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  • 외국인직접투자가 국내 산업구조와 노동시장에 미치는 영향
    Differential Effects of FDI on the SMEs and Wage Premium for Skilled Labor

    The influx of foreign investment to Korea began in the 1980’s, and increased dramatically following the establishment of the ‘Foreign Investment Promotion Act’ in 1998. However, it declined in the early 2000s because of global ..

    CHOI Hyelin et al. Date 2015.12.30

    industrial policy, foreign direct investment
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    The influx of foreign investment to Korea began in the 1980’s, and increased dramatically following the establishment of the ‘Foreign Investment Promotion Act’ in 1998. However, it declined in the early 2000s because of global economic slowdown due to events such as the 9-11 terrorist attack and Information Technology Bubble Decay, etc. Investments have rebounded since 2004 and attracted more than 10 billion dollars thereafter, reaching a peak of 19 billion dollars in 2014.
    Most governments believe that FDI contributes to economic development by creating jobs and introducing advanced technology and management practices to the host country. Based on this belief, governments provided various incentives such as tax breaks, relaxed regulations, and cash grants to attract multinational companies to their respective countries. This includes the Korean government, which changed its restrictive strategy to actively attract foreign firms since the Asian financial crisis by providing a variety of incentives for foreign firms.
    As a result, foreign firms now account for about 20 percent of total exports and 6 percent of employment, and have had significant impacts throughout the economy. In recent days, some questions have been raised concerning differential effect of foreign firms on domestic small and medium sized enterprises (SMEs) and skilled labor, with subsequent discussions on the relationship of FDI and economic polarization. As multinational firms which are known to be more productive and possessed of more advanced technology enter the domestic market, they might bring about intense competition and crowd out domestic firms from the market, in particular SMEs.
    Also, foreign firms in technology-intensive and services industries might demand more skilled labor, and thus increase wage premium for high-skilled labor. Although both foreign direct investment and economic polarization are very important issues, there are relatively few studies which investigate their relationship. It is this lack of research on FDI and economic polarization that provided motivation for this report, which examines whether foreign firms have differential impacts on the survival and growth of SMEs and increase wage premium for high-skilled labor. This was done by using foreign investment data from Korea's Ministry of Trade, Industry, and Energy; firm-level data from Statistics Korea; and survey on labor conditions by type of employment from Ministry of Employment and Labor.
    According to the empirical investigation on FDI and exit and sales of domestic firms, foreign firms exert pressures to drive domestic firms from the market, and SMEs in particular. In addition, crowding-out effects are shown to be stronger for SMEs in the manufacturing sector and the low-export group. In contrast, according to the empirical investigation on FDI and change in sales of domestic firms, the presence of foreign firms in the same industry increases sales of domestic firms; the magnitude of the change being larger, in particular, for SMEs. Also, the positive impact are larger for SMEs in the manufacturing sector and high-export group.
    To summarize the results on FDI and survival/growth of domestic firms, we cannot say that FDI aggravates polarization of firms because while it drives SMEs from the market on one hand, its raises their sales on the other. From the perspective of the whole economy, foreign firms raise productivity of the economy by removing uncompetitive firms from the market and then increasing productivity of the surviving domestic firms. According to the theoretical and empirical investigation on FDI and wage premium for skilled labor, we found that FDI in specific sectors, such as electronics and electricity, food and accommodation, finance and insurance, machine equipment, business service, wholesale and retail distribution, other manufacturing, professional engineering in chemical industries; increases wage premium for high-skilled labor.
    In other words, foreign firms in these industries are more skill intensive, demand more high-skilled labor, and hence increase wage premium for high-skilled labor. Also, since these industries have common characteristics of having high levels of FDI, the impact of FDI on the increase in the wage premium for high-skilled labor can be interpreted as not being limited to these industries but in general.
    These results provide useful policy implications which bolster the positive impact of foreign firms. As foreign firms increase sales of domestic survival firms, the mechanism for linkage and technology diffusion effects should be expanded to reinforce growth of domestic firms. For example, there should be places to exchange business information and opportunities, and the government should provide various incentives for foreign firms to develop linkages with domestic firms. Furthermore, the linkage between foreign and domestic firms should be expanded to services such as R&D, accounting, consulting etc. beyond the manufacturing sector.
    Also, as presence of foreign firms in the same industry increases wage premium for skilled-labor, adequate labor reallocation and job training are needed to balance supply and demand of skilled-labor forces. For example, the government should facilitate efficient matching through programs to connect domestic labor supply and demand of foreign firms. In addition, the government should strengthen the social safety net for low-skilled labor, to aim for inclusive growth.
     

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  • 브라질의 對아프리카(포어권 국가) 진출전략과 시사점
    Brazil’s Foreign Policy toward Portuguese-Speaking African Countries (PALOP) and lts Implications

    The interest in the African Continent in the international community has grown significantly recently. During the past 10 years, African economies have grown at a much faster rate than before, and many countries of the world are n..

