Tuesday, September 22, 2009

Could a unified Korea surpass Japan and Germany? Goldman Sachs thinks so.

In the past, I have talked up the potential benefits of a unified Korea and how they could be used to counter the fears that most South Koreans have had about reunification since the two Germanys were thrown back together:
Reunification will be painful and costly, but it will provide benefits that will see things through and lead to a better future.

For starters, South Korean companies will be able to put their factories in North Korea instead of China, which will help rebuild the North (though no doubt creating some friction), bringing it up to par with the south eventually.

North Korea has something South Korea lacks: land and resources. North Korea has half the population of the South on 50% more land than the South.

Moreover, the need to have most of the coast and much of the countryside under lockdown will dissipate. This will free up the economic engine for other things, things that are more productive and enhance quality of life.

It will be tough, but it’s a better future than now.
But not even the cautiously optimistic Kushibo would predict something like this claim made today by Goldman Sachs:
A united Korea — combining Asia's fourth biggest economy with one of its poorest — could surpass that of Germany or Japan in economic might in the next 30-40 years, U.S. investment bank Goldman Sachs said on Monday.

Though North Korea's planned economy system looks to be on the edge of collapse, it offers a large and cheap workforce, a wealth of minerals that the resource-poor South currently has to import to feed its industry and the likelihood of gains in productivity and its currency once economic reforms take hold.

"We project that a united Korea could overtake France, Germany and possibly Japan in 30-40 years in terms of GDP in U.S. dollar terms," it said in a report.
Hmm... In terms of potential economic growth, this is what I wrote in the same Korea Beat post:
Japan’s per capita GDP is $34,200 as of 2008 (reference) and South Korea’s is one quarter less at $26,000 (or you could say that Japan’s is 30% more than South Korea’s).

With Japan’s growth continuing to lag or even shrink, it is conceivable that South Korea could catch up with Japan in terms of per capita GDP, and not too terribly long from now.

But per capita GDP would drop with unification, even if overall GDP would go up. It’s perfectly conceivable that a unified Korea would eventually rise to current per capita GDP rates, but a unified Korea would have a population of 71.1 million versus Japan’s 127 million.

A unified Korea could actually see a baby boom, whereas Japan continues to shrink, but it’s unlikely that the gap would be closed. We might have 80 versus 120 million.

And that would require South Korea to have a per capita GDP 50% greater than that of Japan in order to reach Japan’s overall economic size.

It’s not inconceivable, but if something like that were to ever happen, it would be a long time from now. Think in terms of how long it took to go from one of the poorest countries in the world to an economic powerhouse.

I’d be an old man then. But it’s conceivable, especially if the demands of unification lead to a sea change in how business is done, much like we saw in the 1960s and 1970s with Park and then in 1997-98 with the economic crisis.

Keeping up with the Jonesing Japanese has worked well as a goal, but in the meantime, what’s wrong with enjoying the ride?
I also wrote:
A lot more potential for skiing and beaches would open up (lots of nice South Korean beaches are closed for military reasons), plus the greater geographic accessibility to the growing Chinese market in North Korea would help.

Projects up north would take some of the unemployment pressures off the northerners while taking some of the over-development pressures off the South.
Man, I write a lot of stuff. It's like there are five somewhat like-minded people conspiring together to create this Kushibo persona. And just so we're clear, I'm the funny one.

Anyway, I'm not an economist. What I would like to see is North Koreans protected (by securing their rights to property ownership and ensuring health and food) in the short term, because when the collapse comes, there's going to be a lot of dust settling:
... North Koreans in a post-unification Korea are in danger of being exploited. At the very least, as I’ve mentioned elsewhere, they should each be given title to the land and property they occupy, to give them something of value in the face of the flood of capitalism that will come.
I just hope people are listening to me and not just ignoring me because I hate E2 visa holders. Um, wink.

1 comment:

  1. It does seem a bit optimistic, but not completely inconceivable. 30-40 years. You mentioned yourself the tremendous growth that the South has seen in that same period of time. With the North you'd have more readily available resources, a large market already established in the South, and the now-advance technological foundation.

    That said, I can't quite imagine the social and economic difficulties the peninsula would face with unification. Right now, the brick wall blocking unification is clear: the big (or not-so-big) Kim up north. Take him out of the picture, and I imagine a Pandora's box of issues that would have to be addressed. I'll save that for later, but to say that even with a demise of the current DPRK regime, an immediate unification effort would likely be foolhardy.


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