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St. Petersburg Campus of the Federal Educational Institution

National Research University Higher School of Economics

St. Petersburg School of Economics and Management

Department of Management

GRADUATION THESIS

Bachelor's program in international business and management

On the topic: MEASURES THAT AFFECT EXPORT RELATIONSHIPS BETWEEN RUSSIA AND SOUTH KOREA

Milashina Yana, Nalesnik Anna,

BMN-162

Advisor: Churakova Iya

SAINT-PETERSBURG 2020



Contents

russian korean trade relations

Abstract

Introduction

1. Literature Review

1.1 What was Korea in the early 60s of the last century, and what it became in just 30 years of development

1.2 The historical aspect of the trade, economic and diplomatic relations between Russia and South Korea

1.3 What are the main priorities in the trade and economic relations of both countries

1.4 Recent Principal Features of the Russian - Korean Economic Relations

Methodology

Results

Interview results

Summary

Conclusion

References

Appendices



Abstract

The present paper provides a research of the historical trade between Russia and South Korea. This was done by analyzing the measures taken by private sector companies to export between Russia and South Korea. Besides, the analysis will diagnose promising businesses for future export developments and find out the complications that can be revised to build up import from South Korea. As a result of a lack of information on specific topics, the primary strategy that will be used is standardized open-ended interviews to obtain the data that will be gathered. Moreover, to have a detailed analysis, descriptive research will provide past and current data, while the exploratory study will present a comprehensive picture of the market status. It can be expected that the collected information over the research and interviews will provide us predictable results that will be discussed and analyzed. Considering the companies who were part of the company, the study will offer applicable recommendations to them to improve their import volume and trade relationship wellness.

Keywords: trade between Russia and South Korea, export developments, private sector, trade relationship.



Introduction

The Republic of Korea is considered one of the most industrially developed countries in Asia, which has been characterized for having a high rate of economic growth in the past decade. Korea has undergone a crucial for its future transformation, which led it to become one of the most valuable representatives in the economic and political sense on the global stage. (Young-In Sun, 2018) Back in the 20th century, Korea turned from an agricultural country into an economically developed country, becoming one of the four "Asian Tigers." Since 2011, the World Bank has classified Korea as part of a high-income country group. (Analytic center of RF, 2019)

The South Korean government has shown great interest in Russia's abundant natural resources, the potentially large market size, and the capacity of the development of rail and sea transport networks through the Russian Far East, which is directly connected to the Korean Peninsula.

From 2018 the economic trading movement between South Korea and Russia is based on expanding economic cooperation. To pursue the economic trading movement Russia and South Korea are under a new Eastern Policy. This policy promotes the development of the economy but also diplomatic support to establish new growth industries. The broadened economic cooperation will be the lead of contact between the geopolitical and economic "(overseas diversification and energy)" needs of both countries.

The interest in external and internal economic relationships between South Korea and the Russian Federation has been relevant for the past several decades more than ever before.

The goal of this study will be analyzing potential measures used by private sector companies and governments for exportation between Russia and South Korea. Specifically, the critical research question is: "What are the measures firms and governments can take to develop export with South Korea." The research question relates to measures South Korean firms and governments of both countries could take to develop their exports to Russia.

Thus, the research objectives for this study would be the following:

1. To analyze the overall historical trade relationship between Russia and South Korea

2. To analyze South Korean export trends to Russia through the years

3. To identify potential business niches for future import growth

4. To determine significant difficulties which can be improved to develop export from South Korea

5. To provide recommendations on measures that can be taken by firms and governments to increase export performance from South Korea to Russia

Regarding the practical implementation, the research paper will contribute awareness of trade relations between South Korea and Russia, specifically, about the significant export trends and potential improvements. The main problems of export development will be considered throughout the years. The results will provide knowledge about measures that companies and governments can take in order to make trade more transparent and increase the number of imported products.

The structure of the paper is determined by the research aim. The study is organized as follows: firstly, the Introduction reveals the importance of the problem. Then, the Literature review is divided into six chapters. The first one, "What was Korea in the early 60s of the last century and who it became in just 30 years of development?" gives some theoretical background about South Korean economic and trade development through years. Next, the chapter "Historical aspect of trade, economic and diplomatic relations between Russia and South Korea" relates to agreements over trade between Russia and South Korea for the past decades. The third chapter, "What are the main priorities in the trade and economic relations of both countries?" determines specific priorities for the export of both countries. Then, the chapter about "Recent Principal Features of the Russian - Korean Economic Relations" indicates both Korean export priorities to Russia as well as Russian preferences for import from South Korea. Chapter: "Export Promotion Measures in South Korea" gives a theory about specific policies introduced by the Korean government in order to increase export. Lastly, (interview part) Methodology part introduces the research design describing the framework of the study and answering the research question. The Conclusion presents the main results of the investigation. Finally, the list of references, which consists of forty-one sources, and seven appendices, are introduced. The whole number of pages is fifty-five.



