Cross-border transactions of intangible goods/services and information are rapidly increasing, and raise new issues in terms of both domestic and international rules. This study defines digital trade and identifies issues of cross-border digital trade and its economic potentials. Especially we focus on three major issues of cross-border digital trade: cross-border data transfer, IPRs and taxation issues.
Chapter 2 defines digital trade and categorizes the relevant issues by examining international debates, economic theories, and empirical literature. Digital trade is commercial transactions conducted over internet by methods designed for receiving or placing of orders. Payment and delivery do not have to be conducted over internet. Subjects of digital trade consist of goods, services(digitally deliverable services), digital products that cannot be categorized neither goods nor services(e.g. music downloaded from internet) and diverse kind of information such as private information transferred over internet. Cross-border flows of digitized information generate novel issues.
In a broad sense, we classify issues of international digital trade as follow: ① issues related to cross-border data flows: barriers to international data flows, regulations on privacy protection, localization of computing facilities, etc., ② protection of digital IPRs, ③ taxation on internet services providers located in foreign territories, ④ consumer protection and convenience: payment system, dispute resolution, redress, privacy protection, etc., ⑤ border measures: tariffs, delivery costs, etc.
Korea recently witnesses its e-commerce market growing fast, and has potentials in internet platforms and digital content such as online games. Korean firms now spur development of new internet service businesses such as cloud computing, big data analysis, etc. The rapid growth of East Asian market, especially China, is an opportunity factor. In this sense, Korea need to actively participate in international fora to build global norms of cross-border digital trade. More importantly, Korea has to establish comprehensive, flexible policy making system and upgrade its domestic regulatory system consistently.
Chapter 3 covers issues on cross-border data flows and its implications. It is essential to balance between freer data flows and personal information protection. Countries has introduced different policy measures to regulate data flows across borders and data protection. Emergence of hyper-connected ICT industries such as cloud computing, IoT and big data lead to consider new approach to deal with cross-border data flows and data protection and thus to examine effectiveness of existing regulations and policy measures.
Korea’s policy measures regarding cross-border transfer of personal information should focus on secure use of data. In this context, comprehensive review and improvement of existing regulations, particularly those in contradiction to hyper-connected industries, is necessary. Also, with lessons learned from EU and Japan’s cases, Korea should introduce diverse measures besides prior consent system in order to guarantee freer and safer cross-border transfer of personal information. Korea also should actively take part in international and regional cooperation to harmonize regulatory approaches and enhance interoperatability. Accountability of data processors is a basic condition to secure free and safe flows of personal information.
Chapter 4 examines the trend of international discussions as well as major issues of digital IPRs, where debates arise along with the development of internet technology. In general, due to the characteristics of digital products as public goods, there is a high possibility of market failure, and it is difficult to protect rights with the existing IPR regulations. Main issues of digital IPRs can be divided into ① an issue on whether to strengthen protection of rights on digital products through patent protection, ② an issue on expansion of property rights to items that have not been protected so far like the sui generis database right, and ③ an issue related to reducing internet piracy.
It is necessary to establish multiple IPR protection system including software-related patents and trade secret protection rights(especially related to source codes) as well as copyrights. Also, sui generis database right should be designed not to contradict the protection of personal information. Additionally, Korea has to actively participate in multilateral patent-integration and cooperate to prevent internet piracy.
Chapter 5 draws core taxation issues of international digital trade, and examines them in the context of Korea. Major issues are permanent establishment rule(direct tax), effective VAT collection(indirect tax), and characterization of taxation scope. Korea’s regulation system is not clearly established regarding permanent establishment in cross-border digital trade and destination principle of VAT. Regarding characterization of taxation scope, international discussion begins lately.
Above all, it is necessary to revise tax regulations(VAT and Corporate tax) by reflecting new permanent establishment rule and destination principle. New permanent establishment rule in digital trade should be reflected in tax treaty with key countries like US, China, and Japan. Also, institutional framework like mini One-stop Shop of EU needs to be established for effective VAT collection on cross-border digital trade. In the case of characterization of taxation scope, policies should focus on revising tax regulation by reflecting characteristics of new business, and actively participating in international discussions.
In terms of international trade policy, TPP(Trans-Pacific Partnership)'s Electronic Commerce chapter suggests new rules on global digital trade. In general, Korea has conditions to occupy a strong position to major issues such as privacy protection, cross-border information transfer, location of computing facilities, and requirement of softwares' source codes. Nevertheless, it is necessary to improve domestic regulations and establish a strategy to build up core ICT industries' competitiveness. 

 

