This study revisits and investigates the effects of non-tariff measures on trade flows from a theoretical and empirical viewpoint. First, the theoretical framework provided in the paper shows that the changes of trade patterns with regard to introduction of non-tariff measures by the importing country depend on the relative changes of compliance costs between importing and exporting countries. In particular, it is suggested that the introduction of high standards in developed countries may impose higher compliance costs on producers in developing countries than those in developed countries. In such a case, imports of developed countries from developing countries will decrease. The corresponding empirical analysis investigates the effects of non-tariff measures, primarily SPS and TBT, on imports in eight industries – agriculture/fisheries, mining, textile/garments/other, chemical, metal/non-metallic minerals, transport equipment, electronics and machinery, using the UNCTAD non-tariff measures database. The results are as follows. The effect of SPS measures on imports is significantly restrictive in the agriculture/fisheries and textile/garment/other industries. TBT measures are also trade-restrictive in most industries except for electronics. Further analysis to explain why the electronics industry poses such an exception shows that while TBT measures in electronics play a restrictive role in imports of developed countries from developing countries, they perform a promoting role the other way around. Such results are in line with theoretical predictions and imply with caveat that not all non-tariff measures in certain industries serve as barriers. 

  The year 2017 marks the 40th anniversary of diplomatic relations between Korea and Sri Lanka. Located in the Indian Ocean, Sri Lanka is a small island nation with a population of about 20 million. The country has seen high economic growth and poverty reduction since 2009, when the civil war ended after 30 years. Elected in 2015, President Sirisena of Sri Lanka is pursuing national development that focuses on sustainable growth. In this regard, President Sirisena recognizes climate change as a major challenge in the implementation of national development initiatives. In particular, atypical rainfall patterns have intensified over the last three years, causing damage to agricultural productivity, hydro power generation, and water-related health sectors.
  Since the opening of diplomatic relations in 1977, Korea and Sri Lanka have continued active human and material exchanges. Sri Lanka is also one of Korea’s ODA priority partnership countries. Thus, the Korean government has formulated a detailed strategy on cooperation with Sri Lanka. Sri Lanka is one of the top 10 ODA recipients for Korea. Likewise, Korea is the second largest bilateral donor for Sri Lanka. At the summit held in commemoration of the 40th anniversary of relations between the two nations, Korea pledged to expand its bilateral cooperation, in the form of EDCF assistance and grant activities through KOICA, with Sri Lanka by 2019.
  Under such circumstances, this study was conducted to guide further cooperation with Sri Lanka, mitigating the adverse impact of climate change and promoting sustainable development. The study focuses on Sri Lanka’s climate change policies and related needs, as well as its national development priorities. We also conducted a thorough review on major donors’ cooperation activities and policies, including those of Korea. Most importantly, detailed on-site interviews with major stakeholders were carried out. Through in-depth case analyses of major bilateral and multilateral donor organizations, we attempted to seek the policy direction for climate change assistance and formulate a performance management framework for Korea.
  The report is composed of the following chapters: In Chapter 2, we first provide an overview of Sri Lanka's national economic, social, and environment circumstances. We scrutinize recent development plans in Sri Lanka, such as the National Economic Development Plan for Sustainable Era, the Public Investment Plan 2014-2020, and Vision 2025. By reviewing the documents, we sought to observe how climate change is received and integrated into the policies. Our results indicate that Sri Lanka perceives climate change as a cross-sectoral issue. Sri Lankans recognize the adverse impact of climate change and are pursuing countermeasures in various areas.
  Chapter 3 identifies projections and vulnerabilities to climate change in Sri Lanka. We analyzed the climate policies and climate-related needs of Sri Lanka accordingly. Sri Lanka has drafted detailed climate change policy documents to implement the agreements made under the United Nations Framework Convention on Climate Change. Vulnerabilities and areas demanding support were identified through a rich analysis of documents, including national climate change policies, greenhouse gas reduction and adaptation plans, technology needs assessments, and Nationally Determined Contribution (NDC). We were able to conclude that Sri Lanka has a more urgent need to adapt to climate change than to reduce greenhouse gas emissions. The areas significantly impacted were the food sector – including agriculture and fisheries, water resources, health, coastal and marine environment – and biodiversity.
  In Chapter 4, we reviewed the status of international support to Sri Lanka and examined various related issues. The chapter first looks at ODA support to Sri Lanka, including in regards to climate change, through the OECD DAC Rio Markers. In the following section, we analyzed the assistance policies implemented by donors, namely Japan, the United States, Asian Development Bank (ADB), World Bank, and United Nations Development Program (UNDP). All of the donors recognized Sri Lanka as being vulnerable to climate change and identified climate change as a barrier to the country’s development. Furthermore, we observed that climate change is often addressed as a cross-sectoral issue which the donors treated with different weight, measures and strategies.
  Chapter 5 provides an overview of existing bilateral cooperation between Korea and Sri Lanka and examines performance in this area. Korea has identified Sri Lanka as a priority cooperation partner and, therefore, developed a dedicated cooperation strategy. The first and second Country Partnership Strategies (CPS) for Sri Lanka consider climate change as a risk factor. Nevertheless, climate change is supported in an ad hoc basis, without a systematic assistance framework. Consequently, the amount provided to climate-related aid is nominal.
  Building on the lessons gained from the previous chapters, Chapter 6 seeks to lay out a direction for Korea’s future cooperation with Sri Lanka, with emphasis placed on climate change. We also suggest that a proper performance management framework is essential to increase climate-related support to Sri Lanka. The main points of Chapter 6 include the following.
  First, we proposed agriculture, water supply and management, and disaster management as the most significant and prospective sectors for bilateral cooperation. We also suggested to consider a multi-sectoral and integrated approach where projects with a focus on mitigation and adaptation can merge with one another. Potential projects and programs can take the form of partnerships with active bilateral and multilateral donors in Sri Lanka. Such partnerships will facilitate the use of expertise and experience by these donors and also improve the accessibility of significant climate funds, such as the Green Climate Fund.
  Moreover, it will be necessary to establish a performance framework for climate-related aid, learning from the previous and current CPS for Sri Lanka, which lacked specific goals, baselines, targets, and climate consideration. Some donors, namely the United States, identified climate risks from the design-phase, carried out impact assessments, and took appropriate measures, if deemed necessary. In addition, indicators specific to climate change can be produced and utilized to enable effective management of performance.
  In the long-term perspective, Korea should progress toward the mainstreaming of climate change in its international development cooperation. Korea must also establish a system for performance management. Such actions are the starting point for quantitatively increasing climate-related aid to Sri Lanka. More importantly, it is a crucial transition that Korea must achieve in order to enhance the effectiveness of its activities in international development cooperation. 

