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  • 對중국 정책의 범정부 협력네트워크 강화방안

    Date 2013.12.30

    Chinese legal system

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  • 중국 조선족 청년의 이주와 노동시장 진출 연구

    Date 2013.12.30

    Labor market, Chinese social culture

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  • 무역 및 투자 개방이 한국의 FDI에 미치는 영향
    Effects of Trade and Investment Liberalization on Korea’s FDI

    Effects of Trade and Investment Liberalization on Korea’s FDIJong Duk Kim, Seungrae Lee, Jungu Kang and Hyuk-Hwang KimAfter Korea-Chile FTA became effective since 2004, Korea has made multiple free trade agreements with 47 countr..

    Jong Duk Kim et al. Date 2013.12.30

    Foreign direct investment, Overseas Direct Investment

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    Effects of Trade and Investment Liberalization on Korea’s FDI

    Jong Duk Kim, Seungrae Lee, Jungu Kang and Hyuk-Hwang Kim

    After Korea-Chile FTA became effective since 2004, Korea has made multiple free trade agreements with 47 countries including United States and European Union, and is currently negotiating upcoming free trade agreements with other countries, such as Indonesia, China, Vietnam, Australia, and New Zealand. Along with the global spread of trade liberalization, it is necessary to evaluate the post-effects of FTA that came into effect and the strategies for the upcoming FTAs. However, prior reports and papers analyzing the effects of FTA were mainly focused on evaluating its economic effects on goods, while most of FTAs are influential not only on product sector but also on investment and service sectors. In particular, since foreign direct investment (FDI) is directly and indirectly related to goods trade, FTA is also associated with foreign direct investment sectors. This report analyzes the effects of FTA on outward and inward foreign direct investment (IFDI and OFDI) of Korea. Our report provides detailed analysis on the contents of FDI openness in the trade agreement and construct FDI openness indices by dividing investment sectors from the previous 8 free trade agreements that became effective into 5 sectors and 25 sub-sectors and quantifying FDI openness based on those sub-sectors. By adding our constructed FDI openness indices to the regression, we find that FTA significantly increases both IFDI and OFDI in the short run. Examining the effects of investment liberalization on IFDI and OFDI, the results indicate that investment liberalization from FTA increases IFDI. In particular, its magnitude becomes larger as investor-state dispute settlement is included in the chapter of agreement. On the other hand, the results imply that FTA has heterogeneous effects on OFDI from different industry sectors on the basis of investment related articles. For instance, OFDI from manufacturing sectors is likely to increase to FTA partner as agreement involves high FDI openness articles in general, while OFDI from wholesale and retail sectors is more likely to increase as agreement involves FDI openness articles on service related sectors. Furthermore, based on the relative GDP per capita difference between Korea and its FTA partner, we find that IFDI flow increases from FTA partners that have similar GDP per capita with Korea, while GDP per capita difference and FDI openness indices have interaction effects on OFDI flow from different industry sectors. For instance, we find that FDI openness indices have significant and positive effects on OFDI from manufacturing sectors to FTA partners that have higher income-level but small GDP per capita difference with Korea. Alternatively, OFDI from wholesale and retail sectors are likely to increase to FTA partner as a country has higher income-level and large GDP per capita difference with Korea, with high FDI openness on service sectors included in the agreement.
    Based on the results, our report provides policy implications for expanding Korea's OFDI and IFDI. We find that Korea’s OFDI and IFDI have increased at the aggregate level and they are positively affected by trade and investment liberalization. As our results indicate that FTA significantly increases OFDI and IFDI, we should carry forward upcoming FTAs more aggressively. In particular, upcoming FTA negotiations should focus on including FDI openness in service sectors, FDI regulation and protection, and investor-state dispute settlement provision. Furthermore, as trade and investment liberalization are known to have different effects on OFDI and IFDI based on the GDP per capita difference between Korea and its FTA partner, upcoming negotiations should be proceed by considering country’ GDP per capita relative to Korea and the agreement should include investment related articles that could have positive effects on OFDI and IFDI from different industry sectors.

