The purpose of this study is to seek for policy measure to promote inter-Korean economic cooperation, which is the beginning stage of forming South-North Economic Community.
Creating South-North Economic Community is an important factor in forming Northeast Asia Economic Community and a crucial issue to the Korean economy as it seeks its way out. If South-North Economic Community is defined as an ‘unified economy between two Koreas,” one of the important condition in the beginning stage is to gain mutual trust through expanding economic cooperation. Along with this strategy, it is important to institutionalize the relationship the two; thus leading the North to open up its economy.
Depending on the time of unity, economic community can be divided into institutional economic community and functional economic community. As an example, European Union is a typical case of institutional economic community and China-Taiwan economic relationship is a case for functional economic community. However in case of South-North Economic Community, none of above examples can be applied; therefore, it should consider both institution and function to develop stronger cooperation.
There are many issues which hindered in building relationship between two Koreas and it can be categorized as either policy or economic factors.
In South Korea, ties with politics and economy and lack of consistency in the policy could explain as a factor for policy hindrance, however it seems to be somewhat relieved. In terms of economic factor, though it is relaxed, decreased interest of businesses’ to invest in North Korea has contributed to the factor. However, restructuring of companies after the IMF in 1997 is a negative cause towards investment in the North. Since investment in North Korea is more concentrated on external development rather than profit making, many businesses refrain from investing in North Korea.
In case of North Korea, both policy and economic factors are working as an obstacle in expanding economic community with the South. The North believes that the economic development, reform and opening up can threaten the communist system, therefore leading them to be more cautious in making the decision. Also, continuous financial difficulties since 1990s contribute as one of the factor. This economic phenomenon has decreased productivity in the North which led to decrease in supplies to the South, thus eventually declining the South’s ability to import goods. Moreover, it can downsize the cost of finances which are needed to improve its environment for foreign investment.
From this analysis, creating the South-North Economic Community will take a while, but it is essential for both governments to establish basic principles and systemize those rules. Principles of economic community should include transparency, consistency, reciprocity, and durability; and as basic directions, two standards – profit for private businesses and government’s inclusive reciprocity – must be in order. The form of the economic community should in the following order; ‘processing in commission→ investment→ trade.’ Furthermore, in order to secure the process, it is important to set up legal and institutional strategy that can predict the relationship between two Koreas and guarantee stability and effectiveness in the future.
남북경협 추진전략 및 부문별 주요 과제(The strategies and major tasks for promoting inter-Korean economic cooperation)
|Series Title; No||연구보고서 / 2001-01|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Economic Administration|
|Holding||한국개발연구원; KDI 국제정책대학원|