This research analyzes the economic impact of the sanctions on the Russian economy and explores measures to stabilize economic cooperation between South Korea and Russia. Even if the war between Russia and Ukraine are resolved in any manner, it is highly likely that Western sanctions on Russia may persist in the long term, given the difficulty in resolving deep-rooted traditional conflicts between Western ideologies and Russian ideologies. Therefore, there is an urgent need for a systematic analysis of the long-term impact of the sanctions on the Russian economy. Additionally, it is crucial not to passively observe a deterioration in economic cooperation between the two countries due to the sanctions. This is because the potential for economic cooperation between the two countries has not yet been fully realized, and expectations are high for a mutually beneficial collaboration through dense future economic cooperation. Consequently, exploring measures to stabilize economic cooperation between South Korea and Russia in the face of anticipated prolonged Russian sanctions is a highly meaningful undertaking.

For this purpose, this study comprehensively compares and analyzes the diverse characteristics of Western sanctions against Russia after the 2022 Russia-Ukraine War with those imposed after the 2014 Crimean Peninsula crisis. While the 2014 sanctions primarily exhibited targeted and cautionary features in specific areas, the 2022 sanctions are characterized by an all-encompassing comprehensiveness and substantial punitive nature without sectoral limitations. Due to these contrasting features, the impact of the 2022 sanctions on key macroeconomic indicators of the Russian economy was profoundly severe.

To rigorously analyze the impact of Western sanctions on the Russian economy, this study employs Vector Autoregressive Models (VAR) for time-series analysis as well as a new theoretical framework, extending and modifying a general macroeconomic model dealing with structural transformation to suit the economic conditions of Russia. Through this framework, the prolonged duration of the sanctions and their potential effects on Russian economic growth are systematically examined. Initially, we construct a comprehensive index measuring the overall intensity of the sanctions by categorizing the sanctions imposed by the United States, the European Union, and the United Kingdom from March 2014 to June 2023. The analysis considers a VAR model composed of the constructed sanction index, natural gas prices, industrial production index, export/import ratio, and real effective exchange rate. The results confirms the long-term impact of the sanctions on the Russian economy. In particular, VAR analysis reveals that the sanctions shock significantly contributed to a sharp decline in Russian industrial production, with the negative effects persisting over a year.

This study theoretically analyzes the long-term effects of the sanctions on the Russian economy from the perspective of structural transformation. Considering that the core elements of the sanctions include deepening financial constraints, restricting imports of intermediate goods crucial for advanced industrial development, and limiting technological cooperation, the study rigorously examines the potential impact on Russia’s economic structural transformation when financial friction intensifies and sectoral productivity declines due to the sanctions. To achieve this, a multi-sector growth model is constructed, accounting for varying productivity across sectors and the presence of financial friction. The theoretical analysis suggests that when financial friction intensifies, the productivity of high value-added sectors decreases, delaying the necessary industrial structural transformation for Russia’s long-term growth. Following the same logic, if technological advancement in high value-added sectors is hampered by the sanctions, resulting in delayed productivity improvement, structural transformation further delays. Consequently, by delaying a crucial structural transformation for Russia’s long-term growth, the sanctions may increase the risk of the Russian economy falling into what is commonly referred to as the middle-income trap.

If the long-term impact of the sanctions on the Russian economy is deemed significant, the Russian government recognizes the imperative to exert various domestic and international efforts to mitigate these adverse effects. Accordingly, this study examines the Federal Government of Russia’s external and internal strategies in response to the sanctions. Russia’s post-war external strategy, addressing changes in the existing external cooperation environment, revolves around countering threats to the national economy due to sanctions-induced economic and technological isolation. Within the structural shifts of the international order, Russia indicates its intention to strengthen efforts for survival and development, seeking diverse partnerships across various domains. Moreover, Russia has unveiled a post-war industrial development strategy focusing on high-value-added manufacturing sectors such as automotive, metal, microelectronics (semiconductors), and communication industries. In light of deepening credit constraints resulting from the financial sanctions, efficient restructuring in the financial sector is essential for successful industrial transformation toward high-value-added industries perhaps necessary for the qualitative growth. Therefore, Russia has announced a financial industry development strategy aimed at modernizing its domestic financial market. This study also examines this financial market development strategy.

Finally, based on the analysis presented earlier, we explore short-term and medium- to long-term directions for stabilizing economic cooperation between South Korea and Russia. Specifically, we consider the short-term scenario, assuming South Korea is in a situation where lifting sanctions against Russia is inevitable. We examine the directions for cooperation stabilization required in such circumstances. Additionally, we contemplate the directions for cooperation when South Korea can impose more flexible (relaxed) sanctions in the future.

The persistent global inequality crisis has long been a critical social issue due to its substantial economic and social cost. Despite continuous international efforts to mitigate inequality, the issue remains severe. The outbreak of COVID-19 and associated lockdown measures have further exacerbated inequality in various forms, including poverty rates, gender-based labor gaps, and educational gaps. Moreover, global inequality is expected to intensify further due to multiple post-pandemic crises like inflation, climate change, and conflicts.

This study analyzes the post-pandemic inequality levels in developing countries and derives policy implications for Korea’s development cooperation to help reduce inequality, especially in the education sector. Multidimensionality of inequality requires a comprehensive approach to understand the nature of inequality and its resolutions fully. However, paradoxically, because of the vast dimensions, the complexity of inequality cannot be fully explored in a single analysis, no matter how comprehensive it might be. Hence, this study thoroughly explores a single dimension of inequality—education. Education is one of three critical components of human capital, along with inherent abilities and skills, thus crucial in mitigating and preventing inequality. Because the pandemic led to an unprecedented global disruption in education, including prolonged school closures, analyzing its effect on the education sector is even more urgent.

Chapter 2 assesses the overall impact of COVID-19 on inequality, especially in the economic, health, and education dimensions, and global efforts to address the issue. The results suggest that both across- and within-country inequalities have worsened, with low-income countries or groups experiencing bigger negative impacts. Globally, numerous discussions on inequality acknowledge the severity of the issue and the urgency to solve it but fail to propose specific strategies or solutions.

Chapter 3 summarizes the role of education in mitigating inequality based on previous literature and uses macro-level data to explore the global education levels and gaps from 2010 to 2020. In the 2010s, education levels increased globally, and intra-country educational gaps narrowed. However, the pandemic triggered a sharp decline in education levels and widened educational gaps. Notably, students from low-income countries or rural areas participated less in learning activities during the pandemic school shutdowns, exacerbating the pre-existing educational disparities.

Chapter 4 conducts an in-depth micro-level analysis of the post- pandemic education levels and gaps in Ethiopia and Cambodia. Based on the two countries’ quantitative and qualitative analyses, the study finds that both countries experienced learning loss, with vulnerable households affected more. However, there were some differences across countries due to the economic, social, and cultural differences. For instance, with weaker institutional foundations in education, Ethiopia experienced quantitative educational loss, including a drop in school registration rates and learning activities. However, Cambodia, a higher-income country with stronger foundations than Ethiopia, faced challenges due to the low quality of education, including teachers’ capabilities to hold virtual classes. Meantime, most Cambodian students returned to schools when schools reopened after the lockdown.

Based on the analysis results, the study derives implications for inclusive recovery from COVID-19. Globally, supporting vulnerable groups affected by COVID-19 and multiple crises is critical while providing various quantitative and qualitative educational opportunities and incentives to compensate for learning gaps. As for the social role of education, incentives must be provided to students and teachers to regain their motivation to educate or learn and enhance parents’ awareness of education. At the same time, education policies that can protect students, especially vulnerable ones, should be implemented to reduce educational inequality. Strengthening financial and technical capacity to implement these measures is also essential. In addition, just as the two countries and urban and rural areas within each country show different patterns of educational disconnection and learning loss, recovery plans must be tailored to address the context-specific impact of the pandemic and the consequent new educational conditions. For example, in terms of education infrastructure, in low-income countries with poor educational environments, such as Ethiopia, there is an urgent need to restore basic education to make up for the loss of basic learning, and in countries with higher levels of infrastructure, such as Cambodia, reducing the digital gap is more important than basic learning. In other words, for countries like Cambodia, expanding the digital education base, such as building ICT education infrastructure and strengthening teachers’ digital capabilities, should be prioritized.

Finally, Chapter 5 summarizes the analysis results and derives implications for Korea’s international development cooperation(IDC) in education based on the characteristics of Korea’s current IDC or ODA projects. The study finds that Korea’s ODA projects in education can be summarized into three characteristics. First, most ODA projects are materialistic support such as infrastructure and equipment provisions; second, the focus is on higher and vocational education rather than primary and secondary education; and third, there is little differentiation across countries. Combining the new post-pandemic educational environment in developing countries analyzed in earlier chapters and the characteristics of Korea’s ODA projects, Korea’s challenges in IDC in education can be summarized into three tasks. First, as the educational environment differs across countries, ODA projects should be customized for each context to be more effective. For example, as mentioned earlier, low-income countries need support to strengthen basic education, and middle-income countries with higher levels of infrastructure need support to expand digital education infrastructure and strengthen digital capacity. Training parents and teachers and providing high-quality educational content is also needed. The pandemic has deteriorated not only the quantity but also the quality of education. Therefore, the institutional education base and the social role of education must be strengthened to recover qualitatively by training human resources and producing high-quality teaching materials. In particular, as teachers’ low digital literacy and technological capacity led to educational loss during the pandemic school lockdown, training teachers to strengthen their technical capabilities should be prioritized to support the digitalization of education in developing countries with relatively higher infrastructure. Since Korea’s ODA projects already focus on vocational training, expanding vocational training projects for teachers can effectively achieve such goals. Lastly, support for vulnerable children, including girls, should be expanded. Currently, most of Korea’s ODA projects aim to improve a country’s overall educational environment. If the average education level of a country increases, it can contribute to alleviating inequality. However, a more proactive way to tackle inequality is to focus on vulnerable children and resolving the within-country education gap, especially because the study finds that the pandemic hit vulnerable students harder.

