Archive for September, 2010

South Korea to send hundreds of additional workers to Kaesong

Monday, September 20th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-09-20-1

The South Korean Ministry of Unification announced on September 14 that the number of ROK workers allowed in the Kaesong Industrial Complex, previously limited to fewer than 600, would be increased by two to three hundred. In response to the sinking of the ROKS Cheonan, the South Korean government limited inter-Korean economic cooperation through the May 24 Measure, sharply cutting the number of South Korean workers in the joint industrial complex from around 1,000 down to 500. However, after companies in the complex voiced complaints over production losses caused by the measure, the government slightly raised the number of workers allowed, to 600, in mid-July. With this latest decision, the number will return to almost as many as were working prior to the May 24 Measure. This is the first sanction among those passed on May 24 to be practically rescinded.

A spokesperson for the Ministry of Unification stated, “Companies in the KIC have been complaining about growing difficulties in maintaining quality and of worker fatigue due to the reduction of employees [allowed in the complex],” and announced that the ministry had decided to increase the number of workers since it sees no physical threat to them. This announcement came as inter-Korean relations, which took a sharp turn for the worse after the sinking of the ROKS Cheonan, appear to be improving, with North Korea returning South Korean fishermen seized last month, the ROK Red Cross decision on September 13 to send disaster relief in response to flooding in the North, and working-level discussions on a reunion for separated families being held. However, the spokesperson also stated that although the number of workers allowed to travel to North Korea was being increased, no new or additional investments were being allowed in the KIC, as originally dictated by the May 24 Measure.

Even before the announcement to increase the number of workers in the KIC, the South Korean government had shown flexibility when it came to the May 24 Measure; contracts made before the measure were honored, and North Korean manufactured and agricultural goods have continued to be imported under agreements reached before the sanctions. The government was flexible on humanitarian aid, as well, continuing to provide assistance to the most destitute in North Korea despite the decision to suspend aid on principle. Medical aid, particularly to prevent the spread of Malaria, has also continued. Recently, the South Korean government decided to allow the ROK Red Cross to send 5,000 tons of rice and 10,000 tons of cement, worth approximately 100 million won, to North Korea in response to massive flooding. This is the first time since the Lee Myung-bak administration came to power that any rice aid has been sent to the North. It is very likely that it will be sent as private-sector aid.

Seoul continues to ban visits to North Korea, but private-sector organizations have been allowed to travel to the Kaesong region. Despite the May 24 Measure, exceptions have been made for South Koreans involved with economic cooperation in the KIC and the Mount Keumgang areas. Among the sanctions passed in May, the ban on North Korean ships operating in South Korean waters and the ban on new investment in the North are still being enforced, but the suspension of inter-Korean exchanges, travel to the North, and provision of humanitarian aid have all been eased.

Among the Ministry of National Defense measures, the only psychological warfare tactic employed has been through radio broadcasts, while the distribution of leaflets and the broadcasting over loudspeakers were canceled after North Korean protests. Joint U.S.-ROK anti-submarine warfare exercises in the West Sea were postponed, while the U.S. put on a show of force with the deployment of an aircraft carrier to the East Sea in late July. Maritime interdiction drills led by the ROK military are planned for mid-October. The South Korean government insists that the May 24 Measure continues to stand unchanged, yet the enforcement and execution of the details is less than uniform.

The government’s position is that the restriction on workers in the KIC was not a sanction aimed at North Korea, but rather, a measure to protect South Korean workers; therefore, easing this restriction cannot be seen as a lifting of the May 24 Measure. Ultimately, it appears that a slight improvement in inter-Korean relations has led to a small amount of flexibility in implementing the May 24 Measure, but that the government will continue to enforce the measure until North Korea takes responsibility for sinking the ROKS Cheonan.


German entrepreneurs in DPRK

Friday, September 17th, 2010

The German version of the Financial Times has published an interview (of sorts) with Volker Eloesser and his DPRK JV technology firm, Nosotek. Below I have posted an English translation of the article.