1. Literature Review

The essence of trade and economic relations between Russia and South Korea is determined, first of all, by what Russia is today and why the Republic of Korea is interested in Russia, as well as understanding what South Korea is today in the 21st century and how it is primarily useful and interesting to Russia. To understand the dynamics of the development of these relations, it is needed to touch on historical aspect:

- What was Korea in the early 60s of the last century, and who it became in just 30 years of development?

- What did Korea take from the experience of the Soviet Union at the beginning of its dynamic development?

- Why did the Republic of Korea succeed in such a dynamic development splash?

1.1 What was Korea in the early 60s of the last century, and what it became in just 30 years of development

The Korean War between north and south (1950-1953) and the division of the peninsula into two states (Vanin, 2006): The People's Democratic Republic of Korea (DPRK) and the Republic of Korea dealt a terrible blow to the economy of the entire Korean nation. In general, even before that, the peninsula was the weakest economy in Asia, the economy of the southern part was especially weak - it was a purely agricultural territory. The industry was then more developed in the northern region.

In the spring of 1961, a military coup took place in Seoul, and General Park Jung-hee (Kurbanov, 2009) came to power. The course of the country led by Lee Seung-man was abruptly changed. Park Jung-hee was a tough politician who considered dynamic development to be the most important political task for Korea. He headed for a competitive economy, but he was an opponent of excessive market freedom. He was a supporter of vigorous state regulation in the marketplace and planned economy. He understood that Korea does not have significant natural resources. And development can only be subject to the creation of large firms capable of producing cheap competitive industrial products and earning chances of entering the world market. However, there were no such firms in Korea in the late 50s and early 60s. It was necessary to create them, but to create them under state control.

The search for people capable of founding such companies (Kurbanov, 2009) by General Park Jung-hee was carried out among people close to him: those who had financial resources, either his colleagues or engaged in taekwondo and who were similar in political views to him. The founders of such companies, which later became the leaders of the chaebols, became in the following years the basis of the "economic miracle", which brought South Korea into the category of "Asian tigers".

The term "chaebol" in Korea refers to large, financially industrial conglomerates. Playing a vital role in the country's economy and affecting politics. It was these companies that managed to change the previous focus of the economy, where agriculture was the dominant factor in the development of the high-tech segment. Therefore, new industries were created in the country: electronics, automotive, shipbuilding, and chemical production. It was these high-tech industries that provided not only the high dynamics of the development of the country with a population of 51.2 million but also ensured a high standard of living, as well as the highest level of development of infrastructure in the cities. The capital of the country, with a population of 10.1 million inhabitants, is today one of the comfortable and beautiful modern capitals of the world. From 1962 to 1989, the country's GDP changed from $2.7 billion to $239 billion. At present, the country's GDP is $1,690 billion (Report on foreign trade, 2019). GDP per capita is $36,776.

This is all the real outcome of the model of national development - the model of "managed capitalism".

According to official data, 45 large corporations - "chaebols" are represented in the state economy. Among them, the largest ones are considered to be LG, Samsung, Hyundai, Kohaps, SK Group, and several slightly smaller one's companies. The top ten combine nearly 30 percent of all business assets of South Korea.

Very briefly about the activities of these companies:

· LG's priority areas of activity are the production of electronics, various fields of application, and various household appliances.

· Samsung's priority areas of business are the production of electronics and various household appliances and the production of telecommunications equipment.

· Hyundai motor's priority areas of activity are the production of multiple brands of cars and shipbuilding.

· Kohaps is known for its chemical production, polymers, and various fertilizers.

· SK Group's key areas of activity are telecommunications, oil and gas industry, hotel services.

Company executives argued that none of the significant companies has a mono-focus; they all work on a whole fan of different types of production. This allows them to compensate for losses from sometimes slipping lines of business and not lose growth.

Since the reign of the Republic of Korea by the leader Park Jung-Hee (Kurbanov, 2009), the leaders of the "chaebols" have been appointed oligarchs. This function is preserved today, but they are responsible for the development of the country. And now they are leaders of all leading companies involved in the adoption of common political and economic issues, although the time of dictatorships is a thing of the past.

A few words are needed to be mentioned about the principles on the basis of which the economic power of financial and industrial groups grew. At the very beginning of their formation, on the initiative of Park Jung-hee (Kurbanov, 2009), since there were practically no rich Koreans able to invest in production, their financing was carried out on a loan basis under state guarantees. A prerequisite for support was a promise to work according to government instructions to develop exports and respect for the laws of the country. In order to ensure the rapid growth of the capitalization of new industrial companies, the government of the republic established high protective duties on the import of similar products into the country. Over time, it has become a rigorous tradition for all residents of South Korea to purchase and use any type of goods but only by domestic production origin. It should be noted that from the very beginning, all manufactured products had to be world quality level. And even today it's highly unfortunate to meet a Korean, regardless of his status and income that would use a non-domestic car. The situation is similar to household appliances, electronics, clothes, etc.

