
South Korea to raise $500B for unification - adamnemecek
http://english.yonhapnews.co.kr/business/2014/11/18/6/0503000000AEN20141118006200320F.html
======
threeseed
I've been twice to North Korea on tours and I just don't see a true
reunification happening anytime soon. This isn't like West/East Germany where
both sides were still similar. North Korea is a fundamentally different
country to South Korea in almost every single way. Any comparison between the
two situations is stupid and naive.

There are plenty of opportunities for economic integration. But how exactly do
you plan to reunify when significant parts of the North Korean government are
actively against it i.e. they are doing well under the current regime. Or when
the narrative has always been reunification under the DPRK banner ?

The only way any of this is happening is if China stops supporting North Korea
and the UN Security Council/Agencies puts much of the government in jail for
crimes against humanity. Then South Korea would effectively just take over and
Pyongyang would be turned into a tourist attraction.

~~~
dominotw
"One of the biggest misconceptions I think people have of North Korea is that
they are simple and naive. But I feel that North Koreans as a group of people
have gone through a lot of hardship, and their ability to survive in difficult
situations are a lot higher that what people think. People think that
unification will be a basketcase for North Koreans, but they will definitely
be able to manage. People also think North Koreans will have a hard time
adjusting to the market economy, but the black market is also growing under
the regime’s nose, and people are used to working in this environment. North
Koreans are not naive."

From recent Kang Chol Hwan AMA

[https://www.reddit.com/r/IAmA/comments/2m87gi/i_spent_ten_ye...](https://www.reddit.com/r/IAmA/comments/2m87gi/i_spent_ten_years_living_as_a_prisoner_inside_of/cm1vsys)

~~~
threeseed
The issue with all of this isn't the North Korea people. They are well aware
of life in South Korea and elsewhere courtesy of all the black market DVDs
that have been finding their way there.

It's the government filled with old socialist-era guys who surely aren't going
to be so willing to just give up their power.

~~~
nl
_It 's the government filled with old socialist-era guys who surely aren't
going to be so willing to just give up their power_

And that's what this announcement is about. $500B pays a _lot_ of bribes
(sorry, "industry reunification payments" or something). And don't think for a
moment that the South Koreans will hesitate for a moment to pay them.

~~~
seunosewa
Won't they use the money to buy arms, etc to increase their power?

~~~
nl
a) Obviously you structure it as payments after unification, and you let them
set up up an industrial organisation like Samsung or Hyundai. That's plenty of
power for most.

b) S. Korea would love to be able to fund almost any kind of opposition to the
current regime in N. Korea. That's not what this $500B is for, but if there
was a credible place to spend some money to undermine the regime I'm sure
they'd be happy to do it.

------
adventured
I'm glad they're considering doing this.

However, it's going to cost a lot more than $500 billion to raise per capita
GDP by ~7 fold. It'll cost $500+ billion in the first ten years in just
welfare support, security, education, infrastructure, disarmament, healthcare,
job training.

$50 billion per year in net drag is perhaps even far too low of a number.
There are 24 million people in the north. That's a mere $2,000 per year per
person. It's going to cost a lot more than that to start bringing them up to
speed. I think you could easily spend $2k per person, just on the person - not
counting several expensive things I listed previously.

South Korea should plan for $2 trillion over 20 years. They'll intentionally
under-shoot the numbers, to avoid freaking out the tax paying public, and the
cost will end up ballooning far beyond the public relations numbers.

~~~
WildUtah
" cost a lot more than $500 billion to raise per capita GDP by ~7 fold."

That's a good point, but remember that North Korea, in spite of being the most
backward and poor nation on Earth, is full of Koreans. A strong creative drive
and high levels intellectual life and potential talent and a flair for protest
and organizing reform will do a lot for a nation. Most nations would be lucky
to unify with 15 MM Koreans, no matter how poor. Within a generation of
getting freedom, I expect them to be doing well.

Remember that it only took RoK twenty years to go from a brutal dictatorship
among the poorest in the world to the 1st world nation it is.

~~~
Nogwater
What is so special about Koreans that your comment couldn't have used "humans"
instead?

