This study explores possible frontiers for industrial cooperation among Korea, Russia, Kazakhstan and Uzbekistan. While regarded as one of major foreign policy agenda, the ‘Eurasia Initiative’ lacks practical programs to achieve the desired goals of the Initiative, mostly due to the external constraints imposed by geo-politics surrounding the Korean peninsular. This motivation of this study is find common interests of these countries in order to provide a list of practical programs for cooperation. It focuses on the area of industrial cooperation between Korea and the major Eurasian countries. The Eurasian countries pursue diversification and upgrading of their industrial structure, specially promoting manufacturing sectors, though they are differ in how they implement their strategies. However, these countries are believed to be far behind other countries with respect to internationalization of industries, which seems to be one of the most important factors for competitiveness and economies of scale. As far as the Korean industry is concerned, international cooperation through fragmentation or production sharing should be considered as an effective strategy to promote SME. In this study, we look into the characteristics of industry structures and industrial policies and major Eurasian countries, then identify policy agenda and specific areas of industrial cooperation with individual countries.
It is well known that industry and trade structure of Eurasian countries are heavily dependent on natural rsources including oil, gas and various minerals. Eurasian countries have made efforts to change the industrial structure by promoting manufacturing sectors. Russia’s industrial policy include various industrial development plans such as ‘Plan for Improvement of Industrial competitiveness’. The Plan aims at promotion of various ‘strategic’ target industriess; aerospace, pharmaceutical and medical, shipbuilding, electronics and wireless electronic industrial development and agricultural development. Russia has activelly employed import substitution policies to support the development plan.
In the case of Kazakhstan, the government has also introduced industrial policy measures in order to strengthen its manufacturing basement. The main implementing institutions are ‘National Agency for Technological Development’,‘Investment Fund of Kazakhstan’and‘Development Bank of Kazakhstan’. Through these institutions, Kazakhstan government channel its development funds. Considering its policy focus, this study identified the major areas of cooperation including petrochemical, chemical, electricity, machine building, and medical supplies. Uzbekistan also has a primary sector driven industry such as agriculture, gold and energy. It has as highly closed economic system under strong state control.
Uzbekistan economy is vulnerable to fluctuations of international commodity prices, which plays negatively against FDI. Just like other Eurasian countries, Uzbekistan pursues diversification of its industry sturcte by promoting the manufacturing sector. Uzbekistan government announced many medium-run industry development programs for industrial competitiveness and sustainable development.
The main purpose of the programs is focused on development of machinery, oil and gas, petrochemical and chemical, textile, food processing industry and agriculture, localization, infrastructure development, energy saving etc. Recently Korea faces economic structural problems such as ‘growth without employment’ and ‘decline of growth potential’. In order to overcome these structural problems, the role of SMEs has been highlighted, in that SMEs cover more than 99% and 86% respectively in terms of the number of enterprises and the rate of employment. Nevertheless SMEs in Korea has special features, which are they are mostly based on domestic demand and linked to large enterprises or conglomerates in terms of supply and demand relation.
Korea’s conglomerates have rapidly entred into ‘global supply chain’, and global economic recession makes them face a slump in exports. These situation tells us SMEs needs to converse their domestic demand basis business to export basis. In this sense, the government policies of supporting SMEs in Korea have mainly focused on strengthening the exporting capabilities of SMEs. However, this research argues the government policy should be transformed and new strategies need to be set up. This research suggests industrial cooperation between Korea and Eurasian countries, Russia, Uzbekistan and Kazakhstan. For this, a new modality for cooperation like ‘TIDA’ needs to be further developed beyond the existing system like FTAs which focus on market opening.