Facing economic challenges in Post-Korean War period, strict government regulation in South Korea turned out to be the only way to ensure food security and to alleviate poverty. Seizure of power by military headed by Park Chung-hee in 1961 facilitated the establishment of the leading role of state capturing all the possibilities of conducting administrative, economic and political reforms. Thus the Economic Planning Board was established in order to relocate funds to nourishing prospective industries and to provide large-scale loans to companies operating in those industries. Tselichtchev I., Debroux P. Asia's Turning Point: An Introduction to Asia's Dynamic Economies at the Dawn of the New Century. 2009. Singapore: John Wiley & Sons. P. 170. Money came from domestic banks which acted as mediators between government and enterprises. There we can bridge a gap with the Japanese structure implemented a decade earlier. From this statement, it is possible to say that Japanese political system with its administrative reforms was adopted by South Korean government and regarded as an example of how to achieve successful functioning and become an export-oriented country as according to “flying geese” model was one of the factors of competitiveness. Powerful government had all tools to create appropriate conditions for strong production base for both light and heavy industries. Although considering modernization as a priority, first of all, government needed to encourage companies to extend their activities with the aim to export more goods and services. The appearance of chaebols correlates with Japanese zaibatsu, large financial holdings with a coordinating center, possessing wide range of activities. Chaebols, South Korean family groups consisted of vertically integrated companies, were established and assisted by government through various tax incentives, subsidies and, as have already been mentioned, through loans. Amsden A. Asia's Next Giant: South Korea and Late Industrialization. New York: Oxford University Press, 1989. P. 9. The nature of chaebols was relevant to existing conditions. The primary goal for chaebols was to enter foreign market and to persuade foreign investors to enlarge cooperation. While market institutions were not deeply rooted into the political system, government intervention was crucial to ensure chaebols 'performance as there was lack of qualified personnel ready to work for such companies. The form of large family holdings was easy for government to coordinate rather than small separated enterprises and, what is more, it were founders of groups and their family members who took all the responsibility for company's activities and reputation. This fact defined the family type of management linked with the government support that entailed informal relationships between business executives and high officials and thus impact on proposed legislations. When South Korean government proclaimed the development of heavy industries, it allocated money to chaebols, as a result, 30 leading companies dominated the growth in those sectors. Whereas in Japan, authorities supported small and medium-sized enterprises as well as keiretsu or zaibatsu.

It should be noticed that Japanese experience was crucial to the rise of South Korea as a middle- and later as a high-income country. It cannot be achieved without elaborating its own model of development or, put it another way, “developmental state”. The definition that gives us an opportunity to describe and analyze the efforts of the country, which was striving for its economic progress during the second half of the twentieth century.

North Korean influence

Another example to point out is neighboring North Korea, which turned out to be an outlaw of the world integration processes. However, there are some significant factors beyond a well-known image. Due to its territorial proximity and historical past, the impact of North on the South “developmental state” cannot be underestimated. When Korean War ended in 1953, the government internal policy demonstrated the leading role of state in all spheres of economic activity. As Central Committee of the Worker's Party of Korea (WPK) adopted Socialist countries' tradition of implementing planned economy principles, development plans were announced. The first ones specified postwar economic recovery (1953-1957), the others aimed at shaping socialist economy affected by the ideological factor “juche” or, in other words “self-reliance”. Torkunov A., Denisov V., Li V. Koreisky Poluostrov: Metamorphosy Poslevoennoy Isorii. [The Korean Peninsula: Essays of the Post Second World War History]. 2008. Moscow: OLMA Media Group publishing house. P. 189. Although, it was not exactly so as financial assistance came from the Soviet Union, China and other socialist states. Nevertheless, in North Korea everything was under the control of the Party that managed to mobilized the capability of huge plants focused on heavy industries production. As a result, North became an industrial center on the Korean peninsula and thus remained more developed than South. The impact of Pyongyang economic, social, and cultural achievements on Seoul reached its peak in the early 1970s. People of the South were dissatisfied with the policy conducted by military led by Park Chung-hee. Guided by those factors Park Chung-hee introduced some political reforms. Enactment signed by Park eliminated the opposition political parties and delegated the powers to the Special State Assembly was established instead of National Assembly. Ibid, P. 251. In fact, Special State Assembly obtained full control over the political system of South Korea, even the right to amend the Constitution. According to those amendments, the United Independent Civil Meeting, a newly created institution, elected the President indirectly, in a way opposite to the one that used to be. President was elected for 6 years an unlimited number of times i.e. nothing restrained the governor from being a president-for-life. Such changes introduced by Park Chung-hee reflect the North Korean political arrangement. It was an evidence of the South to replicate the attainments of the North. This fact indicated North Korean growth in its own way and pushed South Korean government to narrow the gap between the levels of economic development from mid-1960s and to adopt some characteristics of the North political model as mentioned above.