~~~
notastartup
I think they would have a hard time adjusting....look at the defectors who
cant fit in in south

~~~
WildUtah
That's a real potential problem, as is the lifetime impairment of childhood
malnutrition. But I expect defectors from any regime to be the kind of
entrepreneurial misfits that never quite fit in and demand their environment
adapt to them.

------
brownbat
Fareed Zakaria wrote in 2010 that too few were preparing for an internal
meltdown of the NK regime: [http://www.washingtonpost.com/wp-
dyn/content/article/2010/10...](http://www.washingtonpost.com/wp-
dyn/content/article/2010/10/17/AR2010101702608.html)

He describes it as a black swan event that would not come on any predictable
timetable, but something that would be far better managed if some preparations
were made in advance.

Maybe that idea is catching on.

~~~
aaron695
The notion of black swan events is rubbish. The theory makes no sense.

Even if it was a logical theory that had coherence not sure how it fits here.

We know countries unify. We know what happens. You can be sure North and South
will one day unify.

Yes the only question is when. Prepare to early = big loss. Prepare to late =
a loss.

It's just about creating a sensible plan on how to deal with something we
don't have a timeline on.

When will a building have a fire? Who knows, just make a sensible plan for pre
and post when it happens. You don't need to call it a black swan. It's just
risk management.

~~~
bnjs
> You can be sure North and South will one day unify.

How can we be sure? We know countries unify and we also know that countries
split never to be unified again.

~~~
nandemo
I'm looking forward to Brazil and Uruguay's unification.

~~~
GFischer
You mean Uruguay and Argentina, right? :P

Short summary for non-uruguayans: Uruguay started out as the Spanish piece of
the land on the eastern side of the river Uruguay according to the treaty of
Tordesillas, and became a disupted frontier between Spain and Portugal.

During the May 1810 revolution (Argentinean revolutionaries against Spain),
while the capital city was a Spanish stronghold the local leader José Artigas
sided with the Argentinean insurgents and founded the United Provinces.

Artigas wanted a federal system, but the Buenos Aires leaders wanted
centralism. So Uruguay actually became a province of the Federal League.

[http://en.wikipedia.org/wiki/Liga_Federal](http://en.wikipedia.org/wiki/Liga_Federal)

When Uruguay announced its independence from Spain, it became annexed to
Argentina.

Then Brasil invaded, and it became a Brazilian province for a short time, thus
the parent comment.

------
orbifold
For comparison Germany unification has now cost roughly ~100billion per year
for 20 years, so far. So roughly 2 trillion total. Given that the DDR was
actually in relatively good shape compared to North Korea, that is there
weren't any famines, it had a more or less working industry and a very good
education system, I believe South Korea would have to bear much higher costs
per annum.

~~~
harryh
North Korea also has a 50% larger population compared to East Germany at the
time of reunification (~24M vs ~16M) which, it seems to me, would only
increase the costs.

~~~
restalis
Nitpick: The East Germany had indeed 16 million people at the reunification,
but the West was far over 24 million! I don't know where you took your figures
from, but Wikipedia says over 63 million:
[http://en.wikipedia.org/wiki/West_Germany#Population](http://en.wikipedia.org/wiki/West_Germany#Population)

~~~
fairthinkum
The 24 million he is referring to is the population of North Korea.

------
noobermin
I've talked to Korean friends and they don't want reunification to happen, at
least the younger generation do not. After living a life seeing nothing but
hatred come from the other side as well as unprovoked attacks on innocent
civilians, it's not surprising that that opinion exists. Certainly, the
younger generation does not remember a unified Korea at all.

It seems like the rest of the world wants them to reunite, but they don't want
to.

~~~
schoolixer
It isn't a question of desire. If the economy of the north collapses and
millions of people are on the verge of famine, the south needs a plan to
maintain some sort of order.

~~~
noobermin
Perhaps then, the question is how much of the responsibility lies with the
South after such a thing occurs. Would SK simply annex NK or would something
like a joint/international humanitarian effort to help NK survive and may be
start its own government be better?

Honestly, I don't have any right to say one way or the other is right because
I'm not even Korean, I just think that we in the west need to stop taking as a
hypothesis that if NK collapses that it is SK's responsibility. I think it is
up to the South Koreans to decide whether they want that, and not us [1].

[1] And yes, that's what this article is about, the government is preparing
for this contingency, but as we in the west know, our government doesn't
always do what we want.

