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  • 주요국의 탄소중립과 그린성장전략에 관한 연구: EU, 미국, 중국, 일본을 중심으로
    Carbon Neutrality and Green Growth Strategies EU, U.S, China, and Japan

    This research analyzes the green growth strategies in major countries and regions including the EU, the US, China, and Japan with a focus on key policies such as energy transition(renewable energy, next-generation nuclear power, a..

    Gyupan Kim et al. Date 2022.12.30

    economic growth, environmental policy United States of America China Japan Europe
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    This research analyzes the green growth strategies in major countries and regions including the EU, the US, China, and Japan with a focus on key policies such as energy transition(renewable energy, next-generation nuclear power, and hydrogen energy), green finance, and carbon pricing. 

    This study begins by providing an overview of the major policy areas of green growth strategy in each major countries/region. Chapter 2, titled, “Green Growth Strategies in Major Countries: A General Overview” covers this topic. In Chapter 3, titled “Energy Transition (1): Renewable Energy and Next-generation Nuclear Power,” examines renewable energy policies and the development of next-generation nuclear technology in major countries. It discusses topics such as the European Commission’s Renewable Energy Directive(RED), Japan’s introduction of the Feed-in Premium(FIP) system through the revision of the Renewable Energy Special Measures Act (April 2022), major renewable energy policies and the state and local government-led renewable energy storage projects in the US, and the operation of the Feed-in-Tariff(FIT) system in China. The research also explores the technology and policies of the next generation nuclear energy, with a focus on the development of Small Modular Reactors(SMR). 

    Chapter 4, titled “Energy Transition (2): Hydrogen Energy,” delves into the hydrogen strategies of the EU, Germany, Japan, and China. It provides an overview of the hydrogen demonstration project known as “Mission Innovation(MI),” a group composed of government agencies from 22 major countries. The research also analyzes major countries’ international competitiveness in hydrogen technology by classifying hydrogen technologies into four types(gray hydrogen, blue hydrogen, turquoise hydrogen, and green hydrogen) and comparing the dependency and technological influence of each hydrogen technology based on a newly constructed index of backward and forward citations for patents from each country and institution.

    Chapter 5, titled “Green Finance,” analyzes the global green finance market and green finance policies of the EU and Japan from an institutional perspective. The chapter begins by reviewing various definitions of green finance—an area that lacks a unified standard—and global green finance initiatives. It then moves on to analyze the recent trends in global sustainable bond issuance, considering bond type and region. Finally, this chapter evaluates national strategies and policies of the EU and Japan, who are two of the most proactive national participants in green finance policy, and who have observed a significant increase in sustainable bond issuance in recent years. 

    Chapter 6, titled “Carbon Pricing,” discusses three types of direct carbon pricing: carbon tax, Emissions Trading System(ETS), and carbon credit mechanisms. The research also covers the Carbon BorderAdjustmentMechanism(CBAM)proposedbytheEU Commission as one of its protectionist measures. 

    Based on the analysis of each chapter, the research provides policy suggestions for the Korean government on renewable energy and next-gen nuclear power, hydrogen energy, green finance, and carbon pricing. Key suggestions in the field of renewable energy include improving policy effectiveness through adopting a PDCA(Plan-Do-Check-Act) cycle, measures for enhancing Korea’s Renewable Portfolio Standards(RPS) system, and initiatives to expand US exports by leveraging the Inflation Reduction Act(IRA) of 2022, etc. Regarding hydrogen energy, the research suggests active participation of the Korean government in developing international standards for green hydrogen and emphasizes the importance of securing competitiveness in green hydrogen production to enter the hydrogen market in China, who is current the leading player. It also suggests enhancing cooperation with Japanese companies in procuring overseas hydrogen energy, considering Japan’s heavy dependence on fossil fuels and low energy self-sufficiency rate. In the context of green finance, the research advocates addressing the problem of greenwashing, incorporating nuclear power into the green taxonomy, and introducing “transition finance” domestically. Finally, concerning Korea’s carbon pricing, the research presents policy recommendations on improving the existing ETS and managing the forthcoming EU CBAM.
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  • 주요국의 대남아시아 경제협력전략과 정책 시사점: 중국, 일본, 인도를 중심으로
    Economic Cooperation Strategies Towards South Asia and Their Implications for Korea: Focusing on China, Japan, and India

    With the Indo-Pacific region increasingly gaining recognition for its strategic importance, major countries such as China, Japan, and India are seeking close economic cooperation with South Asian countries. This study focuses on t..

    Jeong Gon Kim et al. Date 2022.12.30

    economic cooperation, international trade China Japan India and South Asia
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    With the Indo-Pacific region increasingly gaining recognition for its strategic importance, major countries such as China, Japan, and India are seeking close economic cooperation with South Asian countries. This study focuses on the strategic perspectives and cooperation policies of the major countries in South Asia (Pakistan, Bangladesh, Sri Lanka) under the rapidly changing international political and economic environment, and explores Korea’s future economic cooperation strategies and policies in light of progress in the area of cooperation. Korea’s economic cooperation with South Asian countries is centered on ODA, and trade and investment have been centered on some manufacturing industries, but have recently shown a shrinking trend. While competition between major countries is in full swing in South Asia, it is necessary to establish a new direction for economic cooperation and promote policies in South Asia under a strategic perspective. 

    China places great importance on South Asia as a strategic point. Geopolitically, bordering a number of South Asian countries, China seeks to contain India’s influence on the region. Economically, China is focusing on the possibility of economic growth based on the high population growth rate of South Asian countries. Accordingly, China is making efforts to expand the market by actively strengthening trade and investment relations with South Asian countries. After signing an FTA with Pakistan, it is also actively entering into FTAs with Bangladesh and Sri Lanka, which combines diplomatic, security and economic purposes. Meanwhile, China has supported infrastructure construction of South Asian countries from early on through loan-oriented large-scale development financing in response to the economic and development demands of the countries. As China’s influence over South Asia increases, concerns are growing in South Asian countries. Pakistan, Bangladesh, and Sri Lanka record large-scale trade imbalances with China, and their debt to China is also large. As a result, promoting cooperative projects that are economical and necessary for the local economic society are gaining momentum.

    Japan is expanding economic cooperation with South Asia under strategic consideration of the Indian Ocean region. Japan’s ultimate purpose is to counter China’s influence in South Asia while solidifying  Japan’s presence as an alternative cooperation partner. Japan established a “comprehensive partnership” with Bangladesh and Sri Lanka, respectively in 2014 and 2015, strengthening diplomatic relations. Along with the implementation of the Free and Open Indo-Pacific (FOIP) strategy, Japan has expanded its ODA to India, Bangladesh, and Sri Lanka, and South Asia has become Japan’s No. 1 ODA recipient beyond Southeast Asia. In addition, Japan is actively signing FTAs with Bangladesh and Sri Lanka under economic and strategic considerations. Meanwhile, Japan has been very active in promoting projects with neighboring countries in cooperation with India. The joint declaration issued during Prime Minister Kishida’s visit to India in 2022 specified cooperation between Japan and India in the Indo-Pacific region. While Japan has revealed its willingness to check China’s influence in South Asia, it intends to maintain its existing comparative advantage by emphasizing not only physical connectivity, but also human and institutional connectivity. In particular, Japan emphasizes the “high-quality infrastructure investment development cooperation model” to highlight its strengths as an alternative to China.

