Edited by Lee-Jay Cho and Hyung-Gon Jeong
Toward a Northeast Asian Economic Community: Sustaining the Momentum
The Northeast Asia Economic Forum (NEAEF) is a regional nongovernmental organization created in 1991 to sponsor and facilitate research, networking, and dialogue relevant to the economic and social development of Nort..
Edited by Lee-Jay Cho and Hyung-Gon Jeong 발간일 2019.12.28경제통합, 경제협력목차닫기
Introduction and Overview / Lee-Jay Cho
Remarks from Host Institution, Cooperating Host Institution and Country Representatives
Welcoming Remarks from Host Institution / Dong Sung Cho
Welcoming Remarks from Cooperating Host Institution / Ganbold Baasanjav
Country Representative Remarks: Republic of Korea / Kwan-Young Park
Country Representative Remarks: China / Fan Xiaoyun
Country Representative Remarks: United States / Stephen Cowper
Country Representative Remarks: Japan / Yasuo Tanabe
Country Representative Remarks: Russia / Pavel Minakir
Country Representative Remarks: Mongolia / Gankhuyag Sodnom
Part I. Building a Northeast Asia Economic Community and Its Extended Regions
The Asian Financial Cooperation Association (AFCA) / Wang Guoping
Northeast Asia Economic Community Formation and Russia’s Input / Sergei Sevastianov
Part II. Cross-border Infrastructure and Special Economic Zones in Northeast Asia
Talking to North Korea / Glyn Ford
The North Korean Economy and Special Economic Zones / Anthony Michell
Part III. Financial Cooperation in Northeast Asia
Financial Cooperation in Northeast Asia / Yutaka Funada
Should a Northeast Asia Bank for Cooperation and Development Include Financing for the Arctic? / Mead Treadwell
Some Considerations in Establishing the NEABCD / Jai-Min Lee
Understanding the World, Understanding the Region, and Understanding Financial Cooperation / Fan Xiaoyun
Part IV. Energy and Environment in Northeast Asia
Comments on Energy Technology and Policy Trajectories / Terry Surles
State of Renewable Energy and Planning of Cross-Border Transmission in Northeast Asia / Yoshiki Iinuma
Northeast Asia Power Interconnection and Cooperation / Sung Eun Kim
Improving Grid and Community Resiliency Using Advanced Microgrids with Distributed Generation / Mike Hightower
The ‘Carbon Free Island’ Plan / Hesub Rho
Part V. Tourism Cooperation in Northeast Asia
Integrated Resorts Overview: Summary of Presentations by Khalil Philander and Ray Cho / Ray Cho
Medical and Cultural Tourism Overview: Summary of Presentations by Ki-Eun Jung and Zhu Jipeng / Ray Cho
Efforts to Establish an International Ferry Service for Northeast Asia Tourism Development / Ikuo Mitsuhashi
The Northeast Asia Economic Forum (NEAEF) is a regional nongovernmental organization created in 1991 to sponsor and facilitate research, networking, and dialogue relevant to the economic and social development of Northeast Asia. NEAEF is also committed to promoting understanding and relations among the peoples of Northeast Asia, North America, and Europe.
NEAEF’s main objective is to conduct research and conference activities aimed at functional economic cooperation such as cross-border energy, transportation and logistics infrastructure development, and capital mobilization. NEAEF holds annual conferences, workshops, and seminars for planning, facilitating, coordinating, and implementing international and interdisciplinary solutions to common policy problems. It is the only nongovernmental regional organization in which all the nations of Northeast Asia and the United States are consistent and active participants.
Over the years, NEAEF has been promoting regional economic cooperation and integration in Northeast Asia aimed at building a Northeast Asia Economic Community. Despite some interruptions, there has been significant progress among the countries in the region except for North Korea (DPRK), which has been the critical gap in an otherwise productive network of dynamic regional economic growth.