However, North Korean postwar growth and economic policy was different to South Korean and Japanese ones. Directives of WPK dominated in all spheres without an exception and, if in South Korean and Japanese cases the role of state assured the existence of the private sector, North Korea fostered only state-owned enterprises operating in heavy industries sector. During 1990s, the crisis of such model became obvious and it required dramatic economic reforms. Fall of the USSR and Asian Economic and Financial crisis 1997-1998 affected negatively the economy of North Korea, which proved that country did not rely on itself entirely. Deterioration of the economic situation urged the WPK to restructure the state-owned enterprises thus moving towards further market reforms. Government approached to modify micro- and macroeconomic policies through emphasizing the importance of light industries and service sector and decentralized decision-making process by delegating the powers to managers of the enterprises. However, North Korean business executives were not given such decision authority as South Korean chaebols possessed. As far as state-owned enterprises are concerned, they were responsible for covering their own costs but they stopped receiving subsidies except ones in military sector. Kihl Y.W., Kim H.N. Institutional Multilateralism in Northeast Asia: a Path Emergence Theory Perspective // North Korean Review. 2015. Vol. 11. P. 4. Under Kim Jong Un's policy several important changes in a market structure were introduced. With the extension of the private sector up to 50% of the GDP, there were some agriculture reforms, according to which, more power was delegated to families who were cultivating land. Lankov A. Kim Chen Den. Pochemu Severnaya Koreya Vstala na Put Rynochnykh Reform. [Kim Chen Den. Why North Korea Has Embarked on the Path of Market Reforms] // Moscow Carnegie Center. 2015. [Website]. URL: http://carnegie.ru/2015/02/20/%D1%80%D0%B5%D1%84%D0%BE%D1%80%D0%BC%D1%8B-%D0%B2-%D1%81%D0%B5%D0%B2%D0%B5%D1%80%D0%BD%D0%BE%D0%B9-%D0%BA%D0%BE%D1%80%D0%B5%D0%B5/i2on (accessed date 18.02.17) Despite the changes in a private sector that pushed North Korean economy to a certain progress and the difference of Kim Jong Un's policy, compared to his predecessors in that domain, there are still some ideological factors beyond socio-economic reforms.

The influence of North Korean model on the South has ended far from 1970s when the South was ready to adopt some of its practices. However, time has shown it is North Korea that realized the need for foreign investments and its dependence on more powerful neighboring states.

Role of China

Significant contribution in terms of elaborating effective economic and political systems was made by China. In its developmental policy, Chinese leaders outperformed neighboring countries by becoming the Asia's largest exporter and importer. Economic Indicators of China // Trading Economics. 2017. [Website]. URL: http://www.tradingeconomics.com/china/indicators (accessed date 18.02.2017) In accordance with reforms initiated by Deng Xiaoping, the role of government was paramount. The first sector to restructure was an agriculture. Until 1984, communes were cultivating land but when reforms were implemented, in 1978 the responsibility was passed to households. Those rural households should not only to work on the land but also supply the fixed amount of products to the state at the increased purchasing price. The reform thus boosted agriculture production as well as introduced market relations as the households obtained the right to sell the remainder freely. Enterprises established in small towns and villages gave a grounding to the expansion of private companies whose rights though were indefinite. The state-owned Chinese enterprises were initially delegated more power than South Korean ones. It was organized to exploit buying and selling powers of the enterprises and of the national economy as a whole.

In order to attract foreign investments government promoted inward FDI through the establishment of Special Economic Zones (SEZs) since 1980. Those SEZs were located inside the country apart from South Korean experience of following Japanese “flying geese” model and attracting investments through relocating their production abroad. In Chinese SEZs, the foreign investment projects were examined and the transaction between foreign and Chinese companies were simplified. Foreign companies came there due to tax incentives provided and customs duties reduced. Yu Y., Zheng X., Zhang L. Yardstick Competition and the Formation of Enterprise Zones in China // Emerging Markets Finance and Trade. 2016. Vol. 8. [Website]. URL: http://proxylibrary.hse.ru:2056/doi/full/10.1080/1540496X.2016.1184143 (accessed date 20.02.2017) However, building a SEZ in a country was more expensive, especially for local government than transferring production to less-developed states. Such behavior was driven by a variety of factors. Turner R., Cassell M. When Do States Pursue Targeted Economic Development Policies? The Adoption and Expansion of State Enterprise Zone Programs // Social Science Quarterly. 2007. Vol. 88. P. 14. First, ideological explanations, in other words, provision of resources from the haves to the have-nots thus meaning foreign investments and Chinese economy. Then, it determined by socioeconomic conditions, it was aimed at boosting the urban population whose opinion was of crucial importance when creating a SEZ. Finally, centralized management of such SEZs contributed to the efficient planning of resources located within the SEZ. While the decentralized decision-making process dominates there, local government of one SEZ focus on competition between other SEZs rather than attracting FDI. Thus, the way of opening to foreign capital through SEZs may turn out to be inefficient.