  With an understanding that economic integration and reunification of North and South Korea should be accompanied by structural reforms of the two Koreas’ industries and industrial development of North Korea, this paper aims at drawing a competitive industrial map of the Korean Peninsula and exploring ways to restore North Korean industries and grow its economy.
  In order to maximize economic integration and economic benefits from unification, reforming disparate industrial structures of North and South Korea is necessary to create a synergy effect. In other words, as their economic power and institutions are different from each other, the two Koreas have to make industrial reforms in a reasonable way to create a favorable environment for unification and develop industries with growth potential in North Korea.
  North Korean industries are expected to face changes from three perspectives. Firstly, with economic sanctions from the international community rising, the North will continue to change its industrial policy depending on 'external factors'. Secondly, North Korea's industrial policy in the future will focus on normalization of leading industries and improvement of internal efficiency. Thirdly, with investments from other countries and Sino-North Korean economic cooperation limited, the North will face a dilemma between its planned economic system and a market-oriented economy.
  To restore North Korean economy and achieve its sustainable development, the following measures are required.

  a. Finding and nurturing industries that will lead economic growth
  b. Coming up with methods to attract investment to expand production and supply capacity
  c. Enhancing growth potential by expanding SOC facilities
  d. Fostering labor intensive industries to strengthen social safety net that lead to both economic growth and enhanced welfare
  e. Developing export and basic industries based on establishment of a special zone or an industrial complex of local specialization
 
  Directions for inter-Korean industrial cooperation and industrial reform in preparation for unification will have to focus on early economic recovery and industrial normalization of North Korea, while focus on strengthening competitiveness of South Korean industry through building a structure of division of labor that can make a win-win situation.
  From a mid and long-term perspective, these should be pursued with consideration of balanced land development of the Korean Peninsula, enhancing regional  cooperation, formation of an economic community and economic integration of North and South Korea. They also have to consider association with establishment of a Northeast Asian economic bloc.
  To this end, the North will have to implement comprehensive and vigorous reforms and make large-scale investments on most industries. It will also have to foster new industries through privatization of state- owned properties, while attract foreign direct investments to nurture new industries, and establish a division of labor system in relation to South Korea’s key industries.
  This paper points to promising industries in North Korea after unification. Firstly, light industry exports like textiles and clothing, ICT manufacturing and service industries, and food processing and daily necessities industries targeting expanded domestic markets will lead growth in North Korea.
  Secondly, the service industry along with the light industry will have to play a leading role in creating jobs in the North shortly after economic integration.
  Thirdly, with demands for construction rising, the construction industry and related industries including construction materials like machinery, cement and plastic products should be nurtured as one of short-term growth industries right after unification.
  Fourthly, the machinery industry will be one of key industries of North Korea for a mid and long term period based on a comprehensive industrial base. Fifthly, the materials industry such as steel and chemical industries have to experience a limited modernization through rapid and powerful reforms on relatively competitive sectors.
  Sixthly, while restructuring and fostering existing industries, industries of new or advanced technologies that have an advantage to enter into the North region have to be developed so that the foundation for North Korea’s mid and long term economic growth can be established. 

Acknowledgements

Notes on the Contributor

The Tourism Industry in Arab Spring: Effects and Perspectives
Chokri MAKHLOUF
Ⅰ. Introduction
Ⅱ. Tunisia and the Impact of the Jasmine Revolution
Ⅲ. Recommendations
Ⅳ. Conclusion

References 

   The disturbance of Arabic countries especially in the MENA region called the “Arab Spring” has had a direct impact on the tourism industry of the Arab region. Volatile events, instabilities, political turmoil and extremism present the tourism industry with significant challenges. But in any event, future developments will depend in any case on the security situation in the country, as tourism is certainly a sector with many advantages in terms of foreign investment and foreign exchange. At the same time, it is a very sensitive sector. The slightest social upheaval, the smallest popular movement, these all have incalculable effects on the sector.
  Tunisia is an excellent example of what can happen to the tourism industry in such cases. This paper explores first the effects that the Arab Spring has had on tourism industry performance. We aim to identify the influence that events of the Arab Spring had on tourism in Middle Eastern and North African States, namely by examining the cases of other countries such as Egypt and Tunisia in comparison with Morocco and the United Arab Emirates.
  Finally, the study examines the policies and strategies adopted by Tunisian governments in order to mitigate the crisis in the evolving tourism sector, and to develop recommendations on how the tourism industry can recover from the Jasmine Revolution.  

