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Re-unification talks - North Korean chief delegate of Red Cross, Choe Song-ik (L) and his South Korean counterpart Kim Young-chel - Source: Reuters -
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A united Korea - combining Asia's fourth biggest economy with
one of its poorest - could surpass that of Germany or Japan in
economic might in the next 30-40 years, US investment bank Goldman
Sachs said.
Though North Korea's planned economy system looks to be on the edge
of collapse, it offers a large and cheap workforce, a wealth of
minerals that the resource-poor South currently has to import to
feed its industry and the likelihood of gains in productivity and
its currency once economic reforms take hold.
"We project that a united Korea could overtake France, Germany and
possibly Japan in 30-40 years in terms of GDP in US dollar terms,"
it said in a report.
The two Koreas have been separated for more than half a century and
have yet to sign a peace treaty to formally end the 1950-53 Korean
War.
The Goldman Sachs report was published just as the communist North
has shown signs of being willing to reengage with the outside
world, from which it has been all but, cut off after a series of
nuclear and missile tests this year.
It also comes as the conservative government in Seoul has turned
increasingly hard-nosed in dealings with its prickly neighbour,
ending years of aid until Pyongyang starts to dismantle its nuclear
weapons programme.
The cost of reunification has long been seen as one of the biggest
risks facing the South Korean economy.
Many analysts warn the South's rise to an economic powerhouse in
the region could be undone by the burden of absorbing its
neighbour, whose per capita income is about five percent the
size.
But Goldman Sachs said it could be affordable by having the
appropriate policies and by following the China/Hong Kong
reunification model which allows two political and economic systems
to co-exist, with limited inter-Korean migration.
The report was written by the bank's South Korea economist, Goohoon
Kwon, and included input from one of the economists who co-authored
the bank's influential prediction earlier this decade that the
economies of Brazil, Russia, India and China - the so-called BRICs
- would turn dominant by the mid-century.
It argued that there remained a spirit of reconciliation despite
the hardening in Seoul and that the political backdrop in the
region was supportive of peaceful and gradual integration.
North Korea's increasing lag behind other former planned economies,
such as Russia, China and Vietnam, could eventually spark powerful
political and economic changes in North Korea which, with the
recent political changes in the US and Japan, could transform the
nature and magnitude of North Korea risks.