    As coming to power, India’s Modi government has begun to strengthen cooperation in economic and diplomatic relations with neighboring countries in earnest. This is because China’s influence has greatly expanded amid the increasing demand for economic growth support in South Asian countries. The Modi government’s Neighbourhood First Policy aims to expand economic and security links with South Asian countries and presents cooperation tasks in various fields such as economy, technology, transportation, energy, security, and the environment. India is actively supporting infrastructure construction in South Asia using Line of Credit. Currently, India’s share of loans to South Asia has risen to the highest level (about 44% of all loans) compared to other regions. Meanwhile, India is striving to revitalize its regional partners, SAARC and BIMSTEC. India is promoting projects and humanitarian support using its technology through SAARC, and is expanding regional connectivity through 267 projects through BIMSTEC as it seeks to strengthen connectivity between member countries. India is paying more attention to South Asian countries than ever in terms of economy and security, and is active in cooperation with third countries such as Japan.

    Korea, as a matter of fact, has never operated economic cooperation strategies or policies for South Asian countries other than India. Although the New Southern Policy has achieved noteworthy results, it has lacked consideration for South Asian countries other than India. While the Korean government announced the Korean version of the Indo-Pacific strategy in November 2022, this paper proposed the direction and tasks of economic cooperation in South Asia, centered on Pakistan, Bangladesh, and Sri Lanka, which have high independent economic and strategic importance.

    First, the importance of South Asia’s economic security dimension should be considered. It cannot be overlooked that the most important factor in intensifying competition among major countries in this region is strategic importance. Pakistan, which is located in a geopolitically strategic point connecting Asia and the Middle East, Sri Lanka, which is key to maritime transportation as a gateway to the Indian Ocean, and Bangladesh, which can act as a strategic spot through its location adjacent to Sri Lanka, China, and India and maritime connectivity using the Bay of Bengal, all hold high strategic value for Korea. In particular, it is necessary to establish strategic partnerships with Bangladesh and Sri Lanka and diversify its areas of cooperation with these countries.

    Second, it is necessary to actively consider the potential of South Asian countries as markets and production bases. It is a well-known fact that major countries are already paying attention to South Asia, so if Korea neglects economic relations with South Asian countries, it is likely to suffer significant losses in the mid- to long-term. This is because the radius of Japan and India is likely to expand as South Asian countries are expected to diversify their economic cooperation. In particular, it is necessary to push ahead the FTA with Bangladesh by paying attention to its new production base and potential as a market, and to promote the entry of Korean companies to special economic zones of Bangladesh.

    Third, support for economic and social problems common to South Asian countries, namely infrastructure improvement, industrial structure diversification, and climate change response, should be strengthened. In the case of Pakistan, it is necessary to communicate Korea’s strength as a partner in industrial development. Pakistan has a very high will to foster its manufacturing sector, and has ample potential as an export and production base in relation to its initatives for industrial development (e.g., Make in Pakistan), low wages, and geographical advantages. Further, cooperation between companies, such as joint investment to support Pakistan’s manufacturing fostering policy, and programs to strengthen industrial capabilities using ODA funds will be effective. In the case of Bangladesh, the proportion of budget expenditure to GDP is scheduled to more than double for water resource development related to climate change response, thus making demand for cooperation very high in this area.

    It is necessary to discover large-scale projects with great influence that can visualize Korea’s role throughout the ODA projects in South Asia. In the case of Sri Lanka, which has experienced large controversy over ineffective projects, PPP projects were given attention for efficient financing and project implementation by intensifying management of foreign investment projects even before its official declaration of default. This phenomenon is expected to continue while the size of ODA sources in South Asian countries is on the rise, making it an urgent task to scale up these projects using the PPP method. 

    Fourth, considering recent moves to expand links between South Asian countries and  similarities in demand for diversification of external economic cooperation and areas of cooperation, the timing is ripe for cooperation with India and BIMSTEC. Economic cooperation in South Asia linked to India is already under way by Japan through mechanisms such as the New East Forum, and Japan is closely cooperating with the Indian government. Korea also needs to actively seek its role as a cooperative partner. In particular, it is worth paying attention to the “Master Plan for BIMSTEC Traffic Connectivity.” This master plan consists of 267 projects and is also a comprehensive plan that includes building a soft infrastructure, which is expected to serve as a key platform for regional cooperation. As the Indian government has set development of Northeast region, which is racially and culturally similar to Korea, as a priority and requires to spend more than 10 percent of its federal budget on the development, it is an area worthy for Korea to focus active attention. In addition, as BIMSTEC is promoting cooperative projects related to trade vitalization, investment and tourism promotion, technology cooperation, and energy resource development, the possibility of cooperation with BIMSTEC in various fields should be examined.

    Fifth, it is necessary to consider the possibility of cooperation in South Asia with third countries, including China, from the perspective of alignment with Korea’s Indo-Pacific strategy. For example, improving the economy and quality of infrastructure, which is an important task for South Asian countries, is a part that China can also sympathize with. In addition, as Japan’s quality infrastructure model does not exclude China in nominal terms, Korea should take a forward-looking stance on the possibility of cooperation with China and Japan.
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  • 미·중 전략 경쟁 시대 글로벌 기업의 대응과 중국진출 한국기업에 대한 시사점
    Response to U.S.-China Competition by Multinational Companies and Implications for Korean Companies in China

    This report examines how multinational companies in China are responding to the intensifying strategic competition between the U.S. and China, and draws implications for Korean companies in China. With the integration of resources..

    Sang Baek Hyun et al. Date 2022.12.30

    economic cooperation, business management United States of America China
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    This report examines how multinational companies in China are responding to the intensifying strategic competition between the U.S. and China, and draws implications for Korean companies in China. With the integration of resources and markets around the world sparked by the trend of globalization, multinational companies have continued to grow at a rapid pace. In particular, global manufacturers have maintained their competitiveness by distributing resources more efficiently while establishing a global value chain with China as their main production hub. However, measures taken by the U.S. to block China’s access to technology and supply chains in some high-tech industries have prompted discussions on reorganization of the global supply chain, placing these multinational companies in an uncertain situation concerning their operations in China. At a time when competition between the U.S. and China is intensifying, it is necessary to look at the response strategies of global companies that have entered China and seek effective countermeasures for Korean companies.

    Chapter 2 examines the changes in the Chinese government’s foreign capital attraction policy and the current status of foreign direct investment (FDI) in China. Under its “dual circulation” strategy, China is responding to U.S. control measures and expanding foreign capital attraction in the service and high-tech manufacturing sectors necessary for China’s industrial advancement. In particular, the U.S.-China competition has led the Chinese government to expand its efforts to attract foreign capital through more preferential policies in high-tech manufacturing sectors, where the U.S. has concentrated its blocking measures. On the other hand, due to stricter labor and environmental regulations, and China’s establishment of an independent supply chain, the business environment of multinational companies in China is deteriorating as systems and laws related to economic security are undergoing transformation. 

    The trend of foreign investment seen through Chinese FDI statistics indicates that, despite the U.S. ramping up efforts to contain China, the inflow of foreign investment is steadily increasing, especially in the service and high-tech manufacturing sectors that the Chinese government hopes to foster. However, when comparing the FDI of major countries before and after 2018, some countries and regions are cutting back their investment in China and the investor confidence index for China is also on the decline. These conflicting signals are also influenced by China’s zero-covid policy, indicating it is necessary to continuously observe the FDI trend after China’s reopening to understand how the U.S. measures to contain China in technology sectors have affected it.

