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Policy Reference

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  • 제7회 KIEP 대학원생 세계지역연구 우수논문공모전 수상논문집

    Date 2014.12.30

    Economic relations, Economic cooperation

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  • 글로벌 금융위기 이후 유럽 은행산업의 대내외 환경 변화와 대응 전략
    The European Banking Industry after the Global Financial Crisis: Changes in Business Circumstances and Strategies

    European banking industry has been faced with unprecedented difficulties because of the global financial crisis and the European debt crisis. It represents a critical moment when European banks should establish strategies that tak..

    Tae Hyun Oh and Junyup Kim Date 2014.12.26

    Financial crisis, Financial policy

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    European banking industry has been faced with unprecedented difficulties because of the global financial crisis and the European debt crisis. It represents a critical moment when European banks should establish strategies that take into account new business circumstances such as tightening of financial regulations, digitalization of financial services, and demands for transparency in management from consumers and investors. This research focuses on strategies of the European banking industry in response to these changes.
    There are three representative strategies of the major European banks as follows: ① Strategy for Business Expansion under Mid and Long-term Business Plans (S1), ② Strategy for profit improvement along with realigning on-going business projects (S2) ③ Strategy focusing on banks’ core business in the context of management recovery (S3). For instance, the Deutsche Bank established the “Strategy 2015+” and underwent re-organization by improving organizational culture through recruiting talented personnel (S1). Also, BNP Paribas has attempted to strengthen networking between branches and asset management services (S1). Meanwhile, HSBC has focused on improving profits through business cooperation between regional corporate bodies which were operated independently instead of entering new markets (S2). RBS and Commerzbank, which received government bailout, were still focused on stabilizing management (S3). In particular, Commerzbank has tried to enhance the ability of loan qualification evaluation to small and medium sized firms to guarantee higher objectivity.
    In response to increasingly tightening financial regulations, most European banks have made enormous investments towards compliance, and prepared for potential business risks such as class action suit and fine. For instance, BNP Paribas has increased the number of personnel in compliance and developed relevant education programs. In addition, RBS stopped some loan sales and simplified schemes of certain financial products to minimize legal risks. To satisfy demand for business transparency from financial consumers and investors, the European banks have carried out a reshuffle, to create a more customer-centered organization  as well as to focus business capacity on target customers and regions (Deutsche Bank). Also, banks have strengthened customized asset management services (HSBC, BNP Paribas). Digitalization has been applied in the context of improving business efficiency (BNP Paribas, RBS) and creating new profits by building an on-line banking system (Commerzbank).
    Strategies of the European banking industry in response to changing business circumstances provide meaningful implications for the Korean financial industry. It, however, should be more careful in the course of implementing specific policies, in consideration of the competitiveness of the Korean financial industry. In other words, unconditional deregulation may have deleterious effects on sustainable development of the Korean financial industry based on interviews with experts in European banking about the recent tightening of financial regulations. Most of them agreed that tightening of financial regulation is positive and a step in the right direction since this has made the European banks focus more on compliance. That is, Korean policy makers should reform financial regulations selectively and deliberately, while giving full consideration to asset soundness and financial consumer protection.

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  • 중국의 지식산업화 분석과 시사점: 대학과 중국과학원의 특허 라이선싱을 중심으로
    Analysis of Chinese Knowledge Industrialization and Its Implication: Focus on Patent Licensing of the University and Chinese Academy of Sciences

    Knowledge produced by the university and public research institutions has been viewed traditionally as a public good contributing to technological innovation and economic growth. The Chinese government has advocated an application..