Nowadays, though the major driving force of China is placing investments into construction and financial intermediation while the efficiency of the investments into some industries, for instance, textile, materials-producing, is doubted as some excess capacities have emerged. The mentioned fact shows that SEZs failed to boost economic growth and thus have not achieved high performance rates in comparison to attracting foreign investments abroad.

At the same time, China is still ranked first among South Korean trade partners and its role in Seoul's foreign strategy is very important. The Top Export Destinations of South Korea // The Observatory of Economic Complexity. 2017. [Website]. URL: http://atlas.media.mit.edu/en/profile/country/kor/#Destinations (accessed date 03.03.2017) China affects South Korea in its integration and economic policies, especially after the agreement on free trade concluded between China and South Korea on June 2015. Although Chinese way of pursuing development was a bit different from South Korean or Japanese one, it has established itself among the regional and global economic powers through intersecting its values with the East Asian model of capitalism.

2.2 Asian values and South Korean modernization

We suppose that the term “Asian values” is applicable to East Asian economies, especially those included in the “flying geese” model, that share Confucian heritage in their modernization policies. Asian leaders of those economies outlined their vision of Asian values as ones opposed to Western way of development. Moreover, those high officials set Confucian values equal to Asian ones when disregarding the fact that Asian culture is heterogeneous and complex. It seems necessary to examine what embraces such term as “Asian values” and to outline its general characteristics on the level of East Asian economies first and then shift to the insight from South Korean perspective.

Nowadays, there is still no consensus among researchers on what constitutes Asian values. Most scholars do consider Asian values as the common features of Confucian East Asian countries. Yung B. Road to Good Governance and Modernization in East Asia: `Asian Values' and/or Democracy? // Journal of Asian Public Policy. 2012. Vol. 11. P. 269. In general sense, they comprise the importance of family and its projection on the political and company management systems, concern for virtues and dignity, which is reflected in the way business executives rule their corporations, the priority of collectivism over individualism with a strong focus on education. What is more, in Asian societies, harmony prevails over the Western justice, which affects the political side, namely consensus decision-making procedure.

Emphasis on family relations determined the framework of political system in some East Asian economies, with a strong government at the disposal of which were all available resources urgent to assure economic and political modernization as was described in the previous paragraph. Moreover, the implementation of Asian family values affected the state-business relations, core for political and business elites to strike for high growth rates. Not to mention the harmony factor when analyzing the East Asian “economic miracle” which entailed a relative political stability that promoted the economic boom in those economies.

All in all, despite the lack of general understanding of what “Asian values” actually are, the total of political, economic and social aspects determined the way of East Asian development and shaped their own “capitalist” model. At the same time, it should be said that such complex notion as “Asian values” is not only political or cultural term. It weaves all layers of Asian society and is considered in a different way by each member of East Asian community.

Asian values are deeply rooted in South Korean society. Those factors were in use when a country took a stance for fostering modernization and innovations. At the beginning, modernization was traditionally linked to industrialization. However, modernization is a complex issue and closely tied with socioeconomic aspects that change over time. At present, modernization is recognized as the capacity to install innovations in everyday practices. The phenomenon of South Korean modernization is shaped by a variety of factors among which Asian values constitute grounds for South Korean “economic miracle” since the extension of large business structures and until the moment when it reached its peak during 1990s. The way state-business relations were developing determined the theoretical and practical implementations of South Korean model during financial crises in 1997 and in 2008 as well as affected current performance of South Korean corporations. The specificity of South Korean public-private partnership elaborated ways of doing and managing business and stipulated the economic policy not only of South Korean companies in international markets but also contributed to the identification of South Korean “developmental model”. The character of relations between government and companies determined South Korean “soft power” furthered the idea of the developmental state. In this regard, public-private relations should be thoroughly outlined and analyzed.

Nowadays South Korean business practices combine Japanese and American with the traditional Korean ones. The practices adopted from Japan or the USA were implemented in Korean society with respect to traditional values in social, economic and cultural life. Korean management system have suffered changes before incorporating into the modern global system. The efficiency of such model lies in the approach that before adopting “well-known” business practices beneficial for some countries; they may not prove to be that efficient in South Korean society. As a result, they have to be transformed to suit the domestic market realities. It is logical to highlight the flexibility of South Korean system in response to already mentioned conditions as well as the fluctuations on the domestic and global markets.

