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15971. Determinants of FDI in Transition Economies and Implications for North Korea

Author:
Cheol-won Lee, Hyung-gon Jeong, and Min-suk Park
Publication Date:
11-2020
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
North Korean authorities have been seeking changes in North Korea’s economic policy since the Kim Jong Un regime took power. Along with decentralization, the government is trying to increase efficiency and productivity within the socialist economic system, and as part of this policy it has designated 27 economic development zones to attract foreign investment. Foreign direct investment plays a crucial role in economic growth for low-income countries such as North Korea, which lacks capital and technology. This study discusses North Korea's foreign investment policy and tasks ahead of its government to revitalize the economy, based on the premise that nuclear negotiations between North Korea and the US proceed smoothly. First of all, in order to derive policy tasks, we compared and analyzed the achievements and policies of transition countries in Asia and Eastern Europe in terms of attracting FDI, also analyzing the determinants of FDI inflows, after which we present policy tasks for North Korean authorities. As South Korea may very well become the largest investor in North Korea, our study also discusses tasks for the Korean government to pursue in order for Korean companies to successfully invest in North Korea.
Topic:
Foreign Direct Investment, Economy, and Transition
Political Geography:
Asia and North Korea

15972. U.S.-China Technological Rivalry and Its Implications for Korea

Author:
Wonho Yeon
Publication Date:
11-2020
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Recent developments in advanced technology are changing the concept of hegemonic competition. The key feature of technologies in the 4th Industrial Revolution is dual-use. Emerging technologies such as 5G, AI, big data, robotics, aerospace, supercomputers, and quantum computer-related technologies can be used for both civilian and military purposes. The more you invest in the development of advanced technologies, the closer you will be to economic and military hegemony. Therefore, it is no wonder that the U.S. harbors great concerns facing the rise of China in these advanced technologies. To estimate and compare the innovation productivity of the U.S. and that of China, this study constructs a structural estimation model in which each country produces international patents using R&D expenditures and R&D researchers. Empirical results have presented novel findings indicating that China’s innovation productivity has surpassed that of the U.S. since 2015. At the same time we can observe that the U.S. has the world’s largest intellectual property surplus and keeps expanding it, while China’s intellectual property deficit has been growing every year. Given the two contradictory facts - China’s high innovation productivity and low intellectual property balance - we can conclude that China is strong at “innovation” but weak at “invention.” Knowing this, the U.S. eventually began to target this vulnerability. This is the U.S.’ Tech-Decoupling strategy. To achieve U.S.-China tech decoupling, the U.S. has been strengthening trade and investment sanctions against China. In specific, the U.S. has been utilizing the Export Control Reform Act (ECRA), Section 889 of the 2019 National Defense Authority Act, and the Foreign Investment Risk Review Modernization Act (FIRRMA). In return, China is responding to the U.S. sanctions with the new “Long March” strategy rather than a tit-for-tat strategy. In other words, China has been setting long-term aims and responding to the U.S. sanctions by improving institutional arrangements, refining industrial policies, and developing its own technologies such as “Dual-circulation strategy” and “New Infrastructure Plan.” Ironically, increasing pressure from the U.S. is expected to further strengthen China’s R&D capabilities in advanced technology and accelerate its competitiveness in emerging industries. With the onset of the 4th Industrial Revolution, China is rapidly closing the quality gap and technology gap in major industries where Korea has a comparative advantage. If Korea does not adequately respond to changes, it may be difficult to maintain a comparative advantage over China. Thus, now that U.S.-China tensions are intensifying, Korea is facing a pivotal moment in determining the future path of its economy.
Topic:
Science and Technology, Sanctions, Investment, Innovation, Trade, and Strategic Competition
Political Geography:
China, Asia, North America, Korea, and United States of America