FT: You think the economy in North Korea is starving. That is right! Nevertheless, it attracts entrepreneurs there like Eloesser Volker from Germany. He tells Anna Lu the story of his life in the land of Kim Jong-il.

North Korea is one of the most isolated and inaccessible countries in the world. Nevertheless, there are millions of university trained Koreans and entrepreneurs living in the country. Volker Eloesser is one of the entrepreneurs. Eloesser runs a company in Pyongyang. The IT company is known as Nosotek and is a joint venture with the North Korean state. It is not very simple to talk to Eloesser about his life and work in North Korea. The lines are too unstable to North Korea, with numerous eavesdroppers. Not everything can be talked about openly. The following article is the outcome of countless emails between Pyongyang and Hamburg.

VE: “Why do we work in North Korea? There are signs that the country can develop into a booming region. Recently, a short report about the iPad was broadcast. Videos from South Korea are widely circulated amongst students. The policy change may not be imminent, but it is unstoppable. Once that happens, property prices will increase.

This is the strategy of most foreign companies here: Real estate speculation, even if the permits for foreigners are only granted in a joint venture status. Many of the companies produce products as a matter of form and do not make any significant profits. Other opportunities include buying up restaurants, shop buildings and swimming pools. Just imagine if someone would have built a restaurant in China in 1985 in Tiananmen Square. Or at Alexander Platz in East Berlin. Opportunities like these do not happen often in the world.

FT: Volker Eloesser operates an IT company in Pyongyang, North Korea and hopes the country develops into a booming region.

VE: Naturally, we only invest very little into production. Nosotek develops software and apps for the iPhone. We are quite successful. One time, we were even in the top ten in the App Store. Our customers do not want us to mention the name of our company or our employees’ names on the product. Although it is going well, we do not generate profits yet. Our headquarters is located in one of the most sought after residential areas in Pyongyang, not far from the center. The area boasts multi-story, stucco houses and easy metro access. These are some of the best conditions possible, so we are optimistic.

Unfortunately, many things are expensive here. The bulk of the goods are imported and therefore, cost twice as much as they would in China. Power, logistics and communications are almost prohibitive. However, wages are way below Chinese standards, which is a key benefit if you get good people. There are plenty here, all with a university degree in computer science or mathematics, some have doctorates. They seem to wait for an announcement of a job opening. I only have to ask my Korean partner and 14 days later new people are coming in for a trial. I can say nothing about the wages.

FT: In fact, the average salary in Pyongyang is around 3,000 Won a month. After a devastating currency reform and crop failures in recent years, this affords an employee about three kilos of rice. Eloesser does not say it, but we hear such things from aid workers in the region. The aid workers do not wish to be identified. Eloesser further:

Eating together in the common area.

VE: “In total we have 45 Korean employees, including five women. I, am the only European. We all eat in the company common area every single day. I particularly like the octopus salad and will miss it if I relocate. After work, colleagues remain a little longer and often sing songs to the guitar. The atmosphere is friendly. Nevertheless, it is not always easy. Koreans are very proud people who love their country and their culture and know nothing else.

It is not easy to convince them to do something differently. For many it is difficult to recognize a foreigner as an authority, and if they do not understand the meaning of a statement it is often not performed. However, the biggest difficulty is much different: We have an IT company without access to the internet. We solve this problem by delegating the development of online components to partner companies in China. Here in North Korea you can only do things offline. At home I have true internet access, but it is very slow and rather expensive.”

FT: In fact, one can only get on the internet via a satellite dish in North Korea. The acquisition cost to use the internet according to a local charity is the equivalent of 11,000 euros. The monthly expense may be up to 700 euros, depending on how many users share the connection.

VE: “Pyongyang itself has changed in the last few years. Since 2005, the first time I was here, the traffic has doubled. The days of empty roads are long gone, such images only haunt the internet. Instead of old taxis or Ladas, North Korean Pyonghwas and Malaysian Proton sedans are on the road now. Bicycles are hardly center. They may only drive on the sidewalks. There are lots of military jeeps or SUVs from Russian, Chinese and local manufacturers.

