Beginning in the 2000s, as Central and Eastern European countries began to join the EU in earnest, new manufacturing production bases within the EU were established in Central and Eastern Europe. This marked the beginning of a full-scale expansion of Korean companies targeting the EU market. This expansion was concentrated in the V4 (Poland, Hungary, the Czech Republic, and Slovakia) countries between 2006 and 2007. From the late 2010s until recently, Korean companies’ expansion into Central and Eastern Europe shifted to investments in batteries, electric vehicles, renewable energy, and R&D, shifting investment patterns toward eco-friendly and cutting-edge industries and key supply chains. Recently, LG Energy Solution and its partners completed their secondary battery expansion in Poland, while SK Innovation, Samsung SDI, and their partners completed their secondary battery expansion in Hungary. These efforts not only address the EU’s comprehensive environmental regulations and supply chain restructuring but also establish a bridgehead for entry into the European market. Meanwhile, as part of China’s global supply chain restructuring strategy, large-scale greenfield investments are continuing, focusing on eco- friendly electronic components and finished automobiles. Hungary is establishing itself as a key base for China’s European expansion strategy.

With 20 years having passed since Korean companies began expanding into Central and Eastern Europe, it is crucial to assess the progress made, analyze the challenges they face, and explore solutions. The V4 region is currently emerging as a major production base in the EU. Local investment and expansion by both Korean and Chinese companies, particularly in the battery sector, have led to a labor market environment nearing full employment. Consequently, recruiting difficulties are the most significant obstacle for Korean companies operating in the region. The V4 government has recently adopted “protection of strategic industries” and “selective acceptance of foreign capital” as key economic policies. Investment policies are evolving, with a focus on welcoming foreign investment in strategic sectors and emphasizing linkages with R&D investment. China’s recent aggressive investment in Central and Eastern Europe, including Hungary, is expected to impact the local management environment for Korean companies already operating in the region. Therefore, it is crucial to develop a response strategy that goes beyond mere competition and builds on the strengths of the Korean companies operating in the region.

This study assessed the 20 years of Korean companies’ expansion into Central and Eastern Europe (CEE). It examined their motivations and strategies and analyzed their performance over the past 10 years. It also examined the prospects and challenges facing Korean companies’ expansion into CEE. Based on this analysis, it presented policy implications, including implications for the recent expansion of Chinese companies.

Compared to the initial 10 years of CEE accession, Korean companies’ investment in CEE over the past 10 years has been primarily focused on the EV and EV battery sectors, responding to EU policies. Conversely, compared to the initial 10 years, the focus on manufacturing, particularly automotive and electronics, has eased somewhat. Furthermore, Korean companies’ sectors of expansion have expanded to encompass a wider range of sectors, including biotechnology, energy, defense, and medical services. The positive correlation between Korean companies’ investment and exports remains robust over the past 10 years. Consequently, this suggests that the large-scale investment by Korean companies in CEE has led to a sustained increase in Korean exports to the region, rather than a temporary one. This could counter the traditional concern that “foreign direct investment will hollow out domestic industries.” In other words, it aligns with recent major analyses showing that, in an era of global supply chain fragmentation, the expansion of overseas direct investment by Korean companies actually leads to increased regular employment and sales at domestic parent companies.

Recently, relations between China and the V4 countries have been complex and nuanced, driven by economic interests as well as political and strategic factors. Chinese investment patterns have also varied across the V4 countries. Hungary, which has shown the most pro-China stance, has become a key investment destination for Chinese companies not only within the V4 but also within Europe, thanks to its government’s proactive investment promotion policies. Slovakia, which has historically had relatively minimal relations with China, is also showing signs of change by attracting Chinese investment in electric vehicles and batteries. Hungary and Slovakia have diverged from the EU’s China policy, adopting a more favorable stance toward Chinese investment. In contrast, Poland and the Czech Republic, in solidarity with the EU’s China strategy, are adopting a more cautious approach to relations and expressing caution regarding Chinese investment. Comparing the investment landscape of Korean and Chinese companies in the V4 reveals significant differences in the countries of investment, timing, sectors, and key issues. While Korean companies focused on the automotive industry in the mid-2000s, primarily in the Czech Republic and Slovakia, they have recently focused their investments in Poland and Hungary, focusing on EV batteries. In contrast, Chinese companies have been making large-scale investments in the EV and EV battery sectors, particularly in Hungary, since 2020. Korean companies, which have established European manufacturing production bases in the V4 since the mid-2000s, are currently facing challenges due to rising prices, soaring production costs, and labor shortages in the V4 economies. Meanwhile, Chinese companies, which have recently focused on the EV and EV battery sectors in Hungary and are currently in the prototype production stage with plans to commence full-scale production soon, are facing changing negative perceptions of China among EU citizens and EU-level regulations on China.

To address the immediate challenges identified in the evaluation of Korean companies entering Central and Eastern Europe, companies should first strengthen their ESG management and corporate social responsibility (CSR) capabilities at the corporate level to enhance their local image and avoid being subject to EU regulations. Furthermore, given the recent strengthening of the EU’s economic security strategy, they should closely monitor the new regulatory trends resulting from these changes and comprehensively assess their impact on Korean companies. Furthermore, the recent large-scale expansion of Chinese companies into Central and Eastern Europe requires a fundamentally different approach based on the differences between the two countries. Korean companies should leverage the already established cooperative foundations across the V4 to respond to China’s large-scale expansion into Hungary. In the remaining three countries, excluding Hungary, cooperation can be strengthened by actively leveraging the reluctance of European global OEMs to rely solely on Chinese companies due to geopolitical risks and frequent tensions between the EU and China.

The V4, where Korean companies have the largest presence in Europe, is no longer a region with the lowest production and labor costs in the region. Accordingly, the manufacturing- and V4-centric strategy for entering Central and Eastern Europe is no longer viable. Furthermore, the large-scale expansion of Chinese companies into Hungary is expected to intensify competition with Korean companies already operating in the region and exacerbate labor shortages. In other words, a comprehensive reexamination of the fundamental framework for Korean companies entering Central and Eastern Europe is necessary. Therefore, a new mid- to long-term strategy for entering Central and Eastern Europe for Korean companies should consider three key elements: first, reassessing entry goals; second, expanding entry regions; and third, diversifying and deepening entry sectors. In addition to the company-level entry strategies discussed so far, government support should be provided to address issues that companies cannot address on their own, such as employment and labor shortages, competition with Chinese companies, Korea-EU and Korea-V4 cooperation, and improving local living conditions.

