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11. The Microeconomics of North-South Korean Cross-Border Integration

Author:
Stephan Haggard and Marcus Noland
Publication Date:
06-2012
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
Economic integration between North and South Korea occurs through three modalities: traditional arm's-length trade and investment, processing on commission (POC) trade, and operations within the Kaesong Industrial Complex (KIC). In order, these three modalities are characterized by decreasing exposure of South Korean firms to North Korean policy and infrastructure. Through a survey of 200 South Korean firms operating in North Korea we find that these modalities of exchange matter greatly in terms of implied risk. For example, firms operating in the KIC are able to transact on significantly looser financial terms than those outside it. We find that direct and indirect South Korean public policy interventions influence these different modalities of exchange and thus impact entry, profitability, and sustainability of South Korean business activities in the North. In effect, the South Korean government has substituted relatively strong South Korean institutions for the relatively weak Northern ones in the KIC, thus socializing risk. As a result, the level and type of cross-border integration observed in the survey is very much a product of South Korean public policy.
Topic:
Foreign Policy, International Trade and Finance, Bilateral Relations, and Infrastructure
Political Geography:
Israel and Korea

12. Glum and Glummer in Japan

Author:
Jeffrey Hornung
Publication Date:
02-2011
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
When the Democratic Party of Japan (DPJ) kicked the Liberal Democratic Party (LDP) out of power in 2009, there was some sense of hope amongst the Japanese that things would change. If nothing else, the Japanese hoped that the DPJ would bring new ideas to tackle some of the country's ongoing problems. Reality soon proved otherwise. Not only has the DPJ quietly abandoned many of its campaign pledges, it has proved just as incapable at resolving ongoing problems. Seventeen months into a DPJ-led Japan, Prime Minister Naoto Kan faces a number of domestic problems that threaten his government's survival. The unfortunate result is another expected turn of the revolving door that is the Japanese premiership.
Topic:
Democratization, Politics, and Governance
Political Geography:
Japan, Israel, Asia, and Tokyo

13. Policy Concerns of Low Fertility for Military Planning in South Korea

Author:
Elizabeth Hervey Stephen
Publication Date:
11-2011
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
The South Korean military currently is the sixth-largest in the world. But years of low birth rates have resulted in declining numbers of young men available for military service, and the country now faces the pressing question of how to ensure national security in the face of inevitable troop reductions. Some options for offsetting this shrinking recruit pool (such as increasing fertility, increasing immigration, and increasing the number of women in the military) might seem obvious, but the complex economic, social, and cultural reality of South Korea make them unlikely to be embraced. The best focus for immediate action is to stabilize or increase service terms and to encourage development and implementation of high-tech security systems. While the recruit pool appears nearly adequate at present, South Korea must act quickly to develop the leaner, more diverse, and more technologically based military necessary for the country to maintain a viable military force.
Topic:
Security
Political Geography:
Israel, Asia, and South Korea

14. The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment

Author:
Peter A. Petri, Michael G. Plummer, and Fan Zhai
Publication Date:
10-2011
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
Two emerging tracks of trade agreements in the Asia-Pacific—one based on the proposed Trans-Pacific Partnership (TPP) agreement and an Asian track—could consolidate the “noodle bowl” of current smaller agreements and provide pathways to a Free Trade Area of the Asia-Pacific (FTAAP). We examine the benefits and strategic incentives generated by these tracks over 2010-2025. The effects on the world economy would be small initially but by 2025 the annual welfare gains would rise to $104 billion on the TPP track, $303 billion on both tracks, and $862 billion with an FTAAP. The tracks will be competitive but their strategic implications are constructive: each would generate incentives for enlargement. Over time, strong economic incentives would emerge for the United States and China to consolidate the tracks into a region-wide agreement. Each track would bring a different template to such consolidation and can be viewed as defining a “disagreement point” in the Asia-Pacific bargaining game. The study is based on an analysis of 48 actual and proposed Asia-Pacific trade agreements and models impacts on variables including sectoral trade, output, employment and job shifts in 24 world regions.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, China, Israel, Asia, Australia/Pacific, and Asia-Pacific

15. An Evaluation of Overseas Oil Investment Projects Under Uncertainty Using a Real Options Based Simulation Model

Author:
ZhongXiang Zhang, Lei Zhu, and Ying Fan
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
This paper applies real options theory to establish an overseas oil investment evaluation model that is based on Monte Carlo simulation and is solved by the Least Squares Monte-Carlo method. To better reflect the reality of overseas oil investment, the model has incorporated not only the uncertainties of oil price and investment cost but also the uncertainties of exchange rate and investment environment. These unique features have enabled the model to be best equipped to evaluate the value of oil overseas investment projects of three oil field sizes (large, medium, small) and under different resource tax systems (royalty tax and production sharing contracts). In the empirical setting, China was selected as an investor country and Indonesia as an investee country as a case study. The results show that the investment risks and project values of small sized oil fields are more sensitive to changes in the uncertainty factors than the large and medium sized oil fields. Furthermore, among the uncertainty factors considered in the model, the investment risk of overseas oil investment may be underestimated if no consideration is given of the impacts of exchange rate and investment environment. Finally, as there is an important tradeoff between oil resource investee country and overseas oil investor, in medium and small sized oil investment negotiation the oil company should try to increase the cost oil limit in production sharing contract and avoid the term of a windfall profits tax to reduce the investment risk of overseas oil fields.
Topic:
Development, Economics, Energy Policy, International Trade and Finance, and Oil
Political Geography:
China, Indonesia, and Israel