    Hyun-Jung Park and Hyo-Jin Lee Date 2014.12.26

    Technology transfer

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    Knowledge produced by the university and public research institutions has been viewed traditionally as a public good contributing to technological innovation and economic growth. The Chinese government has advocated an application-oriented science policy since the 1950s, with emphasis on promoting science-industry linkages. As major assistants to enterprises, Chinese universities and the Chinese Academy of Sciences(CAS) have been playing a key role in conducting cutting-edge research and effectively transferring knowledge to Chinese industries in order to enhance their competitiveness.
    This study analyzes industrialization of knowledge from Chinese universities and CAS from both macro and micro perspectives.
    In the macro perspective, by analyzing the recent studies on the Chinese national innovation system as well as university-run enterprises and CAS-run enterprises in China, which are distinctively Chinese institutional arrangements, this study shows that the traditional model of knowledge industrialization is being restructured and substituted by a model that is more open, horizontal and based on a diversified network. This indicates the transformation of the Chinese national innovation system. Such open, horizontal and diversified network-based innovation system enhances significantly the regional innovation system and collaboration of industry, university, and research institutes. Given such circumstances, the Chinese university and CAS play an important role in promoting technological innovation.
    In the micro perspective, based on the ‘Record Filing of Patent Licensing’ from China’s State Intellectual Property Office(SIPO) and successful cases, we analyze the characteristics of knowledge industrialization of Chinese universities and CAS. The results are as follows: First, electrical engineering and chemistry are the main fields utilizing patents. Second, patent licensing is concentrated in economically developed regions, such as Jiangsu province, Beijing, Shanghai and Guangdong province. Third, local government is the source of institutional force that imposes or try to facilitate industry-university-research institute collaboration regardless of the geographic distance among them. Fourth, among universities, ‘Industry Characteristic Universities(zhuan ye xing daxue)’ have shown better performances in terms of patent licensing. Fifth, universities and CAS have established scientific & technological enterprises with tech-needy firms to engage in commercialization directly and more effectively. Sixth, professors and scientists have been accumulating the industrial technology and knowhow for 20~30 years while serving in additional positions as CEOs or bureaucrats, for better performance of knowledge industrialization.
    Our findings could produce useful implications for policy-making related to Korea’s innovation system and collaboration among industry, universities, and research institutes. In this regard, the first issue that stands out is the fact that, historically, there has been poor interaction between universities and industry with respect to research and innovation in Korea. However, given the increasing demands of a knowledge-based economy, Korean government should see universities as agents of innovation and lead them to promote academic innovation based on their respective characteristics and competitiveness. The second point of emphasis here is that it is necessary to establish a highly qualified public research institution not unlike the CAS to respond more fully to the challenges of innovation and more fundamentally to the nation’s innovative capacity. Third, open innovation system is required for collaboration among government, industry, universities, and research institutes. Fourth, the Korean government should enhance a rewards system to encourage innovative research. Rational system of rewards and incentives for individuals who are driving innovation can stimulate the country’s innovative capacity. Finally, Chinese universities and CAS are taking advantage of government support and developing a presence of their own in industries that Korea considers its strategic industries, such as robot technology, biotechnology, environmental technology, petrochemical technology, medical devices and mega science projects. The Korean government should enhance efforts to boost institutional efficiency in knowledge industrialization while expanding collaboration with China in scientific research and technological problem solving.
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  • 유럽재정위기에 대한 유럽중앙은행의 대응과 역할 변화
    Policy Responses of the ECB in Managing Euro Crisis and Change in Its Role

    This study aims to review the policy responses of the European Central Bank (ECB) during the global economic crisis and subsequent Euro crisis, and sheds light on the logic and backgrounds related to these responses. The ECB used ..

    Yoo-Duk Kang Date 2014.12.22

    Financial crisis, Monetary policy

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    This study aims to review the policy responses of the European Central Bank (ECB) during the global economic crisis and subsequent Euro crisis, and sheds light on the logic and backgrounds related to these responses. The ECB used increasingly non-conventional measures, such as the purchase of sovereign bonds, which was unexpected before the crisis. In this context, the study raises the following question: is the increasing use of non-conventional measures temporary one in response to an unprecedent crisis or is it a sign of structural change in ECB’s role?    
    The ECB has features in common with most of central banks of advanced countries, but it differs from them in three aspects. First, the ECB has a mandate only with respect to price stability. It has a very high level of institutional and political independence. Third, the ECB and the national central banks of the Eurosystem are forbidden to finance governments (monetization). These salient features of the ECB are very similar to those of the German Bundesbank. Given the role of Deutsche Mark and the Bundesbank in the European monetary integration, it seems that the ECB would include features that are legacies of the Bundesbank.     
    As the Euro crisis spread over the entire eurozone starting from the European peripheries, responses by the ECB have been increasingly active. In order to keep financial markets stable, it has intervened with non-conventional measures. For the first time, it made large-scale purchase of sovereign bonds from the secondary market and provided long term liquidity to financial institutions with low interest rates. In addition, its Governing Council declared the outright monetary transaction (OMT), which means that the ECB will purchase unlimited quantity of sovereign bonds in case of a crisis. Its willingness and determination toward market intervention played an important role in mitigating the crisis. However, these measures, particularly the purchases or plans to purchase sovereign bonds, caused a dispute between different actors and principles. They were conceived and implemented amidst tension between member states, particularly Germany and France and between ECB’s mandate (price stability) and financial stability (response to the euro crisis).   
    During the crisis, the ECB made it clear that its priority and mandate are in maintaining price stability and emphasized that non-conventional measures were implemented to secure a ‘transmission channel’ of monetary policy. Eventually its measures contributed to mitigation of tensions in the sovereign market, but it emphasized repeatedly that these measures were conducted as a part of its monetary policy. Besides, its president underlined that the ECB excluded completely all political influences in its policy consideration.  
    Regarding the future change in ECB’s role, it is necessary to note and consider three aspects. First, the Euro crisis provided occasions for reflecting upon the role of the central bank as the ‘lender of last resort’. As the crisis deepened, the role of ECB has been up for discussion. This means that all debates regarding its role during the crisis could become a starting point for its institutional change, albeit small. Second, the role of the ECB will be impacted significantly by the level of economic integration in the EU. Considering that the EU does not have any authority to impose taxes and conduct fiscal policy, it is hardly expected that the ECB provides credit to any European institutions and governments. Third, the ECB has now a supervisory authority over the commercial banks in Eurozone under the ongoing banking union. This means that the ECB has to follow two simultaneous objectives, price stability and financial stability. While the ECB declared that two objectives will be treated individually according to the ‘principle of separation,’ the political and economic dynamics that the ECB has to encounter will be more complicated than before.

