North Korean Economy Watch

Yonhap
2/26/2007

South Korea has earmarked 20 billion won (US$21.3 million) to provide 50,000 tons of heavy fuel oil to North Korea as part of a recent nuclear agreement in which the North agreed to take the initial steps toward nuclear disarmament, the Unification Ministry said Monday.

“The government embarked on internal preparations to provide 50,000 tons of heavy fuel oil for North Korea in accordance with the six-nation agreement,” said Yang Chang-seok, spokesperson for the ministry.

He said the oil shipment will cost an estimated 20 billion won, including delivery expenses, adding that the details will be worked out during the upcoming meeting of a working group on energy aid.

Earlier in the day, the ministry made the announcement to a panel of the National Assembly on unification and foreign affairs, after the decision was approved by the state-run committee of inter-Korean exchange and cooperation.

“The government will commission the Public Procurement Service to choose a local oil refinery for the project. It will cost about $350 per metric ton, and incidental charges of delivery will constitute about 20 percent,” Yang told reporters.

On Feb. 13, North Korea agreed to shut down its nuclear facilities and eventually dismantle them in exchange for energy aid and other benefits. The United States also agreed to discuss normalizing relations with the communist nation.

Under the deal, North Korea will receive initial aid equal to 50,000 tons of heavy fuel oil for shutting down and sealing its main nuclear reactor and related facilities at Yongbyon, 80 kilometers north of Pyongyang, within 60 days. International Atomic Energy Agency inspectors will determine whether the North carries out the steps properly.

The communist nation can eventually receive another 950,000 tons in heavy fuel oil or equivalent aid if it disables the reactor irreversibly and declares that it has ended all nuclear programs. The cost of aid will be equitably distributed among the five other countries in the six-party talks, which are South Korea, the U.S., Japan, China and Russia.

The agreement also calls for the establishment of five working groups, one of which is to address the normalization of Washington-Pyongyang diplomatic relations. The groups are to convene within 30 days of the Feb. 13 accord.

Reuters (Hat tip DPRK studies)
2/26/2007

Senior officials from South and North Korea resume talks on Tuesday, seven months after dialogue broke down in acrimony over Pyongyang’s missile tests.

Following are key points in the ties between the two:

STILL AT WAR

– An armistice ending the 1950-53 Korean War dominates the relationship between the two Koreas. Nearly 1.2 million North Korean soldiers and South Korea’s 680,000 troops remain in a tense military standoff despite political and commercial ties that have warmed since 2000.

– The two have enough missiles and artillery pointed at each other to largely destroy major cities on both sides of the Korean peninsula.

POINTS OF EXCHANGE

– An industrial park in Kaesong just a few minutes’ drive from the heavily-fortified border is home to 21 companies employing about 12,000 North Korean workers.

– About 1.4 million South Koreans have visited the Mount Kumgang resort in the North just above the border on the east since the tours began in 1998. Roughly a quarter of a million made the visit in 2006 even as tension spiked following the North’s missile and nuclear tests.

– About 102,000 people crossed the border last year, not including Kumgang tourists and most of them South Koreans visiting the North for business. The total exchange of people was 269,336 as of the end of 2006.

TRADE

– Cross-border trade was $1.35 billion in 2006 up from $1.05 billion a year ago, largely from the strength of the Kaesong industrial park.

HUMANITARIAN AID

– South Korea has supplied between 200,000-350,000 tonnes of fertiliser a year to the North since 2000.

– It has also shipped up to 500,000 tonnes of rice a year to the North in the form of low-interest, long-term loans. Food aid has been suspended since the North’s missile tests in last July.

REFUGEES, PRISONERS OF WAR AND ABDUCTEES

– South Korea believes more than 1,000 of its people are still alive in the North either as civilian abductees or as prisoners captured during the Korean War.

– North Korea has said 10 South Korean POWs and 11 civilians were alive there.

– More than 1,000 North Koreans each year have fled hunger and persecution in the North and sought refuge in the South. In the first six months of last year, 854 arrived in the South for a total of 8,541. (Source: South Korean Unification Ministry, Kaesong Industrial District Management Committee, Reuters)

Korea Times
Andrei Lankov
2/22/2007

North Korean spy agencies love kidnappings. Of course, their colleagues worldwide also would not mind abducting a person or two, but in most cases there are some urgent reasons for taking such drastic measures _ the victims are prominent opposition leaders, or wanted criminals who cannot be extradited through normal channels, or people who are unlucky to know something way too important. North Korean abductions are different: They are often surprisingly random and target people of no significance. The very randomness of most of their abductions once was often cited by sceptics who tried to refute these accusations as “Seoul-inspired falsities.’’ Indeed, why should the secret services of a Stalinist state spend so much time and money only to kidnap a Japanese noodle chef, or a tennis-loving teenager? Nonetheless, in 2002 Kim Jong-il himself confirmed that these seemingly meaningless abductions of ordinary Japanese citizens did take place.

