The study examines methodologies for quantitatively analyzing the impact of global supply chain fragmentation and applies these approaches to scenarios involving critical minerals. It identifies two primary analytical approaches: microeconomic and macroeconomic.

Microeconomic methods provide detailed insights at the item or firm level but face challenges due to limited access to specific supply chain data. Macroeconomic methods, while suitable for industry- or national-level analysis, often rely on unrealistic assumptions when applied to item-level fragmentation. Despite the significant macroeconomic effects of disruptions in critical supply chains, existing item-level analysis techniques struggle to capture these impacts accurately. For instance, efforts to link item-level analysis with GDP using linear programming or inoperability input-output analysis often encounter limitations due to rigid assumptions about input-output structures. High-tech items, in particular, pose challenges due to their complex supply chain interdependencies and their significant influence on final production.

To address these issues, the study proposes an integrated methodology combining machine learning techniques for microeconomic analysis with the OECD METRO model for macroeconomic evaluation. This approach considers key issues and transmission channels identified in previous research. The study also reviews critical mineral management policies in major economies such as the United States, European Union, China, and Korea. The United States identifies critical minerals essential for economic and national security through legislative measures like the 2020 Energy Act and has implemented strategies to strengthen North American supply chain resilience. The European Union has updated its critical raw materials list every three years since 2008 and enacted the Critical Raw Materials Act in 2024 to expand production capacity and enhance international cooperation. China, despite lacking a clear legal definition of critical minerals, strengthens its resource management through export controls and cooperation with resource-rich countries. Korea designated 33 minerals as critical through its 2023 Critical Minerals Securing Strategy, prioritizing 10 strategic minerals essential for industries like electric vehicles and semiconductors. However, Korea’s reliance on imports for most critical minerals highlights its vulnerability.

The study conducts a vulnerability analysis of Korea’s critical mineral supply chains using indicators such as the Trade Specialization Index (TSI) and Herfindahl-Hirschman Index (HHI). It identifies high global supply chain concentration in minerals like cobalt, lithium, and neodymium, which are crucial for secondary batteries and electric vehicles. To assess geopolitical risks, it examines import trends from China across seven countries from 2017 to 2023. Sharp declines in imports of gallium, graphite, and rare earth elements suggest potential disruptions due to trade conflicts or export controls.

The study employs a Dual-Stage Attention-Based Recurrent Neural Network (DA-RNN) model to predict the impact of critical mineral fragmentation on Korea’s exports of key items like batteries and semiconductors under three scenarios involving germanium, graphite, and rare earth elements. The results show significant decreases in export values across all scenarios. For example, restrictions on germanium imports led to a 3.9% decline in battery exports, while rare earth element shortages caused a 10.8% drop.

Using the OECD METRO model, the study evaluates the macroeconomic impact of critical mineral fragmentation under two approaches: direct analysis of import disruptions (Approach 1) and integration of microeconomic results into macroeconomic simulations (Approach 2). The findings indicate that germanium fragmentation could reduce Korea’s real GDP by 0.15%, while graphite and rare earth element disruptions could lead to decreases of 0.14% and 0.89%, respectively.

Based on these findings, the study recommends strengthening supply chain monitoring systems by integrating fragmented platforms across government agencies and establishing a centralized control tower. It also suggests diversifying procurement strategies, promoting R&D for substitute materials, and supporting SMEs through digital-based supply chain management platforms. Additionally, it emphasizes harmonizing policies with major economies to prevent over-securitization and redundant investments while expanding international cooperation for joint mineral exploration and development projects.

Amid complex global crises and the intensifying U.S.–China rivalry, the world economy has been shifting from an efficient system based on global division of labor toward a structure prioritizing supply chain resilience. In response, Korea has been emphasizing diversification of its economic partnership, and expanding its production bases beyond China to other regions. Southeast Asia has emerged as one of the major economic partners in this strategy, yet Korean investment remains heavily concentrated in Vietnam. As regional economies continue to advance, Korean companies are increasingly compelled to seek new alternative manufacturing bases both within and beyond the region. In this context, Africa, endowed with abundant human and natural resources and strategically positioned as a gateway to U.S. and European markets, has gained prominence as a potential partner for industrial cooperation.

The process of industrialization drives structural transformation from agriculture to manufacturing and services, and serves as a key engine for economic diversification, job creation, and technological advancement, ultimately fostering a high value-added economic structure. Both Southeast Asia and Africa have been striving to transform their economic structures through development of the manufacturing sector. While Southeast Asia has achieved significant economic growth through export-oriented strategies, Africa’s production base continues to experience sluggish growth. Measured by Manufacturing Value Added (MVA) per capita, countries such as Singapore, Brunei, and Malaysia exhibit advanced levels of industrialization, and Indonesia, Vietnam, and Thailand also are showing steady progress. In contrast, many African countries still remain in the early stage of industrial transition.

A comparison of their industrialization trajectories reveals that Southeast Asia has built a stable foundation for growth through export-led manufacturing development, while Africa has faced structural challenges stemming from underdeveloped infrastructure and limited integration into global production networks. In the early 1990s, both regions accounted for similar shares of global manufacturing value added. Since then, Southeast Asia’s share has steadily expanded to 3.5% in 2024, while Africa’s has stagnated at around 1.5%. From a trade perspective, Southeast Asia has maintained trade surpluses driven by increased exports of manufactured goods. In contrast, Africa’s persistent reliance on imports of manufactured products has resulted in chronic trade deficits. As a result, Southeast Asia has achieved greater export diversification, higher economic complexity, and stronger backward participation in global value chains (GVCs). Africa, by comparison, remains predominantly engaged in forward participation through the exports of unprocessed or semi-processed materials. These structural disparities suggest that Africa must promote industrialization and manufacturing development to enhance value addition and achieve a more resilient and diversified export structure for sustainable growth. However, the resurgence of protectionism marked by the United States’ reciprocal tariff measures in 2025 poses risks to Southeast Asia’s momentum of industrial transformation. Similarly, Africa could be adversely affected by the expiration of the African Growth and Opportunity Act (AGOA) and the enforcement of new U.S. reciprocal and universal tariffs, particularly in light industries such as apparel and textiles.