As the international environment rapidly changes due to developments such as the war in Ukraine and the competition for hegemony between the U.S. and China, major countries are pursuing new forms of economic security policies such as reorganizing supply chains, fostering industries, and strengthening research security. The study aims to examine the threats and opportunity factors posed by economic security policies of the U.S., China, and the EU, particularly in the areas of supply chain and science and technology diplomacy, amid growing uncertainty in the economic security environment. It goes on to suggest countermeasures, focusing on items and technology areas that are expected to have a significant impact on Korea’s economic security.

Chapter 2 describes the geopolitical conflicts and changes in the international order over the past 30 years since the dissolution of the Soviet Union in 1991, focusing on the revival of competition between major powers due to China’s rise, the weaponization of interdependence and rise of “de-risking” strategies, and bloc formation and solidarity competition. In particular, while the international order that prevailed in the post-Cold War era for more than 30 years was characterized by global free trade and economic interdependence, the focus has now been placed on network reorganization to find and unite with more sustainable and reliable supply chain and economic exchange partners, since 2018 as the world experienced U.S.-China competition, the COVID-19 pandemic, and the war in Ukraine. In addition, the background and implications of supply chain stabilization policies were a government-led increase in industrial policies and trade threat measures, the weaponization of interdependence, and the effect of supply chain gateways. Finally, it was suggested that most countries faced changes in science and technology cooperation, pursuing diplomatic strategies based on their own interests and making fostering key emerging technologies a top priority for economic security.

In Chapter 3, supply chain policies of the United States, the EU, and China were analyzed, focusing on semiconductors, secondary batteries, and core minerals, and trade threats were examined. In the semiconductor field, both the U.S. Semiconductor and Science Act and the EU’s European Semiconductor Act are based on a multilateral export control system. However, despite cooperation in export controls through the decisions of a multilateral council, there is a possibility that competition for subsidies will intensify in the future as the EU and the United States prioritize the fostering of their own industries. China has not enacted a support law specifying semiconductors, but in order to cope with U.S. export regulations, it is continuing to promote support policies to create an ecosystem of semiconductor industries in China and strengthen innovation.

With the enactment of the Inflation Reduction Act (IRA) in 2022, the U.S. is pushing to foster the secondary battery industry within its borders, also introducing Section 13401, which stipulates the requirements for critical minerals and secondary battery components for tax credits related to eco-friendly vehicles. The clause is currently under discussion, for instance regarding the expansion of regional conditions for the mining and processing of critical minerals to countries with close economic cooperation relations with the U.S. and that have signed key mineral-related agreements through subsequent implementation guidelines (drafts), but the economic impact of detailed implementation measures is expected to increase as the scale of tax credits is expected to be implemented on a larger scale, contrary to estimates from the U.S. Congressional Budget Office. The EU is focusing its policy capabilities on attracting companies in the region, presenting the target ratio of manufacturing capacity in the region through the Climate Neutral Industry Act. In particular, while leading the establishment of a circular economy related to secondary batteries, it is rushing to support companies by easing subsidies for companies in the region through the Temporary Crisis and Transition Framework (TCTF). Since 2009, China has expanded demand and created an ecosystem for the secondary battery industry by distributing eco-friendly cars in China, and local Chinese companies are seeking to enter the global market with lithium iron phosphate (LFP) battery technology supported by the government from the beginning of the technology.

In the critical mineral sector, unlike semiconductors and secondary batteries, China is trying to control exports in some resources, such as rare earths, gallium and magnesium, which have international influence, but considering that China has also been converted into the largest consumer of critical minerals in the course of its economic development, China is unlikely to pursue a policy to weaponize critical minerals. However, the overlap in lists of critical minerals in each country, and the difficulty of diversifying supply chains due to the regional ubiquity of some minerals, could pose new trade threats.

When considering the above, caution is required in that China, the EU, and the United States are pursuing various industrial policies to stabilize the supply chain, with the possibility of this developing into a trade conflict between the EU and the United States in the future. In addition, the United States is considered to be the leading country in supply chain management. In particular, the United States collected opinions from various stakeholders by releasing a list of key supply chain items as part of follow-up measures to an executive order, and it is expected that a new policy will soon be implemented that contains the direction of supply chain management based on the final list. Since the items in these lists are likely to be managed as items related to economic security in major countries in the future, an import dependence analysis was conducted in Chapter 5.

Chapter 4 analyzes the science and technology foreign policies of major countries. Although cooperation between the United States and EU member states is actively conducted in areas of ICT technology which include nuclear power and cybersecurity and dual-purpose technology, cooperation between the EU and the United States and China in the area of technology has been reduced. In particular, the United States has been gradually expanding technological cooperation since 2021 through agreements in nuclear and space-related technologies with European countries, similar countries such as Korea and Japan, rather than with the countries of concern. In addition, through the Trade and Technology Commission (TTC) with the EU, it is pursuing a strategy to secure leadership in areas that are expected to have a significant impact in the future by promoting the enactment of international standards for artificial intelligence and genetic biotechnology.

We examined the current state of science and technology diplomacy being promoted by the EU through Horizon 2020, the EU’s international science and technology cooperation project. In terms of project implementation, 89.1% was executed by EU member states, 9.1% by quasi-member states, and 1.8% by third countries without quasi- member status. This demonstrates the importance of non-EU member states joining as quasi-member states for science and technology cooperation with the EU. The scale of science and technology cooperation between the EU and China through Horizon 2020 has been greatly reduced, but cooperation is still underway to address global issues such as climate change and pandemic response. China has also reduced its technological cooperation with the EU and the United States, but is conducting joint research with the United States to respond to climate change.

Taken together, we can see the trend of bloc formation proceeding in areas of cooperation in key technologies (AI, quantum computing, next-generation information communication, etc.) that the U.S., EU, and China are competitively fostering, while technological cooperation to solve global problems such as climate change and biodiversity is still being promoted between even the U.S. and China. In this regard, it is necessary to examine Korea’s technological influence in key technology areas where cooperation with similar countries is becoming increasingly important, strengthen domestic technological competitiveness, and seek cooperative countries in each field. Accordingly, by compiling the technological impact assessment indices of major countries, including Korea, in core technology fields, mid- to long-term cooperation partners necessary from the perspective of economic security were presented in Chapter 5.

Chapter 5 analyzes Korea’s supply chain and its influence in key technology fields, focusing on the items and technology fields presented in Chapters 3 and 4. Supply chain analysis was conducted with the aim of identifying Korea’s supply chain problems by analyzing Korea’s dependence on imports from the world by item unit. When looking at the import dependence by selecting the items related to the economic security-related policies of major countries among Korea’s semiconductor imports, the amount of imports for the relevant items is gradually rising, while the proportion of total imports has decreased. Korea mainly imports the items from Japan and China, but its dependence on imports from a single country by item is mostly in the 60% range or less, and there are at least one alternative importing country. However, caution is required as the proportion of the items among Korea’s semiconductor imports is gradually increasing.

Korea’s imports of secondary battery items have been increasing rapidly in recent years, and the proportion of imports related to secondary battery materials and parts has increased. Among Korea’s secondary battery imports, the number and amount of items related to the economic security policies of major countries are increasing rapidly. In particular, Korea’s imports of these items are largely from China, and its dependence is also becoming more pronounced. Therefore, Korea needs to carefully examine the policies of major countries related to secondary batteries.

As a result of analyzing the indicators that evaluated the impact of key technologies, Korea was evaluated to have a greater technological impact in the energy, environment, and advanced information and communication fields than in others, but it was evaluated to have a lower impact in quantum-related technologies and detection and navigation technologies. In addition, six technology fields with low technological influence in Korea and large differences in influence between the top countries with high technological influence were selected among the core technology fields, and the need to strengthen domestic technological competitiveness and mid- to long-term cooperation targets was suggested from the perspective of economic security.

Chapter 6 summarizes Korea’s economic security policy, focusing on the designation of key technologies through legislation, promotion of supply chain stabilization, and the status of international cooperation. As policy implications, measures for economic security cooperation with major countries were suggested. First, as a cooperation plan with the United States, it was suggested to facilitate the movement of manpower in key areas, establishing a coordinating mechanism related to bilateral supply chains, together with cooperation in the development of critical minerals. Other suggestions were to participate in the EU’s Global Gateway initiative, concentrate capabilities in joining Horizon Europe as a quasi-member, and to re-establish relations with the EU by revising provisions on supply chain cooperation within the Korea-EU FTA. It was also suggested to promote cooperation through ODA, supply chain dialogue channels, and green transformation cooperation with developing countries (ASEAN, India, Mexico and China), which are important in Korea’s supply chain, in addition to developed countries. Other implications of the study to promote Korea’s economic security included: establishing a communication system between ministries to promote active economic security policy, promoting the supply of premium intermediate goods in the global supply chain, and promoting cooperation with key partner countries (Japan, Germany, the United Kingdom, Italy, etc.) that comprehensively considers the supply chain and critical technology competitiveness.

