FREE ESSAY ON KOREAN UNIFICATION

KOREAN UNIFICATION

 
Ideas of the Korean Unification: Can They Learn
From Germany's Experience?
Introduction
The idea of this paper is to compare and contrast German Unification process with the
outlook for possible scenarios in Korea. By looking at the similarities and differences
between
the situation in Germany and Korea. To do this I look at the state of the economies,
recommendations toward policy, the need for international support as well as
possibilities on
how to organize the transition. If the Republic of Korea and the Democratic People's
Republic
of Korea are to merge as one united country, several factors will need to be taken into
question. 
I hope to bring light on what it might take in order for this to happen.
With the end of the Cold War and the disappearance of the East-West confrontation, new
challenges demand political management in order that the emergence of new aggravations
and
tensions be avoided. Divided countries such as Germany and Korea were the epitome of the
cold war era with its acute ideological divisions. German unification in 1989 was one of
the
central events of the process sealing the end of the cold war. Since then, Germany has
undergone a process characterized by positive, but especially also an array of negative
experiences. A series of mistakes was committed during and after the German unification
process that caused avoidable pain and has lasting consequences which may not be overcome
for
decades. The German experience may hold some lessons for other countries. The Korean
peninsula, for one, is still mired in a conflict which reflects the harsh ideological
divide, uneven
economic development and the build-up of menacing military forces, including nuclear
capabilities.
Can Korean standoff and confrontation continue? Will the break-up of the Soviet Union,
the
disappearance of its Communist Party, the ensuing policies towards the market economy,
the
economic reforms in China and new diplomatic alignments in the region trigger Korean
unification? What are the lessons from the German experience? I will attempt to shed
light on
the these and numerous other issues associated with the Korean unification process.
Germany and Korea Similarities and Differences for Unification
While the unification of Germany was treated as a national issue, it actually has and
will
continue to have considerable international implications. Germany grew overnight from a
country of some sixty million people to a nation of eighty million. Germany today is one
and
half times the size of Britain, France or Italy.(Dept. Of State and Foreign Affairs)
Although today
Germany has enormous economic problems which will remain for at least the next 10 years,
all
of Germany's neighbors believe that in the end Germany will come out on top economically.

German unification has demonstrated that the re-establishment of the unity of a country
even
after a long period of division and difficulties is possible and that unification can be
achieved in
a democratic, peaceful way. But despite similarities between the two cases, there may
also be
many differences regarding internal and external aspects. 
Germany and Korea were both divided in the wake of World War II against the
background of rivalry between capitalist West and the communist East. In both countries,
the
hope for reunification was slim during the Cold War period. Unlike Germany, North and
South
Korea had fought a ferocious war. The two Germanys, unlike the two Koreas, concluded a
system of treaties to regularize relations at the official level and to secure a modicum
of civil
contacts and communications among the people. On the Korean peninsula, North Korea
remains to this very day a hermetically closed society. No information flows uncontrolled
into
the country, access to foreign radio and television broadcasts is non-existent and no
contact is
permitted with the outside world, not even the exchange of letters. Travel both inside
the
country and abroad is subject to approval and regulation. Apart from the country's
leaders and
nomenklatura, all other North Koreans are unaware of developments in the world in general
and
the social and economic conditions in South Korea in particular. This constellation is
likely to
make any unification process in Korea fraught with the risks of political and social
instability.
