Korean Unification

.. 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.

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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. Government Essays.

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