adjustment. For automobile industry Korean companies has great chances to cooperate through ① LCGC(Low Cost Green Car) program and ② Converter Kit expansion policy of Indonesia. For ICT and electronics industries ① Korean investing companies need to upgrade the products, ② Korean IT parts companies need to increase FDI into Indonesia, ③ mould and die technologies of Korean companies need to be fully utilized, and ④ Korean companies need to increase FDI of ICT service.
This study focuses on the cooperations of private sector, however government assistance and cooperations are also important to promote trade and investment. The most important duty of government is to provide institutional basis and environment to private sector. One of the important assistance of government is to provide proper financing to investing companies. MOU between Industrial and Commercial Bank of China (ICBC) and Indonesian Ministry of Industry (MOI) could be a benchmark for this purpose. Korea EXIM bank needs to provide more active financing to Korean investing companies. It is also needed that Korean government provide accurate informations about FDI procedures and investment incentives of Indonesian government. 

The changes taking place in North Korea’s political, military and economic aspects since Kim Jong-un came to power, are drawing the world’s attention. In particular, as the Kim Jong-un regime places greater emphasis on the economy, there is growing international interest as to whether the new economic measures will bring about positive changes in North Korea. Current policies of the North bear many startling resemblances to reform policies of past socialist countries. At present, the time might not yet be ripe for predicting North Korea’s full transition to a market economy. However, the Stalinist state has been placed in an abnormal situation where a planned economy and markets coexist in the country. As it is not likely that the socialist planned economy would prosper in such a situation, for North Korea, the transition to a market economy is almost inevitable. 
This report studies the marketization of North Korea and seeks to forecast the possibility of change in its economic system in commemoration of the advent of the new Kim Jong-un regime and the tenth anniversary of the “July 1st Economic Reform Measures” this year. The advances in marketization is likely to lead to weakening of state control of North Korean authorities. In addition, the spread of markets suggests the high possibility of transition to a market economy, which occurred previously in socialist states in Eastern Europe and China.
Most of the existing studies on estimations of market scale in North Korea depended on surveys, involving North Korean defectors. These surveys can be distorted by the economic and social bias of the defectors, or by macroeconomic data which can be inappropriate to estimate the informal economy of the country. As a result of these distortions, there appeared a significant gap between the estimations through surveys and macroeconomic data. This study utilized the “2008 Census of Population of DPR Korea” in an attempt to overcome the limitations of such data.
Through an analysis of census questions, the study found that almost 83 percent of the North Korean population are involved in household economic activities, most related to raising of vegetables, livestock or poultry. This participation rate in household economic activities can be deemed the same or very similar, in the least, with that of informal economic activities. The study also found that the rate is affected by income and other market-related variables. 
Additionally, this research studies further the relationship between the progress of marketization and the pace of transition to a market economy. According to this study, at the early stage of transition, the two factors reveal a positive correlation, but turns into a negative correlation as time passes. In the case were the informal economy is small, there tends to be an official institution, robust governance and low corruption in place, thus leading to a rapid transition. In contrast, in the case of a large informal economy, households or businesses, which benefited from the informal economy, tend to be at the forefront of introducing a change towards capitalism. In addition, a large informal economy facilitates businesses at the early stage of transition. These effects, however, disappear with time. Therefore, it is important to come up with polices to promote transition in the early stages.
The study goes on to divide 27 transition countries, including China and Vietnam, into three groups, into outstanding, fine and poor reform groups, through discriminant analysis based on the outcomes of economic reforms over the past two decades. According to the discriminant analysis, North Korea fell into the poor reform group. Most of the countries in the same group with North Korea belong to the Commonwealth of Independent States (CIS) which had strong planned economies and whose states showed a slow transition to market economies. These states share similarities in that their former governments remained unchanged or they retained a government even after a new system was introduced. North Korea is similar in that it has a political structure unfavorable for reforms, hence, the North is likely to follow in the footsteps of the CIS states. Also, North Korea has an unfavorable initial condition in that the level of economic development at the early stage of transition is low. However, what is more significant is how the North sets up a favorable environment for reform with given initial conditions and how actively and efficiently it promotes its reform. Fortunately, North Korea is situated in the most dynamic geoeconomic location in the world, where neighboring countries like South Korea, China and Russia can play a positive role in supporting Pyongyang to step forward toward transition to a market economy. This is a critical moment for Pyongyang, and Seoul, along with the international community, in moving forward to assist North Korea in a bid to bring about better and faster reforms.