16. Korea's Growth Performance: Past and Future

Author:
Marcus Noland
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
South Korea is arguably the premier development success story of the last half century. For 47 years starting in 1963, the economy averaged 7 percent real growth annually, and experienced only two years of economic contraction: 1980 after the second oil shock and the assassination of President Park Chung-hee, and 1998 at the nadir of the Asian financial crisis. At the start of that period South Korea had a per capita income lower than that of Mozambique or Bolivia; today it is richer than Spain or New Zealand, and was the first Asian and first non-G7 country to host a summit of the G20, the unofficial steering committee of the world economy.
Topic:
Demographics, Development, Economics, Industrial Policy, International Trade and Finance, and Political Economy
Political Geography:
Israel, Asia, South Korea, Spain, Mozambique, New Zealand, and Bolivia

17. Gender in Transition: The Case of North Korea

Author:
Stephan Haggard and Marcus Noland
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
This paper uses a survey of 300 North Korean refugees to examine the experience of women in North Korea's fitful economic transition. Like other socialist states, North Korea has maintained a de jure commitment to women's rights. However, we find that women have been disproportionately shed from state-affiliated employment and thrust into a market environment characterized by weak institutions and corruption. As a result, the state and its affiliated institutions are increasingly populated by males, and the market, particularly in its retail aspects, is dominated by women. Among the most recent cohort of refugees to leave North Korea, more than one-third of male respondents indicate that criminality and corruption is the best way to make money, and 95 percent of female traders report paying bribes to avoid the penal system. In short, the increasingly male-dominated state preys on the increasingly female-dominated market. These results paint a picture of a vulnerable group that has been disadvantaged in North Korea's transition. Energies are directed toward survival, mass civil disobedience is reactive, and as a group, this population appears to lack the tools or social capital to act collectively to improve their status.
Topic:
Corruption, Gender Issues, Markets, and Labor Issues
Political Geography:
Israel and North Korea

18. Rent(s) Asunder: Sectoral Rent Extraction Possibilities and Bribery by Multinational Corporations

Author:
Nathan Jensen, Edmund Malesky, and Dimitar Gueorgiev
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
We argue that openness to foreign investment can have differential effects on corruption, even within the same country and under the exact same domestic institutions over time. Our theoretical approach departs from standard political economy by attributing corruption motives to firms as well as officials. Rather than interpreting bribes solely as a coercive “tax” imposed on business activities, we allow for the possibility that firms may be complicit in using bribes to enter protected sectors. Thus, we expect variation in bribe propensity across sectors according to expected profitability which we proxy with investment restrictions. Specifically, we argue that foreign investment will not be associated with corruption in sectors with fewer restrictions and more competition, but will increase dramatically as firms seek to enter restricted and uncompetitive sectors that offer higher rents. We test this effect using a list experiment, a technique drawn from applied psychology, embedded in a nationally representative survey of 10,000 foreign and domestic businesses in Vietnam. Our findings show that the impact of domestic reforms and economic openness on corruption is conditional on polices that restrict competition by limiting entry into the sector.
Topic:
Development, Industrial Policy, International Trade and Finance, Political Economy, and Foreign Direct Investment
Political Geography:
Israel and Vietnam

19. Population Policy, Economic Reform, and Fertility Decline in Guangdong Province, China

Author:
Jiajian Chen, Robert D. Retherford, Minja Kim Choe, Li Xiru, and Cui Hongyan
Publication Date:
05-2009
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
This paper examines Guangdong's fertility decline between 1975 and 2005 and analyzes how it has been influenced by both fertility policy and economic development. Guangdong's economic development has been very rapid and has attracted huge numbers of migrants from other provinces. The effect of this migration on Guangdong's fertility is an important part of the story. Measures of fertility and nuptiality employed in the analysis include the total fertility rate, parity progression ratios, mean age at first marriage, mean age at first birth, and mean closed birth interval between first and second birth. These measures are calculated from birth histories reconstructed from data from China's 1990 and 2000 censuses and 2005 mini-census. An overlapping-trend analysis provides indications of the accuracy of the estimates.
Topic:
Demographics, Development, Economics, and Migration
Political Geography:
China and Israel

20. How the Asia Pacific Can Drive the Global Recovery

Author:
Peter A. Petri
Publication Date:
11-2009
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
The transition to a new, sustained global growth path is still precarious and will require concerted policy actions by many countries. Leadership by the G-20 will be essential for coordinating the global effort. But due to the central importance of the Asia Pacific in the world economy, regional institutions such as ASEAN+3, ASEAN+6, and APEC could also play large roles in the next phase of the recovery.
Topic:
Economics and Financial Crisis
Political Geography:
Israel and Asia