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  • 2013년 중국종합연구 총서 정책연구과제 요약집

    Date 2013.12.30

    Chinese education, Chinese legal system, Chinese social culture

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  • 신북방 경제협력의 필요성과 추진 방향
    Necessity and Directions of Korea's New Northern Economic Cooperation

    Necessity and Directions of Korea's New Northern Economic Cooperation Yeo-Cheon Jeong   The area of the Eurasian continent north of the Korean Peninsula not only has special historical-cultural significance for..

    Yeo-Cheon Jeong Date 2014.01.29

    Economic development, Economic cooperation

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    Necessity and Directions of Korea's New Northern Economic Cooperation

     

    Yeo-Cheon Jeong

     

     

     

    The area of the Eurasian continent north of the Korean Peninsula not only has special historical-cultural significance for the Korean people, but is also important in terms of national security and economy of the Republic of Korea (hereafter, Korea). Bearing these facts in mind, Korea needs to pursue a 'New Northern Policy' for strengthening relations with that area referred to as “the Northern Area” in this report. Insofar as this policy targets a specific area, it should be different from traditional external policies toward individual countries.

     

     

     

    It is thus perfectly reasonable to state that Korea's New Northern Policy now needs to focus on the Russian Far East and the Chinese Northeast Provinces where large-scale regional development is underway. As development plans both in the Russian Far East and the Chinese Northeast Provinces are mainly aimed at modernizing regional industrial structure; construction of numerous industrial complexes and infrastructure are currently in progress which are intended to increase efficiency in production and transportation networks across the two regions. The extensive development of the Russian Far East and the Chinese Northeast could provide a firm base for Korea's New Northern Policy.

    That both Chinese and Russian governments are emphasizing, more than ever, international cooperation for their regional development plans, is very meaningful for Korea's New Northern Policy. The Russian government under president Putin, for example, considers 'Integration into the Asia-Pacific region' as one of the basic tenets of Russia's external economic policy. In the Federal Program for Developing the Russian Far East, expansion of trade and economic exchange with the Asia-Pacific countries was adopted as one of the main tasks while a number of important projects related to development of mineral resources and transportation infrastructures were set up, with full consideration of establishing direct connections with neighboring countries. Moreover, nationwide industrial policies of the Russian government such as the “Federal Strategy for Energy by 2030” were forwarded, taking direct connection with countries in the Asia-Pacific and, in particular, the Northeast Asian countries into account.

     

     

     

    Meanwhile, the Chinese government has been emphasizing international cooperation in connection with its development plans for the Northeast Provinces since the mid-2000s. In particular, Chinese government has been pushing forward policies to develop their border regions in close connection with its neighboring countries. These policies were well-expressed in the “plan for the integration of land routes, sea ports and zones with North Korea” and “plan for integration of land routes, sea ports and the customs with Russia” formulated by Chinese central government in 2007. Such policies of the China's central government were reflected in numerous bilateral cross-border cooperation projects enacted by 3 Northeastern Provinces of China.

     

     

     

    Of various aspects of international cooperation taking place in "the Northern Area" today, the one between China and Russia plays key roles in terms of magnitude as well as influence on international relations. For example, the agreement in 2009 between governments of the two countries, which aims at cooperative and concerted development of the Russian Far East and the Chinese Northeastern Provinces, included more than 200 projects ranging from cross-border transportation, customs, labor supply, sightseeing, to environmental preservation. Progress in these cooperation projects will greatly enhance bilateral economic ties between Russia and China vis-a-vis their common border.

     

     

     

    Another series of important international cooperation efforts in the development of Korea's “Northern Area” is taking place along the border of North Korea. Since mid-2000s up until the present, a number of Chinese business firms, especially those from Jilin Province, initiated various infrastructure development projects with focus on utilization of the port of Rajin, North Korea. Chinese and North Korean governments signed a convention in 2010 for cooperation in the development of North Korea's Rajin-Seonbong Economic/Trade Zone and Hwanggeumpyong Special Economic Zones that border, respectively, on Liaoning and Jilin Provinces of China. Russia, prompted by Chinese initiatives, embarked upon modernization of the 60 km railroad route between Rajin and Hasan (in the Southern end of Russia's Primorsky Province) in 2007, and subsequently acquired the right to use the No. 3 wharf of Rajin Port for 49 years, which will serve as a logistics hub for Russia's advance into Northeast Asia.