 

This study is to investigate the issues of socio-economic development in Ethiopia and Kenya and to propose how Korea can improve ODA to these countries. Ethiopia and Kenya are major economic powers in the Horn of Africa. There are a few countries with unstable government in  the region causing problems to neighbouring countries. During the last 20 years, Somalia, as neighboring both countries, has been unstable and created problems in the continent and in the off shore.
Ethiopia has a long history and suffered from 17 years of socialism in the 1970s and 1980s. After a new government was established in 1991, the country has been trying to promote her economy with a market driven economic system. Since year 2000, the Ethiopian economy has  been achieved one of the highest economic growth in Africa. However, there are many issues that could be improved socio-economic development for the country.
Kenya was a British colony until 1963 and had some economic infrastructure inherited from the colonial rule. However, the economy was not performing well during the last five decades due to political instability, corruption and mal-management. Kenya provided  a long term development plan 'Vision 2030' in 2007, and has given priorities to promote key industries. The key industries were encouraged foreign direct investment and government support. Nevertheless, their economic record has not been successful and Korean ODA could be beneficiary to improve social and economic environment.
This study suggests how Korean ODA can enhance socio-economic capacity of the two countries. By promoting these two economies and social development, the Horn of Africa will be stabilized.

Executive Summary

I. Introduction

II. State of Play in the Two “Tracks”
1. The Trans-Pacific Track: TPP
2. The East Asian Track – the RCEP
3. TPP, RCEP and the Architecture of the “Two-Track” Approach to the FTAAP

III. The TPP: Prospective Content and Issues for Regional Economic Integration
1. Market Access for Goods
2. Rules of Origin
3. Services
4. Investment (Investor-State Dispute Settlement)
5. Competition: State-Owned Enterprises
6. Intellectual Property
7. Pharmaceutical Evaluation, Pricing and Subsidy Programmes
8. E-Commerce: Data Flow
9. Customs
10. Sanitary and Phytosanitary (SPS) Measures
11. Environment and Labour
12. Development and Capacity-Building

IV. The RCEP: Prospective Content and Issues for Regional Economic Integration
1. Tariffs
2. Rules of Origin
3. Trade Facilitation
4. Services
5. Investment

V. Which Way to the FTAAP – TPP or RCEP?

VI. Concluding Remarks

References

In the early years of the twenty-first century proposals reflecting two distinct “visions” of Asia-Pacific integration were being advanced for consolidating the regional trade architecture through the establishment of region-wide trade agreements. The rise of East Asian regionalism was reflected in proposals for an East Asian Free Trade Area (EAFTA) and Comprehensive Economic Partnership for East Asia (CEPEA), envisaged as major elements in an agenda for building an economically integrated East Asian region. APEC’s “trans-Pacific vision”, of integrating economies on both sides of the Pacific through achievement of APEC’s Bogor goals of free trade and investment in the Asia-Pacific region, was refreshed in modified form with the proposal for a Free Trade Area of the Asia-Pacific (FTAAP), conceived in principle as a free trade agreement embracing all APEC members.

In 2006 APEC leaders sought to emphasise complementarity between the two “visions” by formally adopting a Regional Economic Integration agenda in which the FTAAP was recognized as a “long-term prospect”. At Yokohama in 2010 the leaders set out the way forward in more concrete terms, when they unambiguously endorsed the FTAAP as the end-point to be reached in the evolution of the Asia-Pacific regional trade architecture, while at the same time endorsing a “two-track” approach to its eventual achievement. The leaders stated that achievement of the FTAAP is to be based on progress made within both a “trans-Pacific track”, represented by the Trans Pacific Partnership (TPP), involving economies from both sides of the Pacific, and an “East Asian track”, now represented by the Regional Comprehensive Economic Partnership (RCEP), a successor initiative to the EAFTA and CEPEA, with participation at this stage limited to the sixteen “ASEAN Plus Six” economies on the western side of the Pacific. Six of the 21 APEC economies are currently participating in both “tracks”, while four are participating in neither track. Four of the RCEP participants are not members of APEC.