As Sustainable Development Goals (SGDs) were adopted in New York in September 2015, attentions on fragile states, where most of people under the poverty line have lived in, have been increased. Because SDGs will more focus on marginalized people in terms of economic and social perspective, it is important to address issues related to fragility in fragile and conflict-affected countries.
Major donors have recognized importance of supporting fragile states since 1990 and they have established separate strategies and reflected it into country assistance strategy. They especially emphasized on supporting fragile states in order to achieve Millennium Development Goals (MDGs). However, 43% of the world’s poor now live in countries and economies on the 2015 OECD fragile states list, by 2030, poverty could become increasingly concentrated in fragile states.
Therefore, it requires much more effort to reduce poverty and development issues in fragile states such as peace-building, state-building, and humanitarian aid.
Prime Minister’s Office of Korea released 24 priority partner countries for 2016-2020 in early 2015. Among them, 8 countries are categorized as a fragile state and 5 out of 8 belong to Asia. Korea plans to establish new Country Partnership Strategy (CPS) for priority partner countries. Because proportion of fragile states among priority partner countries is high, it is necessary to have cooperation strategy for them before establishing CPS.
This study will analyze definition, standard, major categorizations and characteristics of fragile states as well as discussions on assistance to fragile states. Especially this research chooses Myanmar and Nepal, which were least developed countries (LDCs) as well as fragile states, for case study to figure out how donors and Korea support them in perspective of fragile states.
This study is organized as follows: Chapter 1 describes the objectives, ranges and structure of the research. In Chapter 2, it explains recent trends and issues about fragile states in the international community and analyzes major characteristics of fragile states by reviewing definitions and standards and classification and its criteria. Especially it covers discussions and issues under the OECD Development Assistance Committee (DAC), International Network on Conflict and Fragility (INCAF), and Post-2015 framework. Chapter 3 gives general description on development and characteristics of fragile states in Asia.
Especially it selects Myanmar and Nepal as objects of case study and draws implications for establishing Korea’s new CPS by analyzing their recent development conditions and needs and international communities’ support on them in perspective of fragile states. Nepal’s fragility is studied in terms of violence, justice, institutions, and economic foundation as well as environmental fragility caused by earthquake in early 2015. Also it looks into how major donors, such as the UK and Asian Development Bank (ADB) support Nepal as a fragile states. In case of Myanmar, the study focuses on fragility related to violence, institutions, justice, and conflicts caused by ethnic minority issues and also review how Japan and EU assist Myanmar to reduce fragility under CPS. In Chapter 4, it analyzes current status and policy how Korea has supported fragile states in Asia based and derives policy implications on how Korea should prepare a strategy for supporting fragile states and improve CPS by incorporating characteristics of fragile states into it.
Korea’s policy for supporting fragile states has concentrated on emergency relief and humanitarian aid to recover and reconstruct the country after conflicts or disasters including peacebuilding activities. In order to help fragile states to reduce its fragility and reduce poverty, however, Korea should establish systematic strategy for assisting fragile states beyond refined supports such as emergency relief or humanitarian aid.
First, Korea should clearly set up definition of fragile states, select the proper target country for development aid, and then establish CPS along with the characteristics of fragility each country has. Because every fragile state has different ranges of fragility, it is necessary to strengthen the country-specific approach when establishing and operating CPS. Therefore, it should take precedence to implement comprehensive analysis on how and why fragility could affect development environment and implementation of ODA programs in the country by studying fragile situations, politics, economic situation, and social and cultural aspects.
Furthermore, when establishing CPS, it is need to provide performance objectives and indicators. If objectives and indicators related to fragility are suggested in the CPS, the effectiveness of operation of CPS could be improved by regular and systematic monitoring and evaluation. Due to incorporation of performance objectives and indicators in the CPS, connection between the strategy and each ODA projects could be strengthened and clear direction of the project could be secured when conducting aid programs to fragile states. As studied in Chapter 3, Korea could refer to the cases of major donors who emphasize concrete action plan and evaluation frameworks established through detailed preliminary analysis.
Lastly, comprehensive connected ODA programs under the CPS should be provided in order to improve the effectiveness of development cooperation in fragile states. It is crucial to establish comprehensive strategy considering fragility into the CPS and implement proper ODA programs based on the CPS. In order for that, it is necessary to figure out the way to effectively link grants and concessional loans. In addition, when providing aid to fragile states, it is important to consider to division of labor and harmonization among donors. Therefore, Korea should reinforce basis for cooperation with other donors by pursuing country program-based approach, such as budget support or pooed funding. 

 