    In Chapter 3, in the situation where U.S.-China strategic competition is intensifying, multinational companies entering China have changed their business strategies in China and reviewed from various angles how they are responding to the conflict between the U.S. and China.

    The U.S. is pursuing a strategy to block China through various means and systems, such as customs imposition (Article 301), export regulations (ECRA, EAR), import regulations (Article 889 of NDAA 2019), and investment restrictions (FIRMA, CHIPS, IRA, and NCCDA). Europe has also labeled China a “strategic competitor” and is redefining its partnership with China. After the U.S.-China trade war began, European companies’ investment in China has been decreasing centered around specific industries and companies. Europe is pursuing a China strategy where cooperation and checks coexist, such as the case of Germany, which is strengthening cooperation with China while reducing its dependence on China in areas related to economic security. Japan has implemented a “China+1” strategy to prepare for “China risks” after the Senkaku Islands (Chinese: Diaoyudao) dispute in 2012, and restructuring of investment in China. Recently, the number of Japanese companies moving production bases from China to ASEAN or reducing their dependence on Chinese supply chains has been increasing due to the U.S.-China competition and China’s zero-covid policy. Taiwan continues to pursue its New Southbound Policy and reshoring policies. With U.S.-China conflicts escalating geopolitical risks, the policy deadline was extended as the number of Taiwanese companies reshoring increased.

    Multinational companies in China, from countries such as the U.S., Europe, and Japan, saw their overall management performance deteriorate after the U.S.-China conflict, adding to their difficulties due to implementation of the zero-covid policy. It was also confirmed that difficulties were aggravated by measures to strengthen the competitiveness of Chinese local companies and tighten cyber security in the process of China’s response to U.S. containment measures. As the competition between the U.S. and China intensifies, multinational companies are responding in various ways, such as: decoupling the U.S.-China supply chain in the semiconductor field, diversifying production bases (relocating to ASEAN or India), and expanding entry into China (In China, For China). 

    Major countries’ Chinese strategies are changing as competition between the U.S. and China intensifies, but unlike major governments’ strategies, multinational companies’ Chinese business strategies are mostly due to market factors such as rising production costs, intensifying competition with local companies, and sluggish local market sales. At the same time, it was confirmed that there are many cases of multinational companies expanding their investment into the huge Chinese market to enjoy a first-mover advantage in the electric vehicle sector. This points to multinational companies restructuring to explore high-tech fields and new markets due to changes in the business environment in China, rather than withdrawing their Chinese businesses or pushing for overseas relocation on a large scale.

    In Chapter 4, we investigated the business conditions of Korean companies operating within China amid U.S.-China competition and looked at what changes are being detected.

    Korean companies’ investment in China continued to rise even after the U.S.-China conflict began, breaking an all-time high. Major investments are mainly made in high-tech manufacturing industries such as semiconductors and electric vehicles. Since the U.S.-China strategic competition, Korea’s investment in China has been characterized by maximum investment, minimum number of new companies, withdrawal and relocation expansion, and concentrated investment in semiconductors and electric vehicles. This seems to be a process of restructuring similar to other multinational companies.

    Looking at the business status of Korean companies operating in China, the operating profit ratio, sales, and import and export inducement effects of Korean companies have recently declined, indicating that their management performance is deteriorating. The results of the survey on business difficulties also showed that sluggish local demand, sluggish exports, rising labor costs, and intensifying competition were major difficulties. Overall, the business environment in China is deteriorating, but this was confirmed as due to market factors rather than the U.S.-China conflict.

    A survey conducted by KIEP on 75 domestic manufacturers who had established branches in China also showed that their business performance has deteriorated or uncertainties increased. In addition, the majority of companies are not considering new investments in China due to the U.S.-China conflict, geopolitical conflict, and implementation of zero-covid policy. Nevertheless, the U.S.-China conflict has not prompted many companies to move their Chinese operations to overseas locations. The majority of companies in China had aimed at entering the Chinese market, meaning they viewed the Chinese market from a more mid- to long-term perspective. As in the case of multinational companies, most of the major difficulties were due to market factors. However, as the U.S.-China conflict continues to pose potential risks, Korean companies feel the need to reorganize their supply chains. Small and medium-sized companies found it difficult to respond with active countermeasures, such as relocating production bases or seeking legal advice, due to their limited scope of information and funds.

    Based on the above analysis, this report draws the following conclusions and implications.

    Multinational companies are showing various types of responses, according to how they are affected by the U.S.-China strategic competition and the industries they are engaged in. First of all, in the case of labor-intensive industries, it is necessary to consider withdrawing Chinese operations and relocating overseas, as production costs continue to rise in China and local Chinese companies gain higher levels of competitiveness. Moreover, it is difficult to maintain the price competitiveness of Chinese businesses in sectors subject to U.S. tariffs imposed on China. In the case of state-of-the-art semiconductors, the U.S. is expected to strongly push for a containment policy against China for national security reasons, making it necessary to prepare for the decoupling of supply chains between the U.S. and China, and to formulate prudent strategies to enter the Chinese market. Next, in the case of products that are highly dependent on the Chinese market, such as electric devices, it is necessary to pursue a strategy to diversify the production base of “China+1 or N” to strike a balance between the potential of the Chinese market and supply chain stability affected by the U.S.-China conflict. In addition, in areas with high potential in the Chinese market, such as electric vehicles and renewable energy, it is necessary to expand entry into China to gain an early mover advantage in the Chinese market. However, in order to prepare for the separation of supply chains between the U.S. and China, it will also be necessary to promote the “In China, For China” strategy of both producing and conducting sales within China.
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  • 일본의 중장기 통상전략과 한·일 협력 방안
    Japan’s Medium- to Long-term Trade Strategies and Korea-Japan Cooperation plans

    This research examines recent changes in Japan’s medium- to long- term trade strategy, focusing on global trade issues that have emerged amidst the growing US-China technology competition and the Covid-19 pandemic. The issues inc..

    Gyupan Kim et al. Date 2022.12.30

    economic cooperation, trade policy Japan
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    This research examines recent changes in Japan’s medium- to long- term trade strategy, focusing on global trade issues that have emerged amidst the growing US-China technology competition and the Covid-19 pandemic. The issues include supply chain restructuring, digital trade, climate change responses, and health and development cooperation. For each of the topic, this research offers policy implications for Korea. 

    In chapter 2, “Restructuring the Supply Chain,” this research examines Japan’s supply chain restructuring policies, including the government’s reshoring policy, semiconductor strategy, Economic Security Promotion Act, and international cooperation in supply chains (QUAD, IPEF). First, this paper evaluates Japan’s reshoring policy and points out that Japan’s success is due to the relatively clear-cut design of the government support programs, which made it easier for companies to comply with government policies. Second, this paper maintains that Japan’s semiconductor strategy focuses on attracting Taiwan’s TSMC and establishing advanced logic and foundries. Third, this research analyzes the Japanese government’s supply chain policy, as is revealed in the Economic Security Promotion Act, enacted in May 2022. Finally, this research looks into Japan’s international cooperation in supply chain, which is still in the early stage of development, focuses on the US-led QUAD and IPEF.  

