Working Papers
PUBLISH
Working Papers
-
Korea’s Regional Cooperation and ODA Policy in Asia: Performance and Challenges
The Asian region has drawn great attention as an emerging market with relatively stable growth since the 1990s. The COVID-19 pandemic crisis, however, has revealed its structural vulnerability, intensifying socio-economic inequali..
Kwon Yul et al. Date 2021.12.30
Economic development, Economic cooperationDownloadContentSummary정책연구브리핑The Asian region has drawn great attention as an emerging market with relatively stable growth since the 1990s. The COVID-19 pandemic crisis, however, has revealed its structural vulnerability, intensifying socio-economic inequality in the region. Economic activities have shrunk due to the lockdown measures, resulting in stagnation and widening the income gap. Uncertainties have also increased in the environment for development cooperation in the region, which calls for a new approach for effective implementation of official development assistance (ODA).This study aims at deriving Korea’s mid-term ODA strategies towards the Asian region by analyzing changes in the development context and conditions for cooperation in the region since the pandemic, as well as progress in the Sustainable Development Goals (SDGs) and the development gap. As economic interdependencies with Asian countries have intensified, Korea’s ODA has given the highest priority to the region: fifty to sixty percent of its ODA has been directed to Asia and sixteen out of twenty-four priority partner countries are in the region. The Korean government has also pursued diplomatic diversification focused on strengthening partnerships with Asian emerging markets, particularly under the New Southern and Northern Policy.Establishing an effective ODA strategy in the post-COVID-19 era requires not only country-specific assistance plans but also a regional approach which incorporates the diverse development needs, so as to improve policy coherence as well as development effectiveness. As the demands from developing countries willing to share Korea’s experiences and know-how in response to COVID-19 have increased, the role of Korea’s ODA has gained its importance particularly in the health sector. The uncertainties further increased by the recent spread of the omicron variant, however, make more difficult the implementation of ODA projects in addition to normal economic activities.While the Korean government continues to support the Asian region as a priority, the overall strategy lacks integrated regional approach as Korea’s ODA has been based on individual country strategies—Country Partnership Strategies (CPS). In this context, the study suggests ODA strategies which reflect the regional characteristics and specific ways for strengthening the strategic alignment between ODA and the government agenda based on the Third Mid-term Strategy for Development Cooperation (2021–25) and major foreign policies. In addition to health crises, it also considers the needs for responding to various challenges caused by climate change, natural disasters, and migration from a regional perspective.As Chapter Two demonstrates, COVID-19 has increased socio-economic uncertainties in the Asian region in diverse ways. Economic growth has been slow due to the lockdowns and restricted economic activities. With the prolonged stagnation, poverty and food insecurity have increased, and educational outcomes and multifaceted inequality have deteriorated. International support has been limited with the implementation environment worsening, which has also had negative impacts on progress towards the SDGs in areas such as poverty reduction, food security, education, health, gender, environment, etc. To mitigate the negative impacts of COVID-19 and support the SDG implementation in Asian developing countries, development assistance must be allocated into relevant sectors by country, taking into account the differences in development needs and factors that hinder progress of the SDGs.Chapter Three presents the target size of Korea’s ODA to Asia along with the financial requirements and four possible paths to achieve such a target. To achieve the 0.2% of GNI goal by 2030, it is estimated that a total of 20.6 billion USD is required for the next ten years. This normative target amount calls for a detailed review of practical resource allocation plans, as well as greater efforts to mobilize such resources for responding to the development needs caused by COVID-19 and supporting SDG implementation.Chapter Four reviews Korea’s ODA to Asia in terms of its strategies and performances, finding that Korea’s ODA structure makes it difficult to implement integrative ODA programs in response to region-wide development challenges or in collaboration with regional bodies, since the focus of Korea’s ODA strategy has been on the individual countries. Although Korea has made efforts to promote government-wide strategic programs under the New Southern and Northern Policy, the current “bottom-up” approach, in which each ministry or agency initiates and implements its own ODA projects individually, impedes establishing integrated strategies and systematic and efficient delivery. To plan and design top-down strategic programs which reflect Korea’s policy priorities, as well as the regional development challenges, are essential in establishing a regional ODA strategy towards Asia.Based on the findings in the earlier chapters, Chapter Five identifies the characteristics for a regional development cooperation strategy by conducting a comparative analysis of the regional assistance strategies of major bilateral and multilateral donors and detailed reviews of “top-down” strategic programs, and finally suggests policy directions for Korea’s regional ODA strategy towards Asia, as follows.First, the worldwide crisis caused by COVID-19 has revealed that the development challenges which the Asian region is facing cannot be solved by individual countries but by regional or sub-regional efforts, which will require stronger foundations for integrated cooperation with regional communities. Strengthening inclusive partnerships would be a key to mitigate the development gap in the region, by supporting regional programs such as the ASEAN Connectivity, ASEAN Smart City Network, and Mekong Subregion development projects.In response to the pandemic and health security crisis, Korea needs to extend its assistance not only to individual counties but also for region-wide programs. The establishment of the ASEAN Center for Disease Control, contribution to the Asia Pacific Vaccine Access Facility (APVAX), and increase in support to multilateral organizations and international initiatives can be good examples.Lastly, new ODA modalities involving private capital in the form of public-private partnership (PPP) are required to support green and digital sectors as well as infrastructure development in the Asian emerging countries, by designing large flagship projects and encouraging participation of the private sector. Establishing strategic programs and active policy dialogues with development partners will improve the effectiveness and efficiency of Korea’s ODA. Government-wide efforts are also called for to diversify development finance through PPP, to strengthen the coordination of ODA projects with the private sector to maximize synergies, and to increase collaboration with multilateral development banks. -
The Export Effect of Servitization in Manufacturing
This study examines the status and characteristics of Korea’s servitization of manufacturing and its impact on corporate performance and exports. In particular, we focus on the phenomenon that manufacturing companies produce more..