  This study focuses on analyzing China, India and Singapore’s driving capability for the 4th industrial revolution (4th IR), related national policies, plans, or strategies, etc. In addition, this study suggests implications and directions for the development of policies related to the 4th IR by the Korean government and the strengthening of cooperation with each of these three countries.
  As expected, in terms of driving capability for the 4th IR, although there is still a significant gap between the U.S. and the three countries above, overall both China and India are in a higher rank in the areas of R&D, innovation cluster, and start-ups, relative to other developed countries except for the U.S. India and China also ranked first and second as the best global R&D investment destinations, while in the first half of 2017, the number of unicorn companies by country was the largest in the order of China, Britain, and India, next to the U.S. Meanwhile, Singapore is ranked the highest for digitalization and flexibility.
  Based on these capabilities, the three countries have been actively preparing for the 4th IR in various ways. First, China’s national policy framework consists of its Manufacture 2025 and Internet Plus strategies, and the promotion of Artificial Intelligence (AI) programs, with a focus not only on promoting investment, but also enhancing firms’ innovation capability by establishing incubating facilities, a credit management system, and improving protection for intellectual property rights. Thanks to this, many Chinese unicorn companies have been born in the fields of finance, O2O, and shared economy services. In addition, innovation cooperation with the U.S., Germany, and Israel has been enhanced, increasing opportunities to utilize developed nations’ advanced technologies and experiences in the areas of smart manufacturing, science and technology.
  Second, India focuses on developing IoT (Internet of Things) technology and related projects as a priority. In particular, NASSCOM, a private IT organization, has established an innovation center called CoE-IoT in cooperation with the Indian government, creating an IoT ecosystem through incubating and accelerating start-ups, supporting technology and human resource development. Additionally to promote an IoT ecosystem in an effective way, the Smart City Project has been under development as a test-bed for IoT technology-based start-ups to test and apply their solutions or services. Meanwhile, Aadhaar, the world’s largest biometric digital authentication platform, is another flagship project for the 4th IR. This platform is already being used in various public and private services in India. India is also making up for its lack of domestic investment by working with multinational companies such as Cisco, Bosch and Intel. In particular, Cisco has developed a Smart City integrated platform called City Digital Platform, developing various solutions in cooperation with major cities such as GIFT City and Jaipur, as well as the City of Telangana state government.
  Finally, Singapore has been pursuing its Smart Nation Initiative since November 2014, in line with the 4th IR. The Smart Nation Initiative aims to make Singapore the world’s first smart country by 2025. The Smart Nation Initiative of Singapore is directly led by the Prime Minister’s Office and is supported by the Smart Nation Platform (SNP), Government Technology Agency (GovTech), National Research Foundation (NRF), among others. In particular, the Singapore government supports the Initiative through a master plan like the Infocomm Media 2025 and Research, Innovation and Enterprise 2020 Plan (RIE 2020 Plan), and has been committed to fostering the world’s best start-up ecosystem. To lead the development of the world’s smart cities, NRF is developing the Virtual Singapore project in joint with the French Dassault Systèmes. Singapore also launched FinTech Bridge with the UK as a part of its efforts to build a Smart Financial Center and a Global FinTech Hub. At the same time Singapore is developing and operating a POLY-GOES-UAS program with German small and medium businesses with the world’s best competitiveness to nurture young talent in advanced technologies and cross-cutting technologies.
  Based on the above, this study suggests the following policy implications. We need to 1) focus on innovation R&D and cluster internationalization, 2) strengthen the R&D base in India, and 3) create and globalize a sustainable innovative start-up ecosystem.
  In addition, this study presents the following cooperation directions and policy tasks in respect to the three countries above. First, we need to enhance selective and strategic cooperation with China in the aspects of competition and response via the following strategies: 1) strengthening R&D projects for original technologies in new technology and industry areas, thus focusing on early commercialization and standardization; 2) developing strategies to actively utilize digitalized consumers in China and protecting domestic digital consumers and cross-border personal information; 3) advancing into the areas of 5G, smart manufacturing and robot-related fields in China; 4) enhancing collaboration in terms of internationalization of innovative entrepreneurial ecosystems; 5) pursuing agreements to address the issues of technology deception and technical protection.
  Second, we need to enhance all-round convergence and win-win cooperation with India through the following channels: 1) early enhancement of core SW technologies such as artificial intelligence, embedded and cloud computing via using India’s excellent SW, IT service capability; 2) taking advantage of India’s Big Data resources, including Adhard, the world’s largest digital personal authentication system; 3) participating in smart manufacturing, digital infrastructure development with new technologies and products related to smart city, cooperation between start-ups in both countries; 4) to do this, we will need to consider utilizing the Vision Group of Korea-India Future Strategy’ and 5) creating a Korea-India Innovation Venture Fund.
  Lastly, with Singapore, we need to strengthen innovation cooperation in policies and systems, education, R&D, and entrepreneurial ecosystems that underpin the 4th IR. To do this, the following tasks will be necessary: 1) benchmarking the Virtual Singapore, Mobility 2030 initiatives, smart home solutions, and health hub programs, which Singapore is developing together with France’s Dassault Systèmes and considering a joint R&D if necessary; 2) exploring active cooperation projects with the Singapore National Research Foundation (NRF), the Science and Technology Research Agency (A* STAR), and 14 test-beds; 3) establishing a partnership channel with BASH, Singapore’s largest innovation entrepreneurial community, and SGInovate, which operates BASH; 4) promoting cooperation between Korean and Singapore Start-Up, which is involved in FinTech and Smart City businesses. 

