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  • DDA 서비스협상의 주요 쟁점 평가와 시사점
    Major Issues of DDA Services Negotiations and Implications for Korea

    This study seeks to stock-take and assess major issues of Doha Development Agenda (DDA) services negotiations. Unlike previous studies in this area, this study tries to analyze the plurilateral negotiations based on several pluril..

    June Dong Kim Date 2022.10.25

    multilateral negotiations
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    This study seeks to stock-take and assess major issues of Doha Development Agenda (DDA) services negotiations. Unlike previous studies in this area, this study tries to analyze the plurilateral negotiations based on several plurilateral requests which were leaked on the internet. 

    As the major issues at the multilateral level addressed at the Special Session of Council for Trade in Services, this study intends to analyze three areas, that is, the assessment of trade in services, the review of negotiation progress, and the modalities for the least developed countries.

    With regard to the plurilateral negotiations, among the total of 22 services sectors where plurilateral requests have been exchanged, this study aims to assess 19 services sectors, including 15 sectors whose plurilateral requests were leaked on the internet.

    As for the discussions at the subsidiary bodies, this study seeks to assess those conducted at the Working Party on GATS Rules, Committee on Trade in Financial Services, Committee on Specific Commitments, and Working Party on Domestic Regulations. 

    As policy implications, this study suggests a pro-active position with regard to the second revised offer, considering the fact that in most of the service sectors, Korea has been experiencing remarkable developments. 

    In addition, with regard to the other negotiation strategies, this study recommends for Korea to request the removal of MFN exemption measures, incorporation of additional commitment in architectural services related to qualification requirements as in Korea’s UR schedule, and request of improving offers in the five infrastructure services of telecommunication, construction, distribution services, financial services, and maritime services.

    Summary
    This study seeks to stock-take and assess major issues of Doha Development Agenda (DDA) services negotiations. Unlike previous studies in this area, this study tries to analyze the plurilateral negotiations based on several plurilateral requests which were leaked on the internet. 

    As the major issues at the multilateral level addressed at the Special Session of Council for Trade in Services, this study intends to analyze three areas, that is, the assessment of trade in services, the review of negotiation progress, and the modalities for the least developed countries.

    With regard to the plurilateral negotiations, among the total of 22 services sectors where plurilateral requests have been exchanged, this study aims to assess 19 services sectors, including 15 sectors whose plurilateral requests were leaked on the internet.

    As for the discussions at the subsidiary bodies, this study seeks to assess those conducted at the Working Party on GATS Rules, Committee on Trade in Financial Services, Committee on Specific Commitments, and Working Party on Domestic Regulations. 

    As policy implications, this study suggests a pro-active position with regard to the second revised offer, considering the fact that in most of the service sectors, Korea has been experiencing remarkable developments. 

    In addition, with regard to the other negotiation strategies, this study recommends for Korea to request the removal of MFN exemption measures, incorporation of additional commitment in architectural services related to qualification requirements as in Korea’s UR schedule, and request of improving offers in the five infrastructure services of telecommunication, construction, distribution services, financial services, and maritime services.

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  • Challenges and Opportunities of Korea’s Foreign Policy as a Developed Coun..
    Challenges and Opportunities of Korea’s Foreign Policy as a Developed Country

    Despite the fact that China and the United States represent the G2 in terms of economic size, the RMB’s international significance in the existing international financial system is limited. China has made significant progress in ..

    Alexander Downer et al. Date 2022.09.30

    international politics
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    Summary
    Despite the fact that China and the United States represent the G2 in terms of economic size, the RMB’s international significance in the existing international financial system is limited. China has made significant progress in encouraging RMB internationalization. It has the ability to disrupt the global financial system, dominated by the US dollar. In order to seize chances under such circumstance, Korea must find a new direction for the internationalization of Korean Won.

    This collective volume has seven independent papers that investigate the current and future status of the RMB internationalization and its impacts and implications on Korean economy. The summarizations of each paper are as follows: Chapter One explains the background and motivation of this collective volume. Also, it describes the current status of the Korean Won Internationalization. Chapter Two provides detailed descriptions of the current status of RMB internationalization and its future prospects. Chapter Three examines the performance of Shanghai and Seoul RMB-KRW direct foreign exchange markets and figures that such direct FX markets have not been fully developed yet. However, such markets are expected to become more efficient gradually. Chapter Four finds that in the gradual evolution of the RMB internationalization, the KRW is becoming more synchronized with the Chinese yuan. Chapter Five explores the factors for coupling between the RMB and the KRW. Not only trade and finance channels but also policy implementations are important. Chapter Six develops the index for the KRW internationalization in light of the RMB internationalization. This chapter finds that the RMB internationalization may hinder the KRW internationalization. If the Korean government continues to delay the KRW internationalization, the benefit from the currency internationalization will become smaller. In that regard, Chapter Seven emphasizes that at this moment, it is very meaningful to re-examine the long-term strategy for Korea’s won internationalization. 

    The internationalization of the Korean won provides a new opportunity for the country’s financial development, rather than a disruption to the current global financial system. In the process of the internationalization of RMB and KRW, China and Korea should further strengthen bilateral financial and economic cooperation to push forward the process of RMB and KRW internationalization. Because the RMB or the KRW each have such a small proportion of the global monetary system, it is premature to be concerned about competition. Cooperation should take priority. The key policy suggestions for cooperation between these two currency internationalizations could at the very least include: (1) increasing the bilateral currency swap lines (BSLs) and making them more effective; (2) encouraging more usage of RMB and KRW in bilateral trade and direct investment; (3) encouraging more Chinese investors to hold KRW denominated assets and so does the other party; (4) accelerating the development of offshore RMB market in Seoul while having increasingly important offshore KRW market in China; (5) strengthening the coordination and cooperation in exchange rate policies.
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  • 메르켈 정권 16년: 주요 국제 이슈와 정책 평가
    Merkel Era of 16 Years: Observation on Major International Issues and Policies

    While Angela Merkel lead Germany for nearly 16 years from November 2005 to December 2021, the voices of both Germany and the EU in the international community had been elevated. Germany, once been called “the sick man of Europe,”..

    Hyun Jean Lee Date 2022.09.08

    competition policy, political economy
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    Summary

    While Angela Merkel lead Germany for nearly 16 years from November 2005 to December 2021, the voices of both Germany and the EU in the international community had been elevated. Germany, once been called “the sick man of Europe,” revived only to achieve economic development and industrial improvement, as well as reinforcing her position in the global society. The EU, on the other hand, has developed to strengthen its solidarity within the Member States by suggesting common responses to the challenges. During Merkel’s era, numerous challenges have occurred in the field of economics, politics, and environment/security, not merely striking Europe, but also the world. Merkel’s “slow and steady” approach had been successful handling the situations. Her policies implemented to seek stability had been overall appreciated by the public.