    YOON Taek Dong et al. Date 2015.12.30

    economic relations, economic cooperation
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    The interest in the African Continent in the international community has grown significantly recently. During the past 10 years, African economies have grown at a much faster rate than before, and many countries of the world are now entering African countries hoping to pre-occupy profitable markets or increase trade volumes. Indeed, the fact that 7 of the world's 10 fastest growing economies by real GDP growth rate are African countries suggests that many African countries have great potential for future economic development. In this sense, this study looks closely into Brazil's foreign policy and its expansion strategy towards Africa, and identifies a number of practical implications for Korea. Especially, this study focuses on Brazil's relationship with PALOP, namely the group of Portuguese-speaking African countries - Angola, Mozambique, Cape Verde, Guinea-Bissau, and Sao Tome and Principe.
    Both Brazil and PALOP were former colonies of the Portuguese Empire for more than several hundred years, and thus basically share the same language and culture. Based on these unique social-historical ties, Brazil has historically had a close relationship with PALOP, and greatly increased the level of development cooperation, especially since the Lula administration after the beginning of the second millennium. It warrants a closer look from both practical and academic perspective as Brazil's development cooperation with PALOP, often called "South-South cooperation," deviates significantly from "traditional" development cooperation as implemented by Western developed countries hitherto, and at the same time, has shown to have had a very positive impact. The Korean government recently recognized the strategic importance of Angola and Mozambique, as they are one of the most resource-rich countries in Africa. In this context, this study will discuss Brazil's development cooperation strategy with PALOP in detail, especially focusing on Angola and Mozambique, gauging pros and cons of building a partnership with Brazil from Korea's perspective.
    In Chapter 2, the study looks closely at the historical connection between Brazil and PALOP, dividing it into 4 periods, 1) from the 15th to 19th century, 2) after the independence of Brazil in 1822 up to the early 1950s (the "cooling-down" period), 3) from 1960s to the early 1980s (the period of restoration), 4) from the mid of 1980s to Brazil's economic crisis in 1990s (the period of shrinking relations), and finally 5) from early 2000s to present (the period where relations were closer than ever).
    During the first period, Brazil's relation with PALOP, especially with Angola, was seemingly very close. For example, such history as the transatlantic slave trade from PALOP to Brazil, frequent meetings of high officials between these two regions, the dispatch of the Brazilian army to Angola to fight against Dutch forces, and secret attempts by the Angolan anti-colonial resistance to incorporate Angola as one of the states of Brazil after the independence of Brazil clearly confirm it. However, during the second period, Brazil's interest in foreign policy was mainly concentrated on countries in Latin America, Europe, and the USA, and thus the relations between Brazil and PALOP became weak and tenuous. The fact that those of African descent in Brazil failed to consolidate their political power also accelerated the deterioration in the relationship. But again, during the third period, PALOP-Brazil relations were largely restored as Brazil began to pursue independent foreign policy stressing the importance of "South-South cooperation" with African countries. Also, the outbreak of the oil crisis forced Brazil to seek good relations with oil-rich African countries. Consequently, Brazil's exports to African countries rose by 129% and import by 300%. Brazilian banks and firms began to expand into Africa as well. During the fourth period, however, the relations stagnated again as Brazil experienced a severe economic crisis. But after year 2000, the Lula government again took the initiative in taking Brazil’s relations with PALOP to a whole new level.
    Actively seeking independent foreign policy, the Lula government tried to improve relations with virtually all African countries, not just with PALOP. As a result, the number of Brazilian embassies, as well as diplomats in Africa, almost doubled since 2002. The president himself also frequently visited Africa, 34 times to 23 different countries. A variety of development cooperation programs were newly launched or expanded during his regime such as education programs PEC-G and PEC-PG for foreign undergraduate and graduate students respectively, in addition to aggressive expansion of credit line by BNDES (Brazilian Development Bank) towards Africa; and humanitarian aid in the field of health, education, and agriculture. However, after Dilma's government came into power, Brazil has begun to experience a serious economic crisis, and thus the size of cooperation programs is likely to be reduced significantly. But during Dilma's regime, Brazil would expand its cooperation with African countries to include military cooperation ? specifically the export of warplanes - and thus it is likely that Brazil's foreign policy towards Africa may remain close in near future.
    In chapter 3, we further discuss in detail Brazil's expansion to PALOP - especially, in areas such as development cooperation, foreign direct investment, and bilateral trade - based on a variety of official statistical data. Overall, it is safe to argue that compared to other "giants" such as US and China, Brazil's presence in Africa is still relatively weak, at least in terms of various statistical figures. However, seeking a new approach with "South-South cooperation," Brazil's relations with African countries, especially with PALOP, still warrants an in-depth evaluation. Its characteristics can be summarized as follows: First, the absolute majority of Brazil's development cooperation in Africa seeks to transfer so-called "made-in-Brazil" social development programs, which had been successful in Brazil, to African countries under the label of "technical cooperation." Brazil, several decades ago, also experienced similar health and education problems, e.g., high prevalence of HIV/AIDS that African countries are currently facing, and it is thus highly likely that, if correctly implemented, Brazil may emerge as a better partner for many African countries than Western countries. Second, the number of triangular cooperation is surprisingly large. In fact, ABC, the Brazilian agency which roughly corresponds to KOICA in Korea, clearly articulates in its mission statements that Brazil actively seeks triangular cooperation opportunities, especially with Western developed countries. Third, Brazil's aid towards PALOP clearly aims to attain regional leadership within the CPLP (Community of Portuguese Language Countries). Fourth, Brazil's aid structure is extremely diversified and fragmented without any central coordinating agency. Though it is apparently Brazil's central governmental agency of international development cooperation, ABC has very limited power, and aid projects tend not to be properly monitored and evaluated.
    Fifth, BNDES have played an important role in Brazil’s support for the development of many African countries. Sixth, with respect to some "major" development cooperation activities, especially in Mozambique, Brazil is aggressive in seeking commercial profits. And lastly, Brazilian multinational firms prefer a high level of localization in PALOP than any other foreign countries.
    Furthermore, this study also compares Brazil's characteristics discussed above with other major foreign countries that are currently actively cooperating with PALOP. As a result, we could observe that Brazil behaves in a similar way as those countries in many aspects, but at the same time has some clearly distinctive features as well. First, concerning the first characteristic discussed above, namely exporting “made-in-Brazil” programs, it would be safe to argue that it is clearly one of the strongest competitive advantages Brazil has. Second, the fact that the number of triangular cooperation is exceptionally large can also be seen as one of the positive aspects of Brazil's cooperation strategy with African countries. It implicitly suggests that Brazil's "South-South cooperation", aside from the fact it is seeking a "new" way of cooperation, can basically be seen as being complementary to Western donors' aid programs. Third, the limits of Brazil's aid structure such as a lack of monitoring and evaluation sysms can be found in many other emerging donors, e.g., India and South Africa. Fourth, the most obvious and perhaps strongest competitive advantage Brazil has in PALOP against any other major country is that they share the same language and culture. Here, it is worth noting that in PALOP countries, the image of Brazil is relatively positive and its products are often seen as something "prestigious".
    Consequently, we could draw the following implications for Korea from what has been discussed so far. First of all, Korea, also an emerging donor, is currently experiencing a high level of aid fragmentation just as Brazil does, although relatively less. We do not believe that it is simply negative as it perhaps seems, especially in the case of Brazil. Certainly, a severe fragmentation of aid structures can lead to various negative effects, diminishing overall aid effectiveness. On the other hand, aid fragmentation can actually have some positive effects as well, such as quicker response to actual needs in developing countries with possibly better decision-making. In Brazil's cooperation mechanism, we believe, the positive aspect of aid fragmentation is more predominant.
    Second, the unique historical and cultural ties between Brazil and PALOP is clearly a strong competitive advantage that no other country can easily imitate. In this sense, building a partnership with Brazil clearly seems to be beneficial for Korea in building good relations with PALOP.
    Also, since the year 2000, many emerging donors began to successfully increase their aid or engage in "South-South cooperation" with African countries. The total amount of aid from emerging donors are now significant and cannot be easily ignored. As more countries that were recipients of aid in the past are becoming donors, international aid is becoming more diversified than ever before. In this context, we strongly argue that Korea needs to invest more efforts toward maximizing its aid effectiveness through international cooperation with other traditional or emerging donors.
    Third, Brazil, mainly because of the same language, prefers to hire locals than send expatriates when implementing projects for development cooperation, especially in PALOP. It is clearly opposite of what China usually does. We suggest that Korea also needs to increase the level of localization, show better understanding and greater acceptance of local partners and, if possible, active hire local employees. Moreover, as Brazilian aid agency ABC emphasizes, no-conditionality and mutual benefit from development cooperation is vital for long-term success. In this sense, it is interesting to see how the ProSAVANA project in Mozambique may develop in future.
    After becoming a member of DAC recently, Korea is straining become a more respectable donor. In this context, a lot has been said and written to answer the following question: what is a "Korean" way of supporting development of Africa? We believe at least a part of the answer to the question above can be found in the case of Brazil.