Hyunsoo Kim et al. Date 2021.12.30
Trade policy, Industrial policyDownloadContentSummary정책연구브리핑This study examines the status and characteristics of Korea’s servitization of manufacturing and its impact on corporate performance and exports. In particular, we focus on the phenomenon that manufacturing companies produce more services as final goods and provide them to the market with products. The main results derived from this study are summarized as follows.First, the proportion of service sales in the total sales of manufacturing companies increased significantly, albeit gradually between 2012 and 2019. Service sales, which stood at 4.5% of the total sales of manufacturing companies in 2012, surged to 15.9% in 2017, and then decreased to 6.9% in 2019. Also when the rate of servitization, which is the proportion of service sales out of total sales for each individual company, was calculated and examined by distribution, it was found that the distribution of the servitization rate increased at the most positive level in 2019 compared to 2012. However, it was found that many manufacturing companies had no service-related sales at all. Manufacturing companies with less than 50 employees are not included in the survey object of the “Survey of Business Activities”, which is the key database of this study. Since small businesses with less than 50 employees showed a high servitization rate according to the previous studies, the distribution of the servitization rate may actually be more skewed toward zero than in reality.We checked how servitization has progressed by industry by calculating the proportion of companies selling services. In general, the trend toward servitization in labor-intensive manufacturing such as food and beverage manufacturing, textile and clothing manufacturing, and wood/printing industry has decreased, while the trend toward servitization in capital- intensive manufacturing such as petrochemicals, electricity/ electronics and machinery manufacturing is higher in 2019 than in 2012. The transportation industry, including automobile, ship, railroad, aircraft and its parts industries, did not change significantly during the analysis period, and in particular, the distribution of servitization was found to be significantly lower than that of other industries.Second, distribution service is the most major service business for manufacturing companies. Sales in distribution service by manufacturing companies accounted for about 74% of total service sales in 2012 and about 60% in 2019. This is interpreted as a movement by manufacturing companies to strengthen interaction with customers through expansion into distribution businesses such as the introduction and expansion of e-commerce or establishment of offline directly managed stores under a situation where product competition in the market is intensifying. In addition, professional and engineering service and R&D service, which manufacturing companies did not participate in much during 2012-14, are emerging as major businesses from 2015-16. However, this increase was found to be driven by specific industries, such as the manufacturing of electronic components, computers, images, audio, and communication equipment, and the manufacturing of chemicals and chemical products. It seems that it is due to the increase in the number of R&D activities of manufacturing companies becoming more active, and the provision of patents obtained through such activities to domestic and foreign companies.Third, comparing Korea's status of servitization in manufacturing with major countries such as the US, Germany, Japan, and France, the proportion of companies generating service sales among the total manufacturing companies was somewhat lower than that of the US and Germany, but similar to that of Japan and France. Compared to major countries, companies generating service sales were concentrated in some industries such as computer, electronic, optical product manufacturing and mechanical equipment manufacturing. Also, it was found that most of the sales of service subsidiaries of Korean manufacturing companies were concentrated in the wholesale and retail industry. This is a characteristic of Korean manufacturing companies compared to companies in major countries such as the United States and Germany, which earned significant amount of sales from service subsidiaries not only in the wholesale and retail business, but also in ICT, financial service, and R&D service.Fourth, we analyzed the effect of servitization, which is measured by service sales of manufacturing companies, on performance indicators such as profit rate, sales, and employment. We showed that servitization in manufacturing in Korea has a positive effect on both the profit rate and productivity of the company. It can be interpreted that in the recent trend toward servitization of manufacturing in Korea, the effect of increasing the productivity and profit rate of companies through servitization was stronger than the effect of intensifying market competition and lowering the profit rate due to servitization. On the other hand, when the long-term trend was controlled, causality between index related to the size of a company, such as employment or sales and servitization was not found.Fifth, we examined the export effect of servitization in manufacturing by comparing companies which export both products and services with companies which export products only. It was found that service exports of manufacturing companies have a positive effect on overall exports. The export effect of servitization by industry is somewhat heterogeneous. In machinery and other manufacturing and computer, electronics, optics manufacturing, it was found that service exports significantly increase overall exports, whereas in automobile and transport equipment manufacturing, the coefficient estimate has a positive sign, but is not statistically significant. Compared to other industries, there were fewer companies in the automobile and transportation equipment manufacturing industry that show a high level of servitization. A small proportion of service sales to total sales means that the proportion of service exports is likely to be small, and it is likely that the export effect of servitization may not be evident due to relatively small service exports.Lastly, we provide policy implications in Chapter 5 based on the findings above, such as △ designing manufacturing-service industry linkage activation policies by the level of servitization △ supporting development of business models from servitization and △ improving statistics in consideration of servitization. -
Analysis on India’s Trade Policy and Its Implications for Korea-India Cooperation
Economic exchanges between Korea and India have been expanding since the signing of the Korea-India CEPA, which took effect in 2010, and the recent promotion of the New Southern Policy (NSP) by Korea, but the level of exchange sti..
Jeong Gon Kim et al. Date 2021.12.30
Trade policy, Foreign direct investment India and South AsiaDownloadContentSummary정책연구브리핑Economic exchanges between Korea and India have been expanding since the signing of the Korea-India CEPA, which took effect in 2010, and the recent promotion of the New Southern Policy (NSP) by Korea, but the level of exchange still remains insufficient considering the potential of the two countries. This study aims to contribute to deepening Korea-India trade cooperation by analyzing India’s trade policy and trade investment relations. Taken overall, Chapter 2 analyzes the trends of commodity & service trade and characteristics of investment policies, centering around India’s economic liberalization since the 1990s. Chapters 3 and 4 examine India’s recent trade and investment structure with major countries including Korea, and Chapter 5 analyzes India’s status on the global production networks. In conclusion, Chapter 6 presents various implications for Korea-India trade cooperation.Looking at Chapter 2 in more detail, India has achieved great results in lowering tariff rates and easing investment barriers by promoting full-fledged liberalization policies since 1991. In particular, investment barriers have been significantly lowered and automatic approval is now being implemented in most areas, reflecting the remarkable improvements made in the investment environment since the inauguration of the Modi government. But at the same time, India has continued to actively utilize non-tariff barriers such as anti-dumping measures, and has been showing a trend of raising tariff barriers since 2018 with the aim of establishing its economic self-reliance. In short, India has placed its focus on developing its own production base by attracting foreign investments. And in spite of steady liberalization, India’s trade policy continues to lean towards the protection of domestic industries.According to Chapter 3, as intermediate goods account for an increasing proportion of total trade in goods, India’s status as a global production base is on the rise. In recent years, India’s major import destinations have switched from North America and Europe to China, Korea, and Southeast Asia, and in particular, trade with Korea has significantly expanded since 2000s. Furthermore, since the Korea-India CEPA took effect in 2011, trade between the two countries has been increasing, and Korea’s exports to India have increased even more, widening India’s trade deficit with Korea. However, India is also enjoying the positive effect of diversifying its export items to Korea. The share of intermediate goods in India’s trade with Korea is the highest among India’s major trading partners, and the manufacturing network between the two is growing stronger. Nevertheless, the volume of trade between Korea and India has not grown as much as expected following establishment of the CEPA, thus indicating a new breakthrough is required.In Chapter 4, we examine India’s growth into a major FDI target country in the global market. In particular, India recorded a significant increase in FDI inflow along with China in 2020, when the global economy shrank significantly due to the COVID-19 pandemic. The major fields of FDI in India are services, software, renewable energy, and infrastructure. Also, FDI investment in India has recently shown a notable increase in brownfield investment over greenfield. Korea’s FDI in India began in earnest during the 1990s with the entry of Korean manufacturing companies into India, and increased further with the Korea-India CEPA. The proportion of investment in manufacturing and green fields is relatively high compared to the United States, the United Kingdom, and Japan, but on a far smaller scale. Korea needs to diversify its investment fields and methods in response to India’s aggressive investment liberalization.According to Chapter 5, India is reinforcing its global connectivity as a production base. Since the Modi government took office, India has been more actively supporting foreign companies’ production in India, and it has been effective in promoting production activities of foreign companies in India. If we classify the contribution of major countries to India’s exports and production, they have in common that their contribution to production is much greater than that of exports. This means that major countries’ production linkages with India place greater weight on the purpose of meeting India’s domestic demand. Therefore, Korean companies and the government need to closely monitor demand in India and strategically strengthen production linkage with the country.In Chapter 6, we consolidate the research findings of the study to present implications for Korea-India economic cooperation. As shown in this study, Korea and India are excellent cooperative partners, especially in the manufacturing sector, meeting each other’s needs. Korea has the ability to invest in key manufacturing industries that India seeks to foster, such as electrical/electronics and automobiles. Meanwhile, India continues to conduct active trade in intermediate goods while exhibiting a strong will to foster its manufacturing sector. Moreover, India needs a partner that can alleviate its excessive economic dependence on China, all of which is likely to expand Korea’s opportunities.In the process of bolstering its production network with India, Korea should keep in mind its connection with Southeast Asia. From a strategic point of view, Korea needs to minimize the risks associated with US-China conflict by streamlining investment deployment, making it is necessary to expand the existing Korea-ASEAN production network to India. As found in this study, India has recently been trying to reinforce production connections with Southeast Asia. This could offer opportunities for Korea to establish a three-nation production network by expanding production and exports of final goods in India using Vietnamese intermediate goods. Developing these links in the mid to long term can further boost Korean companies’ trade and investment in the New Southern Region, which could also lead to expansion of India’s participation in the global production network.Considering this potential, Korea and India should break away from the trade imbalance issue and take the view of expanding and strengthening the bilateral economic cooperation relationship. According to the findings of this study, the Korea-India CEPA is not a direct cause of the trade imbalance between the two countries, but could instead be a result of failure to fully reflect the characteristics and potential of the bilateral trade structure. Given this fact, the two countries should shift to a forward-looking perspective to further expand liberalization through further negotiations to improve the CEPA.Meanwhile, Korea should actively consider diversifying its investment in India in addition to