Why did the Republic of Korea succeed in such a dynamic development spurt?

It is important to understand why, from an impoverished and starving country, South Korea, for less than 25-30 years, having virtually no natural resources, has turned into a prosperous state. The Republic of Korea, along with Hong Kong, Singapore, and Taiwan, was named the Asian Tiger. It should be noted that in Korea, the reforms began after the military coup of General Park Jung-hee (Kurbanov, 2009), then in Singapore, the brilliant dawn of the country, began after civilian prime-minister Lee Kuan Yu came to power. And in Singapore, as in Korea, the reforms began with tough decisions for the nation, the start of fighting corruption, and overcoming resistance.

Hence, what were the reasons for the rapid dynamic revival of South Korea, as well as Singapore? Undoubtedly, at the time the reforms began, a firm and sturdy "hand of leaders" was required, and equally firm course, possibly even cruel to opponents of changes, was needed to consolidate the reforms that had begun. But gradually, consolidation of the nation came, the whole country believed in transformation. It was especially important that all ordinary people could see real results, real improvement in life. And in the Republic of Korea, despite the death at the hands of the leader Pak Jung-hee, the reforms launched have become irreversible. And in Singapore, despite the death of Lee Kuan Yu, the transformation was irreversibly continued.

The model of the course of economic reform chosen by Korea needs to be dwelled on, the model of "managed capitalism". This model on the part of the government enables specially selected companies to participate in the planned national projects. These projects were outlined in the construction, infrastructure development of the whole country, the development of all types of engineering, electronics, etc. To implement these projects, companies received state loans as well as borrowed finances from international banks under a solid-state guarantee. If necessary, patents for the production of specific types of products were acquired, or production schemes with foreign participation were built. It should be noted that when attracting international partners, the controlling stake remained with the Korean side.

All these rather strict organizational measures would not have been successful if they had not been based on the traditional Korean culture of relations. In Korea, the culture of production, the culture of work is superimposed on the conventional culture of human relations; traditionally, companies observe a strict hierarchical system of organization and strict subordination of ties. For example, any production complex at certain moments requires albeit minor, but in modernization. A specific employee sees how to update; he offers the idea of rationalization but passes it on to his immediate boss, which does the same to his boss. And so, in a chain of ideas, an idea becomes surrounded by a concrete solution and is put into practice; each member of the collective work performs its function in the hierarchical system.

All of the above is one of the most critical factors in the dynamic growth of the Korean economy. So it was in the period that was observed before the beginning of the 21st century. Of course, in recent years, probably, western economic relations have left some imprint on relations in Korean companies, but I think that the basic principles and traditions are preserved, this is an indicator of a worthy place for South Korea in the alignment of world productive forces and worthy successes of this highly organized country.

The Export Promotion Measures in South Korea

In the early 1960s, the Korean government began an import substitution policy. In 1964, an export promotion policy was announced under the slogan "Export Number One". Therefore, export promotion became the most critical policy, and the government began to increase the volume of export subsidies.

- In 1964, the government introduced a 50% reduction in export income tax and export financing schemes.

- The exporter was granted the right to use foreign exchange to stimulate exports in the face of a shortage of foreign currency.

- The government provided land to industrial firms that focused on exporting at a low cost.

- Institutions to support export promotion (EP) were created.

- Since 1964, a tax exemption on profits from exports was granted, such as an 80% reduction on profit tax.

- In 1967, exporting firms were given the opportunity to amortize the investment in equipment 30% faster.

- Since 1973, the engineering, shipbuilding, chemical, and steel industries began to be exempted for the first three years from internal taxes, such as income taxes and exemption from half of the fees for the next two.

- Since 1982, the tax benefits scheme has become functionally oriented, for example, to support research and development.

- In 1995, tax incentives were introduced in order to develop industries for capital goods related to R&D.

- To this day, the basis of tax incentives is the principle of functionally oriented support. Such incentives are mainly provided for FDI inflows and R&D. For example, as of 2005, in the case of investments by foreign investors in areas designated as the FDI region, income taxes and income taxes are exempt for the first ten years from the date of creation. Tax deductions are granted up to 50 percent (40 percent in the case of large firms) of new R&D expenses.

- In 1995, the government announced the Capital Goods Industries Development Plan, to facilitate the development of capital and high value-added industries by supporting the development of new products and establishing them as significant export industries.

