This study measures the trade in value added using the World Input Output Tables and the socio-economic accounts of 40 countries and 35 industries from 1996 to 2009. Specifically, this study analyzes the effects of trade on the value added, based on Meng et al. (2006), WTO and IDE-JETRO (2011), Stehrer (2012), Stehrer et al. (2012). The measurement results indicate that export and import values in value added turned out to be smaller than the values in gross value. However, the trade balance in terms of value added does not necessarily shrink compared to the bilateral trade balance in terms of gross value.
This study also investigates the determinants of trade in value added, incorporating the gravity model, the Heckscher-Ohlin model, and the Ricardian model. When we use the data on trade in value added, the explanatory power of the gravity model turned out to be relatively small compared to the pooled data on trade in gross value, but that of the Heckscher-Ohlin model turned out to be stronger while the Ricardian model revealed mixed results. Interestingly in our investigations, the elasticities of the Heckscher-Ohlin as well as the Ricardian parameters have been increasing while that of the gravity model has remained stable during the period 1996-2009. This result implies that trade patterns can be better explained by factor endowment and technological differences during the 2000s compared to the 1990s.

Preface Contributors Introduction and Overview Part I. Financing Economic Integration and a Regional Multilateral Bank: Keynote Papers on the Northeast Asian Bank for Cooperation and Development (NEABCD) Advancing of the Establishment of the NEABCD / Byungwon Bahk Toward the Northeast Asian Bank for Cooperation and Development / Jin Liqun and Zhang Zhixiang Part II. Financing Economic Integration and a Regional Multilateral Bank: Research Papers on the NEABCD Creation of a Joint-venture Bank by China, Japan and Korea / Jai Min Lee 1. Introduction 2. Financial sources for development projects and NEABCD 3. Creation of a joint-venture bank by China, Japan, and Korea 4. Conclusion 5. References Re-thinking the Northeast Asian Bank for Cooperation and Development (NEABCD) as an Effective Regional Development Framework / Jae Hyung Hong 1. Background 2. Rationale for the Northeast Asian Bank for Cooperation and Development 3. Various Models of NEABCD 4. Issues Associated with NEABCD 5. Prospects for NEABCD 6. References Cross-border Projects in the Northeast Asia: Experience, Prospects and Perspective from the Proposed New Financial Institution for Northeast Asia / Liu Ming 1. Introduction 2. The basic theory of cross-border cooperation 3. Cross-border Projects in Northeast Asia: A Brief Review 4. The Role of the Proposed Northeast Asian Bank for Cooperation and Development 5. Appendix: Illustrative Projects Financing Cross-Border Infrastructure of Coastal Cities of Japan and Korea: Pan East Sea Economic and Logistics Cooperation as the Third Step for Northeast Asian Era / Jung Duk Lim and Yul Seong Kim 1. Introduction 2. Review on Economic Cooperation in NEA 3. Pan East Sea Economic Cooperation as a New Engine for NEAEC 4. Role of Busan as a Regional Hub 5. Conclusion 6. References China’s Development in the Financial Sector in the Context of the Proposed NEABCD / Tu Hong and Zhang Jiangping 1. China’s Development in the Financial Sector 2. China’s Challenges and Risks: Near-Term Issues 3. Long-term Challenges and Risks in Demographics and Energy 4.Changing Dynamics in Asia-Pacific Region and Prospects for establishing the Northeast Asian Bank for Cooperation and Development (NEABCD) 5. Conclusion Proposal for a Northeast Asian Bank for Cooperation and Development (NEABCD) / Lee-Jay Cho 1. Background 2. Northeast Asia: Regional Characteristics and Factor Endowments 3. Developing Regional Cross-border Infrastructures 4. The Rationale for a Northeast Asian Bank for Cooperation and Development (NEABCD) 5. Capital Requirement: Who Pays? 6. Some Economic and Political Implications: Economic partnership and regional security 7. Conclusion Appendix

The Northeast Asian region, despite the recent changes in political leadership in the major countries of China, Japan, Korea and Russia, is still one of the most dynamic economic centers of the world. With its own capital resources and advancing technology along with enormous resources in Russia and Mongolia, and productive linkages to the Pacific and North America, the region continues to play a pivotal role in the global economy. Even with the phenomenal economic growth in the region in recent decades, regional security and stability has been fragile, mainly attributable to the geopolitical conditions resulting from the Cold War era. Northeast Asia is one region of the world where a formal regional institutional mechanism comparable to the European Union or ASEAN has yet to be developed. Yet, it is crucial for the Northeast Asian countries to continue to promote region-wide cooperative projects. The northeastern part of China, North Korea, Mongolia, and the Russian Far East together constitute an area that is well-endowed with natural, energy and human resources. As the three major countries of China, Japan and Korea are heavily dependent on energy imports and are highly vulnerable to energy crisis, Northeast Asian region needs to realize the importance of cross border infrastructure developments. Financing requirements for the necessary cross-border infrastructure are likely to be large, and a regional financial institution is a key to meeting that financing need. This volume, fourth in the series of proceedings volumes titled, Financing Regional Economic Integration and Functional Cooperation for Northeast Asia: A Multilateral Financial Institution for Northeast Asia, presents the results of the project implemented in 2012 to develop a regional institutional arrangement for financing cross border infrastructure developments and thereby regional economic integration.