     

     

     

    As economic development of the Russian Far East and the Chinese Northeast Provinces is the most essential part as well as the most important driving force that will bring about changes in the “Northern Area”, the New Northern Policy of Korea should utilize it as a foothold. This means that the “New Northern Economic Cooperation” should be the main facet of the New Northern Policy of Korea. However, Korea's New Northen Economic Cooperation should, insofar as it is a part of the New Northern Policy, not only aim at economic gain, but strive towards broader goals such promoting favorable international circumstances, bolstering national security and, furthermore, improvement of inter-Korean relations.

     

     

     

    The directions and objectives of Korea's New Northern Economic Cooperation should be as follows. First, Korea should actively participate in the development process of the “Northern Area” in order to increase Korea's presence and have Korea's interests reflected within that process. To this end, entry of Korean businesses, especially small and medium-size firms, into the region would be a necessary precondition. Therefore, the first and foremost objective of Korea's New Northern Economic Cooperation is to support Korean businesses interested in investing in the Russian Far East and Chinese Northeast where the business environment is still relatively poor. It is advisable to establish a number of business information centers in those regions that could provide Korean businesses with proper information, and on-site consultation. Also, it is recommended that industrial parks for Korean businesses in the Russian Far East be established, as no such facilities has been set up presently.

     

     

     

    Second, from the perspective of economic interest, it is important for Korea to secure certain production factors from the “the Northern Area”. Considering that Korea is one of the World's manufacturing and export powerhouses but very poor in natural resources, Korea's cooperation with “the Northern Area” should prioritize securing natural resources, especially energy and mineral resources, from that region which are essential for stable development of Korea's manufacturing sectors. Besides, it is also very important for Korea to make use of the trans-Eurasian transportation infrastructure in “the Northern Area” in order to enhance efficiency of its international export distribution lines. In this regard, Korea needs to pay more attention to the railroad networks of “the Northern Area” as a whole; meaning present discussions on utilization of Trans-Siberian Railroads should be extended to include other main railroads lines in “the Northern Area” such as the Trans-Manchurian Railroad.

     

     

     

    Third, Korea's New Northern Economic Cooperation needs to focus more on multilateral cooperation. As Russian and Chinese governments are stressing multilateralism in their development plans regarding “the Northern Area”, it is expected that opportunities for multilateral cooperation in that region will increase greatly in the near future. Korea should not only participate actively in multilateral projects, but also spontaneously initiate new multilateral projects to lead the development processes in “the Northern Area”. In this case, it would be even better for Korea's New Northern Policy to organize those types of multilateral cooperation projects that, on the one hand, North Korea could take part in and, on the other, could contribute to the formation of a common economic community among Northeast Asian countries as a whole.

     

     

     

    The New Northern Economic Cooperation is closely related to other policies of the Korean government. Hence, a concerted action among ministries and government agencies is essential to the success of the New Northern Economic Cooperation. Also, in order for the New Northern Economic Cooperation to come to fruition, Korean government should endeavor to create efficient consulting channels with governments of counterpart countries both at the central and regional level.

     

     

     

    Even though Korea's New Northern Policy will be enacted mainly in the economic field, this policy pursues more wide-ranged goals involving international politics as well as national security. This means that Korea strives to upgrade overall relations with “the Northern Area” by means of the New Northern Policy. If the Korean government's New Northern Policy and the development policies of “the Northern Area” by Chinese and Russian governments can reach common ground, Korea, China and Russia will be able to form a “strategical partnership” not only in name but also in reality.