After alarming political tensions resulting from a series of nuclear and missiles tests by North Korea, a dramatic change took place last year in the historic summit between US President Donald Trump and North Korean Leader Kim Jong-un, providing the Northeast Asia region with both challenges and opportunities for minimizing the risk of military confrontation and war. This year, however, the prospect for rapid progress in the de-nuclearization of DPRK has considerably slowed due to subsequent summits and meetings which were not so successful.
In this context, nevertheless, NEAEF continued its effort began in 1991, toward peace and economic cooperation in Northeast Asia by implementing conference and meeting activities in 2019. These activities are aimed at regional economic integration and thus prepare a meaningful basis and foundation for a potential next step in realizing the goal of building a Northeast Asia Economic Community.
As in previous years, NEAEF is continuing to fulfill the need for timely and forward-looking research and meetings by focusing on critical issues, such as 1) discussion and emphasis on connectivity in cross-border infrastructure developments involving North Korea as an integral part of a broader regional economic community in Northeast Asia, and 2) establishment of the proposed Northeast Asia Bank for Cooperation and Development (NEABCD). NEAEF has over the years developed a more cohesive basis for a strong network for functional economic cooperation through regular discussions and consultations among stakeholder country experts.
For the year 2019, the NEAEF, in collaboration with KIEP, focused on the following topics:
● Building a Northeast Asia Economic Community and Its Extended Regions
● Cross-border Infrastructure and Special Economic Zones in Northeast Asia
● Energy and Environment in Northeast Asia
● Tourism Cooperation in Northeast Asia
● Financial Cooperation and the proposed development bank for Northeast Asia
Annual Conference and Meeting Activities:The Planning Meeting for Regional Cooperation and Strategies for a Northeast Asia Economic Community
The meeting was held during 21-23 April 2019 in Honolulu, Hawaii, and was organized in collaboration with KIEP and the University of Hawai‘i College of Social Sciences. The plan for major meeting activities was reviewed and discussed: 1. Ad-Hoc Group Meeting on Financial Cooperation in Northeast Asia Stake Holder Countries of China, Japan, and Korea on June 14th, 2019, in Osaka, Japan; 2. The 28th Annual Northeast Asia Economic Forum; and 3. Young Leaders’ Training Program (YLP).
At the planning meeting, participants agreed that the conference in 2019 will focus on strengthening functional economic cooperation among the principal stakeholder countries of China, Japan and Korea, and will cover broad as well as specific, topics such as cross-border infrastructure and development and trade, a regional financial institution in Northeast Asia, aimed at a future Northeast Asia Economic Community. The topics will include:
1. Discussion of relevant issues that will provide the basic foundation for a future Northeast Asian Economic Community
2. Examination of current issues in functional economic cooperation in the Northeast Asian region by the countries of Northeast Asia and particularly, the stakeholder countries, China, Japan and Korea, in the context of future financial cooperation through the proposed Northeast Asia Development Bank (NEABCD)
3. Providing wider perspectives from North America, Russia and Mongolia on the Korean Peninsula for future economic cooperation through a regional financial mechanism
NEAEF, with support from the Freeman Foundation, has been conducting its annual Young Leaders Training and Research Program in Regional Cooperation and Development since 2006. NEAEF is planning to conduct its 14th Young Leaders Program (YLP) from July 28 to August 10, 2019 in collaboration with UNESCAP/NEA and Incheon National University.
The Ad Hoc Group Meeting on Financial Cooperation in Northeast Asia & Pre-G20 Planning Meeting on Establishing a Northeast Asia Bank for Cooperation and Development: Summary
1. Update on Current Situation in Japan
Maeda Tadashi explained that the independent study group led by Tsuyoshi Yamaguchi and other key experts on the Korean peninsula consolidated their works into a proposal and summited it to Yoshihide Suga, the chief cabinet secretary of Japan. Mr. Maeda discussed the building block approach for economic cooperation in Northeast Asia and added that the blocks should be put together by the hands of the leaders of the region. Japan has changed its skeptical posture to one prepared for financial cooperation in Northeast Asia.