manufacturing. This study shows that Korea’s investment in India is biased toward manufacturing compared to major countries, and competition with Germany, Japan, and China is likely to intensify. It is worth noting that investment in India from major countries has been increasing recently, mainly in services, computer software /hardware, renewable energy, communication, and infrastructure. And in terms of investment methods, it is recommended to actively consider brownfield investment. According to this study, while Korea’s investment in India has been concentrated in greenfield investment, most of the major countries have a very high proportion of brownfield investment. These investment fields are where India’s demand is increasing, and companies in major countries are enjoying a rapid first-mover effect through brownfield investment.Korea is currently in dialogue with India’s trade authorities, focusing on improvements of the Korea-India CEPA and India’s trade relief measures with Korea, but these efforts seem insufficient to broaden its understanding of the potential for cooperation. Therefore, the country should establish regular trade policy dialogue channels with India to broadly understand each other’s core policies, raise immediate issues, and continuously discover possibilities for cooperation. In addition, the Korea-India CEPA must be upgraded into a comprehensive platform for economic cooperation by including areas such as infrastructure, energy, and digital industries, which India is currently focusing its efforts on.As well as the intergovernmental trade policy dialogue channel, a joint initiative should be pursued between Korea and India as a trade and investment support channel in which various economic actors, including Korean and Indian companies, governments and institutions, can participate. The Korea-India joint initiative would serve as a comprehensive platform for bilateral cooperation, which can be used as a window to specifically identify the immediate needs of the two countries, match companies, and directly communicate difficulties in business activities with the Indian government. It is also necessary to create a Korea-India cooperation fund in connection with this joint initiative. This should be utilized to further encourage projects and research across almost all fields related to bilateral cooperation. More specifically, this fund can support business matching projects between companies in both countries, and could help companies related to the CEPA and support joint research to revitalize trade investment.When cooperating with India, it is critical for Korea to prioritize investment that meets India’s needs. This is because India prefers partners that solve its needs through investment rather than unilateral expansion of exports. In other words, it would be feasible for the Korean government to preemptively present the investment projects that India needs in terms of economic policy and receive support from the Indian government. One such example is the India-Japan Investment and Trade Promotion and Asia-Pacific Economic Integration Action Plan agreed upon by Japan and India in 2015. At the time, Japan suggested expanding investment in India and inviting Japanese companies into the market, focusing on major projects, based on which India provided Japanese companies with trade investment benefits. In order to proceed with such large-scale projects, not only corporate investment but also government support in the form of ODA, etc., must play an important role. -
Green New Deal for Carbon-neutrality and Trade Policy in Korea
This research defines the Green New Deal, as a fiscal policy having both environmental and economic growth as its main objectives. A trade policy perspective and approach has been applied while reviewing the carbon-neutral policy ..
Jukwan Lee et al. Date 2021.12.30
Trade policy, Environmental policyDownloadContentSummary정책연구브리핑This research defines the Green New Deal, as a fiscal policy having both environmental and economic growth as its main objectives. A trade policy perspective and approach has been applied while reviewing the carbon-neutral policy as both carbon-neutrality and economic growth pursued by the Green New Deal are closely linked to the multilateral system and the international trade system. Climate change is a global issue that transcends national borders. There are inevitably limits to the level of greenhouse gas reduction that can be achieved through the efforts of any one region or country. Carbon-neutrality also requires an understanding of the international economy and production networks. Production supply chains are expanding all over the world and value chains are intricately connected. The Green New Deal needs to be considered in terms of trade policy. Therefore, this study tries to provide implications in terms of trade policy in relation to the Green New Deal policy for carbon-neutrality.Chapter 2 introduces carbon-neutral policies that major countries are adopting and compares them with past Green New Deal policies. The latter were introduced in the context of economic stimulus and eco-friendliness during the 2008 global financial crisis. In addition, we compare Korea’s current Green New Deal with its 2008-version called the low-carbon green growth policy to examine the similarities and differences. Although major countries used different names such as ‘Green Deal’ or ‘Green New Deal’ to implement policies for greenhouse gas reduction and economic growth, they were not sufficient in reducing greenhouse gas emissions. Past and current policies generally put more emphasis on short-term employment growth and economic stimulus. Korea’s Green New Deal also had limitations while considering carbon-neutrality as a policy goal until the government announced the Green New Deal 2.0 in July 2021. Discussions in Chapter 2 confirm the need for a balanced Green New Deal design which takes into consideration trade aspects for achieving carbon- neutrality and economic growth, as the effects of carbon-neutral policies promoted by major countries also affect trade.Chapter 3 examines the reason why each country is imposing independent carbon policies as seen in Chapter 2, and the factors to be considered when designing Green New Deal policies. As with carbon policies, multilateral cooperation is more effective than individual countries’ independent strategies for environmental policy. However, discussions in Chapter 3 shows that the multilateral discussions at the UN, WTO, and APEC did not make much progress over the past 20 years, and as a reaction, major advanced countries are increasingly adopting individual policies to try to solve the issues on their own. Chapter 3 argues that where global cooperation is difficult, it is desirable that the basic direction of the Green New Deal policy at the national level be based on ‘the principle of targeting by policy means’ which matches policy means and goals. Furthermore, under the circumstances in which major countries operate carbon-neutral policies, by only considering the environment or growth the society’s optimum as a whole cannot be achieved. Therefore, this chapter presents the role of trade policy tools to be considered while promoting the Green New Deal. First, it needs to correct international environmental externalities and second, improve the terms of trade. When designing the Green New Deal, we need to consider environment goals having in mind that environmental policies interact with industrial and trade policies. That is, there needs to establish implementation paces’ and priorities based on economies of scale and domestic export/import competitiveness in terms of trade.Chapter 4 answers the question of whether participation in international trade actually increases the efficiency of carbon-neutral policy under tightly intertwined global production networks, and suggests the direction of the Green New Deal policy from an industrial perspective in connection to trade. As the discussions on international cooperation for carbon emission reduction expanded, the question of whether the expansion of international trade and openness actually help to reduce carbon emission was constantly raised. In this report, we attempted through an empirical analysis to determine whether the expansion of openness helps reduce carbon emissions. In particular, unlike existing literature, openness was interpreted in terms of the expansion of trade in intermediate goods and the development of a global production network (or global value chain (GVC)), and its impact was analyzed accordingly. The results in Chapter 4 provide supports to the existing discussion that trade expansion (in particular, expansion of forward participation) helps reduce carbon emissions, and that carbon leakage does not actually increase, with the latter being statistically significant. Based on this, Chapter 4 proposes the need to consider the effect of the current Green New Deal policy on securing economic efficiency and reducing carbon emissions following openness. In addition, it was discussed that a strategic openness policy can be used as an effective carbon reduction policy based on the direction of industrial structure transformation under the carbon-neutral policy.Chapter 5 attempts to answer whether each country’s current independent carbon-neutral policy is cost-effective. The analysis in Chapter 5 contains the discussions of previous Chapters 3 and 4. Basically, Caliendo and Parro’s (2015) multi-country/multi-industry model is introduced to analyze the impact of a carbon-neutral policy, such as the EU’s carbon border adjustment, on the global economy under global production networks. In addition, the amount of financial support from Korea’s Green New Deal needed to offset the negative economic effects of other countries’ independent carbon- neutral policies was derived by selecting hypothetical industrial combinations. The government has budget constraints so resources that can be put into the Green New Deal are limited. The result of the analysis is consistent with the discussion in Chapter 3. In order to increase the effectiveness of the Green New Deal under a situation where a national carbon-neutral policy reduces economic welfare, both the environment and trade aspects needs to be considered in policy measures. Based on this, Chapter 5 emphasizes that it is necessary to balance carbon intensity by industry, export competitiveness, and cost effectiveness of investment in designing the current Green New Deal. At the same time, since the input of the Green New Deal causes a significant financial burden, it leads to concerns about the need for a plan to reduce the government's fiscal input by using a more market-friendly system.Chapter 6 examines the need to develop international standards for carbon and environment and tries to check how we can understand current increase in unilateral carbon policies in the context of current WTO regulations and find ways to induce cooperation from the multilateral system. we show that it is necessary to establish and comply with multilateral norms that lead to joint efforts for carbon-neutrality and prevent the Green New Deal from becoming a protectionist policy for the economic growth of powerful countries. In particular, from the point of view of Korea which grew under liberalization and international order based on norms, the Green New Deal and each country’s carbon-neutral policies in the protectionist era, we should consider restoring international cooperation and order so that trade barriers and reckless competition do not spread.Environmental policy has been basically recognized as a domestic policy, but as the carbon-neutral policy has recently become a major part of environmental policy, it is also affecting the setting of government’s policy directions, such as the Green New Deal. At the same time, as the world economy is closely connected through global production networks and carbon moves to countries around the world through carbon-connected networks, carbon-neutral policy is inevitably linked with trade policy. Our research does not cover all the contents of the Green New Deal, nor does it claim that all economic problems related to carbon-neutral policy can be efficiently solved through trade policies. However, trade policies should be considered and fully utilized as one of various policy alternatives within the comprehensive policy platform of the Green New Deal policy. This study finally suggests that the effect of the Green New Deal can be expanded through the restoration of openness and global cooperation. More specifically, first, the Green New Deal should be pursued beyond protectionism. To this end, it is necessary to consider △recognizing the expansion of openness as one of the measures to reduce carbon intensity and △considering the structural transformation to a carbon reduction-friendly ‘GVC downstream industry’. Second, it is necessary to achieve a Green New Deal that conforms to the norms of trade. To this end, △Reorganization of the Green New Deal into ‘basic technology investment’ in climate technology, and △Securing the autonomy of the Green New Deal through improvement of multilateral trade rules can be considered. Third, the recovery of global cooperation can lead to synergies. Thus, △Consideration of climate club participation for joint-response to climate change, and △Green New Deal that contributes to the establishment of a global carbon market is proposed. -
30 Years of Korea-Vietnam Economic and Social Cooperation 1992-2021: Achievements, Limitations and Suggestions for Further Expansion
Korea and Vietnam have achieved remarkable outcomes of cooperation over the past 30 years since establishing diplomatic relations in December 1992. The rapid expansion of cooperation between the two countries is due to their geogr..