This study defines the concept of ‘strategic ODA,’ which has recently gained attention, and proposes ways to improve the Korean ODA system to promote strategic ODA. Strategic ODA is defined based on a literature review of related academic fields. Elements for promoting strategic ODA are derived for different stages of the ODA process – planning, implementation, and performance management. Policy recommendations are drawn based on an evaluation of the Korean ODA system, an analysis of major donor countries, and interviews with international development cooperation experts from a strategic ODA perspective.

Chapter 2 reviews the academic literature in business administration, public administration, and political science to define the concepts of strategy and the term ‘strategic’. This study defines strategic ODA as “ODA as a means to achieve foreign policy goals, with differentiated competitiveness, and clear goals and action plans to achieve desired results.” An analytical framework for pursuing strategic ODA was derived to determine factors to consider at each stage of planning, implementation, and performance management. First, it is essential to have planning capabilities that encompass the vision, strategic goals, targets, and performance indicators. Coordination and cooperation between relevant ministries is a given. After that, it is necessary to decompose the strategic objectives into executable units, form the required organization, and establish a budget plan and periodic performance review process. For result management, the main elements are setting performance targets and indicators, and disclosing performance-related information.

Based on the strategic ODA concept and analytical framework developed in the previous chapter, chapter 3 presents case studies of the leading bilateral ODA donors for benchmarking. The United States implements the strategic ODA considerations proposed in this study throughout the planning, implementation, and performance management phases based on the principle of Managing for Results (MfR) framework. The U.S. Agency for International Development (USAID) plays a central role in ODA implementation, working closely with the Department of State. While Germany stands out as the only country among the OECD Development Assistance Committee (DAC) members with a ministry dedicated to international development cooperation, Germany’s development cooperation also involves a variety of actors, such as local governments and the private sector. Therefore, Germany invests incoordinating among implementing actors towards unified development cooperation goals. Japan’s ODA Charter explicitly states national interest as a goal, and this factor is considered in evaluating its ODA performance from a national interest or diplomatic perspective. In some cases, different ministries or agencies play specialized roles according to their development cooperation objectives. For example, FinDev, a Canadian development finance institution provides various instruments to support private sector development in developing countries, which also helps to promote the entry of Canadian companies into these markets. The Netherlands has a mechanism for international trade linkage that considers development cooperation and overseas expansion of Dutch companies. The Netherlands’ performance framework and information disclosure system are the most noteworthy among the donor countries we analyzed. Finally, as Denmark strives to consolidate its position as a leaderin the action against climate change, the country also shows coherency in development cooperation. It systematically strives for results by setting a specific strategy and allocating the budget accordingly.

Chapter 4 reviews Korea’s ODA system from the strategic ODA perspective. First, the chapter explains the legal and institutional system of Korea’s international development cooperation and then summarizes the implementation procedures of grant and concessional loan projects, respectively. Although Korea’s ODA system has improved since the enactment of the Framework Act on International Development Cooperation in 2010, there is still work to be done. In particular, to promote strategic ODA as defined in this study, further efforts are needed to better align ODA with foreign policy goals, promote competitiveness in the local context, and pursue systematic goals and action plans to achieve results. Based on the analysis of government policy documents and institutions, this chapter identifies areas for improvement for each phase of planning, implementation, and performance management. The Comprehensive Strategy, a top-level implementation strategy published every five years, should contribute to the achievement of the objectives set out in the Framework Act. There are various levels of thematic or sector policies and strategies, national or regional strategies, which need to be complementary. International development cooperation policies should also be consistent with other relevant policies and strategies, such as the foreign policy and the national security strategy. The criteria for approving individual ODA projects should be clear, be transparent, and align with the overarching strategy. By ensuring that each project is aligned with the strategic objectives, the project would effectively achieve the intended results of the Korean government.

The case studies of the five donor countries provide valuable insights and lessons for Korea's strategic ODA implementation. By carefully examining the strengths and weaknesses of each country’s system, Korea can identify best practices and adapt them to its own context to enhance the effectiveness and efficiency of its ODA programs.

Chapter 5 presents the survey results on strategic ODA. The purpose of the survey was to verify the understanding of strategic ODA among the academics and practitioners in international development cooperation and to identify areas for improvement in promoting strategic ODA. The experts agreed that the planning phase most critical in promoting strategic ODA. However, under the current system, there is some question as to who is responsible for planning strategic ODA. There was a consensus that a unified approach involving more than 40 implementing ministries is urgently needed to implement strategic ODA in the planning stage. The experts also argued that it is essential to set clear targets for strategic ODA. At the same time, a regular performance management plan is needed to monitor the achievement of targets.

The study suggests the following to improve Korea’s strategic ODA system:


1. Deepen expert engagement in high-hevel decision-making:
Recognizing ODA as an essential instrument of economic cooperation abroad, expertise in international development cooperation should be integrated into national-level decision-making processes regarding foreign policy and economic partnerships. This integration can be achieved through designated positions within relevant top-level decision-making structures.

2. Improve the roles of the Committee on International Development Cooperation (CIDC):
Strengthen the CIDC’s capacity to develop unified development cooperation programs that are consistent with national foreign policy aspirations. This could include expanding its expertise to enable comprehensive program planning and coordination.

3. Prioritize resource allocation and streamline processes:
Allocate dedicated budgets to strategic ODA priority programs to ensure flexibility and agility in resource allocation. Consider alternative budgeting mechanisms that bypass traditional annual review processes for individual projects within a priority program while maintaining accountability and transparency.

4. Implement blended finance for greater impact:
Utilize a mix of financial instruments, including grants, concessional loans, and innovative development finance solutions, to maximize the effectiveness of strategic ODA programs.

5. Strengthen results monitoring and measurement:
Establish robust performance measurement frameworks for strategic ODA, using measurable indicators aligned with program objectives and overall ODA goals. Ensure that individual program targets are clearly defined, quantifiable, and contribute to the broader strategic vision.

The international community is faced with the dual challenges of securing stable energy and achieving carbon neutrality. This study approaches energy security from the perspective of energy transition and comprehensively analyzes key issues and cases of international cooperation in the area of carbon neutrality and energy security. Building on this analysis, the study offers implications for governmental measures to enhance energy security while facilitating the transition towards carbon neutrality.

Chapter 2 summarizes the concept of energy security from the perspective of energy transition. Energy security includes energy availability, accessibility, affordability and acceptability. The focus shifts from the availability and accessibility of fossil fuels to that of clean energy during the energy transition period. Price is important in the clean energy transition. It is also important to ensure stable and environmentally sustainable energy transition. Furthermore, fostering international collaboration to overcome individual country-level limitations serves as a cornerstone for contributing to global carbon neutrality while advancing energy conversion schemes.

Next, looking at the main characteristics of the recent energy market, the importance of “energy security” has been re-emphasized due to the recent outbreak of the Russia-Ukraine war. Accordingly, the EU is implementing policies to reduce its dependence on energy supply from Russia through the announcement of the Fit for 55 package and the REPowerEU plan. In addition, the United States is focusing on restoring its global leadership in the field of climate change, for instance by hosting the Leaders Summit on Climate, and is placing more emphasis on climate change in industrial support policies, such as including climate change as a key support target in the IRA. Meanwhile, Korea has been pursuing energy transition to achieve a low-carbon economic structure. With its recent dedicated focus on energy security, it is unveiling policies and external strategies that consider both energy security and carbon neutrality.

In Chapter 3, we examine essential aspects to consider when pursuing carbon neutrality and energy security, transition to clean energy, critical mineral supply chain, and investment and institutional support. First of all, as the proportion of variable renewable energy (VRE) gradually increases in the energy transition process, it is necessary to compensate for volatility and promote stable power supply through measures such as energy storage devices, demand management, and distributed energy systems. In addition, there is a need to promote the commercialization of technologies that are still in the early research and development stage among advanced energy sectors such as nuclear energy, clean hydrogen, biofuel, and CCUS. Moreover, the advantages and limitations of natural gas and nuclear energy, which are used as transitional energy sources, must be taken into account when designing energy policies.

Next, the stable procurement of critical minerals required for batteries and renewable energy needs to remain an important policy. Demand for these critical minerals is expected to continue to grow in the future, while the distribution of production sites is concentrated in certain countries, making these inevitably vulnerable to security conditions. Meanwhile, as critical minerals have recently begun to attract attention as a major strategic asset, countries, mainly China, the United States, and Indonesia, are frequently implementing export control measures along with efforts to secure critical minerals. Therefore, it is necessary to respond to this.

Lastly, it is important to provide a market and institutional environment which enables carbon neutrality and energy security. The scale of public and private investment to achieve carbon neutrality must be expanded, and support is also needed for developing countries that lack the capacity for energy transition. Additionally, in the process of promoting carbon neutrality and energy transition, we must consider a just transition that embraces vulnerable groups and vulnerable industries. Lastly, there is a need to improve flexibility in the existing power grid and power system by taking into account the changing energy mix.