The export-oriented industrialization model that underpinned Southeast Asia’s growth could be relevant for African countries, as the current global dynamics have become increasingly favorable to the continent. Demographic changes, rapid urbanization and expansion of the middle class, regional efforts for economic integration through the Africa Continental Free Trade Area (AfCFTA), and advances in digital technology create new opportunities for industrial development. Nonetheless, Africa faces a range of internal and external challenges that constrain industrial progress. Domestic obstacles include macroeconomic instability, poor infrastructure, weak institutional and administrative capacity, unfavorable business environments, political instability, and corruption. Externally, rising protectionism and decline in development assistance further complicate the industrial landscape. Moreover, the imperative to pursue green industrialization to mitigate climate change adds another layer of complexity, demanding substantial financial and technical support for green technology innovation and robust regulatory frameworks.

Despite their different stages of development, both Southeast Asia and Africa share common policy goals in their industrialization strategies: transforming economic structures, creating high value-added industries, deepening regional integration, diversifying industrial bases, fostering sustainable growth, and strengthening supply chain resilience. ASEAN seeks to become a single market and an advanced manufacturing hub under the ASEAN Community Vision 2045 and the AEC Strategic Plan 2026-2030. Meanwhile, Africa through the African Union’s Agenda 2063 and the AfCFTA aims to enhance regional integration and expand its manufacturing base. On the other hand, a strategic difference exists. Southeast Asia is transitioning toward high-tech industries, having adopted distinct strategies, such as Vietnam’s semiconductor initiative, Thailand’s “Thailand 4.0,” and Indonesia’s promotion of downstream industry, focusing on digital transformation, green growth, and high-tech industries like semiconductors and electric vehicles. In contrast, African countries, in the foundational stage of industrialization, are prioritizing labor-intensive sectors such as agro-processing, and textiles and apparels while formulating country-specific industrial strategies suited to their respective conditions. In Southeast Asia, Japan has leveraged ASEAN’s institutional frameworks to establish a region-wide production network targeting its domestic market, promoting localization of value chains through public–private human capital development programs. China, in turn, has advanced vertical integration in emerging industries such as electric vehicles, batteries, and solar energy by utilizing policy finance, and selectively transferring core technologies.

Korea, meanwhile, has established production bases primarily in Vietnam and Indonesia, but its operations are mainly limited to labor-intensive activities such as assembly and testing. This structure has led to limited value addition within the region and a high reliance on Chinese suppliers for critical components and materials. To address these challenges, Korea should refer to Japan’s division-based supply chain model to expand local parts production and strengthen local partnerships and supply chains. Furthermore, Korea needs to proactively invest in emerging sectors, such as digital, green transition, and bio-industries, and establish a sustainable growth framework grounded in ESG management. Enhancing localization capacity also requires comprehensive technology transfer packages covering R&D, technology diffusion, and standardization, alongside joint public–private programs to develop local human resources.

Japan, China, and Korea have each adopted distinct approaches to cooperate with Africa. Japan, through the Tokyo International Conference on African Development (TICAD) launched in 1993, has evolved from an aid-focused model to one emphasizing private investment, supporting SMEs, human resource development, and institutional capacity building. China, through the Forum on China–Africa Cooperation (FOCAC) since 2000 and the Belt and Road Initiative (BRI) since 2013, has promoted an integrated industrial cooperation model centered on infrastructure development. Notably, it has facilitated the establishment of industrial parks through intergovernmental partnership to support Chinese manufacturers’ local expansion.

Following the Korea–Africa Summit held in 2024, Korea has established a comprehensive foundation for cooperation in trade and investment, critical minerals, and infrastructure. However, Korea’s engagement in Africa still remains concentrated on development aid, with private participation dominated by large conglomerates and limited SME involvement. Moving forward, Korea should draw lessons from Japan’s public–private partnership model and China’s comprehensive support measures for private-sector expansion, to create a long-term and predictable cooperation framework for industrial cooperation with Africa. Strengthened institutional support will also be crucial to boost SME participation and enhance local adaptation capabilities in African markets.

Industrialization rests on three pillars: infrastructure, skilled labor, and technology transfer. Countries seeking to industrialize must tailor their mix of investment, technology adoption, and innovation policies according to their income levels and stages of industrial development. For Southeast Asia, which already possesses a certain level of basic infrastructure, the priorities lie in enhancing industrial competitiveness through skilled labor development, technology absorption, and innovation ecosystems, while ensuring industrial stability. In contrast, Africa must first focus on establishing the foundational elements of industrialization by expanding essential infrastructure such as transportation and electricity, and effectively implementing industrialization policies that strengthen participation in GVCs. To attract foreign direct investment (FDI) in manufacturing, African countries should develop mechanisms for foreign investment and technology cooperation in priority sectors and promote industrial clustering through building special economic zones (SEZs). Strengthening technological capabilities will also be needed for improving industrial competitiveness.

Building on lessons from Japan and China, Korea should expand its manufacturing footprint in Southeast Asia and Africa as part of its broader strategy to diversify economic cooperation. In Southeast Asia, Korea should reduce its excessive concentration in Vietnam by adopting a “Vietnam+1” strategy that incorporates Indonesia and Cambodia. Leveraging incentives from localization in sectors such as electric vehicles and batteries would be important to tap into the region’s growing domestic market. Directions of cooperation should be aligned with ASEAN’s efforts for regional integration so as to develop the regional value chain (RVC) and promote mutually beneficial partnerships through technology transfer and human capital development.

In Africa, Korea needs to adopt a gradual and long-term cooperation strategy. Given the continent’s low level of regional integration, Korea should pursue broad and continent-wide partnerships while concurrently directing practical efforts toward bilateral and country-specific cooperation models that could deliver measurable outcomes. In the manufacturing sector, Korean companies can follow a two-track approach: initially establishing export-oriented production bases and gradually expanding toward targeting the local markets. In the short term, North Africa can serve as a strategic production hub for exports to Europe.

Considering Korea’s limited networks and experience in Africa, it would be essential to advance triangular cooperation with partners such as Europe, the Middle East, or India, the regions with strong ties with Africa. To facilitate more private participation in African manufacturing, Korea should establish an integrated support framework that links ODA and other financing measures while expanding channels and projects for private-public partnership to boost participation of SMEs. In parallel, Korea must develop specialized systems to provide market intelligence, mitigate investment risks, and foster local partnerships, thereby creating a sustainable ecosystem for industrial cooperation.

Recent demographic and technological changes have deepened labor market imbalances – disparity between labor supply and demand - across industries, regions, and skill levels. Although international migration is often proposed as an alternative to mitigate these imbalances, assessing the economic and social impacts of immigrant inflows remains challenging. This report examines whether the influx of foreign labor can help ease Korea’s labor shortages by (1) reviewing the immigration policies of Korea and other major countries (Chs. 2-3) , (2) conducting empirical analyses on the effect of labor mobility (Chs. 4-6), and (3) proposing policy options for Korea (Ch. 7).