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  • Cost-Benefit Analyses of Unification and Economic Integration Strategies of the ..
    Cost-Benefit Analyses of Unification and Economic Integration Strategies of the Korean Peninsula

    Those of us living in the contemporary times have a common mission to achieve unification in the Korean peninsula for the joint progress of South and North Korea based on the support of the international society and Northeast Asia..

    KIEP Date 2014.12.19

    Economic integration, North Korean economy

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    Preface
    Ⅰ.A Study to Analyze Cost­Benefits of the Reunification of Korean Peninsula to the United States (Marcus Noland) 
    1. Unification Scenarios and Interests of the United States 
    2. General Equilibrium Calibration of Unification 
    3. Implications for the United States from the Gravity Model 
    4. Policy Issues 
    Ⅱ.A Study to Analyze Cost­Benefits of the Reunification of Korean Peninsula to China (Jin Jingyi et al.) 
    1. Introduction 
    2. Ideal Condition of the Korean Peninsula within China’s Development Strategy in Northeast Asia 
    3. Unification of the Korean Peninsula and Economic Benefits for China 
    4. Unification of the Korean Peninsula and Security Benefits for China 
    5. Sino-Korean Cooperation Strategies for Korean Unification 
    6. Conclusion 
    Ⅲ.A Study to Analyze Cost­Benefits of the Reunification of Korean Peninsula to Japan (Kyoji Fukao et al.) 
    1. Introduction 
    2. Scenarios of Economic Development after Unification 
    3. Increase in GDP and Employment in Japan and Other Major Economies 
    4. A ‘Super Korea’ as Japan’s Rival in the East Asian Division of Labor 
    5. Financing North Korea’s Infrastructure 
    6. Role of Japanese Private Firms in Supporting the Infrastructure Projects 
    Ⅳ.A Study to Analyze Cost­Benefits of the Reunification of Korean Peninsula to the Russian Federation (Alexander Zhebin et al.) 
    1. Factors Determining Russia’s Korean Policy 
    2. Major Shortcomings of the Existing Reunification Scenarios 
    3. Cost-Benefits of 5 Unification Scenarios 
    4. Suggestions for South Korea’s Unification Policy 
    Ⅴ. The Effects of Economic Integration between South and North Korea(Sung Hankyoung)
    1. Introduction 
    2. Changes due to Economic Integration 
    3. Model and Scenario 
    4. Analysis of Results by Scenario 
    5. Comparative Analysis of Scenario Results  
    6. Policy Implications 
    Ⅵ.Gradual Economic Integration between South and North Korea and Economic Cooperation in Northeast Asia (Kang Moonsung et al.)
    1. Introduction 
    2. Fundamental Directions for Achieving Economic Integration of North andSouth Korea 
    3. North and South Korean Economic Integration and Effects on NortheastAsian Division of Labor 
    4. North and South Korean Economic Integration and Northeast AsianEconomic Cooperation 
    5. Gradual Achievement of South and North Korean Economic Integration 
    Ⅶ.Analysis on Diplomatic and Security Benefits of Unification and Strategies for Unification (Chun Chae-sung et al.) 
    1. Introduction 
    2. International Politics in the Current East Asian Region 
    3. Position on the Unification in the Korean Peninsula of Countries US, China,Japan and Russia 
    4. Unification Diplomacy Strategies for the Unified Korean Peninsula vis-à-visNeighboring Countries 
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    Summary