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  • A Study on the Effects of Multinational Production on Global and Domestic Value..
    A Study on the Effects of Multinational Production on Global and Domestic Value Chains Following Trade Restructuring and Corresponding International Economic Policies

    Emphasizing foreign affiliates amid stagnant global value-chained trade, this study provides important evidence for measurable policies which should be taken dependent on the level of GVCs integration in shaping international trad..

    Myoung Shik Choi and Hun Dae Lee Date 2022.08.26

    industrial structure, free trade
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    Summary
    Emphasizing foreign affiliates amid stagnant global value-chained trade, this study provides important evidence for measurable policies which should be taken dependent on the level of GVCs integration in shaping international trade flows and multinational production activity. The recent decreased share of value-added exports within gross exports represents characteristics of a wider value chained network. It is common not only for firms to increase their economic activities globally but also for oversea affiliates to operate as the linchpin between the international and domestic parts of value chains. Our findings suggest that foreign affiliate activity strengthens domestic value chains, thereby leading to the outcome of further growth in the host country, while domestic affiliate activity abroad strengthens global value chains which spur growth in the broader world economy. 

    Based on empirical discussions centered on participating in GVCs, OECD high-income countries significantly integrated into GVCs will benefit from upgrading their GVCs policies such as capturing value-added in exports and building new technology or innovation. There is also a need to continue enforcing the domestic linkages of MNE affiliates, which contributes to growth and employment as they contract and cooperate with domestic firms. In addition, low-income countries not fully integrated into GVCs in the Asia-Pacific region may need to secure entry into existing GVCs with trade liberalization, while middle-income countries which have secured entry into GVCs may focus on enhancing competitiveness by increasing productivity and developing regional economic integration through forums like APEC.   
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  • COVID-19 and the Health of Banking Sector in Japan and South Korea: A Comparati..
    COVID-19 and the Health of Banking Sector in Japan and South Korea: A Comparative Study

       1. The economies of Japan and South Korea are dominated by banks. Both countries have created a complex financial structure, including a well-established banking industry at their heart that supports economic operatio..

    Munim Kumar Barai Date 2022.07.30

    financial policy, financial system
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    Executive Summary

    1. Introduction

    2. Structure of Banking Systems in Japan and South Korea
    2.1 Japan
    2.2 Korea

    3. Literature Review
    3.1 A Review of the Japanese Banking System
    3.2 A Review of the Korean Banking System

    4. Objectives and Methodology of the Study

    5. Monetary Policy of BOJ and BOK Since 2010

    6. Covid-19 and the Banking Health of Japan and South Korea
    6.1 Portfolios of Banks in Japan and South Korea
    6.2 Productivity of Assets and Stockholders’ Equity (ROA and ROE)
    6.3 Profitability of Japanese and Korean Banks
    6.4 Operating Efficiency

    7. Banking Health in Pre-and Interim Period of Covid-19: A Comparative Analysis
    7.1 Comparative Portfolios of Banks
    7.2 Productivity of Banks
    7.3 Efficiency Ratios and NPAs of Banks
    7.4 Profitability

