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The local area is emerging as an essential economic unit while its role and importance are highlighted, whereas the central government's role is being reduced due to both the localization and the globalization of the economy. With this trend of new regionalism, the wide-area development strategy of economic development coupled with local political changes, such as decentralized national development structure, is emerging on a worldwide scale. Case studies of local governance system in Korea and foreign countries show three tendencies. Firstly, decentralization of government has advanced and attention on governance has increased. Especially, inter-governmental relationships and decentralization have spread widely, and multi dimensional governance is actively discussed nowadays. Secondly, changes have been made in inter-governmental relationships such that the trend in developmental strategy is to shift decision-making to localities. Progress in decentralization has transformed central-local government relationships and also gradually changed the goals, means, and bodies of local of a full-charge organization's role for local development. As recent local-development plans show selective and strategic characteristics in policy goal, subject, and form of execution, central governments are preparing and operating their organizations. Thirdly, there is a strategic importance for local development and the strengthening the governance system for local development has various forms according to the characteristics of the nation's political, administrative structure, and horizontal cooperative culture.

This paper examines how the optimal control techniques could be applicable to calculate the optimal size of the credit guarantees that would coincide with various policy objectives. The numerical example illustrates the usefulness of the methods for this purpose suggesting the main findings as follows: (1) It is not always optimal to immediately cut down the credit guarantees, as they are closely linked with the amount of investment expenditures that has a great impact upon the national economy. Four out of six cases reveal that it is the best to increase the credit guarantees in the first period and then drastically decrease them thereafter. (2) If the government regards the reduction of the credit guarantees as more important than balanced budget, national economy enjoys a rapid economic growth with the credit guarantees approaching the desired paths. It is noticed, however, that the government should pay the price of the serious aggravation of the budget deficits.

Recently, we have tried to introduce local tax for fiscal autonomy. However, this reform is connected with fiscal decentralization between central and local governments. It is important to set relevant goals for revitalizing of local economy in the process of fiscal decentralization which can be obstacles. At first, this article set some targets compared with those of OECD nations for fiscal decentralization. Secondly, more reasonable devices are designed for local fiscal autonomy. For example, the local share tax and national subsidy could be corrdinated in the first decentralization stage. Secondly, we should construct good life cycle structure among fiscal operations, local earning and local economy.

The national logistics cost of Korea is very high(2.94% of GDP) compared to those of the advanced countries such as U.S.(8.4%) and Japan(8.15%). The fundamental reason for the high cost is the extremely high dependence on road transportation of national cargo shipping. Truck-transportation comprises 90.4% of all cargo shipment in Korea while the shares are much lower in U.S.(65.9%) and Germany(70%).for the project. Korea needs to diversify cargo transportation modes and reduce the too high dependence on road transportation significantly. Otherwise, the country may experience declining competitiveness of Korean products in the oversea's and domestic markets together due to rising logistics costs. A good alternative is canal construction, especially one connecting Seoul and Busan areas. The line is now experiencing heavy traffic congestion, resulting in high logistic costs. The canal will not only reduce national logistics cost but also revitalize the region along the canal corridor. Inland ports and industrial sites will be constructed along the canal, thus creating local value-added and various jobs in the devastated inland region. In order for Korea to enhance national competitiveness and revitalize regional economies, the canal project should be reviewed seriously and come up with a very efficient and environment friendly transportation mode in the near future.

The investment to Gross Regional Domestic Production(GRDP) ratio has declined from 12 percent in the sixth business cycle(1993～1998) to 9.3 percent in the eighth business cycle(2002～2006). Also, as equipment investment has been concentrated more in regions such as Gyeonggi-Province, Gyeongbuk-Province, and Chungnam-Province, there is concern of regional development and growth disparity. Therefore, the components of the regional investment climate is analyzed in this paper and further the strategies how to accelerate regional investment is discussed. First, regional investment environment is classified into four groups and ten sub-categories. The four groups are input conditions, industrial agglomerations, infrastructure conditions, and policy conditions of regional government. According to a survey of 3,651 firms, input conditions are the most important component of four groups. Also physical infrastructure, human resources, agglomeration of related industries, and market conditions are important sub-categories in investment and location decisions by firms. The priority in the decision criteria, however, depends on the industry and size of firms. Hence, it is necessary to carefully approach any improvements in the regional investment climate. Secondly, short and long term strategies are discussed for regional investment environment. In the short run, the improvement in incentives and streamlined procedures are very effective. On the other hand, to facilitate regional investment in a more fundamental way over the long run, deregulation of the investment climate and nurturing of specified industrial clusters are recommended. Above all, region-oriented strategies are needed for key improvements of the investment environment in each region.

This paper aims to analyze the interregional industrial linkage on social overhead capital investment between the broad economic network in Korea. In order to analyze the interregional industrial linkage we need to measure forward linkage effect and backward linkage effect by using interregional input-output table. In this process, linkage effect can be measured by demand-driven input-out model which uses Leontief Inverse Matrix Coefficient and supply-driven input-output model which uses Goshian Inverse Matrix Coefficient. This paper compared the results produced by the two models above, based on interregional input-output table released by The Bank of Korea 2007. The two models presented similar linkage effect. The detailed analysis is as follow. First of all, it was proven that backward linkage effect had huge intra-regional linkage effect and modest inter-regional linkage effect. The more vulnerable the broad economic networks had, the more modest another interregional industrial backward linkage effect they witnessed. On the contrary, forward linkage effect showed huge intra-regional linkage effect and modest inter-regional linkage effect. The more vulnerable the broad economic network had, the more huge another interregional industrial backward linkage effect they witnessed. Specially, the capital area enjoyed huge forward linkage effect from the broad economic networks.