Since the end of World War II, the European Union’s (EU) defense and security architecture has relied almost entirely on the US-centered North Atlantic Treaty Organization(NATO). While integration at the EU level has made significant progress in the economic and financial integration, defense and security remain relatively underdeveloped due to ongoing tensions between member states’ sovereign authority and supranational leadership. However, the outbreak of the Russia-Ukraine war in 2022 marked a fundamental turning point in Europe’s security landscape. Not only was it the first full-scale war on the European continent since World War II, but it also coincided with renewed criticism from the Trump administration regarding the EU’s excessive dependence on NATO and demands for increased defense spending. As a result, the EU came to recognize more acutely the necessity of securing strategic autonomy and strengthening its own defense capabilities. In response, the European Commission announced a strategy to reinforce the defense industrial base and build an autonomous and competitive defense posture by 2030, launching full-scale policy efforts to enhance the competitiveness of EU-based defense firms and promote joint procurement.

Even before the Russia-Ukraine war, the EU had sought to enhance cooperation among member states through mechanisms such as Permanent Structured Cooperation (PESCO), the European Defense Fund (EDF), and the Coordinated Annual Review on Defense (CARD). PESCO provides a framework for closer cooperation in defense and security, with 75 projects currently under development, while the EDF supports the development of innovative defense technologies and equipment with a budget of €8 billion for the 2021-27 period. The EU Defense Innovation Scheme (EUDIS) aims to foster an innovation ecosystem for start-ups and small and medium-sized enterprises (SMEs). Following the war, however, the EU has adopted more proactive, immediate, and robust defense measures. Notably, the Act in Support of Ammunition Production (ASAP) aims to supply one million rounds of artillery ammunition to support Ukraine, with a particular emphasis on expanding manufacturing capacity within the EU. In addition, the European Defense Industrial Strategy (EDIS) - the EU’s first-ever defense industrial strategy - encourages member states to invest more, better, and collectively. The Security Action for Europe (SAFE) initiative is a €150 billion loan-guarantee program designed to support joint weapons procurement and represents the largest defense-related financial instrument ever established at the EU level. Furthermore, the European The Defense Industry Programme (EDIP) will provide €1.5 billion in grants between 2025 and 2027 to strengthen the EU’s defense posture by enhancing industrial competitiveness and promoting joint procurement. The EDIP consists of three pillars: strengthening the competitiveness and responsiveness of the European Defense Technological and Industrial Base (EDTIB), improving the timely availability and security of the supply of defense products, and supporting Ukraine’s Defense Technological and Industrial Base (DTIB). Together, these measures aim to ensure the sustained development of Europe’s defense industry and establish a supply chain capable of rapidly procuring critical materials during crises.

Nevertheless, the EU defense market faces a structural challenge of fragmentation. With 27 member states operating under different procurement systems and regulatory frameworks, building a pan-European defense procurement market remains difficult. As a result, as of June 2023, 76% of weapons procured by EU member states were imported, with the United States accounting for a dominant 63% share. Defense industries within the EU, are primarily concentrated in France, Germany and Italy and, the EU aims to use these countries as anchors for a renaissance of the European defense industrial base. In this process, the EU’s defense industrial innovation roadmap emphasizes that disruptive technologies - such as artificial intelligence, quantum, cyber capabilities and space- based systems - are fundamentally transforming the nature of warfare. Accordingly, the EU highlights a ‘spin-on’ development approach that rapidly integrates cutting- edge civilian technologies into the defense sector.

Meanwhile, the South Korean government has set itself the goal of becoming the world’s fourth-largest defense exporter by 2027 and has designated advanced defense industries as a national strategic sector. In its Defense Science and Technology Planning Document for 2025–2039, the Defense Acquisition Program Administration (DAPA) has outlined a roadmap to secure ten strategic technologies, including AI, manned–unmanned teaming, quantum technologies, and space capabilities. In addition, the government plans to provide comprehensive support for overseas expansion by defense firms through the establishment of a “K-Defense Export Fund” and expanded tax incentives. Korea’s defense industry is particularly competitive in terms of mass-production capacity, rapid delivery, high performance relative to cost, and strong government backing. Poland has emerged as a key partner, accounting for a substantial share of Korea’s defense exports, with major platforms including the K2 main battle tank, the K9 self-propelled howitzer, and the FA-50 light attack aircraft. However, Korea’s level of core technological capability in advanced domains remains at approximately 82% of that of the most advanced countries, indicating a need for further improvement, and its export structure remains overly concentrated in a limited number of markets.

As the EU actively seeks to enhance its own defense competitiveness, particularly by supporting EU-based defense firms and prioritizing European-origin products in joint procurement- there is a risk that Korean defense companies may face growing barriers to entry in the European market. Nevertheless, the potential synergies arising from the complementary strengths of Korea and the EU should not be overlooked. While the EU excels in advanced technology, Korea has strengths in production capacity and cost efficiency. Moreover, as the EU seeks to reduce excessive dependence on the United States while enhancing its internal defense capabilities under the banner of strategic autonomy, Korea could be a valuable partner. This, in turn, suggests new opportunities for Korean defense firms. Accordingly, this study proposes the following policy recommendations.

First, Korea should pursue the joint establishment of defense industry clusters in Eastern Europe, centered on existing major export destinations such as Poland and Romania. By building maintenance, repair, and overhaul (MRO) facilities and localized production systems, Korean firms can meet “Made in Europe” requirements. Defense companies should analyze the industrial ecosystems of individual Eastern European countries and differentiate their roles accordingly. For example, Poland could serve as a hub for tank and self-propelled artillery assembly and maintenance, while Romania could be developed as a base for artillery ammunition and component production. By creating a horizontally integrated supply chain, Korean firms can secure continuous orders across the EU. Second, a strategic and reciprocal offset framework is needed. Rather than focusing solely on exports, Korea should design models that combine localized technology transfer with industrial cooperation to secure a sustainable position in the EU market. At the government level, the scope of offset recognition should be negotiated in advance, and guidelines for technology protection should be established to prevent excessive demands for technology transfer. At the same time, firms should design technology-transfer models that are phased and conditional, and which contribute to local industrial development while preserving technological sovereignty. Long-term contracts with local firms and the operation of technical training programs will be essential to facilitate natural integration into EU supply chains.