15973. Belt and Road Initiatives: China and South Korea's Economic Ties with South Asia and Nepal

Author:
Bama Dev Sigdel
Publication Date:
04-2020
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The main objective of this article is to assess the effect of the Belt and Road Initiative (BRI) in terms of economic interrelations between Asian countries mainly China, Korea, India and Nepal. China’s Belt and Road Initiative (BRI) is one of the most ambitious economic strategies in modern times that alters the economic, political and social relationship between Eastern and Western societies. It not only improves transport networks and facilitates trade, but also raises GDP of many economies. For China, BRI manifests its intention to become the next global power through bigger market access and economic opportunities. Although South Asia is less developed economically, it has high strategic utility for the BRI, which has drawn attention from China to deepen its relations in the region. On the other hand, South Korea has also emerged as a soft power in Asia. It has been playing a significant role in Asia by contributing the majority of its aid, i.e., 35 per cent in Asian economies and a major share of its FDI, i.e., 34.1 per cent. With the rapidly increasing growth of South Korea, it also has a growing relationship with ASEAN and other South Asian economies such as India to reduce its dependence on traditional trade allies. Moreover, for least developed economies like Nepal, the BRI can bring improved infrastructure, needed technology, managerial talents and greater connectivity to the world. South Korea can yield higher benefits through its relation with South Asia and especially Nepal through expansion of export and market access, access to cheap workable manpower to cope with its rising aging population, and less dependence on traditional allies through its investment in South Asian region.
Topic:
International Relations, Economics, Economy, and Belt and Road Initiative (BRI)
Political Geography:
China, South Asia, Asia, South Korea, and Nepal

15974. The Value-added Creation Effect of Global Value Chain Participation: Industry-level Evidence from APEC Member Economies

Author:
Innwon Park and Soonchan Park
Publication Date:
12-2020
Content Type:
Special Report
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
We analyze the value-added creation effect of GVC participation by applying a standard fixed effects regression model analysis with economy-wide country-industry data. We use OECD Inter-country Input-Output Tables covering 64 countries (21 APEC members and 43 non-APEC members) and 35 industries (1 Agriculture, forestry and fishing, 3 Mining, 16 Manufacturing, and 15 Service) between 2005 and 2015. We find that APEC member economies’ participation in GVC activities is not distinct from non-APEC member economies but the causal relationship between GVC participation and created domestic value-added is much stronger in APEC member economies. More specifically, from the qualitative evaluation on statistical data, we find that backward linkage has been stronger than forward linkage and both have been recently decreasing. The APEC industries’ upstream positions in production line have been slightly more distinguished than non-APEC industries. From the econometric regression analysis, we find that forward participation in GVCs is more desirable than backward participation in terms of creating domestic value-added. We also find that the industry position in middle stages of production line in contrast to earlier and later stages creates higher domestic value-added per output unit. This implies that the firm-specific conventional U-shaped “Smile Curve Hypothesis” is not applicable at the economy-wide country-industry level, especially in APEC member economies. This finding supports that manufacturing industries are still a major driving force for less developed APEC member economies to move up the development ladder. Considering that gains from GVC participation are diversified across industries and upgrading country-industry positions in GVCs is competitive among the interconnected countries, we strongly recommend for APEC member economies to construct effective domestic value chains and coordinate with other members during their process of upgrading GVC participation.
Topic:
Economies, Global Value Chains, and APEC
Political Geography:
Global Focus

15975. Measuring Convergences and Divergences in APEC RTAs/FTAs: a text-mining approach

Author:
Jeongmeen Suh
Publication Date:
12-2020
Content Type:
Special Report
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In this paper, I suggest that text mining analysis of regional trade agreements (RTAs) can be a suitable methodology to develop a tangible measure of convergence between RTAs. By utilizing well-established text similarity concepts in related literatures, I attempt to investigate how much RTAs in APEC are converging in terms of how much similar RTA texts are. Furthermore, which areas of RTA converge more or less will be examined. The main results of the study are as follows. The RTAs signed by APEC members are gradually converging over time, and they converged (in terms of 5-gram Jaccard similarity) at an annual average of 8% for all RTAs (both inter- and intra-regional) while 9.7% for intra-regional RTAs only. The areas that converged the most are service and transparency chapters, which show 2.2 times and 1.6 times higher level of convergence than the average, respectively. The objective and intuitive indicators of regional norm convergence are expected to provide a common understanding for setting goals and strategies for regional economic integration in the future.
Topic:
Treaties and Agreements, Regional Integration, Trade, Economic Integration, Regional Economy, and APEC
Political Geography:
Global Focus

