Adopted at the UNFCCC COP21, the Paris Agreement is recognized as the most significant international environmental agreement since the United Nations Framework Convention on Climate Change in 1992. Laying the foundation for the post-2020 climate regime, the Paris Agreement emphasizes GHG mitigation efforts by all parties, including developed and developing countries. Korea decided to cut the national greenhouse gas emission by 37% in 2030 compared to the business-as-usual emission estimate and included the statement in its Intended Nationally Determined Contribution. In achieving the target, Korea stated that 11.3%p of greenhouse gas reduction will be achieved through international carbon market mechanism while the remaining 25.7% will come from domestic source.
  Nevertheless, the international community is in the process of developing consensus around the details of trans-boundary carbon market mechanism that is environmentally sound and sustainable enough to be recognized under the Paris Agreement. In this regard, the study aims to present ways for Korea to properly respond to the issue by observing the progress in the climate discussions and analyzing major carbon programs. Particularly since the Korean government is considering the use of cross-border carbon offset programs, the study comprehensively reviews a number of international carbon offset programs and thus seeks to provide implication for Korea. The study considers key principles highlighted in the international community and develops a Mitigation Cooperation Index (MCI), applicable to identifying prospective regions and fields for carbon offset programs. The study also looked at constraints to private participation in implementing international carbon projects and suggests ideas to increase private participation.
  In order to identify potential carbon partner countries for Korea, the study devised a set of index, namely ‘Mitigation Cooperation Index.’ The study deemed the following elements as essential: GHG emission level and intent for international carbon transfer, economic ties with Korea, and national development potential. By sub-categorizing and indexing the above-mentioned elements (emission level index, economic exchange index, and national capacity index) and varying the weight among the elements, the study induced values between 0 and 1, with 0 being less prospective and 1 being more prospective.
  When placing most weight on emission environment, India, Iran, Kazakhstan, Mongolia, and Vietnam were analyzed as the most potential partners. Nine out of thirty most potential partners were Asian countries. In terms of economic exchange, Vietnam, Indonesia, the Philippines, Bangladesh, Cambodia, Myanmar and several other Asian countries were included in the more prospective group. In regards to national development capacity, countries with higher income levels while classified as developing countries in the UNFCCC (i.e. Singapore, Israel, Chile, Qatar, etc.), were in the top tier. However, through a MCI analysis, we were able to conclude that it is most effective when national capacity support is provided along with cooperation in carbon reduction in a number of Asian countries.
  On the Korean side, while private companies are willing to participate in overseas reduction projects, many of them lack local network and capacity. Therefore, it is necessary to enhance private sector competitiveness through adequate institutional and policy design. In terms of finance, Korea must seek a linkage between ODA resources and international carbon reduction programs. Given the financial constraints of low-carbon projects, ODA resources can be linked to lowering entry barriers and inducing private capital inflows. Also, active participation in international carbon finance initiatives by multilateral banks and organizations should be considered.
  In conclusion, the study suggests the followings to facilitate Korea’s participation in international GHG reduction. First, the government should set up and implement a mid- to long-term plan to assist the private sector participation in climate change mitigation. There is a need for a powerful inter-agency control tower beyond the current level to perform and coordinate relevant action plans established by each ministries.
  Secondly, active support from the government is needed to promote private participation in climate change projects overseas. For example, establishing a one-stop support organization for Korean companies to successfully launch business in overseas green industry sector, building a system for companies to transfer overseas carbon credits to domestic reduction, and supporting private sector competency and experience through domestic institution building.
  In addition, resource mobilization must be considered. In this respect, Korea may consider supporting GHG mitigation projects in connection with ODA, multilateral funds, and various other financial instruments. Particularly, enhanced efforts to access the Green Climate Fund is necessary. Access to the Fund can be highly potential through a well-devised project plan.
  Finally, efforts are needed for Korea to engage and collaborate in various international carbon partnership programs. Through participation in the discussions with major international organizations, donors and recipients, Korea will be able to access first-hand information and also cultivate climate capabilities while engaging in actual business. Engagement in such activities will also increase business opportunities and partnership with interested parties.
 

 