  E-commerce is the sale or purchase of goods or services over the Internet or computer network. Despite the importance of e-commerce market, existing papers in Korea have only covered with basic analysis including the size and growth of e-commerce market in Korea. We do not know whether e-commerce activity substitutes or complements existing trade in goods, or whether it creates or destroys jobs. More fundamentally, we do not know the differences between e-commerce firms and non-e-commerce ones.
  The first goal of this study is to characterize the e-commerce market in Korea. To show the characteristics of e-commerce market in Korea, we collect the 2010-2016 e-commerce data provided by the Korea Customs, the online shopping trend survey from 2000 to 2016 by the Korea Statistics, and the 2000-2016 reports (including micro-data from 2013 to 2015) from National Information Society Agency, the e-commerce reports and data from 2010 to 2015 by the US Census, and other referenced data in reports including UNCTAD and market agencies. We have carefully summarized and compared the latest trends and features of the e-commerce market in Korea, having the scope of each dataset in mind. We also provides some caveats in interpreting figures in e-commerce import and export data from the Korea Statistics and the Korea Customsin order not to misguide readers in interpreting the different values between them. Many interesting features of the e-commerce market in Korea are included in the study.
  This study aims to characterize global B2C e-commerce by firms in Korea and to examine the impact of e-commerce on international trade. Using export statistics through e-commerce provided by Korea Customs, we reportthe proportion of SMEs engaging in global B2C e-commerce exports is high compared to that in traditional exports in goods. The total volume exported through e-commerce has been rapidly increasing while the price of goods in e-commerce transaction has been decreasing since 2014. Traded goods via e-commerce consist of mainly consumption goods. They are replaced more frequently compared with traditionally traded goods. Next, we examine the relationship between digital intensity and international trade by using, in industry-level, digital intensity as a key independent variable and total export value as a dependent variable (which is decomposed into average export value and number of goods and ICT development index as one of the control variables. We show that the higher the digital intensity, the greater the total export (as well as average export value and number of goods), implying that e-commerce has a positive impact on exports in goods.
  This study also aims to examine the impact of e-commerce on employment by using the Korea Census. We conduct empirical analysis at industry-level and firm-level. At industry-level, we build variables for job creation and destruction of Korea (Davis and Haltiwanger 1992) and digital intensity and do the OLS and Quantile regression. We find no evidence that there is a relationship, on average, between digital intensity and employment growth rate/job creation in manufacturing. This holds true in different quantiles. On the other hand, there is a positive relationship, on average, between digital intensity and employment growth rate/job creation in services industries. Lastly, we find that there is no relationship between digital intensity and job destruction in both manufacturing and services industries.
  At firm-level, we construct a new dataset from the Korea Census by using propensity score matching technique (in which propensity scores are generated by logit model) in order to relieve endogeneity issue arising from e-commerce variable. We find that e-commerce firms have, on average, higher employment as well as total compensation than non-e-commerce ones. However, we also find that labor compensation per capita in e-commerce firms is largely equaled to or lower than that in non-e-commerce ones, which implies that the increase in total labor compensation at e-commerce firms is mainly driven by employment increase. At firm-level, e-commerce activity has a larger positive impact on employment in manufacturing industries but no impact on agriculture, whereas it has a positive impact only on temporary workers in services industries.
  This study provides policy implications for enhancing e-commerce market of Korea as follows: (1) promoting SMEs to engaging global e-commerce export, (2) streamlining customs clearance process for e-commerce, (3) strengthening consumer protection related to e-commerce transaction, (4) international cooperation to enhance global e-commerce, (5) expanding education, vocational training, and retraining programs related to e-commerce, and (6) building comprehensive panel data for e-commerce.
 

  A high number of trade remedy measures can be regarded as a representative of protectionism. Over the last ten years, both developed and developing countries have increased the number of trade remedy measures mainly on products in metal, chemical, rubber, and plastics industries. In particular, the U.S. has targeted steel products exported by Chinese manufacturers since 2010. This particular fact raises serious concerns since many steel products exported by China that the U.S. has targeted in its national market are being overlapped with those exported by Korean manufacturers. Further, due to that the Korean economy has heavily relied on international trade in goods with the rest of the world, firms in various industries, governmental officers, policymakers fear negative trade and welfare effects of increased trade remedy measures by the U.S. and the rest of the world.
  This study aims to investigate the economic impact of trade remedy in a general equilibrium model with world input-output linkage by quantifying the trade and welfare effects from trade remedy measures. Before examining the economic impact of trade remedy, we investigate the impact of anti-dumping initiations on trade cost by focusing on the steel industry for the last five years. We conduct the fixed-effect as well as PPML estimation in a panel dataset constructed with anti-dumping initiation records, HS 6-digit product-level trade data among 15 countries for the last five years, tariff-lines, usual control variables used in gravity model provided by CEPII, and other relevant variables. We find that anti-dumping initiation in previous year has a negative impact on trade volume in current year. This key result provides a rationale of the study assuming that strengthening trade remedy measures increases trade cost.
  The main results of the study can be summarized as follows. First, the increased trade remedy measures in the world over the last decade has reduced the Korea’s welfare by 0.167%. The 0.167% reduction in Korea’s welfare can be decomposed to changes in terms-of-trade and changes in trade volume of Korea. It turns out that the change in the Korea’s welfare is the sum of 0.254% fall in trade volume and 0.087% rise in terms-of-trade. Changes in trade volume of metal and chemical industry contribute the change in total trade volume by 30.2% and 16.2%, respectively, in Korea.
  Second, after examining economic impact of increased trade remedy measures on Korean steel by the U.S. (or China) ex ante, we find that increased trade remedy measures by the U.S. (or China) worsens Korea’s welfare. The decrease in Korea’s welfare is largely attributed to the change in terms-of-trade of Korea, rather than changes in trade volume of Korea. The deterioration of Korea’s terms-of-trade mainly comes from changes of terms-of-trade among Korea, the U.S. and China, rather than the rest of the world (the world minus the three countries). It is interesting to find that, given the degree of intensity of trade remedy measures by the U.S. or China, China exerts much more stronger trade-and-welfare effects on the Korea economy than the U.S.
  Lastly, we quantify the economic impact of the U.S trade remedy measures on goods exported by Korean manufacturers in case of U.S-China trade war where the U.S imposes trade remedy measures heavily on goods exported by Chinese manufacturers and China retaliates to the U.S trade policy. The study finds that there is a possibility that the Korean economy might benefit from the U.S-China trade war if the U.S. has no further import restriction on goods exported by Korean manufacturers. However, if the U.S. takes actions by imposing additional trade remedy measures on goods by Korean exporters, the Korea economy suffers from serious reduction in trade volume and welfare.
  Based on the main results of the study, we provide several policy implications to cope with increased and intensified trade remedy investigation (or measures) around the world at international-level, multi-country-level, government-level, and firm-level. 