     

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  • 아프리카 모바일 금융시장 현황과 한국의 협력방안: 가나와 우간다를 중심으로
    The African Mobile Finance Industrial Cooperation and Coordination between African Countries and South Korea: In Cases of Ghana and Uganda

     This research aims to pursue industrial cooperation and coordination between African countries and South Korea through the analysis of Ghana and Uganda’s mobile financial markets and its surrounding environment in Africa, s..

    HWANG Kyudeug et al. Date 2015.12.30

    ICT economy, economic development
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    Summary

     This research aims to pursue industrial cooperation and coordination between African countries and South Korea through the analysis of Ghana and Uganda’s mobile financial markets and its surrounding environment in Africa, specifically Kenya. With the support of the international community, African economies and their industries have begun to bloom. However, addressing the totality of the financial sector, there is still a long way to go due to limitations in distance, institutional infrastructure, and social agreements. Even so, Africa is headed on the right path, especially with the proliferation of mobile phones. In Kenya, many are enjoying the benefits from finance services offered, i.e. money transactions to glossary shopping, through Vodafone's M-PESA service. It can be said that the African mobile finance services are considerably mature compared to that of other regions.
    Chapter 2 analyzes the African financial markets, its supervision system and operating structures. It should be stated that the United Kingdom and Germany had a significant impact on Africa’s mobile finance services. M-PESA was established by the UK’s overseas development agency, DFID, and Vodafone. The institutional framework was established by Germany’s GIZ program.  Success of M-PESA, format of M-PESA became the de-facto standard in Africa and other developing countries. Using Kenya’s market as a basis for this research, as the financial mobile services is considered most mature, the research was extended to Ghana and Uganda’s financial sectors, including their mobile phone environment.
    In Chapter 3, this paper examines the presence of ODA agencies in Africa and examines the financial sector supported by DFID, USAID, GIZ, and related multinational consortium. The DFID took an active role in designing and implementing the service, USAID assisted with pre-developed services, and GIZ focused on administrative policy as well as institutional support. Along with the agencies aforementioned, individuals and MNCs in the private sector, such as Bill Gates foundation and multinational corporations like VISA, Master card and Citibank, supported African financial inclusion issues on the behalf of international consortiums such as CGAP, Making Finance Work for Africa(MFW4A) and others.
    Chapter 4 addresses the financial sector in Ghana and Uganda, including mobile phone services through the comparison of financial institutions and mobile service providers. This paper also covers a survey conducted on individual attitudes of mobile finance services through a consumer behavior model.
    Resulting the need for the presence of oversea donors in both countries. Lastly, a discussion on the strategies that need to be effected for Africa through perspective ODA agencies and corporation in Korea.
    In Chapter 5, supported by the analysis thus far, this paper provides directionality and a detailed scheme for Korean aid agencies and companies. The suggestion for short-term strategies to target the African market is the provision of infrastructure and technical education. Korean ODA agency and government should provide platforms for public-private cooperation with the private sector.
    For medium and long-term strategy, the Korean government must support companies entering Africa, also in addition to, Korean companies offering infra structure and services. Furthermore, financial institutions should enter the African market to support Korean companies for sustainable activities in Africa.
    To conclude, this research will contribute to the Korea’s political economic interests, Africa’s financial inclusion and further development of Africa. One of the key challenges for development is financial access, providing ease of access to finances could assist in the alleviation of poverty. As there has been a proliferation of mobile phone networks throughout the developing nations, the mobile finance system presents itself as a highly opportunistic means to resolve the challenge of financial inclusion and positions itself as a platform for new opportunities. 

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  • 중남미 지역 공공조달시장 진출전략 연구: 칠레와 페루를 중심으로
    The Study on a Penetration of the Chile and Peru Public Procurement Market for Korean Companies

     This study aims at searching current status of Chile and Peru public procurement market and analysing the method of entering the market for Korean companies. ‘Public procurement’in this paper defines to supply goods and se..

    LEE Mi Jung et al. Date 2015.12.30

    economic cooperation, trade policy
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     This study aims at searching current status of Chile and Peru public procurement market and analysing the method of entering the market for Korean companies. ‘Public procurement’in this paper defines to supply goods and services by governments and international agencies. Korea have made an agreement with Central and South America Countries about public procurement part in FTA. (Fermentation: Korean-Chile FTA, Korean- Peru FTA). This study focuses on Chile and Peru government procurement market and UN market by PAHO with connecting Korea by economic agreements. PAHO is an international public health agency working to improve health and living standards of the people of the Americas. It was founded in December, 1902. It is part of the United Nations system, serving as the Regional Office for the Americas of the World Health Organization, and as the health organization of the Inter-American System. PAHO’s procurement scale is about 585 million dollars in 2013. PAHO has raised strategic fund for Central and South America Countries’s health care projects. PAHO mainly give these countries technical support for health care and procurement process come under technical support process. PAHO’s procurement process equates to UN process. Chile’s government procurement scale by Chile Compra is 10.2 billion dollars in 2014. ChileCompra is a government agency under Ministry of Finance, that operate five e-procurement system and monitor the procurement activities in government department. The procurement scale by ChileCompra is 35.3 % of total scale. The rest scale is by Public enterprise and Ministero de Obras Publicas. In Chile, public procurement policies are nothing to give any preferential treatment for foreign companies and small and medium sized businesses. So, to enter Chile’s public procurement market, Korean companies should consider to localize and participate in tender process. Peru’s government procurement scale by OSCE (Organismo Supervisor de las Contrataciones del Estado) is 13.7 billion dollars in 2014. OSCE is a government agency under Ministry of Finance, that operate one e-procurement system and perform a procurement activities instead of government department. The procurement scale by OSCE is 69 % of total scale. The rest scale is by ProInversion, UN agency, IDB, CAF. In Peru, public procurement policies are similar to Chile, not to give any special treatment for foreign companies and small and medium sized businesses. To enter Peru public procurement market, Korean companies should consider to localize and participate in tender process by various routes, especially KOICA’s local procurement process. In comparatively analysing the cases to enter Chile and Peru public procurement market by Korean, Chinese and Japanese companies, Japan’s strategies is to adopt indirect method for joint venture with local business or using local partner, because in Chile and Peru’s vendor registration each procurement government agency request on local business licence. Japan focus on improving the images for Japanese goods and services and capturing public procurement market gradually. China’s strategies are to adopt direct investment to buy local enterprise and participate public tender process as local one. China focus on participate various loan project or investment project premised on employing Chinese related to the project. Otherwise, Korea’s strategies are systematic nothing, because Korea have successful bid case based on the political events, that, for example, Korean President visited Central and South America Countries, or Ministry of Foreign Affairs and KOTRA cooperate the proposal of Central and South America Countries and inculcate their government for G2G project. The most problem is that Korean companies don’t have long period plan for Chile or Peru public tender market, but only look for victory on short time. Accordingly Korean companies suffer loss after loss based on the short period for negotiation with Chile or Peru procurement officer. Korean strategies for public tender market in Chile and Peru should be modified to go toward systematic guide and cooperation network with local Korean companies or competing countries’s companies. But Korean’s support system for entering foreign countries have some weak points as follows: ① main support countries focused on developed countries (ex. USA, UK, and so on), ② only support contents concentrated public tender process, a few contents for contracting, negotiation and follow-up management stages after tender process. This paper suggests that Korean support systems ① develop a consulting guide included simulation analysis for localization, ② arrange co-findings with IDB, CAF, and so on, and financial cooperate with competing countries, ③ connect local (Korean) partner for long negotiation time after tender process, and ④ consult some legal problems in follow-up management stages. This paper represents much to providing the adoptable route to access Chile and Peru, not only informing Chile and Peru tender process. However this paper has follow-up tasks as; deepening a study about ① cooperation network with local Korean partner and competing countries’ partner, and ② manuals for public procurement management in Central and South American countries. 

