Think tank says unification could cost $229 billion

The initial costs for the integration of South and North Korea could vary from 55 trillion won ($50 billion) to 249 trillion won ($229 billion) if the two neighbors are unified two decades from now, a South Korean state-run institute estimated Thursday.

The costs are projected to cover the first year of integrating the rival Koreas, the Korea Institute for National Unification said in a report, a strong indication that the total cost of full-fledged unification could be much higher.

The report was unveiled in a seminar by South Korean experts on how to prepare for potential unification with North Korea whose per capita income is about 5 percent that of Asia’s fourth-largest economy.

The move comes amid no signs that the two Koreas, divided for nearly six decades, could be reunited anytime soon, particularly considering Seoul’s animosity toward the North over its two deadly attacks on the South last year.

In a reminder of the tension, South Korea fired several shells toward a disputed western sea border with North Korea on Wednesday after accusing Pyongyang of firing artillery rounds near a South Korean island, which was shelled by the North in November.

The North’s military denied any shelling, claiming Thursday that the South heard normal blasting for a construction project near the sea border.

Despite the North’s constant security threats, South Korean President Lee Myung-bak believes that unification with North Korea is a must for South Korea, not a matter of choice.

Last year, Lee first floated the idea of using taxpayer money to cushion the cost of unification. Seoul has since been working on details of a so-called unification tax. The move has angered the North, which has long suspected that Seoul could be plotting to absorb its impoverished northern neighbor.

An Chong-bum, an economics professor of Sungkyunkwan University, said it would be desirable for South Korea to implement the tax so it could accumulate a fund to help finance the unification.

Experts have said the potential unification would marry South Korean capital and technology with cheap North Korean labor and rich natural resources, a prospect that could make the unified Korea an economic powerhouse.

Hong Ik-pyo, an analyst at the state-run Korea Institute for International Economic Policy, said the unification would bring economic benefits to the unified Korea as it would help reduce defense spending and tap into natural resources and human capital in the North.

Experts estimate North Korea has about 300 kinds of mineral resources, including magnesite, iron ore and rare earths, and that the potential value of North Korean mineral resources is as much as 6,984 trillion won ($6.6 trillion). 

(Yonhap News)