  The aim of the research is to suggest policy implications and proposals to expand bilateral industrial cooperation between Korea and Iran focusing on the petrochemical and automobile sectors that occupy the largest share of the Iranian manufacturing industry.
  Chapter 2 touches upon the political and economic trends, international relations, and economic policies in Iran in order to understand the recent changes in both economic and political spheres of the country, analyzing Korea-Iran economic relations. Contrary to expectations for a rapid economic recovery after lifting the international sanctions against Iran in January 2016, foreign direct investment inflows to the country have continued to remain sluggish and the unemployment rate has remained high. A ban on Iranian access to U.S. dollar transactions as prescribed under the primary sanction and the worsening relationship between the U.S. and Iran after President Donald Trump came into office have become key factors which undermine investors’ confidence. On top of this, the stability of Iran’s macro-economic conditions is recently being threatened mainly by the high inflation rate and steady rial depreciation. Upon this backdrop, economic relations between Korea and Iran have greatly expanded, mainly in the trade and construction sectors.
  Chapters 3 and 4 deal with the policies, structure, characteristics of Iranian petrochemical and automotive industries. Iran’s NPC (National Petrochemical Company) performs the pivotal role of producing petrochemical products as well as regulating the petrochemical market. Iran’s petrochemical complexes are mainly being developed in special economic zones at Mahshahr and Assaluyeh with 58 petrochemical complexes under construction that are expected to produce 134.4 million tons of petrochemicals per annum. The Iranian government has designated the petrochemical sector as a strategic industry through its fifth and sixth 5-year development plans and is pushing for policies such as privatization, expansion of production facilities. The Iranian government also provides cheaper feedstock, tax exemption and deregulation on petrochemical companies in special zones in order to induce foreign direct investment in the petrochemical sector. After the economic sanctions against Iran were lifted, French and German companies showed strong commitment to invest in the Iranian petrochemical sector, reflecting high expectations for Tehran’s development policy and high growth potential. However, due to the uncertainty in international relations surrounding Iran and difficulties in financing, global companies’ willingness to invest in Iran has weakened.
  Following the lifting of sanctions against Iran, the largest auto-producing country in the Middle East, car production has been recovering since 2013. The Iranian government is actively moving to foster its automotive industry, focusing on inducing foreign direct investment and promoting transfer of technology with high tariffs on imported cars. Iran is trying to become an automobile manufacturer with advanced technological foundation rather than a CKD (completely knocked down) assembler. With the rise of Chinese companies and re-entry of French and other European firms in the Iranian auto market, competition in the market is expected to be intensified. In addition, there are interior and exterior risk factors such as the existence of the primary sanction imposed by the U.S., and the volatility of Iran’s regulatory policies.
  Chapter 5 presents specific cooperative projects by comprehensively assessing the industrial environment of the petrochemical and automotive sectors. Given the risks stemming from uncertainty in U.S.-Iran relations, bilateral cooperation should be approached strategically in division of the short-term and the long-term. This study presents specific measures focusing on collaborative projects that could be implemented in the short term. In the petrochemical sector, first of all, advisory service projects to transfer the production system of high-value-added petrochemicals could be explored. Second, Korean companies could be an operations and maintenance service provider in the Iranian petrochemical sector, participating in petrochemical plant construction projects initiated by Korean construction companies. Third, exchange program of engineers and experts in both countries’ petrochemical sectors could contribute mutual understanding of bilateral industrial cooperation and future joint ventures in the sector.   The projects could be carried out more effectively through high-level government cooperation between the two countries.
  In the automotive sector, it is necessary to focus on high-tech components and automotive software development rather than large-scale investment projects as cooperative projects that could be implemented in the short term. Given negative impacts that could be imposed on large scale projects due to uncertainty of U.S.-Iran relations, small and medium-sized enterprises could participate in those projects. Second, a technical advisory program utilizing retired but experienced Korean engineers could be considered as a tool for technology transfer. Such an exchange program could benefit both countries, as Korea can create jobs for retired engineers and Iran could improve its technological knowhow and cultivate skilled manpower. Third, considering the uncertainties in the Iranian market, an intergovernmental channel for enterprise support could be established to find solutions to corporate disputes in joint projects. Fourth, the Korean and Iranian governments could promote cooperation for transfer of Korea’s standardization systems to Iran that could be beneficial to bilateral cooperation in terms of technology transfer and job training. 