The leaders left open the question of how the two “tracks” might evolve and eventually converge into the FTAAP. In the meantime, attention is focused on the substance of the TPP and RCEP agreements being negotiated within each “track”, and their implications both for the size and distribution of the prospective economic benefits of each agreement, and for the prospects of each agreement for gaining acceptance from other economies in the Asia-Pacific region as the “model” for the eventual FTAAP.

Of the two agreements, the TPP at this stage appears to have the more ambitious and comprehensive agenda. After three years negotiations have advanced to the point where failure, while still possible, would be a major surprise, but there are many sensitive issues remaining to be resolved. In addition to the expected market access issues of particular sensitivity to individual participating economies, other highly sensitive issues involve rules of origin, intellectual property, pharmaceutical evaluation pricing and subsidy programmes, management of electronic data flows, labour and environment. These and other issues are discussed in detail in the paper. How these issues are eventually resolved will be important in determining both the extent to which the TPP lives up to its stated ambition of being a “high quality” agreement and also its prospects of being accepted as a “model” for an eventual FTAAP.

The RCEP negotiations are only just beginning. It is correspondingly more difficult to evaluate its likely content and its potential as a basis for the eventual FTAAP. It appears likely that the most substantive provisions will be those on trade in goods, trade in services, and investment, prospects for which are analysed in detail in the paper. In these areas the RCEP faces formidable challenges in consolidating existing arrangements among the participating economies to a level that would mark an impressive step towards the eventual FTAAP. On the other hand the RCEP may be better placed than the TPP to develop rules of origin that foster deep integration among the production systems of participating economies. Provisions on intellectual property and competition policy are included in the proposed content of the RCEP, but it would be a surprise if these provisions approach the depth of commitment being sought in the TPP.

Like the TPP before it, RCEP faces all the issues involved in establishing agenda priorities and modalities for negotiating an agreement among countries that in many cases are already linked by existing agreements, or in some cases by ongoing negotiations. The complexities and difficulties will be compounded by the likelihood that the participating economies will come to the negotiations with widely divergent levels of ambition. Especially under these conditions ASEAN’s determination that the RCEP should be an ASEAN-led process also means that RCEP negotiations could turn out to a defining test of ASEAN’s ability to maintain its leadership role in regional economic integration.

As the external economic environment has been worse since 2008, China laid emphasis on the domestic consumption as a new drive force for sustained economic growth. And luxury consumer market expands very fast as Chinese consumers’ purchasing power has increased. Before targeting the Chinese luxury consumer market aggressively on a national scale, some regional market like Shanghai is needed to testify the effectiveness of distribution and marketing and to understand consumers’ tendencies.
The purpose of this study is to provide implications to both the Korean enterprises and government which have tried to foster competitiveness in luxury consumer market in China by analyzing competitive strategies of various enterprises in Shanghai. We approach this study based on the case studies in the clothing and cosmetics industry in Shanghai.
Chapter 1 introduces background, objectives, and methodology of this research. Chapter 2 analyzes the business environment of Shanghai luxury consumer market, inter alia, clothing and cosmetics market. Chapter 3 illustrates our case studies and Chapter 4 discusses the competitive strategies of each case study. And Chapter 5, with implications for Korean government and enterprises, reveals the limitations of this study.
As for business, Korean enterprises should carefully choose entry points when they are advance into the Chinese luxury consumer market. Second, they should utilize various strategies including regional specialized marketing strategy to increase brand awareness. Third, they should carefully analyze the characteristics of the Chinese luxury consumer. Fourth, there is a need to develop a new luxury goods area that you can enjoy the first-mover advantage, while increasing brand awareness in the area of the existing market. Fifth, Korean enterprises should prepare for the infringement of intellectual property rights in China and use it as a way of noise marketing at the same time. Sixth, Korean enterprises need to pay more attention to looking for the partners in China. 
In order that Korean enterprises can succeed in the luxury consumer market in Shanghai as well as in China, indirect support of Korean government is also required. First, Korean government should support promotional activities for Chinese tourists so that they can have the luxurious image about Korean products. Second, Korean government is advised to support the Korean enterprises in China to improve Korean brand awareness. Third, Korean government needs to request the Chinese government the strict management to counterfeit goods and negotiate with Chinese government to lower the entry barriers into Chinese market.