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  • 전략지역 심층연구 논문집 3: 중앙아시아∙몽골

    Date 2013.12.30

    Economic relations, Economic cooperation

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  • 전략지역 심층연구 논문집 2: 러시아

    Date 2013.12.30

    Economic relations, Economic cooperation

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  • 전략지역 심층연구 논문집 4: 중남미∙중동∙아프리카∙터키

    Date 2013.12.30

    Economic relations, Economic cooperation

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  • 전략지역 심층연구 논문집 1: 동남아, 인도‧남아시아

    Date 2013.12.30

    Economic relations, Economic cooperation

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  • 한-중동 금융협력 활성화를 위한 국내 은행의 중동 금융시장 진출 전략 및 기대효과
    Expected Effects of Entrenching Financial Cooperation between Korea and the Middle-East and International Expansion Strategies of Korean Banks to the Middle-East Financial Markets

    Expected Effects of Entrenching Financial Cooperation between Korea and the Middle-East and International Expansion Strategies of Korean Banks to the Middle-East Financial MarketsOh Suk YangThroughout the Chapters 2, 3, 4, 5 in re..

    Oh Suk Yang Date 2013.12.30

    Economic cooperation, Financial policy

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    Expected Effects of Entrenching Financial Cooperation between Korea and the Middle-East and International Expansion Strategies of Korean Banks to the Middle-East Financial Markets