In Chapter 4, we analyze the status of international cooperation for carbon neutrality and energy security response, focusing on international cooperation cases for each major issue and major agendas and opportunity factors in major multilateral cooperation. Regarding the stabilization of the critical mineral supply chain, major countries are currently promoting various international cooperation projects such as the establishment of a bilateral and multilateral supply chain consultative body, supporting cross-border investment promotion using ODA, and signing a bilateral and multilateral trade agreement to bypass supply chain restrictions. Next, for energy transition, technology-leading countries such as Japan and the EU are promoting technological cooperation projects between countries specialized in green hydrogen and eco-friendly fuels, and are also actively participating in the process of establishing related international standards. In addition, we also reviewed the international investment initiatives and cases with particular emphasis on reducing risks and supporting early-stage clean energy investment in developing countries.

The main issues and opportunities for cooperation at the multilateral level derived from this study are as follows. The Indo-Pacific Economic Framework (IPEF) is seeking effective ways to revitalize the clean economy market and stabilize the supply chain under Pillar 3 (Clean Economy), and discussions at the G20 are focused on energy transition and circular economy. The Major Economies Forum on Energy and Climate (MEF) and the Clean Energy Ministerial (CEM) are supporting decarbonization of the industrial sector and clean energy technology innovation. It is expected that each country will be able to create synergy effects by selecting and participating in projects that overlap with their own policy goals and contribute to the international community among these activities.

In Chapter 5, building on the earlier discourse, the energy transition phase was segmented into three key stages: the introductory phase, the transitional phase, and the maturation phase. Furthermore, the chapter provided international collaborative measures within the energy transition process. Addressing the imperative of bolstering energy security in response to carbon neutrality necessitates an expansion of clean energy conversion while diminishing reliance on fossil fuels. The following countermeasures are proposed to achieve this goal.

First, the promotion of external cooperation to stabilize the critical mineral supply chain requires the following strategic considerations. To begin with, it will be necessary to use bilateral and multilateral cooperation channels related to critical minerals as an opportunity to strengthen networks and discover cooperative projects. In addition, it is necessary to promote a bypass strategy for export restrictions of major mineral suppliers by utilizing the revision of existing FTAs and conclusion of limited FTAs in the mineral sector. Finally, it is necessary to promote private participation in overseas resource development through overseas investment incentives and ODA project support.

Second, it is necessary to strengthen efforts to innovate new energy technologies and establish international standards. There are still many technical challenges to overcome in order to utilize new energy forms (especially hydrogen) in an environmentally friendly and economical manner. However, at the same time, it is expected to be a driving force in achieving carbon neutrality and energy security in the long term. Korea’s hydrogen-related technological capabilities are generally insufficient compared to developed countries, and efforts to establish international standards need to be strengthened. There is a need to effectively utilize energy-related bilateral dialogue with technologically advanced countries and programs of multilateral organizations such as the Major Economies Forum on Energy and Climate (MEF), Clean Energy Ministerial (CEM), and Mission Innovation (MI), and expand support from ministries for joint research with other countries. In addition, in order to lead the establishment of international standards, it is necessary to redefine the role and support needs of Korea's private sector, and support efforts in the long term.

Third, it is also crucial to expand the global clean energy investment. Creating a regulatory and institutional environment to promote clean energy investments such as a green taxonomy for eco-friendly economic activities or green bond guidelines is prerequisite. In addition, it is necessary to deepen the existing bilateral and multilateral energy cooperation system to seek cross-border clean energy investment opportunities, while discovering new cooperation partners with energy investment demands and potentials. Domestically, there is a need to analyze the costs and benefits arising from carbon neutral scenarios and energy mix changes and present an investment roadmap. Lastly, for energy transition in developing countries, Korea should consider participating in various innovative financial instruments and specialized funds in addition to ODA projects.

India’s stature on the international stage is strengthening. The country has recently become the world’s most populous country, and the international ranking of its economic size is expected to go from 5th to 3rd this decade. Moreover, India is becoming a major partner for many developed countries amidst the rising diplomatic conflict between the west and China. Advanced economies, including the United States, the European Union, and Japan are devising detailed strategies to strengthen relationships with India in the areas of trade, investment, development cooperation, and security. Along with these major trends, global companies in search of a huge consumer market and competitive manufacturing base are expanding investment in India. The Korean government and companies also need to strengthen their partnership with India. To support their ventures, this report takes a close look at four main areas with significant potential, namely supply chain rearrangement, digital transformation, climate change, and south-south development cooperation. The report analyses India’s position and strategy, as well as policies that Korea and India could implement to strengthen their relationship.

In India, forward- and backward-linkage global value chain trade ratios declined in the early- to mid-2010s and increased in the late-2010s. While ‘complex’ global value chain trade ratios remained stable, ‘simple’ global value chain trade ratios led an increase in these overall ratios. As these small adjustments have canceled out one another, the global value chain trade ratios in the early-2010s and the early-2020s did not show significant change.

India’s gradual global value chain participation is linked to the government’s industrialization strategy, which prioritizes domestic value addition rather than export expansion via using imported products. A key policy that matches this description is the ‘production-linked incentive’ scheme. During the 2010s, the Indian government focused on improving the business climate by streamlining investment processes and improving infrastructure under the ‘Make in India’ strategy. In the beginning of the 2020s, the government began providing subsidies to incentivize domestic manufacturing under the ‘production-linked incentive’ program. Furthermore, India has been participating in discussions on supply chain at multinational forums such as the Quadrilateral Dialogue and the Indo-Pacific Economic Framework.

As the Indian government has been actively adopting policies to stimulate domestic manufacturing and as global manufacturers are rushing to establish production bases in India, Korean companies should also strengthen their entry into India to tap into the growing consumer market. However, there are still many hurdles that Korean manufacturers face when seeking to enter India. To collaboratively solve these challenges, the governments of the two countries can establish a senior-level institutional structure. This body will find viable solutions to problems that Korean manufacturers face in India and use the outcomes of the discussion when negotiating the upgrade of Korea-India Comprehensive Economic Partnership Agreement. Moreover, as the Korean government is planning to strengthen development cooperation with India, the focus may be on ways to strengthen India’s manufacturing competitiveness. Infrastructure projects that improve connectivity and skill training projects that support local companies and workers could indirectly help Korean manufacturers in India.

India’s enormous digital market is expanding rapidly. India’s digital communication networks, equipment, contents, finance, and online marketplace are quantitatively and qualitatively upgrading. India’s digitally deliverable services trade is also growing with India recording a large trade surplus. This notable growth of India’s digital economy is supported by government-driven policies across diverse segments. The government is actively participating in establishing the foundations of digital economy as it aims to secure domestic benefits from digital transformation. For example, the government has established an electronic identification system, Aadhaar, the Unified Payments Interface (UPI), and the Open Network for Digital Commerce (ONDC). The Indian government has also emphasized the public character of digital data. In other words, the country maintains a conservative stance in terms of cross-border data flows and international agreements on data transfers. While the government has, at times, weakened its stance in order to foster the growth of the digital industry, its overall position of limiting foreign companies’ access to India’s market and data with an aim to support domestic firms is expected to be in place for the foreseeable future.

Considering that the areas for digital cooperation are diverse and because the Indian government considers digital industry a key pillar of economic development, the Korean government should establish a high-level cooperative mechanism with India. Participating officials may discuss digital public infrastructure, communication networks, artificial intelligence, finance, and standards. The relevant information may be passed on to Korean digital companies to help them adjust strategies. Moreover, the Korean government could continue monitoring the changes in India’s regulations in the digital industry and share information that could act as risks to the Korean companies. The two countries can find ways to co-invest in start-ups and research and development activities in the digital industry.

India is expected to be one of the countries that suffer to the largest extent from climate change. News on extreme weather in India has already been widely shared, and statistics highlight the seriousness of the situation. Compared to approximately nine decades ago, the recent monthly temperature patterns show that winters have become warmer and summers have become longer. The comparison of monthly precipitation during the same period shows that the level has decreased in June and increased from August-October. The frequency of natural disasters such as floods and storms is also increasing along with climate change. These trends not only threaten lives and livelihoods, but also hurt worker productivity thereby having negative consequences on India’s economy.

In response, India has adopted various climate change adaptation policies. Under the National Action Plan on Climate Change, the government has designed strategies to expand renewable energy, protect ecosystem and forests, and create sustainable urban areas. Furthermore, reflecting increasing concerns surrounding natural disasters, the Indian government has been continuously modifying the National Disaster Management Plan. There are also policies aimed at climate change mitigation. India has established and adopted policies for achieving the Nationally Determined Contribution, which demonstrates the country’s plan to cut emissions. India’s climate change policies also have an international angle. India aims to become leader of the Global South by implementing climate change policies on an international scale. For example, India has been at the forefront of establishing and operating multinational bodies such as the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure. Using these multilateral platforms, India is supporting developing countries’ adoption of climate change policies and expansion of infrastructure.

As India’s climate change policies cover adaptation and mitigation and are both domestic and international, Korea should establish a multifaceted cooperative relationship with India. An important starting point would be to construct a high-level communication channel that would support the establishment of a cooperative strategy. This forum will provide a venue for information sharing on India’s demand and Korea’s strengths. Korea should also pay attention to India’s international efforts to fight climate change. Korea may contribute to finding global solutions by firstly joining the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure, which already have numerous developed and developing countries as members. Moreover, the Korean government’s efforts to strengthen development cooperation with India may focus on the green sector. Furthermore, diversifying Korea’s development financing tools would expand the scope of cooperation.

