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Measures for inter-Korean cooperation in the machinery industry: with a focus on general machinery

Author Lee Seog-ki et al. Date 2020.12.30 Page
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This work is one of a series of studies on industry-specific cooperation strategies to promote inclusive inter-Korean industrial economic cooperation, conducted as part of an effort to realize the New Economic Initiative of the Korean Peninsula. The primary objective of this work is to present strategies and propose detailed sector-by-sector cooperation plans for North-South cooperation in the machinery industry.

 

Cooperation in the machinery industry was studied first owing to the fact that, given weak overall industrial production capacity in North Korea, in order to build a foundation for manufacturing cooperation between the two Koreas it is necessary to pursue cooperation in the machinery industry. This includes the provision of machinery to North Korea from the South. In addition, we judged it necessary to promote cooperation in the machinery industry to incentivize the North Korean government’s active participation in North-South economic cooperation efforts.

 

The paper is structured as follows. The first chapter functions as an introduction, describing the reasons for pursuing the research and its main objectives, as well as the principal subjects of analysis. In the second chapter, we present the case for North-South cooperation in the machinery sector and lay out strategies for promoting such cooperation. We review the overall state of the machinery industry in the two Koreas and examine both the necessity of and possibilities for cooperation. And through an analysis of machinery trade data from North Korea and South Korea, we ascertain what types of machinery are most conducive to North-South cooperation. In Chapter 3, we suggest promotional strategies for North-South industrial cooperation on a sector-by-sector basis. We also provide step-by-step directions for each potential avenue of cooperation, including information exchange, the direct provision of machinery to North Korea, and cooperation in production in addition to exploring the necessity of cooperation and plans to pursue it. Types of machinery subject to the analysis include machine tools, textile machinery, agricultural machinery, construction equipment and mining equipment. In Chapter 4 we conclude this study by summarizing its arguments and submit policy recommendations for galvanizing North-South cooperation in the machinery sector. 

 

These proposals are described below. First, any strategy for North-South industrial cooperation must be multi-dimensional, incorporating the final goods sector as well as the machinery and materials sectors in both the establishment and implementation stages. Second, in the early phase of North-South economic cooperation, programs for supplying idle and/or unused machinery to North Korea should be expanded to bolster the North’s inventory of production machinery. Following this, North Korea’s machinery production capacity must be augmented through the consignment processing and production cooperation. Simultaneously, it is necessarry to improve the efficiency of programs supplying machinery to the North through support for invigorating the machinery re-manufacturing industry in the South. This in turn could create jobs in South Korea. Third, it will be necessary in the mid-to-long term to engineer a North-South industrial structure in the machinery industry. As a means to accomplish this, an actual base for industrial cooperation between the two Koreas must be established. In terms of location, Pyongyang is the most likely candidate, but it is worth reviewing the suitability of the city of Cheongjin on the East Coast, in which North Korea’s heavy and chemical industries are concentrated.