Of course, North Koreans spies did not limit themselves to Japanese only. Quite a number of South Korean citizens have disappeared into the Northern maw as well: it is known that at least 486 South Koreans have been forcibly taken to the North and have never returned.

A vast majority of them are fishermen who were imprudent to come too close to the North Korean coast, but this figure also includes a number of known victims of covert operations. Currently they number 17, but there are few doubts that the actual number is much higher. If the abduction is planned and conducted well, its victim simply disappears and is eventually presumed dead.

A good example is the case of the five South Korean high school students who disappeared from the island beaches in 1977 and 1978. They all were believed dead for two decades, but in the late 1990s it was discovered that the youngsters were working in North Korea as instructors, teaching the basics of South Korean lifestyle to would-be undercover Northern operatives.

Eventually, one of those former students was even allowed to briefly meet his family at the Kumgang resort. Kim Yong-nam disappeared from a beach in North Cholla Province in 1978. Later he was identified as the husband of an abducted Japanese woman, so North Korean authorities grudgingly admitted that Kim Yong-nam was indeed in the North, and staged a meeting with his family. Unsurprisingly, during this meeting and press conference, he insisted that he was not kidnapped but saved from the sea by North Korean sailors. Far more surprisingly, he sort of admitted that his job was related to spying.

It is remarkable that the kidnappings of the South Korean teenagers roughly coincided with similar abductions in Japan. In both cases the abductors obviously targeted randomly selected teenagers who were unlucky enough to be on a lonely beach. Another commonality was that the abductees were later used to train espionage agents. Perhaps, teenagers were seen as ideal would-be instructors for the spies _ still susceptible to indoctrination but with enough knowledge of local realities to be useful.

In April, 1979, a young South Korean walked into the North Korean Embassy in Oslo, Norway. His name was Ko Sang-mun, and he was a schoolteacher back home. Why and how he came to arrive at that embassy is not clear. As was usually the case, the North Korean side insisted that Ko Sang-mu defected, while the South Koreans alleged that the young teacher was the a victim of a taxi driver’s mistake: He took the taxi to a “Korean embassy’’ and the driver delivered him to the embassy of the wrong Korea.

It is impossible to say now whether this highly publicised case was abduction, defection, or something in-between. However, in 1994 it became known that Ko Sang-mun was in a labour camp. A small propaganda war ensued. Ko was made to appear in a North Korean broadcast assuring everybody that he was free, happily married, and full of righteous hatred for the US imperialists and their Seoul puppets (most of his speech consisted of customary anti-American rhetoric). We do not know where he went after delivering this speech _ to an apartment in Pyongyang or to a dugout in a prison camp. Meanwhile, Ko’s widow in the South committed suicide, unable to cope with the stress of the situation.

There were also more “normal’’ instances of abductions. The North Koreans kidnapped people who possessed important intelligence. In 1971 Yu Sang-mun, a South Korean diplomat stationed in West Germany was kidnapped in West Berlin, together with his family _ wife and two children. Perhaps, the few other South Korean officials who went missing in Europe in the 1970s were also abducted by North Korean agents, but presently only Yu’s case is certain.

In the 1990s most abductions of this sort took place in China, and their victims were political activists, missionaries, and real or suspected South Korean spies. All these abductions occurred in the Chinese North-East, near the borders of North Korea.

The abduction of North Korean dissenters, or suspected would-be defectors, from Soviet territory has been quite routine for decades. Sometimes these abductions sparked a crisis in relations between Moscow and Pyongyang, but in most cases the Soviets simply turned a blind eye to such acts.

Unification Ministry says assistance should continue ‘if possible,’ regardless of the actions the country takes
Joong Ang Daily
Ser Myo-ja
2/21/2007

Humanitarian aid will keep flowing to North Korea “if possible,” no matter what the country does politically, the Ministry of Unification announced yesterday.