    Those of us living in the contemporary times have a common mission to achieve unification in the Korean peninsula for the joint progress of South and North Korea based on the support of the international society and Northeast Asian cooperation. Korean unification is also an historical imperative for the Koreans who have been one nation and one people for a long time. Therefore it is necessary to present to the government strategies and policy alternatives through in-depth research on ‘when’ and ‘how’ unification would be achieved, and ‘what’ kinds of impact it would have, rather than ‘if’ it will happen.


    In this respect, this book is a summary of 7 studies conducted under the ‘Research Project on the Unified Korea and Northeast Asian Economic Cooperation’. Its main contents include analyses on the costs and benefits of the unification of Korea in the perspective of its four neighboring countries—US, China, Japan, and Russia; effects of inter-Korean economic integration in Korea’s perspective, and analysis of diplomatic/security benefits of unification.


    The world is now more interconnected than ever, and Korean unification will invariably impact its neighbors. In this regard, the cost-benefit analyses of the four countries are quite meaningful in that 12 overseas Korea specialists analyze the benefits of Korean unification and provide policy suggestions to maximize these benefits from the perspective of their own respective countries. In addition, the three research projects conducted by 11 domestic experts which provide advice on the effects of economic integration along with strategies for Northeast Asian cooperation based on their analysis on inter-Korean economic integration and diplomatic/security benefits of unification are also extremely valuable.
    The research projects conducted by researchers from 4 major countries present four unification scenarios-status-quo, North Korea’s reform and opening-up, absorption of the North by South Korea, and peaceful unification. In the case of peaceful unification, which is preferable to all parties involved, the US, China, Japan, and Russia will all witness an increase of $7.6 to 48.5 billion in their GDPs, and creation of 210,000 to 5,640,000 new jobs, resulting in positive ripple impacts for all 4 countries. According to the analyses, China will be the biggest benefactor of Korean unification, the US and Japan will reap similar benefits, and Russia will benefit the least. In the event of Korean unification, China’s three northeast provinces will become a vibrant logistics center and  hub for the Eurasian Continent and the Pacific region. According to the study by Japanese researchers, a ‘Super Korea’ will emerge after Korean unification, rivaling Japan. The russian researchers analyzed that if energy exports increases; and the Siberian railway and gas pipeline were connected all the way to the Korean peninsula as a result of unification, it  will lead to an economic boom in the Far East.


    Domestic researchers show that unification will bring changes in factors of production, market expansion, decrease in military spending, and improvement in international credit rating. According to their various unification scenarios, North and South Korea’s GDP growth rates will increase 16%p and 1%p respectively between 2016 and 2030. In the early stages of unification, independent currencies should be used but One Korea Indexed Unit of Account (OKU) must also be introduced; and in order to make use of North Korea’s human resources, disparity of wages between South and North Korea is unavoidable. They also analyze that a unified Korea will contribute to the resolution of the security dilemma in Northeast Asia by buffering the competition for economic and military hegemony between major powers such as the US vis-a-vis China and China vis-a-vis Japan, facilitating cooperation. Also, North Korea’s denuclearization alone will, in and of itself, significantly benefit neighboring countries.

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  • 통일편익비용 분석과남북한 경제통합 방안

    Date 2014.12.18

    Economic integration, North Korean economy

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  • 한국의 유라시아 협력 전략 연구: 중견국 전략의 사례와 EEU가 한국에 주는 함의를 중..
    A Study on Korean Coperative Strategy for Eurasia

    The main purpose of this research is to seek for solution concerning “What does Korean diplomacy have to prepare for not only success of ‘Eurasia initiative’ but also realizing a long-range national interest constantly by colla..

