Preface

Contributors

Introduction and Overview
     Lee-Jay Cho

Statements by Country Representatives and Keynote Address

  Country Representative Statement: South Korea
     Kwan-Young Park

  Country Representative Statement: China
     Wang Shuzu

  Country Representative Statement: United States
     George Ariyoshi

  Country Representative Statement: Russia
     Pavel Minakir

  Country Representative Statement: Mongolia
     Ganbold Baasanjav

  Keynote Address
     Nikai Toshihiro

Part I. Building a Northeast Asia Economic Community and Its Extended Regions

  Promoting International Cooperation in Industrial Finance, Propelling High-quality Development of an Asian Economy
     Zhao Xianfeng

  Northeast Asia Economic Community Formation and the Role of the Russian Far East
     Sergei Sevastianov

Part II. Cross-border Infrastructure and Special Economic Zones in Northeast Asia

  Cross-border Infrastructure and Special Economic Zones in Northeast Asia: Politically Holding Hands and Economically Going Underground
     Anthony Michell

  Logistic Connectivity for Northeast Asia
     Inoue Satoshi

  Cross-border Infrastructure in Northeast Asia: Transport and Energy
     Sangmin Nam

Part III. Financial Cooperation in Northeast Asia

  Financial Cooperation in Northeast Asia: Current Trends and Opportunities
     Maeda Tadashi

  A Review of the Asian Infrastructure Investment Bank
     Stanley Katz

  Establishment of the NEADB to Support North Korea’s Economic Development
     Jai-Min Lee

Part IV. Energy and Environment in Northeast Asia

  Trends in Energy Transformation and Policy
     Iinuma Yoshiki

  Perspective from the United States: Update on US Energy Policy and Technology
     Terry Surles

  Perspective from Korea: New Paradigm for Korean Energy Transition and Policy
     Haksik Yoo

  Perspective from Japan: Energy Trends and Policy and Northeast Asia Cooperation
     Tanabe Yasuo

Part V. Tourism Cooperation in Northeast Asia

  Border Tourism in Northeast Asia
     Iwashita Akihiro

  Increasing Tourism through Integrated Resorts—Tourism and Gaming in Northeast Asia
     S. Ray Cho and Brendan Bussmann

  Current Status and Challenges of Japan’s Inbound Tourism Boom: Evidence from Japan’s City-level Data
     Konishi Yoko

  Latest Market Trends: Visitors to Japan
     Tsuboi Yasukiro

Part VI. Panel Discussion on Natural Disaster and Regional Cooperation

  Summary of Panel Discussion on Natural Disaster and Regional Cooperation

Part VII. The Honolulu Ad Hoc Group Meeting on Financial Cooperation in Northeast Asia: Proposal for the Northeast Asia Bank for Cooperation and Development (NEABCD) Revisited

  Review of Current Situation and Recent Developments in Northeast Asia Regional Cooperation Relevant to Financial Cooperation Opening Remarks
     Kwan Yong Park

  Recent Developments and NEABCD
     Stanley Katz

  Perspective from Japan
     Maeda Tadashi

  Perspective from Korea
     Jae Hyung Hong

  Perspective from China
     Liu Ming and Zhang Jianping

  Perspective from the United States
     Mead Treadwell

  Commentary
     Inessa Love

Role and Justification: Why Is the NEABCD Necessary to Meet NEA Financing and Technical Assistance Needs?

  Overview 
     Lee-Jay Cho and Stanley Katz

  A Review of the Ad Hoc Committee on the NEABCD and the Brief on the Establishment of the NEABCD
     Liu Ming

  Recommendations of the Study on the Establishment of the Northeast Asian Development Bank: The Tokyo Foundation Draft
     Chiba Yasuhiro

  Update on Northeast China and Efforts Toward an NEABCD
     Liu Lanbiao

  Strategies, Future Plans, and Activities Establishment of the NEADB to Support North Korea’s Economic Development
     Jai-Min Lee

  Promoting the Northeast Asia Development Bank
     Zou Lixing

  Promoting Financial Cooperation  in Northeast Asia
     Li Zheguang

  The NEADB: Securing the Attention of the United States
     Mead Treadwell

  The NEADB: Considerations and Recommendations for Energy
     Terry Surles

Appendices 

   The risks of political tensions and military confrontation and war in the Northeast Asian region, triggered by North Korea in particular, has been a critical gap in an otherwise productive network of dynamic regional economic growth. However, this year, the milestone summit between US President Donald Trump and North Korean Leader Kim Jong Eun has resulted in a dramatic change on the Korean Peninsular, prompting greater need for the region to strengthen ties and find mutually beneficial ways to handle tasks ahead.
   Toward this end, the KIEP–NEAEF collaborative project seeks to fulfill the need for timely and forward-looking research and meeting activities by focusing on critical issues, such as 1) discussion and emphasis on connectivity in cross border infrastructure developments involving North Korea as an integral part of a broader regional economic community in Northeast Asia, and 2) revisiting the design and establishment of a Northeast Asia Bank for Cooperation and Development (NEABCD) in the context of economic cooperation and integration in the Korean Peninsula.
   This volume in the series of proceedings volumes is titled “Momentum for Building a Northeast Asian Economic Community: Emerging Challenges and Opportunities” and comprises summaries of research presentations and discussions at the planning meeting in Honolulu, at the 27th Annual Conference of the Northeast Asia Economic Forum in Sendai, Japan, and at the Honolulu Ad Hoc Group Meeting on Financial Cooperation in Northeast Asia in 2018. The results of this project represent activities that have been contributing to economic dialogues, interactions, and research on common issues for cross-border future economic cooperation in the region, which involves North Korea.
   KIEP is grateful to Dr. Lee-Jay Cho, Chairman of NEAEF, for his leadership in implementing the project, and to the authors of the presentations, conference participants and discussants who contributed to this volume.
   Drs. Lee-Jay Cho and Hyung-Gon Jeong would like to extend their appreciation to the NEAEF staff for their assistance in the course of the successful implementation of this project, and to Drs. Karla Fallon and Kennon Breazeale for their editorial review and editing of this volume. 