15976. Financial Inclusion Through Fintech in the Digital Economy

Author:
Eunsook Seo and Kyeongwon Yoo
Publication Date:
12-2020
Content Type:
Special Report
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Since the 2008 global financial crisis, including the recent COVID 19 pandemic, low interest rates and low economic growth have continued around the world. In spite of this low interest rate trend, as the economic downturn prolongs, there is a situation of concern called the “new normal” of low interest rates and low economic growth, and low prices. In this new normal economic structure, the rapid progress of aging is increasing the necessity and desire for asset accumulation. In addition, digital finance such as Fin-tech with the evolution of the underlying technologies and the emergence of new technologies has replaced or improved many functions of existing finance in the advent of the 4th industrial revolution era. These changes are expected to bring benefits to the individual and corporate finance sectors, which have been subject to financial inclusion. On the other hand, digital finance, which is changing at such a rapid pace, may further isolate some individuals who were in the blind spot of finance, such as the elderly, and a support system for this is an issue that should be included in the policy of financial inclusion in each country. In this paper we find that Asian countries like other regions have achieved tangible results in financial inclusion while achieving financial deepening. When looking through various financial inclusion indicators such as holding accounts and loans, ATMs, and bank branches, the Asian region has achieved similar or superior performance to other regions. Compared to the income level, the growth of financial inclusion in Asia was found to be attributable to better performance in middle-income countries than in other similar regions. High-income countries in Asia are performing somewhat lower than similar peer groups in other regions, but this seems to be due to stagnation of growth. More seriously, financial inclusion in low-income countries in Asia is not appearing faster than in other income groups. In Asian countries there appears to be a wide variation in regional financial inclusion. However, Asian countries are expanding around the younger generation in the use of ICT technology that is helpful in spreading financial inclusion so if digital inclusive finance centered on Fintech is properly applied, Asian countries will become a new model for digital financial inclusion. However, since the gap in the use of Fintech in the region is large, how to fill this gap is being raised as an important policy task for each country as well as the whole region. We also tentatively examined the effects of financial inclusion and digital financial inclusion in the Asian region using the Asian country panel data collected from WDI and Global Findex data. Looking at the implications of the empirical analysis results even though it is very cautious to interpret the results of this analysis due to the lack of data of inclusive finance in Asia., first, the expansion of financial inclusion(such as ATM) in Asia seems to have some relationship with the reduction of poverty rates and income inequality which is measured with Gini coefficient. And the expansion of internet usage in Asia seems to have some relationship with the reduction of poverty rates and income inequality although we use it as the proxy variables instead of the digital financial inclusion variables. Lastly, the higher share of rural population which is used as a proxy for digital divide, which may occur due to the expansion of digital inclusive finance in Asia, has the potential to erode some of these achievements, but there is still a possibility that the expansion of inclusive finance will be effective. Despite the likelihood of success in digital inclusive finance in the future, digital divide spreads due to various gaps such as between urban and rural areas, between young and old, between low and high income, and between men and women, occurring in Asian countries and may worsen the performance of inclusive finance. Thus the governments in the region need to actively intervene to resolve these gaps. In addition, it is necessary to close the digital gaps that is occurring between countries through policy cooperation among APEC members. Considering the situation that the degree of development of Fintech in each member is expanding financial inclusion, it is necessary for Korean financial companies to set up an advancement strategy that focuses on the financially marginalized class based on the advanced system strategy of credit rating based on big data. Our analysis results will give some implications for the New Southern Policy. Personal and SME finance are very important business areas when financial companies currently enter the ASEAN region, and accurate analysis of each member' current status for Fintech or digital finance and financial inclusion should be given priority in terms of business expansion.
Topic:
Poverty, Financial Crisis, Finance, Income Inequality, COVID-19, Inclusion, and Digital Finance
Political Geography:
Asia and Global Focus

