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OECD Territorial Reviews: Trans-border Urban Co-operation in the Pan Yellow Sea Region, 2009

image of OECD Territorial Reviews: Trans-border Urban Co-operation in the Pan Yellow Sea Region, 2009
The Pan Yellow Sea Region (PYSR) covers the coasts of Northern China (Bohai Rim), western and southern Korea and south-western Japan (Kyushu). It has been one of the fastest growing economic zones in East Asia since China’s opening in the early 1990s, thanks to the region’s extensive manufacturing and transportation networks. Development has been driven by cities such as Dalian, Qingdao and Tianjin in China, Busan and Incheon in Korea, and Fukuoka and Kitakyushu in Japan. 

However, the PYSR has yet not fully utilised its assets nor reached its potential for growth.  Further economic integration has been hindered by excessive competition and inadequate co-operation within the region. The regional transportation system requires structural changes to be integrated, especially in the container transportation market. Deepening the region’s social and cultural network remains a challenge. And environmental concerns are increasingly attracting attention. This report analyses these factors and assesses a wide range of policies to improve the PYSR’s competitiveness and integration.

In particular, the report examines the PYSR’s trans-border governance system, which has emerged since the 1990s as a key regional policy agenda. The harmonisation of authorities within the region is a prerequisite to achieving economic success and addressing the PYSR’s diverse challenges. A comparative analysis of trans-border cooperation in OECD countries in Europe and North America is also included in an annex. This report will be of special interest to policy makers, researchers, NGOs and others active in trans-border development or Asian economic development. 

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Assessment and recommendations

The Pan Yellow Sea Region (PYSR ) covers the coasts of northern China (Bohai Rim), south-western Japan (the Kyushu area) and western and southern Korea. It had a population of 256 million people in 2006. It is one of the fastest growing economic zones in East Asia with a regional GDP of USD 1.5 trillion in 2006. Rapid economic integration began in the early 1990s when the Chinese economy opened its markets to the world. Since then, the PYSR has made significant progress in economic exchange across its borders. This achievement has principally been driven by the private sector, which has taken advantage of the variations in factor prices within the region. In particular, Japan and Korea’s multi-national enterprises (MNE s) have played a key role in turning the region into an integrated economic zone. China has an abundant labour force, vast natural resources and huge markets, while Japan and Korea have ample capital and advanced technologies. This process has been further driven by the industrial restructuring of Japan and Korea. Japanese firms relocated production sites overseas following sharp rises in the yen, land prices and unit labour costs. A similar approach was taken by Korean companies. At the same time, the Chinese government has provided a wide array of incentives to promote investment by foreign companies, such as creating special development zones in coastal areas, providing infrastructure and tax incentives. Matching interests among business sectors in the three countries has resulted in rapid economic integration in the region.

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