  Since 2015, the Chinese government has been strongly promoting its “Made in China 2025” initiative, which aims to accelerate the transformation of China from a “big manufacturing country” into a “world manufacturing power” by boosting manufacturing competitiveness through innovation and nurturing high-tech manufacturing industries. China’s “Made in China 2025” strategy is both a threat and opportunity for Korea. This study aims to analyze the development status of Chinese manufacturing industries and the policy of “Made in China 2025,” and to provide implications and countermeasures.
  As a threat, first, “Made in China 2025” could hurt existing manufacturing powers such as Korea, an economy heavily dependent on Chinese exports, by promoting import substitution in the manufacturing industry and increasing global market share. Second, the preferential benefits and financial support provided by “Made in China 2025” to local companies could be used to fund overseas technology and acquisitions, which could lead to difficulties in protecting domestic companies. Third, if “Made in China 2025” leads to excessive investment and redundant investment in specific technologies and industries, it could cause problems such as overproduction, overcapacity, and price collapses around the world. Fourth, if China adopts a policy to prevent foreign companies from entering the domestic market and nurture high-tech new industries through “Made in China 2025,” new trade disputes could increase and pose obstacles for foreign companies.
  As an opportunity, first, “Made in China 2025” can create demand for software and equipment in a vast ICT field centering on the new growth high-tech industries: next-generation information technologies, new energy vehicles, high-performance machine tools and robots. Second, the expansion of open-door policy in “Made in China 2025” – such as negative list type foreign investment; safe, transparent and predictable management environment; trade facilitation; industrial adjustment of the steel, chemical, ship sectors through opening up; and support for overseas expansion of the high-speed railway, electric power equipment, and construction equipment sectors – could increase new business opportunities for foreign companies. Third, each region in China is promoting “Made in China 2025” and this could lead to international cooperation in several sectors based on regional differences in the level of manufacturing development, the industries each region specializes in due to their comparative advantage, and the core industries of “Made in China 2025” by region.
  In addition, this study analyzes the Chinese manufacturing industry’s development status in terms of industrial structure and trade structure, using indicators related to China’s manufacturing industry, import and export data, and indicators of localization. First, the results of our industrial structure analysis show that the Chinese manufacturing industry has been actively developing under the Chinese government’s aggressive policy of promoting and investing in the high-tech manufacturing industry. The mid-high technology and high technology sectors’ sales ratio has increased over the past 10 years and R&D investment expenditure on high-technology has increased as well. Second, our analysis of the trade structure shows that the export comparative advantage of China has generally increased regardless of the technology level, but the high-tech sector has been stagnating recently. In addition, import substitution has been progressing at a rapid pace due to the expansion of production and procurement of general intermediate products in China. These results provide the following implications. First, the development status of China’s manufacturing industry and “Made in China 2025” show that the mid-high and high tech industries and new industries related to the 4th industrial revolution are developing remarkably. Therefore, Korea can expect to be fully exposed to competition with China in these areas. Second, from the perspective of technology levels, China’s recent advancement in high-tech and medium-to-low technology industries is remarkable, but high-tech sectors are showing signs of being stalled or delayed. It is unclear whether China will be able to achieve the goal of developing its own technologies and product competitiveness in these sectors as rapidly as planned.
  In addition, this study analyzes the effect that the recent development in China’s manufacturing sector has had on Chinese global value chains (GVC), employing a GVC analysis based on WIOD and ADB data. As a result of the analysis, the proportion of intermediate goods in the Chinese domestic market has increased significantly in the areas of textile manufacturing, clothing and leather manufacturing, computers, electronics, and optical product manufacturing (by industry), and in mid-high manufacturing (by technology). The proportion of gross exports’ overseas value-added has declined gradually and dependency on foreign countries has decreased. We also confirmed that China has been shifting from a rear to front position in the GVCs, as its GVC participation based on vertical specialization has decreased. Also an analysis of China’s exports to Korea － mainly in the manufacturing of electrical and optical components, chemical and chemical products, and primary metal and metal processing industries, which account for a large trade volume between Korea and China － shows that China’s GVC participation rate decreased while Korea’s position in GVCs has relatively increased as the overseas value-added portion of its intermediate goods declined. The increase in intermediate goods imports due to China’s economic growth was greater than the import substitution of intermediate goods, which had no negative impact on Korea’s intermediate exports to China.
  This study also confirms changes in the status of China’s global value chains by analyzing the intra-Asia trade network using the international trade data of major industries. The results indicate a Chinese “centrality,” in which most intra-regional trade relations were linked through export or imports from China, in the textile and apparel and mobile phone intra-regional trade networks. In other words, our results confirm that the scope of China’s intra-regional specialization structure is gradually expanding upstream of the value chain. Meanwhile, in the automotive industry, China still has not become a leading player in GVCs. And the centrality of China weakened in 2007-2015 as other Asian countries formed new intra-regional trade relations that did not go through China. The implications of the analysis are as follows. First, there is a clear distinction between industries in the intra-regional trade network structure, and these inter-industry differences provide the implication that differentiated strategies for each industry will be needed to respond to the emergence of China. Second, the expansion of China’s centrality and role in the value chain is being led by foreign capital firms. Third, the emergence of the new intra-regional trade network is the result of a reorganization in the intra-regional specialization structure, as the Korea-China-Japan-based specialization structure centered on Northeast Asia expands to other regions in Asia such as Southeast Asia and South Asia.