  Recently, there has been growing interest in the use of production networks in the ASEAN region, which has emerged as a new production base and consumer market for Korea. If Korean firms establish regional production networks with intra-regional enterprises, they can improve production efficiency by heightening the possibility of local survival and international market competitiveness. Meanwhile, given the fact that Korea has gained a trade surplus of about $ 30 billion in 2015 from the ASEAN region, Korean firms should seek further cooperation with local ASEAN firms. If the new protectionism that has been spreading across the world contaminates ASEAN member states (AMS), AMS may complain about the trade imbalance.
  ASEAN member states have recently demonstrated their willingness to support the participation of SMEs in global production networks. If firms in AMS successfully participate in a global production network and upgrade their competitiveness, they can become competitors to Korean firms working in the ASEAN region. The utilization of local firms can be considered a countermeasure against the growth of ASEAN firms. Based on the above needs, it will be necessary to establish regional production networks (RPN) in the ASEAN region, as a new strategy for increasing both the sustainability and efficiency of Korean firms in ASEAN. In addition, this will lead to the expansion of exports. Therefore, the purpose of this study is to establish strategies for regional production networks in the ASEAN region.
  The level at which Korean firms have established regional production networks with local ASEAN firms is still relatively low compared to Japanese firms. Therefore, we benchmark the Japan case and see how we can utilize local ASEAN firms. First, we explored how Japanese firms have formed production networks in ASEAN region. Next, through a survey, we analyzed the capability of Korean firms and local companies to participate in regional production networks and the needs of Korean firms. Finally, we presented strategies and plans for the RPN construction of Korean firms and governments in the ASEAN region.
  In Chapter 2, we analyze the business environment of local firms and the current business situation drawing from previous research and various data. According to the World Economic Forum (WEF) Global Competitiveness Index (GCI) and the World Bank's Ease of Doing Business Index, the competitiveness of ASEAN countries has clearly improved since 2010. However, we do not believe that the improvement of these indicators necessarily coincide with the sentiment of Korean firms. Although indicators relating to the labor market, foreign investment, investment incentives and fair competition have improved, Korean firms are still unsatisfied. Nonetheless, it is meaningful that the improvement of the ‘format,’ such as the improvement of the indicator, is the starting point of ‘substantial’ progress. Fortunately, business conditions in Vietnam and Indonesia, which are subjects of the study, have significantly improved compared to Cambodia, Lao, and Myanmar (CLM).
  FDI inflows into the ASEAN region have grown rapidly in line with improvements in the business environment. The volume has been larger than that flowing into China, since 2013. To meet the growing investment in the region, Korean firms have adjusted their investment strategies. Even up until the mid-2000s, SME-centered single investment was the mainstream channel. Since 2010, large corporations have been led by SMEs. Such joint movement of large, medium and small enterprises into the ASEAN region is attributed to the fact that ASEAN-affiliated firms cannot participate in the production activities of Korean firms.
  Meanwhile, in Chapter 2, we surveyed the difficulties of management for Korean SMEs operating in the ASEAN region. There was hardly any difference from the difficulties identified by Kwak et al. (2014, p. 156-160). However, one problem that did differ from Kwak et al. (2014) was raised by Korean SMEs and large corporations that entered the ASEAN market together. Such joint entry into a new market improved the stability of Korean SMEs, due to the reduction of risk. However, it also secured a structure dependent on large firms, which weakened the bargaining power of SMEs against large corporations. Less bargaining power leads to a decline in product prices, causing problems in profit structure. In addition, the management status of SMEs would also be determined by that of large enterprises, their main customers. To avoid these problems, SMEs must diversify their production networks. In other words, Korean SMEs can consider diversifying the sources and buyers of parts and materials procurement as a strategy for sharing entry risk. Such efforts are also expected to be effective in responding to ASEAN's strategy of involving its own SMEs in global production networks. For example, Indonesia’s domestic component requirement (TKDN: Tingkat Komponen Dalam Negeri) policy can be overcome.
  In Chapter 3, we analyze how Korea will build a local production network through the experiences and cases of Japan, which has the best production network in the ASEAN region. Japan first employed the strategy of establishing its base in ASEAN countries, centering on electricity, electronics, machinery and automobiles. By connecting these bases to the network, they shared information, knowledge, experience, know-how and managed risk. In addition, Japan standardized the production process to establish division of labor in the ASEAN region, in order to maximize production efficiency. Moreover, local ASEAN firms were involved in the production activities of Japanese firms that had entered the market, so that Japan understood the needs and preferences of the consumers in the host countries. By applying the identified needs and preferences to the design, function, and characteristics of the product, Japan effectively targeted domestic markets. In addition, Japan created a system which produced and procured parts and components locally, so as to deploy them in production processes in a timely manner. Meanwhile, Japan managed to increase price competitiveness by including products of ASEAN countries that utilize cheap labor into the production process.
  For this reason, Japanese firms have steadily strengthened its ASEAN regional production networks over the past decade (2006-2015). Japanese firms in the ASEAN region have increased the proportion of raw materials and parts procurement for production from both ASEAN local firms and Japanese firms located in the ASEAN region. In particular, Singapore, Malaysia and Indonesia are among the countries in which Japanese firms have swiftly raised the percentage of procurement from local firms. This is because these countries are strongly advocating the use of domestic products for the production of Japanese firms. In addition, the extent to which local firms are utilized differs by industry. The local procurement portion was high for industries such as transportation machinery and equipment, where parts and raw materials logistics costs are high. However, the local procurement shares of electronic components and parts are relatively low, due to the short product cycles and relatively low logistics costs. It seems that Japan clearly distinguishes local procurement items from domestically procured items. It will be necessary to benchmark Japan when Korean firms in ASEAN seek to expand local procurement. For light parts and components requiring high quality and high technology, Korean firms have to be supplied from Korea. On the other hand, parts and components that have low value added or high transportation costs should be supplied locally. To this end, the domestic parts and materials industry in Korea should be further fostered.
  Meanwhile, a survey was conducted on 90 firms in order to identify the regional production networks of Korean firms located in ASEAN. Korean firms operating in the ASEAN region mainly procured raw materials and components from Korea and China. In particular, the reason Korean firms in Vietnam have a high procurement ratio from their home country is that most of them are engaged in electricity and electronics. Also, since large corporations and Korean SMEs entered Vietnam together, the proportion of local procurement in Vietnam is high. Currently, production networks in which only Korean firms participate are subject to complaints from ASEAN local firms.