China and Vietnam have been the two fastest growing economies in the world in the past 25 years. Each started out as a planned economy in the model of the Soviet Union, and each achieved disappointing economic results. In each country there was a clear break with the past and a shift to a more market-oriented economic system, ratified by a decision of the Central Committee of the Communist Party. In China the key meeting was held in 1978 and launched gaige kaifang (reform and opening up). In Vietnam reform was launched a number of years later at a Party meeting in 1986 under the banner of doi moi (renovation).
In each country reform of the financial system was one important element of reform, an aspect that is difficult and prone to risks. It is useful to examine their record of financial reform, the similarities and differences, and to draw some lessons -- lessons that would be helpful for developing countries in general, and potentially for DPRK in particular. DPRK has some important similarities with China and Vietnam in the early stages of their reform. If DPRK were to pursue market-oriented reform, then the financial lessons of China and Vietnam could be quite relevant.
China and Vietnam both have to be judged as successful in transforming their financial systems from mono-banking to a more market-oriented system that supports a real economy that is also largely market based. A couple of general lessons can be taken from their experience. They have pursued reform gradually, over a period of decades. Second, some of the characteristics of their reform were dictated by country conditions. That said, there were considerable degrees of freedom in various choices and it is interesting that the two countries often made different choices. Some of the potential lessons from financial reform in China and Vietnam come from comparing their different choices and results. So, what are some of the potential lessons for DPRK?
In the area of commercial banking, both China and Vietnam separated commercial banking functions from the central bank and established several state-owned commercial banks. Much of their reform was then concentrated on making those banks operate efficiently, while remaining under state-majority ownership up until today. They both developed policy banks to take over the function of directing credit to particular sectors (agriculture, infrastructure, foreign trade). They both allowed a small amount of entry into and competition among banks. The interesting area of difference is how they treated foreign investment in commercial banking. Vietnam was more open to foreign banks setting up operation. This foreign entry provides healthy competition and stability to the sector. China up until 2015 has resisted foreign banks operating independently in China and has restricted them to about 1% of the market.
While China did not want foreign banks operating independently, it did, however, see the benefit of bringing in big international banks as strategic, minority partners of the four SOCBs. By taking off the balance sheets the non-performing loans, recapitalizing the banks, and bringing in the strategic partners, China was able to improve the performance of the SOCBs and lay the foundation for successful IPOs in Hong Kong. Vietnam was not willing to bring in foreign banks as strategic partners and as a result its domestic IPOs have not been successful.
In the area of monetary policy and inflation control, China provides better lessons than Vietnam. Both countries relied initially on quantitative controls, initially lending quotas for individual banks and later, required reserve ratios that could be raised or lowered to affect the amount of lending. Over time, interest rates have begun to play some role in managing monetary policy. China went through a learning period during which the growth rate of credit and money was too high, and inflation as measured by the GDP deflator, above 10%. But from 1997 until today, China generally kept the growth of M2 below 20% and inflation, in single digits. Vietnam was often trying to push the growth rate higher through faster growth of credit. In Vietnam the growth rate of M2 generally has been above 20% per year, often well above that rate. This has made Vietnam prone to boom-bust cycles in which real growth and inflation both accelerate, but inflation becomes dangerously high. Reining it in then leads to a sharp drop in the growth rate.
In the area of interest rates, the two countries took different paths and there is something to be said for finding a middle ground between the two. Vietnam did not have the option of severe financial repression because people simply would not put domestic currency deposits into banks at sharply negative real interest rates. Early in its reform Vietnam attempted a big bang liberalization of interest rates: it allowed all kinds of different economic entities to offer uncontrolled interest rates to the public. This short experiment ended in disaster because interest-rate liberalization in a poorly regulated environment led to abuses and failures of credit cooperatives. China was at the other extreme, keeping controlled interest rates quite negative in real terms and sticking with interest rate controls long past the point at which they were necessary.
This interest rate policy is one factor behind China’s highly investment-intensive growth model. There is much to be said for an interest rate policy that splits the difference between China and Vietnam. Control interest rates in the early stages of reform but ensure that they are at least moderately positive in real terms. Introduce greater flexibility and market-determination at a pace faster than China did, but probably not during the first decade of reform.
One of the most important monetary lessons from China, Vietnam, and the earlier East Asian industrializers (South Korea, Taiwan) is to not let the currency become over-valued, and preferably to keep it modestly under-valued. If a low-inflation environment can be achieved, such as in China, then pegging to a major currency such as the dollar has some appeal as an anchor, provided the pegged exchange rate makes the country highly competitive, as in China’s case after 1994. However, it is a fact of life that the dollar will vary in value against the Euro, Yen, and other currencies in an unpredictable way. It is a more reasonable policy to try to stabilize the real exchange rate and to allow some modest appreciation over time in order to account for productivity gains. In es sence this involves pegging to a basket and allowing some adjustment over time.
In the cases of China and Vietnam, they each made some mistakes in exchange rate management, in different directions. China, by sticking with its dollar peg in a period when the dollar was depreciating, let its currency become too under-valued resulting in large trade surpluses that complicated monetary policy and were not in the country’s interest. The authorities then had to allow fairly sharp appreciation in order to get back close to external balance. It would have been better to have smooth appreciation of the real effective exchange rate rather than the roller-coaster of devaluation from 1998 to 2005 followed by sharp appreciation after 2005. Vietnam allowed even larger swings in the real effective exchange rate, principally because of big shifts in capital flows (discussed below). Vietnam would have been better off either limiting capital inflows through capital controls or sterilizing inflows when they occurred.
In the area of capital markets, neither China nor Vietnam gets particularly high marks. Each country wanted to severely limit access of firms to the capital markets so that they could use the markets to partially privatize a few key state enterprises. The end result was thin markets, prone to bubbles. It only took a small amount of investor interest to push up prices quickly, leading to inevitable corrections.
Finally, in terms of opening the financial system to the global market there are two distinct issues. It makes sense first to open up financial services to direct foreign investment. Experienced international firms investing in commercial banking, insurance, and other sectors bring stability and competition to these markets. China has missed the opportunity to get these benefits, while Vietnam has been more open. The other issue of international finance concerns opening the capital account to inflows and outflows of portfolio capital. These flows, often referred to as “hot money,” can often be destabilizing and hard to manage at an early stage of development. China was smart to severely limit these flows. China sterilized even direct investment inflows. It may have gone over-board, particularly with the reserve accumulation during the years of severe currency under-valuation, but overall it provides interesting lessons on external management. Vietnam was more open to hot money flows. It is tempting to make use of these flows when foreign interest rates are low, but they do appreciate the real exchange rate and cause problems of volatility. One of the striking differences between China and Vietnam after decades of reform is that China is a big net creditor internationally whereas Vietnam is a big net debtor. The optimal policy for a developing country probably lies in between: making use of FDI but limiting other flows, and accumulating reserves as necessary to prevent large appreciations of the currency.
In summary, the main tasks of financial reformers in transition economies can be summarized in six “no’s”:
·No banking crisis
·No double-digit inflation
·No negative real interest rates
·No over-valued currency
·No stock market bubble
·No hot money inflows. 

