1.5
Prospects for Sino-Korean Economic Cooperation and Collaborative Development of the Coastal Areas of Shandong and West Korea
한․중 경제협력 전망과 연안지역개발 방향: 산동성 연안지역과 한국 서해안지역 협력증진 방안 (RR98-10)
Won-Bae Kim and Young Sub Kwon 1998. 11․270 pages․Korean
Background and Purpose
In the Yellow Sea Rim area, China's Bohai region and Korea's west region play a central role in integrating various parts of the regional economy. However, economic cooperation has been thus far limited to investment and trade. Synergy effects through the joint development and use of infrastructure have yet to be realized. Inter-city linkages have to be further strengthened to enable the spatial integration of the whole region. The primary rationale for a closer economic cooperation among the constituent parts of the region lies in the possibility of enjoying network, scope, and scale economies.
Therefore, it is the primary purpose of the present study to look into the possibility of industrial as well as spatial division of labor between China and Korea across the Yellow Sea, particularly focusing on Shandong's coastal area and Korea's west coast region. For this purpose, the study sets out to examine:
a) the current status of economic development in both Shandong and West Korea; b) patterns of foreign direct investment and trade between two regions;
and c) the existing pattern of spatial linkages between cities across the Yellow Sea. Based upon the investigation of the above items, the study attempts to develop the means to upgrade economic cooperation as well as strategies to enhance inter-city linkages between Shandong and West Korea.
Major policy recommendations
1) Korean investors and government, despite its current economic crisis, have to continue to strengthen the economic cooperation between China and Korea. Both
governments of China and Korea can certainly help facilitate the process of economic cooperation and industrial networking by improving institutional environment and jointly developing infrastructure. Specifically, Shandong authorities can help Korean-invested firms to weather the current crisis by providing favorable policy measures such as tax exemption and special operation loans.
2) As desired by the Chinese host, Korean investors should pay efforts to move into more capital-intensive and technology-intensive sectors. However, given the Korea's financial crisis, investment in China should be selective in a few strategic sectors such as cars, machinery, communications equipments, and social overhead capital construction. Joint ventures with state-owned enterprises are considered to be particularly helpful in advancing into China's domestic market.
3) Shandong and the Bohai region are regarded to be an important base from which Korean firms can expand inward and downward to China's market. The already established bases in Shandong and the Bohai region clearly provide agglomeration economies by which Korean-invested firms to enhance their competitive edge within China.
4) Sino-Korean economic cooperation would benefit more if future cooperative activities expand into non-manufacturing sectors such as social overhead capital construction, advanced services, distribution, tourism industry, and logistics services.
5) Industrial division of labor between Shandong and West Korea should be based on dynamic comparative advantage of each region. Since China has already declared its intention to develop machinery, electronics, petro-chemical, and automobile as the four leading industries in the 21st century, Korea has to find its niches as well as ways to reduce unnecessary competition with China.
6) To further strengthen business and physical networks, it is recommended to form inter-city networks and associations. Such associations can discuss and seek
ways to share locational assets of both coastal areas across the Yellow Sea, to support joint infrastructure provision, to jointly market cities, and to represent common interests of those cities within the region against others.
7) Inter-city and inter-country cooperation should also expand into the areas of institutions and culture. Barriers restricting flows of people, capital, and commodities have to be either removed or significantly reduced. Specifically, visa requirements have to be significantly simplified to facilitate the movement of people. Tariff and non-tariff barriers should be gradually removed by bilateral or multilateral cooperation schemes.
8) The Korean government and enterprises should expand their efforts to strengthen local-to-local cooperation since China is a large country composed of diverse regions and its local government has a large degree of discretion in local management.
9) For the sustainable development of the Yellow Sea region, special attention must be paid at environmental issues including ocean pollution. Through inter-city collaboration, many benefits can be derived from exchanging ideas and practices in pollution reduction technologies, less-damaging industrial location, recycling of industrial wastes, and so forth.