    8. Conclusion and Policy Recommendations

    References

    Summary
       1. The economies of Japan and South Korea are dominated by banks. Both countries have created a complex financial structure, including a well-established banking industry at their heart that supports economic operations. However, both countries’ banking sectors have previously faced crises such as the Asian Financial Crisis (mostly in South Korea), the Japanese economic slowdown, and the financial crisis of 2007-08 (both). While the Bank of Japan (BOJ) approved the quantitative easing (QE) monetary policy and lowered interest rates to manage the crises, the Bank of Korea (BOK) pursued interest and financial restructuring as well as banking system digitization to overcome the crises. Covid-19 has disrupted the normal operation of banks, and the central banks and governments of both countries have implemented a variety of monetary and other measures to mitigate its economic and financial consequences.
       2. This study aims to identify and assess the health of domestic banks in Japan and South Korea for the Covid-19 ex-ante and interim periods. Several important variables, i.e., portfolios of assets and liabilities, asset productivity, stockholders' equity, profitability, and operating efficiency, have been included to evaluate the health of their banks. This compari-son of health metrics for 2010 to 2020 could help identify changes or shifts in the banking sector of Japan and Korea. The study has used ex-ploratory and descriptive methodologies to undertake qualitative and quantitative evaluations of important bank health indicators in the ex-ante and interim periods of Covid-19. It also used a hybrid method to produce research goals and arguments, including a framework based on what was already known in the field.
       3. Japanese banks are divided into four clusters, i.e., City Banks, Regional Banks I, Regional Banks II, and Trust Banks. The City Banks and Trust Banks clusters feature the largest banks, while the other clusters include smaller regional banks with a regional banking concentration. Despite being a large financial institution, Japan Post Bank is not considered a commercial bank in Japan. In Korea, Commercial and specialized banks are the two categories of banks. National and local banks make up the domestic commercial banks. The principal business of special banks is banking too.
       4. Throughout the timeframe of our investigation, the BOJ and BOK de-ployed monetary policy measures to influence bank conditions. In April 2013, the BOJ used an easy money policy, or QE, for the second time under Abenomics to combat chronic deflation and the rolling-recession effects of the 2007-08 GFC. Under QE-2, which is continuing, the BOJ has been influencing financial markets through interest rates, loan and fund support programs, and market purchases of assets of various du-rations. Starting in January 2016, the BOJ announced a negative interest rate of -0.1 percent on all new deposits. As a response to Covid-19, the BOJ gave institutions extra financial help at a low-interest rate of 0.1 percent and continues to purchase ETFs, J-REITs, JGBs, corporate bonds, etc. Due to QE-2 asset purchases, the BOJ’s balance sheet has grown by more than $5 trillion. BOK, for its part, used the bank rate as a primary policy tool to influence the money supply through bank lend-ing in the 2010s to mitigate the effects of the GFC of 2007–2008. The key interest rate was reduced from 5.25 percent in the third quarter of 2008 to 2.75 percent in the first quarter of 2013. Simultaneously, the sec-tor underwent structural restructuring to boost digitization. However, BOK adopted a more flexible monetary policy approach in response to the poor domestic economic development caused by the Covid-19 epi-demic. BOK also raised the limit on the Bank Intermediated Lending Support Facility to ₩35 trillion and made the Corporate Bond-Backed Lending Facility (CBBLF) a safety net for businesses, banks, and non-bank financial organizations.
       5. Figures show that the total assets of Japanese banks increased continu-ously, albeit at varied rates, from 2010 to 2019, never falling below 2 per-cent. The increase in bank loan amounts, from ¥8 trillion in 2012 to ¥543.9 trillion in 2021, explains some of the banks’ asset expansion. The loan portfolio breakdown reveals increased bank engagement in the real estate and housing sectors. Real estate has the highest industry share of outstanding loans, accounting for roughly 81 percent of all bank loans in 2020. Before Covid-19, both new consumer and home loans fell. Overall, portfolios of commercial banks did not undergo any significant rebalancing after QE-2. Their stockholdings fluctuated, and corporate bond holdings decreased, but t stock holdings climbed. In contrast to the BOJ's expectations, banks saw a significant increase in JGB purchas-es in FY 2020–21. Except for deposits, the effects of QE-2 and Covid-19 on banks’ liabilities were minimal. Their loan-to-deposit ratio has worsened, with loans accounting for only 66.2 percent of deposits in 2021, a record high during the pandemic. Throughout the period 2011 to 2020, the asset growth lines of Korean domestic banks shifted fre-quently. On the other hand, bank assets have been increasing since 2017, with assets reaching ₩2,977.6 trillion in 2020, up 10.6 percent from 2019. Most of the growth in banks’ assets came from borrowers’ loans and securities holdings, presently hovering around 70 percent. Between 2011 and 2020, the loans stayed higher than the deposits. In 2020, the overall liabilities of banks in South Korea were larger than the country’s GDP.
       6. Japanese banks had relatively low net earnings against their assets in terms of productivity, resulting in a poor return on assets (ROA). The highest ROA for all clusters of banks, both individually and collectively, was recorded in FY 2013-14. However, their ROA dropped in 2016-17 and 2019-2020. Nevertheless, Japanese banks earned a much higher ROE than their ROA. However, in 2020–2021, the overall bank ROE increased to 3.96 percent. Since 2010, the ROE of Regional Banks I and II has been lower than that of other banks. For Korean banks, the high-est ROA was in 2011, at 0.81 percent, and the lowest in 2016, at 0.11 percent. Banks’ ROA dropped dramatically in 2019 and 2020. Korean banks’ return on equity peaked in 2011 (9.81 percent) and troughed in 2016 (1.37 percent). In the year 2020, Covid-19 had a low ROE of 5.54 percent.
       7. Japanese banks’ ordinary profits peaked at 7.39 percent in 2014 and have steadily declined. However, the operational profit data from 2015 to 2020 has formed a U-shaped curve, indicating recent improvement. At the same time, banks' net incomes were significantly lower than their op-erating profits. QE-2 is perceived to be the significant underlying factor for their low NIs. When Covid-19 was at its most disruptive, however, the rate of net income increased to 1.84 percent in 2020, up from 1.11 percent the year before. In contrast, Korean banks had a difficult year in 2016, with NI falling by 43.18 percent from the previous year. However, net income improved over the next two years. Nonetheless, their net in-come has fallen since 2018, declining to ₩11 trillion in 2020.
       8. The efficiency of Japanese banks has remained low for a long time. From 2011 to 2021, none of the Japanese bank clusters met even the less strict efficiency standard of 60%. Even though Covid-19 might the-oretically cut operational expenses, Japanese banks’ overall efficiency ra-tio in 2021 was 83.9 percent. We are constrained by the Korean banks’ operational efficiency data. However, available data for 2020, the year of the COVID-19 outbreak, shows that most of them maintained an effi-ciency ratio of 60% or less.
       9. Since 2012, Japanese banks have reduced the percentage of non-performing loans to total loans. Between 2012 and 2020, however, the ratio fell from 2.4 to 1.1 percent. Due to Covid-19, the NPL ratio went marginally up to 1.2 percent in 2021. At the same time, Korean banks had significantly lower NPL ratios than Japanese banks. All banks’ total NPL was 0.25 percent of their loans in 2020. Banks in Japan and Korea are well-capitalized, evidenced by their good CARs. However, Japanese banks are better positioned with a higher ratio of CAR. The net interest margins (NIM) index clearly shows that Korean banks do better than their Japanese counterparts. However, in 2019 and 2020, the profitability index of Japanese and South Korean domestic banks fell.
       10. Despite their differences, the study revealed that Korean domestic banks could sustain better health indicators than their Japanese counterparts for much of the study period. Banks in Japan are trying to maintain bet-ter financial health with the ultra-low interest rates imposed by the QE-2 monetary policy. During Covid-19, the profitability and efficiency of the sector have been adversely affected. In contrast, Korean banks had the advantage of higher interest rates. They maintained a better degree of ef-ficiency, while their low nonperforming loans provided them with man-agerial strength, though Covid-19 seems to have marginally impacted their efficiency, profitability, and performance.

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  • 주요 선진국의 외국인직접투자 정책변화와 시사점
    Changes and Implications of FDI Policies in Major Developed Countries

    Due to COVID-19, global FDI has decreased rapidly, and the trade environment to attract foreign investment is rapidly changing. Amid the decreasing inflow of FDI worldwide, the trend of corporate tax cuts continues as competition ..

    Hyung-Gon Jeong and Ara Lee Date 2022.07.29

    foreign direct investment, overseas direct investment
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    Summary
    Due to COVID-19, global FDI has decreased rapidly, and the trade environment to attract foreign investment is rapidly changing. Amid the decreasing inflow of FDI worldwide, the trend of corporate tax cuts continues as competition among major countries to attract foreign investment intensifies. The global average corporate tax in 2000 was 28.3%, but fell to 20% in 2021. The OECD average fell from 32.3% in 2000 to 22.9% in 2021. Along with the trend of corporate tax cuts to attract investment, there is also a movement to set the so-called global minimum corporate tax rate, aiming to prevent excessive corporate tax cuts. On July 1, 2021, following negotiations at the OECD, 130 countries which account for 90% of the world’s GDP agreed to apply the global minimum corporate tax rate of 15% from 2023. Subject to the application are multinational companies with total annual sales of EUR 750 million or more. In recent years, active reshoring policies to protect domestic industries and create jobs in developed countries have made it more difficult to attract FDI to Korea.

    On his fifth day in office, President Biden announced Executive Order 14005, which prioritizes the federal government’s financial support and procurement, laying the legal foundation for the revival of U.S. manufacturing and job creation through the “Made in America” and “Buy American” initiatives. In addition, the Infrastructure Investment and Jobs Act (H.R. 3684), which legislated federal support for domestic infrastructure construction, passed both the Senate and the House of Representatives in the 117th Congress.