  This study seeks the countermeasures of Korea in response to the above opportunity and threat factors. The countermeasures against the opportunity factor of “Made in China 2025” are as follow. First, we should pay attention to the huge demand that China will create by fostering new-growth industries in the “Made in China 2025” initiative. The Korean government should selectively support the technology development of small- and medium-sized companies that possess global competitiveness in the parts, materials and equipment sectors, and strive to secure their sales network in China. Second, it is necessary to actively seek Korean companies’ entry into China by utilizing the internationalization of “Made in China 2025” and further opening up of the Chinese capital market. Innovative ICT venture entrepreneurs can increase their chances of success by cooperating with rich funding partners and the broad market in China. We can also consider entering into the Chinese market through preemptive mergers and acquisitions (M&A), equity investments, and joint ventures with promising Chinese companies in new growth industries. Third, Korea should select “key cooperation areas and fields” in each region of China and seek for entry through selection and concentration. In particular, it is necessary to seek strategic entry into regions with high demand for economic cooperation with Korea but with little competition between domestic and foreign companies.
  The countermeasures against the threat factors of “Made in China 2025” are as follows. First, China’s import substitution and expansion of global market share are inevitable developments, but China still imports core parts and technology from overseas. Therefore, we need to steadily develop high technology, high quality and high value- added products and identify opportunities within China’s fostering of new growth industries and expansion into the global market. Second, there is a possibility of domestic technology and company leakage due to China’s aggressive M&A strategies, but M&A can also be one of the ways for Korean companies to enter the Chinese market. Third, there is the possibility of global overproduction due to the concentration of resources in specific industries and technologies in “Made in China 2025.” Therefore, when the Korean government and industry establish their market supply forecast, facility investment plan, and future strategy, they should take into account the future supply of major industries supported and nurtured under “Made in China 2025” and study the impact on future global markets. Fourth, as the preferential benefits, financial support, and trade barriers provided to local companies under “Made in China 2025” could have a market distorting and deteriorating effect on the competitiveness of foreign capital companies, we will have to continue monitoring the various subsidies for local enterprises and other support measures by China to seek appropriate response measures.
  There is also a need for countermeasures against changes in China’s industrial and trade structure. First, China’s manufacturing industry has a wide development gap by industry and technology. Therefore, Korea should design differentiated responses by industry, product, and technology levels. Second, the Chinese manufacturing industry has reached a certain limit in its global market share, especially in the high-technology sector. And this suggests that we need to understand the status of global market share and future market share forecasts for the Chinese manufacturing industry and seek the detailed countermeasures. Third, although import substitution is proceeding in line with China’s expansion of intermediate production and procurement, it should be noted that this trend is also large in terms of industry and product variances, and a countermeasure strategy should be prepared in light of this. In addition, as China’s core components and technologies are still highly dependent on foreign companies, it is necessary to maintain the mass exports of intermediate goods through the development of high-technology, high-quality and high value-added products.
  The countermeasures against the GVC phase change in Chinese manufacturing can also be considered as follows. First, we must develop new industries and new products through sustainable innovation, protect core technologies and technicians who possess competitiveness while maintaining differentiated technologies, and make China’s rising in GVC an opportunity for us. Second, regional manufacturing GVCs are likely to be led by China, but the centrality levels of China show big differences depending on the characteristics of each industry and product. Therefore, we should study how GVCs centering on China will form in the new-growth industries of “Made in China 2025” and how Korea will participate in these industries. Third, the expansion of China’s role in the GVC does not necessarily indicate a central role being played by Chinese local companies or a shift to high value-added areas; the role played by foreign companies is still important. Thus companies should position themselves to utilize and benefit from China’s expansion. Fourth, with the Korea-China-Japan-based specialization structure being expanded to other regions in Asia, such as Southeast Asia and South Asia, and the intra-regional specialization structure undergoing a reorganization process, a new intra-regional trade network has emerged that does not have China as its main axis. We should actively seek out third countries as our future production base and consumer market.
  Government policy to respond to development in the Chinese manufacturing sector is important. However, the policy-making must be designed from the initial stage to be bottom-up, sector-specific, in which industry and industry experts participate. In addition, the government should prepare policies to foster long-term new growth industries for the next 30 years and cope with “Made in China 2025” and the 4th industrial revolution. It will be essential to establish a neutral and independent control tower that will consistently promote industrial policy, regardless of political changes. Related government departments, research institutes, and industry associations should participate in the project to act as a control tower where information is shared on China’s development status, policy changes, and future prospects, and appropriate countermeasures are taken. 