 

The whole world has been keeping its eye on Mongolia’s economic growth. Although Mongolia has experienced considerable socio-economic instability during the process of the regime transition in the early 1990s, it has managed to establish the market economy in a relatively short period of time and reached an annual average growth of 9% in the mid 2000s. Despite the rapid fall in the growth rate due to a global financial crises, Mongolia has quickly recovered its trend to accomplish astonishing 17.4% in 2011.
For such reasons, the international assessment on Mongolia has undergone noticeable changes. Leading international organizations and assessment institutions are presenting optimistic prospects for Mongolia’s economic growth, while foreign investments into Mongolia continue to increase. With such changes in Mongolia’s investment environment, expanding opportunities for market entry has become an urgent issue for Korean businesses.
Given such background, this research provides a systematic analysis of Mongolia’s overall investment environment, and identifies management situation and difficulties of Korean firms in Mongolia, in order to elicit ideas for specific measures and policy implications in order to expand market entry by Korean businesses. In particular, this research tries to provide detailed information and analysis through a survey research on 59 Korean firms in Mongolia, along with in-depth interviews of local professionals and company representatives.
Chapter 1 forms an ‘introduction’ that includes the significance and objective of this research, literature review to emphasize the contribution of this research, research methodology and the overall structure of this research.
Chapter 2 describes ‘Mongolia’s economic situation and mid to long-term prospects,’ providing an overview of Mongolia’s current economic state, its main policy objectives, and mid to long-term prospects for growth. Mongolia’s major industries include mining, agriculture and stock-farming, manufacturing (cashmere and textile processing), wholesale and retail, and tourism among others, while mining is the engine of growth. Mining represents about 20% of the GDP, about 60% of the total industrial production, and about 80% of total exports. The share of agriculture and stock-farming is decreasing, but still holds the largest number of employees. The share of manufacturing is under 10%, but helped by aggressive industrial policy initiated by the Mongolian government, it is showing a growing trend. The wholesale and retail, and the real estate business sector is consistently increasing their respective shares due to economic growth (driven the mining industry), or the so-called spending effects.
Presently, the main economic policy objectives of Mongolia include the development and diversification of industries to fully implement the benefits of its resource-based economy, along with price stabilization, reduction in unemployment rate and poverty eradication, effective application of economic policies, industrial policy realization, and control of the macroeconomy, among others. The Mongolian government hopes to provide and meet the mid-term national development strategy and realization plans in accordance with abovementioned policy objectives. Successful implementation of these policy goals is likely to shed a light of optimism to Mongolian mid-term economic outlook.
The third chapter, ‘Mongolian investment environment,’ analyzes in detail the overall investment environment of Mongolia, along with its infrastructure, labor system, and legal and institutional structures. Despite its vast territory, Mongolia is a country with a small population and generally poor infrastructure. For such reasons, the Mongolian government is increasing its investment in infrastructure for railway and road expansion, expansion of airway services, securing energy supply, information and communication technology development according to its mid-term national development strategy.
Labor market of Mongolia is characterized by its small labor population in comparison to other Asian countries. Particularly apparent is the imbalance between the demand and supply in the labor market, with high levels of unemployment despite increasing job openings due to rapid economic development. It is explained by the lack of skilled workers and low wages causing movement of local labor to foreign markets.
For its part, the Mongolian government has been improving its legal and institutional structures to promote foreign investment. It has established several laws on foreign investment to assure that foreign and domestic investors have equal rights in production, sales, and investment. The government has also concluded the Stability Agreement for foreign investors, including provisons on free trade areas, approved the use of land, applied low levels of tariff along with other incentives.
Chapter four, ‘Foreign investments to Mongolia and their strategies’ discuss the current circumstances and trends in FDI to Mongolia. The chapter provides a comparative analysis of the investments and entry strategies of China, Russia, Japan, Canada, United States, and the EU countries. Currently, China is first in foreign direct investment to Mongolia, which can be explained by the increase in China’s demand for Mongolian mineral resources and the relatively good condition of railways and transportation routes between China and Mongolia. Chinese businesses concentrate on various types of mineral resource development, while avoiding overlapping investments with other businesses.