 

Transition of North Korea to a capitalist market economy remains a probable though relatively distant possibility. The model of centrally planned economy based on government (public) ownership of all major economic assets and direct regulation of economic activities by authorized state bodies (usually termed “the Soviet model” by Russian economists) has revealed lack of efficiency and ability to adapt to changing conditions. For that reason it has been replaced with a capitalist economic model in all countries of the former Soviet bloc, as well as in China and other former “socialist countries” of Asia. This system has already led to degradation and actual crisis of official economy in North Korea and to its partial replacement with semi-legal quasi-market economy, which combines administrative distribution of major resources with private initiative and de-facto market distribution of an increasing number of products and services. As this has not led to official abandonment of communist ideology and legalization of private sector, the current quasi-market system includes wide-scale corruption as its vital integral part.
The likely pattern of future transformation of North Korean economic system into a full-fledged capitalist market model is likely to be determined by the present state and structure of North Korean economy. Theoretically speaking, the process of transformation may take the form of gradual evolution through adaptation (‘Chinese model’), or of acute crisis and abrupt replacement (‘Soviet model’). The first of these two options implies gradual and measured liberalisation that would allow keeping political, economic and social situation in the country under control of the top leadership. The second one means that the necessary adaptation is constantly delayed by the authorities according to “too little, too late” scenario, which makes inevitable the collapse of old economic and political system.
Comparison of the present economic situation and institutions in North Korea to that of China in the end of 1970’s and that of the USSR in mid-1980’s suggests that the future transformation of economic system in North Korea is more likely to follow the Soviet path. Commonalities include comparatively low share of rural economy, dominant position of military production in manufacturing industry, strong aversion of the leadership to the idea of private property, strong resistance to political change of any kind. Like in the case of the Soviet Union during last years of its existence, North Korean communist leaders demonstrate their inability to narrow the gap between changing realities and outdated ineffective institutions by implementing thoughtout reforms. Instead, they cover the gap with pretence and corruption, thus making eventual collapse of the old economic and political system inevitable in the long run.
That makes possible to use Russian experience of the Soviet-era crisis and the post?Soviet transformation to draw conclusions on the likely characteristics of future North Korean transformation and effectiveness of different policy options. Most important of them include 1) necessity to legalize market regulation and set up relevant institutions before surrendering rights of autonomy to industrial enterprises; 2) the need to set up a firm and clear distinction between private and public assets to prevent the latter being used for private gains; 3) key importance of choosing appropriate model for privatising government assets: 4) necessity to allow for new opportunities for every segment of society, including beneficiaries of the old system, to prevent stalemate or dangerous distortion of the transformation process as a result of powerful social unrest and resistance.
Another important lesson to be learnt from Soviet and post-Soviet experience is that the process of transforming and modernizing a centrally planned economy is not necessarily preconditioned by a transit to a Western model of political system. While economic democratization is a must if successful transition to a capitalist economy is to be secured, formation of a new political system may depend on specific circumstances and be a very conservative process. 

 

