Northeast Asian Business Hub

Soonhoon BaeThe Korea Advanced Institute of

Science and Technology, Seoul, Korea－韓国科学技術院教授、元韓国情報通信相

Thought on Korean Initiatives

October 29, 2004

Current Picture of Northeast AsiaCurrent Picture of Northeast Asia

-Lack of full reconciliation-North Korean nuclear issue-Competition on leadership

-Lack of full reconciliation-North Korean nuclear issue-Competition on leadership

-No sense of common identity as Northeast Asian community-Collision of nationalism

-No sense of common identity as Northeast Asian community-Collision of nationalism

CultureCulture

EconomyEconomy

InternationalRelations

InternationalRelations

-Surge of China as the World’s factory and market-Japan’s high-tech capacity-No FTA yet

-Surge of China as the World’s factory and market-Japan’s high-tech capacity-No FTA yet Common Common

ground for ground for Northeast AsiaNortheast Asia

No foundation for No foundation for sound competition sound competition

and cooperationand cooperation

Economic Environment for KoreaEconomic Environment for Korea

Stagnant domestic consumption

Stagnant domestic consumption

Competition with Japan

Competition with Japan

Competition withChina

Competition withChina

Gap in R&D investment(Korea: less than 1/10 of Japan)

Gap in R&D investment(Korea: less than 1/10 of Japan)

China’s export increase(year 2003: increase by 30%)

China’s export increase(year 2003: increase by 30%)

Stagnant job marketStagnant job market

Increased imports of intermediate goods

from Japan

World market share

1991 2002

Korea 2.0% 2.5%China 2.0% 5.0%

Burdens of social costGovernment(60%)Companies(40%)

Deteriorated competitive edge

loss of jobs(Labor market shrinks

for new entrants)

NEA 3 countries(GDP 5.8 tril.US$, T.V.1.7tril.US$)

NEA 3 countries(GDP 5.8 tril.US$, T.V.1.7tril.US$)

NAFTA(GDP 11.5tril.US$, T.V. 2.7tril.US$)

NAFTA(GDP 11.5tril.US$, T.V. 2.7tril.US$)

EU(GDP 7.9tril.US$, T.V. 2.4tril.US$)

EU(GDP 7.9tril.US$, T.V. 2.4tril.US$)

APEC (21)

• Pop. 2.6 bil. (42%)

• GDP 20 tril. US$ (60%)

• T.V. 6.4 tril. US$ (48%)

ASEM (26)

• Pop. 2.2 bil. (38%)

• GDP 15 tril. US$ (49%)

• T.V. 6.3 tril. US$ (55%)Trans-Atlantic Market Place

• Pop. 0.65 bil (11.2%)

• GDP 20 tril.US$ (60%)

• T.V. 5.5 tril.US$ (50%)

Pop. (100 mil.) 14.5 (23.6%) 3.8 (6.2%) 4.1 (6.8%)

Area (10thou. ㎢ ) 1,007 (7.5%) 324 (2.4%) 2,174 (16.3%)

GDP (tril. US$) 5.8 (18.6%) 7.9 (25.2%) 11.5 (36.7%)

Trade Volume (tril. US$) 1.7 (12.6%) 2.4 (18.3%) 2.7 (20.8%)

* ( ) : share of the world total

Comparison among Economic BlocsComparison among Economic Blocs

Kor · Chn · Jap EU NAFTA

Market-customization

Korea’s Role for Common Prosperity in NE AsiaKorea’s Role for Common Prosperity in NE Asia

EU NAFTA

EU NAFTA Northeast AsiaNortheast AsiaRepublic of Korea

InvestmentTechnology

InvestmentTechnology

Inbound Outbound

Products &

Services

ProductsMaterial

GatewayGateway

Business HubBusiness Hub

LogisticsFinance

Marketing

Cooperation by differentiation

Market focus(Intermediary roles)

Northeast Asian market

World market

Technology of JapanManufacturing of China

Hub Strategy of KoreaHub Strategy of Korea

Korea’s competitiveness as a hub in NE Asia

• Geographic proximity to China with huge domestic market & low labor cost

• Geographic proximity to Japan with high technologies

• Highly educated labor force and entrepreneurial skills

• Strategic Advantages such as well-developed national infrastructure, overall superior technological platform, etc.

• Advanced Information Technology

Korean Business Hub

Logistic hub - Vertical integration

Trans-Shipment JIT Supply SCM

Business Hub Business Hub (Regional Logistic Support for Manufacturing and Distribution)(Regional Logistic Support for Manufacturing and Distribution)

Stand-alone transportation

Parts and raw material Sub-assembly

Financial hub - Northeast Asian(Regional) focus

· Commercial banking – Reform by global practice

· Investment banking – Asset Management

(Industry restructure through M&A)

· Consultancy and project financing – Open service market

Business HubBusiness Hub (Specialized Regional Financial Hub) (Specialized Regional Financial Hub)

Emerging market focus

Market Integration through FTAs – Pursuing economies of scale & economies of network

FDI - Regional (global) corporations

BrokerageBrokerageNational goal-orientedmarket economy

Private profit-motivatedmarket economy

Business HubBusiness Hub (Regional Industrial Cluster) (Regional Industrial Cluster)

Japan Korea China

Balanced development Business Hub

(Finance, management, and

technology)

Fast track industrialization

Projects of infrastructure Projects of infrastructure construction that would contribute construction that would contribute to peace in the regionto peace in the region

1. Development of nodes for

inter-Korean economic cooperation

2. Linking of inter-Korean and

Trans-Asian railroads

3. Development of regional energy

resources

4. Cooperation in ICT and other leading

edge technologies

5. Exploration of financial

resources for regional development

6. East Asia FTA (EAFTA)

7. Regional financial cooperation

8. Cooperation on environment

9. Social and cultural exchanges

Projects leading to a Northeast Projects leading to a Northeast Asian community Asian community

Possible Areas for CooperationPossible Areas for Cooperation

Thank you.