Preface

Contributors

Introduction and Overview
Lee-Jay Cho

Statements by Country Representatives

Part I. China’s Economic Development and Northeast Asia Regional Cooperation in the Context of the Road and Belt Initiative

Part II. Future Tourism Cooperation in Northeast Asia

Part III: Cross-border Infrastructure and Special Economic Zones in Northeast Asia

Part IV: Building a Northeast Asian Economic Community and Its Extended Regions

Part V: Financial Cooperation in Northeast Asia

Part VI: Energy and Environment in Northeast Asia

Appendix: Hong Kong Statement and Agenda 

  This year witnessed political tensions resulting from a series of provocative nuclear and missiles tests in North Korea and from domestic political unrest, culminating in the abrupt leadership change in the Republic of Korea. All these events pose enormous challenges for minimizing the risks of military confrontation and war in the Northeast Asian region. A significant dampening factor on these possibilities is the real progress made in recent decades in economic cooperation and integration within the region, which contributes to reducing military action in the Korean Peninsula. North Korea, however, still remains the critical gap in an otherwise productive network of dynamic regional economic growth.
  For Northeast Asia, there is a continuing and growing need for promoting peaceful economic interactions and research on a common basis for cross border economic cooperation for the future common good, as a means of ameliorating political tensions and frictions in the Korean Peninsula and Northeast Asia. Toward this end, the KIEP–NEAEF collaborative project seeks to fulfill the need for timely and forward-looking research activities by focusing on some of the critical components, such as strengthening economic cooperation with China and exploring future scenarios of North Korea as an integral part of broader regional economic cooperation in the region. This collaborative work on Northeast Asia remains essential in carrying out activities aimed at building a future Northeast Asian economic community on the basis of the strong network the NEAEF has built over the years for functional economic cooperation, through discussions and consultations among stakeholder country experts on issues such as cross border infrastructure development and financial cooperation.
  This volume in the series of proceedings volumes is titled Sustaining the Momentum for Building a Northeast Asian Economic Community and comprises summaries of research presentations and discussions on building a Northeast Asian economic community presented at the planning meeting in Honolulu and at the Annual Conference of the Northeast Asia Economic Forum in Hong Kong, China, in 2017. The results of this project represent activities that have been contributing to efforts toward regional economic cooperation and have been carried out in a spirit of cooperation.
  KIEP is grateful to Dr. Lee-Jay Cho, Chairman of NEAEF, for his leadership in implementing the project, and to the authors of the presentations, conference participants and discussants who contributed to this volume.
  Drs. Lee-Jay Cho and Hyung-Gon Jeong would like to extend their appreciation to the NEAEF staff for their assistance in the course of the successful implementation of this project, and to Drs. Karla Fallon and Kennon Breazeale for their editorial review and editing of this volume. 

Preface

Contributors

Introduction and Overview
Cho Lee-Jay and Lee Chang Jae

Statements by Hosts and Country Representatives

 

Part I. Jilin Province’s Economic Development and Northeast Asia Regional Cooperation in the Context of the Belt and Road Initiative

Part II. Cross-Border Infrastructure and Special Economic Zones in Northeast Asia

Part III. Future Tourism Cooperation in Northeast Asia

Part IV. Building a Northeast Asian Economic Community

Part V. Financial Cooperation in Northeast Asia

Part VI. Energy and Environment in Northeast Asia

Appendix 

The Northeast Asia Economic Forum (NEAEF) is a regional nongovernmental organization created in 1991 to sponsor and facilitate research, networking, and dialogue relevant to the economic and social development of Northeast Asia. The Forum is also committed to promoting understanding and relations among the peoples of Northeast Asia, North America, and Europe.
 NEAEF’s main objective is to conduct research and conference activities aimed at functional economic cooperation such as cross-border energy, transportation and logistics infrastructure development, and capital mobilization. The Forum holds annual conferences, workshops, and seminars for planning, facilitating, coordinating, and implementing international and interdisciplinary solutions to common policy problems. It is the only nongovernmental regional organization in which all the nations of Northeast Asia and the US are consistent and active participants.
 For the year 2016, NEAEF in collaboration with the Korea Institute for International Economic Policy (KIEP), carried out activities aimed at building a Northeast Asian economic community. NEAEF has established the basis of a strong network for functional cooperation, for example, regular discussions among stakeholders on financing cross border infrastructure development. For the year 2016, the goal was to take more concrete steps toward a Northeast Asian economic community including efforts to increase dialogue with North Korea, with a view to future functional cooperation. NEAEF has continued to maintain a cooperative networking approach and exchanges with North Korea regarding the Tumen River Area and North Korean special economic zones.
 This year’s volume titled, Consensus Toward a Northeast Asian Economic Community presents the results of a project implemented in 2016 that includes the planning meeting discussions as well as the presentations and summaries of the 2016 NEAEF Annual Conference in Changchun, China.
 