Tanzania has been newly selected as a Korea's priority partner country for development cooperation and the Korean government is currently developing a Country Partnership Strategy (CPS) which will be effective starting from 2016. Tanzania is not only one of the Korea's pivotal development cooperation partners but also is a country of high economic and strategic importance in East Africa. The country shows relatively stable political and social conditions in comparison to other African countries; and its fast growing economy and abundant resources raise the potential for development and economic cooperation. Nonetheless, the country still remains as one of the least developed countries in the world. Tanzania faces multiple development challenges such as its weak industrial base, lack of human resources, simple economic structure, and poverty. To achieve effective development aid delivery, therefore, requires a comprehensive study on the complicated development context in Tanzania.
This study aims to provide an in-depth analysis on the development context in Tanzania, propose potential priority areas for Korea-Tanzania development cooperation, and ultimately contribute to the process of establishing the CPS for Tanzania with policy suggestions on cooperation strategies based on the analyses. In order to set the objectives and priority areas for development cooperation with Tanzania, this study has considered the following four criteria: i) the development environment in Tanzania by sector to meet its development needs; ii) Tanzania's policy directions to align with its development policies; iii) the cooperation strategies of other donors for aid harmonization and iv) assessment of the Korea's comparative advantage along with the continuity of its current assistance to Tanzania.
Against this backdrop, the study consists of the following structure. Chapter 2 discusses the development environment and needs in Tanzania to identify development prospects and challenges by sector. Chapter 3 examines Tanzania's mid- and long-term national development plans and poverty reduction strategy to analyze its development strategy implementation system, governance, and obstacles. Chapter 4 presents the overview of development assistance by international community in Tanzania and case studies of major donors to draw implications for harmonized assistance strategies of Korea. Finally Chapter 5 proposes objectives and strategies for Korea-Tanzania development cooperation and makes suggestions on the potential priority areas and assistance plans, based on the analyses of earlier chapters as well as in accordance with the Korea's current assistance status to Tanzania and its improvement plan for CPS formulation.
The GDP per capita of Tanzania remains around USD 700. 75 percent of its population is engaged in subsistence agriculture and 25 percent lives in absolute poverty. Development needs in all sectors are considered to be high. Agriculture accounts for the majority of the country's economy, but its infrastructure such as irrigation system is found to be poor; and its productivity is extremely low. In education, the country's enrollment rate has increased significantly since 2000s yet the drop-out rate remains high and the quality of education needs serious improvement. Although health sector has shown relatively good performance compared to other African countries, sanitation and hygiene in Tanzania are still poor and a lack of safe drinking water poses remaining challenges. In addition, transportation infrastructure such as roads, railways, air transport, ports is in extremely poor conditions, hindering the country's economic development. Lastly, while the government of Tanzania has shown some improvements in governance, it is found to lack capacity to lead the country's development process and the problems of corruption and transparency still remain as big obstacles.
Tanzania's mid- and long-term development challenges can be summarized into three pillars: i) eradication of poverty and human resource development; ii) improvement of industrial structure and expansion of infrastructure; and iii) improvement of economic system and business environment. A long-term Tanzania Development Vision 2025 introduces overall policy directions whereas the mid-term Five Years Development Plan (FYDP) and the National Strategy for Growth and Reduction of Poverty (MKUKUTA) support these visions by providing specific policies. The six core priorities proposed in the FYDP include i) infrastructure, ii) agriculture, iii) industry, iv) human capital development and social services, v) health, and vi) tourism, trade and financial services.
Each core priority includes a set of specific financial plans and operational objectives. Furthermore, MKUKUTA is organized around the three interdependent clusters, namely i) growth for reduction of income poverty; ii) improvement of quality of life and social well-being; and iii) governance and accountability. Specific strategies and policy interventions are mentioned for each cluster. After reviewing its development policies, it can be concluded that the focal areas that the Tanzanian government is promoting with special emphasis are: infrastructure development (e.g., road, railway, water), agriculture for food self-sufficiency, and good governance including institutional reforms, strengthening of public administration, and anti-corruption strategy.
Tanzania is one of the donor darlings due to its strategic importance and political and social stability. In 2013, the net ODA to Tanzania was USD 3.4 billion. Tanzania is in fact the second largest recipient of ODA in Sub-Saharan Africa, following Ethiopia. Over the last decade, foreign aid has doubled in size and is gradually increasing despite the global financial crisis in 2008. While social infrastructure and services sector, including health, water supply and government, captures more than a half of the total ODA to Tanzania, a rapid increase in economic infrastructure and services sector, including transportation, energy and agriculture, has been observed since 2010. In terms of type of aid, project type intervention still occupies a considerable portion of the total aid. In addition, budget support takes up about a quarter of the total aid which is of relatively great importance compared to those of other recipient countries. Moreover, a number of basket funds is being operated at the sectoral level. Most of the donors participate in more than one basket funds. In terms of harmonization among donors, Tanzania presents an exemplary case. For example, donors have established the Development Partners Group (DPG) and provide support based on the Joint Assistance Strategy for Tanzania (JAST).
Likewise, the Korean government has been expanding its support to Tanzania since 2010. In fact, Korea is the sixth largest donor in Tanzania according to the disbursement from the year 2011 to 2013. This is the largest aid provided by the Korean government to a country in Sub-Saharan Africa. Concessional loans are primarily provided to transportation, energy and health sectors. The size of the concessional loans has increased rapidly in recent years, placing Tanzania at the center of the EDCF's operation in East Africa. On the other hand, grants are mainly given to agricultural development, health and medical services, education, and public administration. The size of the grants has been somewhat stagnated since the Tanzania's elimination from the priority partner countries in 2010. Nevertheless, the Korean government has strengthened its development cooperation base with Tanzania by expanding support to multilateral cooperation and/or NGO projects in place of implementing new KOICA projects. In addition, other public agencies such as the Korea Foundation for International Healthcare (KOFIH) and NGOs are gradually increasing their development activities in Tanzania.
Based on the analyses on Tanzania's development needs, development policies, other donors' assistance strategies, and the Korea's comparative advantage along with its assistance experiences to Tanzania, it is recommended that the future strategy for Korea-Tanzania development cooperation focus on the following four areas: i) strengthening public administration capacity; ii) increasing agricultural productivity; iii) improving transportation and electric power infrastructure; and iv) improving industrial capacity in manufacturing.
First, strengthening public administration capacity is the area of the Tanzanian government's keen interests as well as one of the core development objectives of other major donors in the country. The Korean government has also provided continuous support in this sector through the Modernization of Tanzania's Customs Administration Project and National ID System Data Center Project. The study suggests programs for establishing administrative infrastructure using ICT and capacity building based on Korea's development experience in a way of fully utilizing Korea's comparative advantage.
Second, in agriculture sector the study recommends the Korean government to focus on increasing productivity by supplying agricultural skills and materials, providing farmer trainings for commercialization of agricultural products, and establishing a distribution network and storage facilities to increase productivity. As Tanzania has achieved substantial improvements in education and health sectors in rural areas as a result of pursuing Millennium Development Goals (UN MDG-2015), it is desirable to put the emphasis on continuous and self-sustainable growth in rural areas by increasing agricultural productivity as well as rural households income.
It is feasible to implement agricultural development programs with focus on increasing productivity while incorporating social service elements such as education and health when necessary.
Third, improving infrastructure is the top priority of the Tanzanian government as it serves as the foundation for economic growth and industrialization. The study recommends the Korean government to concentrate on expanding transportation infrastructure and stable electric power for industrialization so that Tanzania can realize its potential as the hub of shipping and logistics in East Africa. Korea's assistance in this sector is primarily in the form of concessional loans; yet, other types of support such as grant programs for management capacity building, joint projects with multilateral development banks and public-private partnership can be considered to enhance effectiveness.
Finally, improving industrial capacity is at the center of economic growth as highlighted in the Sustainable Development Goals (UN SDGs-2030). The government of Tanzania likewise has set industrialization as one of the key objectives in the next FYDP acknowledging that industrialization through manufacturing development forms the backbone of the economic growth. As Korea has an experience in implementing government-led strategy to advance its manufacturing industry, the Tanzanian government expects a great deal of support from Korea in this area. In order to improve industrial capacity, a multifaceted approach is necessary. For instance, the Korean government may offer a combination of support through building institutional environment and human resources, supplying infrastructure, industrial technology, vocational training and training for skilled workforce, and strengthening administrative capacity to establish and implement industrial promotion policy. The Korean government may provide support through both grants and loans, Knowledge Sharing Program (KSP), budget support for establishing market-friendly governance and system, and participate in basket funds.
A number of risk factors should also be recognized in the process of establishing development cooperation strategy. From the partner government side, there are risks of failure in fulfillment of financial commitment due to its weakness in public finance, a gap between the data on public documents and reality, the lack of implementing capacity of public agencies and the vestige of socialism, and so on. In addition, insufficient number of Project Management (PM) agencies who are well aware of the local conditions is a big challenge for Korean development agencies. It is essential, therefore, to consider such risks in advance and establish a contingency plan.
Futhermore, it is important to cooperate with other donors to enhance aid effectiveness. There are various aid harmonization channels institutionalized in Tanzania such as the JAST, the DPG and sectoral working groups, and annual consultative group meetings with the partner government. It is critical for the Korean government to actively participate in these meetings and lead the agendas. Tanzania may serve as a platform to pursue joint projects with other donors with more experiences. In doing so, the Korean development agencies can take advantage of this learning opportunity to build their own capacity in development cooperation. Participating in basket funds or providing budget support, which are rather new forms of assistance for Korea, can be also considered in Tanzania where the relevant systems are relatively well established.
The future government-wide CPS can direct and coordinate the development activities of Korean agencies operating in Tanzania by providing principles and strategic guidelines on Korea-Tanzania development cooperation. Establishing the CPS based on rich information and detailed analyses is the key to enhance aid effectiveness and can further provide a foundation for diverse forms of economic cooperation with Tanzania. This study is expected to serve as such preliminary study for establishing the future CPS as well as to provide useful information for the Korean development agencies in Tanzania for their development activities. 