Finally, Korea and the EU should expand their joint R&D initiatives in advanced and disruptive technologies of shared strategic importance, such as AI, space, and cyber capabilities, and operate joint testbeds. The establishment of a Korea–EU joint defense innovation fund would allow risks to be shared through co-investment, while institutionalized cooperation between Korea’s Agency for Defense Development and EU research institutions could support joint research on reconnaissance satellites, military PNT (positioning, navigation, and timing), and AI-enabled battlefield experimentation. At a corporate level, Korean companies should form multilateral consortia with EU firms in areas such as AI-based battle management systems and drone swarm operations and actively participate in joint prototype development.

Brazil, Latin America’s largest economy, maintains high tariff and non-tariff barriers but has shifted toward open trade policies since President Lula’s 2023 inauguration. While the Trump administration’s trade disruptions accelerated this shift, Brazil’s diversification reflects deeper structural imperatives driven by three core motivations:

First, reducing trade concentration with specific partners to mitigate risks amid rising global protectionism. Second, overcoming premature deindustrialization through industrial cooperation. Brazil deindustrialized at income levels far below advanced economies, prompting Lula’s New Industrial Policy (NIB) to revitalize manufacturing. Trade agreements serve as institutional frameworks for technology transfer, investment attraction, and supply chain integration beyond market access. Third, expanding multilateral trade to secure strategic autonomy, reducing dependence on major powers while strengthening Brazil’s negotiating position within the U.S.-China bipolar structure.

Following these priorities, Brazil concluded agreements with the EU (December 2024) and signed FTA with EFTA (September 2025). Also Brazil conduct various industrial cooperation with European countries. Analysis of these trade agreements and industrial cooperation reveals key characteristics:

Brazil adopted sector-differentiated opening strategies, protecting strategic industries while liberalizing manufacturing to enhance competitiveness. Brazil secured policy autonomy for industrial tools including export tax authority, exclusion of the public health system (SUS) from procurement commitments, restricted bidding for innovation projects, and offset requirements. Services and investment followed positive-list approaches—fully opening manufacturing-related sectors while minimally opening strategic areas and preserving space for domestic preferences. The agreements introduced environmental norms linking trade to sustainability to promote cooperation in sustainable development. However, European agricultural protections through geographical indications and tariff-rate quotas may limit Brazil’s market opening benefits. In industrial cooperation, Brazil seeks to encompass technology transfer, joint development, local production, and workforce training beyond simple product supply.

Implications for Korea-Brazil relations include: Korea’s value as a diversification partner given Brazil’s high concentration with China and the EU; urgency to resume stalled TA negotiations during pro- diversification administrations like Lula’s; cooperation opportunities in NIB priority sectors, particularly critical minerals (Brazil holds all 10 Korean strategic minerals and ranks second globally in rare earths); balancing Brazil’s policy autonomy with opportunities for Korean companies rather than demanding unconditional liberalization; establishing long-term government cooperation platforms beyond past episodic efforts; and activating private sector cooperation through industry associations given the TA’s likely lengthy timeline.

Amid the intensifying U.S.–China semiconductor conflict and the Russia–Ukraine war, the vulnerabilities of global value chains (GVCs) have deepened, elevating technology from a mere industrial asset to a strategic lever shaping national trade, diplomacy, security, and politics. The United States has pursued an innovation-based economic security strategy that integrates R&D, supply chains, and emerging industries through the CHIPS and Science Act and the IRA, while Europe has responded by advancing the concept of technology sovereignty. Technology sovereignty emphasizes a nation’s ability to independently develop and procure critical technologies essential for national prosperity and competitiveness, thereby mitigating unilateral dependencies.

Against this backdrop, escalating U.S.–China technological rivalry has driven countries to pursue Sovereign AI strategies aimed at designing data, computing, models, cloud, and regulatory ecosystems in ways that are controllable within their own borders. Sovereign AI can be defined by applying the four pillars of technology sovereignty to the AI domain: (1) identification of strategic technologies, (2) dependency management, (3) governance design, and (4) social and democratic context.

The Korean government has also positioned Sovereign AI as a national strategic priority and is implementing aggressive promotion policies, including a 100-trillion won investment, the establishment of a National AI Computing Center, expansion of GPUs and data centers, designation of AI special zones, development of domestic foundation models, and strengthened cooperation with NVIDIA. However, Korea faces structural limitations compared to the United States and China in terms of financial resources, talent pool, domestic market size, technological breadth, and global influence. Additionally, concerns have been raised regarding the constraints of a government-centric approach, fragility of private-sector consortiums due to competition among major corporations, and excessive expectations placed on Korea’s strengths in memory semiconductors and telecommunications infrastructure.

This study aims to redefine the concept, boundaries, and stratified levels of the Korean model of Sovereign AI from the perspective of technology sovereignty and to present Korea’s strategic positioning and policy roadmap through comparative analysis of major countries. To this end, the study reconstructs Sovereign AI typologies (Full-stack, Hybrid, and Leverage-oriented) by applying the core elements of technology sovereignty to the AI domain, and analyzes the AI, semiconductor, and digital strategies of the United States, China, Japan, France, and others to identify policy elements that Korea should emulate or avoid. The analysis further identifies domains that Korea can realistically secure based on its resources, talent, market characteristics, industrial structure, and technological capacity, and proposes actionable policy directions including public-private-international cooperation strategies.

The research methodology integrates literature and policy document analysis, focus group interviews (FGIs), and interviews with international experts. The literature review examined AI, semiconductor, and digital strategies as well as technology sovereignty and economic security policy materials of major countries, while key indicators such as the Stanford AI Index were used to compare AI capabilities and policy outcomes quantitatively. FGIs were conducted with experts in AI, technology management, industrial policy, and public policy to identify policy gaps, institutional bottlenecks, and on-site needs related to Sovereign AI. Interviews with overseas experts provided insights into the objectives, policy design principles, and distinguishing features of each country’s Sovereign AI strategy, as well as elements that may be applicable to Korea’s policy environment.

The analysis shows that major countries commonly regard AI as a ‘core strategic infrastructure and a pillar of technology sovereignty.’ AI is conceptualized not as a standalone ICT technology but as an integrated national strategic infrastructure that combines data centers, GPUs, cloud computing, networks, data, and human capital, supported by long-term investment and regulatory development. Consequently, data sovereignty, computing capacity, public-private collaboration, AI safety and ethics governance, and international standards competition have emerged as universal strategic pillars of Sovereign AI policies.