Chapter 2 defines labor imbalance as a mismatch between labor demand and supply in specific periods or sectors, driven not only by short-term wage rigidity but also by structural change such as demographic decline and industrial transition. Previous studies project widening labor shortages over the next decade in Korea, particularly in health and social care, ICT, logistics, food services, and agriculture. Korea’s immigration policy is gradually shifting from a short-term rotational model toward longer-term residence, yet restrictions on low-skilled labor, weak competitiveness in attracting skilled workers, and public concerns about social integration remain major obstacles.

Chapter 3 compares labor mobility trends in the EU, the US, Japan, Vietnam and India. EU’s Free movement enables labor exchange that eases shortages in manufacturing and construction. The EU uses instruments such as the Single Permit Directive, Seasonal Workers Directive, and Blue Card to attract various types of labor. The US experienced persistent shortages in low-wage sectors, leading to the establishment of short-term labor visas such as H-1B, H-2A, and H-2B, with undocumented immigrants filling remaining gaps.

Recent political pressures have reduced both unauthorized and legal entries, raising costs and disrupting production in immigrant-dependent industries. Facing rapid aging, Japan has strengthened both low-skilled and high-skilled labor channels. Japan recently introduced a new “Skilled Labor” system in 2024 and expanded highly skilled visas such as J-SKIP and J-FIND. Vietnam, which sends a large number of workers to Korea, maintains a state-led labor export system, characterized by stricter regulation and cost controls to reduce illegal migration. India also shows strong incentives for overseas migration, as low-skilled workers mainly migrate to the Middle East while high-skilled professionals move to advanced economies. The Indian government is expanding bilateral mobility agreements and diaspora engagement.

Chapter 4, then, analyzes the impact of increasing immigrant shares within the EU on labor market efficiency using indicators such as labor market tightness, vacancy rates, unemployment, and labor market slack. The EU has a unique background of significantly increased immigration inflows during its expansion process. 2SLS analyses report that higher immigrant share reduces labor market tightness by decreasing vacancies and increasing labor. Notably, short-term effects showed a significant increase in employment for low-skilled immigrants, while the influx of highly skilled immigrants drives employment expansion in the service sector in the long term.

Chapter 5 analyzes the effects of expanding Korea’s Employment Permit System. The results show that regions with increased foreign labor experienced a reduction in labor shortages with a lag of about one year. However, no improvement in labor productivity was observed from the influx of foreign workers, potentially because of the lack of skills among new foreign workers and the delayed exit of low-productivity businesses from the market. It suggests that it is necessary to improve the employment permit system by allowing longer-term stay rather than simply increasing new foreign labor.

Chapter 6 represents the original contribution of this report by analyzing the link between trade and migration. This chapter examines the effects of the trade-migration linkage by analyzing the operational effects of Mode 4 (movement of natural persons) in service trade agreements. According to this chapter’s empirical analysis, while simple Mobility provisions alone show no clear trade-enhancing effect, combining them with illegal migration control provisions yields an expansionary effect on service trade. Specifically, concessions for intra-corporate transferees and trainees show positive impacts, whereas those for CSS or business visitors sometimes show negative effects. This indicates that Mode 4 concessions become less effective when not linked to visa systems or when conditions are overly restrictive. Subsequently, an investigation of Mode 4 concession best practices revealed a growing trend toward opening that increasingly includes CSS and IP.

Based on these findings, Chapter 7 proposes three policy directions: (1) streamline foreign labor inflow and strengthen employment management by improving data, simplifying residency and workplace rules, accelerating matching processes, and enhancing oversight; (2) link immigration and trade by setting targets for professional inflows and aligning Mode 4 concessions with Korea’s visa system, including for care workers; and (3) deepen cooperation with sending countries to support skill development and coordinate labor supply. Although the report provides a comprehensive review and broad policy direction, further research is needed on immigration governance, strategies for attracting high-skilled talent, effect of changing global trends in migration, management of illegal stays, and a full cost–benefit analysis of immigration.

In response to the unprecedented crisis triggered by the COVID- 19 pandemic in 2020, governments and central banks around the world injected massive fiscal stimulus and liquidity support. These bold policy measures succeeded in averting the worst recession, but as a consequence, the world is now facing historically high levels of debt. According to the Institute of International Finance, global debt surpassed USD 324 trillion in the first quarter of 2025-roughly three times the size of global GDP and “[a level unseen] since the Napoleonic Wars.” Moreover, global debt increased by USD 7.5 trillion during the same quarter, more than four times the quarterly average increase of USD 1.7 trillion since late 2022, indicating that the global debt problem has worsened rather than eased after the pandemic. Against this backdrop, this report reassesses the structure of the post-pandemic high-debt environment, analyzes vulnerabilities across advanced economies, emerging markets, and Korea, and derives policy implications for proactive responses.

To begin, Chapter 2 analyzes external debt crises in emerging market economies using the Threshold-augmented Global Vector AutoRegression (TGVAR) model developed by Chudik et al. (2021). In this model, the dependent variable is GDP growth, while one of the main explanatory variables is the growth rate of the external- debt-to-GDP ratio. A threshold variable captures the non-linear effect: When the growth rate of external debt exceeds its threshold value, an additional constant term affects GDP growth. The model is estimated using quarterly data for 14 emerging economies-including China, India, and Brazil-from 1985Q1 to 2024Q4. The estimation results are as follows.

Countries such as India (1.46%), China (3.14%), Saudi Arabia (3.61%), South Africa (4.39%), and Brazil (4.59%) show relatively low thresholds (below 5%), while Peru (19.19%), Thailand (10.71%), Mexico (10.13%), Indonesia (8.82%), and Malaysia (8.84%) exhibit much higher ones. Interestingly, the coefficient on the non-linear term (the indicator that takes 1 when external-debt growth exceeds the threshold) is not uniformly negative; it is positive for Brazil, China, Mexico, Saudi Arabia, and Turkiye. This implies that the non-linear growth effects of rapid external-debt accumulation cannot be explained merely by differences in size or development stage among countries.

