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Policies and Implications of Reorganizing Global Supply Chains by the Biden Administration: Focusing on Semiconductor and Battery Industry
This study discusses the current status and future prospects of the Biden administration’s U.S.-centered supply chain reorganization policy for the semiconductor and electric vehicle battery industries. In addition, based on the ..
Gusang Kang et al. Date 2022.12.30
economic security, industrial policy United States of AmericaDownloadContentSummary<This study discusses the current status and future prospects of the Biden administration’s U.S.-centered supply chain reorganization policy for the semiconductor and electric vehicle battery industries. In addition, based on the current status of the global semiconductor and battery industry supply chain, this study addresses the future direction of the industry supply chain reorganization. Finally, this study indirectly estimates the impact of implementation of the Biden government’s supply chain restructuring policy on the U.S. and Korean economies, and derives policy implications accordingly.In February 2021, President Biden signed an Executive Order on the implementation of the supply chain structure and development strategy for major industries in the U.S. Accordingly, a government- wide review of the supply chain structure, supply chain risks, and policy proposals for four key items (semiconductors, large-capacity batteries, core minerals, and pharmaceuticals) over a 100-day period was announced in June 2021. Subsequently, in February 2022, the results of a one-year analysis by seven relevant government departments were released to secure a stable supply chain in six major industries (defense, health, ICT, energy, transportation, and agriculture). Meanwhile, the U.S. Congress passed a series of bills to strengthen the nation’s supply chain. For example, the CHIPS and Science Act of 2022, which includes incentives for investment in semiconductor manufacturing facilities and equipment in the U.S., was passed by the Congress on July 28, 2022. In addition, the Inflation Reduction Act of 2022 for electric vehicle purchase subsidy policy was passed in Congress, and took effect on August 16, 2022 upon President Biden’s signing.This study examines the changes in the global supply chain in the semiconductor and battery industries of the U.S. and Korea using the export and import concentrations for each major item. First of all, while the supply chain for system semiconductor exports in the U.S. shows a trend toward diversification, the supply chain for imports is gradually becoming more centralized. From the perspective of stabilizing the supply chain, it is clear that U.S. system semiconductor exports are diversifying, but the fact that the U.S. is increasingly dependent on imports from Asia remains a challenge. On the other hand, the memory semiconductor sales supply chain in the U.S. also showed a trend of diversification due to the expansion of exports to North America, while the purchasing supply chain remains highly concentrated due to the high proportion of imports from Asia. Unlike the previous two items, U.S. semiconductor manufacturing equipment exports tend to be quite concentrated due to their high dependence on Asia, while the U.S. supply chain for purchasing these items is relatively diversified, centering on Japan and the Netherlands.Both the sales and purchase supply chains of system semiconductors in Korea show a strong tendency of centralization. First of all, Korea’s system semiconductor exports are highly dependent on Asia, and imports of these items are mostly dependent on North America, including the U.S., specialized in system semiconductor design. Korea’s memory semiconductor exports are mainly concentrated in the Asian region including China, which has a huge domestic market, based on the international competitiveness of Samsung Electronics and SK Hynix. On the other hand, Korea’s imports of these items tend to be quite concentrated, with the share of North America significantly decreasing and being replaced by imports from Asian sources. Finally, Korea’s semiconductor manufacturing equipment sales supply chain has recently become more centralized as its dependence on exports to Asia has increased.In regards to the battery industry, the U.S. lithium-ion battery export and import markets show different patterns in terms of concentration. First of all, the export supply chain is spread evenly in North America, Europe, Oceania, and Asia, showing a considerably diversified structure. On the other hand, U.S. imports of these items tend to be concentrated, although their dependence on imports from Asia has eased with a slight increase in the portion of imports from Europe recently. Meanwhile, Korea’s lithium-ion battery export market is gradually reducing its high dependence on Asia thanks to Korean battery producers (LG Energy Solutions, SK On, Samsung SDI) with global manufacturing competitiveness, while steadily expanding and diversifying export regions. On the other hand, Korea’s supply chain for imports of these items is highly concentrated, with a high dependence on Japan and China, which have strengths in material and mineral processing.For the first analysis to indirectly examine the economic impact of the global supply chain reorganization of the semiconductor and battery industries, we estimate the impact of changes in the export share of the semiconductor or battery industry by country on the change in GDP per capita. Our results show an increase in the export share of semiconductors or batteries has a statistically significant increase in GDP per capita. These results support the reason why the Biden administration is moving to expand its exports through the reorganization of the U.S.-centered supply chain in the industry. By reorganizing the supply chain centered on the U.S., President Biden intends to attract production facilities in weak sectors such as memory semiconductors, foundries, and lithium-ion battery manufacturing to the U.S. through cooperation with partner countries such as Taiwan and Korea in the short term. In conclusion, this policy promotion seems to be part of a strategy to discover sustainable economic growth engines for the U.S. while checking China’s technological rise in key industries, and restoring U.S. leadership.Secondly, we estimate the impact of changes in export concentration or import concentration by semiconductor or battery item in the U.S. and Korea on the change in net exports by the two countries. First of all, in the case of the U.S. semiconductor industry, changes in export concentration and import concentration did not have a statistically significant effect on changes in net exports of the corresponding item. However, in the case of the Korean semiconductor industry, an increase in export concentration had a negative impact on the net export of the item, whereas a change in import concentration did not have a statistically significant effect on the change in Korea’s net export of the same item. In the case of the U.S. battery industry, as the import concentration by item increases, the U.S. net export of the same item decreases. However, we find that both the increase in the concentration of exports and the concentration of imports in the Korean battery industry decrease net exports of the product. Taken together, it can be inferred that the concentration of supply chains in the semiconductor and battery industries in the U.S. or Korea has the potential to hinder economic growth by reducing net exports of the relevant items in both countries.Based on the above analysis results, this study concludes with the following policy implications. First, it is necessary to strengthen norms-based supply chain cooperation with the U.S. Second, it is necessary to expand efforts to maintain the technological gap in the memory semiconductor field, where Korea has strengths. Third, policy support is needed to enhance Korea’s competitiveness in the system semiconductor field, which is relatively weak. Fourth, it is necessary to prepare a prompt support system for semiconductor infrastructure based on the National High-tech Strategic Industries Act. Fifth, it is essential to expand tax support for investment in semiconductor facilities through revision of the Restriction of Special Taxation Act. Sixth, efforts are needed to diversify the lithium-ion battery supply chain. Seventh, it is necessary to strengthen cooperation between Korea and the U.S. in the field of next-generation battery technology. -
Challenges and Implications for China’s Economic System Reform in the Third Term of Xi Jinping: Focusing on Establishing a Socialist Market Economy System
The year 2022 marks the 30th anniversary of China's declaration of economic system reform to establish a “socialist market economy system(社会主义市场经济体制)” Over the past 30 years, China has strengthened the role of the market in ..