Contributors

Introduction and Overview

Mark Thoma

Session 1 Trade

China’s Emerging Trade Strategy: Drivers, Influence and Implications for North Pacific Economic Cooperation

Yong Wang

1. Key Drivers of Change in China’s Trade Policy
2. China’s Emerging Trade Policy
3. Why will China Embrace Higher Standard FTAs?
4. Integrate the Belt and Road Initiative and AIIB into China’s Trade Policy
5. Implications for the Global Trade Order and North Pacific Economic Cooperation
References

China’s Belt-Road Initiative and Korea’s Eurasia Initiative

Inkyo Cheong

1. Introduction on Korea’s Eurasia Initiative
2. China’s Belt-Road Initiative
3. Korea’s Nordpolitik and Recent Performance of its Eurasia Initiative
4. Conclusion and Policy Implications

The Trans-Pacific Partnership Agreement High Diplomacy and Low (Domestic) Politics

Claude Barfield

1. Broad Themes and Analytic Frameworks
2. Security/Diplomatic Rationale of Trade Policy
3. The Low Domestic Politics of Trade: Who Wins and Who Loses
4. The Political Problem Areas
5. Concluding Observations

Trade

Comments by Taeho Bark

Strengthening North Pacific Cooperation
Comments by Theresa Greaney

 

Session 2 Macroeconomic Perspectives

Global Economic Problems and Emerging Market Economies’ Macroeconomic Policies

Inchul Kim

1. Introduction 102
2. Global Economic Environment 103
3. Analysis of Global Economic Problems 104
4. Macroeconomic Policies for EMEs 109
5. Conclusion 113

References 114
Economic Conditions in the US and the Uncertain Prospects for Future Economic Growth

Mark Thoma

1. Introduction
2. The Current State of the US Economy
3. Forecast for GDP
4. Risks to Growth
5. Conclusion

References

China’s New Economic Norms

Yijiang Wang

1. Introduction
2. The Slowdown
3. Features of the New Economy
4. Concluding Remarks

The Asian Infrastructure Investment Bank and the Struggle for the East Asian International Order

Ming Wan

1. Introduction
2. The AIIB as an International Financial Institution
3. The AIIB and International Order
4. The AIIB and China
5. Recommendation

Macroeconomic Perspectives for Developed and Emerging Economies

Comments by Michael J. Roberts

1. Introduction
2. Emerging Economies
3. China 200
4. The United States

Macroeconomic Perspectives

Comments by Yoon Je Cho

1. Secular Stagnation
2. China’s Economic Slowdown
3. The Inclusion of RMB in the SDR Basket

Session 3 Finance

Strategies for Currency Convertibility: Korea’s Perspectives

Jang Yung Lee

1. Definition and Accepted Wisdom
2. Benefits and Costs of Convertibility
3. Strategies for Currency Convertibility
4. Countries’ Experiences of Convertibility
5. Conclusion and Policy Suggestions
References

Unconventional Monetary Policy, Spillovers, and Liftoff: Implications for Northeast Asia

Marcus Noland

1. Introduction
2. How We Got Here
3. Spillovers
4. Liftoff
5. Conclusions
References

Exploration of the Prospect of Cooperation between Belt and Road Initiative and TPP in Global Economic Governance

Xiaotong Shan

1. Development Philosophy and Cooperation Approach of Belt and Road Initiative
2. BRI’s Implications for the Global Economy
3. Comparison of Similarities and Differences between the Belt and Road Initiative and TPP
4. Cooperation between the Belt and Road Initiative and TPP for Global Economic Integration
5. Mutual Learning between the Belt and Road Initiative and TPP
6. A Preliminary Study on Cooperation between the Belt and Road Initiative and TPP
7. Conclusion
References

Finance Issues

Comments by Baybars Karacaovali

Session 4 Major Findings and Policy Implications

Monetary Policy Response in Emerging Economies and North Pacific Cooperation

Il Houng Lee

1. Introduction
2. Capital Flows and Impact on Emerging Markets
3. Not Always an Efficient Allocation of Capital Across Borders
4. Synchronization of Interest Rates
5. Unsynchronized Business Cycles
6. Overcoming the Limitations of Monetary Policy
7. Capital Flow Measures
8. Strengthening North Pacific Cooperation

Major Findings and Policy Implications

Comments by Taeho Bark

Conference Program
Program
Participants 

The conference was held on Dec 14-15, 2015 co-organized by the Korea Institute for International Economic Policy (KIEP) and East-West Center (EWC) in Honolulu. Participants from China, Japan, Korea and the United States discussed the economic future of the major North Pacific countries and the importance of economic cooperation among them. Major topics in each session were (1) Trade (2) Macroeconomic Perspectives and (3) Finance. The first topic, "Trade",  related to the China'a trade strategy, China's  Belt-Road Initiative, Korea's Eurasia Initiative, and the Trans-Pacific Partnership Agreement (TPP). The second topic, "Macroeconomic Perspectives", aimed to tackle global or regional economic problems through the understanding of the macreconomic  policies of the emerging market economies, uncertainty in the economic conditions of the United States, China's New Economic Norms, and the struggle of the East Asian International Order. The third topic, "Finance", aimed to provide an analytical perspective over currency convertibility, unconventional monetary policies, and prospect of cooperation between Belt-Road Initiative and TPP in the global economic governance. The conference concluded with the major  findings and policy implications from the earlier sessions, particularily, monetary policy response in emerging economies and the importance of strengthing the North Pacific cooperation were discussed.
 