Unification Minister Lee Jae-joung said yesterday that the 2007 operational plan had been submitted to President Roh Moo-hyun on Feb. 6, before the recent agreement in the six-party talks designed to eventually eliminate North Korea’s nuclear weapons.

The Unification Ministry released the abstracts of the plan yesterday, and critics quickly denounced it.

“I cannot understand why the administration is voluntarily giving up its leverage,” Nam Sung-wook, a professor of North Korean studies at Korea University, said yesterday. “If the government wanted to separate humanitarian aid from politics, it should have linked the aid provision to other developments in humanitarian programs, such as separated family issues or the repatriation of POWs.”

The administration has shown a tendency to try to change its policy toward North Korea whenever inter-Korean relations have frozen, rather than trying to push North Korea to change, Mr. Nam said.

After the North test-fired missiles in July of last year, South Korea withheld its promised 500,000 tons of rice and 300,000 tons of fertilizer aid. Inter-Korean ministerial talks are scheduled to take place from Feb. 28 to March 2 and resuming the humanitarian aid is expected to be discussed.

In its plan for this year, the Unification Ministry set forth six goals for inter-Korean relations, saying “humanitarian assistance will be provided separately from political situations if possible.”

Among the goals were releasing tension and building trust between the two Koreas, expanding inter-Korean economic projects, the construction of infrastructure such as roads and train tracks in North Korea and adding more businesses to the Kaesong Industrial Complex program.

The ministry also said it will seek progress in humanitarian projects, such as reuniting separated families and repatriating South Korean prisoners of war and kidnap victims alive in the North.

Mr. Lee also stressed the importance of the inter-Korean summit to resolving the nuclear crisis and to bringing peace to the Korean Peninsula, but added, “Right now, the government is not engaged in any specific efforts for an inter-Korean summit.”

He said new applications will be accepted by South Korean firms for locations in Kaesong by late as mid-April.

The South will also resume flood relief aid to the North, withheld after the North’s nuclear test in October, Mr. Lee said.

Korea Times
Park Song-wu
2/11/2007

South Korea is thinking of chairing a working group for energy aid to North Korea as the United States is trying to differentiate this round of the six-party talks from a 1994 process, a Seoul official said on Sunday.

But Seoul has a firm position that all parties should jointly pay the “tax” for peace, he said.

“Denuclearization will benefit all parties, so the burdens should be shared jointly,” he said. “But we are thinking of taking the lead in the working group for energy aid, considering the circumstances of the other parties.”

He did not elaborate. But Tokyo is not expected to raise its hand to chair the working group, considering the Japanese anger over the North’s abduction of its nationals in the past.

Russia prefers forgiving the North’s debts instead of providing it with energy.

China, host of the multilateral dialogue, is already playing the most important role of chairing the six-party meeting.

What the United States apparently has in mind, and consented to by all parties, is the necessity to differentiate the result of these on-going negotiations from the 1994 Agreed Framework.

Since it was signed by Robert Gallucci and Kang Sok-ju in Geneva on October 21, 1994, Washington provided 500,000 tons of heavy oil annually to Pyongyang over the following seven years.

But the North’s promise to freeze its graphite-moderated reactors in return for two light-water reactors was not obeyed, causing the Bush administration to criticize the deal as a diplomatic failure of his predecessor, Bill Clinton. After that, U.S. diplomats even avoided meeting their North Korean counterparts bilaterally.

The U.S. policy, however, has recently reached a turning point.

“The Bush administration may have been driven to greater negotiating flexibility by a need to achieve a foreign policy victory to compensate for declining public support for the Iraq war and the loss of the Republican leadership of Congress,” Bruce Klingner, a senior research fellow for the Heritage Foundation said in a recent article.

But one thing that has not changed is the U.S. hope of not repeating the “mistake” it made with the Geneva agreement.

From 1994 to 2002, Pyongyang received 3.56 million tons of heavy oil, equivalent to $500 million, from the now-defunct Korean Peninsula Energy Development Organization (KEDO), and the United States shouldered the largest share of $347 million.

To shake off that bad memory, Washington wants to use the term “shut down” instead of “freezing” and even wants to avoid providing fuel oil to the North, reportedly citing the possibility that it can be used for military purposes.

So the talks have dragged on. And, to make things worse, the North Koreans are demanding a lot.

Japan’s Kyodo news agency reported that North Korea had demanded 2 million tons of heavy oil or 2 million kilowatts of electricity in exchange for taking the initial steps towards denuclearization.

