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  • The Effect of Export Insurance and Guarantees on Export Performance: An Empirica..
    The Effect of Export Insurance and Guarantees on Export Performance: An Empirical Analysis for Korea

       There is a series of empirical papers (Kim and Lee 2004; Egger and Url, 2006; Moser, Nestmann, and Wedow, 2008; Baltensperger and Herger, 2009; Auboin and Engemann, 2014; Van der Veer. 2015) which show that trade fina..

    Kyunghun Kim and Hyelin Choi Date 2019.08.20

    financial policy, trade policy
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    Executive Summary


    1. Introduction


    2. Short-term Export Insurance and Export Credit Guarantees
    2-1. Overview of K-SURE’s Service
    2-2. Data Description


    3. Empirical Evidence
    3-1. Empirical Model
    3-2. Effect of Short-term Export Insurance on Export
    3-3. Effect of Export Credit Guarantee on Export
    3-4. Robustness Check


    4. Conclusion


    References 

    Summary

       There is a series of empirical papers (Kim and Lee 2004; Egger and Url, 2006; Moser, Nestmann, and Wedow, 2008; Baltensperger and Herger, 2009; Auboin and Engemann, 2014; Van der Veer. 2015) which show that trade finance is positively associated with export. Despite its positive impact on export, trade finance has been a contentious issue in international organizations such as the WTO and OECD in terms of implementing related policy measures. This is based on the argument that trade finance hurts fair international trade because it ultimately plays a role just like a subsidy.
       Regarding this contentious issue, in this paper we examine whether there is evidence supporting that trade finance is associated with an increase in export. We also investigate the channel through which the effect of the trade finance on export is working. To this end, we focus on a specific part of trade finance: short-term export insurance and export credit guarantee. This is because noble and ample data on these types of trade insurance are available. This confidential data is provided by the Korea Insurance Trade Corporation (henceforth K-SURE) exclusively.
       We conduct a panel regression using Korean sector-level export data covering from 2010Q1 to 2017Q4. This dataset enables us to control for destination country-, sector-, and time-fixed effects. Our empirical results show that the short-term export insurance and export credit guarantee have a positive impact on exports, and the main channel behind this is related to mitigating financial constraints of exporting firms. The trade finance effectively eliminates the risk of importers' payment, which helps export firms reduce the financial frictions. This ultimately leads to an increase in export.
       Since the main mechanism in which the trade insurance affects export is related to alleviating financial frictions, it becomes more definite that the way how trade insurance contributes to an increase in export is somewhat different from that of a subsidy. When we consider the fact that financial friction is an important factor for restraining international trade, which can partly explain the great collapse in international trade during the global financial crisis, the trade insurance policies would rather be a useful policy measure which can dampen negative impact on export during recession. 

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  • Repercussions of Negatively Selective Migration for the Behavior of Non-migrants..
    Repercussions of Negatively Selective Migration for the Behavior of Non-migrants when Preferences are Social

       We study how the work effort and output of non-migrants in a village economy are affected when a member of the village population migrates. Given that individuals dislike low relative income, and that migration modifi..

    Oded Stark et al. Date 2019.08.10

    productivity
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    1. INTRODUCTION

    2. A MODEL OF ENDOGENOUS WORK EFFORT IN AN ECONOMY WITH HETEROGENEOUS AGENTS

    3. APPLICATION OF THE MODEL: MIGRATION

    4. CONCLUSIONS

    APPENDIX

    REFERENCES 

    Summary

       We study how the work effort and output of non-migrants in a village economy are affected when a member of the village population migrates. Given that individuals dislike low relative income, and that migration modifies the social space of the non-migrants, we show why and how the non-migrants adjust their work effort and output in response to the migration-generated change in their social space. When migration is negatively selective such that the least productive individual departs, the output of the non-migrants increases. While as a consequence of this migration statically calculated average productivity rises, we identify a dynamic repercussion that compounds the static one.

     

    Keywords: Social preferences; Distaste for low relative income; Work effort; Per capita output; Migration
    JEL classification: D01; D31; J24; O15
     

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  • Deeper Regional Integration and Global Value Chains
    Deeper Regional Integration and Global Value Chains

       Recently, international trade has become regional rather than global. This paper aims to test if deeper regional integration contributes to the organization of global value chains along the regional clusters including..