India is actively seeking means of supporting developing countries’ economic and social progress. India’s south-south cooperation began in the 1950s, and its expansion began to accelerate in the 2010s. India has been mobilizing numerous tools to pursue south-south cooperation. The Indian government’s grants and concessional loans to developing countries is concentrated on its neighbors. The government is also providing lines of credit through the Export-Import Bank. While Bangladesh is the largest beneficiary, the lines of credits are provided to a large number of countries in various regions since they are designed to support Indian companies’ global venture. The Indian Technical and Economic Cooperation program invites individuals from developing countries to educational and training courses in India. Moreover, India has contributed to solving global challenges by, for example, providing vaccines to its neighbors during the COVID-19 Pandemic.

Many developed countries view India as a key facilitating partner in triangular development cooperation because the country has accumulated important information and technology in the process of solving its own problems, as well as vast experience in cooperating with certain developing countries. India may benefit from triangular development cooperation as it can strengthen global reach and leverage developed countries’ development finance. Based on these strategic opportunities, India and developed countries such as the United States, the United Kingdom, Germany, and Japan are strengthening triangular development cooperation in various forms.

Triangular development cooperation with India could also support Korea’s aim of becoming a global pivotal state. Korea may seek triangular development cooperation projects by joining multinational forums such as the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure, as well as the Global Biofuel Alliance and the One Future Alliance in the digital sector, which were announced during the G20 Summit in New Delhi. Since Korea has not yet have systematically begun triangular development cooperation, it requires a special taskforce with the role of designing an overall strategy. Following this process, Korea can sign an official document indicating the aims and goals of triangular development cooperation with India and establish a dedicated team that searches for potential projects that reflect the two countries’ strengths.

This report concludes by emphasizing the importance of creating a conducive atmosphere for a smooth implementation of economic cooperation between Korea and India. Firstly, considering India’s economic size and strategic importance, Korea should view the country as a major cooperative partner that is in a different league to other developing countries. Secondly, Korea’s development agencies and government- linked financial institutions could innovate their development cooperation tools to satisfy India’s growing needs for diverse financing instruments. Thirdly, because the Indian government is aiming to foster the growth of domestic firms, Korean businesses must strengthen cooperation with local companies, and the Korean government could provide supporting measures. Fourthly, as business and people exchange between Korea and India is expected to intensify, the Korean government could prepare by adopting measures that could improve the living environment of Koreans residing in India. Finally, the Korean government needs to establish a centralized body that coordinates government institutions at the forefront of strengthening Korea-India relations. A careful coordination would enable the mobilization of various cooperation tools such as the Comprehensive Economic Partnership Agreement, grants, and concessional loans to create synergy and minimize negative side effects.

This study aims to explore a collaborative framework for sustained and resilient economic cooperation between Korea and Mongolia in the medium- to long-term. The collaborative areas considered in this study, expected to have high synergy in bilateral economic cooperation, encompass △mining, △digital, △climate change adaptation, and △healthcare sectors. The study gathers available data for each sector to objectively assess Mongolia’s current situation. Simultaneously, through extensive literature analysis, the study meticulously examines the Mongolian government’s strategies and detailed policies for the development of each sector. This process facilitated the derivation of medium- to long-term cooperation directions between Korea and Mongolia in each respective area.

To achieve the research objective, a systematic examination of Mongolia’s medium- to long-term foreign trade strategy was examined. The key principle underlying Mongolia’s medium- to long-term foreign trade strategy can be summarized as the so-called “establishment of balanced external relations.” Mongolia prioritizes balanced cooperation between nations in terms of economic security, with a primary focus on attracting balanced investments, particularly in the energy and mineral sectors.

The fundamental direction of this trade strategy is equally applicable to external cooperation in the mining sector. Mongolia possesses abundant mineral resources including Korea’s key minerals such as molybdenum, tungsten, copper, and lithium. However, the reality is that most of the major minerals are exported to neighboring China. This situation directly contradicts Mongolia’s external trade strategy aimed at achieving balance. Due to limitations in technological capabilities and manufacturing facilities, Mongolia is compelled to export significant quantities of key minerals in an unprocessed form. The geographical constraint of being a landlocked country further restricts the marketability of exports to neighboring countries. Consequently, it is imperative to enhance the value-added of mineral resources to promote exports to so-called ‘third neighboring countries,’ in order to establish a balanced trade relationship.

Therefore, it can be deemed crucial for bilateral cooperation in the high-value-added processing of key minerals such as lithium and tungsten. The export to Korea currently heavily relies on land and sea transportation through China. However, the potential for high-value- added aviation transport exists for rare ores like lithium and tungsten. Additionally, Mongolia has actively engaged in lithium exploration since 2020, and the yet-to-be-discovered substantial lithium deposits enhance the bright prospects for future collaboration between the two countries. Moreover, the Mongolian government, leveraging incentives for foreign investment, seeks to facilitate large-scale mine development and technology transfer, presenting a high likelihood of collaboration in the development of transportation, logistics, and customs infrastructure projects.

For the purpose of formulating a direction for collaboration in the digital industry, this study conducts an in-depth examination of Mongolia’s digital industry status and reviewed the government’s digital development strategy. The contribution of Mongolia’s ICT industry to the country’s GDP remains below 3%. The critical issue lies in the relatively low number of individuals with higher education among Mongolia’s ICT industry workforce. This is a problem associated with the delayed improvement in labor productivity in Mongolia’s ICT industry. It is crucial for Mongolia’s future, especially in establishing an e-government system and advancing the ICT industry, to urgently address the serious need for workforce development. In expanding cooperation in the digital field between the two countries, the insufficient presence of local ICT professionals in Mongolia poses a significant obstacle, particularly as Korean companies need to enter the Mongolian market as a priority.

Considering these realities, it is deemed challenging to rapidly expand bilateral cooperation in the digital industry in the short-term. Instead, a long-term perspective suggests prioritizing the active utilization of ODA to contribute to local ICT infrastructure enhancement and human resource development. This, in turn, can serve as a foundation for expanding cooperation between the two sides by fostering exchanges among businesses and experts. Through the Knowledge Sharing Program (KSP) initiatives, such as legal advice in the ICT sector, policy consultation, and research advisory services, it is crucial to facilitate collaboration among companies, secure infrastructure for enhanced cooperation, and promote information sharing. Given Mongolia’s recent interest in ‘e-local government’ and ‘electronic customs systems,’ collaborative efforts could involve providing policy advice related to these areas and sharing South Korea’s experiences in addressing various side effects arising from the introduction of digital, electronic, and AI systems.

This study also identifies the direction of cooperation in addressing climate change. To achieve this, we carefully examines Mongolia’s key policies for climate change adaptation and identifies areas where cooperation between Korea and Mongolia demonstrates high synergy. Notably, Mongolia has established a national greenhouse gas reduction target (NDC) focusing on reducing emissions in the energy and agriculture sectors. In addition, Mongolia is addressing current challenges such as air pollution and waste management in connection with climate change issues. Therefore, collaboration between Korea and Mongolia in climate change adaptation is deemed promising, focusing on areas that consider current issues related to climate change based on Mongolia’s NDC and the Green Growth Plan for Vision 2050. These areas can be categorized into five sectors: energy, agriculture, forestry, air pollution, and waste.

Finally, this study examines a direction for economic cooperation between Korea and Mongolia in the health and medical sector. To achieve this, we conduct an objective analysis of Mongolia’s current health and medical status, carefully examining the Mongolian government’s policies for the development of this field as well. Mongolia has faced various health and medical crises amid rapid urbanization and industrialization. Increasing rates of chronic diseases among Mongolian citizens, exacerbated by air pollution and unhealthy dietary habits, along with escalating mental health issues among youth in the midst of rapid social changes, pose significant societal burdens. Ongoing challenges, including the persistence of tuberculosis and the inadequacy of response capabilities to new infectious diseases such as COVID-19, threaten Mongolia’s health security.

In response, Mongolia has actively pursued the improvement of vulnerable health and medical services and infrastructure, echoing the slogan that "health is a national asset." This presents an opportunity for the expansion and substantial strengthening of health and medical cooperation between Korea and Mongolia. Considering Mongolia’s commitment to introducing advanced medical technology and expanding eHealth services in its ‘Vision 2050,’ there is a need to contemplate progressive and practical avenues for collaboration, particularly in the industry of smart healthcare or digital healthcare, which involves the integration of ICT, medical services, and medical devices, creating new opportunities in the emerging sector.

The first-ever ROK-Pacific Islands Summit on May 29, 2023, marked a significant entry for South Korea (hereafter Korea) into the dynamic sphere of Pacific regional cooperation. Since 2011, Korea has consistently engaged in foreign minister-level dialogues with Pacific Island Countries (PICs), while gradually increasing its official development assistance (ODA) to these countries. The 2023 summit, however, was a pivotal step that underscored Korea’s commitment to deeper engagement with the PICs. The summit culminated in the development of two crucial documents - the “2023 Korea-Pacific Islands Leaders’ Declaration” and the “Action Plan for Freedom, Peace, and Prosperity in the Pacific” - both serving as comprehensive blueprints for the ROK-PICs partnership. This proactive engagement is a strategic element of President Yoon’s Indo- Pacific Strategy, aimed at elevating Korea’s role as a middle power and expanding its positive influence throughout the Indo-Pacific region. Korea’s active outreach to PICs has been warmly welcomed by both the PICs and the key regional powers. The main challenge ahead is to sustain the achievements of the summit and enhance Korea’s position as a late-entry donor in the Pacific, in the face of intensifying aid competition in the region. Against this backdrop, drawing on an analysis of the evolving dynamics of Pacific regional cooperation, this study aims to provide policy recommendations for Korea’s future engagement with the Pacific Islands.