Preface

Contributors

Introduction and Overview

Part 1. Regional Integration in Northeast Asia: Status and Potential

A Northeast Asian Economic Community: A Korean Perspective
Chang Jae Lee

Introduction
Recent Trade Situations of China, Japan, and Korea
China-Japan-Korea FTA (CJK FTA)
Conclusion
References

A Northeast Asian Economic Community: A Chinese Perspective
Fu Jingyun

Evolution of China’s FTA and Regional Economic Integration Policies
Overview of China’s FTA Network
Characteristics of China’s FTA Policies
Prospects of China’s FTA Policies and Their Implications for the Region

A Northeast Asian Economic Community: A Japanese Perspective
Yasuo Tanabe

A Northeast Asian Economic Community
An Asian Energy Partnership
Japan-China Energy Conservation Forum
Conclusion

A Northeast Asian Economic Community: A Russian Perspective
Sergei Sevastianov

Introduction
Past and Present Russian Regional Policy in the Far East
Development of Energy and Transport Infrastructure in Eastern Siberia and the Russian Far East
Russian View and Possible Role in NEA Integration
Subnational Models of Economic Cooperation in NEA
Conclusions and Recommendations:

Toward a Northeast Asia Economic Community: Lessons from the European Union (EU), Good and Bad
Glyn Ford

EU lessons for Northeast Asia

Potential for Connectivity in Northeast Asia: Energy and Transport Infrastructure in Eastern Siberia and the Russian Far East
Dmitry Reutov

Energy Projects
Transportation Infrastructure
Conclusion

Part 2. Renewable Energy in Northeast Asia and Prospects for the Region

China Renewable Energy Development and Future Prospects for Cooperation
Shi Dinghuan

History and Mission of the China Renewable Energy Society
Renewable Energy in China
Prospects for Northeast Asia Cooperation

Status of Renewable Energy Development―Toward a Low Carbon Society
Yoshiki Iinuma

Hawaii’s Clean Energy Transformation
Mark Glick

Introduction
Renewable Energy and Energy Savings
Tackling Transportation
Reducing Energy Demand
Hawaii: A Clean Energy Test Bed

Part 3. Financial Cooperation in Northeast Asia

Financing the Asian Infrastructure Investment Bank (AIIB):
Issues for Further Discussion
S. Stanley Katz

Development Bank Objectives
AIIB Financial Arrangements and Parameters

Creating a Multilateral Development Fund for Financial Cooperation in Northeast Asia
Jai-Min Lee

Recent Developments Impacting the Northeast Asian Development Bank Proposal
Creation of NEA Fund
Role of the Greater Tumen Initiative (GTI)
Conclusion

Establishing a Northeast Asian New Financial Institution to Promote Regional Economic Cooperation and Development
Zou Lixing

Strategic Value of and Market Demand for a Northeast Asian New Financial Institution
The Relationship between a New Northeast Asian Financial Institution and
the Asian Infrastructure Investment Bank (AIIB)
Basis and Path to establish a New Northeast Asian Financial Institution

Financial Cooperation in Northeast Asia: Japan’s Perspective
Hideo Naito

The Potential of Northeast Asia
Recent Trends in Financial Cooperation in Northeast Asia
Partnership for Quality Infrastructure
Japan and NEA Potential
Public Private Partnership (PPP) Readiness in Asia-Pacific

The Belt and Road Initiative: Ambition and Reality of China’s “Go Global” Strategy
Liu Ming

Background of the Belt and Road Initiative
Belt and Road Initiative: Challenges
Conclusion

Appendix
 

The Northeast Asia Economic Forum (NEAEF) is a regional nongovernmental organization created in 1991 to sponsor and facilitate research, networking, and dialogue relevant to the economic and social development of Northeast Asia. The Forum is also committed to promoting understanding and relations among the peoples of Northeast Asia, North America, and Europe.
 The main objective is for NEAEF to conduct research and conference activities aimed at functional economic cooperation such as cross-border energy, transportation and logistics infrastructure development, and capital mobilization. The Forum holds annual conferences, workshops, and seminars for planning, facilitating, coordinating, and implementing international and interdisciplinary solutions to common policy problems. It is the only nongovernmental regional organization in which all the nations of Northeast Asia and the US are consistent and active participants.
 In collaboration with the Korea Institute for International Economic Policy (KIEP), in 2015 NEAEF carried out activities on building a Northeast Asian Economic Community based on lessons learned from NEAEF’s previous work on financing cross-border functional economic cooperation. For the first year of this collaborative project the focus was on regional cooperation and strategies in Northeast oriented toward North Korea―this work focused on functional economic cooperation in cross-border resources, energy supplies, infrastructure construction, capital mobilization, and institutional development.
 This volume is the first part in a series of proceedings titled Building a Northeast Asian Economic Community. It contains presentations and summaries from the NEAEF Beijing Special Meeting and the related activities that took place under this project. The aim of the project is to contribute to and encourage activities and efforts toward regional economic integration in Northeast Asia. 

Introduction and Overview 
Affiliations of the Contributors 
Keynote Address
Are Mega Free Trade Agreements the Best Alternative for Advancing Global Trade Liberalization? / Cae-One Kim

Session 1 Prospects for the Region’s Economies
 
Assessing Macroeconomic Policies in the US in Response to the Great Recession / David J. Stockton
Introduction 
Key Characteristics of the Recession and Recovery 
The Response of Monetary and Fiscal Policies 
Prospects for US Macroeconomic Policies and the Implications for the Economy 
Risks to the US Outlook and the Implications for the North Pacific Economies 
Conclusions
 
Challenges and Opportunities in China’s Economy / Wang Yijiang
Introduction  
Economic Challenges for China 
New Opportunities 
Concluding Remarks 

Abenomics and Beyond: The Japanese Economy in the 2010s / Tokuo Iwaisako
Introduction  
Brief Chronology of Abenomics 
Japan’s Macroeconomic Performance under Abenomics 
Potential Dangers for Abenomics 
Conclusion
 
