Although there’s still uncertainty over prospects for peace on the Korean Peninsula, it seems that South Korea is highly optimistic about the economic aspect of its cooperation with North Korea.
North Korea has a population of about 25 million. The largest city, the capital of Pyongyang, has about 3.2 million people and other cities generally have populations of about 300,000. The country’s per capita GDP is a mere $530.
By comparison, with a population of 51 million, South Korea boosts per capita GDP of more than $27,500. But South Korea’s economic growth is believed to have peaked, and its export-oriented growth model has run into trade protectionism.
If the hypothesis of merging and unifying North and South Korea were true, South Korea’s population would increase by 50 percent. In light of this, although North Korea’s GDP is a negligible fraction of that of South Korea, there is a chance that South Korea could see a 50 percent rise in its GDP that now adds up to $1.4 trillion. With a GDP of more than $2.1 trillion, a unified Korea would have an economy half the size of Japan’s, or larger than the economies of Brazil, Italy or Canada.
South Korea’s economy is dominated by family-owned conglomerates known as chaebol, with the top 10 chaebol accounting for a hefty part of GDP. Economic growth is seen mainly benefitting big chaebol such as Samsung and Hyundai, which in theory would have the opportunity of maintaining a fairly high rate of wealth growth over the next 10 years.
An assessment of Asia’s economic future based upon the hypothesis of Korean unification indicates that it would be hard for Japan, China and even the US to derive any meaningful economic benefit from such an outcome.
North Korea’s abundant pool of cheap labor and its market eager to see wealth growth will mostly benefit South Korea. In the past, China used to host a certain number of North Korean workers, but that was during an era when North Korea was blockaded by the outside world and could only rely on China for foreign-currency earnings.
If Korean unification, or to be exact the two nations’ economic unification, becomes a reality, the situation will change. In this case, China or Japan will be just onlookers.
China might even find itself challenged by a unified Korea with lower costs in the world market. Japan might fare slightly better, considering its technological advantages and traditional partnerships with South Korean business groups. The benefits the US would get from unification would be limited or nil, taking into account uncertainties about its geopolitical interests.
For the world economy with total GDP of more than $70 trillion, Korean unification is likely to boost global growth by 1 percent. But much is still uncertain if this scenario is to play out.
North and South Korea still face tough obstacles including ideology, capital, nuclear weapons and internal political stability on the path toward genuine unification. The outcome also depends particularly on US political moves. Nevertheless, amid uncertainties there seems to be one certainty: The only way to avoid risk is to have the foresight to make future-proof plans.
– Global Times
Jul 18, 2018 0
The 2018 Boao Forum for Asia (BFA) annual conference is scheduled for April 8 to 11 in Boao, Hainan Province. The forum will be themed "An Open and Innovative Asia for a World of Greater Prosperity."
— The Daily Mail - People's Daily