- At the same time, the government took deregulation and market-opening measures to strengthen the market mechanism. Moreover, Korea canceled several remaining direct export subsidies immediately after the 1998 economic crisis.

- Currently, the government promotes exports by supporting international marketing and exhibitions abroad, in addition, exporters are provided with certain measures to stimulate exports, such as giving export insurance and canceling duties that do not exceed threshold levels, since they are not prohibited by current WTO rules.

As a result, according to UNSC Resolution 702 in September 1991, South Korea became a member of the United Nations (from now on referred to as the UN), at present, it is a member of all specialized agencies of the UN, and in 2007-2017 the representative of Korea was the Secretary-General of the organization. The country is a member of the WTO, OECD, Interpol, "Group twenty ", IAEA. (Nijhoff, 1992).

The Republic of Korea became the first country in the Asia-Pacific region to conclude an agreement on a free trade area with the EU (entered into force in 2011). (European Commission, 2011).

In total, the Republic of Korea is currently a party to 15 agreements on free trade and economic cooperation (including with the USA, China, India), ten agreements are at the negotiation stage.

The Republic of Korea is an active participant in international trade, which has been shown over the years.

In 2018, the country became the sixth largest exporter and ninth importer of goods in the world. The share of Korea in world exports was 3.2%, in world imports - 2.8%.

Figure 1 The World's Largest Exporters in 2018

1.2 The historical aspect of the trade, economic and diplomatic relations between Russia and South Korea

It is necessary to consider the interest of Russia and South Korea in the continuous development of trade and economic relations from a position of understanding the potential of both countries. In this case, it is needed to look at these relations from a historical perspective. Until September 1990, Russia and Korea did not have not only trade and economic relations but also even diplomatic ones.

This situation was due to the negative attitude of the USSR to the military coup in Korea in 1961. In addition, during the Korean War between north and south (1950-1953) and after the division of the peninsula into two states (Kabrero, Eduardo, 2019), the People's Democratic Republic of Korea (DPRK) and the Republic of Korea, the USSR has chosen to support the DPRK traditionally.

Currently, the situation has changed dramatically; today, South Korea is one of the leading partners of Russia in the Asia-Pacific region. In the past almost 30 years, country leaders met 31 times at various forums and official bilateral events. The Russian delegation led by President Putin due to the formal invitation visited Seoul in 2013. Another important meeting of Putin Vladimir and Prime Minister of Korea Moon Jae In was held in Vladivostok in September 2017 at the 3rd Eastern Economic Forum.

At present, all previous contradictions between the countries have been removed. Over 50 agreements have been concluded: on mutual trade, on guarantees of investments, on cooperation in the military-technical field, in the area of the avoidance of double taxation, on the peaceful use of atomic energy, on cultural exchange, etc. Many more specific agreements and intentions were introduced. The entire diplomatic and interstate basis for intensive development and cooperation has been created.

According to official statistics, the Republic of Korea today is at 9th place in the list of Russia's trading partners. And Russia takes 16th place among the partners of the Republic of Korea. Back in 2015, bilateral trade amounted to $18 billion. The surplus of Russian exports over imports resulted in $8.9 billion. Today, trade turnover has grown, according to data of 2019, it is within $24 billion, but the surplus of exports over imports remains.

1.3 What are the main priorities in the trade and economic relations of both countries

Priorities are determined by the needs of countries for the previous and present period.

Priorities of the South Korean side has been considered:

1. It has already been mentioned that Korea has virtually no significance in terms of development in natural resources. Consequently, the Republic of Korea (Stanley, 2018) is primarily interested in importing from Russia various raw materials necessary for the life and development of the country, as well as for ensuring the production activities of its developed high-tech financial and industrial corporations.

2. The Republic of Korea is interested in exporting its high-tech products in various fields of application in Russia and primarily engineering products and electronics.

3. The Republic of Korea is interested in importing its high technologies to Russia by creating assembly plants on a joint basis, primarily in the automotive and electronics sectors.

4. South Korea is interested in the joint implementation of serious and significant projects in its potential. Among them is the creation of the Trans-Korean (with the participation of the DPRK and through its territory) railway line with access to Transib. Korea is interested in creating a pipeline for the supply of natural gas (with the participation of the DPRK and its territory). Korea is also interested in setting up production facilities using gas as a raw material. Also, projects of interest are in the field of nuclear energy, in which Russia is strong. But these projects are a matter of the future due to difficulties in relations with the DPRK.

Russia's Priorities in the Development of Trade and Economic Relations with South Korea:

1. Unfortunately, Russia, during the period of the collapse of the USSR and economic chaos in the 90s, lost many of the previously developed areas of industrial activity: machine-tool construction, the production of household and general industrial electronics, many areas of pharmaceuticals, some types of shipbuilding, and a number of industries in the field of processing fish and seafood. Russia is interested in reviving many of these technologies on its territory.