Christopher Hill, the top U.S. envoy, expressed hope on Sunday that such technical issues could be discussed at working group meetings. On the same day, the Seoul official hinted that South Korea will chair the working group.

BBC
2/7/2007

As six-party talks on North Korea’s nuclear programme resume in Beijing, the BBC’s Penny Spiller considers whether food shortages in the secretive communist state may have an impact on progress. 

Negotiators for the US, North Korea, China, Japan, South Korea and Russia are meeting in Beijing amid signs of a willingness to compromise.

While the last round of talks in December ended in deadlock, bilateral meetings since then have brought unusually positive responses from both North Korea and the US.

Such upbeat noises were unexpected, coming four months after North Korea shocked the world by testing a nuclear bomb.

The test brought international condemnation and UN sanctions, as well as a significant drop in crucial food aid.

South Korea suspended a shipment of 500,000 tonnes of food supplies, while China’s food exports last year were sharply down.

The World Food Programme has struggled to raise even 20% of the funds it requires to feed 1.9 million people it has identified as in immediate need of help.

Aid agencies warned at the time of a humanitarian disaster within months, as the North cannot produce enough food itself to supply its population. It also lost an estimated 100,000 tonnes-worth of crops because of floods in July.

‘Queues for rations’

Kathi Zellweger, of the Swiss Agency for Development and Cooperation in Pyongyang, said the present food situation in the country was unclear.

No figures are yet available for last year’s harvest, and it was difficult to assess what impact the lack of food aid was having on supplies, she said.

However, the UN’s Food and Agriculture Organisation estimated the country was short of one million tonnes of food – a fifth of the annual requirement to feed its 23 million people.

South Korea-based Father Jerry Hammond said there were signs of shortages – not only in food but also in fuel – when he visited the North with the Catholic charity Caritas in December.

He described seeing long queues for rations, and ordinary people selling goods in the street for money to buy the basics.

“You do expect to see more shortages during the winter time,” the US-born priest, who has visited North Korea dozens of times in the past decade, said.

“But I did see a noticeable difference this time.”

High malnutrition rates

Paul Risley, of the World Food Programme, said people in North Korea may still be cushioned by the November harvest and the pinch will be felt in the coming months.

“We have great concerns,” he said, pointing out that North Korea was now in its second year of food shortages.

He says “stabilising food security” in the country will be very relevant to the talks in Beijing.

“It is certainly the hope of all who are observing the situation in [North Korea] that imports of food can be resumed and returned to prior levels,” he said.

“Malnutrition rates are still the highest in Asia, and we certainly don’t want to see those rates rise any further.”

Father Hammond thinks Pyongyang may be persuaded to consider compromises in Beijing, but is unlikely to do so as a result of any pressure from the people of North Korea.

“People are very cut off from the outside world, and there is constant propaganda about national survival. Even if they go hungry, it will be considered patriotic,” he said.

There have been signs of possible compromise from both sides in the run up to the talks.

Washington has reportedly hinted at flexibility over its offer of aid and security guarantees, as well as showing a willingness to sit down and discuss North Korea’s demands to lift financial sanctions.

Meanwhile, North Korea reportedly recently told visiting US officials it would take the first steps to disband its nuclear programme in return for 500,000 tonnes of fuel oil and other benefits.

And South Korea is keen to resume its shipments of rice and fertiliser aid – if Pyongyang agrees to freeze its nuclear programme, the Choson Ilbo newspaper has reported.

As the nuclear talks resume, all sides will be looking to translate such pressures into progress.

Korea Times
Lee Jin-woo
2/8/2007
 
The government has decided to slash the amount of cash provided to North Korean defectors who come to South Korea and to focus more on helping them find jobs here, the Ministry of Unification said Thursday.

According to the plan, the subsidy provided in cash for the settlement of North Korean defectors will be cut from the current 10 million won ($9,500) to 6 million won. The amount is based on a one-person family and varies according to the number of people in the family.

Those who have come to Seoul since Jan. 1 this year will be subject to the new regulations, the ministry said.

The ministry, which deals with inter-Korean affairs, said it would almost double incentives to encourage North Korean defectors to find workplaces in the South.

Regardless of their annual income, a North Korean employee will get up to 15 million won for three years.

Some 4.5 million won would be provided after the first year of labor, which will increase by 500,000 won per year up to 5.5 million won for the third year.

Previously, the labor incentive was 9 million won over three years.