------
jfaucett
Could someone give more background on this? Is the reunification something
that's on the table now, is this just planning and hoping? It would be great
to see that happen, it'd be great to hear from someone who knows more about
this issue.

~~~
kijin
Nothing's on the table as far as what is publicly known. This is just the SK
government trying to get prepared for the economic shock of having to absorb
NK on short notice, which could happen at any time this century.

SK is also sending a message to the international society that we should all
prepare for the collapse of NK, while sending a message to Kim Jong Un that
"you won't last long, and we know it."

Just today, the UN General Assembly approved a resolution to refer NK leaders
to the International Criminal Court for human rights violations. Totally
unrealistic, to be honest, but I guess this is how political pressure works on
the world stage. Timing the "we'll spend $0.5T" press release to coincide with
the UN resolution is no doubt intended to increase pressure on NK -- if not
directly, then at least indirectly by letting the people of NK know that $0.5T
is waiting for them if they can get rid of their Dear Leader. (Yeah, the news
is censored there, but I'm sure a few thousand people will have heard of it by
this time next year.)

~~~
threeseed
I don't see the people of North Korea ever getting rid of their Dear Leader
for two reasons:

(1) A significant amount of the working population is part of the government
apparatchik especially in Pyongyang which is where any uprising would need to
start. (2) There is a pervasive culture of fear. Everyone is well aware of the
"we will harm you and your entire family tree" approach to keeping everyone in
check. There is a culture of people telling on other people and "someone
always watching" which makes it hard to trust anyone.

So I think the ICC/UN will be key to all of it in particular China/Russia who
need to be convinced to abstain from any resolutions. China's speech to the
Australian parliament at the G20 was promising in that they are trying to be
better citizens in Asia. And Russia surely doesn't want the US to be
continuing to use North Korea as an excuse to build anti-missile systems in
Eastern Europe.

~~~
kijin
I agree, a bottom-up uprising in NK would be difficult to kickstart.

But if Kim Jong Un's brutal execution of his own uncle is any indication,
there's plenty of room for infighting within the elites, or even a full-blown
civil war if things get desperate enough (more trade sactions, another massive
famine, etc).

Sooner or later, one of the factions might realize that their best exit
strategy is to hand the country over to SK in exchange for a guarantee of
immunity and a comfy retirement in the Caribbean. If I were the leader of SK,
I'd accept that deal and, several years later, arrange for their luxury yachts
to have an "accident" in shark-infested waters ;)

------
verisimilitude
In order to understand North Korea, you simply _must_ read Escape from Camp
14[1]. If not, then at least read the Wikipedia entry[2]. Dear lord, it's
incredibly tragic...

[1]:
[http://www.amazon.com/dp/0143122916/](http://www.amazon.com/dp/0143122916/)
[2]: [http://en.wikipedia.org/wiki/Shin_Dong-
hyuk](http://en.wikipedia.org/wiki/Shin_Dong-hyuk)

------
meric
If unification was going to happen I think maintaining two currencies until
the two economies are on par would be most stable for noth Korean citizens. By
stabilising the NK currency through having it managed by the SK central bank
while having the currency maintain a lower value than SK's, stability can be
maintained while retaining labor competitiveness. All they need to do then is
open the country to foreign investment and gradually open up the border. This
way minimal public funds will be required and the private sector will help the
economies unify over time in the most stable and efficient way.

~~~
WildUtah
Germany just gave a huge gift to ever DDR citizen by trading the Mark and the
DDR Mark at 1:1. With a per person limit of a few thousand marks, it wasn't
that expensive and really set the unification up to succeed with popular
backing.

~~~
meric
They could do the same by just sending some amount of south korean currency to
every NK mailbox (or do it more throughly through records which I'm sure NK
has kept on almost every household), while maintaining two currencies to allow
NK export firms to have a competitive advantage in cheaper currency, rather
than suffocating them for a period of time after unification (as you can read
in the link), slowing the economic recovery.

"East German currency was exchanged for West German deutsche marks at a rate
of 1 to 1, although the market rate was 4 to 1, according to the FSC.

The overestimated currency conversion helped stabilize the livelihoods of
workers from East Germany in the short term, but soon resulted in a sudden
wage hike, which damaged the profitability of East German companies."

------
rdl
I wonder how much insurance companies could save through unification instead
of war (* the odds of war). I have to imagine "rebuilding Seoul with 10% odds
over the next 50 years" would exceed the direct costs of unification.