You meet uniformed people everywhere in North Korea, but not all are military. Civilians bear just as many olive green suits with no weapons or rank insignias. The rest are soldiers. Soldiers are often used to harvest and help with road and house construction. I never feel threatened by the military presence as a foreigner. I feel I am treated with respect. People think; if he was not important for our country, he would not be here. Nevertheless, I am of course aware that somebody writes reports about me. Wherever I go, if I am at a restaurant or at work, somebody knows me. He notes when and where I parked my car and statements like this interview will be read by the authorities. At first I thought they listened to me at my apartment. However, even if they have actually done this, I think it has become boring for them.

Sometimes I can understand their suspicions; the reports by many Western media outlets are biased. Recently, the North Korean government printed a picture of children splashing around in Wonsan. People abroad believed the picture was staged, but this type of activity is common in the summertime heat.

FT: Sense of unwritten prohibitions

VE: The authorities are particularly suspicious of journalists and tourists because they do not know their true intentions. We are entrepreneurs and largely left alone. We are not required to go to political events or memorials. As a business man you have one clear goal, business. It is understood and supported. Life would be easier if we knew what we can and cannot do. Unfortunately, this is not written anywhere. It is better to hold back. Over time, you develop a sense of unwritten prohibitions. I have my own opinion about the policy, but I will keep it to myself. I make sure I never have a camera with me, not even on my phone. I do this so no one thinks I want to photograph something without permission. I live in the Bulgarian Embassy because there are no mixed residences. I never visit North Koreans at home and do not talk to them on the street. I do talk to children occasionally. They are not afraid of foreigners and like to try out their English vocabulary. They will say things like; “How old are you?” Where do you come from? Bye-bye.” Then they run away giggling.

Basically, I lead a fairly normal life here. I can move around in my free time and go to the mountains and play golf or tennis. There is a night life in Pyongyang with bars and karaoke. More precisely, there are two types of night life, one for locals and one for foreigners. For example, I do not get tickets to the local cinema. Today I went to an amusement park that many North Koreans visit. The park was built in 2010 and is equipped with fair attractions like the kind they have once a year in small German towns.

Shopping is not a problem. There are no signs of a food shortage as the shops are packed. Curiously, a kilo of chicken on the market is often cheaper than a kilo of vegetables. This may be because chickens can live in backyards and on balconies. Vegetables cannot, that would require offseason greenhouses, which are not found in North Korea. Imported goods usually have astronomical prices. For example; a Hungarian salami costs the equivalent of 42 euros. Other products like yogurt cannot be found in the summer because the refrigeration is inadequate. Sometimes I shop at the diplomatic supermarket and buy things like Haribo, Mosel wine and milk chocolate.”

FT: Of course, the well-equipped shops have a catch; purchases must be paid for in euros.

VE: “By the way, last Saturday night something strange happened. I had an accident. A man ran out in front of my car. He was in dark clothing and came out of nowhere across the eight-lane main road. I slammed on the brakes, but the car hit him, and he fell onto the road. When someone came to help him up, he quickly departed from the scene of the accident. You call that a victim’s escape?

A short time later, three police officers arrived on motorcycles. They were friendly and professional, and they even offered me a cigarette. In some other countries, I would have been imprisoned or would have been asked to pay an exorbitant bribe. Here I was only given a warning, because I had forgotten my passport and driver’s license and the technical inspection (also here) was outdated by nine months. That was all. There was not a victim. Only screeching tires in the night.”

The original German verison can be found here:
Unser Mann in Pjöngjang
Financial Times (German edition)


How North Korea was lost to China

Friday, September 17th, 2010

Aiden Foster-Carter has written an long piece in the Asia Times on North Korea’s geopolitics.  It is a fairly long piece, so here is the punch line:

So there’s our winner. Its rivals’ missteps have helped, but Beijing has long played a skillful, patient game. Like Moscow, it irked the North by recognizing South Korea (in 1992), but unlike the abrupt Russians it worked hard to soothe sensitivities.

