This report examines how EU’s ‘open strategic autonomy’ has been developed and realized facing recent changes in the global trade landscape, especially in areas such as supply chain, energy transition, immigration, and security integration. In response to the fragmentation and blocization of the global economy, which manifested in the US-China strategic competition, the COVID-19 pandemic, and the Russia-Ukraine war, the EU has sought to strengthen the competitiveness of its own high-tech and strategic industries and reduce its dependence on foreign countries (strategic autonomy). At the same time, it seeks to continue cooperation with like-minded countries with shared values and interests to address challenges that require global effort (openness).

 Chapter 2 defines open strategic autonomy in more detail and investigates how it has been implemented in the supply chain sector. The industrial and trade policies that have been published since the inauguration of the current EU Presidency in 2019 embody the concept of open strategic autonomy, which is defined as “strengthening competitiveness Executive Summary in the region to defend EU interests without relying on other countries, while continuing to cooperate with partners who share the values and interests.” After the Russia-Ukraine War, the EU continued its efforts to identify areas of weakness in the EU’s competitiveness and to localize and diversify its supply chains. This strategic shift was reflected in a series of supply chain legislation such as the European Chips Act, Critical Raw Materials Act, Net-Zero Industrial Act, and Corporate Sustainability Due Diligence Directive. The EU sets targets for the share of home-produced goods and provides various support measures such as subsidies, tax benefits, R&D investment, and workforce training. In addition, the legislation emphasizes bilateral and multilateral strategic partnerships, reflecting the open strategic autonomy of the region to continue cooperation with like-minded countries.

Chapter 3 investigates energy policies of the EU and EU Member States. The energy crisis brought on by the Russia-Ukraine war illustrated how overdependence on a single country can have a profound impact on the EU economy. In response to the energy crisis, the EU sought to phase out or suspend energy imports from Russia, diversify its energy import sources, increase the production of renewable energy, and promote energy efficiency. The energy policies of Germany, France, Finland, and Poland are then examined as case studies. Germany’s recent energy policy has been characterized by an increased use of renewable energy sources, the closure of all nuclear power plants, and an increase in hydropower generation. France, on the other hand, has maintained a high reliance on nuclear power, while persistently investing in renewable energy to achieve climate neutrality by 2050. Finland is a low-carbon country with a high share of renewable energy, and has been importing energy from neighboring countries such as Norway and Estonia after the outbreak of the Russia-Ukraine war. Poland is the most fossil fuel-dependent country in the EU, and as such, it is expected to face the Executive Summary • 259 most difficulties in implementing EU-wide green transition policies. Therefore, Poland aims to overcome this limitation by starting a nuclear power project. It is common to all four countries that they are trying to expand renewable energy while developing alternative energy sources such as nuclear and hydrogen power. Increasing energy independence through the development of alternative energy sources is expected to increase the EU’s strategic autonomy in the energy sector.

 Chapter 4 analyzes the trend of Ukrainian refugee influx to European countries and their impact on the labor markets, through literature review, fieldwork and statistical analysis. Immediately after the outbreak of the Russia-Ukraine war, there was a large influx of Ukrainian refugees to European countries, and EU member states actively accepted refugees by invoking the Temporary Protection Directive. The refugee influx to Europe is characterized by a high proportion of women and children and a high number of highly educated and skilled workers. The empirical analysis in this chapter, using microdata from UNHCR, shows that access to language training is significantly and positively associated with a refugee’s probability of employment. While the impact of refugee flows on the labor markets of host countries still needs further studies, an increase in the labor force with no significant impact on labor market conditions is observed so far. While Europe has been welcoming Ukrainian refugees, it showed a very different attitude towards migrants and refugees from the Middle East and North Africa, including Syria. This could be explained by an attempt to overcome the security threats posed by the war through solidarity with Ukraine, a country with a similar position. This illustrates one aspect of the EU’s tendency to selectively accept migrants and refugees to defend its interests and provides evidence that the EU’s commitment to open strategic autonomy is also observed in the area of immigrant acceptance.

Chapter 5 focuses on the changing concept of strategic autonomy in the EU’s security sector after the war. While the need to strengthen the EU’s defense capabilities in response to the immediate security threats of war has intensified, Europe’s strategic autonomy has remained an elusive goal, even as its security dependence on the United States has increased dramatically. The accession of traditionally neutral countries such as Sweden and Finland to the US-led NATO alliance signals a growing preference for increased US-dependent defense capabilities. However, the EU has pursued a strategy of strengthening its own security and defense capabilities independent of NATO. The provision of arms and munitions to Ukraine and the implementation of training missions to Ukraine’s armed forces are examples of such moves. The EU’s efforts to establish a common market for defence procurement have also been partially realized with the passage of the European Defence Industry Reinforcement through Common Procurement Act. The EU’s strategic autonomy in the security field will be determined by its progress in establishing relations with the United States and NATO, building a regional defence industry ecosystem, supporting Ukraine’s post-war defence build-up, and security cooperation with Indo-Pacific countries.

