Final draft

Economic cooperation between inter Korea

 

 

It is a great tragedy that Korea peninsula remains divided into two, although South Korean and North Korean have the same ethnic group. So, Korea have to be unified as soon as possible, because it is our duty. Then, have you heard about ‘economic cooperation’ between South Korea and North Korea? One of the most serious problem that obstructs Korean peninsula from unification is the economic gap between South Korea and North Korea.

Think about the case of Germany. There were also divided nation like Korea, but they could achieve their unification thanks to economic assistance. Korean peninsula also can accomplish unification when putting economic cooperation above other things.

  

 

Economic cooperation, which is done by both South Korean and North Korean, is an activity that contains 'exchange' and 'investment'. It mainly aims economic profits, but it is considered as 'little unification space'. According to the June 15th North-South Joint declaration, South and North Korea promised to equivalently develop economy so that through exchanges and cooperation. Also, they establish a compromise to independently have talks for reunification as hosts. Then, South Korea and North Korea have some economic cooperation since the Declaration. Especially, there is 'Kaesong Industrial Region' which called small reunification space. There have been many economic cooperation above KIR between inter Korea, and it evolved from general trade to commissioned processing trade to direct investment. The world pays attention to the situation of the Korean Peninsula, because when Korea have unification, there will be much changes in the international situation. So, to achieve reunification, Korean government should increase and fortify economic cooperation.

  

 

First, Economic cooperation between South Korean and North Korea is a method to relieve difference between them. South Korean and North Korea can relieve the difference not only by economic communication but also by political communication and negotiation required during the process of cooperation. The case of Germany, for example, East Germany and West Germany signed many treaties for economic integration including <4 Stage Unification Plan>and <Convention about currency, economy, and social assurance alliance>. As a result, West Germany could make economic integration possible such as reconstruction of economy and reorganization of industrial economic structure. The process of unification of Germany shows that there was political communication through economic cooperation between East Germany and West Germany. Also, Korea peninsula can elicit an exchange of various fields from economic cooperation. Now, South Korea and North Korea are operating Kaesong Industrial Region. Although Kaesong Industrial Region was closed temporarily, it reiterated thanks to a proposal of comprehensive meeting between two Korea by both Korea. KIR played an important role such as a forum for conversation. The world corporations also changed a view of Korea, so they don't regard Korea as danger area anymore. It means that economic cooperation can alleviate difference by leading political communication and consent.

 

Second, economic cooperation can recognize the importance of the market economy to North Korea. Before the unification of Germany, East German has already aware of inefficiency of socialist market economy. Accordingly, many East German emigrated to West Germany and East Germany lost labor force. After September 1989, financial condition got worse and worse because of the demonstration and sudden increase of emigrants. So, demonstration was spread and the situation could not settle the dust without bloody suppression. There was no executive of the communist regime who strongly wants to remain the regime. In this situation, the government of West Germany linked these to unification with the firm will and the object after the collision of the Berlin Wall. This was the result of East German's the awareness of perfect democratic system and prosperous economy and awareness that capitalism is necessary. North Korean can also notice that they can solve the economic problem through market economy. Thus, people will demand change of regime. It leads to the situation that autocracy collapse inevitably. It is difficult for North Korean to educate market economy system. But, they can know the system with economic cooperation as a duck takes to water.

 

Third, North Korea can have a degree of interdependence with South Korea. North Korea mostly depend on China and will be subject to China deeply as times goes by if this situation is remained. According to CIA, almost all of the import and export of North Korea in 2010 was done with China. China has provided food and crude. At the same time, North Korea tries to solve the economic problem through the interchange with China. So, economic cooperation between North Korea and South Korea is nothing more than interchange in name only. To solve this matter, South Korean government should make economic cooperation that can penetrate into North Korean economy, not a just simple support. It can make higher interdependence and closely united each other.