15977. An Uneven Welcome: Latin American and Caribbean Responses to Venezuelan and Nicaraguan Migration

Author:
Andrew Selee and Jessica Bolter
Publication Date:
02-2020
Content Type:
Special Report
Institution:
Migration Policy Institute (MPI)
Abstract:
The sudden mass movement of people fleeing political and economic crises in Venezuela and political unrest in Nicaragua has transformed the migration landscape in Latin America and the Caribbean. Approximately 4.8 million Venezuelans had emigrated by December 2019, the vast majority remaining in the region, and as many as 100,000 Nicaraguans have moved to neighboring Costa Rica since early 2018. This report examines how 11 countries—Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guyana, Mexico, Peru, Trinidad and Tobago, and Uruguay—are responding to the mass outflows. Drawing on extensive fieldwork and interviews with government officials and representatives of nongovernmental organizations, migrant-led groups, and international actors, the study analyzes efforts to provide newcomers with legal status and to integrate them into schools, health-care systems, and local labor markets—measures that are important for both migrants and the communities in which they are settling. Overall, receiving countries have shown openness and even creativity, providing legal status to many and access to basic education and emergency health care to most. But as the exodus continues and it becomes clear that large numbers of Venezuelans are likely to remain in their host countries in the mid- to long term, the initially warm welcome has begun to cool in places. Capacity constraints in many education and health-care systems, which existed prior to the arrival of large numbers of newcomers, have also become more acute. Looking ahead, the report sets out a range of recommendations for both receiving countries and the international community. Among them: balancing security and flexibility in entry requirements; strengthening asylum systems and other, more nimble legal pathways; and streamlining credential recognition so migrants’ skills can benefit local communities and economies.
Topic:
Education, Health, Immigration, Employment, Economy, Welfare, and Skills
Political Geography:
Latin America, Nicaragua, Caribbean, and Venezuela

15978. The Patchy Landscape of State English Learner Policies under ESSA

Author:
Leslie Villegas and Delia Pompa
Publication Date:
02-2020
Content Type:
Special Report
Institution:
Migration Policy Institute (MPI)
Abstract:
When the Every Student Succeeds Act (ESSA) was signed into law in 2015, it was hailed as a significant step forward for English Learner (EL) students. The law aimed to raise the profile of accountability for ELs, including in terms of their progress towards English proficiency and their performance in academic subjects. More than four years on, all 50 states, the District of Columbia, and Puerto Rico have submitted plans to the U.S. Department of Education describing how they intend to meet their commitments under ESSA. But despite anticipation of a clear vision for the future of EL education policy, these plans offer a rather fractured picture and considerable variation. This report provides a detailed breakdown of key aspects of EL education outlined in these state plans. It examines policies governing how students are identified as ELs, assessed, and eventually exited from EL status once they reach proficiency; how their academic achievement is tracked; and the extent to which they are included in state accountability systems. On the whole, the authors conclude, ESSA has fostered more consistency within (though not between) states on matters such as EL identification and reclassification procedures. However, the law has significant shortcomings in other critical areas. For example, it provides no guidance to states on how to address cases involving ELs who do not reach proficiency within the state-determined timeline. The complexity of ESSA’s state accountability framework—with elements pertaining to ELs scattered across it—can also make it difficult to understand how and how much ELs’ performance counts in school accountability ratings. While it is too soon to understand the full impact of ESSA on EL students' academic outcomes and English acquisition, the report points to a number of key areas that merit careful attention from education policymakers and researchers in the coming years.
Topic:
Education, Immigration, Law, Language, and ESL
Political Geography:
North America and United States of America