    Sang Nam Park et al. Date 2014.12.12

    Economic cooperation, Multilateral negotiations

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    The main purpose of this research is to seek for solution concerning “What does Korean diplomacy have to prepare for not only success of ‘Eurasia initiative’ but also realizing a long-range national interest constantly by collaborating with an international society, and by securing international leadership beyond the national division between two Koreas. This project, as its alternative, proposes that Korea must pursue to be “Middle power” itself. This is because “Eurasia initiative”, which the present government advocates it as one of the main foreign policies, may not be realized unless Korea becomes “Middle power”. For the purpose of integrating the Eurasia Continent into a united market and communication space among themselves, it is required to draw solidarity between countries while harmonizing interests and conflicts from a myriad of counties.
    To do so, Korea must show a coherent action and intention as Middle power, and suggest a justification and agenda for the sake of international peace, stability and common prosperity. Without this kind of gradual process, Eurasia initiative is not likely to be accomplished by gathering international agreement and participation on it. Korea ought to endeavor proposing agenda and policy that all countries in the Eurasia continent could benefit equally from having no biased impartiality and sense of balance in order to vitalize Eurasia initiative.
    Unfortunately, however, proposed present Eurasia initiative has only slogan rather than a concrete policy and content. Additionally, Korea does not suggest what qualification and condition they have to prepare for in order to attain it both internally and externally. If Korea can’t overcome such a limit, there would be less feasibility to realize it such as “Equal diplomacy” or “New Asia diplomacy” which was already proved failed one and ended up with short diplomatic declaration in the former governments.
    This study covered what Korea has to make preparations so as to surmount this sort of limits which Korea already faces. Thus this study suggests Korea must be Middle power and there wouldn’t way to alternate it.
    Ultimately, this study would explain the questions below in an attempt to overwhelm the limit that mentioned above and to alter Korea into Middle power.
    First of all, what characteristics and concept of Middle power does Korea have to seek in the future? What kind of Middle power will Korea be according to various contents and international circumstance surrounding Korean peninsula? What policy implication does the example of Turkey and Kazakhstan where are already Middle powers positioned at strongpoint of the Eurasia continent give Korea to bring Eurasia initiative to a successful issue? What does Eurasian Economic Union (EEU) mean for us as one of alternatives that Korea would become Middle power through diversifying cooperative routes and balancing economically and systematically?
    The reason why this study selected Turkey and Kazakhstan is that both countries are considerably crucial parts of Eurasian cooperative strategy of Korea. Both countries are located in geopolitical strongpoint such as Korea, and they seek to be Middle powers actively. Also they are on the strategic point where the interests of great powers cross over and at the same time logistics and communications network of Eurasia. In addition, they advocate being in charge of mediators to connect between Europe and Asia. Hence that means they could take a role in solidarity and communication across the Eurasia continent, and they could be regarded as cooperators of Korea.
    Furthermore, the reason why this study focused on EEU is that this organization is likely to provide Korea with alternatives, which could lead Korea into Middle power in the future. Also with the fact that the industrial structure between Korea and participant countries in EEU is complimentary and they declare to integrate economic zone across the Eurasian continent, this study would consider they have mutual interest with Korean policy purpose of Eurasia initiative. The analysis about examples of a variety of Middle powers and EEU proposes that Korea is necessary for policy supplement below in order to establish international credibility, international leadership, broadening various diplomatic options and economic & systematic balance.
    First of all, the qualification of being Middle powers requires not only physical condition but also coherent policy for international peace and common prosperity. However, Korea cannot be recognized as credibility and leadership of true Middle power because Korea still lacks of constant practice but they fulfilled external condition with rapid economic development in a long time.
    Second, the ideological background backing national identity and sense of duty is necessary to be Middle power. But Korea still doesn’t have domestic agreement and reestablishment regarding to national identity and philosophical background to determine the midterm and long-term way. Thus there have been cases which showed limits of coherent policy and durability in accordance with a number of governments on foreign policy.
    Third, the true powers of each country derive from diplomatic strategy through soft power. Korea is a representative cultural power that propagates Hallyu and has a wide range of historical and cultural heritages. However, in terms of foreign policy, they need to supplement more exquisite strategy of soft power.
    Fourth, Korea must find their way in the niche diplomacy suggesting and developing creative and independent agenda. Recently, Korea also proposes a variety of the niche diplomacy and policy development vigorously. But in an attempt to be recognized as Middle power having an international leadership, more systematic and active improvement of policy and agenda setting are necessary for Korea.
    Fifth, Smart diplomatic strategy combined between bilateral and multilateral relationship must be established with contribution diplomacy united between practical understanding and idealism. Korea carries out dynamic contribution diplomacy as well. But the problem on it is that current foreign policy is biased to bilateral relationship so much. Thus they need to enhance more multilateral approach than present.
    Sixth, Korea is required to analyze the meaning of EEU as one of multilateral approaches’ solutions of Middle power towards the Eurasian continent. Effective action regarding to EEU is necessary to lead Eurasia initiative, and to diminish reliance to Chinese economy and balance economic influence. A great deal of experts and diplomats from Kazakhstan, Russia and Uzbekistan showed their optimistic opinions of Korean participation in EEU via unofficial interviews.
    Seventh, building an image of independent international power and accumulating confidence through cooperation with near strong powers and pursuit of independent way are significantly essential. Korea also needs to enhance an image of independent power that is an alliance with U.S simultaneously.
    Finally, both the success of Eurasia initiative and the feasibility that Korea could build its own independent leadership and influence in international society might be determined by whether Korea applies policy implication given by aforementioned examples of major middle powers to the strategy of Middle power.