Russian investments in Mongolia generally involve mines, mineral processing factories, and infrastructure already built during the past Soviet era. Unlike their Chinese counterparts, Russian businesses prefer joint investment, which is the traditional method of cooperation between Mongolia and Russia. On the other hand, Japanese investment is relatively low primarily due to geographical reasons, but is increasing nonetheless. Japanese businesses have been cooperating with local Mongolian businesses and investing in manufacturing, foodservice, and information and communication industries, but recently turned its attention to mining as well. Canada is another leader in investment, with the 6th largest total investment volume among foreign investors. Because mining industries require large volumes of capital, investment by Canadian businesses occurs in various ways, including individual investment, joint investment with Mongolian businesses, and joint investment with a third-party. United States, which is 8th in terms of its total investment volume, has been also investing primarily on mineral resources, but recently expanded into other industries such as trade, foodservice, and banking.
Chapter five, ‘Investment to Mongolia by Korean businesses and their management evaluation,’ introduces the current state of Korea’s investment to Mongolia, analyzes the motives for investment motivation, obstacles in local management, and their achievements based on a survey research on 59 Korean businesses in Mongolia. The research also provides a basis for policy implications for future business entry included in this chapter. According to the survey results, Korean businesses focus primarily on mining, services, wholesale and retail, lodging and foodservice industries, while manufacturing has a very low share. The businesses are mostly small scale with less than 10 employees, but their sales volume vary accordingly, and a large number of them have entered the market in the end of 2000s when optimistic prospects on Mongolian economy were dominant.
It turns out that most Korean businesses in Mongolia had experienced a lot of difficulties due to complex administrative structures, investment approving institutions, and frequently changing behavior of their local partners. They were also forced to procure their resources and operating funds in Korea due to Mongolia’s underdeveloped manufacturing system and poor banking infrastructure. The goods and services of the local Korean businesses were mostly sold in local markets, with the quality of those goods and services being above the average, and garnering high brand awareness. Also, because of the poor distribution network in Mongolia, local sales were occurring either directly by Korean businesses or indirectly through local partners. The greatest obstacles included difficulties in collecting loans and payments due to poor banking infrastructure, and price competition with cheap goods from China. Greatest difficulties in wage and employee management were rapid increase in wages and the high employee turnover rate. Overall, the business environment in Mongolia is characterized by particularly poor infrastructure; and while there are some problems in procurement of raw materials and resources, employment, and management of the personnel; there were almost none in terms of labor management conflicts, surtax refund, or the local administration interference.
The net profits of local Korean businesses appear to have increased continuously over the last three years, which has led businesses to consider expansion or at least maintenance of status quo rather than withdrawal or volume reduction. Also, these businesses are aiming to strengthen their marketing strategies and expand their entry in local markets, while trying to bestow the impression of good quality on their anchor products. In observing the overall business obstacles experienced by these enterprises, there are readily noticeable problems in employment, wage, and taxes; while the problems are not as apparent in terms of banking, foreign-exchange, and investment barriers. Looking into concerns raised to Korean government and public agencies, the businesses were most in need of stronger consular functions, investment information services, and banking support. On the other hand, concerns raised to the Mongolian government include issues regarding visa services and long-term visas, freedom of economic activities for foreigners, and improvements in the distribution sector. 
Based on these findings, chapter six, ‘Measures to expand Korea’s investment to Mongolia’ reconfirms the need for investment expansion, introduces the promising sectors for entry expansion of Korean businesses, and provides policy suggestions for the Korean government in establishing an active support system.
In sum, Mongolia’s investment environment holds potential in mining, plant industries, infrastructure development, tourism, banking, and manufacturing sectors for Korean businesses. Korean government needs to provide structured investment information, come to an agreement on visa waivers, reinforce consular services, place greater efforts to improve the image of Korea, and reinforce the local human networks.
In conclusion, considering the overall prospects of Mongolia’s economic growth and market expansion, Mongolian government’s efforts to stabilize its laws and institutions concerning the economy and investment, the quantitative investment growth to Mongolia, the entry expansion and diversification of Korean businesses constitutes urgent policy priorities

 

 

Foreword

Contributors

Ⅰ. Introduction and Summary / Pyeong Seob Yang
1. Background
2. Review of Previous Studies
3. Summary

