SEOUL, Nov 19: South Korea’s top financial regulator said today that developing North Korea’s moribund economy in the wake of eventual reunification would cost around USD 500 billion.
Financial Services Commission (FSC) chairman Shin Je-Yoon told a seminar in Seoul that the estimate covered a period of 20 years that would be needed to raise the North’s per capita GDP from the current USD 1,251 to USD 10,000.
The FSC stressed the figure of USD 500 billion was open to revision and should not be taken as an official government position, but rather a starting point for discussion.
A survey released by the Unification Ministry earlier this year showed that while 70 percent of South Koreans support the idea of a unified peninsula, almost half have no interest in helping cover the massive financial cost.
The FSC estimate noted that the South’s GDP was more than 40 times greater than the North’s in 2013, compared to the near 10-fold difference between West Germany and East Germany at the time of their reunification in 1990.
Shin said half the needed funds could be bankrolled by public finance institutions in the South such as the Korea Development Bank and Korea Exim Bank.
The other half could be financed by commercial banks, tax revenues from development projects in North Korea and international organisations such as the World Bank, he said.
Forecasting the cost of unification is an almost meaningless task, given the large number of possible scenarios under which a merger might occur.
As a result, estimates vary wildly, with the only real consensus being it would be far from cheap.
Last year, South Korea’s finance ministry put the cost at around seven percent of South Korea’s annual GDP for a decade.
That would mean around $83 billion a year for 10 years — and that is assuming a peaceful unification scenario, which is by no means assured.
President Park Geun-Hye has said reunification would bring a “bonanza” through the marriage of the South’s capital and technology with the North’s human and natural resources.
But the nuclear-armed North Korea reacted angrily, accusing the South of dreaming “a pipe-dream” of reunification through absorption.
Because the 1950-53 Korean conflict ended with a ceasefire rather than a treaty, the two Koreas remain technically at war.
Cross-border tensions remain high and there have been a number of minor skirmishes involving exchanges of fire along the land and sea borders in recent months. (AGENCIES)
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