National and Regional Economic Impact FTA
3. Impact of the K-J FTA in the BUG region
3.4 Implications for the K-J strait region
Korea and Japan should consider concluding K-J FTA early enough to generate economic welfare and development through the cooperation of both countries. But K-J FTA would have both negative and positive impact on the industry in Korea and Japan. Therefore it is important to classify the impact of K-J FTA and to ensure the principle of equality among industries. Both countries should be aware that the agricultural industry could be an obstacle to forming an FTA.
For economic cooperation between Korea and Japan in a short time, the existing systems and programs should be used efficiently. For example, Korean government designated Busan-Jinhae, a free economic zone (FEZ), which is located in Korea-Japan strait zone. The FEZ for establishing logistic center in Northeast Asia is planned to introduce the functions for marine logistics, international producer services and advanced technology. Because the FEZ fosters foreigners and foreign investment firms with a suitable
8) Considering the size of FDI inflow to the BUG region since 1999 and reflecting the industrial composition of the region (using the weighted index by industry, which was derived from the impact of the FTA on inflow of FDI), the regional scale of FDI was estimated.
environment and benefits, concluding K-J FTA would allow the FEZ to play an important role for an industrial cooperation in Korea-Japan strait. In the mean time, Japan also designated the Special Area for Structural Reform for regional development. Thus the two kinds of special area can become leading areas which refer to the key strategy for industrial cooperation (FDI) in Korea-Japan strait zone.
Among the industries, the priority order of industrial cooperation should consider sensitive industries that are more related to the influence of FTA.
Because they are vulnerable to the negative influence of FTA, the industries need to establish complementary relations between Korea and Japan. For example, general machinery has a significant proportion of regional industries in the Southeastern region of Korea, but technical competitiveness is a long way behind that of Northern Kyushu, Japan. Thus the inferior industry in competitiveness has a negative attitude to FTA and needs to be ready to accept the other side's strong points. Consequently it is important for the industry to secure an international competitiveness for expansion of markets in East Asia, which explains the necessity of K-J FTA and regional cooperation.
Cooperative strategies for expansion of international market are required.
If the world market share in a certain industry were higher than that of Korea-Japan strait, the industry should be located in a region with cheap production cost or region equipped with sufficient marine infrastructure. On the other hand, industries where share in K-J market is higher than that of world market could be located at more appropriate regions in K-J strait. In that sense, the Southeastern region in Korea is suitable for the location of world market-oriented industries. Therefore it is necessary that local governments and supporting bodies choose pilot industries that have strong industrial complement or can strengthen competitively by cooperation, and they should supply technological information, financial support and market development in partnership for the pilot industries.
In order to minimize the negative effect if K-J FTA, there is a need to establish various administration and supply information, and international governance which consists of local governments and private sectors in Korea-Japan strait zone. The exchange of staffs and personnel in the body could play an important role in administrative and economic cooperation.
Besides it is necessary to establish the industrial technology cooperation committee for a close and wide economic cooperation in Korea-Japan strait zone. The mutual cooperative body founded on both regional authorities and private sectors could play the central role for inter-regional cooperation and promoting economic integration. Under the control of the committee, some bodies could be established as follows: 1) a viable mutual cooperative body by activating non-governmental involvement at local government level and exchanging manpower 2) an exchange center at non-governmental level to expand information and personnel exchange at the non-governmental level 3) a cooperative body and regional fund consisting of regional business personnel so that it could support companies and businesses at regional level.
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