    Chapter 3, “Digital Trade,” this research identifies three characteristics of Japan’s digital trade strategy by analyzing its digital trade-related agreements. They are: first, reinforcement of digital trade (e-commerce)- related norms, as is epitomized by the Three Principles of TPP; second, enhanced interoperability in regards to personal information protection, while allowing for differences in the level of protection according to each country’s legal system; and third, inclusion of cooperation clauses in most FTAs, in order to promote the development of e-commerce and digital trade among FTA parties. The chapter ends by pointing out some of the remaining challenges in Japan’s digital trade norms. 

    In chapter 4, “Climate Change Response,” this research summarizes Japan’s energy transition policy renewable energy, next-generation nuclear power technologies, hydrogen energy—which is the most critical element in tackling climate change. The findings are as follows: firstly, Japan’s climate change strategy is unique in that the government views it as a catalyst for economic growth, which will transform the country’s industrial and socio-economic structure by promoting private investment and productivity; secondly, Japan is leveraging all available policy options facilitate energy transition from existing fossil fuels to renewable and hydrogen energy; thirdly, Japan’s international cooperation in climate change focuses on the “QUAD Climate Change Adaptation and Mitigation Package (Q-CHAMP)” that was agreed in the QUAD Summit in May 2022.  

    In chapter 5, “Health and Development Cooperation,” this research summarizes Japan’s development cooperation following the COVID-19 pandemic, focusing on health and medical fields, as well as the linkage between Japan’s ODA and the Indo-Pacific strategy. The research finds that: firstly, Japan’s development cooperation in the health and medical fields centers around bilateral and COVAX-related vaccine support for Southeast Asian countries, Taiwan, and Middle Eastern countries, in addition to support for diagnostic/ treatment and healthcare systems through JICA; secondly, in relation to the Indo-Pacific concept, Japan is consistently increasing its budget for “Free and Open Indo-Pacific (FOIP)”-related ODA, utilizing regional security cooperation frameworks such as the “Vaccine Partnership” and “New Quad Infrastructure Partnership;” it is also noteworthy that the country’s revised “Development Cooperation Charter” embraces a much more concrete version of FOIP concept compared to the previous versions.      

    Based on the analysis of each chapter, this research provides following policy suggestions for the future Korea-Japan cooperation. Firstly, in the field of supply chain restructuring, the study advocates for a re-evaluation of the current reshoring policy that focuses on assisting “U-turn” firms, taking into consideration the on-going technological competition between the US and China and the US’s decoupling policy from China. This research also points out that further discussion is needed on how to enhance the effectiveness of Korea’s Basic Supply Chain Act, as well as how to stabilize supply chains between Korea and Japan in the US-led IPEF framework. Second, regarding digital trade, this research proposes that Korea leverage its experience in endorsing the “Korea-ASEAN Digital Partnership Agreement” to sign the “Korea-Japan Digital Partnership Agreement.” In addition, this research suggests expanding joint projects on digital trade, such as establishment of a Korea-Japan e-commerce joint platform. Thirdly, concerning climate change, the research proposes benchmarking Japan’s JCM system, pursuing Korea-Japan joint response to the EU’s CBAM, and jointly developing overseas hydrogen and ammonia energy. Finally, in relation to development cooperation, this research proposes that Korea and Japan collaboratively strengthen development cooperation in emerging areas as health and medical cooperation, digital transition and green transformation, and that the Korean government contemplate expanding overseas infrastructure investment through the ODA, following the Japanese government’s approach. 

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  • 팬데믹과 전쟁 이후 국제경제질서 변화와 대응
    Changes in the international economic order in the post-pandemic and war era and challenges for Korea

    The COVID-19 pandemic and the Russo-Ukrainian War marked the end of the post-Cold War era and the beginning of a new Cold War era. From the global economic perspective, it was an event in which cracks occurred in the integration o..

    Kyungsoo Kim et al. Date 2022.12.30

    economic security, international finance
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    The COVID-19 pandemic and the Russo-Ukrainian War marked the end of the post-Cold War era and the beginning of a new Cold War era. From the global economic perspective, it was an event in which cracks occurred in the integration of the world economy, which was completed with China's accession to the WTO in 2001, and de-globalization has begun.

    However, these changes did not happen suddenly, and many factors have contributed to this turmoil. Among them, the most fundamental cause can be attributed to the United States’ declining status as a hegemon, which continued to lead the world order since World War II. The declining status as a hegemon is not simply due to the declining trend of the US share of world GDP. Compared to the advanced countries, including the United States, the economies of emerging countries have made a rather explosive growth in the recent decades. Above all, China has achieved strong economic growth and military power to the extent that the G2 has been crowned.

    However, the status of the dollar as a reserve currency is still dominant. The dollar occupies an overwhelming share in world foreign exchange transactions, and as a global safe asset and settlement currency for international trade and commodity transactions, it is incomparable to any other currencies. The US Federal Reserve's monetary policy is having a huge ripple effect on the world economy by generating a global financial cycle.

    The declining power of the United States’ status as a hegemon should be found within the failure of domestic politics, which has caused much societal conflict and polarization such that no consensus can be reached on everything from masks to abortions. The failure of domestic politics is largely responsible for the vast societal inequality. Loss of jobs caused by China trade shock, automation (from digital technology development) and labor outsourcing (from GVC enabled) has contributed significantly to inequality. The failure of domestic politics also occurred in other center countries of the global world, such as Britain and France.

    The failure becomes as a hefty constraint on foreign policy as a hegemon. Moreover, emerging and developing world has brought a skeptical view of the liberal order, the basis of the Bretton Woods system led by the United States.

    Continued rise in political conflicts and polarization has prevented science and technology from effectively coping with the aftermath of the pandemic, and vaccine selfishness in advanced countries has contributed more developing countries to fail. As of early 2022, 90 countries, or nearly 47% of UN member states, are receiving financial assistance from the IMF.

    President Biden has declared that ‘America is back’. However, the United States cannot return unless the problem of domestic politics is resolved. National Security Strategy 2022 is nothing but the continuation of National Security Strategy 2017 under Trump government, and the IPEF proposed to countries in the Indo-Pacific region emphasized fair trade, not free trade.

    Witnessing the humiliating U.S. withdrawal from Afghanistan, Niall Ferguson noted the historical fact that retreating from the status of a hegemon was never a peaceful process and expressed concerns that the world could become embroiled in unnecssary conflicts. His concern became a reality with the Russian invasion of Ukraine in February 2022.

    The Russo-Ukrainian war has proved the causal relationship that free trade resolving conflict and promoting peace is fictitious. Opinion leaders accused China and other revisionist countries of taking advantage of the international economic order established by the United States. Without considering economic legitimacy, the argument that the global value chain should be reorganized into countries those share values is gaining more persuasion. The war was a game changer for the hegemon, the United States. A bipartisan agreement has reached when it came to China.

    The post-pandemic/war world is expected to be divided into three: developed countries led by the US, Eurasia led by China, and the Global South. The economic interests of the United States and China need each other. However, it is difficult to expect that the new Cold War, wrapped in strategic competition, will end soon. Naturally, it seems inevitable that the geopolitical and geoeconomic risks surrounding Korea will escalate.