Pyoung Seob Yang and Hongwon Kim Date 2022.12.30
economic reform, economic developmentDownloadContent
Summary<The year 2022 marks the 30th anniversary of China's declaration of economic system reform to establish a “socialist market economy system(社会主义市场经济体制)” Over the past 30 years, China has strengthened the role of the market in resource allocation and economic operation, and has promoted ownership reform in which both the public – the core of China's socialist economy - and the non-public sectors of the economy develop together. China has continued to build a “basic economic system of socialism(社会主义基本经济制度) with Chinese characteristics”, in other words, an economic system which is based on fundamental socialist institutions but combines market economy mechanisms. At the same time, however, entering his third term Xi Jinping has stressed a Dual Circulation Strategy aimed at common prosperity and domestic consumption (“internal circulation”), leading to forecasts that China may be strengthening the socialist nature of its economic system. Therefore, from the perspective of completing the socialist market economy system that China is pursuing, this study aims to infer changes in China's economic system in the 3rd term of Xi Jinping, specifically by analyzing tasks related to economic system reform included within China's mid- to long-term development strategy and the direction of its promotion.The reformation process of China's economic system following the implementation of reform and opening policy can be understood as one of establishing a basic economic system of socialism with Chinese characteristics. This process can be comprehended as changes in the relationship between the three elements of the basic economic system of socialism: joint development of public and non-public sectors of the economy (ownership relationship); the coexistence of various wealth distribution methods, with labor income as the main body (distribution relationship); and the socialist market economy system (relationship between market and government). In addition to reforming its economic system, China's opening and trade policies to connect the domestic economy and the world economy have played an important role in promoting domestic reform. From this aspect, China has pursued a strategy of linking reform and opening, which means to promote reform through opening. During his official report to the 20th National Congress of the Communist Party of China, Xi Jinping announced the goal of reforming the economic system, while also reaffirming that accomplishing the socialist market economy system lies at the foundation of the “Basic Economic System of Socialism” In addition, reforming current wealth distribution systems for the realization of common prosperity, promoting Dual Circulation as a new development structure, and institutional opening-up with regard to rules, regulations and standards were presented as important tasks for the next five years.This study focuses on analyzing these issues. First of all, the key to completing the socialist market economy system is to complete market-based allocation of production factors. It includes the market supply of land, free labor mobility, and marketization of raising capital, together with marketizing transaction and standardization of new production factors like technology or data. In this study, we identified the areas of land system reform, “hukou(户口)”system reform, interest rate and capital market reform as the most representative tasks related to this goal. Second, as it advances toward a new development structure through dual circulation, China will accelerate reforms to eliminate obstacles blocking the virtuous circle of production, distribution, and consumption. To promote a virtuous circle within the domestic economy, reform tasks have been presented to allocate production factors at the stages of production, distribution, and consumption. Third, achieving common prosperity is a key goal of Chinese modernization pursued by China and thus will be further promoted as an important goal in the 3rd term of Xi Jinping. In order to realize common prosperity, reformation of the wealth distribution system is inevitable. Common prosperity will be pursued in two aspects: strategies to increase the size of the economic “pie,” and those to ensure a fair share for participants. The former is to form an olive-shaped income structure by maintaining a stable income for workers while fostering a middle class, while the latter is to reduce relative wealth inequality through redistribution and tertiary distribution. Fourth, more opening efforts will be made to connect the domestic economy and the international economy, in the form of institutional opening-up that connects rules, regulations, management, and standards related to investment and trade globally. However, there is a need for caution when considering how the strategy links safety and openness in response to risks arising in the opening-up.The Chinese economic reform and opening-up aimed at achieving China's socialist market economy will continue in the third term of Xi Jinping. This study performed an in-depth forecast, based on the criteria of marketization and privatization, on the direction of China's future economic system reform. Marketization reform is expected to be pushed ahead, focused on market-based allocation of production factors, while privatization centered on reformation of mixed ownership is also likely to be gradually advanced. However, while such reform is taking place in the Chinese economy, the possibility of competition between China's socialist market economy system and the Western capitalist economic system continues to escalate amid the strategic competition between the U.S. and China. Under this situation, it will be an important task for a middle power like the Republic of Korea to firmly establish its principles and directions for competition issues as they arise. -
A Roadmap for Korea’s Digital Trade Agreements
This report examined the short- to medium-term roadmap for Korea's digital trade agreements. It suggested that the roadmap include, among other things, an assessment of Korea's position in the network of digital trade agreements, ..