Chapter 6 presents policy implications for Korea based on the above findings. The EU’s expanding support for local industrial competitiveness is likely to pose challenges for Korean exporters, but there are also opportunities for Korea to take advantage of this. European Chips Act, Critical Raw Materials Act, Net-Zero Industrial Act are all concerned about expanding bilateral and multilateral cooperation with trusted partners. In addition, the EU’s recent supply chain legislation is characterized by weak geographical discrimination, so it is expected that Korean companies with a local presence will be able to enjoy similar benefits as EU companies. Taking advantage of the EU’s favorable aspects of its foreign and economic policies will not only benefit our companies, Executive Summary • 261 but will also allow us to make a joint contribution to addressing global challenges that require international cooperation, such as the reshaping of the international order, supply chain pressures, climate change response, and labor supply shortages. To this end, Chapter 6 identifies areas where we can expand our cooperation with the EU in the energy, immigration and security sectors. Finally, the challenges of the changing global trading environment faced by the EU are the same challenges faced by Korea, and we need to learn from the EU’s responses and use them to develop strategies tailored to our own circumstances. While it is beyond the scope of this report to formulate a specific foreign economic and economic security strategy for Korea, the EU case analyzed in this report is expected to serve as an important reference point.

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. 

The global trading environment is changing rapidly due to disruptions in global supply chains caused by the COVID-19 pandemic and the Russia-Ukraine war. This combined crisis, accompanied by inflation, tight monetary policies, and a consequent decline in investment, is changing the trade paradigm. The emphasis on participating in the Global Value Chain(GVC) and maximizing efficiency through a global division of labor is shifting to reducing the length of the value chain and developing the Regional Value Chain(RVC). In Addition, the pace of digital and green transformation is accelerating to build economic resilience for inclusive and sustainable growth.

As the global market becomes more fragmented, Africa, with its 54 countries, is attracting attention for its potential for market growth, abundant resources, and geopolitical influence in the international community. Major powers such as the U.S., EU, China, and Russia are moving to strengthen their cooperation with Africa. Korea is facing demands to diversify economic partnerships in order to achieve economic security. Therefore, it is high time to consider expanding its relations with Africa as an emerging economic partner.

Korea and Africa can establish a mutually beneficial cooperative relationship and become complementary partners in economic cooperation by combining Africa’s natural resources, labor force, and market potential with Korea’s experience in economic development and technological innovation. In the face of the increasing uncertainties in both the domestic and international economic and trade environment, Korea is seeking to diversify its export partners, secure its supply chains, and identify new growth drivers. On the other hand, Africa, in the midst of a green transition, needs to achieve industrialization and export diversification. This would enable it to expand its participation in GVC while developing RVC.

In this regard, this study aims to develop medium to long-term strategies for economic cooperation between Korea and South Africa. As a member of both BRICS and G20, South Africa occupies a significant position in the African economy, ranking first in trade volume and second in foreign direct investment within the region. It serves as a strategic gateway to entering the sub-Saharan African market and is a leader in the economic integration process of the Southern African Development Community (SADC), the Southern African Customs Union(SACU), and the the African Continental Free Trade Area(AfCFTA) agreement. In particular, as a beneficiary of the United States’ African Growth and Opportunity Act(AGOA) and the European Union’s Economic Partnership Agreements(EPA), the country can serve as a manufacturing hub for the U.S. and EU markets.

In Chapter 2, the study examines the supply chains in South Africa and Africa, and offers suggestions on how Korea can cooperate with South Africa in the automotive and critical minerals sectors, where South Africa is internationally competitive. In the African region, economic integration has been pursued, with AfCFTA, launched in 2021, serving as the flagship. AfCFTA aims to create a single market encompassing 54 countries and a population of 1.3 billion, with the goal of increasing both intra- and extra-African trade, promoting industrialization, and enhancing the capabilities of the manufacturing and services sectors. However, the successful implementation of AfCFTA depends on the development of infrastructure such as transportation, ICT, and energy.

The Southern Africa participates significantly in the global mining value chain and is engaged in downstream manufacturing activities . To enhance the regional value chain, it is necessary to expand the high value-added manufacturing sector and improve the value chain in the mining sector. Despite its advanced economic structure, South Africa relies on minerals like platinum, gold, manganese, nickel, and copper for more than half of its exports. As a result, the government is pursuing strategies to diversify exports by enhancing the competitiveness of the manufacturing sector, including automotive, clothing, agro-processing, pharmaceuticals, and electronics.

