Unification Costs

Unification Costs

A ROK National Assembly Special Committee on Budget and Accounts has estimated that unification could cost around 1 trillion dollars – yes, 1 trillion – with the cost increasing further over time.

The report notes the difference in timing. If unification occurs in 2015, it could cost around $858 billion over 10 years to absorb the North. If unification occurs in 2030, it could cost $1.32 trillion.

On the positive side, there could be benefits through decreased military spending, new markets in North Korea as well as cheaper land and labor.

More on the report at the Korea Times. I guess that’s why economic cooperation projects are a priority…

How to pay for Korean unification

How to pay for Korean unification

With estimates on the cost of unification providing such alarming figures (as in the last post), it is natural for people to wonder where the money will come from. A paper by Yang Un-Chol at the Sejong Institute gives a good summary of how this could be achieved. Amongst the methods, he lists:

  1. Inter-Korean cooperation projects. Basically, paying now to reduce the burden of paying later or as Yang states: “inter-Korean economic exchanges can, in the long run, contribute to reducing unification expenses by transforming North Korea’s economy in a market-friendly manner”
  2. Tax burden. South Korea has a relatively low tax burden, but gaining national consensus on raising taxes for unification would still be very difficult, as it has been in Germany.
  3. Issuance of public bonds. South Korea used this process to aid its recovery from the 1997 financial crisis. Similar methods could be used to defray the costs of unification.
  4. Overseas borrowing. If unification occurred in the near future, this could be very difficult due to the negative effect unification would have on South Korea’s fiscal position. If unification occurred much later, South Korea could have time to secure assistance from international organizations and neighboring countries to promote a much smoother process.
  5. Other Government funds. As Yang notes there are “some of the 56 government-managed funds, which are linked to assistance for North Korea… Inter-Korean exchange and cooperation projects are reflected in the National Sports Promotion Fund, Culture and Arts Promotion Fund and Broadcasting Development Fund, among others…”

Yang doesn’t actually mention the potential for reparations from Japan that could contribute to unification costs. I read somewhere this could amount to around $10 billion. But I guess reparations are not a certainty, and indeed if normalization occurs before unification, a good deal of the funds will be spent on fine cognac and the rest stored safely for future generations in a Swiss Bank account.

To be certain, there are some pretty keen minds that have been working on this issue for some time. Indeed, the Sunshine Policy is basically the public face of saying ‘we gotta pay a bit now so we don’t have to pay so much later’. Can anyone point me to some good papers on unification costs?

‘Reunification cost’ is inappropriate

‘Reunification cost’ is inappropriate

‘Reunification cost’ is not an inappropriate term in the context of current ROKG unification policy according to a recent article on korea.net. With an underlying faith that North Korea will not collapse, the article states:

Think tanks, major financial institutions and individuals are busy estimating how much it may cost to reunite South and North Korea. They often refer to the estimated fee as the “reunification cost.”

However, before we estimate the cost, we need to speculate whether the term “reunification cost” applies when discussing the possible reunification of the two Koreas.

The “reunification cost” here means the total cost that is needed from physically reuniting two countries to the expense incurred until the two countries are settled after reunification.

In that case, though estimates can never be exact, the cost of German reunification altogether, according to different estimates, has been 1.2 trillion to 1.5 trillion euros ($2.1 trillion).

In general, the term reunification cost applies to the case where the reunification is relatively sudden and quick like that of German. It doesn’t apply to the gradual and step-by-step reunification that both Koreas desire.

President Roh Moo-hyun said in Frankfurt, Germany, last year that reunification of the Korean Peninsula would become possible after undergoing “national confederation.’

Under the proposed confederation, the two Koreas will maintain separate systems in the intermediary stage in preparation for reunification while institutionalizing cooperation, he said during a meeting with Korean-German residents.

While the article may ring true for current ROKG unification policy, I am happy that there are ‘think tanks, major financial institutions and individuals’ willing to count the costs and think about the possibility that ’sudden and quick’ unification could possibly occur. It’s always better to prepare for the worst and be pleased by reality, no?

Actually, even the term ‘cost’ gives a negative connotation. When someone says ‘unification cost’ it immediately has a negative meaning… like a tax or a bill. Why not ‘unification investment’??? Then we are really talking positively!!!

Cambodia between Japanese money and North Korean solidarity

Cambodia between Japanese money and North Korean solidarity

According to the Bangkok Post, Japanese money is worth more than North Korean solidarity to Cambodia’s Prime Minister Hun Sen:

“Cambodian Prime Minister Hun Sen appealed to his North Korean counterpart Kim Yong Il to release remaining Japanese citizens abducted by that country nearly 30 years ago, a government spokesman said Thursday.

Spokesman Khieu Kanharith made the announcement while briefing journalists after the first day of talks between Kim, the Cambodian government and a 30-strong North Korean delegation, which includes the North Korean ministers of foreign trade, agriculture and culture.