 

   

Obviously my opinion is not the popular one, despite being the correct one. There are plenty of people who will dispute my position with examples like Cheonan warships affair, North Korea's assault on Yeonpyeong Island. Of course, these arguments are all shortsighted and simply incorrect. The regime of 김대중 and 노무현 launched the Sunshine Policy regarding North Korea and it could make the inter-Korean summit twice. Also, June 15th North-South Joint Declaration was announced. It worked as the start of an amicable North-South relationship. In addition, North Korea government would not regard it as support of South Korea. For example, Kaesong Industrial Region is what South Korean corporation moved to reduce labor cost and under the permission of North Korea. Therefore, understanding each other's position more firmly and operating deep economic cooperation will be a help for unification rather than not prioritizing the economic cooperation.

 

  

To sum up, economic cooperation can relieve the sense of difference between North Korea and South Korea. North Korean people can recognize the significance of the market economy naturally thanks to economic cooperation. Also, it is the easiest way of increasing the interdependence in Korea peninsula. Even though someone said that there was no advance despite there have been much economic cooperation, it is not the problem of economic cooperation, but that of understanding each country. So, South and North Korea should try to communicate and promote the unification through economic cooperation.


References

Inter-Korean Economic Cooperation
A 38 North Interview (October 7, 2012)

http://38north.org/wp-content/uploads/2012/11/Transcript_Yu100712.pdf

Kaesong Industrial Religion and Korea model unification way (September 24, 2014)

http://cdy21.tistory.com/1799

<the June 15th North-South Joint Declaration> (June 15, 2000)

Research. trade and economic cooperation

http://eng.unikorea.go.kr/content.do?cmsid=1792

01.Trade and private economic cooperation projects between the two Koreas

Trade and economic cooperation projects in the private sector between North and South Korea started after the July 7 Declaration in 1988 when Daewoo Inc. gained approval from the ROK government to import 519 pieces of North Korean porcelain through an intermediary in Hong Kong. Since then, economic exchanges between the two Koreas evolved from general trade to commissioned processing trade to direct investment.

In the early days, the majority of inter-Korean was simple trade of goods but developments took place permitting South Korea to provide materials and facilities to the North, for the North Korea to process them and then to export finished goods back to South Korea. Such commissioned processing trade represents the early stage of economic cooperation where the most is made of the needs and advantages of each side. It also opened the way to direct investment in North Korea.

The first investment in North Korea was by Daewoo Inc. in 1993, when the company gained approval for a cooperative project with North Korea where shirts, bags and jackets would be produced at Nampo Industrial Complex. Between 1993 and 2013, a total of 100 cooperative projects were approved, but seven of them have since been cancelled due to changed situations in the North, bringing the total number of approved projects down to 93 (including tourism in Mount Geumgang and excluding Gaeseong Industrial Complex). Direct investment in North Korea by private companies took place in various areas from Gaeseong, Pyongyang and Nampo to Goseong (Mount Geumgang), but most direct investment were in special zones such as Gaeseong Industrial Complex or Mount Geumgang.

02.Economic cooperation projects on the government level

Economic cooperation projects carried out by North and South Korean governments played a vital role in laying the groundwork for further economic cooperation to be led by the private sector in the 1990s. The ‘Act on inter-Korean Exchange and Cooperation’ and ‘Act on North South Cooperation Fund’ were legislated in August, 1990, and in 1994 and 1998, ‘Measures to reinforce inter-Korean economic cooperation’ were announced, providing the basis for further collaboration in the field.

It was against this backdrop that earnest talks between the two Koreas about government-level economic cooperation projects took place in the 2000s. The project to prevent flooding of the Imjin River was the first project to be discussed as a government-level cooperative project, followed by projects to link railways and roads along the Kyeong Eui Line and Dong Hae line, projects for agricultural cooperation, provision of raw materials and projects for the joint development of mineral resources.

The project to prevent flooding of the Imjin River was pushed forward after it was agreed upon at the 2nd ministerial-level talks in September, 2000 and the Agreement on Measures to Prevent Flooding of the Imjin River was adopted by the 8th Economic Cooperation Committee in March, 2004. However, North Korea dragged its feet, only to hold an inter-Korean working-level talk in October, 2009 after an accident occurred near the Imjin River in September the same year. At this working-level meeting, both sides agreed on advance notice of discharge of the Imjin River and on continued efforts to establish a joint usage and flooding forecast system.