    Nakgyoon Choi Date 2019.07.30

    economic integration, trade policy
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    Executive Summary


    Contributor


    I. Introduction


    II. Content of Preferential Trade Agreements


    III. Empirical Model and Data


    IV. Estimation Results
    1. Impacts of Deep Regional Integration on Global Value Chains
    2. Tests of GVC Organization along the Regional Clusters
    3. Possible Impacts of Mega FTAs on Global Value Chains
    4. Robustness Checks


    V. Summary and Conclusion


    Appendix


    References 

    Summary

       Recently, international trade has become regional rather than global. This paper aims to test if deeper regional integration contributes to the organization of global value chains along the regional clusters including Asia, Europe, and America. We estimate the impacts of deep regional integrations on global value chains by region, investigating the implications of mega FTAs for global value chains by scenario. We use not only data on trade in value added but also global value chains participation indexes which reflect the global value chains better than domestic value added in goods and services exports. The estimation results reveal that a deep regional trade agreement has heterogeneous effects on global value chains depending on the regional clusters. In particular, Asia turns out to import more intermediate goods than Europe and America while RTA member countries tend to import more intermediate goods from Europe than Asia and America.

     

    Keywords: deeper regional integration, global value chains

    JEL Classification: F11, F14 

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  • 미국 통화정책의 국제전이: 뉴스와 노이즈 효과 분석을 중심으로
    International Transmission of US Monetary Policy: Role of News and Noise Information

       Expectation on future monetary policy formed based on the information affect current business cycle. Firms that determine investment projects and households that optimize life-time consumption and savings consider cha..

    Kyunghun Kim and Wongi Kim Date 2019.06.30

    financial integration, monetary policy
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    Summary

       Expectation on future monetary policy formed based on the information affect current business cycle. Firms that determine investment projects and households that optimize life-time consumption and savings consider changes in future interest rates as well as current interest rates in their decision making. In the real economy, however, there is a mixture of noise in the information that forms the expectations for future interest rate changes. Noise information represents information that is not actually realized in the future, but believed to do so now for whatever reasons. The corresponding news information is information related to changes in monetary policy actually realized in the future. Until the monetary policy is realized, it is difficult to distinguish between two types of information.
    In this study, we assume that market participants are faced with the information mix of news and noise, which are used to form expectations for future monetary policy. We investigate how each type of information shock affects current business cycle. In light of the impact of US monetary policy on neighboring countries in the global financial market, we will focus on how news and noise information of the US monetary policy will affect real economic fluctuations and financial variables in neighboring countries. 

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  • 2000년 이후 러시아 경제성장 요인 분석과 지속성장을 위한 과제
    Russian Economic Growth after 2000: Assessment and Suggestions

       This paper investigates Russian economic growth after 2000. We first identify growth regimes of the Russian economy between 2000 and 2014 by using the break-point estimation. Russia’s economic growth during the perio..

    Minhyeon Jeong and Jiyoung Min Date 2019.06.21

    economic development, economic cooperation
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    Summary
       This paper investigates Russian economic growth after 2000. We first identify growth regimes of the Russian economy between 2000 and 2014 by using the break-point estimation. Russia’s economic growth during the period turns out to have three different regimes, the first, second and third of which are 2000-03, 2004-07 and 2008-14, respectively. We notice through growth accounting that total factor productivity (TFP, henceforth) led growth during the first regime in terms of its contribution to growth. However, TFP’s contribution to growth has diminished since the second regime, while capital accumulation has contributed to growth the most.
       To figure out the driving force behind the findings from growth accounting, we take a careful look at critical economic events and policy changes that could affect TFP during the period. We find that there were extensive institutional reforms for efficient administration and taxation system in the first regime, which would promote TFP at large. On the contrary, the Russian government started to intervene resource allocations in the market especially by nationalizing large energy corporations in the second regime and Russian economy’s reliance on the energy sector has increased, both of which would undermine TFP growth.
       Actually, we find that the production and export shares of mid- and high-tech manufacturing in the Russian economy begun to shrink from the second regime, while the export share of fuel increased rapidly. Related to this, we measure institutional barriers of Russia that prevent adoptions of technology and knowledge from foreign countries and found that the barriers are the smallest in the first regime while the largest in the second regime.
       We then revisit the growth effects of trade to find befitting growth implications for the Russian economy. To address the endogeneity, we use the dynamic panel GMM method and confirm the positive growth effects of trade. Particularly, it boosts both income and TFP growth for a middle-income country such as Russia to increase goods import from high-income countries, which are stronger in mid- and high-tech manufacturing in overall. We also provide empirical evidence that more goods import from high-income countries fosters domestic mid- and high-tech manufacturing industries. These empirical findings indicate that the Russian economy can deal with the stagnation of TFP growth more effectively by expanding goods trade with high-income countries such as Korea. 
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  • 일본 임금정체의 요인 분석과 정책적 시사점
    What’s up with Wage Growth in Japan?