KWAK Sungil et al. Date 2021.12.30
Economic relations, Economic cooperation Southeast Asia OceanDownloadContentSummaryKorea and Vietnam have achieved remarkable outcomes of cooperation over the past 30 years since establishing diplomatic relations in December 1992. The rapid expansion of cooperation between the two countries is due to their geographical, historical, and cultural similarities and commonalities. Vietnam and Korea are both traditionally agricultural countries that have grown rice since ancient times, and have been influenced by Confucianism. In addition, Korea and Vietnam, which have inherited abundant cultural heritages thanks to their long history, have strong national pride. In particular, many Vietnamese scholars often take Korea as an example when discussing improving national industrial strategies and infrastructure, given that Korea has overcome the ruins of the Korean War and Vietnam is growing over the scars of the Vietnam War.However, since Vietnam joined the WTO in 2007, cooperation between the two countries has been mainly led by the economic sector. As economic cooperation strengthened, the two countries fell into the illusion that they knew each other well. Delusions often lead to unnecessary misunderstandings. A representative example is the dissatisfaction of Koreans with Vietnam’s quarantine response in the early stages of the 2020 COVID-19 outbreak. Vietnam regarded quarantine as a war situation and controlled it with strong discipline, but foreigners, including Koreans, did not understand this social trend. It was a misunderstanding that could have been avoided if Koreans were a bit more aware about Vietnam’s quarantine situation and culture, and conversely, Vietnamese knew better about Korean society and culture. This study analyzes the performance of cooperation in the economic, social, and cultural sectors over the past 30 years and seeks ways to enhance cooperation in the social and cultural sectors, which are relatively less successful than the economic sector. This is because the sustainable development of their bilateral relations requires not only economic cooperation but also “soft power” cooperation in social and cultural sectors.Chapter 2 evaluates the achievements of economic cooperation between Korea and Vietnam over the past 30 years. As of 2020, Vietnam is Korea’s third-largest export destination and Korea is Vietnam’s fourth-largest export destination. However, the amount of trade between the two countries, which had soared until 2017, has stagnated since 2018. Efforts between the two countries are needed to expand trade. The revealed comparative advantage index (VRCA) based on value-added exports of both countries was calculated year by year using the ADB-MRIO (ADB Multi-Regional Input-Output Table). Although there has been a change in the structure of the comparative advantage between them, the two countries still show a complementary relationship. The complementary relationship between the two countries is a starting point for expanding trade again.In addition, it is necessary to expand trade between the two countries in order to resolve the trade imbalance issue raised as the biggest problem in trade between Korea and Vietnam. The fact that Vietnam’s export intensity index to Korea is lower than that of Korea to Vietnam suggests that Vietnam has room to expand exports to Korea. We need to think about how Vietnam can expand exports to Korea. The expansion of exports of rice, coffee, tea, cashew nuts, and natural rubber to Korea simply based on comparative advantage will be effective in improving the trade imbalance between the two countries in the short term. However, if this trade structure is prolonged, Vietnam will remain a low-value-added primary product exporter.Vietnam shows lower domestic value-added utilization than neighboring ASEAN member states (AMS) such as Thailand, the Philippines, Malaysia, and Indonesia. This is a chronic problem in the Vietnamese manufacturing industry rather than a problem between Korea and Vietnam. While the Vietnamese government is making various efforts to foster a supporting industry, there are also notable activities by some Korean firms to transfer technologies and build management capacity so that Vietnamese local firms can participate in the production network of Korean firms.Since 2014, Korea has been Vietnam’s largest foreign direct investment country. Amid a recent surge in Japanese investment on infrastructure construction, Korean firms’ investment on manufacturing sectors is meaningful. According to the Vietnamese government’s long-term development plan until 2045, it plans to attract more than $30 billion in FDI every year. This suggests that Vietnam should become a more open market, which can provide new opportunities for Korean firms. However, Vietnam’s somewhat insufficient measures in the recent COVID-19 pandemic may have created anxiety for Korean firms hoping to secure a stable supply chain. Vietnam itself needs to express a clear principle that guarantees the activities of Korean firms in Vietnam.Meanwhile, demands for technology transfer from Vietnam are expected to gradually increase. Based on ADB-MRIO data, backward GVC participation rates from 2007 to 2020 are always higher than forward GVC participation rates. In addition, the contribution of domestic value-added contents of exports is decreasing year by year. Therefore, Vietnam will strongly demand technology transfer to increase the domestic contents of exports. In fact, Vietnam has received relatively less technology transfer than other AMS. In particular, given the rate of foreign value-added content of exports to Vietnam’s total gross exports across industries, those of electronic equipment, primary metal, chemical product, and textile products manufacturing sectors, which Korea has mainly invested, are higher than the overall average of all industries. When technology transfer to Vietnamese local firms expands, the Korean and Vietnamese governments need to pay attention to Korean SMEs working in Vietnam so that they can preemptively seek new paths through cooperation with Vietnamese local SMEs. Special attention should be paid to the firms that need business restructuring, in particular, due to the COVID-19 pandemic and the U.S.-China competition.In addition, Vietnam is less dependent on regional value chains (RVCs) in the ASEAN region than neighboring AMS. The utilization rates of RVC in the ASEAN region is falling every year.As uncertainties in supply chains expand due to the U.S.-China competition and the COVID-19 pandemic, the importance of regional supply chains within the ASEAN Economic Community (AEC) has increased further. In particular, not only Vietnam but also all AMS competitively attract multinational firms moving from China to Southeast Asia due to the U.S.-China competition. It is time to coordinate this competition and make efforts to more effectively establish a supply chain in the ASEAN region.Chapters 3 and 4 evaluate social and cultural cooperation between Korea and Vietnam after diplomatic relations in 1992. As mentioned earlier, the performance of cooperation in the social and cultural sectors is very insignificant compared to the performance of economic cooperation between the two countries. In addition, in terms of the direction of cooperation, activities from Korea to Vietnam are wider and deeper than those from Vietnam to Korea. It is no exaggeration to say that efforts to resolve this double imbalance began in earnest only after the New Southern Policy was declared in 2017.Chapter 3 evaluated the performance of social cooperation between Korea and Vietnam. First, the trends in human exchanges (tourism and visits, short-term and long-term stays, etc.) between the two countries and exchanges between institutions (central administrative agencies, local governments, research institutes, etc.) were reviewed.First, indicators related to human exchange show the justification for improving quality in bilateral cooperation. The Vietnamese society in Korea and Korean society in Vietnam have grown. As of 2019, Vietnam is the country where Koreans visit the most and Koreans stay the most among ASEAN countries. In addition, Vietnamese visited Korea the most and the number of residents in Korea is the largest among Southeast Asians. The number of Vietnamese migrants residing in Korea for labor, marriage, and study abroad has also increased. The increase in visitors and migrants between both the countries suggests that practical and specific cooperation is needed to improve the quality of life, such as health care, along with enhancing mutual understanding.Since the implementation of the New Southern Policy in 2017, Korea has been implementing regular exchanges between institutions with Vietnam through various methods such as seminars, forums, performances, and exhibitions to promote public diplomacy. Korea promoted “Hallyu (Korean Wave)” and Korean food through Korean food festivals and K-Pop festivals, and also