Kyu Yub Lee et al. Date 2022.12.30
international trade, electronic commerceDownloadContentSummary<This report examined the short- to medium-term roadmap for Korea's digital trade agreements. It suggested that the roadmap include, among other things, an assessment of Korea's position in the network of digital trade agreements, the objectives and directions of digital trade agreement policies, the scope and content of digital trade agreements, the priorities and selection criteria for negotiating partners to reach digital trade agreements, the procedures and timeline for such agreements, and the expected quantitative and qualitative effects of digital trade agreements.Understanding Korea's current position in the process of developing a roadmap for digital trade agreements necessitates objectivity. This report claimed that Korea's influence on the network of digital trade agreements has been moderate. It is the outcome of assessing using network analysis, which takes into account centrality of digital trade network, similarity of agreement text, and the size of the economy.The report suggested Korea to target becoming a hub for digital trade as a short-term and mid-term strategic priority. It is costly and subject to numerous restrictions for Korea to be a global leader in the digital space in the short- to medium-term. That is, to be a leader in the global digital trade and to establish relevant digital trade rules, Korea requires a sufficiently sizable digital trade market, abundant human resources, and high-skilled labor. In particular, it needs specific strategies to support the leadership that sets rules for norms in digital trade. The report thus suggested that Korea's primary role in the short- to medium-term is to become a rule-promoter of the digital trade norms through an active promotion strategy based on the roadmap for digital trade agreements.When determining the scope and content of digital trade agreements, it is critical to develop criteria for selecting negotiation partners and rank countries in order of importance. Essentially, digital trade agreement text for Korea should be written in a way that reduces or eliminates barriers to digital trade and challenges faced by domestic businesses. Furthermore, Korea should make efforts to improve the thoroughness of the form and content aspects of trade law in relation to key elements identified as appropriate for the development of the digital trade roadmap. To achieve policy objectives of digital trade, the report recommended to develop a Korean-style digital trade agreement template with varying levels of protection. This is due to the fact that the process of developing a template comprised of digital trade norms appropriate for Korea has numerous advantages and can take the lead from selecting a partner to negotiate with to coordinating, through negotiating contents of the text, to signing the negotiation. The report also emphasized the importance of developing supplemental content to strengthen digital economic cooperation in order to increase trading partners' willingness to negotiate and activate digital trade among countries and regions.The report listed four criteria for selecting a partner to negotiate with, such as the possibility for export expansion, the potential for market growth, the compatibility of the regulatory framework, and practicality. For instance, the top 20 countries in Korea that export digital services are estimated to be the United States, United Kingdom, Japan, Hong Kong, China, Singapore, Australia, Germany, Switzerland, the Netherlands, Ireland, India, France, Canada, Italy, Brazil, Spain, Russia, Norway, and Sweden, in that order. Thus, the most important are the Korea-UK FTA, Korea-China FTA, Korea-EU FTA, Korea-Canada FTA, Korea-India FTA, and Korea-Mercosur TA. The report came to the conclusion that Korea should actively participate in IPEF negotiations and consider upgrading the most recent digital trade rules in the FTA. Furthermore, it advocated for the creation of a digital trade agreement in the style of Korea.According to the report, domestic regulations and institutional reform plans must be developed in accordance with the scope and content of the digital trade agreement. This is because maintaining the coherence of domestic regulations and system restructuring for digital trade are linked to the problem of determining the content and level of digital trade agreements and selecting a negotiating partner. Korea should consider how to collaborate or respond jointly with other nations in relation to current issues related to digital trade, such as internet service, data localization, and cloud. It was also recognized that a careful assessment is necessary to keep domestic rules in line with industry standards for digital trading.The report concluded by saying that it is critical for enhancing effectiveness of digital trade agreements to have the process of actively soliciting feedback from businesses involved in digital trade transactions, as well as public relations strategies that can elicit support from the general public. A roadmap for Korea's digital trade agreements is necessary to explain the anticipated economic implications of its conclusion quantitatively and qualitatively. -
Comparison of ESG Raters and Rating Scores: Focusing on Korean Firms
In response to increasing demand for sustainable management, adopting Environmental, Social, and Governance (ESG) measures is now more important than ever. Firms now must disclose ESG performance to receive investment and meet the..
Jiwon Park and Yerim Lee Date 2022.12.30
financial system, business managementDownloadContentSummary<In response to increasing demand for sustainable management, adopting Environmental, Social, and Governance (ESG) measures is now more important than ever. Firms now must disclose ESG performance to receive investment and meet the regulation making ESG disclosure mandatory in many countries and exchanges.With growing intertest in ESG and relating topics, evaluating firms’ ESG performance become necessary. Many regional and global ESG raters exist, focusing on different sets of firms. Regional ESG raters such as Sustinvest and Korea Institute of Corporate Governance and Sustainability (KCGS) in Korea are more knowledgeable in domestic situations and Korea-specific characteristics, and in particular, they can evaluate companies without English ESG and business reports. However, regional raters mostly focus on domestic firms, making it difficult to compare to internatioanl companies. Global raters have an advantage in this regard, however, their coverages in Korea are restricted to very large global companies. Major global raters include Sustainalytics, Moody’s, MSCI, S&P Global, CDP, Refinitiv, Bloomberg, and FTSE.Unlike credit ratings, ESG evaluation is heterogenous across raters as a company’s ESG performance is assessed using non-financial indicators with strong qualitative characteristics. Divergence in ESG evaluation is inevitable due to difference in eveluation objective, standards, categories, measurement, etc. However, if ESG ratings diverge too much, it misleads the investors and researchers by sending confusing signals on ESG performance. This research focuses on the divergence of ESG rating of Korean firms, and by following previous research that decompse ESG rating divergence in scope, measurement, and weighting.Chapter 2 analyzes the major raters’ methodologies, standards, objectives of ESG ratings. We focus on Sustinvest and KCGS for regional raters, and Refinitiv, Moody’s, Sustainalytics, and CDP for global raters. Each rater focuses on heterogeneous factors to produce the final scores and ratings. Except for CDP, the objective of global raters’ ESG rating is to provide information to investors, as a part of their financial service. Korean raters both sum E, S, G scores and subtract controversy scores of each area, similar to Refinitiv. The two agencies have different objective as well; Sustinvest is to provide information to investors, on the other hand, KCGS is a part of Financial Services Commission, rating ESG performance to provide information to evaluated firms and to support sustainable management.In chapter 3, we empirically analyze the divergence in eight ESG ratings of Korean companies. We show that rated companies by the eight raters are not representative firms. The rated firms are disproportionately large and in specific industries, which is more noted in global raters. We also show the correlation coefficients of rater pairs and decompose the divergence into contributions of scope, measurement, and weight. The average correlation coefficient is 0.48; while the coefficient between Sustinvest and KCGS (Korean raters) is 0.7, coefficients between Korean and globla rater are not as large, ranging from 0.03 to 0.641. The average coefficients of each E, S, G score are 0.59, 0.48, and 0.43. In fact, the correlation coefficients of Korean-global raters are vefry small, implying that divergence in G is the greatest. Finally, I redefine each ESG rater’s rating categories into 26 common categories and perform variance decomposition. I find that measurement contributes 37% of the divergence, Scope 77%, and weights -13%.This research is first to conduct a very close analysis of ESG score gap among Korean companies, including domestic evaluators, and it empirically analyzes rater differences to derive policy implications and further contributes academically. -
Korea-Australia Supply Chain Cooperation: Focus on Critical Minerals and Hydrogen
The U.S.-China rivalry and COVID-19 have increased the supply chain's vulnerability and reshaped the global value chain. The weaponization of resources, such as Russia's natural gas export restrictions in response to the war in Uk..