There are also significant differences in the economic constellation between Germany
and Korea. The population ratio between East and West Germany was 1:4, while for North
and
South Korea this ratio stands at 1:2. In 1997, North Korea is believed to have
experienced an
economic decline of 3.7% and in 1998 of 5.2%. South Korea has continued to achieve rapid
economic growth in the past couple of decades. This has brought about an ever-widening
income gap. Today, the per capita income of the South is at least five times the size of
the
North. This alone will make economic integration between North and South an exceedingly
tough and complex task. North Korean GDP per capita corresponds to some 16% of that of
South Korean, while East German GDP per capita stood at 25% of West Germany's at the
time
of unification. North Korea's trade volume stood at $ 4.7 billion US dollars in 1990 and
$ 2.7
billion in 1991. The decrease resulted from a slump in imports. South Korea's trade
volume
reached $ 153 billion US dollars in 1991. China and the former Soviet Union accounted
for
some 70% of North Korea's trade. Instead of barter or compensation trade arrangements of
the
past, they now demand payment in hard currencies which North Korea lacks. North Korea
used
to import millions of barrels of oil yearly from the former Soviet Union against coal and
other
raw materials, but currently it receives only 40,000 barrels producing an energy crunch
with
serious repercussions for industrial production and living standards. The utilization of
industrial
capacities has actually fallen 40%. North Korean leaders seem to be beginning to open up
their
country to Western capital and technology. Most investments so far have come in the form
of
joint venture projects with pro-North Korean residents living in Japan. (Flassbeck, Horn,
1996
Chap. 4) 
Unlike East Germany, a unification of the two Koreas will not entail ready-made access
to new foreign markets for either of the two given the absence of an Asian common market.

Protectionism in the United States and Europe-Korea's main export markets-threatens to
erode
Korea's export base and places South Korea in a vulnerable economic position. To assist
any
unification process in the future, the international community ideally would have to be
more
accommodating to Korea in the future. But given the present climate in global trade
negotiations, it is unlikely that a unified Korea would be granted assured access to the
European
Common Market or the United States.
The differences between North and South Korea with respect to their industrial base are
much different from those between East ands West Germany. Unlike East Germany, North
Korea relies essentially on large supplies of various raw materials most of which were
traded on
a barter basis with the Soviet Union before its demise. Korean unification may mean that
additional markets could be tapped for their export. Given North Korea's limited trade
exposure, any reduction in demand for its products following unification would therefore
not
pose a problem comparable to that experienced in East Germany. Currently, North and
South
Korea engage only in some indirect trade through Hong Kong, Singapore and Japan. Between
1988 and 1992 there were only some $ 450 million worth of exports and imports between
the
two countries.(Sung Yeung Kwack, 1994). In Germany's case, trade had steadily been
growing
between the two countries prior to unification, facilitated by a generous financial
facility
extended by the West German government.
North Korea is suffering from severe shortages of goods. In 1991, it produced 4.4
million tons of grains but consumed 6.5 million tons. Part of the short fall was made up
by a
donation from South Korea. Following a possible unification, South Korea as the stronger
economy will have to take care of 22 million North Koreans, requiring substantial funds.
(Sung
Yeung Kwack, 1994). The North Korean economy is far more distorted than the East Germany
economy was at the time of unification. It is also much more geared towards meeting
military
requirements than East Germany ever was. This may also complicate the eventual
demobilisation of military personnel following unification.
Regarding labor costs, the gap between East and West Germany was probably higher
than is the case for Korea. In Germany, gross labor costs increased following unification
due
both to the assimilation of wage levels towards levels prevailing in the West and to the
introduction of the costlier social security system of the West. The Korean social
security
system is not very costly compared to German. In general, South Korea has not the
capacity to
bear the full cost of unification and might need to resort to higher domestic taxation
and external
borrowing on a large scale. Furthermore, South Korea is not in a position to offer
generous aid
programs to other countries in support for reunification.
Possible Re-Unification Scenarios for Korea
Several possible developments should be considered in any discussion of Korean
unification. In particular, there is a need to study the internal developments in North
Korea. For
one new leadership may change policies drastically or he may not do so. Either way, this
could
prolong the process, but could also yield benefits for the economic and social situation.
Another
scenario might be that of a revolt against the system and leadership by part of the North
Korean
party elites. The consequences of such an event are entirely unpredictable. Another
scenario
would be the collapse of the North Korean economy leading to the absorption by the South.
