Sixty-year cost for Korean reunification 

Unification of the two Koreas will raise the tax bill for South Koreans by the equivalent of an annual two percentage points for 60 years, a report by a South Korean state-funded research agency showed on Thursday.

The figures are some of the most detailed by South Korea on the potentially huge cost of reuniting with the communist North, whose economy has been driven close to ruin by central economic planning, heavy military expenditure and years of famine.

"Additional fiscal spending will initially reach 12% of South Korea's annual gross domestic product each year, declining to around 7% about 10 years later but increasing again afterwards," the Korea Institute of Public Finance said in a report.

It put South Korea's economy, Asia's fourth biggest, at nearly 40 times the size of its reclusive neighbour.

North Korea's economy has been hit further by an end to free-flowing aid from the South since conservative President Lee Myung-bak took office 18 months ago, and by tightening international sanctions after the North's nuclear test in May.

The past few weeks has seen the North re-emerge from its shell and offer some conciliatory gestures to the South.

South Korea's central bank estimates the annual gross national income in the North, which does not announce official data, at 27 trillion won ($US21.77 billion) in 2008, compared with 1,031 trillion won for the South.

Some unofficial estimates reckon that it would cost the South anywhere from 2-25% of its annual economic output to integrate the two sides, which have never signed a formal peace treaty to end the 1950-53 Korean War.

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