    Oh Suk Yang

    Throughout the Chapters 2, 3, 4, 5 in respective order, this paper examines the concentration ratio of bank market in GCC at status quo, competitiveness of Islamic bank in GCC, and competitive advantage and internationalization strategy of banks comprising GCC market, local commercial banks, and global commercial banks in GCC market.
    In chapter 2, we examined the distribution of Islamic banks at status quo, the peer group analysis on 11 peer groups of the world’s largest (total asset) Islamic banks, and regional distribution of Islamic banks, along with careful observation on development and prospect of GCC bank market. The competition in bank market of GCC and MENA countries was analyzed through peer group analysis and PR H-statistics, together with thorough analysis on the consumption behavior for GCC bank at both individual and corporate level.
    GCC region is the most concentrated area of Islamic banks and assets, where "troika" of Islamic bank industry is established among Bahrain, Malaysia, and Iran. Meanwhile, GCC occupies a great share, outweighing other regions among the Top 20 Islamic banks. The average of net interest margin (3.01%) of GCC Top 20 Islamic banks surpasses the average of the Islamic banks all over the world (2.35%).
    The size of GCC bank market measured by total asset to bank equity ratio has grown by 17.4% during 2000~2011; domestic private credit (to GDP %) has grown by 63.7% during 1993~2011, which proves its outstanding financial development in light of bank market activity. In terms of asset size, UAE and Saudi Arabia are predominant, while Bahrain shows a steady rising tendency of GDP ratio. Furthermore, GCC bank industry, in general, presents rapid trend of recovery and development. The fall of bad debts and increase of bank profitability are expected to be consistent, and the saving ratio over 170% makes the prospect even brighter.
    The peer group analysis substantiates the competitive status of GCC bank market. This is evident in the Gini’s coefficient measured by Lorenz curve: net income (0.24), total asset (0.38), operating revenue/turnover rate (0.01), market capitalization (0.38) and so on. However, for the purpose of methodological rigor, this paper applies PR-model to demonstrate the level of competitiveness in GCC bank market. As a result, it has been proven that GCC Islamic bank market is at balanced-competitive status (H-statistics 0.6386), which is a fairly equivalent level in comparison to bank’s H-statistics (0.60~0.80) over 50 different countries according to preceding research (Claessens and Laeven 2003). Meanwhile, GCC commercial bank market is also proven to be at balanced-competition level (H-statistics 0.6652).
    In chapter 3, for escalation of practicality and holistic evaluation, an empirical analysis was conducted using pertinent firm specific variables, derived from internal factor such as financial structure and managerial attribute, and macro economic variables to analyze external factors affecting profitability of banks. As a result, the deviation in the determinants for each indicator between Islamic bank and commercial bank is verified: profitability, growth, efficiency, financial strength and stability.
    In chapter 4, an empirical analysis was conducted to examine the correlation between corporate governance and firm values of Islamic bank and commercial bank.
    The biggest distinction in corporate governance between Islamic bank and commercial bank is the presence of board of Sharia and Sharia executive department. Through ex ante and ex post supervision of bank business, Sharia board reinforces the compliance of Islamic law in their business. However, there are arguments purporting that multilateral supervision rather hinders efficiency, which abates the authority of Sharia board’s regulation. Furthermore, the original function of Sharia board may stand out in financial trade, but at work of bank management, the practical managerial skills of Sharia executive management is appraised to be more significant. The operation of Sharia board differs from country to country, mainly in two ways: The presence of internal Sharia board and the employment of external consultants.
    In chapter 5, GCC bank market was investigated as to inquire the suitability for overseas expansion site of Korean banks. The examination encompassed the study of entrance and concentration of global bank’s GCC bank market, and the internationalization of participants in GCC bank market and Korean domestic banks. Competitive advantage of GCC bank market participants including Korean banks was also analyzed.
    Concentration ratio of GCC commercial bank, executed with peer group analysis, delineated fairly low value. In measuring market concentration ratio using Lorenz curve, the Gini’s coefficient substantiated the GCC commercial bank at balanced-competition: net interest revenue (0.16), operating income (0.16), net income (0.32), savings & short-term fund (0.17) and so-on.
    It can be proposed that a bank has sustainable competitive advantage when the bank’s resource for its competitive advantage is valuable(V), rare(R), immitable(I) for its competitors, and have organization(O) that can exploit such resource. Through VRIO internal analysis, domestic bank’s competitive advantage is based on its IT and consumer-on-demand service. Information, which is the pivotal source of competitive advantage for financial industry, is essential to realize economy of scale, and is expected to function as a resource that can overcome the ownership-specific advantage and location-specific advantages of Islamic bank and local commercial banks.
    Meanwhile, result from quantitative analysis on performance suggests that Islamic bank has the highest competitive advantage on growth and financial strength, and competitive disadvantage on profitability, efficiency and stability. Global banks have displayed the highest competitive advantage on growth, but stopped at showing only fairly high competitive advantage on the rest of the indicators. Local commercial banks have shown the highest competitive advantage on profitability and growth, but fairly high competitive advantage on efficiency, stability and financial strength. Meanwhile, the Korean domestic banks appeared to have competitive disadvantage on growth, but they also appeared to be equipped with the highest competitive advantage on stability and financial strength, and fairly high competitive advantage on profitability and efficiency.
    This study ultimately proposes Korean bank’s strategies for GCC bank market entrance. There are various strategic options for Korean domestic banks to penetrate into foreign bank market. First, collaborative entrance with another Korean bank already existing in the market would be the most favorable strategy. Second, collaboration with a local bank could be a safe choice in eluding the potential risks associated with foreign market entrance. The third option would be augmenting the risk-avoiding opportunities by joint overseas expansion with a manufacturing firm.
    However, the following factors are required for Korean domestic banks to sustain its growth after its entry to GCC bank market. The first factor is the ability to incorporate various needs of local people in their financial products. Secondly, a pursuance of long-term orientation is a prerequisite for the acquisition of sustainable development, offsetting potential costs from internationalization at the same time.
    Another strategy that drives GCC bank market entrance of Korean domestic banks to success is the optimization of internalization, which serves as a catalyst in reducing potential risks through experiential learning. At similar marginal cost-marginal benefit level, it is favorable for banks to reduce risks by maximizing the process of internalization.
    However, entering GCC bank market is unachievable with sole effort of Korean domestic banks. Thus, in addition to persistent efforts of the Korean government through different policies, the following complementations are required to be processed. First, more active and practical moves regarding contracting agreements and treaties at government level are to be encouraged. Secondly, the government support to the bank's entry to GCC by training mid-east Islam experts are to be expanded and intensified. Third, a policy promoting GCC market penetration of domestic banks and firms is also a pressing matter.
    Lastly, unlike the aforementioned optimistic expected effect from global business activities, foreign market entrance may become easier due to deregulation, which could result in excessive penetration on specific regions, arousing concerns about deterioration of profitability and financial accidents. In order to prevent such accidents, the supervisory authorities should strive to reinforce their superintendence on foreign branch, control over imprudent foreign market entry, stay vigilant on law compliance, and ameliorate internal control systems.

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