The appearance of such form of business groups as chaebols was defined by a variety of factors described in the previous paragraph. It was of great advantage for government to monitor large corporations and for the business executives to hold the power. Although government and chaebols were pursuing different aims, both were keen to cooperate. However, that was so until the 1980s when the country took the path for democratization and boosted economic growth which changed the attitude of chaebols towards government. Zhang X. Global Forces and Corporate Reforms in South Korea // International Political Science Review. 2011. Vol. 11. P. 63. As chaebols consolidated their presence on international markets by promoting Korean products and attracted foreign investors, they gained firm financial support. At that time, chaebols stopped counting on government aid and pretended to be self-sufficient. Chaebols made a significant contribution to achieving South Korean “economic miracle” and represented an important source of income to South Korean economy thus becoming a real power. The influence of chaebols extended so much that they began gaining advantage through influencing government decisions. This was a major stumbling point to private-state relations. Driven by political ambitions of the past and with the intention to maintain control over the companies' resources, high officials did not want companies to become estranged from governmental control. The conflict of state-private interests escalated during 1990s. When Asian financial crisis broke out in 1997, the situation changed as companies and government were obliged to cooperate in order to fund their activities and to ensure stability on the labour market. At the turn of the 21^st century, according to the government decision, companies that were able to pay their debts and not became bankrupts, had to undertake take-over bids over the low-performing firms thus absorbing their labour and production resources. Rowley C., Bae J. Human Resources Management in South Korea // Managing Human Resources in Asia-Pasific. 2014. P. 33. It was a solution to economic problems appeared two decades ago. Government played a crucial role in that process while chaebols continued influencing the decision-making process. It seems logical to point out that public-private relations have been transforming dramatically since their establishment until the present due to many circumstances. The performance of both South Korean companies and politicians confirms the compliance with the specifications of the global system throughout the 20^th century, however, at present it is far more complicated.

When the investment base and market regulation tools were being developed, South Korean corporations could not operate properly without governmental intervention. By the time those institutions were formed and national economy was booming, the influence of business was also at the rise. It was estimated that South Korean modernization was linked to economic indicators which, in their turn, were stimulated by the activities of chaebols.

In the meantime, the transition from an authoritarian state to a democracy cancelled the need for strict apparent government regulation of business groups. What it has not cancelled is the interdependence of political elites and the leading chaebols. It remained in the form of non-transparent government interfering and subsequent corruption scandals. Cooperation between business elites and politicians turned out to a response to government policy after 1997 financial crisis. As high officials could not stand the opportunity of losing control over the more powerful actor. The nature of bilateral relations has changed after the Asian crisis. It is fair to suppose that the flexibility mechanism stopped working after the crisis and uncovered that government and business remained interdependent, not isolated from each other. Instead of encouraging companies to return to their previous growth rates, government initiated some reforms aimed to restructure companies as soon as possible. Thus, their development was not supported. Companies accepted the aid as it was the only way to sustainable future profits. The example of post-crisis reforms is remarkable, as both government structures and Korean transnational corporations understood the interdependence and did not hide it. Whereas nowadays, they still depend on each other in terms of non-public or, it is better to say, private character of their relations.

We suppose it is necessary to consider one more aspect of relations between politics and business in South Korean society. Aimed at fostering economic growth rates, during 1990s government realized the need to promote innovations as the major link to modernization. Thus in August 1997 the Special Venture Business Law was adopted. Tselichtchev I. East Asia: New Wave of Growth and Structural Transformation // Institute of World Economy and International Affairs, Russian Academy of Science (IWEIR RAS). 2012. P. 54. It provided small and medium enterprises with the “venture companies” status, in other words, they became the platforms for promoting innovations through the research and development (R&D). The benefits of being such an incubator of technologies included the access to state funds and assistance to carry out research experiments and training of people as well. At the same time, the venture companies succeeded in obtaining some state warranties when borrowing money, which was crucial to finance companies' activities as the investment, was made through the borrowing and not through the issue of stocks.

Under President Park Geun-hye government also links modernization to favoring innovations and creating an economy of a new type or so called “creative economy”. The aim of this project is to improve the production base and to forward the groundbreaking technologies. As far as practical implementations of governmental policy are concerned, the idea is to reduce the number of employees in large corporations to encourage young entrepreneurs to set up their own businesses. It is predicated by consideration of the business diversification. The more business is varied, the wealthier and more sustainable the economy will be. That is why, driven by this statement South Korea plans to take the lead in innovations thus leading the global modernization processes. Venture enterprises funded by venture foundations obtain the highest priority in the modernization task. The funds South Korean government is going to raise in order to support venture start-ups are exceeding. This year a special institution called the Small and Medium Business Administration (SMBA) along with the Korea Venture Business Association (KVBA) are planning to attract at least 1.4 trillion won (1.2 billion US dollars) to assist various types of venture enterprises when the total amount of funds raised is by 21% higher than the previous year. Jung S. Korean Fund of Funds to be Raised 21.5% from a Year Earlier // Business Korea. [Website]. URL: http://www.businesskorea.co.kr/english/news/smestartups/17295-fund-funds-korean-fund-funds-be-raised-215-year-earlier (accessed date 24.02.2017) South Korea is ranked first three years in a row by the Bloomberg Market with the R&D spending of about 4% of the GDP. Jamrisko M., Wei L. These are the World's Most Innovative Economies // Bloomberg Markets. [Website]. URL: https://www.bloomberg.com/news/articles/2017-01-17/sweden-gains-south-korea-reigns-as-world-s-most-innovative-economies (accessed date 24.02.2017) It is fair to say that government strikes for modernization and thus attracts significant sums to business to assure the development of small and medium enterprises and to erode the typical chaebols structure. In this sense, the representation of South Korean business is changing; however, the public-private relations still exist and, what is more, they are deeply rooted in Korean society. It seems logical to conclude that government still depend on chaebols' donations while chaebols are the ones who contribute the most to the economic growth and modernization of the country. As long as small and medium enterprises are under development, large corporations continue to play crucial role in national economy and it appears that government has nothing to do with that.