South Africa, the largest automotive producer and consumer in Africa, has a long history in the automotive industry dating back to the 1920s. The government has strategically implemented protectionist policies to boost the global competitiveness of the automotive industry, resulting in its growth to become the largest manufacturing sector. Major automotive companies have made their way into South Africa to produce cars through outsourcing. With the stable establishment of the South African automotive industry ecosystem, Japanese, European, American, and Korean automotive companies have expanded their investments in South Africa. European companies mainly export cars produced in South Africa to Europe, while Japanese companies use South Africa as a base to penetrate the sub-Saharan African market. With the implementation of AfCFTA, South Africa could potentially become a regional hub for automotive manufacturing.

Korea can view South Africa as a gateway to sub-Saharan Africa and a detour to markets in Europe and the United States. As demand grows, the prospect of cooperation in electric vehicle production becomes increasingly viable. In the long term, Korea can support the development of the regional value chain with a hub-and-spoke model, where South Africa becomes a center of finished vehicle production, while neighboring countries manufacture and supply automotive components.

As the green transition gains momentum, the demand for green minerals is predicted to soar. A stable mineral supply chain has never been more critical, prompting the US and the EU to develop strategies to reduce their dependence on specific countries and to internalize their mineral supply chains. The US established the Mineral Security Partnership(MSP) to underline supply chain diversification and stabilization, investments in the supply chain, ESG compliance, and recycling of core minerals. For Korea, active participation in multilateral organizations such as the Indian-Pacific Economic Framework(IPEF) and MSP is necessary. In addition, the establishment of industry-specific channels for technology cooperation, information sharing, and research and development is crucial to ensure a stable supply of critical minerals. Korea can support the improvement of value chains in African mineral-producing countries. South Africa, as a major producer of critical minerals, is a crucial partner for Korea. Korean companies should proactively engage in overseas resource development, and the government should formulate policies to promote investment in the mineral sector. Companies venturing into the local market should take responsibility for the entire spectrum of the critical mineral supply chain to avoid problems such as environmental pollution, human casualties, labor exploitation, and human rights violations.

In Chapter 3, the analysis focuses on the cooperation between Korea and South Africa in the area of digital trade. Globally, the demand for contactless services has surged in the wake of the COVID-19 pandemic, spurring a parallel increase in the demand for digital transformation across Africa. As a result, digital trade, encompassing the trade in goods and services using digital technology and trade in ICT services , has grown in importance. The volume of the ICT services trade in South Africa has been on a steady upward trajectory, with Europe and Asia emerging as key partners. AfCFTA is poised to expand digital trade within the African region in the future. However, hurdles such as digital taxation, consumer protection, cybersecurity, regulation, and infrastructure need to be addressed to facilitate the expansion of digital trade in the region. Korea can support the the establishment of digital trade standards and systems during the implementation of AfCFTA and help expand digital trade within Africa.

The South African government’s Integrated ICT Policy White Paper underscores the importance of digital accessibility, digital security, digital infrastructure development, digitization of government services, and digital inclusion. South Africa, home to the highest number of e-commerce companies in Africa, is witnessing rapid market growth. Among South Africa’s digital technology start-ups, the proportion of e-commerce/retail companies(10.2%) is second only to fintech(30%). South Africa has recently enacted legislation such as the Consumer Protection Act, the Electronic Communications and Transactions Act, and the Protection of Personal Information Act, in line with these strengthened regulatory policies.

The United States announced the Digital Transformation with Africa Initiative(DTA) in 2022 with the aim of broadening cooperation in the digital economy, infrastructure, human resource development, and the digital environment. The U.S. exports ICT services from global technology giants to South Africa, while primarily investing in the establishment of data centers. India boasts significant ICT service exports to South Africa in the telecommunications, finance, retail, manufacturing, and healthcare sectors, mainly to small and medium-sized enterprises. Although the volume of China’s trade in ICT services with South Africa is not substantial, Chinese telecommunications companies have recently made considerable investments in ICT infrastructure, including the construction of 5G networks and data centers in South Africa. trade in ICT services between the EU and South Africa is active, with Ireland being South Africa’s largest trading partner in ICT services and the Netherlands being the largest investor in South Africa. The EU has announced the Global Gateway Strategy, which includes projects for enhancing infrastructure in developing countries, and for digital inclusion and sustainable network development in the African region. Korea should enhance its cooperation with South Africa in areas such as technology transfer, infrastructure development, digital convergence such as e-government and smart cities, digital trade regulations, and digital skills development.