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  • 21세기 한국·쿠바 협력 관계 증진을 위한 정책방안 모색: 정치외교·문화·경제·환경..
    Searching Cooperation Methods for Promoting Relation between Korea and Cuba: Focusing on Political Diplomacy, Culture, Economic and Environmental Fields

     This study aims at finding out (international) cooperation in the fields of culture, economics, and environment for promoting Korea-Cuba relations. Expected delaying of normalization of diplomatic relation between S. Korea a..

    CHUNG Kyung Won et al. Date 2015.12.30

    economic opening, economic cooperation
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    Summary

     This study aims at finding out (international) cooperation in the fields of culture, economics, and environment for promoting Korea-Cuba relations. Expected delaying of normalization of diplomatic relation between S. Korea and Cuba which it is not clear how soon this would happen, our research question focused on what strategic choices could be helpful to promote future relations for both countries.
    Of course, it could be consider a giving up strategy as one-side method in negotiation of normalization of diplomatic relation between S. Korea and Cuba. However, even if S. Korea could not obtain overwhelmingly large benefits with getting in a situation, unilateral concessions would not be considered in a good way for international negotiation. If S. Korea also recognize the limited situation with win-set changes, such as by using strategies that would set a deadline for when given that it has limited, or no choice, this kind of pushing strategy is to work as a disadvantage for better negotiation. Beyond giving up or pushing strategy, therefore S. Korea must consider the changing market situation in Cuba such as a closely related with a possibility of America’s embargo release for Cuba in near future and a possibility of changing political circum stances, etc. and rather than being in a hurry to step on a course for strengthening ties, S. Korea must take actions in a way of more realistic methods with a long-term process for making normalization of diplomatic relations for both countries.
    The other method is to creating special conditions by changing circumstances and inducing Cuban concession with some ways as below: First, as a little bit easy and a possible option, ‘Move Cuban Political Leaders’. We understand that Cuban political leaders have played a great role as important decision-making entity, especially in the context of diplomatic policy-making structure established more strongly and for a long time in particular after Cuban Revolution in 1959. By providing them strong incentives and leading them to keep away from N. Korea, it will lead to normalize diplomatic relations with S. Korea. However, in fact this strategy is not easy to realize as well, because Cuban diplomatic policies have been sustained for a long time on a basis of upholding loyalty and a cause for their foreign policies, especially with N. Korea as well.
    Second, ‘Move N. Korea’. As Cubans make sense to talk about, “it depends on improvement the relationship between S. Korea and N. Korea” when asked about the most serious obstacle for normalization of diplomatic relation between S. Korea and Cuba and many point out by saying that recovering of relations with the communist N. Korea for S. Korea is the most important thing. However and in reality, there still remain a serious question about how would S. Korea be able to take a signal from N. Korea that it does not matter for the normalization and move into peace relation for both ones.
    Third, ‘Move the USA’. currently the USA accomplished lots of a diplomatic achievements, such as diplomatic normalization with Cuba, reaching a great settlement on nuclear negotiations with Iran, etc. and from this same position and participation, the USA will play a leading role by participating a peace-building process and will contribute to rebuilding denuclearization zone in Korean Peninsula, as same as S. Korea and Cuban issue. Finally, ‘move the other neighbor country who has a good relationship with S. Korea and Cuba in Latin American region’. Of course, the third country who has friendly ties with both countries in Latin America could play as a leverage and persuade Cuba to join diplomatic negotiation. However, this strategy is also hard if we understand the complicated diplomatic geopolitics in Latin American region, in particular in the conditions of the dominant of left governments and other economic relationship as well.
    Even this research identified there exists alternatives and methods mentioned above such as changing strategy and inducing the changing of circumstances, it is still hard to make a diplomatic normalization within a short period between S. Korea and Cuba. However, one principle which this research strongly suggest is that, regardless of when diplomatic relation achieved by using various strategies, it must be designed to improve relations with strategy and cooperation methods. Instead of considering when and result(e.g. normalization), this research focused more process and searched a various way of cooperation method, emphasizing on promoting human interchange and expanding people’s contacts, strengthening economic ties between S. Korea and Cuba, and finally two countries have a great potential for cooperation in a field of environment, or climate change issue.
    Up to now, K-wave is booming and increasing friendly Korean image in Cuba and is another potential power, such as Korean companies who want to take advantage of Cuban opportunity through creating new business in Cuban market, or it helps an other catalyst to improve international development cooperation in the field of environment and sustainable development, climate change issue, all of these approaches will help to make a good relation naturally in near future even it will take a little bit long term each other.
    Based on this awareness, cultural cooperation is possible with the following policy suggestions. We understand in many senses Korean culture and contents for entry into the existing Cuban market seems too early stage yet, because we can not know exactly what is the real consumer market and sometimes it is difficult to identify in-depth and various levels as well. However, already we have experienced and accumulated lots of materials and created useful methods for entering into the other Latin American cultural markets where are currently growing in the private sector. This kind of bench-marketing from other country in Latin America will be helpful to develop a new market approach for S. Korea into Cuba.
    However, concerned about cooperation method and direction related with Cuban case, it must be more careful. Because of having a colonial history for a long time and economic blockade from the USA currently, sometimes Cuban cultural market has a great resistance against oppressive manner from other foreign culture. If we understand this national sentiment, S. Korea must adapt and access through just pure meanings of cultural exchange by mutual understanding and harmonizing it with in cultural contents (e.g. non-ideological materials), rather than showing off economic and technical superiority of S. Korea.
    This kind of policy priority should be considered as an important guideline and adopted into real cultural cooperation activities each other. If we also understand the current popularity of the Korean culture and contents which is rising around the mania groups rather than the public in Cuba, cooperation must focus on appealing power and should have a high focus on selected targeting small groups and anticipating its spill-over to the public in near future. For example and based on the consumer survey, S. Korea should consider the popular ‘telenovela(television serial drama)’ as target type drama which match the tastes of Cuban consumers.
    If we understand the main consumers for K-Pop is groups of teens and twenties and then they must be the first target for Korean television dramas, movies, etc. It is also necessary to introduce and access in conjunction diverse cultural contents, such as plays, musical, dance, and folk performances as well.
    In addition, it is necessary international cooperation for building more broadcasting infrastructure in Cuba. and free showcase, fan autograph meeting will be good cooperation methods in enhanceing and expanding contact opportunity each other. In the case of Cuban consumers who enjoy Korean culture and if we consider the existing various and relatively diverse groups such as younger audience in K-Pop and other audience in movie market, and women and older people in dramas, so called 'line-up' is established at the moment. In the conditions of understanding this consumer variety in Cuba, from now the ‘line-up’ must be enhanced for every member of the household through creating an integrating genre that family member can enjoy all together. In other words, emphasizing the ‘family’ is the need to absorb all ages.
    In the case of broadcast video contents, S. Korea-Cuba should participate in co-production process. if Korea has the varios skills and technologies in aspects of hardware(world-class level) for making broadcast video contents, Cuba has various culture, natural environment and artistic sensibility. It should combines and produce a high level of work. In order to enable the cultural exchange between S. Korea and Cuba, not only broadcast cultural content, it should be included literary and cultural festival, sports, education and there is a need to improve the exchange of medical fields as well. For example, authorities in both countries make a great effort to develop educational programs in the field of Korean cultural education and exchange, or invite Cuban experts who know Korean culture.
    In economic terms, it is necessary to consider the following points. If we think the current USA- Cuba normalization and then in the case of release of economic blockade against Cuba in near future, Cuban economic growth is a matter of time. Korean economic cooperation toward Cuba in the short term and before establishing diplomatic relations, Korea should focus on expanding export items and volumes with Cuba as main goal. Expected sectors are construction equipment, IT communication, agricultural machinery for development of agriculture and natural resources. According to the analysis of KOTRA, automobiles and parts, hotel and home appliances, information and consumer communication devices, pharmaceuticals and medical equipment, mining equipment and processing machinery, etc. will be included.
    However, after achievement of diplomatic normalization between S. Korea and Cuba, it will go further beyond only expanding economic trade . After normalization and in the short and medium term, economic cooperation with Cuba will be required granting of credit. From initiative and as a complement to minimize the risk of granting of credit, it will make more trade opportunities each other, including being guaranteed a stable sales for trading companies and exchange a bilateral investment, guaranteed by guarantee agreements for a stable economic activities each other.
    Furthermore, after reviewing foreign investment and industrial development policies which are emphasized by Cuban authorities currently since 2008, this research finds out that Cuban government wants more foreign investments in the fields of energy, tourism industry and others(infrastructural parts), such as power generation, telecommunications, industrial complex, ports development, oil exploration, etc. For these, S. Korea can cooperate with Inter-American Development Bank(IDB) and other international financials by enhanceing multilateral cooperation channels.
    The possibilitis or potentials of environment cooperation for both countries started from reviewing many national environmental strategies and sustainable development policies in Cuba. However, Cuba has lots of problem for sustainable development, such as the state budget deficit, labor shortages, poor environment management, capacity for sustainable development is quite low. In addition, in the process of economic open, reform currently it is now asking a new governance and become urgent for Cuban sustainable development model. Besides the various impacts of climate change : typhoon(hurricane), drought(increased water stress in Cuban), water management system, air and water pollution and biodiversity destruction, rising sea level threats(in the coastal lowland areas) are another matters of unsustaibable way of development and urgent issues for requiring international cooperation. S. Korea-Cuba environmental cooperation in the sustainable development dimension is required, especially in the parts of renewable energy development and greenhouse gas reduction sectors by providing economic incentives(adaptation and mitigation balancing) will reduce climate change impacts, natural disaster risk, etc. In this case GCF funding and technology transfer will be useful mechanism. 