2.3 The specificity of South Korean “soft power”

According to Joseph Nye, soft power is conceived as the ability of a country to persuade others to do what it wants without force or coercion. Nye J. Soft Power: the Means to Success in World Politics // Foreign Affairs. 2010. [Website]. URL: https://www.foreignaffairs.com/reviews/capsule-review/2004-05-01/soft-power-means-success-world-politics (accessed date 24.02.2017) To say more precisely, soft power can be defined in the form of economic aids or extension of cultural and historic values or participation in integration organizations.

Numerous studies have been conducted to outline the significance of countries benefited from being involved in the integration patterns in Asia-Pacific. The region is characterized by the absence of a strong leader and the expansion of influence between China and the United States. Those countries are forced to enter the integration processes in the region and they have to determine their allies. Thus, they can be defined as major powers. Previous studies considered South Korea as a country, which realizes the need for striking a balance between following its national interests, and joining the China or US- led organizations. Sohn Y. The Role of South Korea in the Making of a Regional Trade Architecture: Convening, Bridging, and designing FTA networks // East Asia Institute Middle Power Diplomacy Initiative. 2014. P. 2. Some scholars pointed out that South Korea as a medium-sized country cannot conduct its policy without referring to opinion of China or United States, otherwise speaking, countries establishing their own order in Asia-Pacific. Ravenhill J. The New East Asian Regionalism: a Political Domino Effect // Review of Political Economy. 2010. pp. 199-200. We suggest that “medium-sized” powers can be strong enough to cope with economic challenges and take advantage from it and secondly, South Korea's policy means not necessarily to adjust to the needs of the global powers but to transform their ambitions to gain a new strategical ally in Asia-Pacific. This paragraph aims to evaluate several relevant issues by examining the above questions. This analysis tends to shed light on the fact that South Korea presents a crosspoint of Asia-Pacific direction of integration, which is a completely new vision of positioning itself as a middle power on the global stage.

South Korea is characterized as a post-industrial economy with technological, economic and cultural potential. The country may enhance its emerging soft or state-led power due to a variety of factors. In this paragraph, we will examine the integration vector of South Korean soft power as the most topical issue nowadays for Seoul's economic and political agenda and the steps taken to enter bilateral and multilateral agreements and evaluate participation of South Korea in existing integration processes.

Being involved in the Asia-Pacific integration processes for a middle-sized country, like South Korea, means the opportunity to expand its economic and political influence, which goes beyond national borders. The buildup of free trade and economic area within such a dynamic region as Asia-Pacific is in the center of international trade of major regional economies that pretend to obtain some benefits of the total trade volume. The participants of those integration organizations could gain advantages which exceed those of bilateral free trade agreements. What is more, it is possible to establish good rapport with more number of counterparts - other members of the integration organization.

When the new trend in regional diplomacy emerged, the so called “political domino” effect, the necessity of the engagement in processes of economic cooperation in Asia-Pacific, was shaped. Ibid The emerging number of free trade agreements throughout the region is perceived as the struggle not only for obvious economic benefits but also for the political influence on the regional players. It should be mentioned that political influence of a regional actor assumes the ability to concentrate integration trends around itself and to define the “rules of the game”, i.e. agenda within a particular integration organization. Nowadays, two major vectors contribute to Asia-Pacific integration patterns. That is to say, Asian vector led by China and Pacific one in which the lead is taken by the USA. Those powers compete for being at the forefront of Asia-Pacific soft power tools and attracting more advocates for their way of determining regional agenda on political and economic issues. The struggle between two directions is getting stronger as the new American Administration under President Trump officially rejected Obama's pivot to Asia policy. As Susan Thornton, acting assistant secretary of state for East Asian and Pacific affairs, claimed, “pivot” was a word that was used to describe the Asia policy in the last administration.” Kim G. Trump Administration Rejects 'Pivot' to Asia, At Least in Name // Stars and Stripes. 2017. [Website]. URL: https://www.stripes.com/news/trump-administration-rejects-pivot-to-asia-at-least-in-name-1.458527#.WRNJpvKfLWk (accessed date 25.02.2017) In general, it was reduced to the following formula: be engaged and active in Asia, collaborate on free trade and fair trade issues and address the threat from North Korea which has tested two ballistic missiles since January 2017. The USA will stay in East Asia and will continue negotiations on regional security issues advancing American agenda and even pressing to reach a constructive, stable order in the region as the assistant secretary mentioned. It may turn out to be successful if new president manages to stabilize US's position in Asia-Pacific without undermining the hub and spoke network or causing a crisis among its competitors and allies. Auslin M., Brooks K., Glaser B. et al. What Future for the Asia Pivot under Trump? // Council on foreign relations. [Website]. URL: http://www.cfr.org/asia-and-pacific/future-asia-pivot-under-trump/p38581#expert_roundup_author_9388 (accessed date 25.02.2017)

In particular, for South Korea as a middle-sized country, political influence represents one of the soft power tools through which it can coordinate actions of both trendsetters and those who accept them. However, the economic growth of the country sorted out priorities in the external policy. President Lee Myung-bak prioritized free trade through bilateral agreements. This particular format clarifies the firmly established economic ambitions through political relations with its counterparts. In that case, the number of participants is limited to minimum thus it is easier to reach a compromise herewith following the national interests. It is a fact that the majority of bilateral agreements is related to the Lee Myung-bak presidency.