       Beginning from the end of 2012 and up to recently, approximately 4 million new jobs have been created in Japan and the unemployment rate has fallen to the low 2% range, showing a great improvement in employment condit..

    Sung Chun Jung and Hyeog Ug Kwon Date 2019.05.30

    economic reform, labor market
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    Summary

       Beginning from the end of 2012 and up to recently, approximately 4 million new jobs have been created in Japan and the unemployment rate has fallen to the low 2% range, showing a great improvement in employment conditions. At the same time, however, the average wage level of workers remains at pre-1997 levels. In this study we analyze the reasons why wage levels remain stagnant in the Japanese economy.
       Our analysis reveals the following reasons. The first is a change in the composition of the Japanese workforce. Female workers, elderly workers, and non-regular workers, who on average receive lower wages, now represent a larger proportion of the workforce and employment has increased in industries with lower wage levels. For instance, the percentage of female employees has increased from 32% in 1970 to 45% recently. The shares of non-regular workers increased from 20.2% in 1990 to 37.6% as of the 1st quarter of 2018. On average, non-regular workers and part-time workers receive 67% and 75% of the wages of regular workers, respectively.
       Our study also identifies certain structural factors contributing to the situation. The aging of regular employees leads to a sharp increase in labor costs, and a flattening of the wage curve has begun in response to this. Another factor is that foreign shareholders have increased greatly, contributing to the spread of shareholder-oriented corporate governance and performance-based pay schemes.
       Japanese corporations have revamped their business strategies as well. Since the mid-1990s Japanese businesses have recognized the need to reduce overall labor costs as an important element of their strategies to gain competitiveness amidst steeper international competition. This has led to a shrinking in the regular workforce and subsequent increase in non-regular workers, and the curbing of seniority-based payment. Due to the downward rigidity of wages, compensation levels are slow to rise despite short-term recovery in the economy.
       We also observe a cohort effect contributing to this trend. The so-called “employment ice age” generation in Japan, who finished education and entered the labor market between the years of 1993 to 2005, have faced various disadvantages compared to other generations in terms of wage levels or the forms of employment offered in the market. Among these, middle-aged “freeters” (free arbeiter) – non-regular workers between the age of 35 to 54 (excluding married women) – were mostly men and working under low-wage and unstable employment conditions, totaling approximately 2.73 million people in 2015. As such, a large portion of a particular generation has remained in unfavorable conditions in terms of employment and wages. Failure to resolve this situation has contributed to sluggish wage growth.
       The results of our study provide the following implications. First, it is very important to maintain the competitiveness of the manufacturing sector in the domestic context. The Japanese manufacturing sector shows a significantly lower percentage of non-regular employment and higher productivity compared to other sectors, thus providing better job security. While employment has sharply increased over the past 20 years in sectors related to healthcare and welfare, food and beverage services and accommodations, wholesale and retail, and other services, wage levels in these sectors remain below the overall average. Elevating productivity in these services sectors is at the crux of increasing the average wage level across all sectors.
       Another important agenda is to create an environment where more women and elderly workers can participate in the labor market. We can see how the “employment ice age” generation in Japan struggled with unstable employment and relatively lower wages, and how failing to resolve this situation over the years led to further social problems. Korea as well is faced with acute difficulties as its younger generation continues to struggle in the job market, and there is a significant possibility of a similar situation unfolding in Korea over the next couple of decades.
       The aging population and stagnation in productivity lie at the root of Japan’s sluggish wage growth. Employee compensation schemes formulated during the nation’s period of rapid growth have continued to falter since the mid-1990s as the Japanese society experienced the adverse shocks of an aging population. Ultimately, the only way to increase wage levels is to elevate international competitiveness in the manufacturing sector and productivity in the services industry, where employment has increased significantly. 

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  • 남ㆍ북ㆍ중 경제협력 방안 연구
    South Korea-North Korea-China Trilateral Economic Cooperation

       This study is a forward-looking study that deals with South Korea-North Korea-China economic cooperation amid rapid changes in the situation on the Korean Peninsula. The study consists of four chapters. In Chapter 2, ..