Despite these commonalities, each country configures these elements differently according to its technological, industrial and geopolitical conditions. The United States aims to maintain overwhelming technological superiority by reinforcing a private -sector-driven AI ecosystem, whereas China seeks full-stack autonomy—from chips to frameworks to operating systems—to eliminate U.S. dependence. The United Kingdom focuses on maximizing access to the U.S.-led ecosystem and enhancing regulatory and normative influence, while Japan pursues a leverage-oriented strategy by embedding itself deeply in the global ecosystem.

A comparative interpretation suggests that Korea, while possessing world-leading competitiveness in telecommunications and memory semiconductors, faces structural constraints in GPUs, data, and upstream-downstream industrial linkages, and the overall level of AI utilization across the public and industrial sectors remains limited. Therefore, rather than pursuing a full-stack Sovereign AI model in the short term, Korea’s most realistic pathway involves initially operationalizing a ‘leverage-oriented Sovereign AI’ strategy—using existing technological strengths as a bargaining asset to increase global ecosystem participation and negotiating power—followed by a gradual transition to a ‘hybrid Sovereign AI’ model through targeted capability reinforcement.

To realize a hybrid Sovereign AI framework, it is critical to recognize that AI-driven economic value is ultimately generated in the application and service layers. Accordingly, activating an AI application ecosystem is imperative. Korea must reform its policy environment so that companies developing AI services and solutions applicable across diverse industries—not only manufacturing—can grow and scale. By moving beyond the ‘basic self-reliance’ phase centered on AI models and computing infrastructure and expanding AI utilization across industrial and economic activities, Korea can systematically transition toward a sustainable hybrid model of Sovereign AI.

Brazil has become one of the most attractive partners, especially in light of recent changes in the global environment. Rising uncertainty and instability call for the need to diversify trading partners. As of 2024, Brazil’s GDP has reached 2.2 trillion US dollars. Brazil ranks as the world’s seventh-largest economy, following the United States, China, the European Union, Japan, India, and the United Kingdom. Despite its significance, however, relatively little research has been conducted in Korea to investigate and understand the Brazilian economy. This report aims to analyze Brazil’s consumer market through the lens of the informal economy in particular. The informal economy refers to economic activities that would be included in GDP if monitored by the government but are not officially documented due to institutional or regulatory contexts. The size of Brazil’s informal economy is so large that understanding it is essential to understanding the Brazilian economy in depth. More specifically, the informal economy share in Brazil amounts to 33.4% of GDP. This figure is significantly high for a country with a decent level of GDP per capita compared to other Latin American countries.

This report exclusively investigates three features of the Brazilian economy, all of which are closely related to the informal economy. First, the low-income and low-wealth groups experience severe and the poverty rate is high. Both income and wealth mobility are low. Inequality is pronounced not only in a static sense but also in a dynamic sense. Second, access to financial intermediaries is limited for both low-income (low-wealth) households and small and medium-sized enterprises (SMEs). As of 2025, the Selic rate is 15%. Borrowing rates for households and SMEs are particularly high, as household borrowing rates typically exceed 50% annually. Although fintech has recently made access more feasible, demand for cash transactions still remains high. Lastly, informal labor contracts are prevalent. Approximately 37.9% of total employment is informal.

Furthermore, Brazil is well known for its inequality and polarization. Although the income Gini coefficient has declined over the last 30 years, it remains high, exceeding 50. The top 10% income share in Brazil is 39.1%, which is higher than the Latin American average of 34.2%. Meanwhile, the bottom 10%’s income share is 1.4%, which is relatively lower than the Latin American average of 1.7%. Brazil also demonstrates a high degree of urban concentration, contributing to heightened regional inequality.

Using a simplified macroeconomic model, this report provides a theoretical foundation for the underlying mechanisms through which the informal economy exacerbates the above-mentioned features. Limited access to financial intermediaries and the prevalence of informal labor worsen inequality and generate a poverty trap. Low returns on assets for wealth-poor households raise their marginal propensity to consume, leading to low savings. As the informal economy grows, capital accumulated in the formal sector shrinks and the rate of return rises. Wealthy households benefit from the high returns, and polarization widens on the right tail of the wealth distribution. The model quantitatively evaluates the potential gains that the Brazilian government could achieve through implementing policies aimed at improving financial accessibility.

This report examines Brazilian policies that partially mitigate the informal economy. Of course, few policies are designed to directly target the informal economy. However, the Brazilian government has implemented numerous policies to support low-income and low-wealth households, improve financial accessibility nationwide, secure tax revenues through formalization, and increase aggregate productivity through worker education. All of these policies are closely related to the informal economy.

Next, the report analyzes consumption patterns among Brazilian domestic consumers. Due to Brazil’s high level of income inequality, it is common practice to classify households into five groups—A, B, C, D, and E. With Group A representing the highest-income class and Groups D and E representing the lowest-income classes, these polarized consumers tend to exhibit distinct consumption patterns. The report also presents case studies of marketing strategies targeting low-income and low-wealth households as well as top income earners. In general, expanding the consumer base and improving financial inclusion play key roles in low-income markets. Regardless of income level, consumers rely heavily on the established images of companies.

Finally, we suggest several broad policy implications based on the observations discussed above. Due to the Brazilian government’s multifaceted policy efforts related to the informal economy, there is substantial potential for public-sector cooperation between Korea and Brazil. Brazil has recently established the Ministry of Entrepreneurship, Microenterprise, and Small Business (MEMP), signaling a strong policy commitment to supporting SMEs. In this context, cooperation through Korea’s Ministry of SMEs and Startups and the Knowledge Sharing Program (KSP) appears promising. Bilateral programs could also be pursued within the framework of the Global Alliance Against Hunger and Poverty, which was launched under Brazil’s leadership. Moreover, due to the polarized nature of Brazil’s domestic consumer market, Korean firms could benefit from entering the Brazilian market through strategies such as product differentiation and image-based marketing.

Although Northeast Asia functions as a core axis of the global economy, it faces a structural dilemma where economic cooperation is restricted due to political and security tensions between regional states. This study focuses on the cruise industry as a strategic alternative to break through this rigid environment. Due to its nature as a tourism sector, the cruise industry carries a relatively low political burden. However, it generates significant economic ripple effects across both upstream and downstream industries, ranging from port infrastructure development to the advancement of service sectors. Consequently, the industry can serve as a strategic medium for strengthening economic cooperation between nations.