Being involved in either Asian or Pacific way of integration means to Seoul to support the trendsetter's policy and to accept its rules. The soft power lies in the fact of bringing together two directions and striking the balance between vision on regional development of both China and United States. In fact, Korean government referred to bilateral dialogue between China on the one hand and the USA on the other. Thus, the expanding influence of China in Asia-Pacific proved to be the main reason for searching new allies and after that concluding the US-South Korean agreement on free trade (KORUS FTA) which was aimed at strengthening the link between American market and the one of Asia-Pacific countries. On the contrary, signing of free trade agreement between South Korea and China in 2015 took place. South Korean political and business elites regarded cooperation with those states as an impulse to national economy and increase of trade volume on favorable terms and as a way to be engaged in world trade standards estimated by the USA and China. Agreement with American partners was perceived as counterbalance to “Chinese rules” in the region. Whereas entering into an agreement with China was a way to be involved in regional trade patterns as China is ranked as first trade partner of East Asia economies.

Numerous agreements on free trade were directed at reinforcing the status of Korea as a coordinator within the system built on bilateral agreements. In our opinion, the benefit for middle-sized country constitutes a fact of positioning itself as a regional hub, which is the intersection of Asian and Pacific vectors of integration. Intersection means to combine Korean interests in both Chinese- and American-led integration processes. However, the difficulty is to achieve the realization and harmony of its interests on the two vectors and to do this within even one organization is more challenging than during bilateral meeting.

Previous studies dedicated to South Korean external policy have left several questions unanswered. Those researchers have neglected the new ambitions of Seoul, which is going to benefit from being a transport hub in Asia-Pacific. In the meantime, scholars have ignored the issue of economic prosperity of South Korea and especially the fact that South Korean companies have a strong influence on political agenda. Nowadays, the trend in Korean internal policy has shifted from the bilateral agreements format to multilateral dialogue platforms. It has pushed South Korean government to be a mediator between the interests of developed and emerging economies of regional organizations. Come to power in 2013 Park Geun-hye's administration announced its own vision of the external policy influenced by international relations in the region which are defined by the behavior of major powers that build the integration blocks. Driven by the fact that the position of medium-sized countries like South Korea has attracted considerable interest in the field of integration trends in Asia-Pacific, President proposed the Eurasian initiative as a claim for a new project beyond East Asia. Vorontsov A. Eurasia from Right to Left // Russia in Global Affairs. 2015. [Website]. URL: http://www.globalaffairs.ru/number/Evraziya-sprava-nalevo-17314 (accessed date 25.02.2017) The most important thing here is that South Korea has the resources to realize the planned projects. It is already transforming its seaports into foreign trade gates. South Korea considers itself as an open to the Eurasia Pacific gates, which covers the space as far as the Atlantic Ocean.

At present, the situation is far more complex as the country is trying to strike a balance between carrying out its obligations on bilateral agreements and participating in various integration organizations. Chinese factor is strong and the USA is not going to give up its Asian policy. Moreover, political crisis in South Korea tends to be the stumbling stone to the Seoul's soft power ambitions. The ongoing political crisis made it difficult to respond effectively to a coherent policy against North Korea with the neighboring countries. Lee B. South Korea's Dangerous Vacuum // The Diplomat. 2017. [Website]. URL: http://thediplomat.com/2017/02/south-koreas-dangerous-leadership-vacuum/ (accessed date 25.02.2017) Especially, when the latter intensifies its provocations and succeeds in its nuclear weapons program with the increased number of launched missiles. The political vacuum in Seoul after the impeachment of Park Geun-hye in December 2016 challenged its relations with regional partners. The relations with Japan remain controversial when considering the historical and territorial disputes. China nails colors to the mast when speaking about THAAD and as far as Trump's policy is concerned, the USA continue its projection on East Asia. Finally, it seems questionable for the South to respond to the North's threats and to elaborate a coordinate policy with regional players.