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  • 이집트 산업정책 및 산업구조 분석과 한·이집트 산업협력 전략
    Industrial Development Strategy in Egypt and Its Implications for Cooperation with Korea

     Egypt is one of the economy in the Middle East and North Africa with great potential in terms of population size and natural resource reserves. As well, it may realize economic growth and diversification through industrializ..

    PARK Bokyeong et al. Date 2015.12.30

    economic cooperation, industrial policy
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     Egypt is one of the economy in the Middle East and North Africa with great potential in terms of population size and natural resource reserves. As well, it may realize economic growth and diversification through industrialization because it doesn’t depend on oil or natural gas excessively and currently has basic foundations in manufacturing sectors.
    Starting from this assessment on the Egyptian economy, this study inquires into the appropriate direction of Egypt’s future industrial policy and, further, aims to propose some policy measures to strengthen economic ties between Egypt and Korea.
    Egypt, as Korea did, adopted industrial policies for industrialization and industrial up-grading merely to be unsuccessful. Import substitution industrial policy in the 1950s and 1960s led to only stagnant productivity and large trade deficits. Later in the 1990s, Egypt shifted its policy toward export promotion, but the policy ended with protection for vested interests of old uncompetitive manufacturers. The result left the Egyptian economy heavily dependent on staple industries with low value-added such as textile and clothing, food, and oil and chemistry.
    While Korea promoted new high-tech industries as strategic sectors to level up its position in the international value chain, Egypt adopted a strategy to support all of manufacturing sectors rather selected industries. Policies to attract foreign direct investment, to develop attractive industrial zones, and to produce technology and skilled labors were also disappointing, which was mainly attributable to corruption and red-tape.
    Relying on Korea’s experiences with consideration of the current situations in and around the Egyptian economy, this study suggests some directions for the future industrial policy in Egypt. First, Egypt needs to selectively support strategic industries with large employment absorption capacity. Second, Egypt needs to upgrade its industrial structure in the mid or long run, although in the short run it may focus on investment in infrastructure and mega civil engineering projects for prompt job creation. Third, Egypt needs to refine incentive mechanism to attract FDI by enhancing labor market flexibility and streamlining administrative procedure. Last, Egypt needs to ensure political stability, corruption control, and government efficiency, which are all pre-conditions for successful implementation of an industrial policy.
    When selecting strategic industries, Egypt should mainly consider three aspects of candidate industries: static and dynamic comparative advantage, global market growth, economy-wide spill-over effect. Through considering and measuring these three aspects, this study selects 9 industries as Egyptian strategic sectors: primary metal manufacturing, non-metal mineral manufacturing, food and beverage, chemicals, textile, metal manufacturing, electric equipment, rubber and plastics, furniture. Further, this study proposes more active cooperation between Egypt and Korea in 5 industries out of 9 above: primary metal manufacturing, food and beverage, chemicals, electric equipment, rubber and plastics.
    This selection is based on match-making between the Egyptian strategic industries and Korea’s overseas investing industries. As cooperation tools at industry level, this study suggests Korean companies’ participation in the Egypt’s electric power generation and distribution, creation of industrial zones in Egypt exclusively for Korean companies, sharing of Korea’s experiences in industrial policy, enhancing the Egyptian capacity for R&D and vocational training, and supporting the establishment of a national chemical research institute in Egypt. 