Chapter 2 delves into the regional characteristics and cooperation needs of the Pacific Island Countries (PICs). Due to their small size, sparse populations, and geographic isolation from major global markets, many PICs have underdeveloped economies and rely heavily on foreign aid. While the PICs are island nations with vast exclusive economic zones (EEZs) rich in marine and fisheries resources, they face challenges such as rampant illegal, unreported, and unregulated (IUU) fishing, and the devastating impacts of climate change. With minimal carbon emissions, the PICs are nonetheless profoundly vulnerable to climate change effects, including rising sea levels, extreme weather events, and coastal erosion, posing an existential threat to their homelands. This precarious situation calls for urgent international support for climate change adaptation in the PICs. In addition, most PICs struggle with low gender equality and inadequate social infrastructure, including education and healthcare, highlighting a pressing need for development cooperation.

On the diplomatic front, the PICs have exerted significant influence globally, effectively punching above their weight. Through collective diplomacy, particularly throughthe Pacific Small Island Developing States (PSIDS) grouping, they have actively championed the implementation of new climate change regimes. They have also been at the forefront of establishing norms for the sustainable marine resource management, notably contributing to the adoption of the UN BBNJ (Biodiversity Beyond National Jurisdiction Agreement) for example. Furthermore, in response to the escalating strategic competition among major powers, the PICs have strived to take initiative in Pacific regionalism by launching the 2050 Strategy for the Blue Pacific Continent (hereafter 2050 Strategy). Despite concerns that they might become pawns in this geopolitical competition, the PICs are wisely using this competition to garner external support for their economic and social development.

Chapter 3 explores the collaborative strategies of major countries (Australia, New Zealand, the United States, Japan, and China) towards the PICs and their implications for Korea. As a Pacific Islands Forum (PIF) member, Australia has been a vital security and economic partner for the PICs since their independence. However, Australia’s approach, characterized by a strong guiding roleand its reliance on fossil fuel-based economic policies have often led to conflicts with the PICs within the PIF. The escalation of China’s aid to the PICs has enabled them to leverage their relationship with Australia, leading to Australia’s new Pacific policy such as ‘Step Change’. Australia has notably stepped up its commitment to climate change, fully in line with the PIF’s ‘2050 Strategy’. In response to China’s Belt and Road Initiative (BRI), Australia launched the Australian Infrastructure Finance Facility for the Pacific (AIFFP), which combines grants and loans for infrastructure projects. Australia is also an active participant in mini-lateral initiatives such as the Australia-US- Japan Trilateral Partnership and the Blue Pacific Partnership (PBP). With its long history of cooperation in the Pacific, Australia seeks to enhance its role in both mini- and multilateral engagements in the region, often acting as a facilitator among various donors. Consequently, Korea should effectively utilize Australia’s network and cooperation expertise to expand its own regional cooperation.

New Zealand, much like Australia, is a member of the Pacific Islands Forum (PIF) and shares a history of deep engagement with the PICs. Unlike Australia’s predominantly white society, New Zealand has embraced a “Pacific Islander” identity, influenced by its significant indigenous population. This cultural orientation has informed its Pacific policy, emphasizing the representation of PICs’ voices and perspectives. With a relatively modest economy, especially when compared to other Development Assistance Committee (DAC) countries, New Zealand prioritizes the effectiveness of its limited Official Development Assistance (ODA) budget. This is achieved by favoring multilateral cooperation mechanisms over bilateral aid to individual countries. New Zealand’s approach, highlighting cooperation with international organizations and major nations, offers a potentially valuable model for Korea, as it embarks on its Pacific regional cooperation journey.

Beyond its Compact of Free Association with Palau, the Federated States of Micronesia, and the Marshall Islands, the United States has traditionally delegated its foreign and security affairs in the Pacific to Australia and New Zealand. However, in response to China’s growing influence in the region, the U.S. is ramping up its diplomatic engagement across the entire Pacific. During the first U.S.-Pacific Islands Summit in September 2022, the U.S. unveiled the U.S.-Pacific Partnership Strategy, which enhances its cooperation on maritime security, climate change, marine and fisheries resources, and proposes economic initiatives that could serve as alternatives to China’s BRI. In addition to strengthening bilateral ties with the PICs, the U.S. is collaborating with like-minded countries through the Blue Pacific Partnership (PBP), the Quadrilateral Security Dialogue (Quad), and other mini-lateral partnerships. With its substantial financial resources, the U.S. is launching various initiatives tailored to address the immediate needs of its partners. a challenge, however, is that U.S. engagement in the region is increasingly perceived by the PICs through the lens of strategic competition, with concerns about avoiding entanglement in power struggles among major nations. This view may also pose a challenge for Korea, which is aiming to deepen bilateral and trilateral cooperation with the U.S. in the Pacific region.

Japan, a founding member of the Pacific Islands Forum (PIF) along with the United States, was the first non-colonial power to host a summit with the PICs through the Pacific Islands Leaders Meeting (PALM). Since 1997, Japan has regularly convened PALMs every three years. Instead of formulating a specific grand strategy for the PICs, Japan has used the PALM meetings to set cooperation agendas aligned with the immediate needs of its partners. This approach of reviewing three years of cooperation and updating the cooperation plan at regular summits is regarded as a potential model for Korea to emulate. Traditionally, Japan’s collaboration with the PICs has been centered on economic and community-based development projects. More recently, however, Japan has expanded its focus to include enhancing maritime security capabilities as part of its Free and Open Indo-Pacific (FOIP) strategy framework. Additionally, Japan is actively engaged in strategic cooperation through trilateral partnerships with the U.S. and Australia, the Quad, and the PBP to secure strategic advantages in the Pacific region.

China has long expanded its cooperation with the PICs to secure a diplomatic advantage over Taiwan. Under Xi Jinping’s leadership, this engagement has intensified, marked by increased high-level exchanges and enhanced development assistance to the PICs. Notably, China’s escalated support for infrastructure projects in the PICs, despite their limited marketability, has attracted global attention. As underscored by the 2022 China-Solomon Islands security agreement, China’s engagement with the PICs appears to be extending into the security dimension. To strengthen practical cooperation with the PICs, China has set up sectoral cooperation centers focusing on emergency stockpiling, climate change response, and poverty alleviation. At the same time, China has deepened government-to-government (G2G) cooperation, extending these efforts to the provincial level. China’s strategy highlights South-South cooperation, aiming to differentiate itself from Western approaches frequently viewed through the prism of strategic competition. However, amid concerns about increased debt risks for nations hosting the BRI, China’s BRI projects in the PICs have also been the subject to speculation that they could exacerbate the already fragile economies of these host countries.

Chapter 4 assesses the current status of Korea’s cooperation with the PICs and identifies future challenges and opportunities for deepening this relationship. Compared to other major countries, Korea’s history of cooperation with the PICs is relatively recent, and its scope remains limited. In 2022, Korea’s trade with the PICs amounted to $5.54 billion, representing 0.4 percent of its total exports and imports. Additionally, Korea’s investment in the PICs was estimated at $4.12 billion in 2022, making up only 0.5% of its total overseas investment. Nevertheless, the Pacific region holds significant importance for Korea, accounting for more than 70 percent of its fisheries catch, highlighting a robust link in the fisheries sector.

Meanwhile, as a dialogue partner of the PIF since 1995, Korea has supported various development cooperation projects in the PICs through bilateral ODA and the Korea-PIF Cooperation Fund. Between 2002 and 2021, Korea provided a total of $140 million in aid to the PICs. This represents 0.42% of the total aid given to the PICs by OECD DAC members, ranking Korea ninth among DAC member nations in terms of aid contributions to this region. However, this figure is notably smaller compared to the contributions of the top five donors (Australia, New Zealand, the United States, Japan, and France) to the PICs, given that each of these countries has contributed over $2 billion, cumulatively accounting for more than 97% of the total aid provided. In terms of sectors, Korea’s development cooperation has largely centered on maritime and fisheries, climate change, and health, while dedicating less attention to areas such as infrastructure, human rights, gender, and governance, which are priorities for other major countries. While many of Korea’s initiatives address local needs, especially in the areas of climate change and health, the scope of cooperation among other significant nations is broader, including trade and investment promotion, labor mobility, infrastructure, people-to-people exchanges, and security. Acknowledging this, Korea should consider expanding its cooperative efforts with the PICs to include these wider-ranging areas.

To enhance its position in the Pacific region, Korea’s urgent priority is to implement the 2023 Korea-Pacific Islands Summit Declaration and Action Plan, along with the enhancement of its diplomatic ties with the PICs. Korea should aim to optimize the impact of its initiatives, efficiently leveraging its limited budget and human resources. Given that most of the PICs are small island developing states (SIDs) with a limited capacity to manage the recent influx of development aid, Korea needs to shift from irregular project implementation to a more systematic approach by organizing ministry-specific ODA projects into distinct key sectors. In line with the PIF’s efforts to bolster the coordination of aid projects under the ‘2050 Strategy’, Korea should identify and propose collaborative projects that align with this strategy’s implementation plan. Acknowledging the preference of the PIF for long-lasting initiatives over ephemeral and short-term projects, Korea should adopt a programmatic approach aimed at achieving sustained and multifaceted results across various sectors. Given concerns about aid inefficiency, exacerbated by competitive aid distribution and overlapping projects, effective coordination and collaboration with other leading donors are also imperative. Significantly, as a late entrant to regional cooperation in the Pacific, Korea needs to establish a clear and distinct role for itself, ensuring that its engagement with the PICs is rooted in its unique identity and strategic approach as a middle power in the region, and not entangled in strategic competition.