It is
hoped that such an option can be averted in favor of a step-by-step approach to
reunification. A
further possibility would be the Chinese-style reform by opening up the country. The
absence of
any private ownership would complicate such an option, although the recent promotion of
joint
ventures might be a signal in the direction of such a reform. South Korea appears to be
prepared
to extend economic and social cooperation should such a course materialize.
Ultimately, both Koreas must have some kind of vision on the kind of country they
would like to have after reunification. Gradualism has to be balanced against the risk
of
reversal. A gradual approach should only be pursued if it is certain that the process
cannot be
reversed. If there is too much gradualism, the process may equally falter unless there is
a critical
mass of institutional change, which by itself is difficult to determine. The main task
would be to
prevent military complications during a transitional period that would precede
unification. 
Thereafter would come a period during which both countries would be integrated. All
above,
care should be taken that the international competitiveness of the South Korean economy
be
preserved.
The German reunification had a specific, favorable external environment: the Soviet
leadership pursued perestroika, dramatic changes took place in Poland. Czechoslovakia
and
Hungary, the Berlin Wall fell and relations between the Soviet Union and the West
improved
drastically. In Korea, such conditions are non-existent. It will be important for Korea
to develop
good diplomatic relations with its neighbors, especially China, Japan, the United States
and the
ASEAN countries. It is incumbent upon Korea to foster an international climate conductive
to
its reunification process, for which it needs the assistance and content of the world
community. 
One particular issue of concern to the world community at large is the nuclear status of
North
Korea and how it will affect the status of a reunified Korea.
Recommendations
Generally, Korea should avoid rushing or getting pressurized into unification. It should
preferably be a gradual process under controlled conditions. To that end, it is of
utmost
importance to prepare and to be prepared in case a political opportunity arises to unite
in
whatever steps and phases. Once the process has started, political decisions must be
throughly
interfaced and coordinated with economic policies and requirements. The transformation of
a
command economy calls for a most detailed planning in all areas. One factor of resistance
to a
transition may be the huge North Korean army, certain to be demobilized and fearful of
large-
scale unemployment.
It is estimated by some economists that South Korea will have to transfer annually 8% of
its GDP to the North for a 10-year period. Under more gradual conditions, some 3% of GDP
may be required. To achieve parity in living standards might take more than 30 years
some
estimate. (Mosher, 1992). The unification of a country cannot be accomplished in the
short and
medium term without weakening the growth base of the economy. South Korean savings will
need to be utilized as it will be a resort to foreign capital. South Koreans must be
aware that
during the transition period their general economic conditions will change. As a result
of
unification, there will be an excess demand for capital and an excess supply of labor.
In
response, government expenditures need to be reallocated and switched from the South to
the
North.
Land reform in North Korea will be one of the first tasks during a transition. The
experience gained by Korea in the post-World War II period may serve as a guide in this
venture. 
Property rights issues will therefore play a prominent role after unification. There
could be
restitution of property rights to original owners still alive, the scale of state-owned
properties
through public auction, a distribution of property rights to the general public through a
voucher
system, distribution of properties to actual users or a compensation in state bonds. 
Privatization is a means. Its objective would be to introduce some elements of a market
economy. In the process of privatization of hitherto publicly owned enterprises, priority
should
be given to service and tourism establishments, such as hotels, as many visitors may be
expected
from the South. In the shift from a collective to a private agricultural system, serious
problems
are bound to arise. Industrial policies ought to be devised to respond to a variety of
problems
and challenges: the contamination of the environment, unemployment, social justice and
concentration of economic power. Market forces are unlikely to create a productive
economic
structure in the North that will match that of the South. 
Public infrastructure- roads, energy, transportation, telecommunications, hospitals,
schools and so on area precondition to make the economy function. Institutions
administering a
more market-oriented economy must be built and it must be decided what they will do and
how
they will be financed, where and in which time span. There will also be the need for
massive
human capital investment in terms of on-the-job and vocational training and retraining as
well as
the temporary transfer of managers, entrepreneurs and skilled administrators. Special
adjustments will be required in the educational field, including new education curricula.