Seung Jin Cho and Minlee Shin Date 2022.12.30
economic security, economic cooperationDownloadContent
Summary<The U.S.-China rivalry and COVID-19 have increased the supply chain's vulnerability and reshaped the global value chain. The weaponization of resources, such as Russia's natural gas export restrictions in response to the war in Ukraine, demonstrates that the government must take urgent measures to stabilize the supply chain. Korea relies entirely on critical minerals such as lithium, cobalt, nickel, and rare earths from other countries because these minerals are essential for the electric vehicle and secondary battery industry. Moreover, Korea will increasingly rely on hydrogen imports to achieve carbon neutrality by 2050.Korea and Australia signed a memorandum of understanding on December 2021 for cooperation in the area of critical mineral supply chains, carbon-neutral technology and a clean hydrogen economy. Australia is the world's largest producer of lithium and contains large deposits of other critical minerals such as nickel, of which it has the largest reserves in the world. Australia has a favorable geographical environment for producing hydrogen. Australia also has the advantage of being relatively close to Korea, and is one of the countries expected to become a major hydrogen-exporting country. From Australia’s point of view, Korea offers a stable demand for critical minerals and hydrogen. Therefore, bilateral cooperation to stabilize the supply chain is expected to increase. Accordingly, this study analyzes Australia’s policy on critical minerals and hydrogen, and the current status of international cooperation. Based on this, effective measures to strengthen the supply chain cooperation between Korea and Australia are derived.The Australian government announced its critical minerals strategy in 2019 and 2022. This critical minerals strategy and modern manufacturing initiative were launched to boost the weak indigenous manufacturing sector. The Australian government is also aiming to boost the capacity of downstream industries by leveraging its strengths in the mining sector of critical minerals. This policy is also found in Western Australia’s Future Battery Industry Strategy and Critical Minerals and High-tech Metal Strategy announced by the state government.In addition, the Australian Government has announced the National Hydrogen Strategy in 2019 under the vision of becoming a leading country in the global hydrogen industry by 2030. Also, all Australian states are implementing a hydrogen strategy or plan, and are committed to fostering the green hydrogen sector. They also aim to promote demonstration projects and research assistance to improve efficiency in the hydrogen field, enhance community trust, and improve institutional problems.Regarding Australia’s international cooperation in critical minerals, Australia participates in the multilateral Minerals Security Partnership. Australia and the U.S. plan to build a critical mineral facility in Texas to import critical minerals from Western Australia. Japan has been collaborating closely with Australia since China banned rare earth elements exports in 2010. Australia and Japan signed a critical minerals partnership in October 2022. The Australian state government and companies are also participating in the European Commodity Alliance launched in September 2020. Australia has also developed active research collaborations with India.Australia's international cooperation in the field of hydrogen is focused on producing hydrogen in Australia, especially green hydrogen, and transporting it to partner countries for their own use. Japan can be evaluated as the country with the most progress in cooperation with Australia in the hydrogen field, and cooperation with Korea and Germany is also active. Many pilot projects, feasibility studies, and joint research projects are underway with Japan. Furthermore, exports between Australia and Japan for commercial purpose are expected to begin around 2025.This study recommends four measures to secure the critical minerals supply chain. First, installing a critical minerals control tower will play a significant role in establishing Korea's long-term strategy for critical minerals and reducing investment risks for the private sector. Second, stronger linkage with the Australian industrial development strategy would help develop the secondary industry and Korean companies enter the Australian energy storage system market. Third, developing critical mineral technology through the establishment of a joint fund could improve critical mineral extraction productivity and strengthen competitiveness in the critical mineral processing field, where both Korea and Australia are weak. And the fourth measure is to establish a mini-lateral network that allows Australia, Korea, Indonesia or India to participate. This network would help construct a value chain between the participating countries.This study proposes three methods to stabilize the hydrogen supply chain. First, Korea and Australia should conduct more demonstration projects to evaluate the commercial and technical feasibility of hydrogen cooperation projects, as the formation of the hydrogen supply chain is at an early stage. Second, technical development of hydrogen transportation is required to introduce hydrogen produced in Australia to Korea. This development will facilitate the hydrogen transportation sector and establish the entire hydrogen industry cycle. Third, policy efforts are required to preoccupy global hydrogen technology standards and reflect Korea’s opinions in international standardization organizations through cooperation with Australia. -
Measures to Strengthen Korea's Public Diplomacy toward Latin America
In 2010, Korea pinpointed public diplomacy as the three pillars of Korean diplomacy and has made efforts to strengthen the institutionalization of public diplomacy by securing various resources and overhauling its implementation s..