The new measure will be effective retroactively to defectors who have arrived from the beginning Jan. 1 of last year.

Despite the cut, the total amount of subsidies will be slightly lower than now, as the ministry decided to provide 13 million won, up from 10 million, for each one-man family to help find housing in the South, the ministry said.

Those who are handicapped or suffer from a serious disease will get up to 15.4 million won, it said.

“North Koreans should no longer sit idle in South Korean society,’’ Kim Joong-tae, acting chief of the ministry’s social and cultural exchange bureau, told reporters. “The incentive is aimed at increasing support for North Korean defectors who are trying to adapt to South Korean society.’’

Life is getting more challenging for North Koreans arriving in the South. As the number has surged, the government subsidy for each defector has plummeted.

Many North Korean defectors have complained that the government’s decision lacks an understanding of the harsh reality that they face in Korean society.

“Officials are ignoring the fact that the majority of North Korean defectors who come here after years of hardship in China and other Southeast Asian countries are not able to work normally for a certain period of time,’’ Lee Hae-young, an official of an association of North Korean defectors in Seoul, told The Korea Times.

Lee said it takes about five years for defectors adjust to a completely different market society.

“I think only about three out of 10 defectors who arrive in the South are healthy enough to work,’’ Lee said.

The total number of North Korean defectors to the South since the end of the 1950-53 Korean War is presumed to have surpassed 10,000 early this year, according to the ministry.

Seoul Cautious Over Rift With China
Korea Times
Lee Jin-woo
2/2/2007

South Korea tried Friday to downplay its short track skaters’ action over Korea’s historical claim to a mountain on the border between North Korea and China during the ongoing Winter Asian Games.

On Wednesday, five South Korean female short track skaters held up seven placards with the message “Mount Paektu is our territory” during the awards ceremony following their silver medal win in the 5,000-meter relay.

A high-ranking South Korean official said the young skaters’ behavior was impromptu and should not be interpreted to have political significance.

“We have stressed that both Seoul and Beijing should deal with this issue calmly,” a government official said on condition of anonymity because of the sensitivity of the issue. “We delivered the message yesterday and today to our Chinese counterpart.”

The organizing committee of the Changchun Asian Games expressed regret Thursday and asked that similar incidents to be prevented in a letter to Kim Jung-kil, head of the Korea Olympic Committee. The games will end tomorrow.

The Chinese officials defined South Korean players’ act as a political activity, which is banned under the charter of the International Olympic Committee and the Olympic Council of Asia.

China’s foreign ministry also called on a senior South Korean diplomat in Beijing on Thursday afternoon and expressed regret over the issue.

South Korean skaters’ surprising move at the award ceremony came after the Chinese government made efforts to promote Mt. Paektu as “Changbai Mountain” during the games.

China has reportedly renamed schools after the mountain and has also ordered a dozen hotels run by ethnic Koreans near the mountain to halt business.

On Sept. 6, the organizing committee lit a torch at the top of the mountain, angering many South Koreans. The mayor of Changchun, the host city, said the mountain was chosen as the torch site on Sept. 6 because three rivers _ Tuman, Amrok and Songhua _ originate there. Tuman and Amrok rivers are known as Tumen and Yalu in China.

Many South Koreans believe the efforts are part of the Northeast Project, a Chinese academic project to reexamine the ancient history of the region.

They view the project as an attempt to distort ancient Korean history in the northeastern territory of what is now China, including the Koguryo Kingdom (37 B.C.-A.D. 668) and the Palhae Kingdom (698-926).

Beijing has disclosed plans to list the mountain as a UNESCO Natural World Heritage site, and plans to host the 2018 Winter Olympics there.

Unlike the angry South Korean public and news media, the South Korean government has remained calm over China’s actions to avoid stirring up a diplomatic dispute.

Under an agreement struck in 1962, China and North Korea, two sovereign states and U.N. members, agreed to share the mountain. The North has claim to 54.5 percent of the mountain, while China claims the remaining 45.5 percent.

Yonhap
2/1/2007

North Korea has intensified efforts to stem the spread of South Korean pop culture in the communist state, even as South Korean movies and TV dramas gain popularity there, informed sources said Thursday.

“This year, North Korean authorities waged what they call ‘psychological warfare’ against ‘exotic lifestyles’ by cracking down on South Korean pop culture,” a senior government official said, asking to remain anonymous because of the sensitive nature of the issue.