2. Losses in their own production of many types of consumer goods stimulate the import of these products that are significant for people's lives.

3. The financial sector of Russia, for various reasons, including financial losses during the devastating 90s, cannot meet the investment needs of our economy, which is why Russia is interested in both direct investment and the creation of joint ventures, using Korean financial resources.

Russia, like South Korea, is interested in the joint implementation of serious and significant projects in their potential. Among them is the creation of the Trans-Korean (with the participation of the People's Democratic Republic of Korea party and through its territory) railway line with access to Transib. Russia is interested in creating a pipeline for the supply of natural gas to the Korean Peninsula (with the participation of the DPRK and through its territory). Moreover, Russia is interested in creating not only at home but also on the Korean peninsula production using gas as raw materials. Also of interest are projects in the field of nuclear energy, in which Russia is strong. All these projects not only expand the market of nations' raw materials but also have a significant economic effect on the development of high-tech production. Unfortunately, these projects are a matter of the future, due to the imbalance of political relations on the Korean peninsula.

So, when considering priorities in the development of the trade and economic interests of both South Korea and Russia, only four main factors for each party were identified. Naturally, there are other less significant needs.

Some specific examples of economic cooperation between Russia and South Korea are presented:

In the relations between these two countries, the necessary balance of interests has been achieved, which is confirmed by the concluded more than 50 agreements. This could also be confirmed by the growth of trade volume from year to year. The predominance of exports from Russia over imports from Korea is determined by the predominance of raw material supplies, which the Republic of Korea especially needs.

As an example, the structure of Russia's exports to South Korea in the first half of 2018 and 2019 is considered:

- Mineral products (HS codes 25-27) - accounted for 84.01% of Russia's total exports to South Korea;

- Food and agricultural raw materials (HS codes 01-24) - accounted for 8.35% of Russia's total exports to South Korea;

- Metals and products from them (HS codes 72-83) - accounted for 3.75% of Russia's total exports to South Korea;

- Wood and pulp and paper products (HS codes 44-49) - accounted for 1.69% of Russia's total exports to South Korea;

- Precious metals and stones (HS code 71) - amounted to 0.94% of Russia's total exports to South Korea.

- It is also interesting to consider in which types of goods the most characteristic growth in the 1st half of 2019 compared with the 1st half of 2018:

- Mineral fuel, oil and products of its distillation (HS code 27) - an increase of $ 1,583,380,880;

- Fish, crustaceans, mollusks and other seafood (HS code 03) - an increase of $ 72,505,494;

- Nuclear reactors, boilers, equipment, spare parts and mechanical devices (HS code 84) - an increase of $ 64,640,392;

- What conclusions follow from the data given:

- At present, the structure of Russian exports is dominated by exports of raw materials and low-level products, as well as food;

- In general, the need for South Korea in these types of goods is growing, and will increase;

- At the same time, a tendency towards the need for Russian deliveries of high value-added products to Korea begins to emerge.

When developing proposals on measures to strengthen trade and economic relations between Russia and the Republic of Korea, it is necessary to pay attention to these foreign trade factors.

2. The Republic of Korea is actively using its strengths in high-tech development in economic cooperation with Russia.

Consider some examples of the structure of Russia's imports from South Korea for the nine months of 2019, when compared with the nine months of 2018:

- Machinery, equipment, and vehicles (HS codes 84-90) - 67.03% of all imports, (for nine months of 2018 -62.01%);

- Chemical industry products (HS codes 28-40) - 16.29% of total imports, (for nine months of 2018 - 18.64%);

- Metals and products from them (HS codes 72-83) - 7.58% of total imports, (for nine months of 2018 - 9.2%);

- Food products and agricultural raw materials (HS codes 01-24) - 1.79% of all imports, (for nine months of 2018 - 2.24%);

- Textiles and shoes (HS codes 50-67) - 1.69% of all imports, (for 9 months of 2018 - 2.11%);

- Mineral products (HS codes 25-27) - 1.09% of total imports, (for 9 months of 2018 - 1.14%);

- Also, it has been considered which types of goods the most characteristic growth for nine months of 2019 compared with nine months of 2018:

- Ships, boats and floating structures (HS code 89) - an increase of $ 414,970,149;

- Ground transportation means, except for railway or tram rolling stock (HS code 87) - an increase of $ 348,659,130;

- Products from ferrous metals (HS code 73) - an increase of $ 61,551,792;

- Optical, photo and cinematographic instruments and apparatus, measuring, medical or surgical instruments and instruments (HS code 90) - an increase of $ 42,961,792;

- Nuclear reactors, boilers, equipment, parts and mechanical devices (HS code 84) - an increase of $ 36,961,908;

- Electric machines and electrical equipment, their parts; sound recording and reproducing apparatus, apparatus for recording and reproducing a television signal (HS code 85) - an increase of $ 36,906,722;

Analysis of the structure of Russian imports from South Korea in 2019 and 2018 show a steady growth trend in imports as well as growth in exports from Russia. At the same time, imports of high-tech products prevail, and these are various machines and equipment, cars, and sophisticated household appliances.