Chapter 3 turns to advanced economies and examines the sustainability of public debt. Using the debt dynamics equation, we decompose changes in the government-debt-to-GDP ratio into contributions from the interest rate, growth rate, and primary balance. The results show that advanced economies’ government-debt ratios have risen by an average of 2.3 percentage points annually since 2008, driven by expansionary fiscal responses to successive crises and persistent fiscal deficits, and are projected to continue rising by 0.8 percentage points per year until 2030. To assess the growth implications of sustained high public debt, the analysis applies the Panel Threshold-AutoRegressive Distributed Lags (Panel Threshold-ARDL) and Panel Threshold-Distributed Lags (Panel Threshold-DL) models of Chudik et al. (2017), where the threshold variable is the level of government-debt-to-GDP itself.

The estimated threshold for advanced economies lies between 78% and 89% of GDP, broadly consistent with earlier literature (80–100%). When public debt exceeds this threshold, GDP declines by 0.013–0.020 percentage points on average, and a 1-percentage- point rise in the debt-to-GDP ratio reduces GDP in the long run by 0.151–0.210 percentage points. A time-series analysis shows that since the 2008 global financial crisis, the debt threshold rose sharply-from 32–36% of GDP before the crisis to 87–89% afterward- while the long-run cumulative impact of public debt on growth deepened from –0.059~–0.049 to –0.137~–0.091 percentage points.

Finally, Chapter 4 investigates how private debt affects Korea’s real economy and financial stability.

For real effects, a state-dependent local projection model incorporating a smooth-transition function is employed. The transition function depends on the gap between the actual private- debt-to-GDP ratio and its long-term trend. The results show that private-debt growth exerts a statistically significant negative impact on GDP when the debt ratio is in a high regime, with the adverse effect persisting for about two quarters. Specifically, household- debt growth boosts GDP in low-debt regimes with a lag-likely reflecting a liquidity channel through which credit expansion supports consumption. In contrast, when the debt ratio is high, household-debt growth no longer has a significant effect on GDP, while corporate-debt growth is insignificant in both regimes.

To analyze the effect on financial stability, a regime-switching vector autoregression (VAR) model is estimated using a financial stress index from FnGuide. In Regime 1 (which is highly consistent with periods of a declining output gap-namely, phases of economic slowdown or contraction), a shock to private-debt growth initially raises financial stress but subsequently eases it, whereas no significant effect is found in the alternative regime. Disaggregating by borrower type, corporate-debt growth generally amplifies financial stress, while household-debt growth mitigates it.

These findings yield several policy implications for Korea.

First, private-debt accumulation is not inherently harmful; depending on the macroeconomic environment, it can support both economic recovery and financial stability. Hence, policy should go beyond aggregate restrictions and account for cyclical and sectoral differences.

Second, policy responses should differentiate between household and corporate debt. Household debt shows positive effects on growth and dampens financial stress; thus, encouraging long-term, fixed-rate, amortizing loans and targeted support for vulnerable borrowers can preserve its stabilizing role. In contrast, corporate- debt expansion-especially during downturns-tends to intensify financial stress. Therefore, authorities should closely monitor the pace and composition of credit growth by firm and industry, prepare liquidity backstops for the corporate bond market, and manage refinancing and maturity risks.

Third, macroprudential surveillance should move from static, indicator-based early-warning systems to dynamic monitoring frameworks that capture interactions between macroeconomic conditions and debt structures. The econometric analyses demonstrate that the impact of private debt depends on debt levels, business- cycle phases, and interest-rate conditions, underscoring the need for integrated, system-wide approaches to risk assessment.

Fourth, while Korea’s government-debt-to-GDP ratio (47.2%) appears well below the estimated threshold range of 78–89%, this should not lead to complacency. The threshold is derived as a cross-country average and may vary by nation and period; moreover, estimation results are not immune to issues such as reverse causality and omitted variables. Thus, the threshold should be interpreted as a reference point, not a rigid limit, in fiscal policy design.

Finally, the analysis of emerging-market external-debt vulnerabilities also holds lessons for Korea. The finding that a debt-growth shock in Thailand-the epicenter of the 1997 Asian financial crisis-has a far greater spillover effect on Indonesia and Malaysia than on the U.S. highlights the importance of regional financial-stability cooperation. As a key member of ASEAN+3, Korea should remain committed to strengthening the Chiang Mai Initiative Multilateralisation (CMIM) liquidity facility and enhancing the ASEAN+3 Macroeconomic Research Office (AMRO) surveillance capacity.

Amid growing geoeconomic uncertainty and intensifying U.S.–China competition, the Bay of Bengal region has emerged as a new focal point for global production networks. Seeking alternative manufacturing bases beyond China, multinational firms are increasingly investing in coastal areas of India, Bangladesh, and Malaysia, regions that are rapidly integrating into Asia’s evolving “flying geese industrialization” pattern.

India’s coastal states exhibit distinct industrial profiles: Andhra Pradesh specializes in food processing, Tamil Nadu serves as a hub for automotive and electronics manufacturing, and Odisha and West Bengal host resource-based industries supported by abundant mineral and energy reserves. Bangladesh’s coastal zones are anchored in textiles and ship recycling while expanding into pharmaceuticals. Malaysia’s western region remains a critical node in the global semiconductor value chain.

Central and state governments across the region are implementing proactive industrial policies characterized by clear target sectors, investment incentives, institutional coordination, and detailed implementation roadmaps. Their two-track approach promotes both comparative advantage–conforming industries that build on existing strengths and comparative advantage–defying sectors that aim to move up the global value chain. Industrial park development is at the core of this strategy, offering concentrated, infrastructure-ready production bases designed to maximize agglomeration effects and attract investment.

The study identifies over 1,400 industrial clusters across the Bay of Bengal, with expansion occurring through two major patterns: (1) hub-and-spoke growth around established clusters and (2) corridor-based development integrating multimodal logistics infrastructure. While most parks are government-led, an increasing number involve private developers, often supported through public–private partnerships. Cluster ecosystems typically involve a network of industrial associations, resident firms, research institutions, and local organizations.

Although the region’s geopolitical landscape remains relatively calm, the Bay of Bengal nevertheless faces its own regional risks. Military and infrastructure competition among global and regional powers, illegal marine activities, and undersea cables are among the risk factors that could destabilize the Bay of Bengal’s value chain and production bases.

The report concludes with three key policy implications for the Korean government. First, provide Korea’s small and medium enterprises with detailed and practical information on the region’s industrial parks while offering financial and administrative support to those relocating production bases to the region in pursuit of greater economic security. Second, step up the monitoring of regional risks as the Bay of Bengal becomes an increasingly integral part of Korean companies’ global value chains. In addition to the geopolitical and infrastructural risks highlighted in the report, potential risks related to climate change could also have significant implications for regional supply chains, warranting the establishment of appropriate contingency plans in advance. Finally, mobilize Korea’s development financing to support the creation and management of industrial parks in the region. Korea’s development finance policy increasingly emphasizes scale, visibility, strategic value, and development impact, criteria that industrial park projects meet effectively. Supporting such projects directly or indirectly would not only strengthen local development outcomes but also provide enabling environments for Korean companies seeking to expand their presence in the Bay of Bengal.