Prospects of the Korean Economy / Il Houng Lee and Seongman Moon
Introduction  
Searching for Lost Economic Growth in Korea 
Reasons for the Decline in Domestic Demand Growth 
Conclusion
 
Commentary:
Prospects for the Region’s Economies: Discussion on Session 1 Papers / Sang-Hyop Lee
Report of the Session Rapporteur:
Prospects for the Region’s Economies: Overview by Session Rapporteur / Michael G. Plummer

Session 2 Pathways toward Trade and Investment Integration in the North Pacific Region 

The Trans-Pacific Partnership (TPP) as a Pathway to Asian Integration / Deborah Elms
The Goal: Free-Trade Area of the Asia-Pacific (FTAAP)  
Two of Four Pathways in Play 
The Launch of the TPP 
Specific Benefits of the TPP: Market Access for Goods 
Additional TPP Provisions 
Last-Minute Shaving of Quality? 
TPP Timelines 
TPP Institutional Framework 
Trade and Investment Diversion Coming 
Circling Back to the FTAAP
 
The Regional Comprehensive Economic Partnership (RCEP): Design, Status, and Challenges / Zhang Jianping and Nie Wei
Status of RCEP Negotiations  
Dilemma of RCEP Negotiations 
Compared with TPP, Is RCEP More Welcomed by Developing Economies in the Asia‑Pacific Region? 
Challenges of the RCEP under the Framework of Five “10+1” FTAs 
General Perceptions or Concerns about FTAs in China 
Implications of RCEP for FTAAP Proposals 
Implications of the RCEP for the North Pacific Economies 
Conclusion
 
China–Japan–Korea Free Trade Agreement (CJK FTA): Design, Status, and Challenges / Dukgeun Ahn
State of the Play of the CJK FTA  
CJK Trade and Economic Assessment Result 
Mega FTA Competition and CJK FTA 
Issues for Negotiation 
Challenges Ahead 

Commentaries:
Pathways toward Trade and Investment Integration in the North Pacific Region: Comments / Kiyoun Sohn
Pathways toward Trade and Investment Integration in the North Pacific Region: Discussion of Papers Presented in Session 2 / Michael G. Plummer
Report of the Session Rapporteur:
Pathways toward Trade and Investment Integration in the North Pacific Region: Overview by Session 2 Rapporteur / Theresa M. Greaney

Session 3 Assessing Economic and Social Change in North Korea 

Can North Korea Follow China’s Path of Reform and Open Door Policy? / Zhou Huji
China’s National Security, the Transformation of Political Concept and Open Door Policy  
Kim Jong Il’s Political Ideas and Survival Strategy 
“Songun Politics”: One of the Political Survival Strategies 
Improved Leader Worship: One of the Political Survival Strategies 
“7.1 Measures”: Economic Survival Strategies 
Nuclear Development and Asymmetric Dampening: International Survival Strategy 
Survival and Emerging from the Crisis: Conclusion and Discussion 

Economic Developments in North Korea / Marcus Nolan
Introduction  
Internal Developments 
External Relations 
Illicit Activities 
Conclusions
 
The Current Situation and Future Prospects of the North Korean Economy / Dongho Jo
Introduction  
The Current Situation 
The Reaction of the North Korean Leadership 
The Future Prospects 

Commentaries:
Assessing Economic and Social Change in North Korea: Discussion on Session 3 Papers / Hyung-Gon Jeong
Assessing the Economic and Social Change in North Korea: Discussion on Session 3 Papers / Nicholas Eberstadt
Report of the Session Rapporteur:
Assessing Economic and Social Change in North Korea: Overview by Session 3 Rapporteur / Anjali Nath

Roundtable Discussion on Strengthening North Pacific Cooperation 
North Pacific Integration from an International Financial Perspective / Hiroyuki Ito
Introduction  
Interest Rates Linkages and Their Implications on Monetary Policy Management  
“Internationalization” of the Renminbi 
Conclusion
 
Comments Based on the Roundtable Discussion / Tokuo Iwaisako
Comments Based on the Roundtable Discussion / Jong Seok Kim
“The Asian Paradox” 
The Limits of Bilateral Talks 
The Need for Multilateral Dialogs 
Soft Issues 
Harmony in Diversity 

Comments Based on the Roundtable Discussion / David J. Stockton
The Global Influences of Half of the World: Comments on North Pacific Cooperation / Wang Yijiang
Report of the Session Rapporteur
Strengthening North Pacific Cooperation: Overview by Roundtable Rapporteur / Duyen Bui

Conference Program
Program 
List of Participants

The conference was held on July 25, 2014 co-organized by the Korea Institute for International Economic Policy (KIEP) and East-West Center (EWC) in Honolulu. The key factors of the conference was to shape the economic future of the major North Pacific countries and the importance of economic cooperation among them. Major topics to be addressed were (1) the macroeconomic performances and outlooks of China, the United States, Korea, and Japan, and the interrelationship among them, (2) the emerging multilateral economic architecture and its implications, with specific reference to the TPP, the RCEP, and China-Japan-Korea free trade prospects, and (3) the future of the North Korean economy and its implications for North Pacific cooperation. The main sessions of the conference covered ‘Prospects for the region’s economies’, ‘Pathways toward trade and investment integration in the North Pacific region’, ‘Assessing economic and social change in North Korea’.