    Advanced countries, including the United States, are pursuing active industrial policies and attracting foreign investment to build their own supply chains, which are also expected to pose difficulties in attracting domestic investment. Developed countries are providing investment support for the purpose of stabilizing the supply of semiconductors and integrating into the GVCs of key materials for the fourth industrial revolution. The U.S. Innovative Competition Act (USICA), which passed the U.S. Senate, established a semiconductor support program centered on the Department of Commerce, which invests USD 52 billion for the development of the U.S. semiconductor industry. Japan’s Ministry of Economy, Trade and Industry also decided to provide 19 billion yen (KRW 200 billion) worth of subsidies to joint R&D between Taiwan’s TSMC and Japanese companies in 2021 to enhance semiconductor competitiveness and strengthen GVC linkage.

    Developed countries are actively attracting foreign investment to reshape their own supply chains, and are also expanding restrictions on foreign investment for the purpose of securing technological supremacy and protecting national security. Investment regulations introduced in 52 countries in 2020 increased by 43% compared to 2019, the highest level since 2003, and most of them have been introduced for national security purposes.

    This report was designed in accordance with the need to reorganize the domestic foreign investment attraction system according to the aforementioned changes in the global FDI environment. In the case of advanced countries, policies on attracting foreign investment are being promoted more actively, and Korea lies in a disadvantageous environment to attract foreign investment, such as withdrawing tax breaks for foreign investment. This is because foreign investment is still effective in technology transfer, technology development and employment promotion, and presents a good opportunity and means to promote the incorporation of domestic companies into GVC. 

    In addition, countries around the world are strengthening regulations on foreign investment in terms of security, technology, and intellectual rights protection, and it is necessary to review our current foreign investment policy in terms of national security and domestic industry protection through case analysis of advanced countries. Also, with the inauguration of a new administration in Korea in 2022, it is necessary to prepare a timely reform (draft) of the foreign investment attraction support system in line with the changing FDI environment and investment promotion policies for the next five years. And at the same time, the report can provide very useful information on overseas investment environments to Korean companies planning to expand overseas.

    The following summarizes the policies to attract foreign investment in major developed countries by dividing them into foreign investment regulatory policies to provide investment attraction incentives and those to protect high-tech sectors, and summarizes the implications for Korea’s foreign investment attraction policy.

    First, in the case of Hong Kong and Singapore, various policies have been promoted to establish business hubs for specific industries while providing various incentives to attract foreign investment. From the perspective of Koreans, these policies are the best examples and are the targets we should benchmark. One of the characteristics of the foreign investment attraction systems in Hong Kong and Singapore is that among the various support systems, cash grants are very diverse. Hong Kong and Singapore operate a tax system that does not discriminate between domestic and foreign companies. In particular, Hong Kong exempts tax on income from the aviation and shipping industries as a way to support business hubs. In addition, Hong Kong and Singapore have simple tax systems. In the case of Hong Kong, there are only business income tax, property tax, and salary income tax, sales tax, capital gains tax, dividend income tax, value-added tax, withholding tax, and inheritance tax. As a free trade port, Hong Kong does not impose tariffs on imports and exports.

    Hong Kong also runs a very large cash grant program. It operates a green and sustainable growth subsidy system, an innovation and technology fund, an incentive organized by Cyberport, and a smart transportation fund, and each program operates a wide variety of systems. In Korea, although a cash grant program has been introduced, there are limitations in operation, and it is not widely used like Hong Kong and Singapore. Hong Kong’s location supports companies by creating specialized complexes, Hong Kong Science & Technology Park being the most representative example. 

    Due to the nature of the city, Hong Kong cannot provide industrial complexes as locations, and mainly supports startups specialized in high-tech technologies in building locations. In addition, acceleration programs simultaneously incorporate space support programs. In the case of Korea, various incubation programs or systems are currently being created to support startups. However, it is necessary to further revitalize the location support system, which provides space to startups along with comprehensive support programs.

    In the case of Singapore, the most representative investment incentive is the tax reduction system. Singapore’s tax reduction system is widely operated. Various incentives including the general corporate tax reduction are provided to establish leading industries and intellectual property that increases added value. Like Hong Kong, it operates systems such as aircraft rental and shipping incentives to strengthen its function as a free city. This is interpreted as a system to strengthen Singapore’s function as a logistics hub and further strengthen its current competitiveness. In addition, in order to strengthen its function as a financial hub and intermediary trade center, it operates various specialized support programs for corporate tax reduction and exemption for companies in this industry.

    Singapore’s cash grants are well known for their scale and anonymity. The Energy Efficiency Enhancement Fund is an official cash aid program. In addition, cash is also provided for the repair and expansion of buildings. Various types of programs are operated to support startups, and these programs are also essentially cash support programs. However, most of the cash support in Singapore is paid only if the company spends first, and is supported legally and in accordance with the support rules through evidentiary documents for subsequent expenditures. Other support programs include granting permanent residency to those who have invested in Singapore with certain conditions, and guaranteeing visas to those who have certain qualifications, so that necessary technicians and experts can work in Singapore.

    As seen above, the policies to attract foreign investment in Hong Kong and Singapore literally institutionalized various investment incentives to attract foreign investment. On the other hand, the U.S., Japan, and the UK are actively attracting foreign investment in terms of industrial policy to stabilize the supply chain, upgrade the value chain, and enhance the competitiveness of their industries, while strengthening regulations on attracting foreign investment to protect their high-tech industries. Although there are some differences in foreign investment concentration industries in each country, foreign direct investment is intended to be used as a way to foster various high-tech and future industries such as AI, big data, and future mobility, along with areas that are spread by digital transformation (DX). Strategic industries to be fostered are selected and these are intended to attract technologies and capital that the country lacks by attracting foreign investment. In the case of Singapore, companies with advanced science and technology or start-up support programs are promoted, and the UK also implements policies to attract patent-holding companies.

    Meanwhile, advanced countries such as the United States, Japan, and the United Kingdom are using foreign investment attraction as a policy tool to support underdeveloped regions in terms of balanced regional development. In the case of the UK, enterprise zones are operated in areas such as England, Wales, and Scotland, and as of 2022, a total of 73 enterprise zones have been designated to actively attract investment in promising industries by individual regions.