This research project examines the current state of new knowledge creation from the perspective of global knowledge networks and analyzes the economic implications of participating in the so-called ‘innovation network.’ Policymakers have as a matter of course prioritized increasing their own country’s total R&D investment to advance technology and strengthen innovation. This research, however, asserts that in our current economic environment innovation cannot be achieved solely through the R&D of a single country, industry, or company. Policies must be formulated with the full understanding that innovation is shared and disseminated across borders—flowing from other countries and industries to new ones through various channels. For Korea, in particular, participating in these networks are critical.

Chapter 2 first lays out the background of our discussion. The theoretical model presented in the chapter highlights that in a closed economy, where all R&D is typically domestic, the impact of inefficient investment decisions is therefore relatively small. In an open economy, however, it warns that poor investment decisions have a much larger and more long-term negative implications on the entire economy. The model also points out a policy contradiction: despite arguing for the need to move toward the “global knowledge upstream,” supporting only “downstream” industries that yield immediate results is a short-sighted strategy. Against this backdrop, the theoretical discussion in Chapter 2 argues for two key policy directions: first, strengthening domestic R&D capabilities in the upstream of leading industries, and second, strengthening linkages with international, knowledge- leading countries and industries. This naturally leads to two critical questions: which future-oriented industries should we pursue, and with which countries must we strengthen our connectivity?

To answer the questions from Chapter 2, Chapter 3 first presents the “stylized facts” of the global innovation network. The presentation is categorized into five key areas: country-level centrality, the participation of major countries, shifts in citation relationships, the identification of leading technologies, and the patent activities of Korea and its firms, in particular.

Regarding the trends in technologies, it is noteworthy that the leading sectors within ICT are changing, while bio-healthcare and climate technologies are emerging as new leading sectors. Within ICT, the landscape has shifted over the past two decades: digital data processing (G06F) and digital information transmission (H04L) have become foundational. Conversely, the status of traditional manufacturing (Y10T) and older pictorial communication technologies (H04N) has relatively weakened. Also notable is the rapid advance of new leading sectors, including medical bio/healthcare (A61), climate technologies (Y02E), and specific ICT sub-fields like artificial intelligence (G06N, G06V) and data-based applications (G06Q).

Regarding the changing status of countries within the global innovation network, China’s rise since the mid-2010s is by far the most striking phenomenon. While the United States has maintained its leadership in the technology ecosystem, China is establishing itself as a major participant, transitioning from a “dependent chaser” to a “technologically self-reliant” economy. At the same time, a deepening of mutual interconnectedness between all countries also characterizes this shift. The innovation landscape, previously dominated by the United States and Japan, is now being reshaped by China’s emergence and the steady growth of Korea and European countries.

Chapter 3 also illustrates Korea’s evolving status within the innovation network. While a significant contribution gap remains compared to the United States or Japan, Korea has been advancing, surpassing Germany and the United Kingdom since the mid-to-late 2000s. Notably, in line with China’s own rise, Korea shows a trend of deepening technological ties with China, reflected in increased mutual citations.

Meanwhile, firm-level data reveal a unique shift in Korea’s patent network participation. The most conspicuous point is that Korean firms’ reliance on Japanese patents, which was overwhelmingly high in the 1990s, has been gradually decreasing. This decline was offset by an increase in citations of US firms in the early 2000s, and more recently, by a rapid increase in citations of Chinese firms since the early to mid-2010s. This evidence strongly suggests a structural change in the knowledge flow for Korean firms within the global innovation network. In terms of technology sectors, Korean patent applications are highly concentrated in semiconductors (H01L) and pictorial communication (H04N), a fact that closely aligns with the nation’s main export industries.

However, Korea’s patent trends appear to lag behind global innovation shifts. While applications in digital data processing (G06F) have risen rapidly since the 2010s, reflecting that global trend, Korea’s innovation status remains notably low in other booming sectors. Specifically, in the globally growing biomedical field, AI-based technology, and climate technology, Korea’s presence in the innovation network is not as high.

Regarding internal R&D activities, a positive correlation was confirmed between R&D expenditure and patent applications for active firms. Furthermore, a clear trend shows that innovation output, once dominated by large corporations, is increasingly shifting toward small and medium -sized enterprises.

The stylized facts from Chapter 3 naturally lead to two key questions. First, did participation in the innovation network and the expansion of citation linkages—a form of global knowledge sharing—actually contribute to new knowledge creation (i.e., new patent applications)? Second, did China’s rise within this network also benefit knowledge creation in other countries, such as Korea? These questions are addressed in Chapter 5.

Before the main analysis in Chapter 5, Chapter 4 investigates the impact of China’s rise on the global innovation network. It analyzes whether China’s emergence altered the network’s structure (specifically, inter-country citation proportions), when this impact occurred, and which policies were responsible. While China has a history of innovation -related policies, such as its 2008 “National IP Strategy,” the period around 2016—marked by “Made in China 2025” and the “13th Five -Year Plan”—is identified as a primary turning point. To verify this, the study analyzed the precise moment of a statistically significant shift by modeling patent citation shares with a Dirichlet distribution to detect a “change point.” The results show this structural change point aligns perfectly with the 2016 policy implementations. This alignment is strong evidence that China’s rise was not just a quantitative increase in patents, but rather a fundamental, policy- driven structural change described as a “realignment of influence.”

To answer the questions posed in Chapter 3, Chapter 5 analyzes the impact of global innovation network participation on the innovative performance (i.e., new patent applications) of firms worldwide. The analysis specifically segmented the impact of patents by the cited country—focusing on the US, China, and Japan—at the level of the citing firm. Building on the findings from Chapter 4, this chapter also focuses on the changes in China’s intellectual property systems after 2015. It provides a comparative analysis of how citing Chinese patents (or not) before and after 2016 affected the innovative performance of Korean firms. The results universally show that utilizing knowledge through the global innovation network contributes to increasing a firm’s total innovation output (the number of new patent applications). In an analysis that disaggregated the network by major countries to capture the specific effects on Korean firms, Japan was found to have the greatest positive impact on innovation performance, followed by the United States and China. However, as the stylized facts in Chapter 3 showed, the declining trend in citing Japanese patents must be carefully considered in policy discussions. Furthermore, regarding China’s rise in the global patent network and its growing contribution, Korean firms that cited Chinese patents showed a statistically significant increase in their total innovation output starting two years after the 2016 “change point,” compared to firms that did not. This suggests that China’s innovation-related “policy changes” are having a tangible impact within the network.