15979. Chasing Efficiency: Can Operational Changes Fix European Asylum Systems?

Author:
Hanne Beirens
Publication Date:
03-2020
Content Type:
Special Report
Institution:
Migration Policy Institute (MPI)
Abstract:
With new EU leadership having taken office in late 2019, Brussels is hungry for fresh ideas that will either revive or reform the Common European Asylum System. The scale and pace of asylum-seeker arrivals on European shores in 2015–16 pushed many Member State systems to a breaking point and brought into glaring focus problems—such as incomplete registration of new arrivals and lengthy case processing backlogs—that existed even before the crisis. Several years on, proposals to address these and other issues through reforms to the EU legal framework for asylum have stalled. Yet, this has also been a period of intense innovation at the national level. Member States have tested new or revamped old ideas to improve the operation of their asylum systems—how they register those seeking protection, offer them reception and material assistance, investigate their protection claims, and then, if their cases are rejected, return them to their origin countries. This MPI Europe-Bertelsmann Stiftung report examines these Member State responses and the wealth of lessons, as well as some cautionary tales, they offer as European leaders contemplate future changes. Among the innovative approaches are the creation in Germany and France of “first-arrival centers” to swiftly register and secure accommodation for newcomers, Swiss “processing centers” that bring together all stakeholders involved in the asylum procedure to make high-quality decisions more quickly, and the Dutch and Swedish “triage” or “track” systems that assign incoming cases to tailored asylum procedures. Understanding this operational dimension—the nuts and bolts of EU asylum systems—is essential for efforts to secure durable improvements. As the author writes, “The era of using (purely) legislative reform to attempt to fix European asylum systems and preserve the integrity of protection regimes has come to an end; the future lies with policy-making approaches, such as a strategic roadmap, that mobilize the full set of tools available.” This is the final report for the Making Asylum Systems Work in Europe initiative, which aims to contribute to efforts to build the capacity of national asylum systems and improve cooperation between EU Member States.
Topic:
International Cooperation, Governance, European Union, Refugees, and Asylum
Political Geography:
Europe

15980. Immigration and U.S. National Security: The State of Play Since 9/11

Author:
Amy Pope
Publication Date:
04-2020
Content Type:
Special Report
Institution:
Migration Policy Institute (MPI)
Abstract:
The wide-ranging reforms that followed the September 11, 2001, attacks on the United States significantly strengthened the national security capabilities of immigration agencies. The U.S. Department of Homeland Security (DHS) was created to bridge gaps between the intelligence community and immigration functions. Yet, the restructuring was not comprehensive, and threats to national security continue to evolve. In addition, while the tendency to frame immigration policy through a security lens predates the Trump administration, this now routine practice clouds the picture of who and what pose a threat. This report takes a critical look at the increasingly complex security threats U.S. immigration policy must manage—from public-health emergencies, such as the coronavirus (COVID-19) pandemic, to the activities of transnational criminal organizations. It assesses the tools available to respond to these threats, and the successes and challenges to date in innovating as risks evolve. To do so, it traces the evolution of the country’s immigration and border control system, with a focus on how institutions and processes have developed since 9/11. While the U.S. government has made important progress in shoring up weaknesses in its defenses at the nexus of immigration processes and national security, this analysis identifies a number of critical gaps that remain—from a need to more clearly define mission space, to effectively sharing information and transitioning to electronic-based systems. Under the Trump administration, resources and political will have also been steered away from core DHS national security missions, including disaster response, cyber security, and general policy and planning in favor of immigration enforcement measures focused on low-risk unauthorized migrants and asylum seekers. The challenge ahead, the author writes, is to “rebuild the department’s credibility at home and with foreign partners, while recalibrating resource allocations and strengthening its capacity to respond to and manage the most pressing national security threats.” This report is part of MPI’s multiyear Rethinking U.S. Immigration Policy initiative, which aims to generate a big-picture, evidence-driven vision for the role immigration can and should play in America’s future. To learn more about the initiative and read related research, check out the initiative's home page.
Topic:
International Cooperation, National Security, Immigration, Infrastructure, Governance, Border Control, Refugees, Resettlement, and Asylum
Political Geography:
North America and United States of America