Yongseok Noh et al. Date 2022.12.30
DownloadContentSummary<In 2010, Korea pinpointed public diplomacy as the three pillars of Korean diplomacy and has made efforts to strengthen the institutionalization of public diplomacy by securing various resources and overhauling its implementation system. With the enforcement of the Public Diplomacy Act in August 2016, the division and fragmentation of public diplomacy projects was resolved, and at the same time, a control tower called the Public Diplomacy Committee was established in the Ministry of Foreign Affairs to enhance the unification of the public diplomacy implementation system. Korea has emerged as a middle power and an advanced country in the international community today, and the importance of public diplomacy is becoming more salient as a means of securing influence in the international community through a series of activities such as improving the national image and national brand based on Korea’s cultural assets and attractiveness.Korea established official diplomatic relations with Brazil for the first time in Latin America in 1959 and established diplomatic ties with major regional countries such as Argentina, Mexico, Colombia, and Chile in 1962. 2022 marks the 60th anniversary of diplomatic relations with 15 Latin American countries, raising the need to make this year a new leap forward to establish sustainable reciprocal relations between Korea and Latin America. Korea and Latin America are on opposite sides of the Earth, and cooperation and exchanges are relatively sluggish compared to other regions due to various barriers caused by these geographical distances, and Korea needs to strengthen public diplomacy toward Latin America to consolidate multilateralism and diversify public diplomacy.This study aims to derive policy implications applicable to Korea’s public diplomacy in the future as well as research related to public diplomacy. Due to Korea’s inherent geopolitical and historical specificity, the main diplomatic issue from the past to the present remains in the security area. Therefore, Korea’s diplomacy has traditionally focused on bilateral relations with the U.S., China, Japan, and Russia, which are called the four major stakeholders in resolving the North Korean nuclear issue and peace on the Korean Peninsula. However, as a middle power with limited influence and control of international order in the international community, Korea has been developing public diplomacy in the 2010s to secure soft power, one of various types of powers, and has been seeking to strengthen and consolidate relations with cooperative partners such as Latin America. This study derived practical policy proposals that will help promote Korea-Latin America relations.The research methods used in this research are as follows. First, this study used extensive literature review as a basic research method. Existing academic studies related to public diplomacy and Korea’s public diplomacy with Latin America were reviewed to derive differentiation and originality from previous studies, and major archive data such as local public documents and news articles were collected and analyzed.Second, an “Open Survey” agency was commissioned to examine the perception of Korea(ns) in major Latin American countries and a survey was conducted on 1,400 adults (200 per country) aged 20 or older in seven Latin American countries between May 13 and May 19, 2022. The questionnaire was carefully selected after consultation with the participating researchers, and the questions were translated into Spanish and Portuguese, respectively, and provided to the respondents. Through this, we conducted a foundation analysis to further utilize Korea’s strengths in future development of public diplomacy with Latin America and draw up policy measures to compensate for weaknesses.Third, a case analysis was conducted to understand the current status of the Korea’s public diplomacy in major Latin American countries. Specifically, through case studies on Mexico, Brazil, Argentina, Chile, Peru, Colombia, and Guatemala, we identified and derived main problems and challenges surrounding Korea’s public diplomacy in Latin America.Fourth, in this study, a field research was conducted in Guatemala. The decision to conduct an field research in Guatemala is due to the specificity of Guatemala among Latin American countries. Guatemala is a place where Koreans have increased rapidly based on the Maquila industry since the 1990s. Until the early 2000s, Koreans in this region had shown the characteristics of enclaves while being thoroughly isolated from Guatemalan society for the purpose of obtaining short-term profits. However, in recent years, Guatemala’s Korean community has been carrying out various activities, realizing that it is necessary to actively interact with the local community to expand corporate profits and strengthening the national image of Korea. This situation is not limited to Guatemala, but can be seen as all countries in Latin America. Therefore, this study attempted to analyze the diversity of public diplomatic activities conducted by Korean immigrants in many Latin American countries by analyzing the case of Guatemala.This research consists of five chapters. Chapter 1 stated the background and purpose of the study, and presented the originality of the study through analysis on existing literature related to Korea’s public diplomacy in Latin America. In addition, the scope of research and research methods were described in detail.In the following Chapter 2, a theoretical review of Korea’s public diplomacy toward Latin America was conducted. In particular, not only a conceptual review of public diplomacy, but also an academic discussion of digital public diplomacy was also reviewed. The importance of Korea’s public diplomacy in Latin America as a country that belongs to the category of the so-called middle power was examined, and the necessity of this study was emphasized.Chapter 3 analyzes the results of the survey, and based on this, we evaluated ‘Korea in Latin America’ to derive Korea’s effective public diplomactic strategies in Latin America in the future. Chapter 4 conducted the case studies on the current status, major achievements and some challenges and limitations of Korea’s public diplomacy in seven major Latin American countries—Mexico, Brazil, Argentina, Chile, Peru, Colombia, and Guatemala, respectively.Subsequently, Chapter 5 finally presented policy implications for strengthening public diplomacy in Latin America based on the main research results explored in Chapters 3 and 4 of this study. First, a comprehensive analysis of public diplomacy in major Latin American countries was suggested, followed by practical policy implications and major promotion strategies related to public diplomacy that can be developed at a common level in Latin America. Based on the results derived from case studies, we also derived policy implications for public diplomacy specialized in seven major Latin American countries for securing effectiveness of Korea’s public diplomacy. -
Analysis on the Determinants of Labor Share and Its Policy Implications
The global decline of labor income share has spurred numerous studies investigating the cause of its drop. As decrease in labor share might imply aggravating income inequality, it has been used as one of the main indicators of ine..