  The purpose of this study is to construct a model that can analyze growth effects to explain the impact that economic integration between North and South Korea will have on both economies. The first chapter explains the background and purpose of this study and how it differs from previous studies in terms of methodology. While inter-Korean economic cooperation projects have been regarded as new economic growth opportunities by every past administration, only a handful of studies have been conducted to estimate the resulting economic effects. The purpose of this study is to estimate the economic growth effects of inter- Korean economic cooperation on both sides of North and South Korea and to identify implications for inter-Korean economic cooperation to maximize the interests of both economies. Methodologically, these points that the Solow growth model is used, the economic growth effect is estimated by taking into account various economic cooperation projects and policy variables, and the dynamic effect of the period is analyzed are evaluated as a distinction from previous research.
  In Chapter 2, the inter-Korean economic integration is divided into short-term inter-Korean economic cooperation projects and mid- to long-term progressive unification, and a model is developed to quantify it and a method to evaluate the growth effect of economic integration is suggested. The basic economic model of inter-Korean economic cooperation assumed the Cobb-Douglas production function in the form of a Solow growth model. The difference between the North and South models is that infrastructure development is separated from capital and constructed as a variable independently, and that North Korea's productivity growth rate changes according to the labor and capital exchanges arising from the process of inter-Korean economic cooperation are internalized by functions in the model.
  The gradual unification scenario was composed by reflecting five major issues in the basic model. A declining growth rate due to excessive government debt, increase in the cost of disruption in South Korean society due to the movement of North Koreans to the Southern region during the unification process, increase in the working population due to the reduction of military forces in North Korea, and support provided by the South Korean government for social security costs in North Korea are applied at different stages depending on the stage of gradual unification. On the other hand, the growth effect of the inter-Korean economic integration is calculated by summing up the difference between a scenario where economic integration is pursued and one where it is not.
  Chapter 3 examines short-term and long-term economic integration scenarios. First, the seven major economic cooperation projects – the Kumgang Mountains project, Kaesong industrial complex project, light water reactor project, South-North railway and road connection project, Han River estuary joint use project, shipbuilding cooperative development project, and the Dancheon area underground resource development project – were selected for closer examination. Labor, capital investment, and infrastructure development proceed differently depending on economic cooperation, with the Kaesong industrial complex project, South-North railway and road connection projects corresponding to labor-intensive economic cooperation projects, and the light water reactor project and South-North railway and road connection projects, which account for more than 80% of infrastructure development during the capital investment stage, were found to be infrastructure-intensive economic cooperation projects. In terms of business duration, projects such as the Kumgang Mountains project and Kaesong industrial complex project are planned for continuous expansion over 30 years according to the development plan. On the other hand, projects such as the infrastructure-intensive economic cooperation projects will show a great reduction in the business scale once the initial construction stage has been completed.
  Meanwhile, the progressive unification scenario was designed as a mid- to long-term scenario conducted in three stages over a total of 30 years. The first stage is assumed to be the simultaneous implementation of the seven major economic cooperation projects, while the 2nd and 3rd stages are assumed as a simultaneous expansion of these projects at a two-fold and three-fold scale, respectively. At the same time, considering the five issues listed above, it is assumed that the growth of South Korea's GDP will be reduced by the increased burden of government debt in the first stage. In the second stage, it is assumed that a decrease in gross domestic product will occur due to the increase of North Korea’s government debt, the increase in the North Korean working population due to the decline of its army, and the North Korean regional wage subsidies. In the last third stage, it is assumed that all five factors are applied, including the cost of disorder in South Korean society due to the migration of North Koreans to the South Korean region, and the cost of welfare expenses in the North.
  Chapter 4 measures the economic growth effects of short- and long-term economic integration scenarios. According to the results of short-term scenario analyses, economic cooperation projects with the highest growth potential for South Korea were the Kaesong industrial complex project (159.2 trillion won), Kumgang Mountains project (4.12 trillion won) and the Dancheon area underground resource development project (4.08 trillion won). In the case of North Korea, the South-North railway and road connection projects (92.6 trillion won), Kaesong industrial complex project (51.3 trillion won), and Dancheon area underground resource development project (34.3 trillion won) showed the highest growth potential. The combined effect of growth for the two Koreas came in the following order: the Kaesong industrial complex project (210.6 trillion won), North-South railway and road connection project (94.2 trillion won), and the Dancheon area underground resource development project (38.5 trillion won). In sum, in South Korea, labor-intensive businesses have a large economic growth effect, and North Korea's economic growth effect is significantly influenced by productivity growth.
  According to the results of mid- and long-term scenarios, South Korea will gain 346.6 trillion won (annual average 14.2 trillion won) in growth effects, North Korea 416.9 trillion won (annual average 27.6 trillion won), and North and South Korea will gain a collective total of 763.5 trillion won (annual average 41.7 trillion won) in growth effects. Compared with a scenario where economic integration is not implemented, the gross production gap between North and South Korea decreased from 51.0 times to 19.8 times and the productivity gap decreased from 11.1 to 7.4 times by the year 2047. Meanwhile, if the effects caused by the five issues are examined separately, the effects in South Korea are not significant, while the North Korean case shows that the total production of North Korea increased by more than 50 trillion won, from 146.6 trillion won to 196.6 trillion won.
  In Chapter 5, based on the results of the research, the implications, performance and limitations were examined. The first implication for the economic cooperation is that it is necessary to plan the project in a more long-term and comprehensive manner, considering the fact that the economic growth effect varies greatly depending on the business aspects of the economic cooperation between two Koreas. The second implication is that, considering the growth effect of South Korea is relatively low in some economic cooperation projects, it is necessary for North Korea to establish a business plan to utilize the labor force of North Korea. And the last implication is that it will be wise for North Korea to effect a change in the form of its economic cooperation projects by directly participating and obtaining the resulting products of economic cooperation, rather than simply supplying its labor force.
  The main results of this study are as follows: first, by constructing the analysis model for economic integration on North and South Korea, the effects of economic integration on North and South Korea were estimated simultaneously, and economic cooperation and unification estimated with the same model; second, the effect of inter-Korean economic cooperation on North Korean productivity was internalized within the model; third, the main variables for evaluation of the North Korean economy were provided; and fourth, through these analyses we propose the economic cooperation projects most likely to maximize the economic growth of the two Koreas.
  Meanwhile, further research will be necessary to supplement the data used for the variables in the growth model, to improve the function we use and to provide further evidence, this being an initial study to internalize productivity. Further considerations will have to be made for the foreign economic relations of North Korea, such as trade and foreign direct investment, and incorporated in the model, and further economic cooperation projects must be developed and analyzed in addition to the seven major economic cooperation projects.