    In the era of the new Cold War, economic security is a key word in foreign policy. Economic security is the ability to identify and control risks (such as geopolitical, geoeconomic or climate change) to a country's sustainable prosperity. Economic security, so defined, may sacrifice current prosperity for future prosperity. Even if the two countries are allies, the economic security of one country may conflict with the economic security of the other.

    Strengthening economic security is a challenge. There are many equations to solve. Define core national interests and goals, list strategic assets and liabilities, identify areas of weakness in foreign policy through mapping between assets and liabilities, and implement policies to fix challenges in an efficient way, etc. In the end, the proper governance structure of the organization in charge of economic security must be established.

    We would like to thank to Drs. Jaewoo Lee and Rudolfs Bems at IMF, Senior Research Fellow Scott A. Snyder at CFR, Senior Fellow Joshua P. Meltzer at Brookings, Chai Matthew P. Goodman at CSIS, Managing Director Barbara Weisel at Rock Creek, and Professor Lee Seung Joo at CAU for their generosity to spend time and patiently consult with us on this project. In addition, thanks to many experts and colleagues who shared their wisdom on the various topics covered in this project.

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  • Analyzing DPRK's Food Supply and Demand Condition with Food Culture
    Analyzing DPRK's Food Supply and Demand Condition with Food Culture

    Estimation of food supply and demand in North Korea follows the FAO/WFP calorie standard at least 1,640 kcal per person per day. This method is useful in that it can estimate the minimum amount of food shortage for survival, but h..

    Jangho Choi and Bum Hwan Kim Date 2022.12.30

    economic security, North Korean economy North Korea
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    Executive Summary

    Contributors

    1. Introduction
    2. Method of study

    3. Data of study

    4. Results

    5. Conclusion

    References
    Summary
    Estimation of food supply and demand in North Korea follows the FAO/WFP calorie standard at least 1,640 kcal per person per day. This method is useful in that it can estimate the minimum amount of food shortage for survival, but has a limitation in that it does not accurately reflect real life in that it ignores the food culture of North Korean residents. In this study, the amount of food supply and demand in North Korea was estimated by considering the food culture. The amount of food shortage was calculated by the difference between food consumption and supply. For food consumption, South Korea’s food supply and demand tables (1970 and 1990) and North Korean population were used to consider food culture. The amount of food supply considered North Korean food production, imports, and exports. As a result of the estimation, first, when the food shortage in North Korea in 2014 was estimated by reflecting South Korea’s food supply table in 1970, 2,388.4 thousand tons were oversupplied, resulting in a food supply and demand rate of 1.26. Second, assuming that North Korea’s food culture changes similarly to that of South Korea in 1990 due to the spread of marketplaces or the unification of South and North Korea, total food consumption increased by 33.3%, and the food supply and demand rate fell from 1.26 to 0.95. The results of this study have two implications. First, it is possible that the cereals shortage estimated by FAO/WFP based on the minimum calorie required for survival was overestimated. Second, North Korea’s carbohydrate-oriented food aid does not take North Korea’s food culture into account, so it is necessary to increase support for fish, meat, fruits and vegetables.
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  • 포용적 무역을 위한 국내보완대책의 성과와 시사점
    The Effects of South Korea’s Domestic Supplementary Measures for Trade Adjustment and Their Implications

    Since the 2000s, South Korea has experienced significant changes in its industrial and employment structures as a result of trade shocks, including the expansion of Free Trade Agreement (FTA) policies and the restructuring of trad..

    Kyong Hyun Koo et al. Date 2022.12.30

    labor market, trade policy
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    Since the 2000s, South Korea has experienced significant changes in its industrial and employment structures as a result of trade shocks, including the expansion of Free Trade Agreement (FTA) policies and the restructuring of trade structures centered on China and Vietnam. Although these changes have contributed to South Korea’s relatively high economic growth rates, they have also widened the income and employment stability gap between workers (Koo and Kim 2020; Koo et al. 2021). 

    In light of the profound impact of trade shocks on the economy, effective protection and support for firms and workers who have suffered relative losses in the adjustment process is considered an essential measure to maximize the net benefit of trade. Such a measure represents a crucial policy goal that requires prioritization in South Korea, given the country’s heavy reliance on international trade. To achieve this policy goal, South Korea has primarily implemented the Act on Trade Adjustment Assistance and the Employment Insurance Act as domestic supplementary measures. However, despite the significance of the policy objectives pursued by these two acts, the analysis of their trade adjustment support performance remains inadequate. 

    Therefore, this study aims to investigate the effects of existing domestic supplementary measures, such as the trade adjustment assistance programs and the employment insurance programs, for domestic firms and workers affected by trade shocks. In addition, we also examine similar programs in the United States and European Union as benchmarks. Based on the results of the regression analyses and case studies, we discuss how to improve the Korean domestic supplementary measures for trade adjustment.

    The second chapter provides an overview of Korea’s trade adjustment assistance programs and the employment insurance system, which can be considered the two pillars of Korea’s trade damage countermeasures. In the third chapter, we analyze the support performance of the trade adjustment assistance program for trade-impacted firms and the employment insurance programs for trade-impacted workers using micro data. The fourth chapter examines the main contents, recent trends, and implications of the United States’ Trade Adjustment Assistance (TAA) and the European Globalization Fund (EGF), which are prominent examples of trade shock protection systems overseas. Finally, in the fifth chapter, we suggest policy improvement plans based on the findings of the empirical analyses and case studies.
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  • ODA 사업의 유형별 평가방법 연구: 기술협력 사업을 중심으로
    Developing ODA Evaluation Methodology for Technical Cooperation

    With the expansion of Korea’s official development assistance (ODA), there is a growing demand for systematic management and effective evaluation. However, the evaluation of Korea’s ODA mainly depends on guidelines and manuals d..

    Eunsuk Lee et al. Date 2022.12.30

    ODA, technical cooperation
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    With the expansion of Korea’s official development assistance (ODA), there is a growing demand for systematic management and effective evaluation. However, the evaluation of Korea’s ODA mainly depends on guidelines and manuals designed for project-type interventions, while there is a lack of research on evaluation methodology for other types of ODA. Specifically, there are significant limitations when applying project-type ODA evaluation methods to technical cooperation (TC), including policy consulting and training.

    Therefore, this study investigates evaluation methods in consideration of the characteristics of Korea’s TC projects and the evaluation environments of its ODA implementing agencies, aiming to design a practical and useful evaluation framework for Korean TC interventions. To this end, it reviews the current trends in TC, discussions of ODA evaluation, and challenges in developing an evaluation methodology for TC projects.

    As shown in Chapter 2, the proportion of TC projects in Korea’s ODA is higher compared to other OECD DAC donors. However, these projects tend to be short-term and small in scale, with 14 out of 31 agencies implementing TC projects with funding of less than KRW 1 billion, or well under USD 1 million. In the case of small-sized TC interventions, the outcomes are often intangible and long-term, posing challenges in determining when and how to measure project results. As such, it is important to consider the evaluability and utility when selecting TC projects for evaluation, aligning with the recent trend that emphasizes the learning opportunities and usefulness derived from evaluations.