Executive Summary 

Chapter 1. Introduction 

Chapter 2. The EU Development Aid in a Historical Perspective 
1. Introduction 
2. The Phases of Change 
3. The Beginnings and Expansion of EU Development Aid 
4. Crisis and Reform 
5. Towards an EU Development Policy 
6. The Process of Europeanisation–Towards More “Europe” in Development Policy 
7. The Emergence of a European Strand of Development Policy 
8. A Productive Dynamic 
9. The Key Role of the European Commission  
10. The EU Development Policy at a Crossroads 
11. The Limit(s) of Europeanisation  
12. The Impact of the Lisbon Treaty 
13. The New Phase of EU Development Policy 
14. Conclusion 

Chapter 3. European ODA Policy through the European Parliament
1. Introduction 
2. Legislation of the European ODA and the Role of the European Parliament 
3. ODA Policy Making in the European Parliament  
4. ODA of the European Institutions: Complimentary or Competitive to National ODAs? 
5. Conclusion 

Chapter 4. German Development Assistance 
1. Abbreviations 
2. Introduction 
3. The German Economy
4. Introduction to German ODA
5. History 
6. Principles and Aims 
7. Politics 
8. Recipients  
9. ODA Organisation within Government 
10. How German ODA Works 
12. Topics and Challenges 
13. Conclusion 

Chapter 5. French Policy of Development Cooperation 
1. The French Cooperation until the 1980s 
2. The Transformations of the ODA System in France 
3. Conclusion 

Chapter 6. Chinese Aid and Investment in Africa 
1. China as the Largest Trading Partner of Africa 
2. Chinese Overseas Direct Investment 
3. Chinese Aid to Africa 
4. Perspectives 

Chapter 7. The World Bank and Development Policies in Vietnam 
1. Imposing the ‘Washington Consensus’ in Vietnam: an Impossible Challenge for the World Bank 
2. The Political Economy of the Relationship between the World Bank and the Vietnamese Authorities: Mutual Interest but Different Objectives 
3. Conclusion 

Chapter 8. Development Aid to North Korea 
1. Analysis of the Aid System in DPRK: Between International Norms of Result Based Management and Adaptation to the National Environment 
2.The Process of Mutual Learning and Trust Building between Donors and Beneficiaries 
3. Capacity Building in DPRK: The Transition from Humanitarian Intervention to Development Aid 

Chapter 9. Conclusion 

This volume represents the effort to help formulate a Korean model of development cooperation. The chapters herein provide potentially important lessons that Korea should take into account. Korea is playing an increasingly important role in global development policy. Because the EU has been involved in this field for decades, it might be helpful for Korea to analyze EU's experience and draw some of the lessons from the EU’s evolution and challenges as a development actor. Furthermore, Korea and the EU are likely to increasingly work as partners in the field of development, notably as part of the Busan Partnership. Therefore, better understanding how the EU works in the field of development should be interesting for Korea, and should ultimately help improve the quality of partnership.
From the role of European Parliament regarding ODA, Korea can draw lessons as follows. First, as in the case of the EU whereas the Korean government and its development agencies play a key role of planning and execution, the Parliament of Korea should play a role of an anchor. Second, the scattered governance structure in the government needs to be integrated. Third, it is desirable that Korea’s laws allow flexibility in terms of legislation, for example, in certain specific areas concerning the portion of tied and untied ODAs.
The Federal Republic of Germany has a strong tradition of giving ODA and much experience and knowledge to share with Korea. During this important start-up phase of Korea's ODA practice, it makes sense for the Korean government to look to and learn from other countries for best practice examples. Certainly, some aspects of the German situation are comparable to that of Korea, including its history of going from aid recipient to donor, its regional economic and trading strength, a complex and strong manufacturing industry, few legacies from colonialism and a stable and strong democracy supported by sound financial structures. In addition to those similarities, many of the challenges facing Germany are also problems Korea must deal with, as most of today's issues are of a global scale. Along these lines, Germany could be a role model with respect to Korean ODA in the following areas: political structures and organization, financing, development policies and strategies, and finally, measures to improve efficiency and effectiveness of ODA both within the country and on site.
It seems also that South Korean politics of development assistance should initially consider the French experience, particularly in Africa. Much knowledge has been produced on this continent, specifically on major demographic and economic challenges facing most African countries south of the Sahara. On the other hand, it would be useful if aid policies proposed by Korea are known and implemented in discussion with the French and European authorities by registering in consultation frameworks in African countries, as well as within DAC/OECD, in order to avoid the risk of opacity that currently exists with other emerging donors such as China.
As Africa denounces the impact of Chinese competition on employment, Korea should be wary of opening its market to Africa. While African governments appreciate the amount of Chinese aid, they criticize the fact that it is tied to Chinese exports, and African NGO denounces its opacity and its lack of concern on environment. As a country that advocates green growth, Korea should maintain its good image in the future as well. Korea should aim at providing budget support and untying its aid to Africa.
The analysis of the World Bank’s aid policy in Vietnam raises important issues related to Korean development aid. The question of what Vietnam needs the most, money or knowledge, has to be asked by Korea as well as by the World Bank and other donors. Indeed, successful Korean development policies conducted over the past decades could undoubtedly keep on inspiring Vietnam as they have in the recent past. Another major issue is Korea’s coordination with the World Bank and with other donors, now that it has joined the Development Aid Committee, especially concerning the breakdown between budget aid  and projects.
North Korea as a case study shows how Korea can collaborate with “traditional” donors and how they accept or reject the principles promoted by multilateral organizations. It compares the approaches of different Western and “new” donors, and shows how aid is implemented in the field taking into account the obstacles to optimal effectiveness.