According to a survey conducted on recent North Korean defectors to the South, South Korean video tapes and CDs enter North Korea via China. North Koreans having TVs, video players or personal computers at home watch them, and then swap the programs among peers or friends, another source said.

The popularity of South Korean media has been so great that a lead actress’s line in the hit South Korean movie “Sympathy for Lady Vengeance” became a household word in the North, while some North Korean youth are glued to such mega-hit TV dramas as “Fall Fairy Tale” and “Immortal Admiral Yi Sun-shin,” the sources said.

They further explained that the wave of South Korean pop culture does not stop at movies and videos. North Korean youth also enjoy sporting South Korean hairstyles and fashion, preferring tight pants and long front hair.

Since the 1950-53 Korean War, about 9,300 North Koreans have defected to South Korea, including about 1,578 in 2006 alone. The sealed border between the two Koreas has nearly 2 million troops deployed on both sides.

Wave of South Korean Trends in North Korea
Daily NK
Park Hyun Min
2/1/2007

A wave of South Korean actors and trends such as Jang Dong Gun, Bae Yong Joon and Won Bin which has washed throughout China, Japan and Taiwan has finally hit North Korean shores. Consequently, North Korean authorities are racking their brains trying to find a solution to this problem.

This wave of South Korean trends in North Korea comes from an influx of foreign movies and dramas in the form of VCD’s and videos. In particular, the phrase “worry about yourself!” from a Korean movie “Sympathy of Lady Vengeance” has become the latest catchphrase to spread throughout the country.

Regarding this, a South Korean government official said on the 31st “North Korean youths are becoming infatuated with popular South Korean dramas such as “Autumn in my heart” and “General Lee Soon Shin’” and revealed “Defectors say that people who do not watch South Korean dramas are treated as outcasts.”

In fact, according to a survey from Hanawon, an educational training centre for defectors, a growing number of travelers now cross the boarder possessing video tapes and C.D.’s. These goods then circulate amongst families in possession of T.V.’s videos and computers, particularly Pyongyang, where South Korean dramas and music are often heard.

Popular South Korean dramas have gradually infiltrated North Korea since the late 90’s. At the time, dramas such as “The Sandglass” describing the S. Korean Kwangju affair in 1980 and “Asphalt man” gained much popularity and since 2000, dramas such as “Winter Sonata” and “Stairway to heaven” have caught the attention of North Korean youths.

These South Korean movies and dramas do not stop at mere entertainment but rather are influencing the hairstyles and fashion of young North Koreans. Nowadays, many North Korean youth adopt “knife hair,” a hairstyle with thin sharp fringe points and “drainpipe trousers” are also a hit item.

A defector who entered South Korea in 2004 said “If a person is caught circulating any copies of capitalist materials, he or she may be dragged to the political gulags. However, if a person is found to be a viewer, then he or she may receive re-education or sent to the labor training camp or the re-educational camp for 6 months.”

In response to foreign culture which is finding its way into North Korea, authorities are aiming to strengthen public propaganda in order to block foreign ideologies. In particular, North Korean authorities have began considering mobilizing its groups of military youths for rearmament.

North Korea is concerned about the balance of its regime with the demands of the whole society increasingly changing. In preparation for this, it seems that North Korea is actively investing more in the light industry in an effort to stabilize public welfare.

Korea Times
Na Jeong-ju
1/26/2007

If at least one member of a North Korean household moves to South Korea after reunification, more than 3 million from the North may head south if the two Koreas are reunited, the Bank of Korea (BOK) said Friday.

According to the BOK’s Institute of Finance and Economy, if such an exodus takes place in North Korea after reunification, the South may face serious economic consequences, the report said.

If Koreas adopt a German model, in which West Germany extended financial support to East Germany before and after reunification, South Korea would shoulder a total of $500-$900 billion in reunification costs. If the money is spent appropriately, it will take 22-39 years for North Korea to top $10,000 in gross national income, the report said.

The institute proposed South and North Korea try to reduce economic gap through economic cooperation programs. If the South supports the North through development programs, using its capital and the North’s cheap labor, it can reduce reunification costs considerably, it said.

“It is desirable for the two Koreas to designate special economic zones to reduce their economic gap and conduct programs to develop the North Korean economy,’’ the report said.

With the development programs, the South can spend much less than adopting the German model, the report said. The reunification costs will be cut to $300-500 billion, while the period for North Korea to see a GNI of $10,000 will be shortened to 13-22 years, it added.