The primary objective of this study is to establish a multilateral cooperation model for Northeast Asia by leveraging the cruise industry and to evaluate its practical feasibility. To do this, cruise trends in global and Northeast Asian markets and policy environments were analyzed, alongside a review of North Korea’s tourism strategies and relevant cases. Furthermore, by analyzing the limitations of existing shipping routes and regional consultative bodies, improvement tasks were derived. Ultimately, by establishing South Korea as a core hub and mediator of the Northeast Asian cruise network, this study proposes a phased policy roadmap to entice North Korea into a multilateral cooperation framework and achieve the advancement of the regional cruise industry.

Unlike previous studies that approached individual topics such as market analysis, national policy comparisons, or inter-Korean tourism in a fragmented manner, this study integrates these to analyze a comprehensive cooperation system connecting the ‘Global-Northeast Asia-North Korea-Multilateral’ levels. In particular, this study offers policy implications that differ from existing research by specifying phased scenarios for connecting North Korean ports of call, while accounting for realistic constraints such as sanctions. Furthermore, it proposes the formation of a working group as a multilateral governance mechanism to support the implementation of these scenarios.

The main contents of each chapter are as follows. Chapter 2 provides an analysis of cruise industry trends and the policy responses of Northeast Asian countries. The global cruise market recorded 34.6 million tourists in 2024, surpassing pre-pandemic levels, but Northeast Asian countries are showing differing policy stances in response. South Korea is moving away from past quantitative growth-oriented approaches and is pursuing the “2nd Basic Plan for Cruise Industry Promotion (2023-2027)” with the goal of a “qualitative transition.” With a vision of “Cruise in Daily Life,” it is focusing on industrial recovery and structural improvement by expanding the domestic demand base, supporting the launch of national cruise lines, and expanding the “Fly & Cruise” model linking air and sea travel. Japan aims to recover to 2.5 million inbound cruise tourists by 2025, significantly strengthening port receptivity and seeking to improve infrastructure and standardize CIQ (Customs, Immigration, and Quarantine) procedures. China aims to transition into a “Cruise Manufacturing Powerhouse,” succeeding in building its own large-scale cruise ships and implementing aggressive market expansion strategies, such as the full implementation of a 15-day visa-free entry policy for foreign tour groups. Russia has established its own development strategy for cruise tourism in response to Western sanctions and is attempting to reorganize its industry around domestic markets and friendly nations. It is concentrating its policy capabilities on modernizing old infrastructure and developing new routes along the Far East and Black Sea coasts.

Meanwhile, existing consultative bodies such as the Greater Tumen Initiative (GTI) and Asia Cruise Cooperation (ACC) are facing difficulties in leading substantial policy coordination due to structural incompleteness— failing to encompass all major regional stakeholders—and a lack of legal binding force. Therefore, the creation of a new dedicated body to supplement these is required.

Chapter 3 reviews North Korea’s tourism development strategy and cruise tourism cases. Under the Kim Jong-un regime, North Korea maintains a stance of “Managed Openness,” utilizing tourism as a means of securing foreign currency and promoting the regime. The recently enacted “Tourism Law” (2023) and “Wonsan-Kalma Coastal Tourism Special Zone Law” (2025) provide institutional support for this strategy. Analysis of past cases, such as the Mt. Kumgang cruises (1998–2004) and the Rason-Mt. Kumgang pilot operation, confirmed that while rich tourism resources and the special zone system are positive factors, vulnerabilities such as lack of infrastructure (port depth, terminals), unfavorable profit structures, and safety issues still persist. This suggests that future cooperation should be designed to compensate for these structural constraints.

Chapter 4 specifies plans for expanding Northeast Asian multilateral cooperation. The core is the construction of a “Multi-nodal Loop Route” that connects four to five countries, going beyond simple bilateral round trips. In the West Sea region, a short-distance circulation model connecting Incheon-Nampo-China (Dalian/Dandong) was proposed, and in the East Sea region, a northern logistics-tourism complex route connecting Sokcho/Busan-North Korea (Wonsan/Rason)-Russia (Vladivostok)-Japan (Sakaiminato) was suggested. In doing so, the operation of small and medium-sized cruise ships and the application of the “Fly & Cruise” model are essential, considering sanctions against North Korea and the shallow water depth (8–11m) of North Korean ports.

Furthermore, to provide an incentive for North Korea’s participation, the study presented an alternative of guaranteeing indirect foreign currency income—within a range that does not violate sanctions—by charging a “Port Stay Fee” on a per-ship or per-passenger basis upon entry. As a governance mechanism to implement this, the establishment of a “Northeast Asia Cruise Cooperation Working Group” under the GTI Tourism Committee, involving member countries such as Korea, China, Russia, and Mongolia, as well as Japan and North Korea, was proposed.

Northeast Asian cruise cooperation should be promoted in stages, considering the sanction environment and infrastructure gaps. The short term is a period for laying the foundation for cooperation, activating the “Northeast Asia Cruise Cooperation Working Group” to share port and navigation information and initiating discussions on standardizing CIQ procedures to solidify the basis for cooperation. The medium term is a period for the expansion of cooperation, pursuing the conditional connection of North Korean ports of call only when safety and compliance with sanctions have been verified. The long term is the stage where the cruise network is completed, establishing a multi-nodal maritime tourism belt connecting five Northeast Asian countries (South Korea, North Korea, China, Japan, and Russia) on the premise of sanction relief and normalization of relations, and maximizing network efficiency by diversifying the functions of each country’s ports. South Korea should utilize its geopolitical advantages to play a leading role as a physical hub of the Northeast Asian cruise network and as a mediator that draws North Korea into the arena of multilateral cooperation.

This study is significant in that it designs a practical multilateral cooperation model mediated by the cruise industry, which possesses low political sensitivity and significant economic ripple effects. Amid ongoing geopolitical tensions in Northeast Asia, it presents a policy path for incorporating North Korea into the regional economic cooperation framework through South Korea’s role as a mediator. However, the phased cooperation scenarios derived in this study depend on the cooperative will of each country and volatile external variables such as the easing of sanctions against North Korea and improvement of inter-Korean relations, thus entailing realistic limitations in determining the timing and speed of actual policy execution. Therefore, future research should reflect scenarios of rapidly changing Northeast Asian situations, involve economic feasibility analysis by route, and carry out specific follow-up studies on legal and institutional detailed designs and financing plans to ensure the stable operation of the proposed multilateral consultative body.