Eighteen years on, guess which power is the top trade partner of both Koreas? Now, there’s subtle hegemony for you. No prizes either for guessing who’s snapping up North Korea’s mines, and beginning the lengthy, costly process of modernizing its decrepit infrastructure.

Face it: who else has the motive, or the means? As all agree, China’s overriding worry about North Korea is not Kim’s nukes but fear of collapse, and the chaos this could cause on its own borders. Beijing’s consistent strategy is not to paint Kim into a corner, no matter what.

Knowing that, how did policymakers in Seoul or Washington delude themselves that China would hurry to join a chorus of condemnation over the Cheonan? No way. Beijing squirmed a bit, but the game was worth the candle. Let Washington and Seoul huff and puff. All that achieved was to push an ever-more isolated North Korea further into China’s orbit and influence.

Nothing is certain, especially about North Korea where forecasts (this writer’s not least) have a habit of turning out wrong. I expected North Korea to collapse long ago: guilty as charged, m’lud. I understimated this tough regime’s staying power, or the horrors it would impose on its people – including famine – to cling to power while refusing to see sense.

But this can’t go on forever. The old game of militant mendicancy is finally up. Kim Jong-il’s frail health, a delicate succession, and an empty treasury – United Nations sanctions have hit arms exports, and crime doesn’t pay like it used to – make defying the entire world just too risky.

North Korea needs a sugar daddy. There is only one candidate left standing, and one who fits the bill perfectly. It may not be a marriage made in heaven, mind you. Pyongyang will keep squawking, and even try the old game of playing off its interlocutors – as in its latest thaw with Seoul.

But at the end of the day Beijing is making an offer no one else can match, and which North Korea can’t refuse. It goes roughly like this: Okay, we’ll bail you out, we’ll guarantee your security, we’ll even stomach your weird monarchical tendencies – unless the kid turns out to be a complete klutz, in which case you know what to do. Jang Song-taek (brother-in-law to Kim Jong-il) knows the score.

You can count on us too not to shame you by spelling all this out and giving the game away. But yes, we do need something in return. Two things. First: markets. For goodness sake just leave them alone, nay let ’em rip – as we’ve been telling you to, ever since Deng Xiaoping.

Look where we are now, and where you are. We’ll do the heavy lifting of investment, so you have functioning factories and railways again. But you have to let it happen. No going back.

Second: no more trouble. We know it may take time for you to give up your footling pesky nukes. But we need an absolute guarantee of no more tests, or else. No other provocations, either. Our People’s Liberation Army will teach your Korean People’s Army how to adapt and how to make money. The new North Korea will be a good global citizen, trading like we do. The returns are good. It beats mugging any day.

And guess what? You’ll love it, all of you. You’ll prosper. No more worries. Your people will eat; your elite will make money. What’s not to like? Just stop all that shouting and marching; what a relief, eh? The rest of the cult can stay, if you must. All hail the young general Kim Jong-eun, finally fulfilling grandpa’s dream of peace and prosperity for all! (With a bit of help from his friends, but we’re modest.) You’ll love him. You really will.

This seems to me a plausible scenario for North Korea’s future. In fact, I struggle to imagine any other. Korean reunification? Maybe in the very long run – but right now, who wants it?

Not the North, whose elite know the fate of their East German counterparts after unification. Can we really expect them to put their faith in the tender mercies of Lee Myung-bak? Even under Kim Dae-jung or Roh Moo-hyun it would have been tricky. What place would there be for most of them, frankly, in a reunified peninsula? Not a privileged one, that’s for sure.

Ordinary North Koreans, too, have learned, from the trickle who have made it to Seoul, that South Korea is no land of milk and honey. True, they’d like a life, and to eat. But China, or a North Korea open to and learning from China, might look a better bet on that score.

Nor is the South enthusiastic, despite all the rhetoric. It would be embarrassing and galling to see the North become a Chinese satellite – yet perhaps also a huge relief. Let Beijing bear the brunt, the burden, and the costs of transforming the madhouse they have long sustained.