Also
present social welfare programs must be expanded to accommodate North Koreans.
Management is of the utmost importance, mismanagement could bring calamity to all
Koreans and another Korean War must be avoided at all costs. The division of the country
should be managed so as not to discourage the will of the people and national consensus
for
unification. National reunification between North and South Korea is on the face of it an
intra-
national issue. Yet, to create conditions conductive for unification and for stability on
the
Korean peninsula and in North-East Asia entails international implications. A sudden
collapse
of the North Korean regime may open up the border on the Korean peninsula overnight just
as
the flood triggered by the collapse of the Berlin Wall in 1989. In the Germany case, the
influence of the four powers - especially the Soviet Union - was very important. In the
case of
Korea, the relations with neighboring powers are quiet different. Korea is a very small
country
compared to its neighbors and has never threatened the security of the surrounding
nations. 
Korea does not need to grab a window of political opportunity as Germany did. It might
therefore prepare for a more deliberate pace to manage the process of reunification.
Korea should form an alliance with the three major powers it counts as neighbors-
Russia, China and Japan. The future of North Korea is linked to development in China.
The
way in which the Chinese look at the Korean peninsula will be of great importance in the
future. 
The United States of America and the South-East Asian states can also be considered
neighbors
vis-a-vis the seas. The four major powers and the group of medium-sized powers in
South-East
Asia should be considered as future economic partners and be approached accordingly.
Korea
should also address itself to the capacity for fierce competition between a future united
Korea
and advanced Japan corporations and industries. Sixty million Koreans are not an order
of
magnitude to match either the 150 million Russians or the 1 billion Chinese or the 120
million
Japanese. (Young-Hwan Choi, 1996). Yet, a united Korea must be considered a major factor
in
the Far East and in the world economy as a whole.
International Support Will Be Needed 
A united and stable Korea is not only in the interests of North-East Asia, but the world
at
large. To underpin unification, Korea would need substantial international economic and
financial support. While Japan is still recording huge annual trade until here recently,
its fellow
global co-financier for many years, Germany, is no longer a surplus country following
unification. Thus, the burden falling on Japan will inevitably increase adding to its
present
levels of development assistance and support for the transformation of Eastern Europe.
As North Korea is very poor in infrastructure, such as roads, harbors, railroads,
communications and power supplies, massive investments will need to be directed to these
areas
following unification. Massive loans will have to be secured from the World Bank, the
Asian
Development Bank and other international financial institutions. The flow of private
investments must be intensified, not only from Japan. As a first step, South Korea
should
become more closely associated with existing fora of international economic cooperation,
such
as the OECD whose members account for more than 80% of international investment flows.
In
the OECD framework, Korea would be asked to subscribe to mutual commitments such as
rules
and principles concerning the protection of foreign investment, trade, the liberalization
of
finance, and the movement of the people, which might induce further investment flows to
the
entire country.
Conclusion
Different scenarios must be kept at hand. Even from a purely political or strategic
point
of view, scenarios might have to be developed. The political rulers, the military, the
families
around the president would have to be urged to anticipate different possibilities. In
the
economic field, if the political conditions permit, one might be lucky enough to start
with and
gradual approach. Korean unification will not happen against the will of China, Russia,
Japan,
and the United States. So, what is needed, if there is something to be learned from the
historical
example of Germany. Is it to build up a good relationship with Beijing. Trust must be
built up
in the relationship with the neighbors which is not simply a question of establishing
ordinary
diplomatic relations. The consent of Japan might be needed for the unification of the
two
Koreas, but Japanese financial assistance will certainly be needed whether it be after a
big bang
or after gradual process. Japan is the only country capable of producing capital exports.
So,
China and Russia are needed from a strategic point of view, and Japan from the financial
point
of view. The Japanese ought to be told that rendering this help to Korea will reduce the
suspicion with which she is viewed in the Far East, South Asia and the pacific.