Based on the previous analyses, Chapter 5 offers policy recommendations for augmenting Korea’s cooperation with the Pacific Island Countries (PICs). Firstly, a key focus should be on incorporating the ‘2050’ strategy into the pursuit of Korea’s Indo-Pacific strategy in the PICs. The principal initiatives, derived from aligning the visions of Freedom, Peace, and Prosperity in Korea’s Indo-Pacific strategy with the ‘2050 Strategy’s seven thematic areas, are as follows: Under the ‘Freedom’ vision, Korea should aim to ‘establish an inclusive Pacific regional order and promoting universal values’. This includes reinforcing the PIF’s leadership in Pacific regional cooperation, promoting good governance and gender equality, and supporting the enhancement of democracy and human rights in the PICs. In the realm of ‘Peace’, Korea’s goalshould be ‘advancing peace in the Pacific through comprehensive security cooperation’. This includes enhancing the abilities of the PICs to combat IUU fishing, bolstering their responses to climate emergencies, and fortifying their systems for preventing and controlling infectious diseases. For ‘Prosperity’, Korea should aim to ‘foster resilience and capacity building in the Pacific region’. Regarding ‘Prosperity’, Korea’s goal should be to ‘cultivate resilience and capacity building in the Pacific region’. This entails backing the sustainable management of marine resources, fostering climate resilience and green growth, and contributing to the development and enhancement of social infrastructure for economic progress.

Secondly, since Korea's aid to the PICs is comparatively smaller than that of other donor countries, it is crucial to maximize its impact by strategically identifying priority areas of cooperation and key partners and thereby effectively allocating resources. In light of Korea’s track record in the PICs and the region’s specific needs, priority should be given to maritime and fisheries, climate change, health, and gender equality. Regarding potential countries for strengthened collaboration, Fiji, Papua New Guinea, the Solomon Islands, the Marshall Islands, and Micronesia are considered as pivotal partners. Importantly, to improve the effectiveness of development cooperation projects, it is important to move away from one-off projects and focus on sustainable and long-term initiatives. In addition, efficient use of resources and risk mitigation can be furthered by expanding cooperation with international organizations and other donor countries.

Thirdly, in line with its Indo-Pacific strategy that prioritizes engagement with like-minded nations, Korea should aim to diversify and deepen its global cooperation network. This involves a multifaceted expansion of the Indo-Pacific regional cooperation framework, achieved through strategic collaboration with major donor countries. Initially, Korea should enhance its role in multilateral cooperation in the Pacific region, using the U.S.-led PBP as a foundation. However, considering the PBP’s status as a U.S.-led initiative, there is a possibility that the PICs may perceive the PBP as a means of strategic rivalry. Consequently, Korea needs to adopt a cautious strategy. Instead of simply aligning with U.S.-led initiatives within the PBP, Korea should proactively seek out and proposeprojects where it has a relative advantage.

Additionally, pursuing active bilateral and mini-lateral cooperation must be pursued with major countries that have close ties with the PICs. Among nations with similar perspectives, cooperation with Australia and the United States appears promising. By engaging in established forums such the ‘Australia-ROK Indo-Pacific Dialogue’, both countries have the opportunity to exchange and discuss their policies towards the PICs, share successful case studies and experiences, and gradually explore avenues for bilateral cooperation in the region. For example, Korea could help finance infrastructure projects that are part of Australia’s AIFFP using Korea’s EDCF resources. Additionally, Korea can help improve maritime security capabilities in the PICs by participating in Australia’s Defense Cooperation Program (DCP). The United States, with its history of joint projects with Korea in third countries and considerable resources, offers significant potential for collaboration. Given the U.S.’s active pursuit of governance-related cooperation projects - an area where Korea’s involvement has been relatively limited - there is an opportunity for Korea to actively participatein joint initiatives aimed at promoting good governance in the PICs. Additionally, considering the growing need for trilateral cooperation among Korea, the U.S., and Japan, enhancing policy dialogues among these countries is vital to strengthening their collective efforts in the Pacific region.

Fourthly, in order to build a sustainable cooperation foundation with the PICs, it is essential to enhance Korea’s diplomatic outreach to these countries. These efforts should involve bolstering staff at Korean embassies in the PICs and gradually strengthen the staffof embassies in the region. Most importantly, holding regular summits, ideally every three years, will help maintain the cooperation momentum with the PICs, and provide opportunities to regularly reassess and update priority areas of cooperation. In addition, promoting people-to-people exchanges is fundamental for establishing sustainable relations with the PICs. Having regular 1.5 or 2.0 track dialogues through international conferences on maritime, fisheries, and climate change issues will provide a key platform for experts from both sides to interact and pinpoint potential cooperation projects. Enhancing collaboration with the Korean branch of the South Pacific Tourism Organization (SPTO) is also important to boost Korean tourism to the PICs, thereby enriching people-to-people exchanges. Given the significance of youth exchanges in cultivating enduring relationships, it is imperative to reinforce scholarship and training programs for PIC nationals, as well as initiatives for youth exchanges between Korea and the PICs. Furthermore, considering the current scarcity of research on the PICs within Korea, it is required to expand scholarship programs and research funding to cultivate Korean nationals with in-depth knowledge of the Pacific region.

China’s policy of nurturing hidden champions is being promoted on the basis of a systematic development system, which has been established by consolidating the economic development policies scattered in each province by linking them to the national strategy. It nurtures hidden champions in the manufacturing industry to strengthen the foundation of the manufacturing industry and improve the localization rate of key basic parts and materials by 2025, which is the goal set by the “manufacturing powerhouse” strategy at the national level. After classifying small and medium-sized enterprises by growth stage, China is nurturing companies that can supplement the technological gap in the supply chain by focusing technology and capital.

It is also expanding the establishment of a national-level manufacturing innovation center necessary for promoting national strategies. The main areas of establishment are high-tech areas such as optoelectronics, display, robotics, lightweight materials, semiconductors, and batteries. The national-level manufacturing innovation center will receive financial support from the government when it is established. In addition, it is operated in a structure in which everyone enjoys the intellectual property rights developed here with the participation of research institutes, universities, and private companies for strategic technology research. In particular, in the semiconductor industry, which has recently increased its strategic importance, three innovation centers are in operation, and core process technologies are being developed by concentrating resources under the leadership of leading companies. In addition, SMEs that participated in this are also building an open system so that they can use the infrastructure and databases of innovation centers.

As of 2023, there are 12,950 hidden champions in China, exceeding the 2025 target of 10,000. In particular, the share of companies in the new materials, next-generation information technology, and advanced mechinery industries increased significantly from about 17% in 2019 to 25.7% in 2023. This seems to be due to the Chinese government’s expansion of support to sectors that are more exposed to U.S. sanctions.

Financial support strategies for hidden champions are divided into initial government subsidies and tax incentives, and sustainable financial support using private capital. Various methods of financial support are of great importance in that they provide financial resources to SMEs that have a long management period and are difficult to obtain additional support to enhance the competitiveness of the company and prepare new growth engines.

The Chinese government plays a very important role in the financial support process for Hidden Champions. This is because government certification of Hidden Champions is linked to direct and indirect financial support using government and private capital. Since the government certification is to ensure a company’s industrial competitiveness, it is related to both attracting seed investment to companies after direct government incentives and tax incentives, and liquidity support policies through listing on the capital market. Therefore, financial support for SMEs can be interpreted as a strategy to improve corporate competitiveness through investment in government finances and private capital based on government guarantees. And in this process, the Chinese government is expanding its scope from government-led projects to marketization strategies by linking private capital with companies subject to government policy support in addition to government funding.

In order to understand the competitiveness of Hidden Champions that the Chinese government is promoting, this report attempted to analyze the management situation and export competitiveness of listed Hidden Champions. The targets of analysis were 692 listed companies that could obtain corporate information among the 12,950 national-level Hidden Champions announced by the Chinese government.

Looking at the distribution by industry in which listed companies are engaged, a total of 563 companies are engaged in 10 industries, including dedicated facility manufacturing, computer, communication, and other electrical equipment manufacturing. Among the above 10 industries, the U.S.-designated core science and technology industries are mainly concentrated in five industries: △ software and ICT service industries, △ computer, communication, and other electronic equipment manufacturing, △ general equipment manufacturing, △ special equipment manufacturing, and △ chemical raw materials and products manufacturing. Accordingly, in this study, the strategy of promoting Hidden Champions promoted by China in response to U.S. technology checks was derived by analyzing the cases of representative excellent enterprises in five industries.

China’s strategy for Hidden Champions, which was derived from the analysis of the case companies, was identified as ① promoting corporate growth through successful localization in response to the U.S. strategy toward China in key technologies, ② fostering enterprises by expanding demand for niche markets following digital and green transformation, ③ promoting mass production of essential materials through cooperation with large companies related to the supply chain, ④ expanding its influence through participation in national industrial standards in China in special fields, ⑤ taking advantage of the domestic capital market through the Beijing Stock Exchange, ⑥ creating a technology ecosystem in China by acquiring foreign enterprises with technology competitiveness, and ⑦ strengthening competitiveness by supporting key enterprises in the global supply chain.