At present, Russia and Korea are also working on the creation of joint production of a high-tech sector of the economy, mainly assembly plants, as well as in some other areas of production:

- -In Kaliningrad, back in 1997, the assembly of Kia cars at the Avtotor plant began, more than 600 thousand cars have already been produced in the following years.

- In 2010, a plant belonging to Hyundai Motor was launched in St. Petersburg. The Korean side has invested more than $600 million in the construction of the plant, which is now considered one of the largest car manufacturers in Russia, in 2015 more than 229 thousand cars were produced.

- Since 2006, in the Moscow region in Ruza, the factory, together with LG, organized the production of a wide range of televisions and household appliances. The Korean side's investments for several years, amounted to 369 million dollars. This gives Russia tax payments of 168.2 million dollars. TV sales account for 26% of the total TV sales market in Russia.

- In 2008, in the Kaluga region, Samsung Electronics factory for the production of televisions and washing machines was launched. The volume of investments is $ 250 million. It produces 28% of the output and sales of this equipment in Russia.

- Food processing plants have been launched in Ryazan and Ramenskoye since 2004, followed by investments of Korea Yakult.

- Lotte Group has commissioned the Lotte Hotel Moscow, the Lotte Plaza complex, and is planning a hotel construction in St. Petersburg. The total investment of this company reaches a billion dollars.

- Energy projects are significant for the Russian economy. From Sakhalin, liquefied gas (LNG) is supplied to South Korea. Deliveries make up 5% of Korea's total gas imports. Oil supplies from Sakhalin also account for 5% of total oil imports. But the oil and gas needs of the Republic of Korea are not saturated, especially in connection with the competitive price. But this can be realized with the implementation of future projects and with the participation of North Korea (DPRK).

- Nuclear projects are also important for Russia and South Korea. Since 1988, Rosatom has been supplying Korea with enriched uranium through its operator's company for all South Korean nuclear power plants. The Korean side is collaborating with Russian institutes to develop fuel for fast neutron nuclear power plants. But this project is a project of the future, Russia is its real performer.

All these projects, changes, and decisions not only expand the market of our raw materials but also have a significant economic effect on the development of high-tech production.

What determines the progress in the implementation of major state-significant projects?

1. For the implementation of such major projects, a political settlement on the entire Korean peninsula is necessary. This is a long diplomatic work of Russia, the Republic of Korea, the DPRK. In many respects, it depends on the USA, China, and Japan. But, there is an expression - "the road will overpower the going."

2. In many ways, their implementation depends on the pace of economic recovery in Russia. In particular, the development of the regions of Siberia and the Russian Far East is of utmost importance. The issues of participation of South Korean companies in joint implementation projects in the territories of Russia's "priority development zones" and the free port of Vladivostok are currently being worked out. The issues of participation of Korean shipping companies in the development of the Northern Sea Route are considered.

What are the constraints for the implementation of less significant projects? Here, oddly enough, the reserves consist of overcoming the differences in doing business, both on the part of Russians and Koreans. And these differences are primarily due to differences in the details of the relationship.

Some of the features that appear in business structures are considered:

- Although both Russians and Koreans quickly move to friendly relations, there is a lack of respect and understanding between Russian employees and Korean managers (Yermakov, 2019). In practice, very often the Korean employee is the manager, and the Russian employee-only executes instructions, and this makes deep understanding difficult;

- Sometimes the Korean conflict seems to be something out of the ordinary; then for Russian employees, this is just a small clarification of the relationship;

- For Russian employees, relations between people are more valuable than the business perspective of them, caring for people is considered one of the most crucial aspects, so that the employee can be more freely in his preferences. For the Korean, collectivism and group orientation are important (Abramova, Gainullina, 2016), but a rigid hierarchy and a large distinction of power in between employees are distinguished;

- Korean employees can be characterized (Abramova, Gainullina, 2016) by having long discussions about any problems but by the whole team, arranging team meetings, etc. For Russians, it is customary to make decisions on any problem individually quickly, not asking for a solution from others;

- for Koreans, despite the hierarchy of their business structures, a respectful attitude towards subordinates and the obligatory nature of wages are typical. For Russians, the possibility of a sharp, crude clarification of business decisions, a frequent tendency to save wages, is acceptable.