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  • 국제운송회랑의 새로운 지정학: 유라시아 실크로드 구축을 위한 협력방안 연구
    A New Geopolitics of International Transport Corridor

     Recently there has been developed intense competition between great powers, which are willing to integrate Europe and Asia into a single economic bloc. The world powers are entering into the era of division and congregation ..

    WON Dong Wook et al. Date 2015.12.30

    economic cooperation, political economy
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    Summary

     Recently there has been developed intense competition between great powers, which are willing to integrate Europe and Asia into a single economic bloc. The world powers are entering into the era of division and congregation depending on their interests with intense efforts made to dominate geopolitical superiority. This looks like the Eurasian plate is fluctuating.
    The intense struggle for the hegemony in Eurasia between great powers is mainly being carried by international transport corridors passing through the continents. International transport corridor is not just network of routes to transport cargo and passengers, but a transversal line of international political economy, in which great powers are making efforts to dominate and extend their influence.
    Eurasia has been the arena of competition on international transport corridors between great powers for a long time. Due to the fact that Eurasian Silk Road is the connection between transportation route, independent actions and approaches of each countries are taking places. Therefore, we need to focus on the fact that the Eurasian Silk Road is a complicated ‘space of game’, in which competitions and cooperation between countries are being made. Particularly, the giant stampede on Eurasia silk road between US, China, and Russia is giving Korea great significance, since Korea is the peninsula, located in the intersection of the Pacific and the Eurasian Continent and is sensitive to hegemonic changes of the ocean and the continent.
    The purpose of this study is to create new opportunities for the new cooperation space, and simultaneously to seek the ways of peaceful reunifications of two Koreas through it, based on the analysis of the geopolitical and geo-economical changes building Eurasia Silk Road. Focusing on the intricate ‘New Great Game’ between the global super powers in Eurasia, especially triggered by ‘One belt-One Road’ plan of China, which is transforming from trans-regional great power into global super power, we are going to seek the way of building Eurasian Silk Road together.
    Recently complex strategical project on Eurasia among China, Russia, and US has been activated already. However, Korea’s ‘Eurasia initiative’ is still remaining in the stage of planning. Even though the road map of ‘Eurasia Initiative’ was set up in the end of 2014, it has not detailed realization plan, so any progress is not being made except the ‘Rajiin-Khasan Project’.
    For these reasons, discussions on key elements of China, Russia, and US’s strategies of building silk road, their geostrategic meanings, and mutual contract and possible collaboration of ‘Eurasia Initiative’ based on them have great significance. So, in other words, it depends on this, whether we can maintain new engine of economic growth, and dynamic momentum of peaceful reunification of Korea by the active efforts to connect Europe and Asia into ‘one continent’, or we could not overcome the limitation of a divided country and we will excluded from Eurasian cooperation community.
    Thus, in order not to sink on the geopolitical confrontation relying on one ocean or continent power, it is important to seek new ways of ‘Eurasia Initiative’ as a middle power country. This is, in the world of ‘New Great Game’ between super powers, Korea needs to seek its own empowerment with the stake holders, such as Central Asia countries, ASEAN countries, India, and Mongolia. It is important to secure the right to speak, escaping geopolitical competitive construction, by taking complex neutral actions among China, Russia, and US. In addition, in the situation of antipode of US-centric international political economic order, ‘projection of power’ needs to be avulsed, since it can be seen as an attempt of china-centric power balance. In other words, community of profit and common destiny needs to induce new Eurasia economic cooperates and development model to overcome gap between countries and to coexist together, not to expend market dominated by inertia of the empire. Also, US’ ‘Pivot to Asia’ should sublate ways, which are aggravating complications, such as reinforcement of partnership by supremacy inhibiting China’s meteoric rise, but should be readjusted to be the partner of developing Asia’s dynamic growth potential. Dice towards the continent of Eurasia already has been thrown. Remnants are the strategic approach of ‘Eurasia Initiative’s evolution, escaping from the traditional geopolitical landscape of hegemony and the conflict.
    The problem of how to derive construction of cooperation is important so far, with the situation of absence of economic cooperate mechanism and unoptimistic security situation in Northeast Asia. To solve this problem, it is preferable to do ‘geo-economical approach’ rather than ‘geopolitical approach’ to set the priority on economic co-operation. And first in importance is to establish a ‘Northeast Asia Economic Corridor’ by enhancing planning convergence of each Northeast Asian countries. This can be called optimum partnership program combining China’s 6 economic corridors construction promotion in accordance with their ‘One Belt-One Road’ strategy, Russia’s EEU, Far East development in accordance with the ‘New East Policy’, recently raised TEBR, Mongolia’s ‘Transit Mongolia’ and ‘Steppe Road Initiative’, and Korea’s ‘Eurasia Initiative’.
    Northeast Asia Economic Corridor is not a new concept but is rather a concept and initiative, consolidating bilateral, multilateral cross-border co-operation, which has been developed focusing on building international transport corridors in the border areas between North Korea and china, and among North Korea, China, and Russia. Northeast Asia Economic Corridor is an effective preventive measures to avoid existing geopolitical confrontation and conflict between ocean and continent powers. It’s core content is realizing ‘2+4 cooperative structure’, cooperating in transport logistics, trade industry, agriculture and forestry marine products, and energy resources, focusing on building the China-Korea, China-Russia-Korea economic corridor in the eastern end of Eurasia Silk Road. It is building China-Korea economic corridor, based on the enhancement of adjusting China’s ‘Liaoning Costal Economic Belt Plan’, ‘Dandong Development Plan’, and North Korea’s ‘Huanggumpyung and Wehuado Development Plan’, along with South Korea’s ‘Pan-Yellow Sea Area Plan’ together. And also, it is building China-Russia-Korea economic corridor, based on the enhancement of adjusting China’s ‘Chang-ji-tu Plan’, Russia’s ‘Far East Development Strategy’, North Korea’s ‘Lason Development Plan’, and South Korea’s ‘Pan-East Sea Area Plan’.
    This, of course, is a biased composition, concentrated on the continent, and it discloses the certain limits, since it excludes main stakeholders of Northeast Asia, such as US, Japan, etc. Especially, if Northeast Asia countries keep uniting with the alliance, focused on bilateral relations, It would not be easy to get initiative building China-Korea Economic Corridor, and also the Northeast Asia Economic Corridor. And considering South Korea-US-Japan’s triangular relation’s trend of US-centric networking alliances in confrontation with North Korea-China-russia’s triangular relation, South Korea, the nation confined to alliance structure, is in a hard position to get the initiative on building economic corridor. In particular, Japan is the kind of ‘cold spot’ in Northeast Asia economic cooperation, and in this regard, securing Japan in the structure of Northeast Asia Economic Corridor would be the key factor in determining success and failure of the building economic corridor. It is possible to carry Japan in the structure of multilateral cooperate structure, since Japan can have an adverse impact on strategic composition if Japan is excluded from the discussion of building Northeast Asia Economic Corridor. Furthermore, Japans’ participation can lead US’ participation, which is an offshore country but very influential in Northeast Asia. Through this, we can anticipate that promoting Northeast Asia Economic Corridor could have leverage effect leading peace and prosperity in Northeast Asia beyond the geopolitical confrontation.
    In conclusion, building Northeast Asia Economic Corridor is the powerful plan to achieve South Korea’s ‘Trust-building Process on the Korean Peninsular’ and ‘Northeast Asia Peace and Cooperation Initiative’, and also it will provide momentum for the construction of inter-Korean economic community, along with the cooperation in transport logistics, communication, and electricity, based on the establishment of transport corridors between North and South Korea. The crucial factor of building Northeast Asia Economic Corridor would be North Korea’s decision to participate. So, we have to develop multilateral cooperation projects toward North Korea, related to building Northeast Asia Economic Corridor with the annulment of 5.24 ban measures for inducing North Korea’s participation.