focused on cultural exchanges such as Taekwondo clubs, volunteer activities, and Korean language education at the central government level. Local governments in Korea are signing sisterhood and exchange agreements with Vietnamese local cities. Local government exchanges are mainly concentrated in the administrative, cultural arts, and economic sectors, while youth-private group exchanges need to be expanded. Exchanges and support between research institutes to foster technical manpower have been steadily conducted. KOICA’s Vietnam-Korea Vocational College of Technology in Bac Giang project (2010-2014), Vietnam-Korea Industrial Technology Vocational College support project (2014-2019), and VKIST establishment project (2014-2020) are representative.Despite the achievements of social sector cooperation as described above, there is a critical view that unbalanced cooperation has been carried out. Due to the importance of the economic sector, the demand for cooperation in the social and cultural sectors was overlooked. In addition, there is a lack of careful attention and understanding of each other. From this point of view, this study has selected cooperation and conflict cases between Vietnam and Korea, reviewed the context, and analyzed the causes. In particular, in order to find actions for a future-oriented cooperation between them, more attention was paid to conflict cases than cooperation ones.First of all, annual trend analysis was conducted with key words for cooperation and conflict between Korea and Vietnam. Over time, it was found that key words about cooperation accounted for more weight than conflict. In the case of social conflict between the two countries, keywords related to marriage migrant women, such as “international marriage,” “domestic violence,” “migrant women,” “mother-in-law,” “multicultural families,” “marriage,” “random assault,” “women,” and “communication,” accounted for high weights and frequency. In the case of social sector cooperation, major institutions and persons who signed cooperation agreements between the two countries accounted for high weights and frequencies. Most of the keywords were classified into health, education, social security, environment, and biodiversity.There are two representative conflict cases as examples between Korea and Vietnam based on the key-words analysis. One is about awareness of multi-cultural families and violence against Vietnamese married migrant women, and the other is a conflict arising from the recent COVID-19 outbreak.Both cases show how dangerous the perception of identifying Korea and Vietnam is. It should be recognized that there are differences in social similarities between Korea and Vietnam. Since Koreans’ emotional intimacy with Vietnam is very high, they, facing Vietnam’s reactions that do not meet their expectation, they tend to criticize Vietnam. In addition, there is a lack of effort to understand each other deeply with a vague idea of “it must be similar.” In order for Korea and Vietnam to advance into a sustainable relation, they must acknowledge and sympathize with the subtle differences found in each other.On the other hand, examples of true reciprocal cooperation between South Korea and Vietnam include Park Hang-seo’s appointment and achievement as the head coach of the Vietnamese national soccer team. Coach Park Hang-seo’s attitude toward the players and the people, the way of communication and leadership, and the attitude of understanding and respecting Vietnam’s history have been talked about by the Vietnamese people. Coach Park Hang-seo’s case is a major example of how to resolve the previous conflict.Chapter 4 evaluated cultural exchanges between Korea and Vietnam. First of all, the most groundbreaking event in the cultural sector among exchanges between Korea and Vietnam for 30 years after diplomatic relations in December 1992 was the spread of the Korean Wave in Vietnam. The Korean Wave began in Vietnam in the late 1990s with TV dramas and spread to movies and music. Accordingly, cultural exchanges between the two countries expanded, deepening mutual understanding. On the one hand, entrepreneurs proclaimed an “economic Korean Wave” and pursued economic benefits from the spread of the Korean Wave. In addition, consumption of Korean products such as cosmetics, clothing, and food increased, and the number of Korean restaurants increased. After the mid-2000s, the center of the Korean Wave seems to have shifted to Korean popular music (K-Pop). Recently, it is judged that the enthusiasm for K-Pop has exceeded the popularity of TV dramas. Around 2010, K-Pop became a major sector of the Korean Wave in Vietnam.Chapter 5 presents frameworks and measures to resolve the imbalance in economic, social, and cultural sectors and to enhance bilateral cooperation. This does not mean that economic cooperation should be reduced just because the pace of economic cooperation is fast, but that it is necessary to approach social and cultural cooperation with a more interest and inclusive attitude than now. Deep understanding of each other will eventually help upgrade the level and quality of economic cooperation.This study made the purpose of bilateral cooperation as the establishment of a “strategic global future cooperation partnership.” This is because cooperation between the two countries is required as a global partner that can expand bilateral cooperation between Korea and Vietnam to the Mekong subregion, India, and Africa. In order for the two countries to function as global future cooperation partners, a balanced understanding and continuous empathy of each other are required in mutual trust. To this end, four principles of bilateral cooperation are presented. First, rather than pursuing mercantilist interests, it is necessary to lay the foundation for mutually reciprocal development. Second, institutional supplementation is needed to form transparent cooperative relationships. Third, it is necessary to avoid cultural supremacy and strengthen inclusion in mutual culture. Fourth, it is necessary to expand exchanges as responsible partners. Under these four principles, this study proposes ways to cooperate in the economic, social, and cultural sectors.First, for economic cooperation pursuing win-win prosperity, it is necessary to expand bilateral relations between Korea and Vietnam to trilateral or quadrilateral relations by including other partners. If Korea and Vietnam provide successful economic cooperation experiences together to third-party countries that wish to cooperate, it will be possible to discover new markets. The economic cooperation process between Korea and Vietnam can be modularized and applied together to the development of the Mekong subregion. In particular, if South Korea’s ODA in Vietnam, which is bound to decrease as Vietnam grows, is used to develop the Mekong subregion, Vietnam’s sense of alienation can be reduced.Second, it is necessary to support the formation of a regional value chain (RVC) in the ASEAN region. In the recent international trade environment, where economic and security issues must be considered together, the establishment of RVC has important implications for Vietnam and Korea in that it can secure a stable supply chain. In particular, building a new supply chain based on its own comparative advantages of each AMS can strengthen the redundancy of their value chains. Meanwhile, institutional supplementation is also needed to establish a stable supply chain. For example, it is necessary to strengthen intellectual property rights and establish a Strategic Trade Controls (STC) system. Third, it is necessary to prepare a cooperative support system between Korean SMEs and Vietnamese SMEs. If technology transfer begins in earnest, Korean SMEs that have entered Vietnam following large companies may feel threatened. Both governments and large firms need to come up with a support system together so that Korean SMEs and Vietnamese SMEs can cooperate. Instead of large companies and Korean SMEs supporting technology and management capabilities for local companies in Vietnam, the Vietnamese government and the Korean government should come up with measures to expand support for Korean SMEs to switch industries or relocate production sites. Fourth, the two countries should support the formation of the Indo-Pacific Food Global Value Chain (IPFGVC). Vietnam has abundant agricultural products that can be processed, and Korea has high processing technology. If Korea and Vietnam can build food GVCs across the Indo-Pacific region together, exports can be expanded to other AMS as well as the United States, Japan, and China. In addition, Korea can free itself at least partially from food security issues in the long run.Four measures are also proposed for social sector cooperation. First, it is necessary to encourage collaboration between Koreans and Vietnamese and to establish a related support system. As discussed in Chapter 3, although Vietnamese are the second most numerous foreigners to stay