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  • 한국의 북극 거버넌스 구축 및 참여 전략
    Changes in the Arctic and Establishment of New Arctic Governance

    With visible changes in the Arctic area in the 21st century, the Arctic is becoming the center of renewed attention. The changes in the Arctic include three main issues that are closely connected to each other. First, as the thawi..

    Seok Hwan Kim et al. Date 2014.12.12

    Economic development, Economic cooperation

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    With visible changes in the Arctic area in the 21st century, the Arctic is becoming the center of renewed attention. The changes in the Arctic include three main issues that are closely connected to each other. First, as the thawing of the Arctic accelerates due to climate change and is expanding in scope and area, an awareness of the importance of conserving the Arctic environment is growing in the international community. Second, as the commercialization of North Pole Routes and resource development in the Arctic become viable, major countries are developing greater interest in development of the Arctic region. In other words, while the thawing of the Arctic means an ecological crisis for humanity that goes beyond the changes in the natural environment, at the same time it intensifies the paradox of the Arctic, as benefits to the international community are increased by raising the possibility of commercial uses of the North Pole Route and resource development. The third is the pressure of changes in the international governance related to changes in the Arctic. This will likely lead to changes in the AC (Arctic Council), which has functioned as the body for regional governance among the stakeholders in the Arctic territories to date in relation to the development, conservation and use of the North Pole Route. The AC approved South Korea, China, Japan, India, Singapore and Canada as new permanent observers at the Kiruna Ministerial Meeting held on May 15, 2013. The meeting transformed the AC from a body for regional governance led by the European and North American countries into a global governance agency with participation by the permanent members of the UN Security Council and G8 countries.
    These three types of changes require continuous attention from the perspective of conservation, which constitutes the 'conventional' agenda related to the Arctic, and raises the issue of “sustainable development” in utilizing the Arctic in the midst of the rapidly-changing environment. In this regard, the Arctic issue after 2013 has undergone a paradigm shift from highlighting the protection of its heritage plus academic cooperation, to “sustainable development” through global cooperation. Sustainable development made the Arctic agenda, which has hitherto been mainly discussed by Europe, more globalized. On the other hand, it would stimulate new competition among nations. This globalization of the Arctic agenda naturally presents the risk of overheated competition between nations, making the Arctic simply another arena for international conflict. In this regard, Arctic cooperation should pursue environmentally friendly, scientific, open and peaceful objectives; bringing it back into focus at the level of international politics and governance; and be handled as an important agenda in the international community.
    Also, issues such as greater number of participants in Arctic governance, an increased need for environmental conservation and sustainable development, and the worldwide impact on the existing environment and ecological issues, go beyond the European Arctic governance led by European and North American countries. This requires changes in the Arctic governance framework. The issue of sustainable development emphasized by the Kiruna Declaration is a common concern for all, including the AC member countries, observers, and non-members. In particular, there is the need for a cooperation regime for Arctic development and conservation not only in Yakutia, Kamchatka and Sakhalin in Russia but also in the Pacific region and East Eurasia, including the U.S. (Alaska) and the North Pacific region of Canada, as well. Since the non-territorial Arctic stake holders in the Asia-Pacific region also have large interests in the Arctic, the need to establish Arctic governance in the region will continue to persist until it is actualized.
    This research suggests a measure to establish the AP/ARC(Asia-Pacific/Arctic Regional Council) for realizing Arctic governance in the Asia Pacific region, which will emerge as a practical issue in the near future. The establishment of AP/ARC may bring additional benefits that will contribute to regional security through national cooperation among the countries in the Asia Pacific region. Aside from Russia and the U.S., there are no Asia-Pacific countries bordering the Arctic. However, the Asia Pacific countries including South Korea, China, Japan, Singapore and Mongolia have a high interest in the development of the North Pole Route, the East Asia-Pacific region in the Russian Arctic Circle and Alaska. In this regard, AP/ARC is highly likely to serve as a governance body that drives regional cooperation in the Asia Pacific.
    There are two ways to establish the AP/ARC that can be considered. The first is to launch the council by inviting the countries among the Asia Pacific countries that are geographically close to the Arctic and the countries and regions interested in Arctic development and the North Pole Route, like the BEAC (Barents Euro-Arctic Council). The second measure is to open it to the nations affected by Arctic climate change by expanding the range of participating countries. Either way, it is necessary to include South Korea, China, Japan, North Korea, Russia, the U.S., Singapore and Mongolia among the initial participating countries. Of course, it is currently unclear whether North Korea will voluntarily join the AP/ARC. However, it is premature to conclude that North Korea will never join the group, because ports in the northeast coast of North Korea including Najin and the entire inland areas are directly affected by the changes in the Arctic area; furthermore, China will inevitably encourage North Korea to join the group as cooperation with North Korean ports on the East Sea is essential for entry into the Arctic.
    The changes in the Arctic highlight the need for global cooperation. Such cooperation may be facilitated by obligations, responsibilities and creative challenges among stake holders that will be directly affected by both the positive and negative effects of Arctic development. In addition, such cooperation can only be effectively managed and expanded by the establishment of an appropriate regime. In this regard, it is inevitable to establish Arctic governance in the Asia Pacific region. Given the geopolitical and geo-economic conditions of the countries in the Asia Pacific region; the roles played by Yakutia in Russia, the U.S. regions including Alaska, and the Asia Pacific countries including South Korea, Japan and China, are extremely important.