    Hyuntae Lee et al. Date 2019.05.27

    economic relations, economic cooperation
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    Summary

       This study is a forward-looking study that deals with South Korea-North Korea-China economic cooperation amid rapid changes in the situation on the Korean Peninsula. The study consists of four chapters. In Chapter 2, following the introduction, each country’s position on economic cooperation between South Korea, North Korea and China is analyzed. Chapter 3 explores cooperation by sector and consists of six sections covering transportation and logistics; the energy sector; industrial complexes; the environment sector; education, science and technology; and the culture and tourism sectors. Each section examines the appropriateness of cooperation by sector, the status of cooperation between past and present cooperative projects, and future tasks and prospects. The last Chapter 4 summarizes the results of our analyses, and goes on to discuss economic cooperation between South Korea, North Korea and China in key areas such as Dandong, Shinuiju, Hunchun and Rason, and presents the limitations of this study. In particular, since cooperation cannot be considered separately from the sanctions against the North Korea, the study developed a policy roadmap by dividing cooperation policies according to the level of sanctions maintained and lifted.
       First of all, at the stage of maintaining sanctions, it will be necessary to push for cooperation unrelated to sanctions while efforts are made to build up experience and trust in cooperation between South Korea and China through various forms of bilateral cooperation. Therefore, in a situation where sanctions are maintained, cooperation in the three northeastern provinces of China (linking China’s One-Belt-One-Road Initiative with Korea’s New Northern Policy) and cooperation between the two Koreas and China in areas not affected by sanctions against the North should be pursued at the same time. The three northeastern provinces have failed to find new growth engines despite being areas where China’s state-level development plans, in line with the One-Belt-One-Road Initiative, the China-Mongolia-Russia Economic Corridor project, Changjitu (Jangil-do) development plan, the New Northeastern Promotion Plan and Liaoning Free Trade Zones all intersect. From Korea’s perspective, the northeast region of China is also the main target of its New Northern Policy, linking the Korean Peninsula to the One-Belt-One-Road Initiative through the China-Mongolia-Russia Economic Corridor. In addition, Northeast China is an area where many ethnic Koreans reside and share historical relics, and where platforms have already been formed for North Korean projects in Dandong, Hunchun and other areas, making it a region where the government and companies can build a bridgehead for the future development of North Korea. As the Northeast region of China shares similar demands for mutual cooperation with South Korea, the two need to actively pursue bilateral cooperation strategically while preparing for the development of North Korea and trilateral cooperation between South Korea, North Korea and China in the future. Second, cooperation in “software” areas, such as the environment sector, medical (sanitary) projects, education and tourism should be promoted first as a trilateral cooperation project unrelated to sanctions. Currently, international research on environmental issues such as the spread of fine dust in Northeast Asia and the destruction of North Korea’s domestic environment is urgently needed. In addition, health care and sanitation issues such as the recent African pig fever and the Changchun rabies vaccine incident are particularly grave matters which could escalate significantly if the epidemic spreads across the border. North Korea has poor quarantine and medical facilities and could be dealt a fatal blow. In response, South Korea and China should consider working actively with North Korea to jointly carry out control measures on both sides, border quarantine and expansion of medical facilities. We can also consider various knowledge-exchange projects to spread knowledge about the market economy and science technology to cultivate future North Korean talents. If such programs could convey the knowledge needed for market economy operations to the North Korea and foster talent, this would alleviate the expected side effects of the North’s reform and opening-up process. This would also be a measure to gain mutual trust by focusing on people’s livelihoods and educational issues before full-fledged economic cooperation. Also, joint research on tourism route development around the cross-border areas, such as the Tumen River and the Amnok (Yalu) River, can be pursued. The Tumen River-Amnok River belt, which runs across the Korean Peninsula and China, retains many historical legacies, including beautiful natural environments such as Mt. Baekdu and historic artifacts of the anti-Japanese resistance, which are expected to bring huge demand for tourism to the North Korea when it opens up. Limited cooperation is also possible in the transportation and logistics sectors. The establishment, joint investigation and studies for a railway between the two Koreas and China, and a road consultative body, in preparation for the establishment of the East Asian Railway Community would become possible. It is also necessary to discuss concrete measures to push forward the standardization of railway and road facilities, and to simplify customs clearance procedures in a rational manner. Another promising project would be to train transportation and logistics experts from North Korean workers in cooperation with China, as part of a transportation and logistics education project. Finally, though full-scale cooperation is currently impossible in the area of energy and industrial complexes while the current sanctions remain in place, it could be possible to push for joint research on cooperative projects and measures, albeit limited.
       Next, if sanctions are eased along with the denuclearization of North Korea, trilateral cooperation between South Korea, North Korea and China and other multilateral cooperation projects related to sanctions should be developed as a multi-pronged approach, while making efforts for cooperative development of the Korean Peninsula and Northeastern China. Through this process, the government should prepare a framework for developing the northern part of the Korean Peninsula and Northeast Asia. At this stage, various cooperative projects in sectors such as transportation, logistics and energy infrastructure construction (operating), industrial complexes, agriculture and fisheries, special economic zone development, tourism, education, environment, etc. proposed in this study could be carried out in the border areas between North Korea and China, such as Dandong-Sinuiju and Hunchun-Nason. In particular, there is a high possibility that connection of transportation and logistics infrastructure will be promoted first. The East Asian Railway Community initiative proposed by President Moon Jae-in will link the Korean Peninsula to Northeast China, and continue on to Mongolia, Russia and Europe once it is connected, thus serving as a crucial corridor for multilateral cooperation in various fields.
       As a final step, if the sanctions against North Korea are fully lifted, full-scale bilateral and multilateral economic cooperation will become possible without restrictions. In particular, if the so-called “Northeast Asian Economic Corridor” is established, it could be organically combined with China’s One-Belt-One-Road Initiative, South Korea’s New Economic Map Initiative of the Korean Peninsula, the New Northern Policy and North Korea’s reform and opening policies. With Northeast Asia connected through transportation, logistics and energy networks and common markets formed with value chains by industry, the possibility of developing into a Northeast Asia economic community can finally be explored.
       This study is meaningful in that it was the first comprehensive approach to South Korea-North Korea-China cooperation projects in the face of rapid changes in the situation on the Korean Peninsula, seeking possible directions for cooperation by sector and providing basic ideas for cooperation. However, in order to promote practical cooperation, it is necessary to overcome a number of difficulties that have not been examined rigorously in this study. First of all, the policy directions of the three parties (South Korea, North Korea, China) on these issues must be aligned with each other, the sanctions currently preventing cooperation with the North should be eased or lifted in line with progress in denuclearization, and the projects that will be pursued must be able to yield adequate returns. There are an additional host of challenges, including the need to fund projects and to derive specific cooperative models and projects in each sector. Therefore, subsequent work will be necessary to cover areas not examined in depth in the current study.