In this paper, we try to draw notable implications and find ways to improve Korea's ODA policy by analyzing the system of European countries, who have accumulated experience and knowledge over a long period of time.
Chapter 2 examines the variation of EU Member States' ODA spending and studies the factors that determine the size of ODA. According to the results of the analysis, we were able to conclude that the impact of temporal changes in political and economic state on ODA size is insignificant. For this reason, it is likely that the decline in ODA following recent European recession and contraction is temporary. On the other hand, if we take into account that income level and long-term paradigm of government operations are significant factors, the pressure within Europe to achieve 0.7% ODA/GDI target ratio can be expected to continue. Thus, it can be said that an increase in Korea's ODA reflects country's economic, political, and social advancement. However, we still need to check whether abrupt quantitative expansion corresponds to general economic and political factor or not. An integrated ODA policy that pursues not only a simple quantitative increase in ODA but also an internal maturity such as enhancing country's stature, political and economic democracy, and civil society is required.
In Chapter 3, we carry out a comparative analysis on aid management system of European countries and find implications for Korea. Through studying France, Austria, and Portugal's case, we realized that assistance enforcement integration brings in enhanced ability to enforce and synergy effect via improving cost-efficiency, preventing overlapping businesses, and combining similar ones. Hence, according to such finding, it seems advisable to reform Korea's ODA policy to "division of policy and integration of implementation" form. This seems to be the most feasible and segmentation problem solving measure considering Korea's ODA size, operating system, and characteristics of aid types.
Chapter 4 is about drawing political direction and improvement method for promoting ODA efficiency from the application of EU's experience. European countries' Country Partnership Strategies (CPS) course of actions are closely linked in the following order: general plan, enforcement plan, and budget plan. And its' multi-year plan is established considering mid- to long-term characteristics of ODA project. Therefore, in order to increase the effectiveness of ODA as European countries and manage the ODA projects systematically, we need to establish mid-to long-term ODA rolling plan through performance-based budget allocation and we should also take a step to allow rolling over residual budget.
In Chapter 5, we try to find lesson for Korea by studying the system transformation case of Europe (EU's support to East Germany, the EBRD 's assistance for the system transformation of East-European bloc, and the support for East-European bloc to join EU.) Among these cases, support for East-European bloc to join EU, in specific, suggests implications on how South Korea can provide assistance to North Korea in case it ultimately aims for the unification. The most fundamental task of unification is to narrow down the gap between the two countries' productivities and institutions to a certain level. However, we should not forget that the satisfying of convergence condition does not depend only on North Korea but that both sides of Korea need to take a responsibility.

During the seven years from 2002 to 2008, Japan had experienced economic boom and expected that it could recover from the so-called “lost two decades”. Japan’s hope, however, was dashed when the global financial crisis disrupted the entire global economy in 2008. Since the global financial crisis, the Japanese economy has suffered from economic downturn and the Japanese government has been trying to come up with policy responses to maintain economic growth. This paper provides some information as to the efforts the Japanese government has made to fight against the economic turmoil caused by the global financial crisis.
In the paper, we have reviewed Japan’s five urgent policy issues. First, we examined the continuously diminishing competitive edge in Japan’s manufacturing sectors. Second, we have surveyed negative effect of the downsizing domestic market and the government’s efforts to expand domestic demand by developing new growth industries, such as green and life industries. Third, we have reviewed Japan’s efforts to reform the tax system and social security system simultaneously to attain fiscal sustainability and institutional soundness in each system. Fourth, we have analyzed Japan’s trade and FDI policy and assessed it. Finally, we have reviewed Japan’s new energy policy which is being given form after the Fukushima nuclear power accident. We especially focused on Japan’s nuclear power policy, new and renewable energy policy and structural reform in the electric power industry. In the paper, we have also suggested some policy implications for Korea in each policy issue.