The South Korean government will unveil its financial plan for inter-Korean reunification at an international conference next month. According to the plan, approximately US$500 billion is required to raise the per-capita GNI of North Korea to US$10,000 within two decades. The current per-capita GNI of North Korea is estimated to be US$1,216.
The blueprint was prepared by the Unification Finance Task Force, which includes the Financial Services Commission, the Ministry of Strategy and Finance, the Ministry of Unification, and the Bank of Korea. The other contents of the blueprint range from central bank establishment in the North, a single exchange rate adoption and temporary fixed exchange rate to gradual currency integration, capital market and non-banking sector establishment.
The biggest obstacle against the plan is the stark difference between the economic powers of both Koreas. North Korea’s nominal GNI is US$297, which is 2.6 percent of that of the South. The former’s GNI per capita is just 5.3 percent of the latter’s, too.
“The gap is too wide in view of the fact that West Germany’s nominal GNI and per-capita GNI were 8.1 times and 2.1 times those of East Germany at unification,” said Kim Yong-bum at the Financial Services Commission, adding, “In this context, government finance and policy finance institutions need to lead the economic cooperation and restoration during the early stage, and then allow private-sector funds and those from international organizations to take a bigger role with time.”
He continued, “This blueprint, though not perfect, is meaningful in that it is the government’s first financial policy report for providing against the inter-Korean reunification, and unification can become a valuable momentum for South Korea, which is struggling amid low prices, low employment, low fertility rate and fast-aging society.”