Chapter 5’s finding—that global innovation network linkages significantly impact national innovation and that China’s influence on Korean patents is rapidly growing—naturally leads to questions about a potential US-China fragmentation. Against the backdrop of expanding discourse on US-China decoupling since the 2010s, driven by geopolitical competition and the concept of economic security, Chapter 6 addresses this. It quantitatively analyzes what would happen if the US-China innovation network were exogenously and partially severed due to policy intentions. The analysis measures the effect on new knowledge creation not only in the US and China but also in closely linked countries (Korea, Japan, and the Rest of the World, primarily Europe). The results show that US-China fragmentation negatively impacts new knowledge creation for all participating countries. Crucially, this impact varies by time period, country, and technology. First, in all scenarios, the negative impact on US innovation performance is consistently the smallest. For other countries, however, the effects of fragmentation differ between 2010 and 2020. The negative impact on China, for instance, is smaller in the 2020 scenario than in 2010, suggesting that its strengthened domestic innovation capabilities have made it more resilient to external shocks. Conversely, the negative impact on Japan—a nation with a shifting status in the global network—appears to grow relatively larger over time.

In terms of technology, the field most affected by US-China fragmentation was telecommunications (H04), a sector with high influence across the entire network. Another interesting finding is that the specific fields impacted by this fragmentation have changed over time, reflecting evolving technology trends. For instance, the impact on medical fields (A61) has become much more pronounced in 2020 than in 2010; in particular, A61B (diagnosis, surgery, personal identification) was identified as the next most-affected field after telecommunications. Regarding Korea, the analysis suggests it has become relatively more resilient to the negative effects of US-China fragmentation over time, thanks to the strengthening of its own domestic innovation capabilities. However, a significant caveat remains: Korea’s innovation is highly concentrated in specific technologies. This means that if fragmentation were to target those particular fields, the impact on Korea’s new patent production would vary dramatically. It is crucial to note that if fragmentation occurs in areas where Korea has a strong leadership position—such as semiconductor-related technologies or image processing—the negative impact on the country would be disproportionately large.

Based on the analyses of this research project, Chapter 7 proposes a “Network-Linked Innovation Policies.” These directions can be viewed from three main perspectives:
1. Identifying Global Technology Trends and Strengthening Domestic Capabilities. The analyses clearly show that the global innovation network is driven by specific leading technologies, which change gradually over time. It also reveals that Korea tends to follow these global trends with a time lag. Policies must be data-driven to close this gap and set a forward-looking agenda.

2. Strategic Participation in and Utilization of the Global Innovation Network. A key factor in Korea’s rapid rise in innovation capacity was identified as its ability to effectively utilize accumulated foreign knowledge through the network, in addition to its own R&D. From a policy standpoint, Korea must identify which countries and which technologies offer the most beneficial cooperation for strengthening its innovation capabilities and then develop policies to support those linkages.

3. Contributing to Network Stabilization Through Global Cooperation. Although Korea’s innovation capabilities and its status within the global network are growing, the ultimate vision for a middle-power leading nation like Korea must be the stabilization of the overall rules-based international order. Especially in the current international trade environment, which is increasingly dominated by nation-centric policies, Korea must deeply consider what kind of international order it should pursue, with whom it should build it, and how.

Since the 2020s, the Japanese government has been actively implementing policies to strengthen its semiconductor supply chain, not only in response to geopolitical risks stemming from the U.S. Biden administration’s export restrictions on China but also from an industrial policy perspective. Among these, the supply chain strengthening measures under the ‘Economic Security Promotion Act’(enacted in May 2021), the ‘Semiconductor and Digital Industry Strategy’(announced in June 2021, and revised in June 2023), and the “Framework for Strengthening the AI and Semiconductor Industry Infrastructure” (announced in November 2024) are expected to bring about a major transformation in Japan’s semiconductor supply chain structure.

This study focuses on the Japanese government’s semiconductor industry revival strategy. First, it evaluates Japan’s semiconductor competitiveness based on global market share by product and manufacturing process, aiming to identify complementary areas from the perspective of the semiconductor ecosystems between Korea and Japan. Second, it focuses on the Japan’s Next-Generation Semiconductor Project(Rapidus) within Japan’s semiconductor revival strategy, aiming to identify areas that could broaden the horizon for industrial cooperation between Korea and Japan. Third, it analyzes Japan’s semiconductor supply chain structure from the perspective of external dependency to identify areas for cooperation between the Korean and Japanese governments in stabilizing the semiconductor supply chain. Finally, it examines the current state of semiconductor industry cooperation between Korea and Japan, focusing particularly on trade and investment relations, and conducts a quantitative analysis of the business activities and performance of Japanese semiconductor companies operating in Korea.