    In the case of the United States, it is very active and open to foreign investment, and there are basically no restrictions on the type of investment. The foreign investment attraction policy operates various systems in each state to attract foreign investment at the state level rather than the federal government. The Trump administration pushed for a pro-business policy through corporate tax cuts, which seems to have had a positive effect on attracting foreign investment. In the United States, tax cuts are also the most prioritized incentives to attract foreign investment. Various cash support systems are also being used very actively for industrial innovation. Active support is provided for technology transfer to SMEs, innovation partnerships, early engineering research, and industry-academic cooperation research. Various programs to provide office locations are mainly used, such as in the special zone systems in Japan and other developed countries. Free trade areas and special opportunity zones are in operation, as well as various loan programs.

    In the case of Japan, policies to attract foreign investment in consideration of the region are operated along with a wide variety of support policies. Foreign investment is used as a means to revitalize the local economy, and to this end, the central government not only offers various subsidies but also guarantees various preferential measures specialized for foreign companies at the local government level. Japan also actively uses its tax system to attract foreign investment, and corporate tax is also being lowered. Various tax benefits are granted to foreign corporations. Depending on the type of corporation, corporate tax is applied differently, and it is used in various ways, such as open innovation, local base strengthening tax system for local revitalization, R&D tax system, tax system for securing talent and expanding income of SMEs, and DX investment promotion tax system. Japan has a much more diverse and wider scope in the use of corporate tax than Korea. Japan also operates various cash grant programs. Most importantly, cash grants are used first for domestic investment to stabilize supply chains. Cash grants are also used in areas that are essential for fostering future industries, such as green innovation. Japan’s location support system is also operated in the form of a special zone like the United States. These special zones are operated for various purposes such as a special structural reform zone, comprehensive special zone, special national strategic zone, special revival zone, and a startup eco-city hub city.

    The UK is also using various methods to attract foreign investment to create jobs and expand domestic investment. First, the tax was lowered slightly, and from 2023, corporate tax will be applied in three stages. In terms of corporate tax reduction and exemption, corporate tax rate benefits vary depending on the type of reduction program. Venture capital, corporate investment, and early corporate investment are representative examples, but patent boxes are also well-known instruments, especially for corporate investments. This is a system to encourage the registration of intellectual property in the UK and promote the commercialization of patents, with the profits generated by these patents becoming eligible for corporate tax reduction or exemption. The UK is also actively using cash grants for foreign investment, most of these being given to companies that contribute to the local economy. There are systems in place to support office locations in special zones, which also incorporate enterprise zones. Creative industrial clusters and free trade ports are also examples of such location support systems.

    One of the notable phenomena in the foreign investment attraction policies of developed countries discussed above is to increase financial support along with support for venture investment. The support system for angel businesses or venture investment is being strengthened so that innovative technologies and ideas can grow into industries in the country.

    The following summarizes the lessons learned from the previous cases of advanced countries. Korea still has a low proportion of foreign investment compared to the size of its economy. ① Korea lacks exceptional incentive means to attract large-scale foreign investment, an issue which needs to be addressed. In the case of Singapore, as previously discussed, pioneer status can be granted, suggesting unconventional conditions such as tax exemption for up to 15 years. ② Another lesson that can be learned from the case of advanced countries is that these countries are using cash grants very actively. However, in the case of Korea, it is necessary to evaluate the economic ripple effect that can be obtained from foreign investment in cash grants, and seek methods to support it accordingly. In particular, in the case of the United Kingdom and the United States, incentives are comprehensively supported by evaluating the economic backwardness of the location. In our case, corporate support is uniformly divided into metropolitan areas and non-metropolitan areas, but in the case of the UK, various elements such as the local unemployment rate, GRDP, financial independence, industrial structure, and infrastructure are comprehensively considered when evaluating regional economic backwardness.

    ③ One of the characteristics of the case of advanced countries is that rent reduction systems are used. In the case of Japan, locational support is provided for various types of special zones, and other countries surveyed in this study also use industrial complex support systems. In our case, the rent reduction or exemption under the Foreign Investment Promotion Act is 1% of the land price (Article 19, Paragraph 4 of the Enforcement Decree of the Foreign Investment Act), which is significantly lower than the 5% rent applied to ordinary industrial complexes. In particular, only foreign investments exceeding $1 million which involve high-tech projects are eligible for 100% rent reduction, which greatly reduces efficiency in terms of the operation of incentives. It would be desirable to switch to a system where the reduced rent is returned in the form of reinvestment.

    ④ It is necessary to supplement the current issuance-type cash support system by introducing a loan-type cash support system and a fund-type cash support system like the UK and Japan. Since the cash support limit can be supported up to 30% of the total investment in the case of the current grant type, it is necessary to expand it to a higher 50% level for the loan type. As in the cases of Japan and the United Kingdom, it is necessary to benchmark loan-type cash support and cash support through fund creation. In particular, along with the loan-type cash support system, a method of combining and operating a part of investment funds using domestic private financial institutions can also increase the effectiveness of cash support.

    ⑤ Finally, it is necessary to refer to various cash support measures under names such as the Investment Effect Adjustment Fund or the “000 Adjustment Fund,” as the term “cash grant” gives the impression of giving to investors for free. Obviously, as mentioned earlier, it is necessary to make sure that this is not a means of inducing preferential treatment or tax obligations because cash support is given depending on the degree of economic ripple effect. Unlike tax cuts, cash support programs are a means of generating financial losses from the government, meaning they require delicate operation.

    Another important trend in attracting foreign investment in developed countries is regulation on foreign investment. Most of the sanctions on foreign investment are imposed on the grounds of national security, but this is to prevent the outflow of technology such as high-tech industries from the host country. To this end, various means and systems are being created to strengthen the screening function for foreign investment and to prevent investment in certain cases. The United States basically had no restrictions on foreign investment, but recently strengthened foreign investment regulations through individual laws or state laws. The U.S. Foreign Exchange Regulation Act extends to all cases in which a company has the authority to determine major matters and to cases where the U.S. party does not have corporate control in acquisition of minority shares, acquisition of foreign companies in the U.S. and joint ventures. In addition, it imposes a high level of monitoring and obligation to report foreign investments for “all transactions related to core industries including important technologies and materials” with countries of special interest, such as China, but exempts companies that receive potential safe harbor letters.

    For national security, Japan is tightening regulations on foreign investment by strengthening regulations on foreign investment in designated industries (155 companies) and lowering the standard for pre-report ownership from 10% to 1%. Japan classifies three types of licenses for foreign investors and differentiates the criteria for reporting obligations according to the type of license. Pre-reporting industries and reporting conditions are being strengthened, but reporting exemptions are also being classified into comprehensive exemption and general exemption, according to the type of investor.

