2.14
Industrial Cooperation and Regional Development in Northeast Asia : Toward a Cooperative Development Strategy
동북아 산업협력과 지역개발 전략구상(RR96-15) Won-Bae Kim and Young-Bong Kim
1996. 12․117 pages․Korean
The main rationale for regional economic cooperation lies in the joint utilization of natural resources, human resources, and industrial bases in NEA.
This pooled use of various resources provide an opportunity to reap the benefits of scaled economies and an enlarged market. Economic growth in various parts and countries in NEA also renders a synergy effect for the region as a whole.
Furthermore, economic interdependence within the region is expected to promote regional prosperity and stability. Therefore, the essence of regional cooperation boils down to the mode of cooperation in the region. A multilateral economic cooperation mechanism is suggested in this paper to supplement the currently predominant pattern of bilateral cooperation in NEA. The Economic Cooperation Committee in operation now with respect to the development of Tumenjiang area provides an easy channel to expand it into a more substantial body to discuss various concerns of economic development for the region.
As has been repeatedly pointed out, system incompatibility, lack of infrastructure, and lack of investment capital constitute three major obstacles to economic cooperation in NEA. With regard to political will, which is essential for initiating the process of economic cooperation, all countries within the region except for North Korea seem to be committed to cooperation although their motives may not be the same. The issue now is rather how to share benefits (as indicated in the case of Tumenjiang development project). If participating countries can obtain more benefits by cooperation and they are persuaded so, cooperation is a better option than non-cooperation. In addition, security issues within the region complicate the matrix of cooperation and non-cooperation and their payoffs. The analysis provided in this paper, in particular, with respect to trade and investment clearly indicates all the countries‘ interests converge toward economic gains unless their sensitive security concerns are threatened. This is a
hopeful sign that the region will gradually move toward higher economic interdependency unless there arise political and military conflicts within the region.
The process leading to higher economic interdependency is largely operated by market forces. However, NEA, unlike Southeast Asia or other regions, requires state assistance for market forces to work effectively. Reasons are again political and economic barriers between countries. Institutional environment is different from country to country. Infrastructure development is unevenly impeding the flows of information, capital, and people. Perceptions about the neighbors show a great variation among people in the region. The historical legacy of war in the region also provides an additional reason to suspect others' intention. All these obstacles pose a threat to meaningful regional cooperation. As recent experiences of trade and investment between NEA countries suggest, confidence building has to start from action--running a factory or building a bridge in China and the RFE and so forth. This ground-up approach, if complemented by state-level agreement, will enable us to overcome those obstacles eventually, thus paving the road for regional prosperity.
Considering the contingency of regional political changes--largely due to the uncertainty arising from North Korea's position regarding international relations and economic cooperation, this paper proposed a gradual approach for economic cooperation and regional development in NEA. For the immediate future, it has been suggested that industrial cooperation can start with projects, which require less investment and negotiation. the candidates are the tourist industry, labor-intensive export processing, and contract farming. These projects can be carried out by private sector with minimum assistance from governments, i.e., inter-state agreements (local to local government agreements would be sufficient in most cases). Spontaneous trade and economic cooperation in the cities along the border should be encouraged and international assistance in infrastructure building at a small scale (e.g., a bridge between Heihe and Blagveshchensk).
Special Economic Zone is an effective mechanism at the early stage of regional economic cooperation. In addition to the existing Hunchun-Rajin/Sonbong-Khasan and Nakhodka, we may consider Dandong and Shineuiju as a strong possibility.
Between China and Russia, Suifenhe--Grodeko and Heihe--Blagoveshchensk in
combination offer an opportunity for Special Economic Zones. Cross-border railways and road connections and possibly power plants for joint use can be supported by direct foreign investment. Port expansion at Rajin/Sonbong and Zarubino are already in progress. In order to function as a Special Economic Zone, Dandong and Shineuiju also require port expansion, which may be of interest to South Korean and Japanese companies.
In this growth-point strategy of regional development, joint ventures are perhaps limited to the labor-intensive export activities and sectors, using local resources. As countries and businesses gain experiences, industrial cooperation can be expanded to larger scale projects with heavier investment requirements.
Household electronics, metal fabrication, machineries with medium technology are obvious candidates for regional cooperation in the continental region of NEA. This expanded industrial cooperation, however, requires industrial base and transportation linkages between the customers and suppliers. The growth-point strategy has to be transformed into the growth-line strategy.
These growth-lines can accommodate industries of regional importance, especially resource-based manufacturing such as wood products, iron/steel, metal products, and non-electrical machinery. Infrastructure development should be not only enhancing linkages between major cities along the growth lines but also upgrading production efficiency within the cities. Since these growth-lines are not accorded with high priority within domestic development plans of NEA countries, international assistance deems necessary to help develop infrastructure.
For international traffic of inputs and commodities within NEA, selected regional ports should be developed and their linkages with the growth lines must be constructed (although expansion and renovation may be required in most cases).
International land connections are perhaps feasible when major growth axes of North East Asia are about to form in later stage. Candidates are Harbin-Dalian, Shenyang-Pyongyang, Harbin-Vladivostok, and Khaborovsk-Vladivostok. Among these, Harbin-Dalian is most likely in the early 21st century. The growth lines mentioned above are eventually to be connected with this Harbin-Dalian axis.
When Dalian is connected with Yantai by an undersea tunnel, the Harbin-Dalian axis will become the major growth axis in NEA. By that time, international highways and high-speed railways connecting Pusan/Seoul with
Shenyang/Beijing and Kwangyang/Seoul (via Chongjin and Vladivostok) with Khabarovsk are possible. Industries such as machineries, steel and iron, and transport equipment will be located along the major growth axis and subsidiary axes to reap the benefits of joint comparative advantage in terms of natural resources, human resource, and industrial base and network. A shift in the regional development approach is inevitable, moving from growth-lines and axes to a growth-network.
Gas pipelines to supply necessary energy for the industrial production in the continental part of NEA as well as for the demand from South Korea and Japan will be fully justified when a growth network forms shape in the early 21st century. Other infrastructures--both physical and social--will be required by the region's economic growth as a whole. To realize these mega-infrastructures, both bilateral and multilateral assistance are necessary and government-level efforts are essential to supplement private initiatives. Some kind of multilateral organization to design and implement these projects are therefore required.
Given the enormous amount of investment required to finance the infrastructure requirements of NEA, external long-term financing will be essential.