It appears logical to conclude that political aspirations of South Korea were influenced by the modernization reforms conducted during the second half of the 20th century. South Korean way of modernization featured the impact of Japanese, North Korean and Chinese developmental paradigms. Thus South Korean increased economic potential owes to the international aspect which helped to elaborate national developmental model. The perception of modernization benefits has changed in response to increased economic potential and transformed integration trends in Asia-Pacific. Nowadays researchers designate South Korean strong growth, which tends to be the primary criterion for benefiting from its geostrategic location. We suggested that South Korea binds Pacific and Asian integration vectors, i.e. it participates in multilateral dialogue platforms and benefits from free trade bilateral agreements. South Korean government used to place emphasis on bilateral dialogue but it appears to question it now. The theoretical models presented devote interest to become a regional transport hub connecting Asia-Pacific and Central Asia. Traditional role of middle-ranked power ended determining the need for new integration initiatives. Within the framework of practical implications, the present study identifies the need for fostering both bilateral and multilateral agreements to address the challenges of the power game in Asia-Pacific. Our analysis highlights the importance of expanding the relations between South Korea and other East Asian economies with the importance of changing the attitude towards them to correspond the shifts in internal and external policies.

3. Exporting South Korean developmental model to East Asia: capabilities and results

3.1 Instruments to promote South Korean foreign policy in East Asia

The current situation on the Korean peninsula has sharply deteriorated and has showed the crisis of maintaining security in Northeast Asia. More and more politicians and experts from different countries are talking about new North Korean nuclear tests and the possible use of force as a response to Pyongyang actions. Fedorovsky A. Deterioration of the situation on the Korean peninsula // Institute of World Economy and International Affairs Russian Academy of Science (IWEIA RAS). 2017. [Website]. URL: http://www.imemo.ru/index.php?page_id=502&id=3111&ret=640 (accessed date 17.04.2017) As for North Korea, it wants to maintain its right of possessing the nuclear weapon and to use it as a defensive mechanism against those who doubt about its capabilities. On the other side of the axis are powerful states, the United States and China, who are afraid that North Korean practices might set a precedent for other authoritarian states and undermine the peace and secure order in Asia-Pacific. In particular, the USA perceive North Korean tactics as a potential security threat to hub and spoke system, that is to say, its relations with allies. It is getting clear now that Trump administration prefers actions to discussions and it will rather interact with North Korea unilaterally, without mediators. We can conclude that by looking at the Trump's quote “well if China is not going to solve North Korea, we will.” Sevastopulo D. Donald Trump warns China the US is ready to tackle North Korea // Financial Times. 2017. [Website]. URL: https://www.ft.com/content/4d9f65d6-17bd-11e7-9c35-0dd2cb31823a (accessed date 17.04.2017) It seems, those are not just bare words as the American naval group has been sent to the Korean peninsula.

Chinese vision towards North Korea does not differ that much from American one, however what dissatisfies China the most is the appearance of a new nuclear state near its borders. Nowadays the coexistence of the two states is a more serious issue as the nuclear status was officially captured in North Korean legislation. The fact that marks a new stage in bilateral relations. However, in Chinese opinion, the security in Northeast Asia is undermined not only by Pyongyang but also by Seoul. The deployment of THAAD defense system by Americans in South Korea is aimed to respond to North Korean threat and to challenge Chinese security interests. All those factors force China to press North Korea as well. Thus, China is freezing economic ties with North Korea, it stopped importing coal and ceased the number of flights to Pyongyang. Anyway, China is activating its policy on the Korean peninsula and it seems, it is not going to collaborate with the US on that stance.

Under Park Geun-hye's presidentship, South Korea positioned itself as a link between Eurasia and the Pacific Ocean. Frankly speaking, the country had the potential to be in the middle of the integration patterns and to establish a dialogue between Asia-Pacific players. Moreover, with the North Korean crisis, Chinese and American behavior and Six Party Talks (SPT) failure, South Korea might take an option to join the processes of establishing security in Northeast Asia and thus contribute to the peaceful order maintenance in Asia-Pacific.

The most urgent task now is to relieve the tensions that arise between North Korea and East Asia countries. The fact is that the UN sanctions towards North Korea are useless and even produce the opposing effect. What is more, comeback to the SPT negotiating table is not an option as well. From the beginning, the talks did not manage to prevent North Korea from elaborating its nuclear weapons. Moreover, when there are several powerful regional states sitting at the one table, it is complicated to reach a unified position. To our mind, there is a possible solution to the current crisis. SPT used to be a suitable suggestion especially when the tensions between the parties involved were not so obvious. Nowadays, in this crisis a mediator is required. Mediator who is capable to balance interests of North Korea and the major participants concerned whose number should be kept to a minimum. South Korea, a country with certain geopolitical and economic ambitions, has the potential to create minilateral formats that involve four or even three parties, the ones that are more likely to refer to multilateral not unilateral actions. Such dialogue platform could embrace both Koreas and East Asian states concerned such as China and Japan for several reasons.

Chinese stance on North Korean issue was already mentioned, the fact is that country takes a strong line on Pyongyang and speaks in favor of North Korean non-proliferation regime to protect its borders. As far as Japan is concerned, it assumes that global community will take measures to resist North Korean nuclear program. However, Tokyo is more interested in keeping the regional peaceful order and it will hardly support another American missile system deployed somewhere else in the region.

