This paper examines the peculiarities as well as the viability of one of the most ambitious goals of the new Korean government which aims at placing Korea at the center of the Northeast Asian economy. Various issues that are comprehensively discussed include the effects of and impact on international trade volume, competitiveness, regional complementary and competitive relationships, and export possibilities. The policy implications suggested by this study are as follows:

First, regarding the achievement of Korea’s full potential, it is essential to expand the absolute size of the economy by maintaining continuous growth, while at the same time not losing sight of the need to enhance export competitiveness, which remains a very crucial factor affecting Korea’s realization of her full potential. Furthermore, encouraging diversification of export items as well as expanding foreign investments is indispensable. Without an expanding economy as well an increased export base, the improved capacity for negotiations in Northeast Asian economic cooperation and the possibility of becoming the center of regional trade will be hugely diminished.

Second, regarding trade transactions in the Northeast Asian region, increasing exports through continuously strengthening of national competitiveness is vital. The Heavy and Chemical Industrial sector, whose contribution to our economy continues to be significant, and in many ways has been the primary engine behind Korea’s economic growth, should not be neglected. Additionally, the grafting of IT technology must be spurred to raise the traditional Heavy and Chemical Industrial sector’s ability to create value added.

Third, the role that the U.S. will play must be carefully reconsidered from the perspective of Northeast Asian economic trade. Despite the large geographical distance, the U.S. has been at the center of Northeast Asian economic developments. Consequently, the U.S. should be instrumental in the formation of a Northeast Asian Economic Bloc as well as in the establishing and consolidating relations with China.

Fourth, special care and effort to maintain healthy cooperation with China is important, particularly given the nature of complementary and competitive relationships in the Northeast Asian region. For example, although Korea continues to endure a competitive relationship with China, a strong complementary relation also exists in the exports and imports sectors of the two countries. China is in many ways the most important country to Korea, but to China, Korea’s importance is only secondary after the U.S., Japan, Taiwan, and Hong Kong-i.e. the least important among the Northeast Asian countries. Nonetheless, Korea’s competitive relationship with China in important industries continues to grow, and, in fact, become more intense particularly in modern innovative and cutting-edge sectors, wherein Korea is China’s main competitor even at the early stages of her development. Korea must however be alert and aware that she may become vulnerable to China’s industrial advancement as it stretches out in various ways.

Fifth, Korea needs to actively invite investment from the U.S. and Japan. To enhance the cluster of industrial innovation that should allow Korea to become a center of Northeast Asia, active invitation of investment from the U.S. and Japan particularly in materials and parts that involve technical transfers to domestic industries should prove to be critical.

Sixth, the fact that Korea is heavily dependent on concentrated areas of exports implies that much effort will be required to stabilize the domestic economy from economic cycles overseas, and diversifying exports to strengthen the potential for continuous economic growth need to complement such stabilization measures. Furthermore, for better and stable living of the 47 million Koreans, exports in more various areas should drive Korean economy. Therefore, the current plan to upraise a few concentrated areas of exports through a “selection and focus” strategy may not be appropriate for Korea in that it may weaken the potential for economic growth. Furthermore, care should be taken not to damage the value of traditional industries in such a process, which may become neglected for political reasons.

Seventh, macroeconomic goals need some adjustments. For example, the aim to “create 2.5 million jobs within the next 5 years” requires an annual real economic growth rate of around 7%. History has not recorded any country having achieved such growth rates once they achieved US$ 10,000 per capita GDP. Besides, studies in Korea’s growth potential are in general pessimistic regarding the achievement of such growth rate. The upshot is that impractical policy goals need to be avoided or revised. The target growth rate for example should be revised downwards. Realistically, out of the 500,000 or 600,000 individuals who enter the job markets, approximately 70,000 more individuals than in the past, will remain unemployed if the economic growth rate falls by 1%.

Another macroeconomic goal set by the government is Korea’s reaching the US$20,000 per capita GDP level in the next 10 years. Numerically, this seems to be an achievable goal. However, as experiences of advanced countries show, a continuous real economic growth rate of around 3% accompanied by continuous revaluation of their domestic currencies as well as stable growth in the price level is important. That is, in order to achieve US$20,000 per capita GDP level with a 3% real economic growth rate, enough competitiveness in the export market followed by adequate revaluation of the domestic currency (the won) must be present. If the continuous revaluation of the won is inhibited in any way, reaching US$20,000 per capita GDP level will be very difficult to attain within the time period stated.