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  • 한·유라시아 주요국 산업협력을 위한 전략적 제휴방안 연구
    A Study on the Strategic Industrial Cooperation among Korea and the Eurasian Countries

     This study explores possible frontiers for industrial cooperation among Korea, Russia, Kazakhstan and Uzbekistan. While regarded as one of major foreign policy agenda, the ‘Eurasia Initiative’ lacks practical programs to a..

    HAN Hongyul et al. Date 2015.12.30

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

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  • 인도의 산업구조와 내수시장의 경쟁구도 변화
    The Changes in the Industrial Structure and Competition in the Domestic Market in India

    The rapid growth of the Indian economy has recently led to a rising interest among other countries regarding the sustainability and direction of India’s economic emergence. Its growth has provided an incentive for major economic ..

    LEE Soon-Cheul and KIM Wan-Joong Date 2015.12.30

    competition policy, economic cooperation
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    The rapid growth of the Indian economy has recently led to a rising interest among other countries regarding the sustainability and direction of India’s economic emergence. Its growth has provided an incentive for major economic powers such as the USA, Japan, China, EU etc. to enter the Indian market and expand their trade volume and investment with India.
    Consequently, such increases in exports and investment from other countries have spurred changes in the industrial structure of India. Because of the recent increase in the market share of other countries in India, Korean firms in India now face higher competitive pressure in the Indian market. This necessitates better, diverse strategies in order to respond to the changes occurring in the Indian economy and the rising competition in the Indian markets.
    Considering these issues, we begin the paper by analyzing the structural changes of the Indian economy and competition over India’s market. Then in the second chapter, we analyze the changes of industry, export and import, and competition in terms of market share. The results can be summarized as follows: First, the share of service compared to that of manufacturing has increased, implying that India’s economy has grown in parallel with service-oriented industries.
    We also found that ‘center of gravity’ of manufacturing in India has shifted from labor-intensive industries to capital-intensive industries. Second, while exports have had a major role in India’s growth, the amount was smaller in relative terms to those of other developing countries. It implies that India’s economy depends more on the domestic market than trade. Third, India depends more on private consumption than fixed capital formation or other similar aspects, with respect to the determinants of aggregate demand.
    Fourth, the major industries have experienced structural changes, as the share of textiles and its products have decreased and those of other manufacturing, especially electrical and optical equipment, have increased in the exports. As for imports, the ratio of other manufacturing, basic metals and fabricated metal, chemicals and related products, and electrical and optical equipment have increased. Fifth, the ratio of intermediate goods is higher than that of final goods in terms of the production process.
    It means that entry strategies of Korean firms need to focus on intermediate goods. Sixth, even though the major trade partner for India is the USA, China’s share in the Indian market has undergone a significant increase. On the other hand, the import ratio of EU has decreased. Seventh, in measuring the effect of creation of value-added from major countries that export to India, USA is still the most influential. However, its ratio has been declining quickly, while there has been rapid growth on the part of China, meaning China has become the most important country for India in terms of trade.
    In the 3rd chapter, the changes within the domestic market and promising industries in India are identified. First, we have identified chemicals and related products, basic metals and fabricated metals, electrical and optical equipment, machinery, and transport as the most promising industries in India in view of growth rate and size of the domestic market and imports. In the 4th chapter, the competition structure of major countries compared to Korea in the said five industries is analyzed.
    The results show that Korea has lost its competitive edge vis-a-vis China and EU 15 in those industries, even though it still holds advantages over USA, Japan and ASEAN. In Chapter 5, we provide several political implications for the Korean government and companies in need of economic cooperation with India. First, the Indian economy depends more on its domestic market than exports, and has grown alongside industries that are heavily engaged in import and investment.
    Thus, Korean firms need to focus more on the Indian domestic market, in addition to formulating proper entry strategies. Second, capital-intensive industries will claim a greater proportion of the Indian economy because the share of labor-intensive industries has been reduced and that of capital-intensive industries have recently experienced rapid growth. It implies Korean firms’ strategies for entry and economic cooperation strategies need to focus on capital-intensive industries.
    Third, the high utilization ratio of most industries shows that the strategies are also necessary for the establishment of bases of production and entry into manufacturing industries. Fourth, a strategy is also needed for expansion of trade for import-oriented industries. Fifth, more strategies in response to China’s expansion in India’s market is imperative, given the aggressive entry of numerous Chinese products into the Indian market.
    Sixth, the entry strategies at the industry level are needed, considering the increased competition with major countries in India’s market. Finally, Korea needs to enter the infrastructure sectors where the Indian government has recently invested heavily. 

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  • 인도 모디(Modi) 정부의 경제개발정책과 한ㆍ인도 협력방안
    Indian Modi Government’s Economic Development Policy and Implication for Cooperation between Korea and India

    The current government of India is pushing ahead with a series of economic reform policy, named ‘Modinomics’ after its chief executive, focusing on high growth and being business-friendly. Modinomics emphasizes the virtuous circ..