Preface
Contributors
Introduction and Overview
Statements by Hosts and Country Representatives

Part I. Regional Economic Cooperation in Northeast Asia: Country Perspectives
- A Korean Perspective (Chang Jae Lee) 
- A Chinese Perspective (Zhang Jianping)
- A Japanese Perspective (Maeda Tadashi)
- A Russian Perspective (Pavel Minakir)

Part II: Energy Cooperation: Energy Infrastructure and Physical Connectivity
Japan’s Energy Challenges and Potential for Regional Cooperation (Tanabe Yasuo)
Energy Issues: Security, Alternative Systems, and Low-Carbon Futures (Terry Surles)
Prospects for a Cross-border Power System in Northeast Asia (Iinuma Yoshiki)
Energy Cooperation in Northeast Asia: A Russian Perspective (Sergey Sevastianov)

Part III: Regional Cooperation and Integration
Regional Cooperation and Integration in East and Northeast Asia (Kilaparti Ramakrishna)
Cultivating Multilateralism in East Asia (Iwatani Shigeo)
Regional Integration in Northeast Asia (Wang Weina)

Part IV: Financing Regional Economic Integration through Cross-border Infrastructure Construction: Review and
New Approaches to Regional Multilateral Financial Institutions

Keynote Statement—Fulfilling a Long-held Dream: Financial Policy for a Unified Korea (Shin Je Yoon)
A Strategy toward a Regional Multilateral Financial Institution (Lee Jai-Min and Kim Yu-Ree)
Establishing a New Development Financing Institution: Comments and Observations (S. Stanley Katz)
Northeast Asian Financial Cooperation in a New Era (Fan Xiaoyun)
Comments on Financial Cooperation in Northeast Asia (Zou Ping)

Part V: Cross-border Economic Cooperation: Tumen River Area Economic Integration for the Korean Peninsula

Political and Economic Imperatives behind North Korea’s Evolving Special Economic Zones (Glyn Ford)
Underdeveloped Sino-Russian Cross-border Cooperation (Natalia Ryzhova)
Creating a Northeast Asian Economy (Tony Michell)

Appendix I. Seoul Declaration and Agenda
Appendix II. Planning Meeting Summary and Agenda
Appendix III. Report of Field Visit to Rason Special Economic Zone, DPRK and Yanbian, China

The Northeast Asia Economic Forum (NEAEF) is a regional nongovernmental organization created in 1991 to sponsor and facilitate research, networking, and dialogue relevant to the economic and social development of Northeast Asia. The Forum is also committed to promoting understanding and relations among the peoples of Northeast Asia, North America, and Europe.
The main objective is for NEAEF to conduct research and conference activities aimed at functional economic cooperation such as cross-border energy, transportation and logistics infrastructure development, and capital mobilization. The Forum holds annual conferences, workshops, and seminars for planning, facilitating, coordinating, and implementing international and interdisciplinary solutions to common policy problems. It is the only nongovernmental regional organization in which all the nations of Northeast Asia and the US are consistent and active participants.
For the year 2014, NEAEF in collaboration with the Korea Institute for International Economic Policy (KIEP), cooperated in efforts toward achieving closer economic and financial cooperation in Northeast Asia, and continued its focus on research, the annual conference, and meetings aimed at financing regional economic integration and establishment of the Northeast Asian Bank for Cooperation and Development (NEABCD). This work aims to promote functional economic cooperation in terms of cross-border resources, energy supplies, infrastructure construction, capital mobilization, and institutional development.
NEAEF, as planned for the year 2014, facilitated conference and meeting activities in which experts presented their perspectives, views, ideas, concrete proposals, and strategies relevant to the issues of a regional institution for financial cooperation.
This volume, which is the final part of a series of proceedings titled Financing Regional Economic Integration and Functional Cooperation for Northeast Asia: Toward a Northeast Asia Economic Community, presents the results of a project implemented in 2014 that includes presentations and summaries from the 23rd annual NEAEF conference and meetings, as well as related activities.

Preface
Contributors
Introduction and Overview

Part 1. Investment Requirements and Strategies for Cooperation in Infrastructure and Energy Development in Northeast Asia

The Socio-Economic Situation in the Russian Far East and Prospects for Developing
Investment Cooperation with Northeast Asian Countries
A. B. Levintal

Cross-Border Economic Cooperation: Notes on Creating a Northeast Asian Economy
Tony Michell
1. Economic Cooperation in the Region
2. Chinese Investments in the Far East and Siberia
3. Agricultural Development
4. Multilateral Funding and Day to Day Banking
5. Why Land Transit Is Important
6. Road Connections
7. Cross-border Cooperation, Hubs, and Clusters
8. Multilateralizing Kaesong Industrial Estate
9. Dandong-The Last Frontier
10. The Disruption of Sanctions on Third Parties–The Need for A Study
11. The Disruption of Sanctions and the Need for a Fairer Sanctions Regime Development in the Future
12. Sanction Exempt Cross-Border Economic Cooperation
13. Conclusion: A Cross-Border Economic Cooperation Wish List for 2014

Challenges to a Northeast Asia Regional Logistics System Satoshi Inoue Port Cooperation in the Northeast Asia
Dong-Keun Ryoo
1. Introduction
2. Concept of Port Cooperation
3. Cases of Port Cooperation
4. Conclusion

Japan’s Sustainable Electric Future
Yoshiki Iinuma

A Note on Power Grid Interconnection in Northeast Asia
Mitsuho Uchida

Russia and Northeast Asia Energy Security
Sergei Sevastyanov
1. Key Findings
2. Introduction
3. The Main Principles of Russia’s New Energy Policy
4. Energy Security and Energy Market in Northeast Asia
5. Russia’s Activities and Vision for Energy Policy in Northeast Asia
6. Evaluation of Russia’s Input into Northeast Asia Energy Security
7. Recommendations and Conclusions

