North Korean economic reconstruction will cost approximately 250 trillion won a year in the initial period of inter-Korean unification, according to a latest estimate by the Ministry of Unification.
The ministry started research on the reconstruction of the North Korean economy in 2011. It estimates the total annual cost at 55 trillion won to 249 trillion won in the first year of unification on the assumption that it occurs in 2030. The estimation is based on consumer price estimates in 2031.
The ministry’s estimate is a little different from others as it includes the costs for social security and healthcare as well as those for administrative and economic integration.
The Financial Services Commission, in the meantime, recently said that US$500 billion in fiscal expenditure is required for North Korean economic development. According to its report, infrastructure development in the North is estimated to cost US$140 billion, including US$77.3 billion for railroad construction, US$37.4 billion for road construction and US$10.4 billion for power grid construction. In addition, industrial development is likely to cost US$35 billion, including US$27 billion for the agricultural and fisheries industry and US$2 billion for the mining industry.
Late last year, the Korea Development Bank said in its growth accounting analysis report that North Korean economic development will cost 705 trillion won from 2018 to 2036. The annual average, 35.3 trillion won, is equivalent to approximately 2% of South Korea’s real GDP. The bank’s estimate is based on the assumption that North Korea’s real GDP per capita increases to US$10,000, 30% of that of South Korea, in 2036.
Experts point out that increased inter-Korean economic cooperation prior to unification can reduce the total unification costs. “It can serve as a tool for ensuring peace, creating jobs and improving the competitiveness of small and medium-sized enterprises in the current generation and less unification costs and more convenience and benefits for the next generation,” said senior research analyst Hong Soon-jik at the Future Korea Institute of Kookmin University.