“Cambodia is not the North Korean government,,” Kanharith quoted Hun Sen as saying, “so we can only suggest. However we are also a friend of Japan, and when you release the hostages, I think relations between North Korea and Japan will improve rapidly.”

This is actually quite a diplomatic coup by Japan, considering the historical association between Cambodia and North Korea.

Cambodia and North Korea continue to maintain close diplomatic relations that began during the Cold War. Former King Sihanouk makes frequent trips to North Korea and has been a long time supporter of North Korea. Cambodia is home to a large proportion of North Korea’s expatriate community (the ones that are not imprisoned on return) and is a preferred holiday destination for the elite. Such is the relationship that the North Korean Government gave Sihanouk a personal gift of a bodyguard unit composed of highly trained North Korean personnel.

From reports, the level of trade remains important too with North Korea’s Prime Minister Kim Yong-Il signing agreements on shipping and trade and later scheduled to meet Senate and National Assembly leaders. Former King Sihanouk will also host a gala banquet for the North Korean delegation on Friday night at the Royal Palace.

The State of North Korean Studies

The State of North Korean Studies

Another guest post, this time on somewhat of a different subject. But I must say, it does give me food for thought as an aspiring student!


The State of North Korean Studies

I would like to present readers with an objective opinion on the state of scholarship relating to North Korea – it is very poor.

In the first instance, it is natural to wonder why the subject of ‘North Korean studies’ even exists. It is after all more precise to classify all such work as  ’Korean studies’ and to further sub-classify the area as ‘political science’. But rather than be satisfied with this, there has emerged a half-subject, a grotesque and misconfigured academic subject of ‘North Korean studies’.

The weakness of the classification lies in the level of interest paid to the subject by social scientists of repute. In ‘North Korean studies’, there is no theoretical debate amongst a number of leading scholars from recognized schools of thought, nor is there a tacitly understood agenda that guides research efforts, such as exist amongst scholars in other disciplines. ‘North Korean studies’ exists in an academic vacuum to which journalists, ex-government officials and creative writers are sucked in, with their tritest opinions being held as respected scholarship.

‘North Korean studies’ counts amongst it key publishing opportunities a number of short-lived, little known journals that, while occasionally having actual scholars, are most often the domain of second-rate post-graduate, first publication efforts, which will undoubtedly disappear from the writers resume as soon as they publish elsewhere. Changes in government, both in South Korea and here in the US, seem to fill the pages of these journals with the opinionated diatribes of the disaffected bureaucrat, adding little to academic debate and adding much less to the academic credibility of ‘North Korean studies’.

The vast majority of works published on North Korea would not obtain a pass grade as an undergraduate essay. Many totally lack in social sciences research methodology, perhaps reflecting the tendency of North Korean studies to attract journalists, ex-government officials and creative writers rather than academics.

If North Korean studies is to become a recognized discipline, worthy of analogous area studies disciplines such as Chinese studies, Korean studies or Japanese studies,  then a more rigorous research agenda is required. The discipline should move away from opinionated attempts to predict the future, such as ’peace regimes in Northeast Asia’ that so predominate the field, and instead focus on a more methodologically sound agenda. Examples could include historical research (recent pieces utilising released Soviet archival material have been one of the only shining lights in the field), linguistic research (from which much is yet to be learnt) and cultural studies (studies below the radar of current political regime such as music, cinema, folk culture and literature). Ultimately, such studies would provide a much better guide to contemporary policy makers than opinionated ideas on the Six Party Talks from which the research source is a series of Korea Times times articles supplemented by the author’s access to the State Department!

North Korean studies has much promise, but its focus really needs a change!

Security Council Report on Korean affairs

Security Council Report on Korean affairs

There is a new Security Council Report Monthly Forecast on North Korea available now. For those that weren’t aware, the Security Council Report is an independent external reporter on the work of the Security Council and its overall performance. According to SCR itself, it is:

…an independent not-for-profit organisation in affiliation with Columbia University’s Center on International Organization.  Security Council Report was founded with the encouragement of the former UN Secretary-General, Kofi Annan, and with the support of the governments of Canada and Norway, the Rockefeller Foundation, the John D. and Catherine T. MacArthur Foundation, and the William and Flora Hewlett Foundation, each of which have nominated representatives to the Governing Board…

The vision for Security Council Report stems from the belief that the lack of consistent, high quality, publicly-available information about the Council’s activities—and those of its subordinate bodies—is a consistent barrier to the effective performance of the Council itself as well as constituting a major handicap for the member states at large, and the wider public.

The SCR provides monthly reporting on major issues including North Korea. It also does forecasts for the next month in the SC. Needless to say, the SCR is an important resource for any researcher interested in Korean peninsula affairs without the time to pay attention to UNSC coverage of Korean questions.