The Yellow River and Cooperation in Northeast Asia
Liu Ming

Part 2. Financing Economic Integration and a Regional Multilateral Bank: Research Papers on the Northeast Asian Bank for Cooperation and Development (NEABCD)

Creation of a Joint-Venture Bank by China, Japan, and Korea
Jai-Min Lee
1. Introduction
2. Challenges for development finance in Northeast Asia
3. Creation of a Joint-Venture Bank by China, Japan and Korea
4. Conclusion

Economic Development of the Russian Far East and the Northeast Asian Development Bank (NEADB)
Dmitry A. Izotov
1. Introduction
2. Economic Development Prospects of the Russian Far East and Foreign Economic Activity Alternatives
3. Development Programs of the Russian Far East and the Northeast Asian Development Bank (NEADB)
4. Conclusion

Re-analysis of Innovation in Asian Infrastructure Financing Mechanisms
Liqun Jin
1. Demand for Innovation in Asian Infrastructure Financing Mechanisms
2. Feasibility of Innovation in Asian Infrastructure Investment

Review and Strategy for the Proposed Northeast Asia Bank for Cooperation and Development
Byungwon Bahk

A Perspective from the Republic of Korea
Jae Hyong Hong

Appendix

Summary

The Seventh Meeting of the Ad Hoc Committee for Establishing the Northeast Asia Bank for Cooperation and Development
Nankai University, Tianjin, China
July 1-2, 2013

On July 1-2, 2013, the Seventh Meeting of the Ad Hoc Committee for Establishing Northeast Asia Bank for the Cooperation and Development (NEABCD) organized by Northeast Asia Economic Forum (NEAEF) was held at Northeast Asia Financial Cooperation Research Center (hereinafter refer to as the Research Center), at Nankai University, Tianjin, China. More than twenty leaders and experts from China, Korea, Japan, and the US attended this meeting. Prior to the meeting, Dr. Jiang Zhenghua, Former Vice Chairman of National People’'s Congress of China and Honorary Chairman of the Research Center, and Mr. Cui Jindu, Executive Vice Mayor of Tianjin Municipal Government and Honorary Chairman of the Research Center met Dr. Lee Jay-Cho, NEAEF and Research Center Chairman and all the foreign participants. The President of Nankai University, Dr. Gong Ke, attended this meeting as well. The meeting was organized by Dr. Lee Jay-Cho and Mr. Wang Shuzu, Former Deputy Chairman of Tianjin People’'s Congress and Deputy Chairman of the Research Center. Mr. Zhang Xiaoyan, Deputy Secretary of Tianjin Municipality and Director of the Research Center, Mr. Zou Ping, the Research Center Secretary General, Prof.
Ma Junlu, Executive Deputy Director of the Research Center, and Dr. Liu Ming, Deputy Secretary of the Research Center all expressed their views on the theme of the meeting. All the participants together discussed the latest developments on the subject of the proposed Northeast Asia Bank, and exchanged their views on new trends, ideas, perspectives and proposals. They agreed on the major issues summarized below.

I. Fully endorse the establishment of Northeast Asia Bank for Cooperation and Development In Dr. Lee Jay-Cho’'s remarks, he stated that at this year’'s summit meeting of Chairman Xi Jinping and President Barack Obama, there was a historic consensus on the need and importance of a mutual and closer relationship between China and the US for the future of the two largest economies of the world. The Assistant Secretary for Asian Affairs of the US state department believes that regional cooperation with Asia is utmost importance in the next ten years, and should be vigorously promoted.
Former Assistant Minister of Finance and Former Executive Vice President of the Asia Development Bank, Dr. Stanley Katz observed that, based on discussions in Washington regarding the BRIC Bank, the proposal lacks basic building blocks and a foundation based on experience and research. However, the US is not opposed to the establishment of the NEABCD. On the proposed Bank, Japan should portray a clearer attitude, China should release a positive massage initially, and then Korea will have a positive response.
The former Japanese Foreign Minister and the Research Center Honorary Chairman, Dr. Taro Nakayama addressed the meeting in a written statement saying that in order to pursue peace and security in Northeast Asia, regional development through economic cooperation should be our goal. If the cross-border gas pipeline from Siberia all the way to China, Busan Korea, and Fukuoka Japan, can be constructed, it can promote mutual understanding among these countries and people, and it might serve to prevent war and strife and build a system of mutual cooperation.
Large-scale cross-border infrastructure requires huge capital and funding. Therefore, it is necessary to establish a regional development bank for Northeast Asia. Dr. Nakayama expressed his willingness to work with meeting participants to realize this vision. Mr. Byungwon Bahk, the former Executive Vice Minister of Planning and Finance and Chairman of the Korean Federation of Banks, pointed out that the ADB only provides 0.9% of its funds to three northeast provinces in China and Mongolia, there still remains a large gap for establishing a Northeast Asian Bank for future dynamic economic development in Northeast Asia. He also stated that China should take the leadership in the Northeast Asian Bank, and persuade Japan, Korea, Russia, Australia, New Zealand, and other countries to participate. China, Japan, and Korea already have shown a willingness and ability to cooperate evident in their funding arrangements in ASEAN. Why can’'t these countries cooperate to establish funding arrangements for the Northeast Asia region? Japan and the US will not take the initiative in promoting the establishment of the Bank, but once China proposes doing so, Japan, and the US would not be opposed to it.
The chief representative of the Japan Bank for International Cooperation’'s Beijing office, Mr. Kikuchi on behalf of the Japanese Cabinet Adviser, JBIC Executive Director, Mr. Maeda stated that the opportunity for establishing the Northeast Asia Bank is ripe and Japan through establishment of the Bank would change the its role from simple investor to beneficiary/partner investor.
Dr. Zou Lixing, Deputy Director of China State Development Bank for Research and the Research Center Advisor, emphasized that the Northeast Asia Development Bank is important for regional strategic cooperation. It will promote the development of regional infrastructure, economic development and corporation through trade, financial cooperation, cultural exchanges, etc. The establishment of the NEABCD will become a new driving force of economic development in Northeast Asia and a useful compliment to the existing international multilateral financial institutions.
Mr. Kwan-Yong Park, Former Speaker of the Korea National Assembly of Korea, underscored the great significance in the establishment of a Northeast Asia Bank. He stated his belief that most important is to promote the cooperation and collaboration of all countries involved and his hope that we can work together for a common understanding of our goal.
The Former Vice Chairman of China’'s National People’'s Congress and honorary Chairman of the Research Center, Dr. Jiang Zhenghua stated that, peaceful development and win-win cooperation is not only the world trend, but also China’'s responsibility.
The leaders of China’'s State Council repeatedly instructed the relevant departments to conduct a study on the establishment of the Northeast Asia Bank, stating that we now have a better vision for establishing the Bank. They stressed that we should not limit ourselves to the region of Northeast Asia, but set a wider framework and be more inclusive. We can start from reality, and consider and envision a long-term strategy.
The information, input, and ideas provided by the participants from China, the US, Korea, Japan, and other countries showed that the continued efforts to set up the Northeast Asia Bank rest on a solid social and economic foundation. The meeting concluded that the establishment of the Northeast Asia Bank is currently in a most critical period –. it requires that all the relevant countries bolster their confidence and continue their work.