The analysis results can be summarized as follows. First, in analyzing Japan’s semiconductor industry competitiveness, it was confirmed that Japan maintains competitiveness in key semiconductor products—memory semiconductors, power semiconductors, CMOS image sensors, and MCUs—and semiconductor manufacturing equipment—thermal processing equipment, coaters/developers, cleaning equipment, mask inspection equipment, CD-SEM, and the semiconductor materials market, despite the absence of notable fabless companies and foundries in the semiconductor design and manufacturing sectors. Particularly in semiconductor materials, Japanese companies dominate not only the front-end process materials market, including silicon wafers, photoresists, high-purity cleaning solutions, CMP slurries, insulating film materials, target materials, and etching gases, but also the back-end process materials market, encompassing package substrate materials, dicing materials, bonding materials, and encapsulation materials. Second, it is no exaggeration to say that the success of Rapidus holds the key to Japan’s semiconductor industry revival strategy. Current challenges facing Rapidus include funding issues, mass production of 2-nanometer-class semiconductors, customer acquisition, and talent recruitment. Third, analyzing the changes in Japan’s semiconductor supply chain structure by examining the input structure of Japan’s semiconductor industry and the import structure of semiconductors during the period from 2018 to 2024, it revealed that Japan has a high degree of external dependence not only in the IC sector, but also in the semiconductor materials and raw materials sector. However, it was confirmed that in some material items, such as industrial plastic products and glass processing products, the degree of external dependence is low and the domestic production rate is very high. Moreover, Japan’s semiconductor import structure shows a very high dependence on Taiwan for finished semiconductor products, and for certain semiconductor raw materials, such as silicon carbide(China, 89%), phosphoric acid/polyphosphoric acid(China, 90%), fluorspar(China, 73%), hydrogen fluoride (China, 97%), and pyrophosphoric acid(Vietnam, 99%) exhibit extremely high import dependency on specific countries. Fourth, semiconductor industry cooperation between Korea and Japan was examined primarily through Korea’s imports from Japan and Japan’s direct investment in Korea. First, regarding Korea’s semiconductor imports from Japan, the impact of Japan’s export restrictions in 2019 was not significant, confirming that mutual dependence between semiconductor companies in both countries persists. Regarding Japanese companies’ direct investment in Korea, since the 2010s, investment in the chemical and electrical/electronics sectors has accounted for 60.0% of total manufacturing investment. This indicates that the Korean government’s foreign direct investment attraction strategy has been effective in attracting Japanese capital and technology. Furthermore, it was confirmed that Japanese chemical companies without major customers in Japan are expanding the establishment of parts and materials factories within Korea. However, quantitative analysis of 43 Japanese semiconductor materials, parts, and equipment companies operating in Korea also revealed the following characteristics and limitations of Japanese direct investment in Korea. First, investment is concentrated in semiconductor materials and manufacturing equipment. In technology cooperation, collaboration generally involves Korean conglomerates combining their production capacity with Japanese technology. Second, while sales of Japanese semiconductor companies in Korea increased by an average of about 20% annually from 2020 to 2023, and the number of employees also grew by about 15%, there was no statistically significant change in tangible and intangible assets. Third, it was confirmed that the economic activities of Japanese semiconductor companies in Korea positively influenced the business performance (sales) of Korean semiconductor companies. Based on these analytical findings, this study proposes two areas for Korea-Japan semiconductor cooperation: joint development of back-end packaging technology within Japan and collaboration in the AI semiconductor sector.

Amid accelerating global trend of green transformation to address climate change and digital transformation driven by technological progress, this report proposes Korea’s development cooperation strategies to promote an integrated green digital transformation in developing countries. Digital technologies are powerful enablers of green transformation—enhancing climate early warning systems, improving energy efficiency, and advancing smart grids—yet they also create new environmental pressures, such as rising energy demand and electronic waste. This duality calls for an integrated approach – the “green digital transformation” - that simultaneously advances “climate response by digital technologies” and the “decarbonization and greening of digital transformation” itself.

Although middle- and high-income developing countries increasingly demand both green and digital transformation, strategies and support for green digital transformation remain limited. This study aims to identify Korea’s policy directions as a member of the international community by analyzing international discussions, other donors’ approaches, and developing countries’ demands and needs. The analysis draws on cross-country indices, correlation analysis, donor policy and case reviews, and field-based studies. Chapter 2 identifies global disparities in transformation levels through cross-analysis of international indices. Advanced economies—especially in Northern Europe—perform well in both green and digital dimensions, while many emerging and developing countries remain unbalanced or lag behind. Correlation analysis reveals that higher levels of digital transformation are associated with increased per capita greenhouse gas emissions, but this effect diminishes when green transformation progresses concurrently. This finding underscores the importance of pursuing both transformations together to offset the environmental costs of digitalization. Countries with strong policy momentum and institutional coherence achieve better green transformation outcomes, confirming that political will and institutional strength are decisive factors. These results reaffirm that green digital transformation is not only a technological or industrial policy but also a core development agenda for sustainable and inclusive growth, emphasizing the essential role of development cooperation in bridging transformation gaps.

Chapter 3 examines post-pandemic development cooperation strategies of major donor countries. Australia and the United Kingdom position climate as a central development priority and digital transformation as an implementation tool, embedding climate safeguards into digital infrastructure projects. Germany treats both dimensions with equal priorities, supporting the application of innovative digital technologies for climate action while addressing digital divides. Donors increasingly link renewable energy expansion with digital monitoring, promote circular e-waste management, and engage startups through public–private partnerships. For Korea, digital transformation is a comparative strength within its ODA portfolio, yet integration with green initiatives remains limited. There is significant potential to expand cooperation in private-sector engagement, energy management, circular economy, and digital-climate governance.

Chapter 4 analyzes developing countries’ needs and constraints. While green and digital initiatives are often pursued in parallel, integration remains weak due to infrastructure, institutional, and financial barriers. Nonetheless, common demands are evident in areas such as smart grids and AI-based energy forecasting for renewable energy management, satellite and drone applications for climate monitoring, and greening ICT infrastructure through green data centers. Smart cities are emerging as integrated platforms combining both transformations. Korea’s experience in digital government, data governance, energy management, and environmental data systems provides a strong comparative advantage for cooperation in climate data platforms, renewable energy monitoring, e-waste management, and green data centers.

Based on these insights, Chapter 5 proposes a three-phase cooperation strategy for Korea. In Phase 1, efforts should focus on creating an enabling environment and mobilizing resources through policy and legal reforms, institutional capacity-building, and market awareness initiatives. Korea should offer policy advisory support on renewable energy, data governance, and e-waste management, linking these with pilot projects. Introducing a “green filter” into digital ODA programs can ensure systematic assessment of decarbonization potential, energy efficiency, and sustainability. Financially, Korea should strengthen ties with global climate funds and establish a Korea-led Green Digital Initiative as a cooperation platform.

In Phase 2, pilot projects financed by public funds can demonstrate feasibility and then be scaled up through matching funds, concessional loans, or PPP models. This phased approach allows public institutions to absorb initial risks while fostering private-sector participation. Priority countries should be selected among Korea’s key ODA partners with adequate digital and energy infrastructure, active KOICA or EDCF offices, and strong political commitment. Priority areas include energy, circular economy, and climate adaptation, including smart grids, AI-based forecasting, green data centers, and e-waste management.

In Phase 3, sustainability should be ensured through localization of operations and maintenance, performance-based grants, and public–private co-management models. Technology transfer and joint development of AI-, IoT-, and blockchain-based green solutions should be promoted, supported by intellectual property protection and long-term education and training systems linking universities, vocational institutions, and industries. Promoting startup and SME participation will help establish local innovation ecosystems. Finally, performance indicators for green digital transformation should be developed to support monitoring, reinvestment, and knowledge sharing through South–South cooperation and toolkits.