For more vibrant exchanges of people and resources in Gaeseong Industrial Complex and the Mount Geumgang area, a construction to link the railway and roads of the Kyeong Eui line and Dong Hae line broke ground in September, 2002. The construction to link roads was completed in October, 2004, and by 2013, a total of 1,300,000 vehicles have passed through the Kyeong Eui road and 180,000 vehicles through the Dong Hae road. Confirmation of the route that would link the two Koreas through railway was made in December, 2005. From December, 2007 to November, 2008 when North Korea blocked road traffic to Gaeseong Industrial Complex, a total of 224 roundtrips were made by cargo trains between Dorasan station and Panmun station.

Agricultural cooperation started by the two Koreas agreeing on five items at the first North-South Agricultural Cooperation Committee in August, 2005. The five fields included the operation of a pilot farm, support for facilities to select seeds and cooperation in agricultural technology. Again, however, North Korea’s passive attitude made it difficult for the projects to take off and South Korea eventually decided to push ahead with a pilot joint farming project through a private organization first. As a result, the Project Team for Reunification in Agricultural and Fishing Industries (private organization) formed a joint farming complex centering on the Samilpo Geumcheonri cooperative farm for the three years from 2005 to 2007. Based this success, the farm was further expanded to Gaeseong in 2007. But, since North Korea’s second nuclear weapons experiment in 2009, joint agricultural projects have been put on hold.

Joint projects in light industries or the development of underground resources were launched by the adoption of the Agreement on Cooperation in Light Industries and Development of Underground Resources between North and South Korea by the 12th Economic Cooperation Committee in June, 2006. South Korea provided 80 million dollars’ worth of raw materials for light industries (textile, shoes manufacturing, soap manufacturing etc.) as loans to the North from July, 2007 to March, 2008. Under the agreement that stipulated that North Korea would repay these loans with underground mineral resources, 1,005 tons of iron ore which account for 3% (or 2.4 million dollars) for the first year from December, 2007 to January, 2008 were handed over to South Korea. The remaining 97% is expected to be paid back in installments over 10 years starting in 2014, after 5 years of a grace period.

Meanwhile, as logistics increased due to inter-Korean trade and economic cooperation projects, The Agreement on North South Marine Transport and The Appendix Agreement for the Implementation of the Agreement on North South Marine Transport were adopted in May, 2004. This agreement took effect on August 1, 2005, opening a direct route that connects South Korea’s Incheon, Busan and Sokcho to North Korea’s Nampo, Cheongjin and Najin. The marine routes where only third country ships were allowed were also opened up to ships from North and South Korea. Since the Agreement took effect and till 2013, a total of 34,350 passages have been made and North Korean ships traversed South Korean waters 2,165 times (including the crossing of Jeju Channel 866 times).

03.Implementation of the ‘May 24th Measures’

In response to the attack on the Cheonan warship by North Korea (March 26, 2010), the ROK government, starting May 24, 2010, pledged the following: i) Total ban of North Korean ships passing through South Korean waters ii) Suspension of inter-Korean trade iii) Total ban of South Koreans visiting North Korea iv) Total ban of new investments in North Korea (excluding Gaeseong Industrial Complex) v) Temporary suspension of humanitarian aid to North Korea. However, aid towards the most socially vulnerable, including children in North Korea are considered an exception for these measures.

In order to minimize the difficulties that South Korean corporations would face with the implementation of the May 24th Measures, the ROK government carried out the following: i) Survey of corporations conducting inter-Korean trade or economic cooperation projects (1st: May, 2010, 2nd: June, 2010, 3rd: May, 2011, 4th: May, 2013) ii) Approval of entry and exit regarding the advance payment made before May 24th Measures iii) Special loans for economic cooperation (1st loan: August, 2010 ~ February, 2011, 37.7 billon Won to 184 companies. 2nd loan: January ~ June, 2012, 18.3 billion Won to 99 companies) iv) Subsidies for emergency operation expenses (5.2 billion Won to 457 companies in September, 2012).

The May 24th Measures was an inevitable step that the ROK government had to take in order to deter North Korean provocation and establish a normal inter-Korean relationship. The government is firmly committed to these measures until North Korea takes responsibility for the provocation and attacks upon the Cheonan warship and Yeonpyeong Island.