    The UK will introduce a mandatory reporting system in 17 high-tech industries with security risks and implement it from April 1, 2022. Acquisitions subject to report fall under the scope of civil and criminal penalties and fines if acquired without reporting, and even acquisitions not subject to report can be reviewed for up to five years after the acquisition.

    Since current Korean law has a weak legal basis for screening national security risks, it is necessary to supplement the foreign investment screening system from the perspective of economic security. New technologies, core infrastructure, sensitive personal information, and security screening targets need to be expanded from the perspective of stabilizing the supply chain, and countermeasures for pre-reporting, follow-up management, and reinvestment of private equity funds under the Foreign Investment Promotion Act need to be supplemented. Foreign investment in listed companies in Korea needs to be classified into companies subject to pre-examination and non-examination, and it is necessary to strengthen the evaluation criteria for economic and industrial impact assessment that will occur in the future, such as domestic market structure, market dominance, and technology and intellectual property level. It is necessary to strengthen the requirements for submitting information and data necessary for the examination of foreign investment, and to strengthen functions so that an effective security examination can be conducted by enabling integrated management and ex officio investigation. In addition, through continuous monitoring of foreign investment, preemptive responses from state-run banks and others are necessary even before problems occur, and the functions of the foreign investment committee need to be expanded and strengthened as in the case of advanced countries.
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  • 글로벌 기후금융의 현황과 발전방향: 녹색채권을 중심으로
    Current Development and the Future of Global Climate Finance: Focusing on Green Bonds

    The mitigation and adaptation of climate change require large-scale investment in green projects. Green bonds, which are liquid financial instruments used to finance climate mitigation, adaptation, and green projects, have shown r..

    Jiyoun An et al. Date 2022.06.30

    capital market, environmental policy
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    The mitigation and adaptation of climate change require large-scale investment in green projects. Green bonds, which are liquid financial instruments used to finance climate mitigation, adaptation, and green projects, have shown rapid growth in issuance in recent years. Besides financing for climate change, green bonds help ESG management by enhancing the issuer’s reputation for eco-friendly activities. Further, they may create, namely, greenium to reduce the cost of financing.

    In 2007, green bonds were first issued by multilateral development banks such as the European Investment Bank and the World Bank. The global issuance volume of green bonds soared from about $800 million in 2007 to $320 billion in 2020, and the total cumulative volume reached $1.5 trillion by October 2021. In 70 countries, sovereign institutions and private companies issued green bonds. The issuance by private companies accounted for 77.9% of the total number of issuance and 63.9% of the total amount. Financial companies accounted for 46.0% of private issuances, higher than non-financial companies, 31.9%. In 40 countries, the public sector, such as the central and local governments, public corporations, and public institutions, issued green bonds, accounting for 25.6% of the total issuance volume. Although developed regions such as Europe and the United States and international organizations have been leading their issuance, it is notable that emerging countries such as China are fast increasing the issuance recently. Since a Korean institution first issued green bonds overseas in 2013, by October 2021, the total stock of green bonds issued at home and abroad by Korea’s public institutions or private companies reached 43.5 billion dollars. In particular, the issuance of green bonds in 2021 increased explosively, approximately ten times more than in the previous year.

    Green bonds need a regulatory system defined as the institutional framework regarding the requirements for being a green bond and the means of verifying the requirements and of penalizing for their violation. The International Capital Markets Association (ICMA) and the Climate Bonds Initiative (CBI) presented the Green Bond Principles as the basis for the green bond regulatory framework. These principles aim to strengthen the credibility of green bonds, expand financial support for carbon reduction and responses to climate change, reduce the risk of greenwashing, and set up standards for certification of climate bonds. The Green Bond Principles outline the four core components of green bonds: use of proceeds, the process for evaluation and selection for projects, management of proceeds, and ex-post reporting. Countries specify their green bond guidelines based on these principles, and issuers of green bonds introduce a green bond management regime consistent with these principles.

    As a result of statistical analysis on the determinants of the issuance size of green bonds in a country, it is found that the higher the readiness for climate change and the higher the vulnerability to climate change, the greater the issuance of green bonds. However, there appears to be no statistically significant relationship between the size of greenhouse gas emissions and the issuance of green bonds. Among macroeconomic variables, the income level, the sovereign credit rating, and the level of financial market development are positively associated with the size of green bonds issuance at a significant level.

    Based on the considerations of the recent green bond issuance trend, the development of the regulatory system, and the determinants of the growth of the green bond market, this study suggests policies to nurture the green bond market in Korea: 

    First, upgrading the domestic regulatory system for green bonds is necessary. The regulatory system in first-mover countries is changing its emphasis from self-regulation and ex-ante procedure-centered regulation to binding legal regulation and ex-post performance and impact regulation. While updating the green bond regulatory system, Korea needs to closely analyze the EU regulatory system and make its system closer to the EU one. Second, it is necessary to induce the growth of credible and competent external review institutions, which are crucial to the credibility of green bonds and the market’s growth. To this end, the government can consider introducing a certification system of external review institutions until the market’s self-regulation works effectively. Third, the government needs to issue sovereign green bonds, which may help build best practices for issuing and managing green bonds in Korea. Finally, it is necessary to expand the base of green bond issuers by inducing more companies, such as mid-sized companies, to issue green bonds. To this end, the government needs to consider temporarily subsidizing the incidental costs associated with the issuance of green bonds, such as external review costs.
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  • 인도의 對아프리카 협력 현황 및 정책적 시사점
    Implications of India’s Africa Policy for Korea

       As Africa rises in both economic and demographic terms, India, as the largest country of import after China, is becoming one of Africa’s core partner countries. The size and share of Africa’s import from India has g..