Executive Summary

Contributors

Chapter 1. Introduction
1. Background
2. Objective

Chapter 2. The Historical Evolution, Achievements, and Collaborative Dynamics of GTI
1. Overview of GTI: Historical Background and Evolution
2. Achievements and Limitations
3. Looking Ahead: Balancing Achievements and Challenges

Chapter 3. Rationale for Legal Transition
1. Previous Discussions on Legal Transition
2. Environmental Analysis

Chapter 4. Comprehensive Frameworks and Strategic Suggestions for Legal Transition
1. Comparative Analysis of Regional Cooperation Models and Implications
2. Strategic Plan for Legal Transition

Chapter 5. Perspectives and Evaluations of Member Countries
1. China
2. Mongolia
3. South Korea
4. Russia

Chapter 6. Conclusion
1. Summary of Findings
2. Policy Implications
3. Strategic Directions for GTI’s Institutional Transformation

References

This study examines the current status of the Greater Tumen Initiative (GTI) by reviewing its establishment background and historical evolution, major activities and achievements, and the development of internal discussions on its transition into an international organization. It assesses the necessity and feasibility of GTI’s legal transformation. Over the past three decades, GTI has played a meaningful role as a platform for dialogue and cooperation in Northeast Asia; however, the absence of an independent international legal personality has imposed structural constraints on project implementation and resource mobilization. To overcome these limitations, GTI member states have formed a broad consensus in principle on the need for legal transformation, and past discussions have already laid a substantial institutional and legal foundation for such a transition. Drawing on comparative analyses of regional development and cooperation frameworks similar to GTI−such as APEC, ACMECS, CAN/CAF, and ADB−this study derives policy implications and proposes a concrete, step-by-step legal, institutional, and policy roadmap for GTI’s transition into an international organization. In particular, through joint research with participating institutions of the GTI Research Institute Network, the study synthesizes member states’ positions and perspectives on the legal transition, and explores cooperative approaches to overcoming differences and building consensus. In this respect, the study makes a significant contribution to advancing practical pathways toward GTI’s institutional transformation.

Supply chain due diligence emerged in the 1990s, during the rapid advancement of global division of labour, as part of ESG implementation and efforts to create a level playing field. It became institutionalised, primarily in Europe, evolving into a substantive obligation for companies. Furthermore, recent geopolitical factors have led to supply chain due diligence being utilised as a means of supply chain blockading. Supply chain due diligence regulations impact not only the companies subject to the due diligence obligation but also their suppliers within the supply chain, thereby placing a burden on companies in developing countries, too. As most Korean industries rely on developing countries’ production networks for intermediate goods and raw material procurement, strengthening developing countries’ capacity to respond to supply chain due diligence is a critical issue for Korea.

Grievances received through National Contact Points (NCPs) in the 52 countries implementing the ‘OECD Guidelines for Multinational Enterprises’ indicate that implementing supply chain due diligence is recognised as a significant challenge. Companies report difficulties complying with the guidelines across various areas, including human rights, employment, and the environment. While supply chain due diligence systems operate to enhance supply chain transparency and accountability, the capacity for their implementation varies significantly between countries. Such asymmetry could potentially lead to instability in the global value chain. Particularly in mineral supply chains, where geopolitical risks and ESG risks intersect, the proper implementation of supply chain due diligence is increasingly emphasised.

As supply chain due diligence regulations proliferate, the key challenges facing enterprises in developing countries can be categorised as: enhancing regulatory compliance capacity, establishing due diligence systems and infrastructure, and enhancing corporate competitiveness. Firstly, issues such as the administrative and legal procedures of supply chain due diligence, the application of systems suited to developing country conditions, and enforcement capacity within developing countries must be addressed. Secondly, there is a need to improve the fundamental conditions for developing country enterprises to respond to due diligence through the establishment of due diligence systems and infrastructure. Thirdly, developing country enterprises must address the lack of technical know-how required to access relevant data and navigate due diligence frameworks, as well as financing conditions resulting from stringent due diligence requirements.

International cooperation concerning supply chain due diligence is actively progressing. Recent international cooperation has focused on labour-intensive industries such as apparel and textiles, agriculture, and the minerals sector. Cooperation content is fundamentally centred on improving labour conditions, ensuring minimum wages, and strengthening human rights due diligence capabilities. In the minerals sector, cooperation from a resource security perspective is emphasised.

Comprehensive support, including building institutional and data infrastructure in developing countries, strengthening supervisory agency capabilities, providing training and consultancy for SMEs, and offering technical assistance, will be crucial for implementing supply chain due diligence. Considering Korea’s strategic interests and its role in the international community, Korea’s development cooperation policy should consider supply chain due diligence capacity-building projects as a key pillar. Korea’s supply chain due diligence cooperation with developing countries should focus on: ① supporting alignment with international norms and strengthening institutional capacity, ② establishing infrastructure to enhance traceability and transparency in developing countries’ supply chains, and ③ strengthening sustainable competitiveness and eco-friendly production capabilities. This should be pursued by strategically utilising ODA, seeking linkages with trade agreements, and supporting domestic companies’ implementation of supply chain due diligence.

Against the backdrop of growing political, diplomatic, and military- security significance, the strategic value of the Global South has been steadily increasing. The Global South is not an entirely new concept; rather, it constitutes a meta-category encompassing what were previously referred to as the Third World or developing countries, as well as regions sharing geographical commonalities in the Southern Hemisphere and historical experiences of discrimination and structural inequality.

Alongside the rising prominence of the Global South, another critical issue has recently drawn considerable attention in the international community: economic security. This reflects how the economy and security are once again becoming closely linked amid intensifying U.S.–China strategic competition and escalating rivalry over leadership in advanced science and technology. Contemporary discussions of economic security primarily focus on key areas such as supply chain resilience; the enhancement of industrial competitiveness, including the protection of advanced technologies; the prevention of excessive dependence on specific countries through the diversification of trade and investment; and responses to economic coercion (or economic statecraft).

As the importance of both the Global South and economic security has grown, it has become increasingly necessary to conceptualize these two dimensions in an integrated manner and to devise effective policy responses accordingly. Japan and China, both neighboring countries of the Republic of Korea, have already been actively pursuing Global South strategies and linking them closely with their respective economic security policies.

