INTER-KOREAN ECONOMIC RELATIONSHIP AND ITS PROSPECTS: POLICY IMPLICATIONS

Abstract

Evaluating the trends of inter-Korean economic cooperation since 1989, North Korea had succeeded in earning its desperately needed foreign currency relying on exporting their primary products to South Korea and processing on commission trade while South Korea had ‘qualitative’ advantages in terms of political, social and military dimensions, e.g., relaxation from worrying about an outbreak of war and some progress in the South-North relationship. To expand and deepen inter-Korean economic relations in the future, the South needs to seek ideas for becoming a ‘partner’ of North Korea’s economic reform and opening by having North Korea change its economic policy toward South Korea. For the purpose, South Korea needs to rearrange roles and functions of government and private business by separating channels for inter-Korean economic cooperation, i.e., government-level cooperation projects and those for profit-pursuing by private firms. Government-level cooperation projects should be designed to assist North Korea’s economic reform and opening or to reduce political and military tensions in the peninsula while civilian firms pursue economic benefits. The government-level plan for economic cooperation should be focused on inducing North Korea to reform its economic system and on assisting projects by private business in an indirect way. In addition, inter-Korean economic cooperation at the level of private sector should be thoroughly in pursuit of profits and carried out by the business-like manner in conformity with international economic order and practice. South and North Korean participants in economic cooperation projects should take responsibilities together for the success or failure of their businesses, and it is necessary to make it a norm for their decision-making.