  Korean firms have not yet established regional production networks in the ASEAN region in comparison to Japanese firms. Japan's regional production networks are strategically linked to Japanese firms located in Japan, Japanese firms located in the region, and Japanese firms producing parts and materials which are also located in the region, Chinese firms and ASEAN local firms. However, Korean firms’ production networks have yet to complete such a picture. ASEAN regional production networks formed by Korean firms, compared with networks built by Japanese firms, are characterized by a low utilization rate when it comes to local ASEAN firms. The history of the entry of Korean firms into ASEAN is relatively shorter than that of Japanese firms. For this reason, in order to overtake Japan in the region and establish a production network in the short term, it is necessary for a strategy in which large corporations and SMEs enter the ASEAN region together.
  Chapter 4 explores the functions of SMEs in production activities and explores why local SMEs in ASEAN should be included in the Korean production network. In addition, we present the results of in-depth interviews and surveys with ASEAN local firms regarding participation in production networks. The outcomes, we believe, can be used as a basis for Korean firms to establish strategies when working with ASEAN SMEs.
 The most representative function of SMEs is to enable smooth connection between production stages. However, SMEs, which are the foundation of the parts and materials industry, are failing to perform this function because they are not growing properly in the ASEAN region. Despite this situation, AMS insist that foreign-invested firms exclude ASEAN local firms from production. This difference can be attributed to the reduction of the incentives provided by ASEAN member states to foreign-invested firms or to the strengthening of regulations. Given the fact that Indonesia is already required to certify its TKDN, other countries among AMS may soon implement similar regulations. Therefore, a preemptive response is required to include ASEAN local firms in the Korean production network and have them operate as advocates of Korean firms. Considering that the purpose of Korean firms’ entry into the ASEAN region has shifted from “manufacturing goods that utilize cheap labor and exporting them“to”entering local markets,” it is necessary to respond quickly to changes in the demands of local ASEAN consumers by utilizing local SMEs in ASEAN.
  We found from the surveys that ASEAN firms have already recognized that their governments are already working to improve business environments for them. Also, more than 50 percent of respondents said that their business performance, financial conditions, employment and business areas either improved or expanded. In addition, ASEAN firms themselves, to succeed in global value chains (GVCs), have recognized that it is necessary to develop internal competencies such as product and quality specialization, innovation and design, and entrepreneurial spirit.
  Moreover, ASEAN firms with experience in participating in GVCs were aware that their relationships with other firms were a very important factor in determining business performance. Although Korean firms are reluctant to admit it, ASEAN firms are growing fast enough to threaten the position of Korean firms in the world market. It is necessary to prepare countermeasures against the growth of ASEAN firms. For example, Korean companies should internalize SMEs with high potential for development, and seek ways for Korean companies to enjoy the fruits of ASEAN SMEs. Furthermore, ASEAN SMEs strongly want to cooperate with Korean firms for technology development.
  Based on the results of this study, this study presents strategy for establishing the direction and goal of regional production networks (RPN). Given the heterogeneity of ASEAN, composed of 10 countries, Korea has to select strategic bases for regional production networks. Then the next step is to gradually widen and connect them. Currently, Korea has established a production base by concentrating investment in Vietnam. In order to gradually expand the base and increase the number of bases, it is necessary to build a master plan which includes a large framework that manages the ASEAN regional production network; a possible title could be the “Vietnam plus One” strategy. Exit and support strategies for Korean firms that have entered Vietnam in anticipation of the TPP could also be established within this framework.
  The long-term goal of the strategy for establishing an ASEAN RPN is to improve the local sustainability of Korean firms in ASEAN. Considering that the primary goal of Korean firms operating in ASEAN is to enter local markets, we can increase the sustainability of Korean firms by working together with local ASEAN firms, because they have more information on their local markets. In particular, the incorporation of local ASEAN firms into Korean firms through mergers and acquisitions (M&A) will provide the advantage of existing business facilities and distribution networks.
  Two mid-term goals have been set. One is to improve the competitiveness and profitability of Korean firms entering ASEAN. Another is to expand the entry of young people into ASEAN by establishing start-ups. As we have seen, building a regional production network improves the management efficiency and profitability of local firms. In addition, we can encourage our technical standards to be applied to the production process in ASEAN, by dispatching our young personnel when we engage ASEAN firms in the Korean production network. Also, if young people establishing their own business in the ASEAN region support the activities of Korean firms in the region, this will contribute to strengthening the Korean production network. In order to achieve these mid- and long-term goals, this study presents measures that should be implemented by the government and corporations, as follows.
  The government should focus on laying the foundation for building regional production networks. First, as seen in the outcomes of the surveys from Chapters 3 and 4, we confirmed that there is a difference between local ASEAN firms and Korean firms in their purpose for participating in the production network. Therefore, it is necessary to activate a cooperation forum between local firms and Korean firms, so as to fill the gap between them. Second, we need to enhance technology exchanges, because we found from the surveys that local ASEAN firms have such needs. We may consider the expansion of the TASK (Technology Assistance and Solutions from Korea) project led by Korea's Ministry of Trade, Industry and Energy. Third, we should encourage AMS to adopt Korean standards, with an emphasis on the need for the unification of technical standards to form and strengthen production networks between the two economies.
  Finally, since the enterprises are the ones that establish local production networks, we propose three methods the entrepreneur can employ to form regional production networks in the ASEAN region. First, Korean firms in ASEAN should strive to reinforce their collaborative relationship with each other and secure various clients. As shown in the case of Japan in Chapter 3, the parts and components that electric and electronic firms utilize for production have a short life cycle, as well as high value added. Japanese firms producing in ASEAN import these parts and components from Japan, rather than ASEAN countries. This should be used as an opportunity for Korean SMEs operating in the ASEAN region. Second, Korean firms must strive to advance into the ASEAN region's local markets by utilizing the distribution network of local ASEAN firms. For example, Korean firms can use M&A to expand the involvement of ASEAN local firms in Korean production networks. Third, Korean firms should prepare plans to utilize the supporting industry promotion policies of ASEAN member states (AMS). As we saw in Chapter 2, AMS governments are implementing various policies to foster their own supporting industries. Thus, we should carefully monitor policy changes related to the fostering of supporting industries and utilize them as opportunities for Korean firms.
 