Against this backdrop, this study examines Japan’s and China’s Global South strategies from the perspective of economic security; analyzes the implications of these strategies for Korea’s own Global South strategy; and explores the potential for cooperation among Korea, China, and Japan in areas where economic security policy intersects with Global South strategies.

The analysis suggests that, compared with the Global South strategies of Japan and China, Korea’s approach remains insufficiently systematized. In particular, there appears to be a notable lack of systematic consideration regarding how to formulate and implement a Global South strategy explicitly grounded in economic security concerns. In response, this study offers several policy recommendations.

First, Korea should urgently establish a comprehensive and coherent Global South strategy, supported by a governance framework that brings together actors from government, academia, and the private sector. Policymakers, scholars, and business stakeholders should engage in joint deliberations on how to systematically design and implement a national Global South strategy, culminating in a unified strategic guideline.

Second, the Global South strategy should be closely aligned with economic security considerations and tailored accordingly. Based on a comprehensive assessment of Korea’s economic security environment, detailed analyses are needed to identify priority needs and to determine which Global South countries should be engaged first to strengthen cooperation. In particular, given that stability and progress in inter- Korean relations are crucial for establishing a stable economic security environment, this unique geopolitical context should be actively reflected in the formulation of Korea’s Global South strategy.

Third, institutional frameworks to promote people-to-people exchanges with the Global South should be strengthened. Such exchanges should encompass a wide range of areas, including tourism, international students, and highly skilled talent in science and engineering, and urgent institutional reforms are required to facilitate these interactions.

Fourth, Korea should develop a long-term Global South strategy that can be pursued consistently regardless of changes in political leadership, similar to China’s Belt and Road Initiative and Global Development Initiative (GDI), as well as Japan’s New Policy toward Enhanced Cooperation with Global South Countries.

Along with these implications for Korea’s Global South strategy, it is also necessary to consider cooperation among Korea, China, and Japan. To enhance the effectiveness of their respective Global South policies, the three countries should seek ways to reduce unnecessary competition and expand avenues for mutual cooperation. A representative example is cooperation with African partners. Rather than operating separate and competing platforms for engagement with Africa, the three countries could consider establishing an integrated framework—such as an “Africa + Korea–China–Japan” platform—to pursue more efficient cooperation. However, instead of hastily advancing “Korea–China–Japan + α” cooperation platforms in regions such as Africa or Latin America, a phased approach grounded in a long-term vision would be more appropriate. As an initial area of cooperation, the joint pursuit of secure access to critical minerals—an issue prioritized by all three countries—could be considered.

Finally, it is important to note that trilateral economic security cooperation should not remain confined to institutional or technical dimensions, such as critical mineral supply chains, but should also entail a broader shift in perception. Korea, China, and Japan need to move beyond zero-sum thinking, in which each views the others as competitors or potential threats to national economic security, and instead embrace a win–win perspective that recognizes the possibility of mutual benefit and coexistence. Under such a mindset, the Global South can emerge not as another arena of competition among the three countries, but as a new space for cooperation that generates shared national interests.

Executive Summary

Contributors

List of Abbreviations

Preface

Chapter 1: Overview of the Bilateral Defense Industry Collaboration

Chapter 2: South Korea’s Rise to Global Arms Market Player

Chapter 3: India’s Defense Sector Development and Future Trajectories

Chapter 4: Strategies for Collaboration of Defense Industry Sector

Chapter 5: Way Forward and Policy Recommendations

References

Appendix

This study is based on the hypothesis that defense industry cooperation between India and South Korea (ROK) goes beyond the technical dimensions of defense and technology transfer. Instead, it serves as a strategic pathway to foster deeper mutual trust, enhance economic interdependence in trade and investment, and strengthen both countries’ positions as credible middle powers in an increasingly fragmented and volatile international order.

Building upon decades of export-driven growth that underpinned the “East Asian Miracle,” South Korea—now the world’s tenth-largest economy—seeks to transition into a sustainable, high-technology economy with the goal of joining the “higher high-income” group, by exceeding a per capita income of USD 40,000. Simultaneously, it is developing a modern and diversified defense portfolio to deter persistent security challenges from North Korea and its ongoing efforts to attain international recognition as a nuclear state. Confronted with external security threats and a protectionist trade environment under US President Donald Trump’s “America First” agenda, Seoul has adopted a dual-track innovation strategy. It aims to become one of the world’s top three artificial intelligence (AI) powers and among the top four global arms exporters in the near future.

India—the world’s largest democracy by population—is poised to become the third-largest economy within a few years under Prime Minister Narendra Modi’s “Make in India - Resilient India” policy. Departing from its historically inward-oriented economic posture, India is now positioning itself to seize global trade and investment opportunities. With per capita GDP still around USD 2,400, India seeks sustained high growth through deeper integration into the global economy. On the strategic front, New Delhi seeks to become a military power commensurate with its rising economic stature—not only to meet regional security challenges but also to strengthen its diplomatic profile as a leading middle power and a representative voice of the emerging Global South. Consistent with its long-standing multi-alignment approach, India continues to engage with a wide spectrum of partners, including the Western world, Russia, and China.

Given their ambitious national trajectories and complementary developmental strengths, India and South Korea share a strong potential for strategic convergence as like-minded partners. Both nations pursue strategic autonomy and diversification strategies in response to the intensifying US-China rivalry and broader instability across the Indo-Pacific. This shared pursuit of autonomy provides a compelling rationale for both countries to deepen and redefine the nature of their collaboration. Despite these synergies, bilateral economic connectivity remains underdeveloped. The Comprehensive Economic Partnership Agreement (CEPA), launched in 2010, has yet to deliver outcomes comparable to South Korea’s trade and investment linkages with China or Vietnam. In an era of proliferating minilateralism and protectionist fragmentation, both countries must find innovative pathways to unlock their untapped potential and realize the full promise of their strategic partnership.

In this context, defense industrial collaboration offers a powerful catalyst for expanding trust, trade, and investment. The India-South Korea partnership in defense production has already yielded tangible results, exemplified by India’s acquisition of the K9 Vajra-T self-propelled howitzer, co-developed with South Korea’s Hanwha Defense—a landmark success story that opens the door for wider cooperation. The implications of such collaboration extend far beyond defense procurement: by working together in arms production and technology transfer, Seoul and New Delhi can cultivate long-term strategic trust and generate spillover effects across broader economic domains.