    Chapter 3 examines the evaluation systems and cases of six multilateral organizations and four bilateral development agencies that carry out TC projects. It has been demonstrated that major donors are addressing the constraints of TC evaluation by reducing the formality and burden associated with evaluations. While formal evaluations are carried out for projects with high evaluability and utility, simplified evaluations that review and validate project completion reports are also on the rise, especially at multilateral institutions. Another important aspect is that comprehensive evaluations are conducted for projects within a similar policy, program, or sector. Most evaluation design is based on theory of change (ToC), in which qualitative analysis and indicators are frequently used due to difficulty of quantifying the effects and outcomes of TC projects.

    Chapter 4 presents an in-depth analysis of the characteristics of Korea’s TC evaluation, with a specific focus on development consulting and training programs. In most cases, performance indicators were defined as the number of outputs or satisfaction scores, but these scores often fall short in accurately representing project outcomes. Alternatively, it would be more effective to collect detailed qualitative information from participants in evaluating the quality of the project content, knowledge transfer or collaboration methods, and gather opinions to contribute to project improvement. In comprehensive evaluations that cover multiple projects, establishing clear evaluation objectives would enhance the usefulness of evaluation results.

    Based on the findings mentioned above, this study presents the following implications for Korea’s TC evaluation. Firstly, it is necessary to set the scope of project results in consideration of the evaluability of TC projects, and employ representative indicators that can provide useful evaluative information on the project processes and quality. For short-term and small-scale projects that have relatively low utility in evaluation, it is advisable to consider conducting clustered evaluations when necessary. In cases where a formal evaluation is not possible, a cost-effective and simplified evaluation can be utilized to ensure accountability and provide learning opportunities. Lastly, it is crucial to clearly define the purpose of evaluation in order to determine the timing and scope of evaluation, as well as whether to involve an external consultant.

    Building on this analysis, Chapter 5 proposes a TC project management and evaluation system consisting of four steps that can be used for Korea’s typical TC activities. The first step which is a prerequisite is to collect project information and data through systematic monitoring throughout the project implementation. Secondly, upon project completion, the project team conducts a self-evaluation as part of the final report to assess the experience and lessons learned during the project implementation that can be accumulated as organization knowledge. Thirdly, a simplified end-of-project evaluation is carried out in which an external evaluator verifies the quality of the project completion report and the self-evaluation. As the final step, an ex-post comprehensive evaluation may be conducted by grouping selected TC projects based on specific needs.

    This step-by-step evaluation mechanism enables small-scale ODA-implementing agencies to conduct evaluations with limited funding while maximizing the utility of the evaluations. To ensure the effective implementation of these measures, each implementing agency should clearly define the purpose of evaluation and establish a comprehensive management system for TC projects. Additionally, TC evaluation should emphasize the identification of project strengths, weaknesses, and areas for improvement by incorporating a range of qualitative measures alongside quantitative outcomes. The Committee for International Development Cooperation is recommended to encourage flexibility in the methods of TC evaluations, and provide quality standards for TC projects, enabling each implementing agency to independently manage the quality of its projects. 
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  • 한국-동남아 가치사슬 안정화를 위한 메콩지역 협력 방안 연구
    A Study on the Cooperation between Mekong Subregion and RoK to Build Stable Supply Chains in Southeast Asia

    The Mekong subregion emerged as the core of the global value chain (GVC) with the influx of foreign direct investment. This is because the Mekong subregion’s economy is growing rapidly and is a strategic point in the face of the ..

    Sungil Kwak et al. Date 2022.12.30

    economic security, economic cooperation
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    The Mekong subregion emerged as the core of the global value chain (GVC) with the influx of foreign direct investment. This is because the Mekong subregion’s economy is growing rapidly and is a strategic point in the face of the U.S.-China hegemony competition. Korea is also recognizing the importance of the Mekong subregion and carrying out cooperative activities. This study examines whether Korea’s supply chain can be diversified through the Mekong subregion. Considering the development situation and infrastructure conditions of the Mekong subregion, it will be difficult for the Mekong subregion to function as a target for Korea’s supply chain diversification in a short period of time, but we will preemptively explore Korea-Mekong cooperation measures to explore the feasibility.  

    To this end, Chapter 2 examines the GVC policies promoted by major developed countries such as the U.S., China, and Japan and the Mekong countries’ own GVC policies. The United States, China, and Japan are promoting various cooperative strategies and initiatives for the Mekong subregion. First of all, the United States, promoting the “Mekong-U.S. Partnership,” is paying attention to economic integration, human resource development, and non-traditional security in the Mekong subregion. China is also promoting Mekong cooperation with interest in linking the Mekong subregion and the southwestern part of China mainland through the Lancang-Mekong Cooperation (LMC) initiative. Meanwhile, China revised the FTA with ASEAN in 2016 and was active in entering into force of RCEP. After the global financial crisis, Japan has established a Comprehensive Asian Development Plan (CADP) that encompasses the Mekong subregion and India and supports the incorporation of global networks in these regions by maintaining wide-area infrastructure and creating industrial complexes. Meanwhile, Japan began to disperse production bases in Asia in 2012 and launched its “China+1” strategy in earnest. In addition, Japan has established “AJIF” in 2022 to foster ASEAN, including the Mekong region, as a hub for the global supply chain. It is also expanding support for Japanese firms to diversify their overseas supply chains.

    The five Mekong countries seem to be taking part in the Global Value Chain (GVC) and the ASEAN Regional Value Chain (RVC) as key measures of economic growth. Each country in the Mekong subregion has different strategies and methods for participating in GVC and RVC. The GVC strategy of Mekong countries can be summarized as the followings; one is to encourage GVC participation directly, and the other is to upgrade the industrial structure indirectly. As in the case of Vietnam and Thailand, the policy to encourage GVC participation appears to be pressure for FDI firms to expand transactions with their own local firms. The indirect strategy to expand GVC participation is to make GVC production length longer through product advancement and expand international division of labor for production. To this end, Mekong countries are implementing the industrial policies to upgrade their economic structure. 

    Chapter 3 explored the inflow of FDI to five countries in the Mekong subregion. Japan, Korea, the United States, and China invested heavily in the Mekong region. They mainly invest the energy, construction, and information and communication, and electronics sectors. In Cambodia, Korea’s FDI went mainly to a finance and insurance industries. Electricity, gas, steam, and air conditioning supplies in Laos, mining in Myanmar, and manufacturing in Thailand and Vietnam are the main sectors on that Korea’s FDI has focused. As a result of analyzing the effect of foreign direct investment on export value-added based on the gravity model proposed by Tinbergen (1962), the main variables of interest in the study, FDI inflow and value-added exports, generally provided an significant evidence to have a positive relationship. In addition, the estimated coefficient of FTA on export added value was mainly estimated to be negative, and PTA, a preferential measure provided by relative developed countries to relative developing countries, was mainly estimated to be positive.

    In addition, Vietnam has quickly participated in GVC, but participation in ASEAN RVC progressed slowly. Thailand was slowly expanding both GVC and RVC participation. Cambodia, on the other hand, was quickly participating in GVC by 2020, and Laos was more actively participating in RVC than GVC. Meanwhile, in the 2021 data, the RVC participation rate in all four Mekong countries increased significantly. The reason is understood to be that firms located in the ASEAN region recognized the importance of supply chain stability and diversification of their procurement sources. Meanwhile, the proportion of using domestic value added in total exports was different for each country in the Mekong subregion. Laos used the largest proportion of domestic value added among the Mekong countries in value-added exports, while Vietnam’s share of domestic value added in total exports was gradually decreasing. In addition, the four Mekong countries had a lower utilization rate of own intermediate goods in the low- and medium-high-tech manufacturing industries. This result suggests that the demand for technology transfer in the manufacturing sector of Mekong countries may increase further in the near future.