Referring to the “America First” slogan and Brexit, he observed that this trend toward fragmentation of the world will lead to the US and UK losing influence, but it will make the discussion on integration in Northeast Asia more meaningful. He also described the Northeast Asia region as a missing link in terms of economic cooperation. North Korea is the major concern in the region and the Japanese government’s position has been that solving three things—denuclearization, the abduction issue, and missiles—must come first in order to normalize diplomatic relations. In this context, Mr. Maeda said that the discussion on financial cooperation in Northeast Asia and establishment of the NEABCD would be useful to prepare an institutional framework for the region, and eventually for North Korea. He concluded that this Osaka meeting could contribute to exploring ways to improve the serious deadlock between Japan and South Korea.
2. Chinese Perspective
Fan Xiaoyun, member of the National Committee of the Chinese People’s Political Consultative Conference and professor & associate dean of Nankai University, briefly explained the continuous efforts of Nankai University in researching financial cooperation in Northeast Asia and emphasized that cooperation is the best way to overcome the challenges that the region is facing now. Like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the “Belt and Road” initiative, cooperation is the necessary path for economic development in the long run, especially for the Northeast Asian region because of complicated geopolitical matters. The region needs the NEABCD as a platform for regional cooperation and economic integration through the support of cross-border infrastructure projects. For cooperation within the region, she suggested four things: 1. the establishment of a cooperation mechanism for local governments of China, Japan, and Korea; 2. the establishment of a joint education and research base; 3. the initiation of an official communication mechanism; and 4. further financial cooperation beyond the NEABCD.
Ming Liu, associate professor of Nankai University, added further information on China’s situation regarding the establishment of the NEABCD. As a channel to solve the trade conflict between China and the US, China wants to reinforce the trade relationship with Japan and Korea. Referring to the words of Mr. Zhou Xiaochuan, a former president of the Central Bank of China, China is making an effort to increase governance transparency and reduce trade subsidies. He mentioned that we should keep an optimistic view on Northeast Asia’s future. Moreover, the NEABCD and Asian Infrastructure Investment Bank (AIIB) could coexist and enhance communication between the governments of China, Japan, and Korea is necessary. Regarding the North Korea issue, he noted that interests could be united under the same channel: infrastructure.
3. US Perspective
Mead Treadwell, former lieutenant governor of the State of Alaska, has been working with the Arctic nations, including Japan, Korea, China, and Singapore regarding the Arctic Circle based on the argument that the arctic can do nothing without these partner countries. He explained the potential roles of the Arctic region: feed the world, fuel the world, provision the world, protect the world, connect the world, inspire the world, and the fact that these activities are directly linked to the markets in Asia. While the Arctic is deficient in infrastructure, traditional development banking is less likely because most Arctic nations are typically donor nations. As an alternative, he suggested cooperative financing mechanisms on global infrastructure, energy, and mineral projects, and gave three illustrative examples of cooperative financing mechanisms: Cooperative Arctic Seaways, LNG export from the Arctic, and Rail connection between Alaska and Canada. The development of infrastructure in the Arctic area is directly tied to Northeast Asia and there has been effort to make sure that Asia is included in the Arctic Circle by encouraging the study group in the Japanese Diet and actively supporting cooperation in research. He concluded that it would be difficult to discuss the idea of developing a new regional bank for cooperation without understanding the Arctic.
4. Korean Perspective
Jae-Hyung Hong, the former deputy prime minister of the Republic of Korea, emphasized that it is time for Northeast Asian countries to make every effort to prevent current turbulence in the region and there are two key issues that are heightening the tension within Northeast Asia: the US-China trade war and no improvement in North Korea’s denuclearization. The G20 summit in Osaka will be important to ease current tensions and must adopt a declaration of maintaining free trade while avoiding self-defeating protectionism. Mr. Hong reiterated the importance of creating the NEABCD and suggested that member countries should work together to prepare for economic aid for North Korea to ease tensions and eventually facilitate North Korea’s economic normalization.