Further down the line, blood could prove thicker. By 2040 or so, a by then semi-transformed North Korea may tire of great Han chauvinism, slough off the Chinese yoke, and embrace the cousins south of the demilitarized zone (which would long ago have become more permeable). They’d be easier to absorb, too, now smoothed by a few decades of Chinese-style modernity.

Speculative, to be sure. But what other scenarios are there? And though from one viewpoint China has edged out rival powers as argued above, presumably to their chagrin, might some of them in truth be quietly relieved to be spared the responsibility? Let China take it on and deliver a new-style North Korea, vibrant and fit for a new century. It could last a long time, and spare the region and world much headache and risk. Does anyone have an alternative?

Aidan Foster-Carter is honorary senior research fellow in sociology and modern Korea at Leeds University, and a freelance consultant, writer and broadcaster on Korean affairs. A regular visitor to the peninsula, he has followed North Korea for over 40 years.

You can read the full article here:
How North Korea was lost – to China
Asia Times
Aidan Foster-Carter


Sinuiju flood photos

Friday, September 17th, 2010

Samaritan’s Purse, the US-based, religious charitable organization, has published some pictures of their recent delivery of flood relief supplies to Sinuiju.

Here is one photo:


You should check out the other photos in the set here.

Here is a video they produced before takeoff.

Samaritan’s Purse is delivering a portion of the US government’s $750,000 flood relief campaign.

Additional information:
1. South Korean aid in response to the flood. China sends aid.

2. Video of Sinuiju. Official Chinese and DPRK photos of the flooding.

3. Here are previous posts about Samaritan’s Purse in the DPRK.


Japanese businessman arrested for exporting pianos to DPRK

Friday, September 17th, 2010

According to the Mainichi Daily News (Japan):

The president of a motorcycle sales company in Hiroshima was arrested Thursday for allegedly exporting pianos to North Korea in violation of Japanese government trade sanctions.

Hiroshima and Hyogo police suspect Yutaka Oyama, 60, exported 22 used upright pianos from Kobe port to North Korea through China’s Dalian on Nov. 5, 2008, without obtaining permissions from the economy, trade and industry minister.

Oyama has admitted to exporting the pianos during interviews with Kyodo News, saying he had “no other work” amid an economic downturn.

The police raided his office and home in April and confiscated items such as a personal computer and a mobile phone.

Japan in October 2006 banned imports from North Korea and exports to the country of luxury goods, including musical instruments, under economic sanctions designed to penalize Pyongyang for the nuclear test it conducted earlier that month.

The sanctions were strengthened in June last year with all exports banned, in response to another nuclear test the previous month and the North’s past abductions of Japanese nationals.

Read the full story here:
Motorcycle dealer arrested over illegal export to North Korea
Mainichi Daily News


North Korean fashion:Jeans, Jesus, and Mickey Mouse

Friday, September 17th, 2010

Beow I have posted some pictures of interesting North Korean clothing:

The family photo below features a little girl wearing blue jeans in public (via Free North Korea Radio):

Blue jeans are frowned upon in public in the DPRK (though privately popular).  Some Swedes are manufacturing jeans in North Korea–though not blue ones.  Learn more here.

The below photo features a shirt which states in English, “Jesus is my Lord” (via Free North Korea Radio):

Jesus made a cameo on another North Kroean girl’s shirt last year.  It is highly likely that the wearers have no idea what the shirts actually say–and neither does anyone around them.

The below photo features a girl with  a Mickey Mouse backpack (via this Russian web page):

Mickey Mouse was also seen on a girl’s backpack in the North Korean film A School Girls’ Diary.

Here are previous posts on clothing.


DPRK defectors leaving ROK

Wednesday, September 15th, 2010

According to Yonhap:

An increasing number of North Korean defectors have been attempting to seek asylum in foreign countries, hiding their newly-won South Korean nationality and pretending to be fresh from the communist nation, a lawmaker said Wednesday.

Britain and Norway have been among the popular targets for these fake asylum seekers, Rep. Hong Jung-wook of the Grand National Party said, citing data from the foreign ministry. Hong said the government should make sure the issue does not escalate into diplomatic problems.