    Chapter 4 surveyed Korean firms that entered the Mekong subregion to diversify their supply chains. The survey investigated the current status and changes in procurement and production structure, and explored the demand for supporting policies for Korean firms working in the Mekong subregion. According to a survey of difficulties in building value chains between local firms and Korean firms, Korean firms reported a lack of quality and technology competitiveness, poor logistics infrastructure in the Mekong subregion, and lack of local raw materials and parts. More than 40% of all respondents answered that the U.S.-China hegemony competition and protectionism negatively affect the value chains (supply chains) of Korean firms working in the Mekong subregion. In addition, respondents predicted that it would have a more negative impact after two to three years. According to the survey, only 62% of all the respondents were aware of the RCEP settlement. There is still a lack of publicity of it for the firms. Meanwhile, firms responded that they need more supports such as providing non-face-to-face FTA consulting, issuing certificates of origin, resolving difficulties in overseas customs, and responding to non-tariff measures.

    Finally, the survey asks the Korean firms to evalate Korean government’s supporting measures. Korea firms showed a weak correlation between recognition and utilization of supporting measures. In other words, it was found that some Korean firms are not aware of the existence of the measures just before they utilize it. Or, other firms arbitrarily utilize them when they needed. Meanwhile, among the supporting measures, there were many cases where the two supporting measures were selected at the same time by Korean firms. Policy efficiency can be improved if these supporting measures are packaged rather than provided separately. 

    The respondents evaluate the importance and urgency of the Korean government’s supporting measures. Respondents reported that expanding logistics infrastructure using ODA is the most urgent and important to expand the value chains into the Mekong subregion. This suggests that when expanding their value chains to the Mekong subregion, Korean firms consider the capabilities of the local firms as well as the quality of socio-economic infrastructure in that region. 

    Based on the above research results, this study proposes the cooperation directions between Korea and the Mekong subregion to stabilize the Korea-ASEAN value chain. First, it is important to promote cooperation policies consistently to build trust. “The Han River-Mekong River Declaration,” announced in 2019, also emphasized inclusiveness, prosperity through experience sharing, and peace, while the “Korea-ASEAN Solidarity Initiative”, announced in 2022, also mentions inclusiveness, trust, and reciprocity as cooperation principles. Second, it is necessary to strengthen comprehensive cooperation across all sectors rather than focusing only on the economic sector. In a market economy, it is also important to seek common interests by promoting regional order and to seek peace from traditional and non-traditional security threats. In addition, it is necessary to strengthen socio-cultural exchanges in order to increase mutual understanding between the two regions. Third, it is necessary to prepare a cooperative plan that reflects the demand of the Mekong subregion. Fourth, it should be expanded to support for the establishment of economic and social infrastructure in the Mekong subregion. 

    Finally, this study proposes seven ways to cooperate between Korea and the Mekong subregion based on the directions of the cooperation. As confirmed in Chapter 3, except for Vietnam and Thailand, Mekong countries have not yet had industrial capacity to build stable value chains. Therefore, in order for the Mekong subregion to become the partner of stable supply chain, Korean firms must increase the volume of trade with the multinational forms or local firms located in the Mekong subregion. 

    First, using ODA funds, it is necessary to establish ‘a risk response manual’ for each country in the Mekong subregion and to enable Korean firms to use it under the sudden crisis such as infectious disease, climate disaster, and economic crisis, It should be considered that not only are the Mekong countries themselves vulnerable to crises, but also that most of the Korean firms that have recently entered the region are small and medium sized firms. 

    Second, it is possible to establish a think tank dedicated to the Mekong subregion by Korean government. Until now, most information related to the Mekong subregion has been obtained from data from leading regional cooperation countries such as Japan, the United States, and China. The limitations of information on the Mekong subregion worked as difficulties in finding how to link value chain effectively between Korea and the Mekong subregion. To compensate for this, we may consider the establishment of a Korean-led think tank in the Mekong subregion. 

    Third, it is possible to consider the installation of the ‘Mekong-Korea Society.’ We have to foster it as an international organization that plays the similar role as the Korea-ASEAN Center in cooperation with Korea and the Mekong subregion. In particular, if all stakeholders, including the governments of both regions, private organizations, public institutions’ representative offices, and local governments, participate in it, the synergy of cooperation can be amplified. It is expected to function as a platform for comprehensive cooperation that encompasses economic, industrial, social and cultural exchanges, and educational and technological cooperation between the two regions. 

    Fourth, it is necessary to magnify trade by improving the utilization rate of FTA and RCEP between Korea and the Mekong subregion. As analyzed in Chapter 3, it was confirmed that the FTA settlement was a significant variable along with an increase in FDI inflow in participation in GVC. In particular, the use of preferential trade agreements (PTA) was an important means of increasing trade, given that the Mekong subregion includes underdeveloped countries such as Cambodia and Laos. 

    Fifth, it is necessary to support the establishment of institutional infrastructure to respond to the demand for technology transfer. In Chapter 2, it was confirmed that countries in the Mekong subregion are increasing their demands for technology transfer through coercive policies to participate in GVC. In addition, as confirmed in Chapter 3, countries in that region had a low proportion of their own value-added utilization in the manufacturing sector. In response to the technology transfer needs of the Mekong subregion, it should be considered as supporting measures improving intellectual property rights and technology security-related systems in the Mekong subregion. 

    Sixth, the effectiveness of supporting measures should be enhanced through packaging and strategic provision of them for stabilizing the value chain. In Chapter 4, it was investigated that when firms utilize the government’s supporting measures, whether to use it or not is determined by its necessity rather than knowing the existence of them in advance. On the other hand, when using government’s supporting measures, firms used specific supporting measures together at the same time. This suggests that packaging supporting measures can increase efficiency. 

    Seventh, it is necessary to promote the use of strategic ODA and the development of infrastructure in the Mekong region through solidarity with Mekong-engaged countries such as the United States, Japan, and China. The solidarity with the major Mekong-engaged countries can lead the improvement of connectivity and infrastructure development in this area in an effective way. As seen in the survey in Chapter 4, Korean firms were also hoping to improve infrastructure in the Mekong subregion. Based on Korea’s strengths, such as its reliable infrastructure technology and capabilities of the world’s best e-government infrastructure and service, we will be able to make cooperation with the U.S., Japan, and China.
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  • 코로나19 위기와 기업경쟁구도 변화: 과거 경제위기와의 비교를 중심으로
    Covid-19 Crisis and Shifts in the Corporate Competitive Landscape: Comparisons with Previous Economic Crises

    In terms of economic fluctuations, it is well recognized that the effects of an economic crisis have a detrimental impact on the entry, growth, decline, and exit of firms. In addition, the magnitude of the impact varies both withi..

    Sang-Ha Yoon et al. Date 2022.12.30

    economic growth, industrial policy
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    In terms of economic fluctuations, it is well recognized that the effects of an economic crisis have a detrimental impact on the entry, growth, decline, and exit of firms. In addition, the magnitude of the impact varies both within and between industries depending on the size and other characteristics of the firm. The economy is going through significant changes due to the emergence of new industries and the decline or disappearance of current ones. This study looks at how big economic events like the COVID-19 pandemic and the global financial crisis have affected businesses and industries. After completing a study at several levels of top international corporations, larger domestic enterprises, and domestic small and medium-sized businesses, it attempts to draw policy implications. 