Yaein Baek et al. Date 2022.12.30
economic integration, labor marketDownloadContentSummary<The global decline of labor income share has spurred numerous studies investigating the cause of its drop. As decrease in labor share might imply aggravating income inequality, it has been used as one of the main indicators of inequality. Not only is labor income the main source of income for low-income class including the self-employed, but its decline could disproportionately affect low-skilled workers within wage earners. This study analyzes the determinants of the changes in labor share. As technological changes such as adoption of robots, advancements in ICT and the Fourth Industrial Revolution are expected to alter the labor market, we analyze the impact of such technical changes on labor share and derive policy implications.This study mainly consists of four parts. In Chapter 2, we estimated the trend of Korea’s labor income share and examined changes in its components. We addressed the measurement issue of income for the self-employed in two ways. First, we applied various methods proposed in previous studies to macro data and analyzed the adjusted series. Second, we separately estimated labor share using firm-level micro data in which measurement issues do not arise. Main takeaways from these analyses are summarized as follows. First, the level and trend of the labor share in Korea changes greatly when we adjust for the earnings from the self- employed. Most importantly, unlike the traditional measure of labor share, the adjusted series exhibit a downward trend from the mid-1990s to the period of global financial crisis. The difference arises due to relatively stagnant operating surplus of private unincorporated enterprises (OSPUE) compared to rising total employee compensation. Second, short-term changes in labor share are mainly attributed to fluctuations in capital income rather than components of labor income (employee compensation and OSPUE). In particular, fluctuations in net operating profit drive variations in the labor share across time and industries. Third, statistics from various international organizations show that Korea’s overall labor income share has been relatively higher than those of other countries, but the gap is narrowing due to declining share of self-employed workers.In Chapter 3, we examine whether the determinants of labor share suggested in previous studies such as technological change, globalization, population and education indicators are meaningful as predictors. We estimate a regression tree model, which is a machine learning method, for forecasting labor share and obtain variables with predictive power. There are three main takeaways as a result of analyzing the regression tree model of developed and emerging countries. First, in forecasting the labor share in the corporate sector in six developed countries, human capital and the relative price of investment goods are found to be the most important. In addition, the non-linear relationship between human capital and the relative price of investment goods can be important in predicting the labor share. Second, human capital and education are important in predicting the labor share in developed countries, whereas demographic change and ICT development play a key role in emerging countries. Third, human capital is important in 5 out of 8 developed countries, and the importance of ICT change varies across countries. In short, it was found that human capital and education are important not only as determinants, but also as predictors of the changes in labor share. In addition, changes in technology, such as ICT, are also important predictors in both advanced and emerging countries.In Chapter 4, we examine the impact of robots on the labor market by conducting empirical analyses with two different data sets. The first analysis estimates the effect of robots on labor share and labor productivity using panel regression on industry-country level data. We merge data from KLEMS and the International Federation of Robots (IFR) to obtain data of 15 industries from 17 countries. The second analysis studies the impact of the 4th industrial revolution, including the adoption of robots and AI, on labor share and labor productivity at the firm level. We apply panel regression using Survey of Business Activities from Statistics Korea. The results from both data sets show that the introduction of robots lowers the labor share. Also, as robot adoption increases, labor productivity tends to improve. Previous studies suggest that the introduction of robots may reduce employment by replacing labor (substitution effect) but also increase employment and productivity by lowering production costs (productivity effect). Our findings of improvement in labor productivity and decline of labor share are consistent with these observations, and suggest that the substitution effect might be stronger than the productivity effect.Based on the results from previous chapters, Chapter 5 discusses policy implications along dimensions of labor, education, and industry. The policy measures are focused on supporting the acquisition and management of human capital in a rapidly shifting technological environment. According to our empirical analyses, technological progress tends to benefit primarily high-skilled workers, while resulting in job losses for low-skilled workers. This calls for timely reallocation of labor in response to technological change at institutional level, so we suggest three policy directions. First, vocational training and lifelong education system improved so that workers can adapt to new environment at the workplace. Second, it is necessary to continue enhancing labor market flexibility and the dynamism of the corporate sector while maintaining a strong social safety net. Lastly, it is also important to check the overall governance of the administrative and legal system for proper implementation of these policies. -
Adapting the DAC Evaluation Criteria to the Context of South Korea
Since first defined in 1991, the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC) evaluation criteria has been one of the most widely recognized and applied criteria for internati..
Jisun Jeong and Aila Yoo Date 2022.12.30
ODA, foreign aidDownloadContentSummary<Since first defined in 1991, the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee (DAC) evaluation criteria has been one of the most widely recognized and applied criteria for international development evaluation. While the DAC evaluation criteria is believed to have significantly contributed to improving the quality of international development evaluations, there has been increasing criticism and demands to revise the criteria so that they can better respond to the rapidly changing development environment and the core values of the Global Agenda for 2030 and sustainable development goals. Following a wide-ranging consultation with various stakeholders and public survey, the OECD DAC published the revised evaluation criteria in late 2019.One of the defining features of development cooperation in South Korea is a proliferation of government ministries and agencies newly engaging in aid with relatively limited expertise and experience in development evaluation. As the officers from the newly engaging ministries and agencies function as evaluation commissioner, manager and internal evaluator, it is crucial for them to have a clear understanding of the revised OECD DAC evaluation criteria. In this context, the study aims to analyze key changes in the revised OECD DAC evaluation criteria from the previous version and to help Korean evaluators and commissioners to understand the purpose, background and intended use of the revised criteria, and to adapt the criteria to their evaluation while reflecting the institutional context of South Korea’s development evaluation. The study highlights specific aspects under each criterion that Korean evaluators and commissioners should pay special attention to, making considerations for Korea’s aid management system, instruments and policy environment.For the relevance criterion, it was emphasized that in the context of South Korea, commissioners and evaluators need to pay particular attention to evaluate whether their selection of aid modalities and partner agency was appropriate. Another point stressed was that transparency and accountability in aid procurement processes should be evaluated within the relevance criterion. In times of multiple global crisis the DAC criteria encourage to assess the extent of adaptive planning and risk management. Nevertheless, the authors argue that the aid identification and budgetary process in South Korea does not allow for adaptive management. For the newly introduced coherence criterion, it was emphasized that each ministry and public agency need to assess whether their intervention is coherent with the interventions implemented by other Korean actors, not to mention external actors in the given country, region and sector. Synergies across different aid instruments and financial channels, e.g., grant and concessional loan, must be evaluated. For the effectiveness criterion, while the revised DAC criteria advise to consider inclusiveness and equity of results across different beneficiary groups, many Korean agencies lack the expertise and resources to take an inclusive approach in intervention design, implementation and results management.The study provides the following policy recommendations to improve Korea’s aid evaluation system. Firstly, the Korean government needs to simplify the approval process and move away from the project-based annual budget allocation system towards sector, region and program-based multi-year budgeting. Currently, the Committee for International Development Cooperation (CIDC) of the Korean government requires all government ministries and agencies to identify development interventions two years before the project commences, and to approve the project design and budget one year before intervention starts. Budget is approved and allocated based on the project, involving a range of decision makers such as the Ministry of Foreign Affairs, Prime Minister’s Office, the Budget office under the Ministry of Economic and Finance and the National Assembly. The complicated and lengthy project-based approval process is too restrictive to allow agencies and ministries to readjust their interventions when needs arise. The current system for project identification was originally introduced to allow sufficient time to ensure coherence between policy and programming and across agencies. But it now poses challenges to adjust the intervention to changing circumstances and unexpected events such as global pandemic, conflicts and climate-induced disasters. Secondly, the Korean government should create an enabling environment to plan, collect, monitor and track the disaggregated data for different beneficiary groups by providing guidelines and resources. Ministries and agencies need to plan ahead to monitor and evaluate differential results across various target groups. Lastly, evaluation should be planned and conducted in ways that facilitate the utilization of the findings to inform policy decisions, improve programming and strengthen institutional learning. The study concludes by arguing there should be more strategic evaluations to assess long-term, higher-level transformative impacts of Korea’s development co-operations. -
Socioeconomic Inequality Measures and Implications
With worsening inequality, the demand for inclusive policies has been continuously increasing. In particular, COVID-19 has highlighted the multidimensionality of inequality by exacerbating existing disparities while accentuating r..