~~~
twistedpair
No way. Ever heard of a _force majeure_ clause? If Kim Jun nukes Tokoyo or LA,
Progressive and Geico are not going to cover the damage to your car. In war,
all contracts are off. You're simply screwed.

~~~
rdl
War risk insurance doesn't include such a clause.

------
lolgas
I would love to see the US devote a huge portion of foreign aid to this
development. Probably going to write my senator about this. Check this to see
if your senator is on the subcommittee for East Asian Affairs, and write them
about spending on the unification of North and South Korea ->

[http://www.foreign.senate.gov/about/subcommittees/subcommitt...](http://www.foreign.senate.gov/about/subcommittees/subcommittee-
on-east-asian-and-pacific-affairs)

~~~
throwaway344
Just the US military mission in South Korea costs $1.1 billion a year. Dealing
with the North Korean situation would make most of that spending completely
unneeded.

~~~
anemitz
Ongoing cost of the U.S. bases in Korea isn't likely an issue. You have to
house those troops somewhere and bringing them back to the U.S. would require
building and/or expanding of existing domestic facilities so the economics
would make keeping the existing bases ideal.

~~~
riffraff
I'm not sure how it works for the US army but don't people get "mission" wages
which are many times the base wage they'd get if they were at home?

~~~
anemitz
Not an expert but based on my research it doesn't seem like this is a
meaningful number at an individual level or at the aggregate base level:
[http://www.militaryrates.com/military-pay-
incentives](http://www.militaryrates.com/military-pay-incentives)

------
munimkazia
The article talks about numbers, finance, GDP and economy without explaining
the politics of it. How are they going to attempt reunifying with a country
which is run by an autocratic regime that has essentially brain washed its
citizens into hating the south? Is there going to be military intervention?
What about north's nuclear arsenal? Or is it going to be an open reunification
where the north government decides to stop ruling and handover the country to
the south?

~~~
restalis
"has essentially brain washed its citizens into hating the south"

I've been to DPRK a few years ago, and as far I could see, their state
propaganda is not aimed at southern ordinary citizens, but on the government
of South Korea. They consider it to be a puppet government in the hands of
USA. (There is actually more than that, but I think this reduction is accurate
enough.) Overall, they are very open to the idea of having the entire Korea
united, and in a lot of instances you can even find maps and logos depicting
their country as the entire Korean peninsula.

------
contingencies
The unspoken assumption throughout the article that the essentially globally
failed model of central-bank inflationary capitalism (on someone else's terms)
is the de-facto result of de-facto desirable reunification is, I think, the
elephant in the room.

------
comrade1
Is there a reason for this planning? Is this government or private enterprise?
Maybe this is the south sending a signal to the north? Or private enterprise
in the south with government backing? I swear Korean politics is more
confusing than the east-west Cold War.

Reunification went well in Germany. Although even now there are vast
differences between the east and west, the east is fully integrated. Think of
it as the poor southern US vs the east coast.

~~~
lolgas
I don't fully understand the politics either, but this is a clear signal that
the South wants the North to flourish. Everyone wins when capitalism is
injected into an economy. The South's private sector gains would be big
because of the cheap labor, and the population of the North would have
incredible wage growth. The effects of injecting capitalism would be magnified
relative to the fall of East Germany because the differences in GDP are
enormous.

If this happens, it would be the biggest win for capitalism/democracy I've
seen in my lifetime (I'm born after the fall of ussr)

------
WildUtah
There should be scholarships for a phalanx of Korean economists to go to
Germany and study the world's best example. Maybe we'd get some new answers
about what's going on with the old DDR's economic malaise, too.

------
FD3SA
_It also noted that currency conversion is the most sophisticated issue in
unification as the exchange rate would be largely conditioned on political
negotiations and social consensus._

Somehow I doubt that currency conversion is _the_ most sophisticated issue.
The nuclear-powered dictatorship is also going to require a few brainstorm
sessions.

------
notastartup
shouldn't they, the north koreans accept reunification first?

I wonder if there is some non public intelligence about north korea that is
pushing them to do this.

~~~
threeseed
The North Koreans already accept reunification.

Except that they assume South Korea will be unified into the DPRK under the
leadership of Kim Jong Un.

------
jkrome
There's no way the North Korean military will allow unification to happen.
They're much farther advanced, technologically and militarily than South Korea
so in any war, they will squash them.

Just watch this video of North Korean might:
[http://www.youtube.com/watch?v=O-hyVzTVDLg](http://www.youtube.com/watch?v=O-hyVzTVDLg)

~~~
jkrome
Hahaha. Everyone that downvoted me has no idea of the sarcasm here... The
video is hilarious, btw.

