How Foreign Aid Facilitates Cooperation: The Korean Case

In 2017, South Korean President Moon Jae-in announced the New Southern Policy (NSP) and the New Northern Policy (NNP) to strengthen regional cooperation and advance the government’s primary goal of promoting peace on the Korean Peninsula. This study examines the differences in South Korea’s foreign aid allocation between the two policies, focusing on why NSP-targeted countries received more aid than NNP-targeted countries. Analyzing South Korea’s foreign aid data from 1987 to 2022, the study finds that NSP countries, particularly those in Southeast Asia, received significantly more aid than NNP countries. This disparity reflects South Korea’s strategic objective to expand economic and diplomatic ties with NSP countries as part of its efforts to support the Moon administration’s peace process initiatives. The findings demonstrate how South Korea strategically leverages foreign aid, through policies like the NSP, to foster regional cooperation and achieve its diplomatic goals.