 

 

 

  More than 20 years have passed since Japan entered a recession in the mid-1990s, with the bubble burst and changes in the population structure-low birth rate and aging population-acting as catalysts. It is true that Abenomics did manage to stimulate some growth in the Japanese economy, which had continued on a downward trend especially after the 2008 global financial crisis and the 2011 Tohoku earthquake; however, Japan’s nominal GDP in 2015 is still a meager 500 trillion yen, significantly lower than its GDP of 521 trillion yen in 1997, demonstrating the necessity for large-scale structural reform. Japan’s potential growth rate also illustrates something along the same line. Japan’s potential growth rate reached 4.9% in the late 1980s, and then plummeted to around 2% in 1992 after the bubble burst. In 1994, the figure halved to around 1%, and in 1997, to around 0%. In 2015, it was a mere 0.3%, showing that indeed something more than the hitherto practiced expansive fiscal policy and quantitative easing (QE) is required.
  Thus, this research presumes that the Abenomics growth strategy will accompany structural reform, using legalization as the tool. We first present a general overview of the Abe administration’s growth strategy, then examine its results and challenges, focusing on the four policy issues of business restructuring, corporate governance reform, the 4th industrial revolution, and employment/labor market reform. This research’s final aim is to present policy implications for the Korean government, considering the policy agendas the Korean government is currently facing, such as expanding the private investment, labor market reform, structural reform, the 4th industrial revolution, etc.
  Chapter 2, titled “The Framework of Abenomics Growth Strategy,” covers the background and goal of the Abe administration’s growth strategy. Here we emphasize that Abe’s growth strategy ultimately aims at solving the so-called “three excessives” of the Japanese economy?excessively little investment, excessive regulations, and excessive competition?and fostering new industries. This research divides the Abenomics growth strategy into two stages: the first stage, which consists of the four growth strategies up to the year 2015, focused on promoting the metabolism of industries through regulatory reforms, strategic markets creation, business restructuring, and corporate governance reforms; on the other hand, the second stage, consisting of the 2016 growth strategy, focuses on the fourth industrial revolution and the reform of working patterns.
  Chapter 3, “Business Restructuring under Abenomics,” deals with Japan’s business restructuring under the framework of the Act on Strengthening Industrial Competitiveness (the Industrial Competitiveness Act) that was enacted in 2013. Although the Japanese government’s restructuring policy shifted to a more market-friendly direction in the 1990s, government still does play a role in business restructuring, as is apparent in its expanding and reorganizing of the 1999 Industrial Revitalization Act in 2009 and in 2013, into the Industrial Competitiveness Act. This research also notes that the active business restructuring in the 2000s, such as M&A, was a result of the government’s various efforts at improving the legal and the regulatory environment.
  Chapter 4, “Corporate Governance Reform under Abenomics,” examines the significance of corporate governance reform from Japan’s traditional main bank system, and observes how the Japanese government is approaching the reform. We analyze the government’s efforts to strengthen the internal governance mechanisms, through measures such as strengthening internal audit systems or requesting the appointment of outside directors, and to strengthen institutional investors’ governing function.
  In Chapter 5, “Nurturing the New Industries in Abenomics,” this research looks into the Japanese government’s policy actions to increase productivity and create markets with high growth potential. Internally, Japan faces structural constraints to growth due to its decreasing population, while externally, Western countries including the US and Germany are actively promoting the 4th industrial revolution as a new growth model. Facing such challenges, Japan has been promoting strategies to create new industries, but following the 2011 earthquake and inauguration of the Abe administration in 2012, the focus is being placed on robots, Internet of Things (IoT), AI, etc.?the technological pillars of the 4th industrial revolution.
  Chapter 6, “Abenomics labor market reform,” covers Japan’s policy measures to reform the labor market and examines whether or not they are effective. We focus on the fact that the Abe administration has come to the realization that Japan’s employment customs?which include long-term (or lifetime) employment, seniority wage system, etc.?can no longer properly respond to Japan’s decreasing labor productivity and labor supply. This chapter divides labor reforms under Abenomics into two categories: policies to improve labor market flexibility, such as relaxing the dismissal standards of regular workers, and policies to increase labor supply by utilizing the labor powers of hitherto neglected sectors of the population, such as women, foreigners, and the elderly.
  Finally, in Chapter 7, “Policy Implications,” the outcomes and challenges of the Abenomics growth strategy are compared with Korea’s policy situations. It must be noted that although Korea has not announced a holistic “growth strategy” under such a name, it is promoting a series of policies that are comparable to each section of the Abenomics growth strategy.
  First, key agendas that are being promoted under Abenomics, which include regulatory reform, labor market reform, strategic markets creation, business restructuring, corporate governance reform, and new industries creation, are all critical to a country like Japan with its decreasing population.
  Second, although there is no denying that some government support is necessary to assist companies’ preemptive restructuring, it may be preferable to place more of an emphasis on modifying related laws and regulations.
  Third, in promoting corporate governance reform, Korea could very well refer to Japan’s case, and especially how it secured momentum of its corporate governance reform by amending the Companies Act in June 2014 and introducing the Corporate Governance Code in June 2015.
  Fourth, Korea, like Japan, needs to establish a government-wide national strategy with public-private cooperation, and promote regulatory reforms to foster new industries under the 4th industrial revolution. Fifth, in relations to the labor market reform, both Korea and Japan are failing to show progress in improving labor market flexibility. In this situation, it will be beneficial to try some measures that essentially are preconditions for labor market flexibility, and which are showing some positive results in Japan. Policies to improve labor conditions for irregular workers and allowing various forms of working are examples of this.
 

