It’s a relief the domestic financial markets are rapidly restoring stability from a short-lived ``Kim Jong-il shock” Monday. Stock prices rose back, the Korean won stopped its fall, and foreign capital showed little signs of exodus. Unlike in 1994 when Kim’s father died, only a small number of people hoarded instant noodles and bottled water this time.
All this shows the political thunderclap has had only brief, limited effect on the economy, at least in the short term. Behind the relative calm lies the confidence in Korea’s economic fundamentals, among both Koreans and foreigners, and the ``learning-effect” from past experiences.
In the long run, however, the outlooks are mixed at best. If and when the power transfer to the ``Great Successor” Kim Jong-un proves to be a protracted and troublesome process, North Korea will continue to be a long-term risk for the nation’s economy. Hence the ``paradox of heredity,” in which neighboring countries of Pyongyang are forced to hope the anachronistic power succession will proceed smoothly.
Seoul is no exception. The economy, which has already been reeling from double troubles at home and abroad, will be able to ill afford to face a third negative factor coming from the North next year.
This is why President Lee Myung-bak’s economic aides must not fall into hasty optimism, and remain highly alert against the worst possible scenarios as well as maintain close cooperation with surrounding powers. They also ought to actively convince foreign investors why some political and military noises on the Korean Peninsula would not leave serious adverse effects on this country’s economy. Nothing would illustrate this better than the brisk implementation of inter-Korean economic projects.
And this also outlines the reasoning for Seoul to expand South-North joint ventures in the Gaeseong Industrial Complex, and resume tour programs to Mt. Geumgang, which the Lee administration has suspended since a North Korean guard’s shooting of a South Korean tourist to death three years ago, as soon as the new North Korean leadership settles down and shows willingness to move toward economic recovery. The best scenario for both Koreas is the new North Korean power elite’s enthusiasm for economic rebuilding will lead to new business opportunities for South Korean companies.
Provided North Korea and Russia are ready, Seoul should also go further and push ahead with the inter-Korean, trans-Siberian natural gas pipeline construction, one of President Lee’s pet projects which reportedly won the late North Korean leader’s approval.
President Lee, who once headed the nation’s largest construction firm, needs to make the most of his entrepreneurial acumen in rebuilding inter-Korean business cooperation. To the extent of not stimulating the North Korean communists and their ally, China, too much, Seoul will need to induce Pyongyang to gradually move toward the initial stage of market economy.
It may sound too optimistic and premature, but Seoul should also prepare for eventual reunification of the Koreas, working out an economic blueprint and stage-by-stage action programs according to diverse scenarios. When it comes to unification, Koreans have been too frightened by the unbearable costs. Experts say, however, mineral resources in North Korea alone have two or three times a higher value than the unification cost.
Only forward-looking, farsighted leaders on both halves of the Korean Peninsula can turn the ``Korea discount” into a ``Korea premium,” a legacy the present-generation Koreans should leave for their descendants. We hope President Lee will be the leader who takes the first major step toward it.