Gee Young Oh et al. Date 2022.12.30
economic development, globalizationDownloadContentSummary<With worsening inequality, the demand for inclusive policies has been continuously increasing. In particular, COVID-19 has highlighted the multidimensionality of inequality by exacerbating existing disparities while accentuating relatively newer factors of inequality. As such, inequality measures have diversified, and a thorough understanding and appropriate use of measures has become a prerequisite to designing and implementing an inclusive policy.In this context, this report studies measures of economic, gender, and digital inequalities, dimensions that have been highlighted during the pandemic. The report compares the purpose, data, calculation methods, and strengths and weaknesses of each measure and illustrates how each measure depicts the current status of inequality. Out of various inequality measures, the report focuses on measures that are either commonly used in the international community or built for specific purposes. By doing so, the report provides useful basic information on inequality measures for policymakers or researchers for future utilizations.To be more specific, Chapter 1 briefly examines the current inequality state, international community’s responses, and the impact of the pandemic. In particular, by overviewing the rising importance of economic, gender, and digital inequality due to COVID-19, Chapter 1 provides background explanations as to why Chapters 2-4 focus on measures of economic, gender, and digital inequality, respectively, and explain contributions of each chapter.Chapter 2 analyzes measures of economic inequality, particularly income inequality. Among numerous measures, those used as analysis tools by Korean government ministries and international organizations are selected. For example, measures based on the Lorenz curve, such as the Gini coefficient and the Hoover index, and those based on income shares, such as the Palma ratio and the quintile share ratios, are included. Also, measures focusing on welfare like the Atkinson index and newer measures like the Co-Prosperity index from the World Bank are selected for the analysis. The report lays out the basic information on the measures and compares strengths and weaknesses to show that measures are complementary to each other.Chapter 3 introduces indices that measure gender inequality and depicts levels of global gender inequality using each measure. Measures include the most widely used integrated indices, region-specific indices, subject-specific indices, and indices that measure factors of gender inequality. By introducing indices with various characteristics, Chapter 3 emphasizes the multidimensionality of inequality and enhances the understanding of gender inequality.Chapter 4 introduces indicators related to the use of digital and information and communication technologies that are frequently used to analyze digital inequality. In particular, various indices measuring differences across- and within- countries, including gaps between companies or classes, are introduced to enhance the understanding of the new dimension of inequality caused by a structural social change called digitalization.Finally, Chapter 5 compares the relationship among the three dimensions of inequality covered in each chapter across countries. The report finds that the correlation amongst the three dimensions is heterogeneous across countries, emphasizing the multidimensionality of inequality and the importance of understanding various measures of each dimension.Understanding how to measure inequality is crucial throughout a policy implementation process, from diagnosing the status quo to setting policy goals and evaluating policy performance. Accordingly, this report enhances understanding of economic, gender, and digital inequality measures by comparing the methodologies and using them to depict the current status of inequality. Inequality will further diversify with socio-economic structural changes such as climate change and trade wars. Therefore, it is necessary to respond to not only the existing inequality problems but also the problems that will arise in the future through continuous understanding and analysis of accurate measures of inequality dimensions. -
India’s Competitiveness and Economic Cooperation between Korea and India in Agriculture
India is one of the top five economies and the biggest agricultural producer in the world. Using the second largest arable land after the United States, India produces corn, cotton, peanuts, curry and spices, fresh fruit and veget..