Ⅱ. The Transformation of China’s Development Pattern and Its Impacts on the World Economy / Yin Xiangshuo
1. Introduction
2. China’s Economic Development Since 1978
3. Transformation of China’s Development Pattern
4. The Impact of the Transformation of China’s DevelopmentPattern on the World Economy
5. The Impact of Transformation on Sino-Korean Economic Relations
6. Concluding Remarks

Ⅲ.China’s Demographic Transition and Labor Market Changes: Implications to China and Rest of the World / Cai Fang and Wang Meiyan
1. Demographic Trend of China
2. Resultant Changes in the Labor Market
3. Impacts on Economic Growth
4. Implications to the World Economy
5. Suggestions to Korean Government and Investors

Ⅳ. China’s Policy Direction on Industrial Upgrading and Its Impacts on the World Economy / Feng Fei
1. China’s Industrial Upgrading Process since Its Reform andOpening-up
2. Current Situation and Development Strategy of China’s Emerging Industries
3. Impact of China’s Industrial Upgrades on the World Economy and Closer Cooperation between China and Korea

Ⅴ. China Energy Policy Trend and China-Korea EnergyCooperation / Han Wenke and Fan Lijuan
1. Status of China’s Energy Development
2.Key Issues and Challenges Faced with China Energy Development
3. The Projection for Energy Development Perspectives duringChina’s 12th Five Year and to 2020
4. The Development Priorities for China’s 12th Five Year Period and to 2020
5. The Impact on the World and Northeast Asia by China’s Energy Economy
6. Suggestions on Cooperation between China and Korea

Ⅵ. RMB Internationalization and Its Impacts / Zhang Bin
1. Introduction
2. Development and Current Status of RMB Internationalization
3. Development Direction of RMB Internationalization
4. Impact of RMB Internationalization on the Global Economy and Financial Orders
5. RMB Internationalization and China-South Korea Cooperation

Ⅶ. China’s Overseas Investment Strategy and Its Impacts on the World Economy / Wang Luo
1. The Evolution of China’s Overseas Investment
2. The Features of China’s Overseas Investment
3. The Evolution of China’s Policies on Overseas Investment
4. The Impact of China’s Overseas Investment on the World Economy and Domestic Economy
5. The Situation China’s Overseas Investment Faces in the New Era
6. Problems in China’s Overseas Investment
7. The Trends of Chinese Enterprises’ Overseas Investments
8. The Outlook of the Policies and Measures to Encourage Overseas Investment
9. The Trends of China’s Investment in South Korea and the Recommendations

Ⅷ. South Korean Multinational Companies in China / Wang Zhile
1. Introduction
2. Development of Foreign Enterprises in China
3. Development of South Korean Enterprises Invested in China
4. Investment of Famous Korean Multinational Corporations in China
5. Suggestions: Integration into China for Sustainable Development

Ⅸ. An Assessment of Korea-China Economic Cooperation / Pyeong Seob Yang
1. Korea-China Economic Cooperation: An Overview
2. Korea-China Trade Cooperation: Assessment and Tasks
3. Korea-China Investment Cooperation: Assessment and Tasks
4. Suggestion of Cooperation for Future-Oriented Trade and Investment