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  • 개성공단의 국제경쟁력 강화방안 연구
    Study on the Strategies for the Enhancement of International Competitiveness of the Kaesong Industrial Complex

    The Kaesong Industrial Complex has, for the most part, experienced relatively stable operation over the last decade, and has become the most visible and representative inter-Korean economic cooperation project amidst deteriorating..

    Seung Kwon Na and Yi Kyung Hong Date 2014.12.10

    North Korean economy, Foreign direct investment

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    The Kaesong Industrial Complex has, for the most part, experienced relatively stable operation over the last decade, and has become the most visible and representative inter-Korean economic cooperation project amidst deteriorating inter-Korean relations. However, in the course of normalization of its operations after its sudden closure in 2013, the issue of internationalization of the Complex has been strongly raised, as part of efforts to ensure greater stability and continuity in its operations. Under these circumstances, many studies regarding the internationalization of the Kaesong Industrial Complex were recently conducted. However, most studies are limited in that they tend to utilize similar research methodology, merely presenting solutions to deal with its shortcomings in connection with the current situation. This study, in an attempt to provide a more systematic and differentiated analysis, tries a methodical approach with investment condition analysis based on a theory called “FDI Decision Factor”. The summary and results of this study are as follows.
    In this study, the achievements of the Kaesong complex to date and the current situation including the overview of its development, related laws and systems, management/operating system, industrial structure and trade status are examined first prior to conducting detailed analysis on the Kaesong Industrial Complex in terms of international competitiveness. According to the initial observation, it is clear that improvements in the system as well as quantitative growth, such as increasing production scale and employment, have been achieved. However, various problems, including some major ones, still remain unresolved: facilitating entry procedures, upgrading of communications infrastructure, streamlining of customs rules and securing labor for the workforce.
    Second, this study compares in both qualitative and quantitative terms the conditions of the Kaesong complex with industrial complexes in other countries such as China and Vietnam, based on a theoretical review on the FDI decision factors, divided by element factors, demand factors and institutional factors. According to the comparison, the Kaesong complex is evaluated as having comparative advantage in terms of production cost with respect to element factors, particularly in labor forces and supply of industrial sites. However, in terms of demand and institutional factors, the Kaesong complex has relatively low competitiveness in attracting FDI when compared to industrial complexes in China or Vietnam. With such conditions taken into consideration, the Kaesong Industrial Complex is assessed as being strong (among the types of FDI) in ‘resource seeking’ FDI, and particularly in ‘cost saving’ FDI, but has low comparative advantage in ‘market seeking’ and ‘efficiency seeking’ FDI.
    Third, considering the current conditions of the Kaesong Industrial Complex based on aforementioned analysis on the factors, this study suggests methods to improve its investment environment. First, with respect to element factors, it highlights the need to provide proper supply conditions for labor forces and to strengthen autonomy in hiring and management of workers. In addition, to improve the supply of industrial sites, it suggests differentiated preferential treatment according to the enterprises and enactment of measures for providing additional industrial sites. On the other hand, in order to improve the conditions regarding supply of raw materials, bringing in raw materials from other areas in North Korea should be made possible in the long run. Concerning its physical infrastructure, the most important task is to improve communication environment along with expanding industrial and logistics infrastructure in the long term. Next, regarding demand factors, efforts should be made in the following areas. The governments should create favorable conditions for selling products from the Kaesong Industrial Park in North Korea and promote more inter-Korean economic cooperation projects to improve the growth potential of the North Korean economy and make an effort to have products from the Kaesong Industrual Park recognized as South Korean products by designating the Park as South Korea’s outward processing zone.
    Meanwhile, regarding improvements in institutional conditions including trade liberalization, legal stability, intellectual property rights; the most important part is to utilize the Kaesong industrial complex as a test bed for experimental reform measures, enhancing international credibility through such efforts. Lastly, the two Korean governments need to establish a joint steering committee and operate the complex on the basis of mutual cooperation.
    Fourth, based on the analysis of general conditions and evaluation results, this study presents both future development plans along with tasks in the short-term which need to be considered first. To begin with, given the overall conditions of the Kaesong Industrial Complex, it is better to maintain its current concept and develop stage by stage from a long-term perspective in the first stage of its development. Then over the long run, it is required that the complex be developed to serve as a leading benchmarking model of development and management for other development bases in the country. However, more realistically, even with various constraints at the moment, it is desirable for the governments to make Kaesong Industrial Park more attractive investment destination. In particular, both Korean governments should try to provide government-led public relations strategies, systematic support and favorable conditions for luring foreign investment through measures for overhauling support/management systems related to foreign investment.
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  • Promoting Innovative Development in the Asia-Pacific Region Through the Internet..
    Promoting Innovative Development in the Asia-Pacific Region Through the Internet Economy

