Don't Expect the Korean Wall to Come Crashing Down
BusinessWeek
COMMENTARY
BY STAN CROCK
June 16, 2000Considerable progress has been made in bringing North and South closer, but full reunification could take decades
It's easy -- perhaps too easy -- to get excited about the Pyongyang summit between North and South Korea. The hype about this "historic" meeting between foes in a technical state of war for 50 years obscures two critical facts. The first is that frigid relations between the two Koreas already were thawing, as trade within the peninsula has mushroomed in recent years. The other is that the conciliatory moves won't -- and shouldn't -- lead to reunification of the country anytime soon. Indeed, a merger could well take decades, perhaps as long as the state of war has existed.
Given the recent experience of Germany, why should that be so? After all, Germany and Korea share some traits. The seemingly permanent division of both countries was a product of the cold war. One side took the capitalist road, and the other adopted a state-controlled economy. And though East and West Germany had contact through TV, mail, and travel, the two Germanys actually knew little about each other, according to a 1993 report by a high-level expert group chaired by former German Chancellor Helmut Schmidt. It's fair to say the same is true of the two Koreas. Yet after some labor pains, East and West Germany gave birth relatively quickly to a thriving, bouncing, unified nation.
But the differences are far greater than the similarities. The economic, political, and cultural gap between the two Koreas dwarfs that between the two Germanys. A Korean union "will make German unification look like a walk in the park," says William M. Drennan, Korea program officer at the U.S. Institute of Peace.
SCARY NUMBERS.
Start with economics. East German per capita gross domestic product was about a quarter of West Germany's at the time of unification, according to the Schmidt report. And while West Germany's unification plan may have had some flaws, such as an inflated exchange rate for convertibility of the two currencies, a wealthy Bonn was able to afford to absorb the East.
In contrast, South Korea's per capita GDP is $8,400 -- while the North is a financial basket case that can't feed itself, with per capita GDP of between $500 and $1,000, according to the Korean Economic Institute of America. The South's recovery from its 1997 financial crisis is sufficiently fragile that it can't conceivably bankroll a merger.
When Seoul officials assessed the cost of a deal, "they were pretty frightened by the numbers," says Robert L. Suettinger, a former top U.S. government Asia hand now at the Brookings Institution. The estimates, he says, came to hundreds of billions of dollars. That's partly because the North is operating at perhaps 20% of industrial capacity, with the remainder of the industrial sector deteriorating or being dismantled. And with much of the state budget devoted to maintaining an expensive but unproductive military, Pyongyang's infrastructure has remained primitive.
CHINA CLOUT.
The difficulties go beyond economics. Unlike the Germans, the Koreans fought a vicious war against each other, and state propaganda in the North has hardened attitudes at the grass roots. "The scars between the two Koreas are much deeper and much more bitter than anything the two Germanys experienced," says Daryl M. Plunk, an Asia specialist at the Heritage Foundation, a Washington think tank. Regional antagonisms in a seemingly homogeneous society could aggravate matters. South Korean President Kim Dae Jung, for example, is from a southwestern region that often faces discrimination. Such animosity would be magnified many times over against the North if it joined hands with the South. "This is not going to be a love-in," says Drennan.
China, which has increasing clout on both sides of the demilitarized zone, also could prove an obstacle. It was no accident that Kim Jong Il's first foreign visit in 17 years was to China. The North, with whom China shares an 850-mile border, remains a critical security buffer and client state for Beijing. Yet China has thrown its economic lot in with the South. The two are each other's third-largest trading partners, with $22.5 billion in two-way trade in 1999, according to the Korean Economic Institute.
In fact, the South is so powerful economically that it surely would dominate any union. Thus, it's in China's economic interest to ease tensions on the peninsula but not in its security interest to promote a reunification that would put a U.S. ally on China's doorstep.
THE ROAD NORTH.
Despite the clear difficulties, progress on the road toward unification already has been made. In a 1992 summit -- which genuinely was historic -- the two sides approved a comprehensive reconciliation accord covering everything from starting mail and phone service to a hotline linking the militaries. No action was taken after the North started to develop nuclear weapons, but the accord provides a good road map for the future.
And commerce already has started to forge key links between the North and South. Two-way trade swelled to about $325 million last year, from almost nothing in 1990. South Korea has become the North's third-largest trading partner. Seoul imports agricultural and fisheries products and textiles, while Pyongyang's biggest purchases are nonmetallic minerals and chemicals.
Even before the summit, the South had classified trade with the North as domestic trade, lifted a ban on exporting manufacturing plants, and eased restrictions on investment and travel to the North. Hyundai Corp. is making a huge investment in a tourism complex near scenic Mt. Kumgang, while companies such as Samsung, Daesang, and Samchunli Bicycles have plans on the table for investments in the North. And the South Korean government has proposals to improve the North's roads and harbors.
If these plans bear fruit, they will gradually boost Pyongyang's economy, which grew last year for the first time in a decade. Over time, that could give Pyongyang a more respectable dowry before the marriage. It will have to be a long engagement, but that's all the more reason for moving quickly to implement the South's economic proposals. As one South Korean diplomat notes, reunification may be expensive, but division is too.Crock covers international affairs for Business Week from Washington
EDITED BY BETH BELTON
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