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Regional Outlook : Korean Economists Dreaming of Unity : The north and south together could become a powerhouse--perhaps the world's fifth largest.

March 30, 1993|SAM JAMESON | TIMES STAFF WRITER

SEOUL — Until recently, South Korean policy-makers and economists appeared to be looking through binoculars backward--seeing only burdens, and no benefits, from possible unification with Communist North Korea.

One report after another contained still higher estimates of what it would cost to raise living and production standards in the north to the level of the south--the latest put the total at nearly $1 trillion over a 10-year period.

Now, two new reports have come out that turn the binoculars around, offering a view of a unified Korea as the world's 10th-largest economy. Or, perhaps, seventh largest. Or even fifth largest.

(South Korea alone, with a GNP of slightly less than $300 billion, now ranks as the world's 15th-largest economy.)

Granted, the major question remains if and when unification might come.

Indeed, hopes faded again earlier this month when North Korea put itself on a "semi-war" footing to protest an annual U.S.-South Korea military exercise and announced that it will withdraw from the Nuclear Non-Proliferation Treaty it belatedly signed in 1985.

The north subsequently announced last week that it was ending the alert but gave no indication that it is reconsidering its nuclear decision.

At a minimum, the latest events throw into grave doubt any possibility that the north would soon receive the kind of South Korean or foreign investment it has been seeking to modernize its economy.

There are other scenarios for an eventual reunification of the Koreas, however, including the possibility of an East German-style collapse in the north. By implication, South Korean President Kim Young Sam predicted just such a development by the year 2000 in his inaugural address.

In a joint report, the Korea Development Institute and the Korea Institute of Economic Policy now say that however it happens, a Korea unified in 2000 could 10 years later have a $1.125-trillion GNP in constant 1991 dollars.

Using data compiled in another report from the presidential "Korea 21st Century Commission," Jung Ku Hyun, a business administration professor and director of the Institute of East and West Studies at Yonsei University, calculated the possibility of a $1.524-trillion GNP--also at 1991 prices--in the same year. Jung is a member of the commission.

Those estimates--which other analysts consider unrealistic--would give Korea a larger economy than Canada and one in the same league as Britain, Brazil and Spain. Japan's economy, now 13 times larger than South Korea's, would be only six times larger by 2010.

The presidential commission said a unified Korea could become the world's seventh-largest economy.

North Korea's economy is now only 8%-10% the size of the south's. But if unified, the proverbial whole would be greater than the sum of the parts. The unified economy would be 59% larger in 2010 than would be the economies of two, still-independent Koreas, according to Jung's calculations. By 2020, the added economic boost would be 62%.

Even those possibilities may have been understated.

Head from Bonn across the former East Germany and you arrive in Eastern Europe, where economies are still struggling along the path to free-market principles. Cross the Yalu River boundary that a unified Korea would have with China, and you enter a booming region with a bright future.

Interaction with a China vying with France for the world's fourth-largest GNP in 2010 would provide an immense spur to a unified Korean economy.

"China is developing light industries in its southern provinces of Guangdong and Fujian. Its strategy in its northeast provinces (adjacent to the Korean Peninsula) is to develop heavy industry," in which South Korea increasingly is finding its strength, Jung said.

The combination of China's three northeast provinces with a unified Korea, he added, would yield an "economic zone" of 220 million people--only slightly fewer than the United States.

"That's what I see as a 'Korean economic zone.' Korea could serve as an engine to lead all of Northeast Asia," Jung said.

Kim Do Kyoung, a fellow at the Lucky-Gold Star Economic Research Institute, was even more bullish. Even without unification, he predicted, China will eventually surpass the United States to become South Korea's No. 1 export market. With unification and a direct cross-flow of exchange with China, Korea could eventually become the fifth-largest economy in the world, after the United States, Japan, Germany and China, he said.

Unification would bring a population of 78 million (in 2010)--11th largest in the world and big enough to create a major domestic market. It would combine the north's natural resources and the south's agricultural strength and open the door to trains from Pusan to Paris, direct air flights to Europe and highways extending into the heart of the Asian continent. As the core of a new "economic zone," the potential to serve as a new financial center and transportation hub would emerge.

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