    Hyoungmin Han and Yejin Kim Date 2022.05.27

    economic development, economic cooperation India and South Asia
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       As Africa rises in both economic and demographic terms, India, as the largest country of import after China, is becoming one of Africa’s core partner countries. The size and share of Africa’s import from India has grown from $18.7 billion (3.7%) in 2010 to $30.2 billion (5.4%) in 2019. While Korea is also regarded as Africa’s emerging partner, import from Korea has dwindled during the same period, from 8th largest to 17th. In terms of export value, it has decreased from $16.8 billion to $10 billion. This book examines India’s strategy and policy towards Africa with regards to the deepening cooperation between India and Africa. It seeks to derive policy implications for future cooperation between Korea and Africa by analyzing India’s current trade with Africa and her strategies through quantitative tools and case studies. 
       While the Asia-Pacific, Europe, North America and the Middle East are the largest regions of import for Africa, India is the largest country, accounting for 9.2% of Africa’s total import in 2019. India's exports to Africa have traditionally headed towards Southeast African countries, where many countries belong to the Commonwealth, and to the islands located in the Indian Ocean. However, export trends have recently skewed towards northwestern Africa, especially Nigeria and Egypt, whereas exports to South Africa, with whom India has had strong economic relations, have decreased, resulting in the diversification of Indian exports to Africa. The composition of export items is mixed and includes high value-added products such as chemicals, machinery, and electronics as well as low value-added products such as shoes, stone materials and glass. 
       In terms of investment, India is a major investor in Africa, following that of Europe and South Asia. India’s investment value in 2020 totaled $3.57 billion. At the country level, most of India’s investment is in Mauritius while investment in Mozambique has gradually increased. Investments in Nigeria, Kenya and South Africa have also expanded. Areas of investments have seen change from manufacturing to service in Mauritius, and from manufacturing to construction in Nigeria. On the other hand, India’s investment in South Africa is relatively small compared to its export value, and is rather focused on the manufacturing sector compared to the service sector. India’s investment in Kenya has increased significantly under the Modi administration. Manufacturing and services account for the largest portion in Kenya. 
       In the area of development cooperation, India’s annual aid to Africa averaged $800 million over the past 10 years. Although development aid to Asia has greatly increased since the Modi administration, India’s aid has largely been directed towards Africa throughout the years, covering 34 African countries. India’s development loans have been utilized for infrastructure development and also for projects specifically intended to strengthen security ties. Also, through its partnership with the private sector, the Indian government has strengthened cooperation in the areas of agriculture, energy, health and IT. India also deploys trilateral partnerships with advanced economies such as the US and UK in its cooperation with Africa. 
       One characteristic of India’s cooperation with Africa is that India emphasizes commonalities with Africa, such as its colonial history, alliance to the “Third World” or their emphasis on market diversification, to build ideological and economic consensus on which they have strengthened their partnership. The numerous presence of overseas Indians in Africa also factor into India’s interest in Africa. The overseas Indian population in Africa grew with the expansion of the British empire during imperialism, reaching the current total of 2.85 million. Countries with the largest Indian population are South Africa, Mauritius, Kenya and Tanzania, which are also India’s main trade and investment destinations. 
       India’s cooperation strategy for Africa materialized in the Singh administration. Noticeable state level cooperation began with the India-Africa Summit in 2008, whereas cooperation within the private sector channels was launched in 2005 through the CII-EXIM Bank Conclave on India-Africa Project Partnership. 
       India’s Africa strategy can be divided into financial support and capacity building. On the financial side, India introduced the Indian Development and Economic Assistance Scheme (IDEAS) in 2005 to provide development loans to developing countries, with India’s development loans estimated to reach $12.5 billion in 2019. Although the conditions of India’s loans are unfavorable compared to that of Korea’s in terms of interest rates and repayment periods, they are actively sought by African countries because of the wide range of products and services covered by the loan. India’s support includes infrastructure development, capacity building, as well as military supplies and training, particularly because India stresses a demand-based partnership.
       On capacity building, India’s support has channeled mainly through the Indian Technology and Economic Cooperation (ITEC) and Pan-Africa e-Network (PAEN) platforms. ITEC focuses on the capacity building of civil servants in partnering countries and has operated in 160 countries since 1964. African participants compose 40% of ITEC graduates. Participants of ITEC are funded by the Indian government. ITEC provides more than 300 programs a year covering a diverse range of studies including finance, IT, and environmental studies. Since 2018, it also provides cultural training programs for yoga and meditation. India seeks to strengthen security partnerships with its neighboring countries through ITEC by providing special military training programs as it holds concerns for the security of the Indian Ocean against the growing Chinese influence in the region, and with the launch of the Quadrilateral Security Dialogue. 
       Meanwhile, the Pan-African e-Network (PAEN), which was launched in cooperation with the African Union (AU), sought to strengthen the connectivity of the African continent and provide universal online education. Through PAEN, the Indian government established wireless networks in selected African countries, through which online medical and academic teaching was provided by higher education institutions and medical institutions based in India. 
       In summary, India’s Africa cooperation policy shows four characteristics: 1) it is demand-driven; 2) presents a “South-South” cooperation model, different from that of developed countries or China; 3) utilizes India’s developmental experience in institutional and capacity building; and 4) is supported by the Indian overseas residents in Africa. 
       Based on the analysis above, this study proposes the following policy directions to strengthen Korea’s cooperation with Africa. First, Korea’s cooperation strategy with Africa should be segmentalized to reflect the different demands of Africa’s sub-regions and fields (topics) of cooperation. India has recently increased its level of cooperation with Western and North Africa, along with the southeastern African region where the Indian diaspora are most populated. India also tailors its strategy to respond to the demands of Africa. For example, PAEN supports the AU’s mission to strengthen connectivity within Africa. The Indian government also uses the CII-EXIM Bank Conclave as a platform to gather information on Africa’s market demands and engage the Indian private sector in meeting Africa’s needs. In terms of identifying competitive fields of cooperation, India actively emphasizes its strength as an IT powerhouse in forming cooperation platforms with Africa. Although the Korean Ministry of Strategy and Finance, Ministry of Foreign Affairs, and the Ministry of Trade, Industry and Energy each hold high-level forums with Africa, a coordinated and specific strategy and actionable programs have not fully materialized. With different market characteristics and cultural norms, different strategies should be articulated for the different sub-regions and economic communities such as COMESA, SADC, and ECOWAS. Moreover, many of Korea’s cooperation programs share and build on lessons from Korea’s past development experience. However, Korea should also be able to create programs in areas that it has strengths in such as mobile and online finance, entertainment, and ICT. 
       In addition, Korea should also create and strengthen a chain for cooperation with Africa. Currently, much of Korea’s cooperation with Africa is development-oriented. However, in consideration of Africa’s resources and its market potential, Korea should engage in strengthening trade and investment, and also enhance partnerships with the private sector. India’s cooperation model exemplifies how the government can efficiently support market demands identified by the private sector. Areas of cooperation identified at the CII-EXIM Bank Conclave are linked and supported by the government through public initiatives such as the IDEAS and ITEC. Creating a chain of partnership between the private sector and the government as such, could increase policy effectiveness. Strengthening and coordinating the activities of KOICA, KOTRA and KITA would be a step in building this chain of cooperation. 
       Finally, the study proposes triangular cooperation between Korea, India and Africa. India is emerging as a global production hub and is increasing its influence in the global supply chain. India’s market value and the government’s policies supporting the nurturing of the manufacturing sector have enhanced the linkage between Korean-Indian production networks, while an increasing number of Korean firms are entering India for both production and export purposes. India is a key partner of the African Continental Free Trade Agreement (AfCFTA), and vigorously supports systems such as the Production-Linked Incentive (PLI) scheme that encourage domestic production and export expansion, enabling the formation of a Korea-India-Africa value chain. In order to do so, increasing the production link between Korea and India is required through negotiations on improving the Korea-India CEPA and the Korea-India Joint Initiative, as well as increasing trade links by supporting cooperation on the automation of customs.
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  • 코로나19의 인도 사회·경제에 대한 영향과 시사점
    The Social and Economic Impact of Covid-19 in India

    The Covid-19 pandemic led to significant reductions in economic activity across the world. In India, the Covid-19 pandemic has also created unprecedented disruptions in the labor market including employment loss and a decline in i..

