South Korea Calculates the Cost of Reunification on Peninsula

D-Bo , Nov. 19, 2014, 9:05 a.m.


In a recent report released by the Chosun Ilbo, the government estimates that rebuilding the North Korean economy after reunification would cost US$500 billion. A new road map envisages establishing banks in North Korea and raising $250-300 billion by issuing bonds there.  This would mean that more than half could be raised without billing the taxpayer.



The blueprint was released by the Financial Services Commission on Tuesday. It estimates that $500 billion is needed to raise the North's per capita GDP from an estimated $1,251 in 2013 to $10,000 within 20 years. The plan is to rely heavily on state-run financial institutions, considering the limited government budget.

It envisages setting up subsidiaries of state-run financial institutions like Korea Development Bank, the Export-Import Bank of Korea and the Industrial Bank of Korea in the North and investing $30 billion in them over 20 years in addition to the $300 billion from bonds.



The blueprint also includes private investment of $107.2-$186.5 billion from home and abroad for special economic zones or lucrative projects. Once the North Korean economy is developed, the commission expects that $330 billion can be collected in taxes over 20 years, of which $100 billion would be earmarked for reconstruction of the North.  The commission claimed this would minimize the government's financial burden.

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