Jai-Min Lee, professor of Korea Maritime University and the former vice president of the Korea Export-Import Bank, pointed out that it became more difficult to put the NEADB issue on the government negotiation table between South Korea, Japan, and China because of the unfavorable political environment around the region. However, two suggestions were made as the region should keep preparing for the establishment of the NEADB with the expectation that the NEA situation will improve. The first suggestion was to initiate multinational research on the NEADB framework, and the second was to launch a financial cooperation council between the national banks: JBIC of Japan and Exim banks of Korea and China, based on past experience of cooperation between the three banks.
5. European Perspective
Glyn Ford, the director of Track2Asia, explained the current political situation and the role of the European Union. He insisted that it is obvious that things have been changed since the Hanoi summit and the only way to proceed is for both the United States and North Korea to build a multilateral framework within which they cooperate, referring to the Joint Comprehensive Plan of Action (JCPOA), the Iran deal, and the infrastructure program for North Korea. He also mentioned that the EU showed a willingness to engage regarding the North Korea issue in terms of providing technical expertise and investment; reference was made to the speech at the Shangri-La Dialogue by Federica Mogherini, high representative of the Union for foreign affairs and security policy.
In the panel discussion, Tae Soo Kang, senior research fellow at KIEP and the former deputy governor of the Bank of Korea, shared his thoughts on the establishment of NEABCD, on differences between NEABCD and the existing development banks with respect North Korea’s access, and how the NEADB might be one way to approach the North Korea problem.
Maeda Tadashi pointed out that this issue of NEABCD has arisen because of the shortcomings of the existing Asian Development Bank (ADB) in terms of dealing with the problems that Northeast Asia is facing. He also outlined his idea on the NEABCD dealing with cross-border infrastructure projects like the Greater Tumen Initiative (GTI). Regarding the concept of NEABCD, it was proposed that not only central governments, but also provincial, municipal governments should be part of it in order to solve the problem of income gap between metropolitan and local areas within one country. Moreover, the starting point for the building block approach is cooperation between China and Japan, as this bilateral relationship is improving.
Ming Liu explained that a new type of development bank will benefit not only developing countries, but also developed countries like Japan and Korea.
Mead Treadwell recommended that the Northeast Asia area be described as a significant strategic opportunity, similar to what Alaska has done to convince global investors that the Arctic should be viewed as an emerging market with better than average returns. He emphasized the need to provide a better macroeconomic snapshot. He also mentioned that North Korea is an obvious special case, but that we should proceed as if it is not the lynchpin.
The 28th Annual Conference of the Northeast Asia Economic Forum
The 28th Annual Conference of the Northeast Asia Economic Forum (NEAEF) was held in Incheon, Republic of Korea during August 7-10, 2019. It was hosted by Incheon National University, in cooperation with University of Hawaii College of Social Sciences, UN ESCAP-NEA, and others. Leaders and experts from China, Japan, Mongolia, Russia, the Republic of Korea, the United States, Canada, and the European Union gathered to advance the NEAEF mission of promoting economic cooperation and peace in Northeast Asia. The 2019 annual conference addressed the increased importance of continuing dialogue and cooperation in the region in light of additional indications of interest in North Korea and new infrastructure developments that carry the opportunity for supporting the integration and development of Northeast Asia, the significant role of financial cooperation in terms of a regional multilateral development bank, tourism cooperation, and energy and the environment. The wide range of topics highlights the vast potentia l for cooperation in Northeast Asia and made for this year’s engaging conference.
The conference was officially opened by Lee-Jay Cho, Chairman of the NEAEF, who warmly welcomed the distinguished guests and participants and thanked the host institution, Incheon National University, and NEAEF’s partner organizations for making the conference possible. He extended special appreciation to UN ESCAP-ENEA for hosting and providing the venue for the 2019 Young Leaders Program (YLP) at its offices, in most accommodating settings that greatly facilitated the YLP.