In conclusion, digital transformation has the potential to increase emissions, but when combined with green transformation, emissions decline significantly—demonstrating the value of integration. Political will and institutional coherence are essential for success, and development cooperation is pivotal in narrowing transformation gaps. By mainstreaming climate into digital development, mobilizing blended finance, and institutionalizing long-term integrated programs, Korea can diversity its coooperation approachees and contribute to balanced and sustainable green digital transformation worldwide.

Along with other major economies, India is actively promoting strategic industries as its broader efforts to secure supply chains and accelerate industrialization. Strategic sectors play a pivotal role in advancing the country’s long-term economic resilience and technology self-reliance.

This report focuses on six strategic industries: biotechnology, space, smart infrastructure, defence, electric vehicles, and semiconductors. It first examines data on trade, foreign investment, and research and development expenditure. With the exception of the biotechnology sector, India’s current trade competitiveness in these industries remains limited. However, recent foreign investment inflows and research development spending indicate strong potential for substantial growth across all six sectors.

An in-depth analysis of the Indian government’s industrial policies reveals a clear and proactive approach to fostering these sectors. The government has established comprehensive sectoral strategies and detailed implementation plans, while allocating significant resources through production- and consumption-linked subsidies, direct investment, and public procurement. Designated institutions have been tasked with managing and coordinating these efforts. A notable feature in India’s policy stance is its strong emphasis on mobilizing private investment, notably by easing restrictions on foreign direct investment inflows and vitalizing the startup ecosystem.

To date, cooperation between Korea and India in strategic industries has been limited. While several engagements took place before and after Summits in the 2010s, most projects lost momentum. Unlike other major countries, Korea currently lacks a bilateral framework or blueprint guiding cooperation with India in strategic sectors.

The report provides three policy suggestions.

First, establish a ‘Korea-India Strategic Industry Cooperation Initiative.’ This initiative should articulate the shared vision, principles, and objectives of the two countries, while identifying potential cooperation areas and responsible institutions. As a part of the initiative, Korea and India should also hold regular high-level policy dialogues to ensure sustained coordination and strategic alignment.

Second, support Korean companies’ participation in India’s strategic industries. Korean firms are showing growing interest in India’s strategic sector but continue to face regulatory and administrative hurdles. The Korean government should play an active role in addressing issues that individual companies cannot resolve on their own by engaging in close consultation with Indian counterparts. It should also assist Korean firms in accessing India’s industrial subsidies and foster stronger business networks by organizing regular events that connect Korean companies with key players in India’s strategic industries.

Finally, leverage development finance to promote industrial cooperation. Korea can use development finance to support projects that advance India’s strategic industries, particularly those related to smart infrastructure and industrial corridors. Such projects would not only contribute to India’s development goals but also create new opportunities for Korean companies seeking to expand their presence in India. Additionally, human resource development and startup support in strategic industries represent promising areas for Korea’s development finance engagement.

North Korea’s economic policy and its domestic and external strategies have undergone notable changes since the mid-2010s. The country faced a phase of “triple isolation,” precipitated by the intensification of UN sanctions in 2016–17, the breakdown of DPRK–US talks in 2019, and the closure of borders in response to COVID-19 in 2020. This period was marked by simultaneous economic, diplomatic, and physical crises, leading to compounded challenges for the regime. In response, North Korea has pursued greater centralization and resource concentration in select sectors to overcome these adversities, resulting in policy shifts emphasizing command management and targeted mobilization.​

This study aims to analyze the characteristics and impact of North Korea’s multifaceted crisis around 2019, identify the components of its new domestic and external strategies, and evaluate their outcomes using multi-source data—including satellite temperature and luminosity readings, media coverage, price indices, and trade statistics. Due to research limitations, the study mainly focuses on three domains of North Korea’s new economic strategy: production, consumption, and external relations.

A major contribution of this research is its assessment that the 8th Congress of the Workers’ Party of Korea in 2021 marked a clear break with prior strategies, introducing the “Comprehensive Socialist Develop- ment Line” or “Second-Phase Intensive Socialist Economic Development Strategy.” Another distinctive feature is the study’s quantitative evaluation of both policy effects and structural changes.

The structure of the research is as follows: Chapter 2 investigates the compounded crisis, its classification into economic, diplomatic, and physical isolation, and analyzes consequential changes in foreign currency acquisition—highlighting the increased role of illegal channels and centralization of foreign incomes. Chapter 3 explores the main features of North Korea’s new socio-economic strategy and institutional changes. Chapters 4 and 5 evaluate the economic implications of North Korea–Russia and North Korea–China cooperation using comparative trade analysis, RCA indices, and export price correlations, and examine industrial outcomes through sector-focused and media data approaches. Chapter 5 further analyzes commercial sector performance—including prices, retail margins, consumer imports, and satellite-based market activity indices—and uses ARDL panel models to investigate the pass- through effects of exchange rate policies.​

Quantitative findings indicate a recovery in DPRK–China trade to USD 2.2–2.3 billion by 2024, with DPRK–Russia trade witnessing rapid growth in agricultural and petroleum supply despite its overall smaller scale. Illicit trade and sanctioned labor dispatches reportedly continue. The “20×10 Local Development Policy” yielded partial positive effects, notably a 24% increase in regional nightlight during industrial construction, though long-term efficacy depends on resource stability. Structural changes in light industry sectors appear to be driving production downturns.

Within consumption and currency management, restrictive state initiatives—including the operation of state-run grain shops and the prohibition of food sales in general markets—have led to price surges and intensified shortages of staple goods. Although general consumer prices have not risen dramatically, expanded market margins indicate rising transaction costs, and the foreign exchange market remains volatile, with limited price transmission from market exchange rates to consumer imports.

In sum, North Korea’s new economic policy may survive in the short-term, but fundamental constraints and ongoing external shocks limit its sustainability. While the regime has leveraged opportunities such as the Russia–Ukraine crisis to cushion the economy, persistent institutional fragilities and external dependency point to significant long-term vulnerabilities. Russia-DPRK cooperation remains a conditional buffer stalled by broader strategic uncertainty, and continued regulatory excess and statistical opacity undermine effective policy outcomes.

In January 2026, North Korea is expected to announce a new five-year plan at the 9th Party Congress, determining whether current strategies will be prolonged or revised. Sustained performance may reinforce self-reliance and centralized control, while persistent stagnation might prompt expanded autonomy in enterprise and agriculture. In the face of adverse political or military developments, a full national mobilization could ensue. For South Korea, the findings underscore the need to revitalize humanitarian support and multilateral engagement, create indirect persuasion channels through global partners, and maintain active support for resumed dialogue among all key actors.​