 

With inter?Korean high?ranking officials having a successful contact in August 2015, South Korea and North Korea begins their new relationship and Park Geun?hye government’s “trust building process” also makes progress. Political initiatives towards unification such as Park’s “Eurasia Initiative” is also expected to be invigorated. Together with a sincere inter?Korean reconciliation and cooperation will develop China and North Korea’s relation and economic cooperation, which will also give positive effect to sound development of inter? Korean relation, and eventually facilitate favorable conditions for North Korea to take reform and development. The reform and opening up experience of China indicate that highly centralized planning economy system does not suit to socialism, thus should be abandoned without any hesitation. Whether a market economy can be established in North Korea rests on the self?innovation of its economic policy. However, in China? North Korea’s economic cooperation, applying to market economic ethics will further promote North Korea’s reforming momentum. It is wrong to set the goal of economic cooperation as conducting North Korea’s reform at the very beginning. The new development strategy which focuses on economic construction and the underlying determination to reform are the source of impetus for North Korea’s reform and development. What should be done in the first place is to establish common interests and strengthen the power of economic cooperation. North Korea can learn successful experience of Chinese enterprises through China?North Korea’s  economic cooperation, combining development with support, wealth with rewarding, economic benefit with social benefit, which will form common interests between the two parties. According to this, North Korea’s modern agricultural economy through agricultural cooperation with North Korea, build foundations for North Korea’s economic development through supporting in infrastructure, promote international cooperation through supporting in establishing North Korean Economic Development Zone and involve North Korea in
international cooperation through implementation of “One Belt One
Road” strategy are needed. Entering the era of Kim Jong Un’s ruling, North Korea’s core key word is ‘Change’.
First Chairman Kim Jong Un’s new political ideas which is “Peoplecentered, National Prosperity led by science and technology” resolves the problem of how to adhere to the KIM Il Sung ? KIM Jong Il Doctrine in new situation and new environment and it will have a deep impact to liberation of the North Korean people’s thoughts. After first chairman Kim Jong Un takes power, new economic development measures were established. It is difficult to interpret North Korea's current new economic development measures as reform and opening?up. It is better to consider it as the strategy of re?promoting modernization in a new period. In other words, from institutional perspective, it is a socialist system, from the perspective of development path, it is industrialization strategy, from the perspective of development method, it is limited opening, and from the perspective of development model, it is government?led.
The third generation?Kim Jong Un’s mission is to develop and resolve people’s livelihood issue. Besides, Kim Jong?un’s regime has already entered a crucial phase, where he needs to keep stabilizing domestic situation as well as pay more attention to foreign relationship management. Despite of the limited impacts of international economic cooperation, North Korea’s basic path to development is still likely to be that the opening?up through international economic cooperation stipulates domestic reform, and such reform propels further openingup. Harmonious external environment would become indispensable for North Korea to achieve further development. While under the current circumstances of sanction and confrontation, it is rather difficult to make material progress. In this sense, facilitating external environment can be deemed as necessary condition for North Korea to increase reforming efforts. The most important part in improving North Korea’s foreign relations is improving inter?Korean relations. There is thus no other choice but to expect the role of South Korea in the process of facilitating North Korea’s external environment for reform and development, and President Park Geun?hye’s import role in improving trust within Korea Peninsula is further highlighted. If South Korea is able to wisely fulfill such role, with North Korean nuclear issue’s being resolved, a new era of Eurasia and Northeast Asian cooperation will come and the reunification is possible to be realized. 

 