Soon-Cheul Lee et al. Date 2022.12.30
agricultural policy, industrial policyDownloadContentSummary<India is one of the top five economies and the biggest agricultural producer in the world. Using the second largest arable land after the United States, India produces corn, cotton, peanuts, curry and spices, fresh fruit and vegetables, and sugar as well as crops such as wheat, rice, and beans at scale. Recently, the Indian government’s active investment policies induce large investments in agriculture and thereby great potential for economic growth. At the same time, India has strict non-tariff measures and strengthens conformity assessment procedures in agriculture.Korea has the trade surplus with India in non-agriculture sectors, but the trade deficit in agriculture. Recently, Korea seizes a chance to enter into the Indian food market due to the global popularity of K-food. In addition, recent events such as global climate change and the war in Ukraine evoke the importance of food security and thereby the need for ensuring and diversifying a stable food supply. However, little is known about competitiveness, potential, limitations, and challenges for India’s agriculture because no research has dealt with them in Korea.This study attempts to fill this gap by exploring competitiveness of India’s agriculture and providing policy implications for economic cooperation between Korea and India. In Sections 2 and 3, focusing on India’s domestic market competitiveness in agriculture, we adopted various quantitative methodologies to measure agricultural production, global presence, related policies, and competition level. In addition, considering the importance of productivity and efficiency for agricultural competitiveness, we measured them at firm level. Consequently, we presented opportunities and challenges for Korean exporters by providing a case study of overseas cooperation at firm level as well as performing the SWOT analysis for India’s agriculture. For this, we adopted the DEA analysis and interviewed local experts.In Sections 4 and 5, we focused on the level of international cooperation in India’s agriculture by analyzing the current trend of trade, overseas activities, and related policies and presented implications for Korean firms’ entering into India’s market. In Section 6, we examined protectionism in India’s agriculture by analyzing TBT and SPS which are main factors of non-tariff measures and suggested solutions.Accordingly, this study showed a vision for co-prosperity of Korea and India in agriculture and provided key challenges and strategies to realize it. In specific, we suggested practical tasks for economic cooperation in public and private sectors, respectively.Main findings of this study are as follows.In Section 2, we found that India’s competitiveness and opportunities in agricultural production are the world-class level. India has the second largest arable land after the United States and the largest number of rural population in large national territory and population. India is the third greatest producer after China and the United States in crops and the second greatest producer after China in vegetables, fruits, potatoes, and onions. India’s productions of livestock and dairy rank in the top 10 of the world. In specific, India produces garden products, livestock, and marine products as well as food and non-food products at large scale.The empirical results from the Porter’s Diamond model also showed that India’s market competitiveness in agriculture is the second highest in the world, The potential for India’s agriculture is enlarging with 1.4 billion including many young people, their future demand for processed foods, and improvements in supply chains, infrastructures, and global outsourcing. Recently, the Indian government actively adopts various policies for productivity, land management, price compensation for agricultural products, modernization of agriculture, reform for policy and governance, and construction of value chains and infrastructures. Accordingly, these policies are expected to develop India’s agriculture much more.However, a portion of agriculture in the whole economy is decreasing and its investment is lower than other sectors despite such high potential for growth and competitiveness. We recognized that India still has many policy issues and challenges for driving agricultural growth.In Section 3, we found that Indian agricultural firms leave room for improvement, but at the same time, have many opportunities for growth. The results from the financial analysis for Indian agricultural firms showed that both corporalization and exports are not enough for their aggregate scale. Efficiency of Indian agricultural firms is low in general: the crop industry are somewhat improved, while livestock, seed, and processed food industries are steady and forestry become worse. In general, the efficiency for technological progress is improved, but low levels of net efficiency and scale efficiency decrease aggregate productivity. The SWOT analysis showed that competitiveness of Indian agriculture comes from abundant law materials, abundant and inexpensive labor force, and massive market size, while its weakness comes from complex regulations, low quality, and low productivity. One encouraging fact is that recently K-wave induces the advancement of Korean confectionery and noodle industries in Indian market.In Section 4, we reconfirmed that India has the world-class competitiveness in agricultural export. In particular, marine products, rice, spice, buffalo, and meat lead up the growth in export. The Indian government adopts overseas export bases, an export promotion forum, and a profile system for agricultural products to encourage exports. India encourages foreign investment, but offers the different degree of market openness and conditions by items. In particular, India has tighter constraints on retails of multi-brand products. India pursued international cooperation in agriculture through technological cooperation and FTA, and currently works together with FAO and WFP. However, India’s cooperation with Korea remains minimal. Accordingly, both countries require greater efforts to collaborate and thereby utilize great potentials in Indian agriculture.In Section 5, we found that India has strong protectionism with various non-tariff measures in agriculture. India adopts TBT and SPS to secure human health and safety, protect consumer right, and provide product information in agriculture. Recently, the issue for environmental production is on the rise, especially in processed food, dairy cream, beverage, fruit, and nuts. The theoretical and empirical results for the effects of TBT and SPS on international trade in India during the 1995-2020 period showed that India’s non-tariff measures negatively affect other countries’ exports to India and these effects are heterogeneous across exporting countries’ income level. By period, the negative effects persist for five years from first adoptions of non-tariff measures.In conclusion, we confirmed that Indian agriculture has high competitiveness and potentials in its production and market size and thereby expect that cooperation between Korea and India will yield great benefit to each other. In particular, India has sufficient production capacities to supply major crops and thereby Korean processed food companies can stably import necessary agricultural raw materials. We conclude that India is suitable for a major partner of food security for Korea. However, a weak spot for Indian agriculture is lacks of productivity, efficiency, and globalization. We assure that India will be a significant sourcing country in agriculture for Korea if these weaknesses can be improved.For this, we suggested objectives, strategies, and policy implications for co-prosperity of Korea and India in agriculture. First of all, we set up the main objective of agricultural cooperation between Korea and India to be ‘Economic Cooperation of Co-prosperity to utilize Comparative Advantage of Agricultural Competitiveness’ and the major tasks to be ‘Improvements of Productivity and Efficiency’, ‘Reduction of Transaction Cost’, and ‘Activation of International Cooperation and Globalization’.To make India’s massive agricultural products be a sourcing hub, we selected necessary items for food security to Korea and for domestic and overseas market expansion to India. For these items, we included food, non-food crops, and livestock products under the objective of making a massive market hub. To realize it, we draw up detailed plans, focusing on overseas advancement of private sectors to promote international trade and investments to India.We suggested directions and challenges for agricultural cooperation between Korea and India in the public sector, the private sector, and international cooperation, respectively. For the public sector, we suggested to (1) designate India a strategic cooperative country in agriculture and (2) operate a working force for agricultural development and cooperation between Korea and India. For the international cooperation, we suggested to (1) promote agricultural cooperation through a revision of the Korea-India CEPA, (2) collaborate with the ODA program to India, and (3) join various activities for international regulatory cooperation. Finally, for the private sector, we suggested to contrive a strategy for (1) promoting overseas advancement of private companies and (2) strengthening participation and capacity of the private sector.
공공저작물 자유이용허락 표시기준 (공공누리, KOGL) 제4유형
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