The Economic Road to Reunification

North Korea chalked up significant economic growth in recent years thanks to reconciliation with the South. But Pyongyang's nuclear development remains a stumbling block to reunification.

THE Korean Peninsula is a land with many monuments dedicated to peace and reconciliation. At least three such monuments are found in Paju in the northernmost district of South Korea: Bell of Peace, Bridge of Freedom and Reunification Monument. These monuments are an expression of a desire of the citizens in both North and South Korea for peace, freedom and reunification.

The Korean Peninsula was divided into two states by foreign powers at the end of World War II. The northern part, North Korea, was supported by the Soviet Union and the southern part, South Korea, by the United States. The two Koreas fought a bitter war from 1950 to 1953. Since then the Korean Peninsula has been one of the hottest spots in the world.

But the spirit of brotherhood remained alive among the people of the two Koreas. Pressure for reunification mounted in the 1980s. In 1990 the prime ministers of the North and the South began preliminary talks for reunification.

On June 13, leaders of the two Koreas, Kim Dae-jung of the South and Kim Jong-il of the North, met in Pyongyang opening the door to reconciliation. Two months after the historic meeting, 100 families from North Korea and 100 from the South met in a reunion, the second such after the first one earlier in 1989.

Economic cooperation followed with South Korea acting like Santa Claus with billions of dollars to dispense in North Korea, left far behind in economic development. South Korean conglomerates known as chaebol came in droves to invest in the North.

Notable among development projects carried out by South Korean businessmen were the construction of an industrial complex on 300 hectares of land in Gaesong, a railway line that linked the two Koreas, and a mountain resort in Kumgang. "Reunification is being pushed forward by means of economic cooperation," said Whan-bin Jang, Senior Vice President of Hyundai for International Business.

Hyundai, the South Korean business giant, played an important role in promoting economic cooperation between the North and the South. The company built the Gaesong Industrial Complex shortly after it signed a memorandum of cooperation with North Korea's Asia-Pacific Peace Committee in August 2000. Gaesong is a city in the southern part of North Korea about 7 kilometers from the demilitarized zone.

According to Jang, three factories are in operation as of April 2007 employing 13,000 people. Most of them, naturally, are North Koreans. The rest are South Koreans. Labor wage ranges on average around US$60 a month. "We'll raise the wage gradually," said Jang. In South Korea, a foreign worker receives about US$740 on average in monthly pay.

Yang said the reopening of a railway between the two Koreas was of vital importance. The 27.3-kilometer-long railway which was opened in 2003 linked Dorosan Station in South Korea with Gaesong in the North. It thus connects the Trans-Korea Railway with Trans-China, Trans-Mongolia and Trans-Siberia. 'This has cut costs sharply," said Jang. Today shipments from South Korea which normally take a month to reach Europe by sea, now take only a week by rail.

Hyundai has also built a mountain resort at Kumgang based on the Protocol for Tourism Development of Mount Kumgang signed in Pyongyang in January 1989, long before the historic meeting of leaders of the two Koreas in 2000. The mountain resort went into full operation only in 1988 with the arrival of tourists on a cruise ship anchored offshore. An overland route from South Korea to Kumgang opened in 2003 across the demilitarized zone.
Since the opening of the Kumgang mountain resort, the numbers of tourists to North Korea jumped sharply from only 1,476,600 in 1989 to 1.4 million in February 2007, most of them Koreans. Only 8,353 were non-Korean.

Also, most of the workers in hotels, restaurants and shopping centers were North Korean. Only a few were South Koreans. Two locations popular with tourists are Okryukwan Restaurant and the Cultural Center. The restaurant was built at a cost of US$4.4 million and the Cultural Center at US$7.9 million. "Both are operated by North Korea," said Jang. But the nearby Oekumgang Hotel, built at a cost of US$14.9 million, is operated by South Koreans.
Another South Korean company which also expanded into North Korea is Daewoo Corporation. In 1996, Daewoo signed an agreement with a North Korean company called Samcholli General Trading Corporation on a joint venture in the construction of three factories in Nampo, South Pyongan, to produce garments, handbags and jackets.

Data issued by the North Korean Ministry of Reunification shows economic cooperation has been growing steadily since it began in 1989 when it amounted to only US$20 million. By the year 2006 the figure shot up to US$1.35 billion. "The economies of the countries should be brought to a more equal level before we push for reunification," said Jang.

Today there's still a wide economic gap between the two Koreas. North Korea's gross domestic product amounts to only 4 percent of that of the South. This is reflected in the per capita income of the South which stands at US$13,980, almost eight times more than that of the North. But that was quite an improvement from 2000 when the South Koreans earned as much as much as 18 times more than their cousins in the North.

But the good picture is clouded by North Korea's nuclear program. Chung Il-yong, head of the Korean Journalists Association, told a conference on peace and reconciliation on March 11-17 that Pyongyang's development of nuclear weapons had been a stumbling block to peace between the two Koreas. "Peace can only be achieved if nuclear weapons are abolished [in North Korea]," he said.

But the economic gap between North and South remains a problem. Marcus Noland from the Institute for International Economics in Washington, DC, was quoted by Time (August 25, 2003 edition) as saying that it would take US$600 billion in investment over the next 10 years to bring North Korea's per capita income to 60 percent of that of the South. He said social stability could be achieved between the two states at that level.
Learning from the experience of East and West Germany, a gap in economic and social development is a problem for a country seeking reunification. In Korea, the gap is much wider than in Germany. Accordingly, it's a long road to peace and reunification in the Korean Peninsula.
Abdul Manan (Kumgang, North Korea)


TEMPO MAGAZINE, No. 35/VII/May 01 - 07, 2007


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