Apparently over concerns about fake defections, Britain has stopped granting asylum to North Korean defectors since last year. In 2008, Norway found more than 50 North Korean defectors with South Korean passports or identity cards during an inspection of a refugee camp, according to the lawmaker.

Since 2004, a total of 695 North Korean defectors have formally filed for asylum in Britain, with the number of applications rising from 20 in 2004 to 410 in 2007. Of those applicants, 373 were granted the asylum, 185 were denied and 135 under consideration as of March of last year, according to the lawmaker.

But the British government estimates that the actual number of North Korean defectors who had come to the country for asylum purposes since 2004 would be about 1,000 and suspects that 70 percent of them would be of South Korean nationality, the lawmaker said in a release.

Britain reached the estimate after a survey of three dozen North Korean asylum seekers, who agreed to provide their fingerprints for the investigation, found that 75 percent, or 24 people, were found to be of South Korean nationality, the lawmaker said.

“Based on this problem, the British side has been asking that our government provide it with broader information on the fingerprints of North Korean defectors, and even demanding a treaty be signed on this,” the lawmaker said in the release.

Hong also said that about 600 fake asylum seekers are believed to be still staying in Britain or Norway, and called on the government to take steps to bring them home.

“The increase in fake asylum attempts by North Korean defectors is because their life in South Korea is difficult,” Hong said. “The government should allow them to return by granting a grace period so as to prevent the issue from growing into a diplomatic problem.”

The foreign ministry denied that Britain had asked South Korea to take back the fake asylum seekers or demanded a treaty on fingerprint information.

“As this issue is related to our nationals, we have been cooperating with related countries within the necessary bounds and are in talks with related countries to work out appropriate measures,” the ministry said in a statement.

Since the 1950-53 Korean War, nearly 20,000 North Koreans have defected to the South to escape from hunger and political suppression in their communist homeland. But many of them have a hard time getting decent jobs due to their lack of education and social discrimination.

Read the full story here:
Increasing number of N. Korean defectors in S. Korea seek asylum in foreign countries
Chang Jae-soon


North Korean web page hints at succession

Wednesday, September 15th, 2010

According to Yonhap:

In a clear indication North Korea is paving the ground for a power succession, a Web site operated by a university in the communist state is calling for picking the right successor to leader Kim Jong-il, possibly alluding to his son.

“Only when the successor to the leader is selected right can the leader’s ideas and revolutionary exploits be firmly maintained and spectacularly passed down,” said a post on Kim Il-Sung Broadcasting University’s website, uriminzokgangdang, seen here on Wednesday.

Citizens in South Korea, which bans the communist state’s propaganda material citing years of enmity between them, are blocked from accessing the Web site at

The uriminzokgangdang post, written in early September in the form of an answer to an apparently pre-arranged question, also said the successor must establish exclusive authority because, until that happens, political turmoil could emerge.

“Not everyone can be a successor to the leader, and just because someone is presented as a successor, it does not mean he can carry out significant tasks as such,” it said, making it clear that the country faces a “succession issue.”

Uriminzokgangdang means “lecture hall of our nation” in English.

It was not immediately clear where the Kim Il-sung Broadcasting University is located. Media reports from Pyongyang indicate the school is based in the capital. The university has been operating its Web site since 2004 to give online lectures on such topics as the ideology of “juche” or self-reliance.

Yang said the school appears to be based in Pyongyang since it bears the name of North Korea founder Kim Il-sung, who died in 1994 after years of grooming his son, Kim Jong-il, as his successor.

Does anyone know if this web page is accessible on the DPRK’s Kwangmyong intranet system?

Also, I cannot find any information on this university.  Can a reader who is fluent in Korean please go through their web page and find the school’s Korean name, English name, picture and address (if any of this information is available)?