    Yoon Jae Ro and Seung Jin Cho Date 2022.05.27

    economic cooperation, labor market India and South Asia
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    The Covid-19 pandemic led to significant reductions in economic activity across the world. In India, the Covid-19 pandemic has also created unprecedented disruptions in the labor market including employment loss and a decline in incomes. Furthermore, the Covid-19 pandemic is having unequal impacts on the consumption of Indian households. 
    In this paper, we investigate the impact of the Covid-19 pandemic on Indian households. We examine the impact of lockdown measures that India imposed during the first and second years of the pandemic. The first lockdown in India was from March 25th, 2020, to May 31st, 2020, which was considered the longest lockdown during the Covid-19 pandemic. The second lockdown was from April to June 2021. We focus on the differential impact of these shocks on employment, income, and consumption, using data from a large household panel survey. 
    Firstly, we observe large and heterogeneous reductions in employment and income in formal and informal segments of the labor market in India. Informal wage workers were significantly more vulnerable to the loss of employment than formal workers during the lockdown. Furthermore, income declined significantly more for the households of the informal wage worker. There was a differential impact of the shocks on labor market outcomes for male and female workers. We find that women were more likely to lose employment during the lockdown, and more likely to not return to work subsequently post the lockdown relative to men.
    Second, we document the impacts of the lockdown on household consumption. We find that consumption decreased the most for the households with initially higher pre-pandemic income. Also, this group has the slowest recovery rate to the pre-pandemic consumption level. For all households, the consumption of food and fuel dropped less than the consumption of durables. 
    When the labor market fluctuates rapidly due to the economic downturn, the harm is relatively concentrated on the low-income and vulnerable groups. This study shows the Covid-19 pandemic caused great economic damage to women and informal workers, who are the most vulnerable groups in India. 
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  • 일본 디지털전환 정책의 평가와 시사점
    Japan’s Digital Transformation Policy and Implications for Korea

       This study takes Japan's digital transformation policy as a research topic after the COVID-19 pandemic. The scope of digital transformation is relatively broad, such as digital government, digital transformation of in..

    Gyupan Kim Date 2022.05.20

    ICT economy, industrial policy
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       This study takes Japan's digital transformation policy as a research topic after the COVID-19 pandemic. The scope of digital transformation is relatively broad, such as digital government, digital transformation of industries, and building of digital industrial infrastructure.
       First, the Japanese government's digitalization in the administrative field, that is, the digital government policy, focuses on regulatory reform in the public domain, standardization of information systems between the government and local governments, and regulatory reform in the private sector.
       There is a general recognition that Japan is lagging behind Korea in terms of digital government, but in the field of private use of public data, Japan has already enacted the ‘Public-Private Data Basic Act’ in 2016 and many local governments have established public-private data utilization promotion plans. In Korea, among the so-called '3 Acts on Digital Transformation' submitted to the National Assembly in June 2021, the ‘Data Basic Act’ can be highly evaluated in that it lays the legal foundation to promote the use of public data by the private sector. However, it seems that the work of building a public information data base like Japan's 'Base Registry' should be accelerated.
       In relation to regulatory reform, the Korean government needs to closely review the Japanese government's permit for telemedicine in the course of responding to the COVID-19 pandemic. The Japanese government's regulatory reform in the medical field is ahead of Korea's as shown in the permission of online sales of over-the-counter drugs in 2014.
       Second, this study analyzed the Japanese government's digital transformation policies and corporate trends in manufacturing, agriculture, and infrastructure and logistics sectors. The Korean government’s ‘Digital New Deal’ policy also emphasizes digital transformation in industrial fields such as smart industrial complexes, smart cities, and smart logistics systems, but in terms of policy directions and technological capabilities to pursue in each area, it is necessary to closely examine the Japanese cases to promote domestic distribution and dissemination.
       In the manufacturing sector, it is necessary to refer to the ‘Common Data Connecting Project’ supported by the Japanese government through pilot projects. At the corporate level, it is worth noting that Japanese manufacturing companies are focusing on industrial digital platforms by attracting related companies that go beyond factory automation to the entire supply chain. Japanese construction companies are also using digital platforms for remote management of construction sites as well as building management.
       Regarding the smart agriculture policy of the Korean government, it is necessary to pay attention to the Japanese government’s ‘Smart Agriculture Demonstration Project’. The Japanese government is implementing various pilot projects in a way that applies the so-called 4th industrial revolution-based technologies such as robot tractors, drones, sensors, cloud services, and AI to local agricultural field by establishing an public-private cooperation system.
       On the other hand, in the field of infrastructure and logistics, the Korean government also needs to actively introduce digital transformation work for urban planning like the Japanese government’s Plateau project. As of November 2021, 56 cities in Japan have developed large-scale 3D city models through the Plateau project, and in the future, use cases involving private companies will be developed in terms of the use of 3D city models to promote smart city development.
       Third, the digital infrastructure field needs to be approached from the perspective of economic cooperation between Korea and Japan. The Japanese government is focusing on supporting technology development in the post 5G mobile networks, but the weak competitiveness of Japanese companies in the field of 5G communication equipment provides room for Korea-Japan cooperation in the future. And, although the Japanese government is making plans to relocate its domestic data centers, there seems to be no way to hedge Japan's geopolitical risks such as earthquakes. From this point of view, the Korean government needs to consider ways to attract Japanese companies' data centers, just as it did immediately after the Great East Japan Earthquake in March 2011. Lastly, the Japanese government is also very active in fostering the domestic cloud service industry. Especially, the Korean government and companies need to be interested in the hybrid cloud system and super-decentralized cloud architecture that the Japanese government has designated as key support areas, and prepare a plan for cooperation with Japanese companies.
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