Defense cooperation inherently builds trust because it touches the most sensitive spheres of national sovereignty—military capability, national security, and long-term technological capacity. Unlike ordinary trade, arms collaboration requires a multilayered ecosystem involving government-to-government (G2G), business-to-government (B2G), and business-to-business (B2B) interactions. For such cooperation to be robust, both sides must align top-down strategic agreements with bottom-up industrial innovation.

Initially focused on self-defense, South Korea’s land, naval, and air systems have now evolved into competitive export products, complementing its high- tech industrial structure. Successive South Korean governments have recognized the defense sector as a vital export frontier alongside semiconductors, electronics, and shipbuilding. Given the current defense portfolios of both countries, numerous avenues exist for deeper cooperation beyond the K9 Vajra project. Potential collaborations include South Korea’s K2 main battle tank with India’s indigenous rocketry and missile programs in the land domain; joint R&D between India’s Tejas and South Korea’s KF-21/FA-50 fighters in the air domain; and cooperation in drone technology and AI-based defense systems. In the naval sphere, South Korea’s world-class shipbuilding expertise can support India’s ambitions in carrier and destroyer production, as well as joint R&D in submarine propulsion and anti-submarine systems—areas aligned with their shared interest in a blue-water navy for Indo-Pacific security.

Across land, air, and sea, India and South Korea exhibit both overlap and complementarity. India brings scale, operational experience, and a strong policy push for indigenization under Atmanirbhar Bharat; South Korea contributes advanced technology, manufacturing efficiency, and export orientation. By combining India’s demand with South Korea’s supply capacity, the two countries can move beyond transactional arms sales toward co-development and co- production ecosystems—spanning tanks, howitzers, fighters, drones, submarines, and warships.

Toward a Sustainable and Future-Ready Defense Partnership

To enhance its defense industry and strengthen its role as a major arms exporter, South Korea is undertaking a wide range of R&D programs aimed at narrowing capability gaps across multiple domains. These R&D efforts can be pursued through both indigenous initiatives and international cooperation—areas where India and South Korea can selectively collaborate on shared defense technology agendas.

Recognizing that the future of warfare will be shaped by frontier technologies such as artificial intelligence (AI), autonomous systems, hypersonics, and electronic warfare, South Korea is pursuing a dual-track strategy: scaling up conventional arms exports to meet rising global demand, while simultaneously investing in frontier technologies to secure its long-term strategic edge. This dual approach aligns closely with India’s own defense industrial development under Atmanirbhar Bharat—balancing immediate operational needs with investment in next-generation technologies.

At present, India and South Korea maintain a buyer-seller dynamic. For a sustainable partnership, they must transition toward a co-developer relationship, grounded in joint R&D and long-term industrial collaboration. The India-France Rafale program and the India-Israel Barak-8 partnership exemplify how trusted, high-technology cooperation can bridge capability gaps while strengthening domestic industrial ecosystems. France demonstrates the power of deep strategic alignment and joint manufacturing; Israel showcases agile, innovation- driven co-development. Together, these partnerships form pillars of India’s evolving defense diplomacy—combining strategic autonomy with technological interdependence.

South Korea, though a newer partner in India’s defense matrix, can follow a similar trajectory. It has rapidly emerged as a global arms exporter by leveraging decades of industrialization to position itself among the world’s top suppliers. India, still the largest arms importer, is actively pursuing indigenization, innovation, and foreign investment to reduce dependency and build domestic capacity. The convergence of these trajectories provides fertile ground for collaboration. South Korea’s proven manufacturing excellence and India’s scale and demand can drive co-production, joint research, and a new wave of defense sector investment. Beyond defense, such cooperation could stimulate linkages in AI, aerospace, and advanced manufacturing.

Policy Recommendations for a Robust and Enduring Framework

1. Institutionalize Strategic Dialogues:Establish a regular summit mechanism and a biennial 2 + 2 meeting of Foreign and Defense Ministers dedicated specifically to defense- industry cooperation. These platforms should include fast-track decision-making to mitigate bureaucratic delays and manage risk effectively.
2. Adopt a Dynamic Defense Roadmap:Build upon the success of the K9 Vajra program by expanding collaboration into frontier technologies and joint export ventures. A shared roadmap should guide R&D priorities toward a future-ready defense ecosystem aligned with Indo-Pacific security objectives.
3. Prioritize Co-Development and Technology Transfer:Focus on areas of strong complementarity—artillery upgrades, naval shipbuilding, and space-based surveillance—leveraging South Korea’s high-tech engineering and India’s manpower, production scale, and market access.
4. Expand Maritime and Shipbuilding Cooperation:Launch a South Korea-India Naval Shipbuilding Partnership Initiative to jointly develop frigates, corvettes, and auxiliary vessels in Indian shipyards, including cooperation on green-ship technologies and submarine platforms.
5. Pursue Space and Satellite Collaboration:Co-develop dual-use satellites for defense communication, weather monitoring, and disaster response to enhance situational awareness and humanitarian coordination.
6. Deepen Cooperation in AI, Cyber Defense, and Quantum Computing:Encourage cross-investment and joint innovation in emerging technologies to ensure resilience and competitiveness in next-generation defense applications.
7. Align Trade and Defense Policies:Upgrade the Comprehensive Economic Partnership Agreement (CEPA) to integrate defense-industry cooperation and unlock the full potential of technology and capital flows.
8. Advance Middle-Power Diplomacy in the Indo-Pacific:Leverage the defense partnership as a platform for minilateral cooperation with ASEAN, Australia, and the EU—shaping regional governance frameworks and promoting collective security.

Conclusion

Defense industry collaboration between India and South Korea is far more than an arms trade arrangement; it is a strategic necessity for two middle powers navigating an unpredictable global order. By institutionalizing cooperation, leveraging complementarities, and aligning with regional frameworks, both nations can elevate their partnership into a cornerstone of Indo-Pacific security and economic resilience.

The pathway forward is clear: deepen trust, expand co-production, integrate emerging technologies, and embed bilateralism within multilateral structures. If pursued with vision and pragmatism, India-South Korea defense cooperation can stand as a hallmark of constructive middle power leadership, symbolizing a shared commitment to innovation, stability, and strategic autonomy by 2047.