Read the full story here:
N. Korean website raises succession issue ahead of key party meeting
Sam Kim


Kim Kwang-jin on the KWP conference

Tuesday, September 14th, 2010

Kim Kwang-jin, a defector from Pyongyang and research fellow at the US-based Committee for Human Rights in North Korea, offers his thoughts on the status of the Worker’s Party conference:

From the perspective of Western world and media, the delay of Party Representative Conference in North Korea, if there really is any, is interpreted and speculated as very unusual. For us in the West, such “long delay” is unusual because we convene meetings to hear our different views, not orchestrated by the regime.

For North Korea, who have a system of full guidance and instruction, it is usual to fix things in order before having a final performance. The so-called delay is actually time to coordinate Party representatives’ roles in the event and instruct them what to do.

It is a stretch to assume that the North Korean elite is far less united now and some fractions are unhappy about the meeting and the result, and Kim Jong-il is growing more unable to exercise full power, as has been suggested.  More speculation of logistical problems, floods, and Kim Jong-il’s inability for reasonable judgment and rational decisions are added. But these are not the real components of North Korea’s usual efforts at orchestration of an event. This is a celebration, not a discussion.

There may be a delay in securing enough gifts to reward the participants.  This is the most important element for both Kim Jong-il and the representatives, in a system of enforcing a decision and celebrating a political decision. Getting all the gifts together would be a real reason for such a delay.

North Korea itself never announced the exact date of the meeting. And finally, let us remind ourselves that North Korea loves drawing international attention and is very good at it. This time, their tactics already succeeded in producing an extreme reaction, not thanks to their skill but to the western way of thinking and approach.

Additional information:

1. See Andrei Lankov’s thoughts about the conference here and here.

2. The Daily NK asserts that the conference is affecting food prices.


Latest reunification study puts cost at US$3 trillion

Tuesday, September 14th, 2010

Here is the report (in Korean) on the KFI web page.   Here is that page translated with Google Translate.

The report was also carried in the English language media. 

According to Reuters:

The cost of reunifying the two Koreas, split since shortly after World War Two, would tot up to about 3,500 trillion won ($3 trillion), the Federation of Korean Industries said on Tuesday.

Not one of 20 economists surveyed by the federation expected reunification in the next five years but almost half said it would happen in 10 to 20 years.

Nearly half also said the largest cost associated with reunification would be in efforts to cut the wealth gap between the wealthy South and the impoverished North.

“The costs to minimize the gap between South and North Korea over the long-term are expected to be greater than the initial cost of reunification,” the federation said in its report.

South Koreans earn an average about $19,230 a year while North Koreans earned about $1,065 in 2008, according to South Korea’s Unification Ministry.

Concerns about the costs prompted South Korean President Lee Myung-bak to propose a “reunification tax” last month.

“In the short term the shock to the Korean economy will be great but in the long-term reunification will be positive,” the survey said.

The two Koreas are still technically at war as hostilities in 1950-53 Korean War conflict ended in a truce, not a peace treaty.

Yonhap also covered the report:

Most of the experts also said the divided Koreas will likely be reunified within the next 30 years, according to the survey conducted by the Federation of Korean Industries (FKI), the largest business lobby in South Korea.

The questions raised by the FKI came after President Lee Myung-bak proposed introducing a new “unification tax,” which he said will help lessen the financial burden of reuniting with the communist North.

Of the 20 experts surveyed, 63.1 percent said the reunification of the two Koreas will cost more than that of Germany, about $3 trillion. The amount includes the initial costs of stabilizing the nation following a reunification, but also the costs of eradicating any economic and social disparities between the two Koreas.

Half of the respondents said the country needed to begin discussing ways to pay such enormous costs of reunification, while 20 percent said such discussions must begin immediately.

“It also showed every respondent saw the need for such discussions as no one answered such discussions were unnecessary,” FKI said in a press release.

None of the respondents said the reunification will take place within the next five years, but 95 percent, or 19 out of the people surveyed, said the two Koreas will likely be unified before 2040.

They all agreed the unification with North Korea will be a great burden on the South Korean economy in its near future, but a great opportunity in the long term.

Here are links to previous posts on this topic.

Read the full stories here:
The cost of reunifying Korea? About $3 trillion

Experts say Korean unification will cost over US$3 trillion