in Korea after Chinese, there is still a lack of communication channels between Vietnamese and Koreans in Korea. The ASEAN-Korea Centre, the ASEAN Culture House, and Asia Culture Center can be well-positioned to discover and support programs to promote cooperation among civilians. Second, fact-based information monitoring and information provision channels should be established. As seen in Chapter 3, as online media became more common, there were cases in which some groups’ opinions were misrepresented as if they were true between the two countries. It is necessary to establish a system that responds immediately when exaggerated or incorrect information is distributed through online media. Third, it is necessary to conduct in-depth research related to Vietnam and spread the research results to the public. Koreans often misunderstand that they know Vietnam well. However, in fact, very few Koreans have a deep understanding of Vietnamese society. This is because there is a lack of channels for research results conducted in academia to spread to the general public. Fourth, it is necessary to establish an innovation sharing model between universities in both countries. Vietnam-related departments in Korea are shrinking, but Korea-related departments in Vietnam are rapidly increasing. Cooperation measures should be prepared so that universities in both countries can coexist. Systems such as co-grants of degrees between Vietnamese universities and Korean universities can also be considered.Finally, to strengthen cooperation in the cultural sector, this study proposes four measures. First, it is proposed to hold a regular Vietnamese film festival. Vietnamese films are being introduced to Korea through the Busan Film Festival or Jeonju Film Festival, but there is little memory of Vietnamese commercial films being released in Korea. As seen in Chapter 4, considering the imbalance in cultural consumption between the two countries, it is required to provide an opportunity to introduce Vietnamese films to Korea. Second, it is necessary to support the translation and publication of Vietnamese literature in Korea. Since diplomatic relations in 1992, there have been only 29 volumes of Vietnamese literature published in Korea. On the other hand, more than 120 books of Korean literature have been published in Vietnam. It is necessary to come up with support measures to resolve the imbalance in the literary sector between the two countries through related civil societies. Third, it is necessary to consider the establishment of a Vietnamese Cultural Center in Korea. As confirmed in Chapter 4, cooperation in the cultural sector between the two countries was very disproportionate. If the two governments together set up a dedicated window for introducing Vietnamese culture to Korea, they can expect to resolve the imbalance in cultural exchanges. Fourth, it is possible to consider supporting the production of online-based bilateral cultural programs. With the recent emergence of new and diverse media that can enjoy culture, the need to utilize them is increasing. Another way is to hold a YouTube content contest every month to introduce the social culture of the other country for Koreans and Vietnamese. As the number of interactive communication media increases, misunderstandings with each other can be reduced, and cooperative relations between Korea and Vietnam can be stably advanced. -
Income and Consumption Inequality in Latin America and Policy Implications for South Korea
This study analyzed income and consumption inequality in Chile, Mexico, and Brazil. The motivation for this study is the recent massive protests in Chile and Colombia. The protest in Chile, which began in October 2019..
Sungwoo Hong et al. Date 2021.12.30
Economic cooperation, Labor market Latin AmericaDownloadContentSummary정책연구브리핑This study analyzed income and consumption inequality in Chile, Mexico, and Brazil. The motivation for this study is the recent massive protests in Chile and Colombia. The protest in Chile, which began in October 2019, were sparked by 30 Chilean peso increase in subway fare and led to enacting a new constitution in progress. In Colombia, the uprising occurred as people protested against the tax reform bill announced by President Ivan Duque in April 2021.Why is it necessary to examine income and consumption inequality in Latin American in which a variety of social inequalities, including income inequality, have always been perceived as severe? Have the inequalities in Latin America changed significantly over time? The main goal of this study is to answer to these research questions.Chapter 1 describes why a research on income inequality in Latin America is necessary. First, there are not many existing studies that have investigated the inequality of individual countries in Latin America because a number of experts have already recognized the inequality in Latin America as a serious social problem and tend to consider it constant. Second, previous studies have not examined diverse indicators related to the inequality and thus have failed to provide accurate information on the inequality of each country. Third, it is meaningful to analyze income inequality in Latin America since the inequality and economic conditions could be critical variables in forecasting future regime change in the region.Chapter 2 examines inequalities in various sectors in Latin America. In general, indigenous people are recognized as the most economically and socially vulnerable class. They are likely to live in areas with poor transportation, and thus access to public education is difficult. The tax systems of Latin American countries are too dependent on indirect taxes rather than direct taxes, and thus is regressive. There is a large gap in welfare spending among Latin American countries.In Chapter 3, the determinants of income inequality were analyzed using micro data provided by Chile, Mexico, and Brazil, and then the outcomes were compared. As a result, the income of women in these three countries was lower than that of man, despite controlling for other explanatory variables. The income gap between men and women was the lowest in Chile and the highest in Brazil; the income gap gradually narrowed in Brazil, whereas there was no significant improvement in Chile and Mexico. In addition, rural residents had lower income than urban residents in Mexico and Brazil; in Chile, residents in Santiago had lower income than residents in the other regions.Chapter 4 investigates the consumption poverty rate and consumption inequality in order to accurately grasp income inequality in Chile, Mexico and Brazil. In Chile, it was shown that a pattern of income inequality was different from that of consumption inequality, as the consumption inequality was mitigated while the income inequality worsened. These findings suggest that the low-income group may have been facing considerable financial hardship because they could not have decreased their expenditure while their income decreased. In Mexico, trade liberalization in the late 1980s and the entry into force of NAFTA in 1994 markedly reduced consumption poverty rates and consumption inequality. In Brazil, all the indicators of income and consumption inequalities improved over time.Chapter 5 looks into poverty and inequality in Latin America during the COVID-19 pandemic and policy efforts of each country to alleviate these. Due to the contraction of economic activity caused by the pandemic, the middle income class experienced a decrease in income, resulting in falling into poverty. This middle income group suffered from economic hardship because many of them working in the informal sector were not able to benefit from social welfare programs. However, emergency cash aid programs for the workers in the informal sector and the self-employed have mitigated the economic damage to them.This study contributes to existing researches in terms of that this study provides policy implications for the Korean government and firms. First, establishing e-government in Latin American countries could be considered as a KSP (Knowledge Sharing Program) project. Since workers in Latin America are likely to avoid tax, the establishment of e-government can contribute to securing additional tax revenues. Thus, it is expected that Latin American countries could demand the project.Second, Korean firms need to seek to enter the market of Latin America through DIP (Development Innovation Program) operated by KOICA. Improving educational attainment or human capital of the low-income group is a fundamental alternative to alleviating income inequality; therefore, the firms could particularly seek to enter the education sector through the DIP. -
Determinants of Success and Failure of Green Parties in Europe
The Green Transformation that has begun before the COVID-19 pandemic is expected to continue to be a major economic policy of governments around the globe. Major European countries, especially the United Kingdom and Germany, along..
