Charles Wolf,
adviser at RAND Corporation |
By Lee Tae-hoon
Staff Reporter
A U.S. economist has estimated that the costs of the unification of the two Koreas would be $1.7 trillion, nearly twice South Korea's gross domestic product (GDP). The South's nominal GDP for 2009 stood at $930 billion.
In a Forbes commentary posted Monday, Charles Wolf, a senior economic adviser at the RAND Corporation, projected the astronomical figure based on the assumption that the goal of unification was equalization of per capita GDP between the two Koreas.
Wolf's estimate was slightly higher than that of Credit Suisse last year, partly due to the dollar's strength at that time. The Swiss financial services firm estimated it would cost $1.5 trillion.
The economist noted that such a large bill was attributable to the wide income disparity, saying, ``A reasonable estimate of per capita GDP in the North is perhaps $700. In South Korea it's about $20,000.''
However, Wolf was optimistic that with careful planning, preparation and implementation, the costs of unification could be kept within manageable levels.
``If a more modest goal is adopted focusing on dramatically increasing per capita income in the North ― say, by doubling it within five or six years ― instead of equalization with the South, the cost burden decreases sharply to $62 billion,'' he said.
Most of the prior estimates assume that the goal of unification was eliminating disparities in the per capita GDP, according to Wolf.
He said the costs of unification will most heavily impact the South, but, ``the burden can and should be shared with Korea's American ally, as well as with the other principals engaged in the six-party talks, including China and Japan.''
``If reunification ensues on the heels of the current Great Recession, the burden is more likely to be amicably borne if the costs are realistically bounded,'' he said.
Japan has pledged to pay up to $10 billion in reparations for having colonized the North in the first half of the 20th century.
Last month, China, the North's key ally, also reportedly promised to invest about $ 10 billion in its communist neighbor to revive its faltering economy.
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