Considering the difficulty of obtaining trade statistics for each detailed item of hidden champions, this study classified the entire trade statistics into materials, parts, and equipment industries where hidden champions are mainly distributed to examine the trade situation and analyze competitiveness.

As a result of analyzing the trade statistics of materials, parts, and equipment from 2012 to 2022, when China’s policy of cultivating foster hidden champions was fully implemented, the global trade balance of the China’s materials, parts, and equipment industry increased significantly from a deficit of $55.6 billion in 2012 to a surplus of $264.1 billion in 2022.

The improvement in China’s competitiveness in the fields of materials, parts, and equipment can also be seen as a change in the trade specialization index (TSI) of the materials, parts, and equipment industries. Looking at China’s global trade specialization index for materials, parts, and equipment, it was import specialized at -0.033 in 2012, but rose to 0.100 in 2022, improving export competitiveness. On the other hand, the trade specialization index for Korea’s materials, parts, and equipment industry with China was found to slow down more significantly from 0.357 in 2012 to 0.139 in 2022.

Among the materials, parts, and equipment industries, in particular, Korea’s imports to China increased and exports to China decreased or export growth slowed as China’s exports increased and import growth slowed, especially in △ semiconductor and display equipment, △ precision processing equipment, △ general machinery parts, △ industrial process equipment, and △ precision equipment parts. The five materials, parts, and equipment industry items mentioned above are related to △computer, communication, and other electronic equipment manufacturing, △ general equipment manufacturing, △ dedicated equipment manufacturing, and △ chemical raw materials and products manufacturing, which are industries related to core science and technology that the United States has designated among the industries that are mainly engaged in China’s hidden champions. This can be interpreted as China replacing foreign import demand with domestic products as the effect of nurturing China’s hidden champions gradually emerges.

The above industries are the areas where China is expanding R&D investment in response to U.S. sanctions, and as the industries where there are already competitive hidden champions, competition with Korea is likely to intensify in the future. Although a more detailed industry-wide comparative analysis of Korea-China competitiveness has not been carried out, considering the competitiveness of the two countries in the materials, parts, and equipment industries, as measured by trade statistics, suggests that Korea is likely to face a situation where risks outweigh opportunities. This is because Korea’s imports to China are likely to expand rather than exports of Korean products to China increasing due to the rapid growth and demand in key new industries following China’s “hidden champions” strategy, which has been given a boost by strengthening technology controls and sanctions against China by Western developed countries led by the United States.

China is Korea’s largest export and import partner for materials, parts, and equipment, while the materials, parts, and equipment industry is a major contributor to Korea’s trade surplus. As a result, Korea needs to make efforts to address sluggish exports to China by diversifying its trading partners for materials, parts, and equipment and, actively responding to China’s strengthening competitiveness in the materials, parts, and equipment industry.

Korea should recognize the changes in the trade and industrial structure between Korea and China and form a new paradigm of economic cooperation to overcome the limitations of economic exchanges between the two countries. China, which used to be seen as a manufacturing base, must now be seen as an advanced country in new industries and the economic cooperation structure must be drawn. China has become a world leader in new industries based on the strong support of hidden champions with competitiveness. Some hidden champions in China also have global competitiveness in the materials sector of high-tech industries.

Now, it is judged that there is no need to be cautious about the growth of China’s hidden champions. In preparation for China’s improvement in the competitiveness of materials, parts, and equipment in high-tech fields, it is necessary to double the competitiveness of our materials, parts, and equipment industries, and to find a way for cooperation between the two countries by making use of China’s comparative advantage in the materials, parts, and equipment industries.

In addition, against the backdrop of the development of new industries, we need to establish and expand the foundation for cooperation between Korea and China in new areas suitable for the era of digital and green transformation. To this end, efforts to build an institutional cooperation base for new industrial fields must first be strengthened.

This study aims to explore cooperation strategies between ASEAN and Korea from a mid-to-long-term perspective, ensuring that engagement in the U.S.-China strategic competition does not lead to reduction in domestic production capacity and exclusion from the supply chain. To this end, this paper analyzes the relationship between the U.S. and ASEAN, as well as between China and ASEAN, in a wide range of areas from trade and economic cooperation to the ongoing U.S.-China strategic competition in the region. Additionally, the study examines the economic impact of supply chain restructuring due to U.S.-China rivalry on ASEAN and Korea, and investigates ASEAN’s responses. Finally, based on the research findings and Korea’s current policies toward ASEAN, the study suggests the direction of Korea’s supply chain cooperation with ASEAN.

Chapter 2 examines the dynamics of U.S.-China strategic competition in the economic and trade sectors, focusing on ASEAN, and explores the cooperative relationship between the U.S. and ASEAN, as well as between China and ASEAN. While the United States is actively pursuing high-level security cooperation with ASEAN, economic and trade cooperation, including free trade agreements, is perceived as relatively favorable to China. China appears to be responding to the US strategy of containing China while ensuring a stable supply chain by establishinga regional production network with ASEAN.

Chapter 3 examines ASEAN’s economic dependence on the U.S. and China by analyzing trade and investment relations. It explores the recent trade and investment status of products listed in the “Draft List of Critical Supply Chains”released by the United States. Looking at ASEAN’s exports and imports, there is a similarity in the share between the U.S. and China in recent exports, while the share of imports is overwhelmingly dominated by China. In terms of investment, the EU was the largest investor among offshore countries in 2010, but the U.S. recorded the largest investor in 2022. On the other hand, looking at the exports and imports of products listed in the“Draft List of Critical Supply Chains” in 2021, it is observed that ASEAN’s exports to the U.S. and imports from China have increased, coinciding with a decline in China’s exports to the U.S. in sectors such as critical minerals, solar energy, audio-visual equipment, computer equipment, and telecom/network equipment. While further in-depth analysis is required, but according to the above results, the trade conversion from China to ASEAN is likely to have occurred, possibly indicating that China is utilizing ASEAN as a bypass for exports to the U.S..

Chapter 4 examined the recent supply chain restructuring strategies of the U.S. and China, with a particular focus on the high-tech industry. And the impact of such supply chain restructuring attempts on ASEAN and Korea was analyzed using an international input-output model. it also examined how ASEAN is currently responding to those attempts by the U.S. and China. The U.S. supply chain restructuring policiescan be interpreted as attempts at selective decoupling to exclude China and establish high-tech industrial supply chains centered on allies. In this context, this study hypothesizesa situation where the U.S. successfully excludes China from the high-tech industrial supply chain and quantifies the spillover effects using the Global Extraction Method (GEM). According to the analysis, in the case of chemicals and chemical products and electrical and optical equipment, if China were to be replaced in the global supply chain with the existing supply chain, the United States, Korea, Japan, Germany, and others would reap the greatest benefits, while ASEAN would comparatively gain less. This result seems to be due to ASEAN’s relatively low level of participation in the supply chain for high-tech industries, implying that, at the current level of production linkage, ASEAN might not significantly benefit from diversification away from China. For some ASEAN countries with high production links with China, it appears that they may suffer from decoupling in the high-tech industries. This suggests that achieving a unified ASEAN stance in response to U.S.-China strategic competition may be challenging, and ASEAN may face difficulties in strengthening its own cohesion and centrality. On the other hand, the study shows that selective decoupling may inadvertently increase China’s participation in other industries.

As the ongoing competition between the United States and China continues, there is a potential for multinational corporations to relocate their production bases from China to ASEAN to bypass U.S. regulations on China. In fact, as the Biden administration’s imposition of semiconductor export restrictions on China has led to continued, multinational corporate investments in Singapore and Malaysia, where the semiconductor industry has developed. In re-sponse, major ASEAN countries are leveraging these investments as a foundation to promote the development and industrial sophistication of manufacturing. They are implementing various supportive policies related to semiconductors, batteries, and other industries. Particularly, ASEAN is actively fostering the electric vehicle (EV) industry as a response to decarbonization and as a new driver of growth. Major ASEAN countries, including Indonesia, plan to build a battery industry ecosystem centered around nickel and bauxite.

So far, ASEAN has maintained a neutral stance in the midst of U.S.-China rivalry. At the ASEAN community level, ASEAN adopted the ASEAN Outlook on the Indo-Pacific (AOIP) in 2019, out of concern about being caught in a situation of choosing between the U.S. and China. In 2022, a statement was issued on mainstreaming the AOIP within ASEAN-led mechanism, emphasizing the ASEAN centrality. This indicates that ASEAN aims to emphasize cooperation under its own leadership, seeking to maintain a certain degree of independence from pressure from both countries amid the strategic competition between the U.S. and China. This is interpreted as a strategy to avoid conflict by maintaining a neutral position and to continue and expand trade with both the U.S. and China.

In Chapter 5, based on the previous research findings and current policies toward ASEAN, the strategic direction for Korea toward ASEAN is proposed as follows: (1) expanding trilateral cooperation under ASEAN leadership, (2) supporting the activation of supply chains within the ASEAN region, (3) jointly responding to supply chain disruptions, (4) cooperating on critical minerals for supply chain stability, and (5) broadening trade cooperation.