With the start of the Kim Jong-un regime, North Korea (N. Korea) has actively begun opening its markets to the outside world via SEZs, in efforts to overcome economic issues facing the country. SEZ development has accelerated at the central government level while new EDZs are being established in large numbers at the provincial level, an all-out effort aimed at economic recovery through foreign investment. The South Korean government needs to seek ways to support Pyongyang’s SEZ and EDZ policies to advance inter-Korean relations through the “Trustbuilding process on the Korean Peninsula” and lay the groundwork for national reunification.
This study aims to explore and recommend various measures for support from SouthKorea toward North Korean SEZs and EDZs, to help them achieve their desired outcomes. By doing so, it will provide the basis for North Korea policy of the South Korean government.
The SEZs of the Kim Jong-un regime suggest new possibilities. First, the recently designated SEZs are more open compared to existing SEZs, which may point to greater openness in the future. Second, the North Korean government is promoting diversification and specialization of SEZs and EDZs. Diversification with respect to size (from large SEZs on the national level to smaller SEZs on the provincial level); and specialization in terms of types of SEZ (economic, export processing, industrial, tourism, and agricultural zones). Third, there will be attempts to diversify development methods and developers. On the other hand, limits and challenges still exist.
The measures for South Korean Support of North Korea’s SEZs & EDZs can be classified into ① Building capacity of N. Korean SEZs and EDZs, ② Improvement of conditions at North Korean SEZs and EDZs, and ③ promotion of participation in North Korean SEZs and EDZs.
First, in order to build capacity of North Korean SEZs and EDZs, it is necessary to provide training for the North Korean workforce and share knowledge and experience on attracting foreign investment and operation of SEZs, and facilitate formation of North Korean companies by supporting joint South-North ventures inside the SEZs. Second, in order to improve conditions in North Korean SEZs and EDZs, we must expand access to markets by designating outward processing zones, alleviate economic sanctions, combine infrastructure development cooperation with special zone development, and develop these special zones through international cooperation organizations. Third, it is required that we provide legal and institutional measures for investment in North Korea, expand financial support for S. Korean SMEs in SEZs and EDZs, and support participation in N. Korea’s SEZs and EDZs through multilateral and international cooperation; in order to promote participation in North Korean SEZs and EDZs.
Also, it is important to differentiate in terms of plans for South-North cooperation according to key features of SEZs & EDZs. The list of SEZs & EDZs of North Korea is as follows: Kaesong Industrial Complex (KIC), China-N. Korea Special Economic Zones, Sinuiju International Economic Zone, Agricultural Development Zones, Industrial Development Zones, Hi-Tech Development Zone, and Tourism Development Zones.
In short, it would not be efficient to apply uniformly the model for Kaesong Industrial Complex for different SEZs & EDZs. Of course, as large-scale Special Economic Zones require significant amount of funds for infrastructure development, in addition to extensive intergovernmental negotiations, it is inevitable that the KIC model be considered first. But as for small-scale Economic Development Zones, a variety of approaches are needed with consideration of the nature or area of EDZs.
However, they will require close coordination and cooperation, thus necessitating the participation of various entities such as local government, NGO, industry and business organizations and cooperative organizations, and private enterprises, as well as central government and public authority.
 

 

Unification of the two Koreas will no doubt bring about massive demands for infrastructure investment in the unified Korea. The newly created mass scale investment demand is predicted to provide a new opportunity for South Korea’s economic growth, which is currently facing serious lack of demand due to the 2008 Global financial crisis and China’s economic slowdown. We also predict that this would not only benefit South Korea, but also benefit countries that have close ties with South Korea such as Japan, China, US and Russia.
This research adapts Solow’s neoclassical growth model and inter-industry relationship table and empirically analyzed how fast North Korean economy would grow after unification through infrastructure investment in the North Korean region and how such infrastructure investment would affect not only South Korea but also Japan, China, US and Russia.
The main findings of this research are as follows. First, we found that for rapid economic growth in the North after unification there must be massive amounts of infrastructure investment. Once they begin building infrastructure, the Northern region will be able to catch up to South Korea’s current level of economic development (in 20 years).
Second, the massive demand for funding needed for necessary infrastructure building which is a must in order for unified Korea to achieve economic growth in the Northern region cannot be procured only through domestic savings in unified Korea. To fill this gap we believe Japan has an important role as a provider of funds and technology.
Third, we showed that the massive increase in infrastructure investment in North Korea will bring about big increase in output in not only South Korea but also Japan, China, Russia and the US. Results show that increase in infrastructure demand in North Korea will result in higher output increase effects in Japan, China, Russia and the US than in Korea. In particular, the US was the biggest beneficiary of output increase effects in the service industries. It is evident that economic integration of the two Koreas will not only contribute to economic growth of current South or North Korea, but also to the growth of neighboring countries or the world.
There is no doubt that there are many limitations in this research, as listed in the following. First, the biggest limitation in analyzing the effects of the Korean unification is the lack of North Korea’s economic data. Without exact information on North Korea it is extremely difficult to have a correct estimate of the effects of infrastructure investment. Since it is difficult to obtain accurate data from within North Korea, we need to obtain accurate data through partnerships with international organizations that collect data related to population and health.
We believe that through collaboration with development financial institutions such as the World Bank, we would be able to obtain more accurate information regarding infrastructure building situation used in this research. In particular, data on infrastructure building data related to electricity and transportation is important.
After that, we also need to obtain information on trade between North Korea and its major trading partners such as China and Russia. Import and export data well reflect North Korea’s economic situation and therefore there needs to be cooperative investigation between Chinese and Russian governments and civilian institutions that have access to not only official trade but also unofficial trade statistics.
 In order to accurately understand and analyze North Korean economy through the obtained current data we need to create a detailed database consisting of system of national accounts, inter-industry relation table, and price index categorized by industry and by product. If we are able to create such a database that would enable us to understand North Korea’s current economic situation we will be able to more accurately estimate the effects of infrastructure establishment as well as discuss what kind of policies would be effective.
Second, our analysis assumes that there is no labor movement from the dilapidated North Korea to the wealthy South Korea. In other words, we did not consider any political or social tension rising from inter-Korean economic integration and only analyzed the pure economic aspects. We believe that since political integration or the issue of political structures are beyond the scope of this research, and therefore did not consider these issues.
Considering such limitations the research findings can be considered as analysis of the effects of economic integration such as free trade agreements, since we did not consider free labor movements or tax. In this aspect, the estimates that we drew is a calculation of benefits that free labor movements and trade would entail if current South and North Korea mutually accept the fact that infrastructure investment will bring significant benefits not only to both Koreas but also to Japan, China, Russia, and the US.
We believe that South and North Korea must begin discussing whether to choose an economic integration model that would minimize costs or to choose a unification model that consists of high costs but also have high socio-political benefits, as soon as possible. In particular, it is important to analyze not only the benefits of infrastructure investment which is estimated in this research, but also the social costs of unification.
Since it is evident that free interaction between the two Koreas will bring about great economic benefits not only to the two Koreas but also to all relevant countries, Japan, China, Russia and the US must cooperate to establish a diplomatic environment conducive to a peaceful economic integration of the Korean peninsula.  