Executive Summary

Contributors

1. Introduction

2. Trade in Intermediate Goods and Pro-cyclical Productivity
2-1. The Model with Domestic and Imported Intermediate Goods
2-2. Empirical Results

3. Trade in Intermediate Goods, Misallocation and Productivity Loss in Korea
3-1. Model of Misallocation and Multiplier Effects in Input-Output Framework
3-2. Productivity Growth and Efficiency Changes in Industry-Panel Data

4. Conclusion

Appendix

References 

There have been voluminous contributions such as Daudin et al. (2011), Johnson and Noguera (2012), Koopmans et al. (2010), and Trefler and Zhu (2010) in measuring value added trade based on input-output tables as generalizations of the vertical specialization measures following Hummels et al. (2001). These studies focused on trade in intermediate goods as a key feature of recent global trade. In the case of Korea, about 50% of total exports and 70% of its total imports are intermediate goods trade. This paper contributes to the discussion about the trade in intermediate goods and productivity by revisiting Basu (1995), Jones (2011), and Lee and Pyo (2007) to examine implications of trade in intermediate goods for macroeconomic business cycles and productivity and welfare at the current stage of Korean development. The major revision of the Basu (1995) model is attempted by decomposing intermediate goods into domestically produced intermediate inputs and imported intermediate inputs to investigate implications of the model in a small open economy. The major finding is that the procyclicality of the intermediate goods usage relative to labor usage and TFP changes in both value added and gross-output regressions are significantly weaker in a small open economy like Korea than the large economy of the United States. We also investigate the effects of misallocation and multiplier effects due to intermediate goods on industrial productivity and efficiency following the model of Jones (2011). Since the effects of misallocation can be intensified through the industrial input-output structure of the economy, we calculate the intermediate goods multiplier by Korea's 29 manufacturing industries. We find technical changes and the degree of inefficiency are related with the magnitude of multipliers, but we leave a fundamental identification problem to future research.

 

- 

 

  The aim of the research is to suggest economic cooperation framework between Korea and the Middle East in the times of lower oil prices. A rapid decline of oil prices since the second half of 2014 has negatively impacted on economy of the GCC(Gulf Cooperation Council) countries which heavily depend on oil and gas sector. GCC countries are facing economic recession with the worsening of the financial situation, lack of liquidity and decrease of investment. The sharp drop in oil revenues due to lower oil prices caused government fiscal distress and made the GCC countries use accumulated foreign exchange reserves and sovereign wealth fund. They also prioritize projects focusing on social infrastructure including education and public services, leading to decrease of number of project contracts awarded in the GCC region.
  In response to the economic slowdown and fiscal burden, GCC countries have strengthened policy measures for economic diversification. They have promoted various supporting policies to nurture their strategic industries - most notably the renewable energy sector - and competitive small and medium-sized enterprises in the region. In order to regain fiscal soundness, GCC countries have been trying to cut their energy subsidies and revise the tax system, expanding government loans and privatization of their state-owned companies than the past. Moreover, they are making more efforts to increase foreign direct investment inflows with improvement of business environment and PPP(Public-Private Partnership) procedures.
  The economic difficulties facing the GCC countries due to lower oil prices is causing a significant concern over dwindling economic cooperation between Korea and the GCC countries. In response to this, a new cooperation framework is needed to strengthen bilateral ties for shared growth. Four fields of cooperation can be identified as follows. First, industrial cooperation should be reinforced to expand economic diversification and job creation in the GCC countries. Second, energy cooperation should be broadened into the fields of renewable energy development and energy efficiency technology other than energy trade. Third, investment cooperation need to be strengthened to facilitate joint investment in the region including joint ventures. Fourth, institutional cooperation between governments is needed to share Korean institutional reforms in the fields of tax, subsidy, privatization, FDI and so on, deepening mutual understanding of economic partners for co-development.
 

 