II. The new connotation and orientation of the Northeast Asia Bank
Liqun Jin, the Chairman of China International Capital Corporation Ltd., Advisor of the Supervision and Guidance Committee of the Northeast Asia Financial Cooperation Research Center, and Former Vice Minister of Finance stated in a written statement that, given Asia’'s economic growth and its energy and infrastructure investment demands, currently available financing channels are inadequate and therefore, innovative financing mechanism are necessary. Asia should establish a multilateral financial institution that would run parallel to the ADB system, and would help meet the need for infrastructure construction and economic development. China needs to further strengthen financial cooperation with Northeast Asia and Asia. The Northeast Asian Bank represents such an innovative financing mechanism.
Zou Ping, Chairman of the China Asia Pacific Institute and Secretary General of the Research Center for Financial Cooperation in Northeast Asia stated that in accordance with the “"open development, cooperative development, and win-win development”" requirements, we should insert the establishment of the Northeast Asian Bank into a broad strategy of innovative mechanisms for investment in and financing infrastructure development in Asia. The Northeast Asian Bank would be open to participation by Northeast Asia and Asian countries with China taking a lead and in Northeast Asia it would principally focus on cross-border infrastructure investments.
Zhang Jianping, Senior Economist and Director of the Department of International Regional Cooperation, Institute for International Economic Research, National Development and Reform Commission (NDRC) argued that China, Japan, and South Korea already work together through the China-South Korea FTA and the China-Japan-South Korea FTA negotiations. The regional trade will increase rapidly after the two FTAs are established and they will need the safeguard and guarantee of the Northeast Asian Bank. The establishment of the FTAs and Northeast Asian Bank share some common ground and thereby the establishment of each will contribute to the other.

III. Main consensus and suggestions at the meeting
1. The meeting approved in principle “"The report in 2013 on setting up the Northeast Asia Bank for Cooperation and Development”" drafted by the research center.
After modification and improvements, the report is scheduled to be submitted for discussion at the twenty-second annual Forum Conference in Vladivostok, Russia in August 2013, aimed at obtaining a broader consensus and further extending the international thrust. The Northeast Asia Economic Forum will submit it to the relevant policy institutions of the Chinese, Japanese, and Korean governments at an appropriate time.
2. The meeting endorsed the proposal that the Northeast Asia Bank can be put into an innovative mechanism of investment and financing for developing cross-border infrastructure interconnections. The most important task is to act as soon as possible. The Northeast Asian countries will play the leading role and the participating countries can be expanded to other areas of Asia, including Australia and New Zealand.
3. Expecting China to play an important role in the establishment of the Northeast Asia Bank, we suggest China could initiate the proposal for the establishment of the Northeast Asian Bank initiatively. South Korea will give a positive response and jointly promote the establishment of the Northeast Asia Bank with China as well as leading the way for Japan, Russia, Mongolia, the United States and other Asia countries to participate in it.
4. The Northeast Asia Economic Forum will continue to play a coordinating and catalytic role, by disseminating relevant information and promoting dialogue with policymakers in Northeast Asia. Tianjin Municipal Government, according to the needs of an innovative mechanism for investment and financing Northeast Asian infrastructure interconnections, will pursue further studies and develop strategies for the Northeast Asian Bank taking into consideration any new international circumstances. This will serve as a reference base for policy decisions.
5. It is hoped that the participants will make timely report on the meeting results to the relevant government institutions, in order to obtain the support of central governments. At the same time, we hope each country will encourage their national think-tanks to exert their influence by participating in policy research on the establishment of the Northeast Asian Bank.
The Seventh Meeting of the Ad Hoc Committee finds that, through the exchange of communication, we can further understand what should be done and how, and we can promote mutual understanding to reach a necessary consensus for further achievements. The meeting stressed that the Tianjin Municipal Government has and will play a very important role in the establishment of the Northeast Asian Bank. We expect China to play the leading role in encouraging breakthroughs in financial cooperation in Northeast Asia.