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  • How to Position South Korea in a Dramatically Changing World
    How to Position South Korea in a Dramatically Changing World

    Korea needs to think strategically how to position itself advantageously in today’s rapidly changing and uncertain world. This paper focuses on three economic and geostrategic challenges. These are the trade war between the U.S. ..

    Danny Leipziger and Carl Dahlman Date 2019.05.25

    trade structure, industrial policy
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    Executive Summary


    Contributors


    Introduction


    Part One. The Changing Constellation of Risks and Opportunities
    Section A. Three Key Trends
    Trend 1. Protectionism and Trade War
    Trend 2. Rapid Development and Spread of DisruptiveTechnologies
    Trend 3. The Rapid Rise of China

    Section B. Main Challenges for Korea
    Dealing with the Increasing Frictions Between the United States and China
    Dealing with the Challenge of a Stronger and More Dominant China
    Dealing with Disruptive Technology
    Conclusion


    Part Two. Possible Korean Policy Responses
    Section C. Repositioning Korea on Trade
    Reducing Dependence on Trade and Finding New Trade Partners
    Exports to the World
    Developing New Products and Services for Export
    Navigating a New Korea-China Relationship on Trade and Technology: Where to Compete, Where to Concede, and Where to Cooperate
    Where to Compete and Where to Concede
    Where to Cooperate
    Future Prospects
    Compete
    Cooperate
    Concede

    Section D. Increasing the Competitiveness, Flexibility and Resilience of the Korean Economy
    Benchmarking Korea on International Competitiveness and Flexibility
    Benchmarking Korea on Innovation
    Conclusion


    Appendix


    References 

    Summary

    Korea needs to think strategically how to position itself advantageously in today’s rapidly changing and uncertain world. This paper focuses on three economic and geostrategic challenges. These are the trade war between the U.S. and China, the challenges and opportunities presented by the rapid development and application of disruptive technology, and those presented by the rapid rise of China. The three are interrelated. The trade war between the U.S. and China are fundamentally about competition between the leading global economy and a new superpower revolving over leadership in new and potentially disruptive technologies. This has serious implications for Korea because China and the U.S. are Korea’s largest trading partners. The first part of the report lays out the context and challenges. The second part lays out some of the actions that Korea should consider on the international side as well as on the domestic side to improve its competitiveness and flexibility to deal with these challenges. 