   Uncertainties in the global economic environment are increasing due to prolonged low oil prices, China’s low economic growth, the possibilities of strengthened protectionist trade policies after the U.S. presidential election, and the emergence of neo-isolationism due to Brexit. In this situation, the Central Asian governments are developing and pursuing individual economic strategies which reflect their own socio-economic characteristics and core policy goals.
  Kazakhstan is shifting its policy direction from maximizing exports of raw materials to qualitative economic development. The country has pursued an open foreign policy and trade liberalization to overcome its geographical limitations as a small landlocked country. The open economy originally focused on exporting energy resources and attracting foreign capital, but with some control by the government in energy resources management. However, as the structural changes in the external economic environment occurred after the global financial crisis in 2008, the government started to focus on improving the structure of the economy, which remained dependent on energy resources. The key tasks for Kazakhstan were to upgrade its competitiveness, improve the investment climate, build infrastructure, diversify its industries through technological innovation, expand the role of private sectors, improve the efficiency of national asset management and develop human resources. Accordingly, the government adopted the State Program of Industrial-Innovative Development for 2015-2019 and announced the Nurly Zhol plan for promoting infrastructure development in 2014, followed by the ”100 Concrete Steps to Implement Five Institutional Reforms“ in 2015. This was a strategic attempt to build a foundation for sustainable economic growth by responding to changes in the external economic sector, through securing new growth engines in the economic sector, promoting industrial diversification and implementing structural reform.
  Uzbekistan has been pursuing an import substitution policy while maintaining a closed economy since independence. Uzbekistan’s government-led closed-economy essentially followed policy goals which prioritized the protection of its domestic market and economic stability from external volatility. Thereby, the country concentrated its efforts in developing domestic industries among the five Central Asian countries. Thanks to this, the country has been able to accomplish considerable achievements in the manufacturing sector, but still has many limitations in cultivating its export competitiveness, asits main export items are weighted towards raw materials (cotton, gold, gas, etc.) and its manufacturing sector is mostly composed of labor-intensive industries. Recently, the Uzbek government is putting the highest emphasis on enhancing competitiveness and efficiency in import substitution while promoting export-oriented industrialization. Through these efforts it aims to pursue stable economic growth based on strategic cultivation of the export industry and to drive a shift from labor-intensive industries to technology-intensive business. The government set key initiatives in reducing excessive governmental involvement in the economic sector, expanding the role of the private sector, deregulating trade activities and exchange rates, etc. In this context, the government formulated a comprehensive global financial crisis recovery plan in 2009, and such initiatives as the “Priorities for Economic Policy” and the “Short-term and Long-term Action Plan of the Uzbekistan Cabinet” were presented in 2015. At present, the government is preparing long-term programs for economic development up to 2030, which are expected to include more details on improving the nation’s industrial structure, such as the development of raw materials processing and high value-added industries.
  Turkmenistan’s government-led closed-economy has its key policy objective focused on natural gas exports, based on strong national control over its energy resources and the financial sector. However, such obstacles as excessive dependence on exports of raw materials, strong governmental control over the economy, and inefficiencies in the economic system have hampered sustainable economic growth. In response, the government adopted the “National Program of Socio-Economic Development of Turkmenistan for 2011-2030” in 2010, identifying sustainable economic development as a major goal of its national strategy. Modernization of the energy sector, industry diversification through cultivation of non-energy sectors were selected as priority goals. Currently, the government is aligning its efforts with the “Socio-economic Development Program 2012-2016,” while formulating the next “Socio-economic Development Program 2017-2021.” In particular, in 2016, President Verdi Muhammedov presented the ”2017 Socio-economic Policy Direction,“ and selected three major projects: attracting active investment, fostering companies with international competitiveness, and developing the private sector. According to this agenda, future projects such as the construction of a mineral processing complex, production of petrochemical products, and construction of industrial infrastructure will be carried out.
  As mentioned above, amidst the uncertainty in the global economic environment, Central Asian countries are devoting all their energies to prepare plans for sustainable economic growth. Their aim is to reform their economic structure centered on exports of resources and pursue industrial diversification. In this situation, our government should establish plans to expand economic cooperation with these countries. In this context, this paper presents plans to promote economic cooperation specialized for each country.
  With Kazakhstan, it is necessary to formulate plans for economic cooperation in areas that contribute to Kazakhstan’s economic modernization, industrial diversification and infrastructure development. Regarding industrial diversification, the six major manufacturing industries (nonferrous metals, chemicals, petrochemicals, machinery, building materials, groceries), agricultural modernization, four major innovation sectors (mobile multimedia technology, aerospace and nanotechnology, robotics and genetic engineering, future energy), tourism cluster creation and energy efficiency are promising areas. For infrastructure development, promoting cooperation in the areas of transportation and logistics, and industrial and energy-related infrastructure can be considered. In addition, technology cooperation in high-tech industries such as medicine, biotechnology, information and communication, as well as knowhow sharing in national land development and renewable energy industries are also promising directions to be considered.
  In the case of Uzbekistan, cooperation measures should be prepared in the fields of industrial diversification and localization, and infrastructure development. Regarding industrial diversification and localization, it is most desirable to seek economic cooperation in the ten priority industries (electric power, oil and gas chemistry, chemicals, machinery, textile and leather, electronics, building materials, pharmaceuticals, groceries, and minerals), the seven most promising industries for localization (agricultural products, minerals, chemical and related industrial products, textile materials, building materials, metal products, machinery and equipment), and the agricultural sector. Regarding infrastructure development, we can cooperate in areas of transportation, and industrial and energy sectors. In addition, the healthcare industry, construction of a joint industrial complex, eco-friendly green technology, tourism industry are also desirable areas for bilateral cooperation.
  For Turkmenistan, it is necessary to prepare cooperation plans linked with industrial diversification, localization and infrastructure development, which is quite the same with Uzbekistan’s case. However, the details within each sector are different. In the industrial diversification and localization sector, we should focus on industrial modernization (oil and gas, chemicals, light industry, food processing, building materials, machinery, textile, agricultural products), localization (building materials, chemicals, household appliances, grocery products), and export promotion industries (chemicals, agriculture, pharmaceuticals, light industry, grocery products). Regarding infrastructure development, the development of tourism-related infrastructure connected with transportation infrastructure (north-south and east-west corridors, complex transportation and logistics hub, and tourism cluster), and infrastructure related to the information communication and agricultural sectors (processing facilities for dairy products, fruits, vegetables, fish) are promising areas of economic cooperation. In addition, further cooperation measures should be explored in the tourism sector, which has recently been designated as one of the priority industries in the non-energy sector.
  Overall, approaches for expanding economic cooperation between Central Asian countries and the Republic of Korea can be summarized as follows.
  Firstly, based on the holding of regular high-level talks, our government should continue strengthening relations with key Central Asian figures, especially through summit diplomacy with key nations in the region. In addition, we should upgrade the Korea-Central Asia Cooperation Forum, which has been held at the vice-ministerial level, to a summit-level meeting. Through this, we can pioneer the ”3.0 era of cooperation between Central Asia and Korea” while further strengthening the responsibilities and performances of cooperation.
  Secondly, deciding on the main actor of economic cooperation between Central Asia and Korea is highly essential. An organization to formulate short- to mid- and long-term strategies for major Central Asian countries is needed in order to promote deeper economic cooperation. To this end, a Korea-Central Asia economic cooperation committee should be established, under the Korea-Central Asia Cooperation Forum, to coordinate Korea’s economic cooperation with major nations in the region. In principle, the committee should be composed of 1.5 tracks, in which all public organizations and representatives of private enterprises in every country participate. In this way, efforts to establish systematic supportive measures and cooperation policies targeting domestic SMEs can also be made.
  Thirdly, we should seriously consider establishing a fund for industrial cooperation between Korea and Central Asia to promote industrial cooperation between countries. It is highly important to reduce investment and cooperation risks for private companies which have limited financial resources. Funds can be sought by national banks in each country and be reviewed to see if our Official Development Assistance (ODA) fund can also be made available to support infrastructure development.
  Finally, since the future development of the Central Asian countries will depend on human resources, a systematic supporting system that includes professional technical training, industrial specialists training, academic and technical exchanges, should be provided by establishing a ”Korea-Central Asia Future Generation Promotion Committee“ under the Korea-Central Asia Cooperation Forum. For example, we should prospectively consider establishing vocational training schools and operating technical education programs in Central Asia, as well as supporting international students from Central Asia through various special programs. 