It is clear that such differences in business relationship arrangement make it challenging to conduct joint business, and these differences appear due to the difference between the two cultures - western and eastern. Hence, for the successful creation of business relations in all types of joint activities, a joint "grinding" of relations and tolerance is required.

Overall, throughout the development of trade relations between South Korea and Russia, there are several different stages. In the period 1992-1996 trade between the two countries grew rapidly, turnover grew almost 20 times in four years. In the 1990s, bilateral trade was growing steadily, but trade remained low, reaching only 2.23 billion US dollars in 1999 (1.59 billion US dollars for Russia export and 0.64 for Korean exports).

The period of rapid growth was stopped in 1998 by the consequences of the financial crisis in Korea (1997) and Russia (1998). Turnover fell 36% in 1998 and will only return to rapid growth in 2001.

In the period from 2001 to 2014, the turnover grew steadily: trade turnover increased almost ten times, from $2.870 million in 2001 to $27.290 million in 2014.

1.4 Recent Principal Features of the Russian - Korean Economic Relations

At the invitation of President of the Russian Federation V.V. Putin, President of the Republic of Korea Moon Jae-in paid a state visit to the Russian Federation from June 21 to 23, 2018. This visit and meeting of the representatives of Russia and the Republic of Korea were of fundamental importance for the development of relations between Russia and South Korea for years to come. Preparatory work for the meeting was carried out by the previously formed joint commission of strategic cooperation.

As a result of the visit, a joint statement of the Russian Federation and the Republic of Korea on June 22, 2018, was published. The statement addressed not only the relationship between the two states but also the prospects for the development of Russian-Korean relations, taking into account the DPRK. The implementation of the largest projects significant for the entire Far East is impossible without the settlement of South Korean relations and the DPRK.

Signed by Russian President, A statement by Putin and President Moon Jae Ying to establish a free trade zone was created. This statement paves the way for Korean companies to enter the Russian market of logistics, medicine, tourism, construction, and information services. And, in general, the Presidents agreed to intensify all areas of cooperation between countries.

A memorandum of cooperation between the ministries of Russia and the ministries of South Korea was also signed, providing for joint work on the creation of an innovative platform for the fourth industrial revolution and cooperation on the protection of investments. In addition, a memorandum on the establishment of the Forum of Interregional Cooperation was signed.

These are significant cooperation plans that were discussed. However, it is also necessary to take into account the problems that arose in March - April 2020 and related to the difficulties that hit the majority of countries worldwide. These difficulties caused by the coronavirus, also known as COVID -19, appeared. For example, a sharp decline in oil and gas prices and other raw materials became noticeable. It has been viewed by economists as a severe global economic and financial crisis. The Republic of Korea has managed to minimize, to date, the effects caused by the coronavirus COVID -19. In the Russian Federation, the growth of the consequences of the virus is not over yet, and the situation is somewhat more complicated in terms of the economy, due to the costs of countering the virus, amid falling energy prices. Economists forecast Russia's losses to 5-6% of GDP. On the one hand, this can affect the pace of implementation of joint plans; on the other hand, the consequences of economic decline in the world are unpredictable. And such a situation may arise that the Russian - South Korean agreements may become an additional driver in promoting trade and joint economic actions of our countries.

Modern examples of the effectiveness of the Korean version of state management of the country, economy, and quality of life of the population:

1. For the text of this thesis, we have considered the main reasons that allowed the Republic of Korea to achieve a great leap in development since the military coup of 1961 and the coming to power of Park Jung-Hee. We have shown that the new course of development of the country has provided conditions for dynamic development and transformation from one of the poorest countries in East Asia considered to be in Asian Tigers. These transformations took only about 25-30 years. South Korea has built a system of economic management in the modern sense of planned state capitalism. Within specific corporations, large and medium-sized, there are principles typical for a successful market economy. However, the state also provides incentives for also small forms of economic activity, and these forms of activity are not absorbed by large corporations, which would seem to be natural, from the position of the strong in relation to the weaker. On the contrary, these small forms of activity; in other words, small enterprises, are used to help large and medium-sized corporations to work. Naturally, such principles of economic relations are regulated by the state, its laws, norms, and rules established during the reign of Park Jung-Hee, and remain virtually unchanged at the present time. This stability, superimposed on the features of the Korean national culture of respect for power, is the foundation of dynamic development.

In conclusion, strict state regulation in the economy and practically state management within the modern system of a planned economy is the main condition for ensuring dynamic both trade-economic and social development of the Republic of Korea.

2. It has been already noted that the most urgent global problem of the present time is the epidemic (pandemic) of the coronavirus COVID - 19 and the world economic crisis associated with it or even developing independently (2020, Dmitrieva M., Izvestia).