Welcoming remarks were made on behalf of the host institution by Dong-Sung Cho, president of Incheon National University. This was followed by remarks from the cooperating host institution, the UN ESCAP-ENEA made by Ganbold Baasanjav, head of office, UN ESCAP-ENEA and former ambassador of Mongolia to the Republic of Korea. Remarks were then made by the country representatives: Park Kwan-Young, former speaker of the National Assembly, Republic of Korea and president of the National Development Institute; Fan Xiaoyun, member of the National Committee of the Chinese People’s Political Conference, professor and associate dean, School of Finance, Nankai University—on behalf of Wang Shuzu, former vice mayor, Tianjin Municipal Government; Stephen Cowper, former governor of Alaska; Tanabe Yasuo, special representative for external relations, Hitachi, Ltd.; Pavel Minakir, academician and president, Economic Research Institute, Far East Branch, Russia Academy of Sciences; and S. Gankhuyag, ambassador and director, Investment Research Center, Ministry of Foreign Affairs of Mongolia. All speakers were grateful for NEAEF’s essential role in working to meet the common aspirations of the countries of Northeast Asia for regional economic development and expressed enthusiasm for another successful conference.
In the first session, the main theme of the conference “Building a Northeast Asia Economic Community and Its Extended Regions” was discussed. While acknowledging the difficulties created by recent regional disputes and the China-U.S. trade war, Wang Guoping examined new prospects for regional cooperation and benefits from infrastructure development complementary to the Northeast Asia region begun by the Belt and Road Initiative. Sergei Sevastianov then gave a presentation on developments in the Russian Far East that created prospects for increased transportation capabilities through a Northern Sea Route and continued interest in the creation of bilateral and trilateral energy transportation corridors. Following these presentations, an expert committee held an engaging question-and-answer session among themselves and with distinguished members of the audience. Discussions noted that historical and current tensions in the region could be overcome in the same manner as was done in the European Union, the increased interest on the part of North Korea in the Northeast Asia region, and the important role of a NEABCD to promote transportation links in the countries of Northeast Asia.
The second session focused on “Cross-border Infrastructure and Special Economic Zones in Northeast Asia.” Glyn Ford and Anthony Michell, both with personal experience in North Korea, commented on the state of affairs in the country. North Korea desires to grow its economy, with a future possibility of cooperation with South Korea. Incremental steps will be needed, through negotiations, to establish trust and a path forward for the regional integration of North Korea. International sanctions will continue to be an impediment and Korea’s denuclearization of the peninsula is a process that will take many years.
Session three addressed the topic of “Financial Cooperation in Northeast Asia.” An international panel of speakers composed of Yutaka Funada, Mead Treadwell, Jai-Min Lee, Fan Xiaoyun, Jae-Hyung Hong, Liu Lanbiao, and Liu Ming presented a number of promising avenues that are emerging in the region, including, for example, Arctic trade routes, developments in the liquid natural gas industry, and infrastructure projects that would be facilitated by cooperation within the region and bring in the support of other actors such as the United States and the European Union. The speakers discussed the continued importance of the NEABCD to facilitate cooperation and economic development amidst the political conflicts. Suggestions for the project included increased multilateral research and planning between the stake holder countries of China, Japan, and the Republic of Korea. Additionally, private sector involvement could reduce reliance on public institutions, which would help the Bank operate even in times of political turmoil. These suggestions will help the region work towards the goals of free trade and improving political relations. A concurring opinion was that the Bank could look into current methods employed by the World Bank, such as the “cascade strategy,” which seeks to increase private investment and “crowd-in” businesses by making upstream legislative and policy changes to political and financial frameworks in developing regions.