 

  Due to North Korea’s nuclear test and the UNSC’s sanctions on North Korea, economic cooperation including North Korea-China trade is one of the most internationally recognized issues, and many analyzes and studies are underway. However, there is little research on the comprehensive trading practices of North Korea and China, centering on the border areas of Liaoning Province and Jilin Province, which serve as outposts in China's trade with North Korea. In this study, we analyzed the changes in trading practices in the UNSC sanctions against North Korea (2006 ~ 2016 (No. 2270)) and bilateral trade between North Korea and China due to bilateral sanctions.
  The disconnection of trade between North Korea and Japan stemming from Japan’s ban on trade with North Korea in 2006 and the suspension of inter-Korean trade due to the implementation of the 5.24 measures in 2010 seemed to have a considerable influence on North Korea’s foreign trade. However, in the late 2000s, the rapid increase in demand for mineral resources due to the economic development of China, the increase of Chinese enterprises’ trade and investment in North Korea replaced the place, and the dependence of North Korea on China trade became even more increased. The UNSC’s sanctions against North Korea and the independent bilateral sanctions imposed by the South Korea, the United States, and Japan have contributed to the deepening of North Korea’s dependence on China and the increase of trade in North Korea and China. In addition, considering the trade structure and characteristics of the North-China whole-trade and the border region, the effect of the existing North Korean sanctions on the North Korean and Chinese trade is very weak and the North- You can see that the map has changed.
  Since the 2000s, the trade between North Korea and China has started from complementary relations. ① there has been a rapid increase in trade volume between North Korea and China, ② the dependence of North Korea on China’s trade has increased, ③ China’s imports to North Korea increased, ④ structural change in trade items, ⑤ China’s trade with North Korea has changed from the three provinces of the northeast to the southern coastal areas such as Shandong, Jiangsu, Sichuan, and Hebei provinces.
  In Liaoning Province, trade between North Korea and China plays a major role as a major trade channel between China and Pyongyang. However, since the normalization of trade in North Korea is becoming more difficult in the international community, especially in the period from 2013 when the issue of settlement of accounts has begun to arise, a special settlement system (trust payment). The importance of the Dandong region in trade between North Korea and China is evident in both formal and informal trade.
  Jilin Province’s trade with North Korea has made great progress in both quality and quantity in the 2000s. Since the implementation of sanctions in North Korea, Jilin Province’s main items of North Korea and China trade are not included in the scope of sanctions, and most of them are in the form of changed trade.
  The main types of trade between China and North Korea based on statistical data of China Customs can be divided into general trade, change trade, processing trade, and bonded trade. General trade accounts for the largest portion of the total trade between North Korea and China. In the case of the border area between North Korea and China, the share of general trade in North Korea’s public imports is not much different, but it is clear that the proportion of the total exports is considerably small. Since the change trade can only be done in a geographically bordered area, it can only be done in Liaoning Province and Jilin Province in North Korea and China Trade. These border areas serve as trade bases for North Korea and China, accounting for more than 70% of the total bilateral trade. Since the United Nations sanctions on North Korea in early 2016, Chinese companies have become increasingly active in ordering or outsourcing orders to North Korea. Especially in the garment processing sector, clothing processing plants in Pyongyang are continuously operating. This suggests that North Korea is actively engaged in the trade of clothing after using the comparative advantages of the clothing sector, which is not subject to sanctions, as the international dispatch of North Korean workers becomes more difficult and the passage of foreign currencies narrows. As for the bonded trade in the border region, the size of the bonded trade has greatly increased in the mass exports, and the proportion of the trade has been steadily maintained at 30 to 40%. As in the case of processing trade, the share of bonded trade exports in the border region is higher than that of bonded exports in total exports, which means that most bonded trade takes place in the border region. In particular, it can be inferred that exports to third countries such as Korea and Japan are actively being carried out through China after 5.24 measures, given that North Korea’s rapid exports of bonded trade exports to China have increased since 2010.
  There is a clear difference between the North and the China trade as the border region and the non-border region and comparing the main trade items. The amount exported by North Korea to the border and non-border regions of China is comparable, and most of the exports to non-border regions are occupied by minerals. The most prominent items in the border region are clothing and minerals. Apparel items account for more than the exports of mineral items, and more than 99% of the detailed items of apparel items are finished products. In the case of North Korean mass imports, imports from the border region are much higher than imports from non-border regions. In general, imports are more distributed than exports, indicating that various consumer goods and intermediate goods consumed by North Korea are covered by imports from the border region.
  As formal trade has expanded in the border region between North Korea and China, smuggling trade is also naturally increasing. It is estimated that the smuggling trade between North Korea and China is relatively systematic and large scale in the region of Liaoning Province, Yalu River Estuary, Pollution, and Jilin Province Changbai. In addition, it seems that a large number of small-scale private transactions are taking place along the border areas of the Yalu and Tumen River basins. Despite the regional differences, the major backgrounds of the smuggling trade are ① the fall of the local economy, ② long-term practice, ③ socio- cultural ties, and ④ embargo on trading items. In this situation, local residents are directly or indirectly involved, and even if there is a crackdown, there is a high possibility of resuming, even if the crackdown is temporarily suspended. This is also the reason that the smuggling trade is not eradicated.
  Currently, North Korea and China are cooperating with each other in expanding trade in non-commodity trading services, which are not included in the new sanctions, and this trend is expected to be expanded and strengthened regardless of sanctions. It is very likely that the Chinese government will activate the border areas of Dandong, North Korea’s main trade hub with North Korea, and Yen Banju, which is easy to reach into Russia, and North Korea and China are showing such a movement even now.
  China, on the other hand, is participating in international sanctions against North Korea while strengthening economic cooperation with North Korea in the border region. The policies related to the Northeast region of China are aimed at improving the trade infrastructures of the neighboring countries and strengthening the interconnection between the border regions and the neighboring countries of China and revitalizing the economy.
  In this study, we examine the trading practices centered on Liaoning Province and Jilin Province, which are bordered by North Korea and China, and analyze the trade practices of North Korea and China in the border region. The changes were analyzed. This study aims to promote the understanding of the current status and system of North and South Korea trade while also examining the changes in economic cooperation in the border region between North Korea and China caused by sanctions against North Korea.
 