 

The aim of this research is to review strategic policies on creating a logistics hub in the GCC which includes infrastructure and hinterland development, and to suggest government policies to enhance industrial and logistics cooperation between Korea and GCC countries. In particular, logistics hub policies being promoted in Saudi Arabia and UAE are analysed as case studies to elicit implications for future government policies.
To summarize research outcomes produced in each chapter, chapter 2 examines government policies for economic diversification and the background of said policies, along with economic role of the logistics hub. The oil and gas sector in the GCC countries represent about 40% of GDP with the manufacturing sector accounting for about 10%, which shows that GCC economies are highly dependent on the oil and gas sector. Economic diversification policies are designed to reduce the degree of dependence on the hydrocarbon sector.
In other words, they are being implemented to increase production and exports by non-hydrocarbon sectors, and ensure sustainable economic growth and stable employment that provide good income.
It should be noted that a logistics hub with infrastructure and industrial base should be understood as the foundation for economic diversification.
Chapters 3 and 4 examines policies of Saudi Arabia and UAE for promotion of logistics hubs. Competitiveness of the logistics sector of Saudi Arabia is within the average range of GCC countries, and still burdened with inefficient procedures and trade restrictions. Saudi Arabia, however, continued to develop ports, airports and railways with close links to Industrial and Economic Cities.
The government is making efforts to induce foreign direct investment in the logistics hub including promotional incentives for multinational corporations in the Cities.
UAE showed the best performance in terms of logistics among the six countries of the GCC, including trade related institutions and regulations. Although the size of its domestic market is small, UAE became the largest re-exporting country with the help of well-established infrastructure and free trade zones in Abu Dhabi and Dubai.
Chapter 5 suggests government policies to upgrade industrial and logistics cooperation between Korea and the GCC countries. First, the logistics sector should be considered in connection with industrial sectors, as logistics hubs have been developed as tools for economic diversification. In other words, free trade zones and industrial cities should be explored as a productive platform to add value to the products exported from Korea.
Second, logistics hubs in the GCC countries could be used as a base to(re)export Korean products to the Iranian market after international sanctions against Iran are removed. Moreover, Iran can serve as a waypoint to Central Asian countries through Turkmenistan, and the Caucasus region through Azerbaijan, creating more logistics demand.
Third, investment by Korean companies is necessary for the establishment of joint ventures between Korea and GCC countries in logistics-related business activities. They could invest in projects incorporating processing facilities in the free trade zones and logistics infrastructure. For these investment projects, various financial support scheme should be developed by Korean and GCC financial institutions including some sovereign wealth funds for development.
Fourth, logistics information platform should be established in major logistics hubs in the region, for Korean companies seeking information on logistics demand and cooperative partners in the GCC market. This will facilitate, particularly, the entry of small and medium sized enterprises into the market. 

 

The costs of unification involved in Korean unification can be categorized as follows: ① crisis management costs for alleviating economic and social shocks from unification (including costs of institutional integration), ② reconstruction costs for the North Korean economy, and ③ fiscal transfers from the South to the North in the form of income subsidies. We deal with how to secure finances externally for costs of reconstruction for the North Korean economy, which would be financed by the international private sector or through PPP (public-private partnership).
We present three pre-conditions for Korean unification after carefully re-examining the German unification process: ① The North Korean people should want unification with the South, ② the North Korean authorities actually representing the wishes of the North Korean people should be present in North Korea, and ③ the international community, including the US and China, needs to be cooperative (or at least, not get in each others’ way). The main implication of these pre-conditions are that political unification of the two Koreas will not be accomplished within a short period of time. Thus, in suggesting realistic policy recommendations for external financing, we need to look at the entire picture regarding the unification process. After political unification, the Government of a unified Korea will become the subject of external financing, whereas before the unification, North Korean authorities will have the primary role in the northern part of the Korean Peninsula.
As a matter of fact, there likely will not be any major issues left for external financing following a successful political unification of Korea. For the successful achievement of Korean unification, there should be an interim period of negotiation between the two Korean authorities for addressing major concerns after political unification of the two Koreas - a period to be referred to as “the imminent unification period.” During this period, the international investors would be uneasy about what would happen after the Korean unification and associated uncertainties.
How to maintain the soundness of financial markets in the imminent unification period will be the most important issue in the course of Korean unification. We present policy recommendations for it. Extending the analysis to the entire period of Korean unification, the most viable method of financing the reconstruction of the North Korean economy would be private-public partnership (PPP). As time goes by, the financing ability of the international public sector would decline and thus, would warrant an increased role of the international private sector. Especially the period after political unification, greater utilization of public-private partnership (PPP) would be feasible. We also present policy recommendations for the period prior to political unification. After our repeated search for ways to finance unification costs from abroad, we have come unexpectedly to conclude that maintaining the fiscal soundness should be the best way to counter the potential costs of Korean unification.
South Korea ratio of national debt to GDP is already over 30 percent and is expected to exceed 35 percent in the next two years. The ratio for West Germany before the German unification was less than 40 percent. Thus, the most effective way in terms of preparing for Korean unification is to build up South Korea’s economic power to be as powerful as possible, and return the fiscal conditions of the Government of South Korea to soundness, setting a limit on the ratio of the national debt to the GDP.