Dong-Hee Joe et al. Date 2021.12.30
Energy industry, Environmental policy EuropeDownloadContentSummaryThe Green Transformation that has begun before the COVID-19 pandemic is expected to continue to be a major economic policy of governments around the globe. Major European countries, especially the United Kingdom and Germany, along with the European Union, are at the forefront of this transformation. However, electoral outcomes of political parties focused on climate change (i.e., Green Parties) differ significantly among these cases. Analyzing the reasons of their electoral success or failure can help understanding their role in climate-change policy. This, in turn, can teach how to make climate policy sustainable in Korea where political support for Green Parties is extremely low. We review the history of Green Parties in the UK, Germany and the EU and analyze the reasons for their success or failure. The related literature considers three major reasons for the extremely low electoral outcomes of Green Parties in Korea, namely the public’s attitude, electoral system and major traditional parties’ reactions. Following this, we focus on those three factors.To the concerned readers in Korea, the UK’s case shows, above all, that a substantial presence of Green Parties in the legislature is not a necessary condition for an active climate policy by the government. Instead, it emphasizes the importance of concrete commitments through legislation and institutionalization and wide consensus, including that of businesses, that the additional costs in the short run will result in net economic gains in the long run. The EU’s case shows that creating a platform on which interested parties of various types can actively participate in the discussion and formation of climate policy and putting more focus on “just transition” can be good starting points for achieving this consensus. For Korean Green Parties' electoral prospect per se, the German case hints at the needs to extend the scope and improve the competence of themselves. -
Policy Measures for Foreign Firms to Participate in Inter-Korean Economic Cooperation
This research stemmed from an inquiry into what issues would surface if foreign firms engaged in inter-Korean economic cooperation, recognizing this as a topic that could potentially emerge if inter-Korea relations improve and eco..
Jangho Choi et al. Date 2021.12.30
North Korean economy, Foreign direct investment North KoreaDownloadContentSummary정책연구브리핑This research stemmed from an inquiry into what issues would surface if foreign firms engaged in inter-Korean economic cooperation, recognizing this as a topic that could potentially emerge if inter-Korea relations improve and economic cooperation resumes. So far, the issue of foreign firms participating in inter-Korean economic cooperation has been focused on internationalizing the Kaesong Industrial Complex. Although the issue of foreign firms entering into Kaesong was intermittently reviewed from 2005 to 2016, it did not lead to tangible results.The objective of this research was to examine the various conditions for foreign firms to participate in inter-Korean economic cooperation and propose stimulation measures. For this, we (1) analyzed the theoretical background and the political/industrial incentives for foreign firm participation in inter-Korean cooperation, (2) investigated central and local government policies towards North Korea and case studies of foreign firms which had participated in inter-Korean economic cooperation, (3) examined how other countries utilized foreign firms during economic integration, and (4) reviewed institutional and non-institutional measures to promote the participation of foreign firms in inter-Korean economic cooperation. In addition, we also reviewed foreign firm participation in multiple inter-Korean economic cooperation projects. Our research defined foreign firm activity in inter-Korean economic cooperation as firms partaking in projects implemented in North Korea via South Korea.To begin with, in Chapter 2, we review the need for foreign firms’ participation in inter-Korean economic cooperation from a theoretical background and political/industrial demand. On the theoretical side, we examined the theories of a peace economy and capitalist peace, and reviewed the debate of foreign investment on economic growth. In addition, we also reviewed the political/industrial demand, such as economic incentives for inter-Korean cooperation projects, as well as exploring new methods, financing funds for North Korea’s development while sharing the benefits with the international community, and sectors that foreign firms can advance into when participating in inter-Korean economic cooperation.In Chapter 3, we review the national and local government agenda related to inter-Korean economic cooperation and investigate foreign firms’ experiences with inter-Korean economic cooperation. First and foremost, we introduced the national government’s agenda to internationalize inter-Korean cooperation, such as the New Economic Map for the Korean Peninsula and Northeast Asia Cooperation, the DMZ Peace Zone, the Vision of an East Asian Railroad Community, West Joint Economic Zones/East Sea Tourism Zone, the Comprehensive Plan for Border Area Development and the Kaesong Industrial Complex. For local governments’ agenda on internationalizing inter-Korean cooperation, we examined projects implemented by Incheon City, Gangwon Province, and Gyeonggi Province, and the potential for attracting foreign investment. We also investigated case studies of foreign firms that had previously attempted to enter into North Korea and the issues involved.In Chapter 4, we examine international case studies, focusing on the policy measures aimed at foreign firms and the economic impact of combining capitalist and socialist market systems. We analyzed the regulations and treatment that foreign firms received under the CEPA agreement during China and Hong Kong’s economic integration, and under the ECFA agreement during Taiwan and China’s economic exchange. Then we analyzed the role and investments made by foreign firms in former East Germany during the process of German unification, and what impact these had. These cases provided insight that could be used as reference on evaluating the roles, institutional measures for guarantees, and the economic impact of foreign firms when entering into inter-Korean economic cooperation.In Chapter 5, we explore measures that would improve the laws and institutions to foster foreign firms’ participation in inter-Korean economic cooperation. First and foremost, we looked at the varying legislation that would apply depending on the channels of internationalizing inter-Korean economic cooperation. Then, we analyzed the characteristics of the laws to be applied when foreign firms enter the scene. We also analyzed the incentives and obstacles for foreign firms and identified the legal issues involved and suggested areas of improvement.Overall, we believe that our research will make a positive contribution to a stable inter-Korean economic cooperation. From an economic standpoint, there are relatively sufficient incentives and interest in inter-Korean economic cooperation on the part of foreign firms. However, we found that the political and legal environment was somewhat lacking to provide the necessary support.First, foreign firms’ participation in inter-Korean economic cooperation will contribute to a more stable relationship between the two Koreas. In addition, we can expect foreign firms to function as a safety net and further the quality and scale of inter-Korean economic cooperation. This is because foreign firm participation rests on the assumption of peace on the Korean Peninsula. From the standpoint of peace economy theory, peace on the Korean Peninsula would bring economic benefits not only to the two Koreas but also the international community. In terms of capitalist peace, foreign firm participation would increase the benefits from inter-Korean economic cooperation due to a larger scale of projects and would lead to continued cooperation, thus providing a positive contribution to promoting perpetual peace.The economic incentives that foreign firms can expect represent the potential for economic growth of North Korea and the indirect benefits from inter-Korean economic cooperation projects. First, investment in North Korea carries incentives such as allowing first-mover advantage, low wages, access to abundant mineral resources, and geographic proximity to large markets such as South Korea, China and Japan. In addition, foreign firms can utilize the established legal institutions, such as investment guarantees from the Inter-Korean Cooperation Fund or tax reductions and tariff-free trade between the two Koreas, as well as indirect benefits from Korea’s numerous FTAs. With these incentives, we discovered that multiple foreign firms wanted to advance into the Kaesong Industrial Complex before it was completely shut down in 2016.However, the political and legal environment for foreign firms to actually participate turned out to be weak. Although the South Korean government’s policy on the Peninsula aims to expand cooperation with neighboring countries, and even though there is a potential demand for foreign firms to participate, we maintain that there are currently no specific projects that envision such direction. Although substantial time is required for actual investment to occur, we see that there is a need for policies for foreign investors to be created and disseminated strategically.Given the right conditions, the Korean government needs to take the initiative and draft a successful pilot project. So far, one of the biggest obstacles of inter-Korean cooperation is that it is impossible to predict the outcomes due to the numerous uncertainties involved. No matter how effective the legislation is, few foreign firms will be willing to participate and take the first-mover advantage if this proves unrealistic. Pushing for successful pilot projects would elevate the feasibility of inter-Korean economic cooperations. Ultimately, it is necessary to devise a model for inter-Korean economic cooperation in which the opening of North Korea can be made compatible with the special relationship between the two Koreas.This research differs from previous studies in that it reviews the theoretical and political issues of foreign firms participating in inter-Korean economic cooperation, while providing a comprehensive analysis of their positions, international case studies, and legal/ institutional issues. In addition, this research categorizes different channels of foreign investment into inter-Korean economic cooperation and the issues that would occur with each channel. We expect that our findings will contribute to the South Korean government’s policy initiative for inter-Korean economic cooperation. -
Petroleum Industry Diversification in the Middle East and Its Policy Implications for Korea in the Era of Energy Transition
The aim of this research is to examine various mid-to-long term plans, policies, and business cooperation cases to promote diversification in the Middle Eastern petroleum industry, suggesting policy proposals for cooperation betwe..