Chapter 4 analyzes cooperation in tackling climate change, a pressing issue that significantly influences economic growth in Africa. Although Africa contributes a mere 4% of global greenhouse gas emissions, it bears the brunt of climate change impacts, including increased precipitation, temperature fluctuations, and natural disasters. Given the region’s heavy reliance on fossil fuels for economic growth, the transition to a low-carbon economy is pivotal. South Africa, in particular, ranks among the world’s top 20 carbon emitters, with annual emissions exceeding 430 million tons. The 2022 floods in the KwaZulu-Natal region underscore the escalating risks of climate-related natural disasters.

The Southern African Development Community(SADC) has adopted a Green Economy Strategy that addresses sustainable resource management, energy efficiency, climate change technologies, green infrastructure, and waste management. South Africa is aligning with the Paris Agreement through its Nationally Determined Contributions(NDC) and a Low-Emission Development Strategy 2050, aiming to halve coal-fired power generation from 88% in 2020 to 44% by 2030.

In light of the burgeoning global cooperation on climate change, Korea needs to identify its comparative advantages to carve out a unique position in the South African market. China, dominating 70-80% of the global solar value chain, is actively partnering with South Africa in green energy development. China has established solar panel factories and energy storage systems in South Africa. The UK is bolstering ties with South Africa in solar energy and green hydrogen, participating in the construction of Africa’s largest green hydrogen and green ammonia plant, and supporting technology transfer and workforce training.

South Africa’s growing demand for small-scale self-generation and improved power transmission efficiency presents opportunities for collaboration in energy storage systems. In the wind and solar energy sectors, Korea should capitalize on its technological prowess and competitive pricing. With over 80% of Korea’s hydrogen demand projected to come from overseas by 2050, South Africa’s abundant renewable energy sources offer potential for green hydrogen production. Initial collaboration could focus on hydrogenpowered vehicles and hydrogen transportation, and eventually expand to renewable energy and electrolysis technology for long-term cooperation. Furthermore, Korea could consider collaboration in the nuclear power sector, considering South Africa’s emphasis on nuclear power for a balanced energy mix.

Chapter 5 delves into the potential for cooperation in South Africa’s health sector. Despite improvements in health-related Sustainable Development Goals(SDG) indicators, South Africa grapples with challenges such as a growing elderly population, a gap in health services coverage relative to the escalating incidence of non-communicable diseases, and pronounced disparities between public and private healthcare services. South Africa is striving to enhance access to medical services, boost transparency and effectiveness of these services, and broaden universal health coverage. South Africa has the largest medical device market in sub-Saharan Africa, and the market size is projected to grow by over 20% over the next five years. However, the country relies heavily on imports for medical devices, with a 90% import dependence rate, mainly from Germany, the United States, and China. The pharmaceutical industry is also substantial, but it imports over 80% of pharmaceuticals.

In Africa’s health sector, the U.S. is working to develop the health workforce, fortify pharmaceutical capacity, and construct medical infrastructure, while Japan concentrates on enhancing public health and sanitation, and establishing sustainable medical resource and disease management systems. The EU has established a Global Health Strategy to aid developing countries with integrated health services and universal health coverage(UHC). Its major projects in Africa underscore local pharmaceutical development, strengthening public health facilities, and building digital health systems.

In South Africa, the healthcare sector offers growing opportunities for Korea to collaborate in areas such as universal health coverage, medical devices, pharmaceuticals, digital health, and healthcare service management. To begin with, Korea can share its experience and best practices in economic development and policies in the health sector. Policy advice projects can be funded through ODA, while private sector participation is essential for the other sub-sectors. Anticipating the growth of South Africa’s healthcare industry and the demand for high-quality medical equipment, Korea can strategically expand exports of medical equipment. In pharmaceuticals, establishing joint ventures with local companies may be a viable option given the highly competitive market and stringent regulations. Furthermore, collaboration in digital healthcare and hospital management systems can be intensified.

In the medium to long term, it is crucial to enhance collaboration between Korea and South Africa in areas such as supply chain restructuring, digital trade, climate change response, and healthcare. Formulating a unified strategy for South Africa and sub-Saharan Africa is vital, and this should be complemented by establishing regular channels for discussion on economic cooperation. Trade agreements can serve as a catalyst for a long-term and stable economic relations. There is a growing need for the private sector to expand its presence into core sectors such as mining, manufacturing, and the digital economy. To create a stable investment environment for Korean companies, it is necessary to establish an integrated market information system, provide assistance in the initial stages of market research and feasibility studies, and expand financial support to mitigate the risks associated with entering new markets. Korea should strive to establish itself as a reliable partner that provides high-quality products and services, thereby expanding economic cooperation with South Africa.