It will cost about US$500 billion to augment the current per-capita gross domestic products of North Korea amounting to $1,251 to about $10,000 within two years. (image: Kobizmedia/Korea Bizwire)
SEOUL, Nov. 19 (Korea Bizwire) – The Financial Services Commission announced on November 18 its financial plan for the two Koreas’ reunification called “Korea’s Reunification & Financial Policy Task.” The Unification Finance Task Force, teamed up with the Ministry of Strategy and Finance, the Ministry of Unification and other research institutes, have studied for the last five months to develop the blueprint.
According to the plan, it will cost about US$500 billion to augment the current per-capita gross domestic products of North Korea amounting to $1,251 to about $10,000 within two years, among which $140.0 billion will be used to establish infrastructures such as railroads, roads and electricity grid while $35.0 billion are planned to be invested in promoting industries including electrical electronics, agriculture, forestry and fisheries.
In order to implement the scheme, the government plans to raise more than half of the money, equivalent to $250 billion to $300 billion, from public financial institutions such as Korea Development Bank and Korea EximBank. It also plans to rely on private investments including lucrative private projects and special economic zone development for $107.2 to $186.5.
On the assumption that North Korea will grow by 8 percent annually for the first ten years after the unification and then by 10 percent on an annual basis for the next ten years, about $100 billion out of $330-billion tax revenues are to be the source of development. Official development assistance from other countries is anticipated to be about $170 billion.
The scheme also includes streamlining the north’s banking system. After the reunification, the government will scale down Chosun Central Bank, which currently functions as a central bank, a commercial bank and an agency to manage the national budget all at the same time. In accordance with the phase-out, a new national commercial bank is considered to be launched. Public financial institutions to take the lead in investing infrastructure and many other industries are to be established as well.
As of last year, North Korea’s GDP was 34 trillion won, or about $30.8 billion, while its budget was $6.6 billion and its trade volume was about $7.4 billion. The overall economy is almost similar to that of South Korea in the 1970s. Considering the fact that the GDP gap between the south and the north is almost 42 times compared to the German case of 9.7 times at the time it achieved unification, it is questionable whether the plan would be feasible.
By Veronica Huh (veronicah@koreabizwire.com)