    CHO Choongjae et al. Date 2015.12.30

    economic reform, industrial policy
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    The current government of India is pushing ahead with a series of economic reform policy, named ‘Modinomics’ after its chief executive, focusing on high growth and being business-friendly. Modinomics emphasizes the virtuous circle of investment that promote employment and consumption, which induces additional investment. The Indian government has been concentrating on improving the business environment through easing or removal of various regulations related to investment, and also establishing a reliable and efficient leadership. Especially, the government of India has placed a priority on attracting private and foreign investment into development of infrastructure and promoting manufacturing sector, based on key policies of Modinomics such as the ‘Smart City’ and development of the Industrial Corridor, and finally, the “Make in India” campaign. 
    As a part of his increasingly active ‘sales diplomacy,’ Narendra Modi, prime minister of India, has visited several countries, including Japan and China; holding summit meetings with its leaders and receiving promises of massive investment. Meanwhile, although India’s manufacturing ratio to GDP is approximately half that of Korea, its growth rate in the sector is fastest among emerging countries and advancements in manufacturing structure is also progressing swiftly. The ratio of registered manufacturers employing more than 10 workers ratio to GDP has increased by 2.8 times, from 3.7% in 1950/51 to 10.6% in 2013/14, and the ratio of non-traditional registered manufacturing such as petrochemical and automobiles, etc. to GDP increased to 75% in 2007/08 from 39% in 1950/51. Also, elasticity of employment in private manufacturing is also rising at a rapid pace, though overall elasticity of employment is decreasing. 
    Investment into infrastructure has been increasing after the conclusion of the 11th 5-year development plan (2007-2012), as the ratio of investment into infrastructure ratio to GDP initially crossed the 5% mark during 10th5-yeardevelopmentperiod, and subsequently recording 7.2% and 8.2% respectively during 11th and 12th 5-year development periods. However, it would take considerable time for India to emerge as a world class manufacturing hub like China because current investment ratio of India is still only around half that of China. 
    After Prime Minister Narendra Modi was elected in May 2014, India’s economic cooperation with Japan and China has been enhanced significantly. The Indian government received promises for investments of 35 billion and 20 billion dollars, respectively, from Japan and China. Japan and China are also pushing forward development of 11 and 2 industrial zones, respectively, for their national companies and are also actively involved in development of a rapid transit railway and a ‘smart city.’ Especially, Japan has already completed a feasibility study into operation of Shinkansen-type train, and several projects for the creation of a DMIC-based smart city projects are also in progress. Also, it is expected that nuclear cooperation agreement, which would mean increased opportunities for Japan to participate in the development of nuclear power generation in India, would be signed between Japan and India at the India-Japan summit planned for the second half of 2015. Japan’s investment into India showed a dramatic increase starting in the late 2000s and as of 2015, its accumulated amount is more than 10 times in comparison with Korea. This represents a direct threats for Korean firms in the Indian market, and it would jeopardize their chances for pre-occupancy in a country widely expected to become ‘the Next China.’. It is amidst such a background that this report places great emphasis on the strategic importance of India. Considering the ongoing slowdown of economic growth in China, it is necessary to enhance cooperation with India. Also, in order to overtake the gap between Korea and Japan in terms of economic cooperation with India, it is urgent that strategies be established for expediting such cooperation.
    Also, development of specific and concrete projects and strategies by make good use of the 10 billion dollars available, including the 1 billion dollars of EDCF funds as agreed to at the Korea-India submit on May 2015 must be undertaken with great urgency.
    This research report suggests development of a ‘Korean Industrial city’ as the new economic cooperation project with India. It dovetails neatly with key policies of Indian government, namely their focus on promotion of manufacturing, development of infrastructure and industrial corridors. Also, Korea can take advantage of its extensive experience and knowhow regarding development, including those for industrial cities, new towns, innovative cities, administrative cities, etc. Development of a ‘Korean Industrial city,’ in particular, would provide a marvelous opportunity to promote investment of Korean firms into India.
    To minimize development risk, as many stakeholders should participate as possible. Especially, participation of firms who are specialized and well-suited for entry into manufacturing-oriented new towns, along with their affiliated and cooperating firms is needed. In addition, government, public and private sector, financial institutes of both India and Korea also should participate. Development of manufacturing-oriented new towns based on cooperation with large firms and cooperative firms can simultaneously minimize investment risks, such as vacancy problems. By utilizing the total of 10 billion dollars of infrastructure development fund including 1 billion dollars from EDCF, along with KSP based project, such activities as Feasibility study, building master plan and urban infrastructure, organizing related institution and transferring operating knowledge can proceed smoothly and efficiently with minimum risk.
    In order to develop ‘the Korean Industrial city’ efficiently and expeditiously, related policies must be prepared and formulated beforehand. First, of these preparations involve selecting a state and city, followed by negotiations with relevant organizations and agencies. Especially, cooperative involvement of cities should start at the very beginning, as the development plan is being conceived, so that there would be greater possibility of securing ‘high return’ cities and regional projects in advance. Although some countries have already established themselves in 15~16 cities, there are still many opportunities available as 20 new cities are selected and provided with budgets annually.
    Also, due to the difference in fiscal conditions and willpower in connection with development, and awareness of land acquisition by the state, selection of target city should proceed carefully. So far, it is the most reasonable to consider 6 states included in DMIC project as a prior selection. The said list of 6 states include Gujarat, Maharashitra, Uttar Pradesh, Haryana, Rajastan, and Madhya Pradesh. Other states that can be considered in addition are Punjab, and Andhra Pradesh.
    Second, it is important to organize a consortium consisting of firms moving into industrial zones in combination with government, public and private sector, financial institutions, and international organizations. Especially, due to the lack of experience of Korean firms in overseas project involving investment development, the government and public organization should communicate the necessity for such projects to all actors, and create a favorable atmosphere for participation. Furthermore, they should lead the way in building the consortium through cooperating actively with firms that move into new cities and industrial zones.
    Most of all, a system needs to be organized that can drive development projects forward by searching for target cities or states, and build a consortium step by step. And discussions for organizing enforcement system should begin where government and public sector must first provide support for related consultative groups, followed by formation of a consultative group that brings together large and small-medium sized firms, and financial institutions. It is expected that attracting participation of firms would be relatively easier considering that 10 billion dollars, including 1 billion dollars from the EDCF, is available as development funding.
    Lastly, strategy of developing projects of reasonable scale, focusing on high quality-low cost industry oriented smart city and taking advantage of Korea’s experience in short-term development, is necessary. This strategy offers a practical direction where Korea can differentiate itself from massive development models of Japan and China, and also spread out to other states and cities using the Korean industry-oriented smart city.  

     

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