     

    JELClassification:F13(Trade Policy), F50(General International Relations, National Security, International Political Economy), O33 (Technological Change)
    Key words:China, Korea, United States, Disruptive Technology, Trade, International Competition
     

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  • 상품공간모형을 활용한 한・중・일 산업구조 분석 및 시사점
    A Comparative Analysis of Structural Changes of Korea, China, and Japan in Product Space

       This paper investigates the change in industrial structure in Korea, China and Japan in the 2000s by using the product space model. As Korea, China and Japan are key competitors in global markets while closely related..

    Boram Lee and Wonju Son Date 2019.05.24

    industrial structure, industrial policy
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    Summary

       This paper investigates the change in industrial structure in Korea, China and Japan in the 2000s by using the product space model. As Korea, China and Japan are key competitors in global markets while closely related to each other through the regional value chain, we expect the comparison in changes in the industrial structure of the three countries will help identify the characteristics of the Korean industrial structure and provide implications for the enhancement of Korea’s industrial structure.
       The main results of the analysis of the change in comparative advantage of Korea, China and Japan in the 2000s are as follows. First, the similarity of the three countries’ comparative advantage has increased. In 2017, the industries which the three countries commonly have strong competitiveness were general machinery, electrical and electronic, and steel and metal. Secondly, with common comparative the number of comparative advantage products in Korea decreased. During the same period, the number of comparative advantage products in China surged and exceeded the level of Japan, in some industries, while that of Japan’s maintained.
       The results of comparative analysis of industrial structure changes of Korea, China, and Japan in product space in the 2000s are as follows. First, all three countries strengthened its competitiveness in products located at the center of the product space. This result implies that all three countries have achieved the structural transformation in manufacturing industries along with the global trend of export sophistication. Secondly, all three countries have strengthened their competitiveness in products, which requires higher level of capacity. Among the three countries, China in particular showed rapid achievement while the country also maintained its competitiveness in products with lower level of capacity. Korea also strengthened its competitiveness in products with higher level of capacity while losing competitiveness in lower level capacity products. Thirdly, focusing the analysis on products with high level of capacity located in the center of the product space, the number of comparative advantage products in all three countries increased. This reflects the fact that Korea’s industrial structure has become more reliant on higher-level capacity products. Fourthly, China’s rapid achievement in structural transformation, however, seems to have been dependent on lower level of quality products compared to Japan and Korea’s.
       The followings are the policy suggestions drawn from the result of this paper. First, support policies for industrial sophistication are expected to be effective if they are implemented together with the support policies for current key industries. Second, creating business infrastructure by removing regulatory barriers could be an important political measure since the industrial structure in Korea has been shifted to produce more central and higher-level capacity products. Third, continuous efforts from both the government and the private sector are necessary for the improvement in product quality while China has achieved quantitative enhancement in terms of the number of comparative advantage products.

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  • New Delhi’s ‘Act East’ and the India-ASEAN Engagement: What They Mean for Ind..
    New Delhi’s ‘Act East’ and the India-ASEAN Engagement: What They Mean for India-Korea Relations in the Indo-Pacific

       One of the principal objectives of New Delhi’s ‘Act East Policy’ (AEP) is to strengthen India’s contact with the ASEAN as well as with the countries in Southeast Asia. The pursuit is evolving and ever-growing, bot..