    ICT and Internet economy development has been one of the main interests of Asia-Pacific regional cooperation from the early stage of APEC and the Telecommunications and Information Working Group (TEL or TELWG) was established in 1..

    NAM Sang-yirl Date 2014.12.05

    APEC, ICT economy

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    Content
    Executive Summary
    I. Introduction

    II. ICT Development and Cooperation in APEC
    1. APEC Activities and ICT Cooperation
    2. APEC TEL Focus and Targets

    III. IDI and ICT Development in APEC
    1. ICT Development Index (IDI)
    2. ICT Development in APEC

    IV. ICT Development and Economic Growth
    1. Reference Studies and Motivation
    2. Production Function Approach
    3. Endogenous Growth Model Approach
    4. ICT Development and Economic Growth in APEC

    V. Implications for APEC Cooperation

    References

    Appendix
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    Summary
    ICT and Internet economy development has been one of the main interests of Asia-Pacific regional cooperation from the early stage of APEC and the Telecommunications and Information Working Group (TEL or TELWG) was established in 1990 to promote building the Asia-Pacific Information Society (APIS). The objective of this study is to highlight and analyze the economic benefits ICT development or the Internet economy will offer as a new source of economic growth, promoting innovative development in the Asia-Pacific region. This study begins by briefing the activities of APEC and the APEC Telecommunications and Information Working Group and then overviews the current state of ICT development in the APEC member economies based on the ICT Development Index (IDI) published by ITU, analyzes the potential benefits of further ICT development in terms of economic growth, or in some sense, productivity growth, and finally presents implications and suggestions for ICT development or the Internet economy to facilitate economic growth of the Asia-Pacific region. Some of the findings and implications of this study are as follows. Despite the huge gaps among the APEC member economies, ICT as a whole has been developed significantly in the APEC region and the gaps have also been reduced in general during 2002-2012. The progress seems to be converging rather than diverging among the APEC member economies. However, there are still huge and enlarged gaps between these economies when it comes to ICT utilization. APEC therefore needs to make efforts to bridge the ICT development gaps existing among its member economies, especially regarding ICT utilization, in addition to continued efforts to further close the gaps in ICT infrastructure, which is regarded as a great achievement of the previous decade. ICT development is expected to bring about significant progress in the economic growth of each of the APEC member economies as well as APEC as a whole. APEC can share the experience of member economies with extraordinary progress in ICT development between 2002 and 2012, such as Viet Nam, Russia, Indonesia, China, Philippines, Peru, Malaysia, etc. APEC needs to identify and share their success factors and policy experiences.
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