 

  India has received the spotlight from the world as ‘Next China’, because of 2nd largest population in the world and many various policies from the government to support India’s development. India has had an average of 8.35% economic growth rate since 2005.
  As new government established by prime minister of India ‘Narendra Modi’ in 2014, there has been many changes in India. Modi has tried to make India as world manufacturing base, urbanize and modernize Indian cities. Modi government has also made programmes to educate Indians for start-ups and small-medium companies and support them with government organizations. For foreign policy in India is mitigating regulations and laws on FDI(Foreign Direct Investment) and reinforcing economic cooperations with many other countries.
  Korea has established diplomatic relations with India since 1973. In effect, relationship between Korea and India started from Korean War. India had detached their medical force, they also were presidency for ‘Neutral repatriation committee’ after Korean War. After establishing diplomatic relations, the two countries have shown their efforts to reinforce their relationship by culture, politics and economy. Especially on economy, two countries have signed for CEPA (Comprehensive Economic Partnership Agreement) to enhance total amount of trade between two countries has grown rapidly. Total amount of trade was about 2.3 billion dollars on 2000 but in 2015 it has increased to 16.3 billion dollars by 600%, which means many Korean companies are trying to enter to India market. Nonetheless only major companies and very few small-medium companies have settled down at India market. According to statistics of export, trading rate of small-medium companies in india has possession of 17.8% of total export rate in india in 2015. Statistics of newly founded Korean small-medium companies in India from 2012 to 2015, most companies were based on manufacturing which was about 47.7% and rest of other fields were very small amount. For start-ups and small-medium companies, India was very unfamiliar country to enter. However many companies are still trying to enter to India market.
  This paper introduces a survey which was revised from 500 people from Kolkata and Chennai, cases about Korean companies in India and some interviews from local company and Korean start-ups in India. The reasons to choose Kolkata and Chennai were; Kolkata is most fast growing city in India and also market is being modernized very fast. Chennai already has Korean companies so that start-ups and small-medium companies would be easier to access. As a result of the survey, India people tend to prefer price, brand and performance of the product rather than country of origin. And they tend to use small shops the most.
  7 cases are about major companies and start-ups/small-medium companies from Korea. Some companies successfully entered India market by ‘localization’, ‘gaining trust from their clients’and ‘understanding of India market’. But some companies were still struggling because of lack of brand awareness or portfolio strategy.
  Chapter 5 introduces about business strategy for start-ups and small-medium companies which wants to enter to India market. First, approach India market as long-term perspective. India is very conservative market so it is important to build up trust from Indian customers and companies. Second, it is important to network with local distribution companies. Because India has large territory but transportation system is not modernized, it is needed to use of local distribution channel to spread companies products. Third, localization is very important. India has various culture and their own special consumer behavior. By localizing marketing and products they will be easier to approach to Indian customers.
  Not only efforts from companies, but also efforts from Korean government are needed. Korean government should establish research organizations for getting the newest and crucial information about india. By doing so, start-ups and small-medium companies solve the financial issues for searching information about India. Also, Korean government should organize 2 types of ‘task force’ for entering India. One should be established in Korea to support start-ups and small-medium companies from the beginning of export and the other should be set-up in India to network Korean companies and local companies.