The recent Chinese Communist Party Congress elected a new leadership that will lead China over the next decade. Under the previous, “fourth-generation” Hu Jintao leadership, China’s economy grew at an astounding pace, with China becoming one of the world’s largest economies and also one of the most powerful countries. The process of this rapid economic growth, however, also revealed deep structural contradictions in China and the increasing susceptibility of the Chinese economy to worldwide recession set off by the financial crisis in the West.
Students of the Chinese economy argue that, in order for China to ensure sustained development, it must take care not to fall into two traps: that is, the middle-income trap and the system transition trap. Although China is still the world’s most populous country, the size of its workforce for manual labor is now in a steady decline. The traditional manufacturing sector is vulnerable to oversupplying, while other developing countries are industrializing at a pace that may soon threaten the industrial prospects of China. The growth rate of the Chinese economy has accordingly slowed down in recent years. In the meantime, disparities in wealth along regional and class lines continue to increase, while a pervasive culture of corruption adds to widespread social anxiety. As the elite increasingly pursue self-serving policies, popular resentment is growing against the policy of continued economic reform.
Under the new leadership, China will fundamentally alter its approach to economic development, seeking to discover and develop new sources of growth. The framework of “development through innovation” will replace the framework of “development through input expansion.” Nurturing domestic consumer industries and markets will take priority over encouraging exports and foreign investments. Development no longer should degrade the environment but will become more eco-friendly, while the overall energy-dependent economic structure will gradually give way to a new and energy-saving economic structure. Industrialization will no longer be led singlehandedly by the manufacturing sector but will depend more and more on the new strategic industries. At the macroeconomic level, China will strengthen its ties to neighboring countries in the region through the expansion of free trade agreements. It will also seek to globalize the Yuan so as to facilitate Chinese investors’ activities overseas. These mid- to long-term changes will exert significant influence not only on the prospects of the Chinese economy for growth, but also the Korea–China economic relations as well as the entire international economy.
The shifts in the approach to economic development will inevitably slow down the growth rate of the Chinese economy, ending the age of high-speed growth and ushering in a new era of middle-speed growth. The new approach to development and the accompanying slowdown of the Chinese economy will also affect the prospects of economic partnership between Korea and China. South Korea has been one of the biggest beneficiaries of China’s rapid economic growth over the last two decades. As China grew to become “the world’s factory” and a major export powerhouse, Korea profited handsomely by providing intermediate goods that the Chinese manufacturing sector needed for the processing trade. This has enabled Korea to maintain a stable surplus in its trade balance with China. Korean companies also invested heavily in China, seeking new impetus for growth there. Now that China’s society and economy are expected to undergo radical transformation, no one can say with certainty that this mutually beneficial arrangement will continue to be so between the two countries for the next two decades as well. As China will increasingly seek to promote its domestic industries and reduce its emphasis on export-oriented growth, Chinese demand for Korean exports will concomitantly decrease. Given the fact that Korea specializes in supplying intermediate goods to China for its processing trade, Korea will be left all the more vulnerable to the decreasing demand in China. The effect could be drastic so long as Korea does not increase its access to the Chinese domestic consumer market.
Thus it is now urgent to develop a new plan and strategy for an updated partnership between Korea and China to guide the two countries’ relations for the coming two decades. We have come to publish the following collection of essays in order to help the reader contemplate and plan a new model of economic partnership between Korea and China. These essays address four main themes. The first essay examines the relationship between China’s changing approach to development and its demographic issues. As China no longer enjoys the “population bonus” that has been a huge boon to its astonishing growth, its potential for economic development is on steadily waning. The effects of this demographic change on China’s future development strategies are analyzed in detail. The second essay reviews China’s mid- to long-term strategy for industrial transformation and how such a strategy will affect China’s relations to the world economy and Korea. Of particular concern are China’s pursuit of advanced and high-tech industries and the mid- to long-term changes anticipated in its energy policy. The third essay addresses the international implications of China’s changing economic policy. Since joining the World Trade Organization, China has grown at an unbelievable rate by opening its doors to the international market and capital. This phenomenon can be described as “the bonus of openness.” The benefits of this bonus, however, have begun to decline, and China now needs to come up with a solution to handle its international economic relationship better. China has accordingly decided to globalize, expanding the markets for its companies overseas, hoping to enhance the sustainability of its growth potential and strengthen its position in the international community. The third essay therefore discusses the Chinese strategy for the internalization of RMB and plans for foreign investments. The fourth essay looks into the Korea–China economic partnership. It assesses the history of trade between the two countries over the last two decades, details the performance of Korean multinational corporations with operations in China, and identifies the challenges involved in improving and sustaining the partnership.
For this project, we invited seven Chinese experts specializing in China’s economic and trade policies. These authoritative experts not only participate directly and indirectly in shaping China’s important policies, but also have deep understanding of Korea–China relations. The studies undertaken for this collection were also extensively supplemented and revised with the help of Korean specialists in Beijing as well as a number of Korean experts on China.
Our hope is to see this collection of essays provide important and useful information to help readers understand China’s long-term development strategy better and develop a new strategy for the Korea–China economic partnership accordingly. I would especially like to thank all the writers who have contributed their work to this collection.