    Jagannath P. Panda Date 2019.05.07

    economic relations, economic cooperation
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    Executive Summary


    1. India’s ASEAN Significance: A Primer
    1-1. The ASEAN Distinction
    1-2. Objective of the Study
    1-3. Methodology and Structure
    1-4. Significance of the study


    2. From “Look East” to “Act East” to “Act Indo-Pacific”: Factoring South Korea
    2-1. India’s LEP: The ASEAN and a New Beginning with South Korea
    2-2. Strategic Partnership: Transitioning from the LEP to AEP and Relations with South Korea
    2-3. “Act East”: Taking Guard in the Indo-Pacific with ASEAN Centrality
    2-4. “Delhi Dialogue”: Deliberating for an Action-Oriented Engagement


    3. Scaling Connectivity in the East and Bridging the Gap
    3-1. Delhi Declaration to AICS: Endorsing the ASEAN Spirit
    3-2. IMT Trilateral Highway (IMTTH): Emerging as a New Gateway
    3-3. Kaladan: Not Just a Transport Connectivity Project
    3-4. “Bharatmala Pariyojana”: Neighbourhood First Policy and Land-Based Connectivity
    3-5. BBIN, BIMSTEC and the MGC: “Neighbourhood First” to “Destination ASEAN” to “ASEAN First” Approach
    3-6. The BCIM and Connectivity Cooperation with China
    3-7. India’s Cautious Approach to BCIM
    3-8. Between Connectivity and Conflict: Reviving the Ancient Silk Route
    3-9. The Stillwell Road and Car Rally
    3-10. Fukuda Vision: India-Japan Connectivity Cooperation in the ASEAN Framework
    3-11. Japan’s Chemistry with Northeast India to Test China’s Nerve
    3-12. Tokyo Strategy 2018 and India-Japan Possible Cooperation 


    4. India-ASEAN FTA and the Regional Economic Architecture
    4-1. An ASEAN-centered Economic Engagement
    4-2. ASEAN-India Cooperation-Contradiction Context
    4-3. India’s Cautious but Ambitious Approach on the RCEP
    4-4. China’s Unilateralism on Free Trade and India
    4-5. Japan: More of a Bilateral Economic Partner
    4-6. South Korea: A Potentially Great Economic Partner


    5. ASEAN and India-South Korea Cooperation in ASEAN by 2025
    5-1. Why an ASEAN Framework of Cooperation?
    5-2. India-South Korea Ties Vis-à-vis the India-China and India-Japan Ties in ASEAN
    5-3. A Country-specific ASEAN Engagement
    5-4. Exploring Connectivity Cooperation
    5-5. Avenues for Cooperation in SAARC and BIMSTEC
    5-6. Search for a ‘Plus’ Policy Context
    5-7. Policy Recommendations


    References

    Summary

       One of the principal objectives of New Delhi’s ‘Act East Policy’ (AEP) is to strengthen India’s contact with the ASEAN as well as with the countries in Southeast Asia. The pursuit is evolving and ever-growing, both institutionally and regionally. With a focus on ASEAN-centric cooperation, forging a closer multi-modal connectivity cooperation between India’s bordering states and the immediate Southeast Asian countries has been one of the guiding principles of this engagement. Also, this engagement is becoming deeper with India aiming to extend the connectivity cooperation to the interior parts of the ASEAN region from the immediate neighbouring region of India. A renewed focus on engagement through increased cooperation in areas such as economic, political and security realms offers a positive future graph to the India-ASEAN engagement at present which is becoming one of the defining features of Indo-Pacific.
       With the possible conclusion of the Regional Comprehensive Economic Partnership (RCEP) in 2019-20, the regional economic architecture will move to a new level of maturity in which India would like to factor in its engagement strongly with the other countries. More importantly, it is in India’s interests to further deeper cooperation with the ASEAN as an institution. The economic role of ASEAN’s dialogue partners, especially that of China, will test India’s relationship character with the ASEAN. How should India react to the evolving regional economic and security architecture around the ASEAN?
       Options for India are perhaps plenty. Yet, India needs to find strategic compatibility with most of the ASEAN dialogue partners – some of which are influential economic actors in the region – to position its strategic interests more coherently. South Korea (officially known as the Republic of Korea) is one of those prime actors with whom India must envision to have more policy convergence keeping the ASEAN framework in mind, and draw strategic compatibility in specific areas of cooperation and mutual benefit. This study examines India’s growing engagement with the ASEAN and factors how India-South Korea could possibly cooperate within and outside an ASEAN framework. The study tries to establish policy convergence between India’s Act East Policy (AEP) and South Korea’s New Southern Policy (NSP), bilaterally and regionally, factoring the ASEAN and the countries around as the central focus of this cooperation.


    Keywords: Act East, New Southern Policy, ASEAN, Indo-Pacific, Connectivity
    JEL Classification: R50

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