South Korea puts cost of reunification with North Korea at US$500 billion

[NewWorldRecord]

South Korea puts cost of reunification with North Korea at US$500 billion

PUBLISHED : Wednesday, 19 November, 2014, 11:22pm
UPDATED : Wednesday, 19 November, 2014, 11:22pm

Agence France-Presse in Seoul

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 US$1,251 to US$10,000.

South Korea's top financial regulator said developing North Korea's moribund economy after eventual reunification would cost around US$500 billion.

Financial Services Commission (FSC) chairman Shin Je-yoon told a seminar in Seoul yesterday that the estimate covered a period of 20 years that would be needed to raise the North's per capita GDP from the current US$1,251 to US$10,000.

The FSC stressed the figure of US$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 per cent of South Koreans supported the idea of a unified peninsula, almost half had 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 tenfold difference between West and East Germany at the time of their reunification in 1990.

Shin said half the needed funds could come from 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 7 per cent of South Korea's annual GDP for a decade.

That would mean around US$83 billion a year for 10 years - and that is assuming a peaceful unification scenario.

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 reacted angrily, accusing the South of dreaming "a pipedream" of reunification through absorption.