The fourth session was dedicated to “Energy and Environment in Northeast Asia.” A dynamic panel of speakers—Rho Hesub, Terry Surles, Iinuma Yoshiki, Sung Eun Kim, and Mike Hightower—presented on energy solutions. such as wind energy, solar energy, and the use of micro grids for increased energy security. These avenues have been made possible through multilateral collaboration, advancements in technology, and the promising economic potential of new energy solutions. Because the environment is a shared resource, panelists stressed the importance of cooperation within the region and with other nations, such as the United States. The example of Jeju Island’s environmental sustainability goals was presented, including its “Carbon Free Island” plan, with the goal of being a 100% renewable energy economy with a 75% use of electric cars on the island by 2030, primarily through the use of wind power, managed as a public resource.
Panelists also discussed increased accessibility to renewable energy across Northeast Asia, with a special focus on wind energy in China and solar energy in Japan. These changes increase security, safety, resiliency, and sustainability, which panelists concurred was more pressing now than ever due to the increased frequency and severity of natural events due to climate change. Finally, the Energy Session discussed meeting supply and demand in a renewable energy market with the incorporation of micro grids in areas subject to natural disaster to provide restoration of needed services to the impacted community. Our future commitments to renewable energy sources within the Northeast Asia region will help assure not only stronger economies, but also a stronger international community.
Session five, devoted to tourism cooperation in Northeast Asia, examined a wide range of tourism opportunities in Northeast Asia in presentations by Ray Cho, Khalil Philander, Ikuo Mitsuhashi, Ki-Eun Jung, and Zhu Jipeng. The tourism industry in Northeast Asia is anticipated to surpass many existing industries in the near future and will be a key driver for future economic development. Integrated resorts, a new ferry service, and medical tourism were presented as prospective future tourism developments in the region. Three licenses will be awarded for the construction of integrated resorts in Japan. Integrated resorts will include facilities to let visitors experience traditional, cultural, and artistic aspects of Japan. The ferry service is an opportunity for international tourism in Northeast Asia, linking areas in China, Korea, Russia, and Japan. The development of medical tourism provides surgical, traditional, esthetic, and recuperative procedures at the best facilities, with specialists in the area, during an extended and comfortable stay allowing for exploration of the local culture. The culture and tourism industry already plays an important role in Northeast Asia and will continue to grow in this capacity.
Northeast Asia is a complex region with its fair share of tensions, but this year’s conference embodied a sense of optimism and possibility for cooperation. With continued dedication, clearly greater functional economic cooperation in our region can be realized. The 2019 Conference demonstrated further progress towards the NEAEF goals of promoting understanding and relations among the peoples of Northeast Asia, North America, and Europe.
The Northeast Asia Economic Forum has for three decades engaged in the mission and goal of promoting economic cooperation, peace, and prosperity in Northeast Asia with its linkages to North America and Europe. Northeast Asia, endowed with abundant natural and human resources and complemented by capital and technology, is a complex region with a long history of conflicts and tension, and at the same time, also a region of shared cultural affinity.
This year’s meeting activities, the Annual Conference and ad hoc financial meeting, embodied a sense of long-term optimism and possibility for cooperation for the future, in spite of the constantly shifting political atmosphere in the region. This project, more broadly, has continued to make important contributions in response to changing international situations through timely and necessary research, conferences, meetings, and consultations on regional economic cooperation and integration in Northeast Asia.
With continued dedication, we believe that greater functional economic cooperation in our region can be realized. To achieve our ultimate goal of developing a Northeast Asia Economic Community, it is absolutely necessary for NEAEF to sustain its effort and momentum and to continue to strive towards the goal of regional development, peace, and prosperity.
This volume entitled Toward a Northeast Asian Economic Community: Sustaining the Momentum, is the result of our ongoing activities, namely, the ad hoc finance meeting in Osaka, Japan in 2019 and the NEAEF annual conference in Incheon, Republic of Korea, held with a view to developing an economic community for Northeast Asia, one of the most dynamic regions of the world.
The contents of this volume provide pertinent references and an important basis for further discussion and consideration by government policymakers and researchers in Northeast Asia. The volume also represents an important step in our continuous efforts toward regional economic cooperation and integration aimed at a Northeast Asian Economic Community.