Kwon Hyung Lee et al. Date 2021.12.30
Economic cooperation, Energy industry Africa Middle EastDownloadContentSummary정책연구브리핑The aim of this research is to examine various mid-to-long term plans, policies, and business cooperation cases to promote diversification in the Middle Eastern petroleum industry, suggesting policy proposals for cooperation between Korea and the Middle East to deepen industrial diversification in the region.Chapter 2 analyzes global factors that have influenced the oil industry, and examines the trends of diversification in the oil industry and characteristics of diversification in major countries. Increasing oil price volatility and the expanding efforts of the international community to make a transition to a carbon-neutral economy have acted as a factor in diversifying the oil industry. As the trend of low oil prices has continued since the second half of 2014, the raw materials for manufacturing petrochemical products have become available at cheaper prices, and this has led to increased investment in downstream sectors such as oil refining and petrochemicals. In addition, as efforts to reduce carbon emissions in the oil industry have expanded, the share of natural gas production increased, investment in hydrogen and carbon reduction technology expanded, and digital technology was actively introduced to increase the efficiency of oil industry operations. In the downstream sector, the United States is focusing on ethylene production using ethane derived from shale gas, and China is continuing its efforts to expand facilities and diversify feed stocks to improve its own production capacity. In the area of hydrogen and carbon reduction, European countries such as Norway and Germany, along with the United States, China, and Russia, are increasing investments in hydrogen utilization and green hydrogen technology development. Efforts in the area of digital technology can be characterized by the introduction of oil field technology in segments such as oil field exploration and development, transportation and storage by multinational oil companies in the United States and Norway.Chapter 3 examines government policies, competitive advantage, and risk factors for the diversification of the oil industry in the Middle East. Saudi Arabia and the UAE are engaged in various mid to long-term plans and strategies aimed at reorganizing the structure of the oil industry, recognizing it as a key industry that is overly biased toward the upstream sector. First of all, the two countries are investing in the petrochemical sector, which is expected to increase in demand even in the era of carbon neutrality. Saudi Arabia is expanding its production capacity of basic and intermediate chemicals through various investments, including the establishment of joint ventures with foreign companies. The UAE has a relatively low production capacity for feedstock and basic chemicals, but has the advantage of diverse products such as plastics and fertilizers. Saudi Arabia and the UAE are also expanding their blue and green hydrogen production capabilities in line with the global demand for green energy. In particular, the Saudi government intends to move early into the hydrogen market by pushing for blue hydrogen exports through Aramco while also advancing the possible production time of green hydrogen. The UAE is still focusing on expanding the production of blue hydrogen, but it has the advantage of having high price competitiveness in green hydrogen and the capacity to produce pink hydrogen using nuclear power. In addition, Saudi Arabia and the UAE are actively promoting the introduction and utilization of digital services or solutions for the digital transformation of the oil industry. However, due to the lack of overall technology to diversify the oil industry in both countries, cooperation with foreign companies is necessary to secure competitiveness and develop technologies.Chapter 4 reviews the direction of external cooperation for diversification of the oil industry and examines specific examples by sector such as petrochemical, hydrogen, CCUS, and digital technology. Saudi Arabia and the UAE are increasing petrochemical or oil refining projects jointly promoted by establishing joint ventures in major overseas export base countries to stably export oil and create added value. Saudi Arabia has acquired stakes in major overseas oil refiners and petrochemical companies or expanded joint investments to secure a stable market for its own crude oil, and has also pushed for equity investments and joint ventures in Korean companies. The UAE is promoting entry into promising overseas markets in the petrochemical sector, while focusing on attracting foreign companies into its domestic market. In addition, both Saudi Arabia and the UAE are actively developing hydrogen based on abundant natural gas and renewable energy. The two countries are promoting cooperation with a focus on exporting hydrogen, based on the price competitiveness of hydrogen produced in their own countries. As major crude oil importers of the two countries, Korea and Japan have been important partners of this cooperation. In the introduction of digital technology, cooperation with US and European companies has been remarkable. Saudi Arabia and the UAE are found to be mainly utilizing solutions for production optimization, integrated supply chain management, asset monitoring and predictive analysis, and safety and efficiency improvement through US and European companies. The two countries plan to foster their own industries and increase job creation by establishing local joint venture companies with global companies and expanding joint R&D.Chapter 5 suggests cooperation policy proposals to further promote industrial diversification in the Middle Eastern petroleum industry. Although Korea and Middle Eastern oil exporters have different industrial environments in the sector, they pursue the same policy goal to attain carbon neutrality. This is the common foundation on which both regions could establish a new energy security cooperation regime. First, stable supply and demand of low carbon energy resources such as hydrogen should be established between Korea and Middle Eastern oil exporters for carbon neutrality and hydrogen economy. For this, both regions need to establish long-term supply contracts on the condition that Korean companies construct the hydrogen production facilities involved. Establishing a Korea-Middle East carbon neutrality fund would ease the financial burden for construction projects. Second, new energy businesses responding to the electrification of energy should be promoted to enhance energy efficiency in national power systems. Consulting projects to establish master plans for efficient power infrastructure and demonstration projects to evaluate consulting results should be conducted, as infrastructure remodelling consumes large amounts of financial resources. Moreover, these projects will require government-to- government cooperation based on mid-to-long term mutual interests. Third, technology collaboration between the two regions should be advanced to attain carbon neutrality. More technological breakthroughs in the sectors of hydrogen production and carbon reduction need to be obtained for future cooperation. Joint study agreements for technology development and a joint research platform should be established for active interaction and mutually beneficial assistance between the two regions. This could be developed into a joint venture for production and sales. -
Japan’s New Trade Strategy Amid U.S-China Confrontation
This research was conducted with the purpose of providing implications for the Korean government and companies amidst the growing US-China conflict by analyzing the trade strategies of a country that shares similar in..
Gyupan Kim et al. Date 2021.12.30
Trade policy, Overseas direct investment JapanDownloadContentSummary정책연구브리핑This research was conducted with the purpose of providing implications for the Korean government and companies amidst the growing US-China conflict by analyzing the trade strategies of a country that shares similar international settings with Korea: Japan.Chapter 2, “US-China Decoupling and China’s Response,” examines US-China decoupling policy, focusing on tariff imposition, export control, technology transfers, foreign investment controls, and government procurement. This study reveals that, although US-China economic relations have deteriorated to the point of partial decoupling or disengagement in high-tech sectors and other select areas of supply chains, it certainly is not up to the level of the US’s containment of the Soviet bloc in the traditional Cold War sense.Chapter 3, “Japan’s Reshaping of the Global Supply Network: Focusing on China,” attempts to verify whether the “China risk”—a notion that has been actively promoted by some in Japan since US-China frictions intensified in 2018, and escalated with the spread of COVID-19 in 2020—actually took place, and evaluates Japan’s “China+1” policy, which is the country’s hedging strategy toward China. The results reveal that although Japan’s import dependence on Chins is significantly high for some import products, this does not seem to bear any serious risk for Japan in that the said products can easily be substituted with imports from other countries.Chapter 4, “Japan’s Economic Security Strategy,” looks into Japan’s new economic security policy, focusing on Japan’s economic statecraft, reinforcing resilient supply chains and strategically important industries, and strengthening global supply chain with its “allies.”Chapter 5, “Japan’s China Policy and Trade Strategy,” reveals that Japan’s position on China’s Belt and Road Initiative and the Asia Infrastructure Investment Bank (AIIB) is somewhat far from the level of containment that the US is demanding of its allies, due possibly to Japan’s strong economic ties to China, or its peace constitution. Regarding Japan’s trade strategy, this study speculates that Japan, while promoting free and fair trade and cooperation with like-minded partners, will try to take the lead in shaping international norms on the emerging trade areas of environment, human rights and labor, and digital trade.The research concludes with Chapter 6, which provides conclusions and political implications for the Korean government and companies.
공공저작물 자유이용허락 표시기준 (공공누리, KOGL) 제4유형
대외경제정책연구원의 본 공공저작물은 "공공누리 제4유형 : 출처표시 + 상업적 금지 + 변경금지” 조건에 따라 이용할 수 있습니다. 저작권정책 참조