    In chapter 2, we analyzed changes in the activities and characteristics of large global firms using Global Compustat: Fundamental Annual data. Specifically, we presented basic statistics on changes in concentration and profit margins in three regions (Asia, North America, and Europe) and then examined how the economic share of large firms has changed over time and across crises. We also looked at the data by industry to identify heterogeneity. To understand the impact of changes in the economic weight of top firms, we examined how the characteristics of top firms have changed over the past 20 years. We looked at cost-to-sales, investment-to-sales, and R&D-to-sales as firm characteristics. Cost-to-sales is closely related to operating margins and markups, while investment and R&D expenditures as a percentage of sales have a significant impact on economic development, with differences between North American companies and those in other regions. After reviewing the changes in the ranking of larger companies, we found that North American firms were more likely to move up and down, while those in Europe and East Asia were less likely to do so. Finally, the regression analysis examined differences in business cycle sensitivity based on firm characteristics. The results showed that firms with larger sales and higher sales-to-cost ratios were less sensitive to cyclical fluctuations, i.e. larger firms were less sensitive to changes in GDP than smaller firms. Using sales growth in local currency terms, the top 500 companies were 20-30% less sensitive to GDP increases than the companies below them. We also found that higher cost-to-sales ratios (mark-ups) were associated with lower sensitivity to economic shocks when analysing companies with higher cost-to-sales ratios (the top 500 companies in the region) versus smaller companies (those below the 500). This means that companies with higher cost-to-sales ratios experienced about 20-40% less revenue decline when GDP fell.

    In chapter 3, we compared and analyzed the negative impacts of each industry in the 2008 global financial crisis and the COVID-19 crisis based on corporate sales, and diagnosed the asymmetrical impact on face-to-face and non-face-to-face industries during the pandemic for Korean listed firms. As a result, first, real sales of all companies fell by an average of 4.28 percent year-on-year in 2020, whereas real sales fell by 20.08 percent in 2009, shortly after the 2008 global financial crisis. This indicates that the intensity of the recession was greater during the 2008 global financial crisis than in the 2020 pandemic for listed firms. In other words, during the 2008 global financial crisis, corporate management activities shrank more significantly than during the 2020 pandemic crisis, and the economic recession lasted longer. Second, immediately after the 2008 financial crisis, all industries except mining, agriculture, forestry, and fisheries shrank. 2009 was particularly hard-hit with real estate and rental sales falling 87.73% compared to the 2008 average. In contrast, immediately after the 2020 pandemic outbreak, there was no significant decline in sales in other industries except for arts, sports and leisure services, transportation, agriculture, construction, wholesale and retail, accommodation and restaurant, facility management and business support services. Sales in real estate and rental actually increased by 52.25% compared to the 2019 average. Third, industries that were more affected by the 2020 pandemic crisis than the 2008 global financial crisis included (ⅰ) agriculture, forestry, and fishing, (ⅱ) mining, and (ⅲ) arts, sports, and leisure-related services. Whereas, all 12 other industries experienced a greater imparct from the 2008 global financial crisis. Fourth, the impact of COVID-19 was asymmetric in the face-to-face and non-face-to-face industries. In the case of non-face-to-face industry sales, the deviation rate was -3.37% in 2020 compared to the 2019 average, while face-to-face industry sales were -12.50% in 2020, showing a greater decrease compared to the 2019 average. Fifth, the gap between the non-face-to-face and face-to-face industries was even greater, recording an average of -16.12% and -0.12%, respectively, showing a much larger drop in the face-to-face industry.

    The second part of chapter 3 focused on smaller companies and examined the characteristics of their regional and industry licensing rates and closing rates through local administrative licensing data. Amid significant patterns by industry and period, the trend was stronger than the economic fluctuation in the entire period after the Asian financial crisis, and the licensing rate was systematically higher than the closing rate. This suggests that the competitive strength of small and medium-sized businesses continued to increase. During the COVID-19 period, it was also possible to find a phenomenon in which the licensing rate rose, and the closing rate fell depending on the industry. The same was true for start-ups with less than the third year of establishment, but the level of closing rate remained quite high compared to the entire industry, consistent with the results of overseas literature studies. As a result of panel regression analysis on how the social distancing policy introduced to prevent the spread of COVID-19 affected the closing rate of all industries and restaurant industries, it was confirmed that strengthening distancing in sectors for all industries and restaurant industries significantly increased the closing rate.

    Chapter 4 summarized the corporate support policies implemented during the COVID-19 period for major countries and analyzed the changes in the size distribution of Korean companies by industry. In particular, in order to examine the effect of the COVID-19 support policy, the inequality in the size distribution of companies such as automobile parts manufacturing, textile and clothing industries, and sports and entertainment-related service industries, which were eligible for support, was measured. The greater the industry inequality, the higher the proportion of sales or employment in the industry by a small number of companies. As a result of the analysis, unlike the rapid increase in manufacturing sector inequality due to the impact of COVID-19, the textile and clothing industries increased relatively less, and the automobile parts manufacturing industry decreased, which can infer the support effect. In particular, in the automobile parts manufacturing industry, inequality was somewhat reduced, which shows that the effect of supporting SMEs in the industry would have been greater than those in the textile and clothing industry. The sports and entertainment-related service industry showed a sharp change in the distribution of corporate sizes during the COVID-19 period, indicating that there was government support, but the impact of social distancing was significant.

    Finally in chapter 5, we presented policy implications based on the above research results. First, it is necessary to foster and support top-tier companies to defend against global economic fluctuations and strengthen international competitiveness. In particular, the institution in charge of competition policies domestically and the institution that helps companies improve their competitiveness are different and the focus of policies is distinctive, so comprehensive attention and perspective of policymakers are needed. Second, it is urgent to respond to new issues related to competition policy in the domestic market. The behavior of emerging big tech and platform companies is different from monopoly companies in the past, so consumer welfare is not impaired, but it burdens nearby and other market participants. Therefore, a view that deviates from the focus on monopoly pricing is also essential for competition policy. Third, measures to support global corporate growth and countermeasures against changes in the industrial landscape should be prepared. Investment and R&D expansion at the corporate level is essential for corporate growth, and measures are needed to boost investment in recently emerging intangible assets. In addition, it is important to revitalize the movement of economic resources to cope with changes in the inter-industry landscape accompanied by the crisis. Fourth, policies to revitalize start-ups and closures are required. The decline in new companies’ market entry and exit rates is a symtom of an aging economy contributing to the overall decrease in productivity. Therefore, enhancing the revitalization of the corporate ecosystem and expanding the size of enterprises are essential to enhance the dynamics of the economy.  Fifth, it is necessary to find an appropriate combination of government roles in times of crisis. In particular, it is important to grasp the detailed status of economic stabilization policies in relation to SMEs, and at the same time, clear judgments on the appropriate size of support measures, the period of support, and the timing of collection are urgently needed.
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공공누리 OPEN / 공공저작물 자유이용허락 - 출처표시, 상업용금지, 변경금지 공공저작물 자유이용허락 표시기준 (공공누리, KOGL) 제4유형

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