South Korea itself could take the initiative to mediate the talks. The country is interested as no one else in relieving the pressure from the North. In case of successful conduct of negotiations or, at least, softening the tensions, attention of the global community would be caught by South Korea. The country's soft power would be spread across the region and, combined with the planned integration projects, may expand Asia-Pacific.

The internal political situation in South Korea may either freeze country's mediating attempts or facilitate them. There is a tough struggle between conservatives and liberals since the beginning of the presidential race. It is up to the new administration to decide what path to choose. If Democratic Party wins on May 9 2017, it has to correct the external policy and play emphasis on the amelioration of bilateral relations with regional players. Toloraya G. Vesna Peremen v Juzhnoy Koree. [The Spring of Change in South Korea] // Russian International Affairs Council (RIAC). 2017. [Website]. URL: http://russiancouncil.ru/analytics-and-comments/analytics/vesna-peremen-v-yuzhnoy-koree/ (accessed date 18.04.2017) Democrats are more likely to revive the “Sunshine Policy” and to invite North Korea to negotiating table rather than Conservatives. Democratic Party candidate, Moon Jae-in, pledged that South Korea will play a bigger role in efforts to denuclearize the North and will push for denuclearization based on simultaneous actions by stakeholders instead of demanding the North first show its resolve to give up atomic weapons.Hanguk Ilbo editorial office. Mun Tonghabjeongbu Anbodaetonglyeong 'Sangkkeul-i' Gonglyag…'Songmungeon' Jeongmyeondolpa. [South Korea is about to launch new nuclear initiative…'Song document' emerged] // Hankuk Ilbo. 2017. [Website]. URL: http://daily.hankooki.com/lpage/politics/201704/dh20170423112359137430.htm (accessed date 23.04.17) During the race for presidency, Moon called for nuclear peace initiative for the Korean peninsula and for further engagement with the North to ultimately persuade Pyongyang to change. According to Dong-A Ilbo paper, Moon Jae-in is a leading presidential candidate. Dong-A Ilbo editorial office. Moon Jae-in 44.4%, An Cheol-su 32.5%, Hong Jun-pyo 8.4%, Sim Sang-jeong 5.3%, Yu Seung-min 5.0% // Dong-A Ilbo. 2017. [Website]. URL: http://news.donga.com/ISSUE/2017president/News?gid=84026689&date=20170423&path=.East.MainNews (accessed date 23.04.2017) Since Moon gains more support than his rivals and considers being the front-runner, he is able to revive Kim Dae-jung's “Sunshine Policy” which ended in 2008 with the election of a conservative president, Lee Myung-bak, who took a tough approach toward North Korea. If so, new government may achieve success if they regard North Korea as an equal partner but not as a state that is about to break up. Reorganization of some economic projects between two Koreas with the participation of external players, for example Russia, may form a positive agenda for Pyongyang and thus involve it to discussion in other spheres, for example security. Despite the fact that such vision is perceived by Conservatives as risky to national security, there are still about 30% of population who support those ideas and want changes after 10 years of conservative rule. Kim Y. SWOT Analysis of Moon Jae-in // The Korea Herald. 2017. [Website]. URL: http://www.koreaherald.com/view.php?ud=20170330000705 (accessed date 23.04.17)

Apart from inter-Korean dialogue that may become possible under the new presidential administration, Seoul may ameliorate Korean-Chinese relations and push on relations with Russia to the next level. One of possible ways to improve relations with China is to postpone or even cancel the deployment of THAAD missile system. In fact, some candidates for presidency speak against it, as it does not provide proper security and protection of borders. If those candidates emphasize the abolishment of the THAAD deployment, there will be significant proportion of population including politicians, business elites and experts who support this idea, those who are concerned about strains with China. Despite the following dissatisfaction of American government, South Korean elites may prioritize relations with Beijing harmed by recent measures. For instance, the decrease in Chinese investment, flow of Chinese tourists, restriction of South Korean export, which is a considerable source of GDP. Ibid At the same time, political elites are interested in reducing Chinese pressure, which was expressed so explicitly. This manifestation may damage the reputation of the country on the international stage and may question its promising projects. Not to mention that relieving the pressure in Chinese-South Korean relations will be key to the North Korean crisis. Since China has the most influential soft power on the North and the South, with Seoul located just 44 km near the border, South Korea is directly concerned with the peaceful outcome. In order to advance the negotiating process, South Korea needs, first of all, to fill the political vacuum that exists right now and to form a clear agenda on its attitude towards regional state of affairs. Fifield A. After Impeachment, South Korea may Reset Relations with China and North Korea // The Washington Post. 2017. [Website]. URL: https://www.washingtonpost.com/world/asia_pacific/afterimpeachment-south-korea-may-reset-relations-with-china-and-north-korea/2017/03/10/4e8af46e-050d-11e7-9d14-9724d48f5666_story.html?tid=a_inl&utm_term=.28a9325d4b2a (accessed date 21.04.2017) Strengthening cooperation with regional players is essential if South Korea plans to fulfill its integration initiatives.