Russia is in third place among countries in terms of morbidity: as of May 15, 2020, there are 263 thousand cases in Russia, Spain - 275 thousand, and the United States-about 1,550 thousand cases, in proportion to the number of deaths. The Republic of Korea is at the end of the world list - about 11 thousand, and about 10 thousand of them were cured. And this is despite the fact that the coronavirus came in February of this year from neighboring China. Thanks to the rapid and effective response of the South Korean authorities and the great mobilization of Korean medicine, almost universal testing of the population, the South Korean Republic was able to quickly block the centers of infection within three to four weeks and practically stop the growth of the epidemic. Other countries, especially the United States and Russia, cannot yet reach a turning point in the pandemic. All South Korean policies and measures during the current epidemic will improve and make Korea's image stronger in the medical sector, which also can support and develop export from South Korea.

Regardless of the causes of the disease, although experts see the rapid spread of the virus in globalization and constant population movement, in many countries, including Russia, high morbidity is due to the optimization and commercialization of medicine, a constant reduction in the number of places available in hospitals, especially in the infectious sector. Indeed, medication cannot be a service that generates direct income. The main task of medicine and the need to invest in it is to ensure the health of the population and ensure economic growth through the said healthy population.

It seems that South Korea is more aware of this task than others, and the state is quite strict and severe in ensuring it. With the onset of the COVID - 19 pandemic, the authorities reacted quickly, taking into account the country's specifics. The specificity of Korea is that it has a high population density, developed transport infrastructure, and great use of Koreans for frequent and active meetings. The testing process was quickly set up, as well as monitoring movement with the help of technical means. Harsh measures were applied to the followers of the "Shincheonji" cult, known for its secretive practices, which often rejected the instructions of the authorities, and were also blamed for the help of virus spread.

It is characteristic or typical that countries where the state has a strong influence on social life and economy, such as China, South Korea, Taiwan, Japan, and Vietnam, have passed the pandemic faster and with minimal losses. This example is illustrative of recent news.

In Russia, the situation is somewhat different. With the onset of the pandemic, the country was forced to overcome the result of the previous liberal approach to medicine, the result of its commercialization, which led to a noticeable reduction in the number of places available in hospitals, especially in the infectious sector of Russian medicine. All this has led to high financial costs, both for the conversion of several hospitals into an infectious disease profile and to the cost of re-equipment of resuscitation narrow-profile departments. In many aspects, the previous approach was made with an eye to the developed countries of the West and following their recommendations.

At present, many countries are puzzled by the problem after the pandemic period. Sooner or later, effective treatment or vaccination options will be found. But economic losses due to the stoppage of production activities in all countries will remain, and this will create the main causes for the global financial crisis, the crisis of the Global Liberal Economy. An economy based on liberal principles is not always based on real production work. It is more focused on the services sector, banking, and brokerage activities. Crisis phenomena in this sector of the liberal global economy will lead to significant job losses and an increasing unemployment rate. At the same time, it must be remembered that in the formed habit of the population of many countries not to have financial reserves, the developed pattern is to live under credit, which is a real problem.

3. Crises, like pandemics, tend to come to an end. Many countries will come out of them with different starting positions. In a more favorable position are countries where budget financial losses are less significant and where the government's influence on the economy and society is quite useful. Liberal globalism is likely to become a history, replaced by a focus on the development of the economic sector on its own territory.

It is useful to look at the real-life situation in South Korea and Russia in this way. South Korea is already minimizing the withdrawal of its production abroad and maintaining a high financial level of financial and industrial groups and banks. Korea already has a high level of industrial robotics and a fairly high level of artificial intelligence. But it is hardly necessary to fear the decrease in employment and the loss of job places by Koreans due to the inevitable robotization. It is important to mention that throughout the years, the mentality of Koreans has formed their high efficiency and desire to master new knowledge. With the experience of state management of the economy and social development, the minimization of losses in development can be expected. Korean high-tech production and financial capabilities, as well as raw material needs, are likely to maintain the goals and prospects outlined by the Governmental Agreement signed in June 2018 between Russia and the Republic of Korea.

In this view, this Governmental Agreement and the Statement signed by Russian President Vladimir Putin and the President of the Republic of Korea on June 22 of 2018 will be of help at the moment of an economic downturn after the pandemic and crisis increase. In this sense, the role of these documents is even more important for Russia than for South Korea.

The explanation of said position can be described in several ways. Indeed, South Korea, due to the measures taken by the state for 30 years to develop its sovereign economy (discussed in detail before in this paper), has managed to create effective high-tech production in almost all modern areas of industrial activity. First of all, Korea needs a variety of raw materials, which is what Russia can provide plenty with. South Korea is interested in a large market for its products, and Russia is, indeed, such a large market for high-quality products. Competition of products produced in Korea and China is also beneficial to Russia. Russia, with its vast territory, can increase the supply of various agricultural products, which Korea needs.