Economic Cooperation Between the Two Koreas

Abstract

IntroductionFluctuating political relations between North and South Korea made it difficult to sustain, at least in past, any meaningful and lasting economic cooperation between two Koreas. This paper reviews history and scope of economic cooperation between two Koreas, leading to conclusion that economic cooperation between North and South Korea should remain unaffected by political turmoil between two Koreas.Historical Background of Economic CooperationThe first official joint statement between two Koreas was released on July 4, 1972, nearly nineteen years after Korean War ended on July 27, 1953. The SouthNorth Joint Communique states that reunification will take place without reliance on or intervention by foreign nations; it will be achieved by a peaceful means; that the two sides shall take measures to stop propaganda broadcasting against other side, stop military aggression and prevent any military clashes; and that the two sides shall institute various exchanges in economic, social and cultural areas; cooperate in holding inter-Korean Red Cross talks; open a Seoul-Pyongyang hotline; and set up a South-North mediation committee.Regardless of cooperative spirit expressed in 1972 communique, economic cooperation between two Koreas did not take place for many more years because of two related reasons: lack of progress on political front and several provocative actions carried out by North Korea. On October 9, 1983, for instance, four South Korean cabinet members were killed by North Korean agents in Burma. On November 29, 1987, Korean Air 858 was exploded by two North Korean agents forty-five minutes away from Bangkok, killing all 115 passengers and crew members aboard. As Soviet Union was dissolved in 1989, ending Soviet Union's economic support to North Korea, focus of North Korean issues shifted to development of nuclear weapons in North Korea. In fact, current nuclear crisis began during 1989 when Yongbyon's nuclear facility was identified through U.S. satellite photos.On October 21, 1994, United States and North Korea concluded four months of negotiations by adopting Framework in Geneva, which called for North Korea to freeze and eventually eliminate its nuclear facilities, a process that would require dismantling three nuclear reactors, two of which were still under construction. In exchange, North Korea was promised two light-water nuclear reactors (LWRs) and annual shipments of heavy fuel oil during construction of reactors. The LWRs were arranged for construction through Korean Peninsula Energy Development Organization (KEDO). On March 9, 1995, KEDO was formed in New York with United States, South Korea, and Japan as organization's original members. On June 1, 2006, KEDO Executive Board announced that it had formally terminated its project to build two LWRs in North Korea due to continued and extended failure of North Korea to comply with its relevant obligations under 1994 Agreed Framework. KEDO was more a political arrangement than an act of economic cooperation. We thus turn our attention to economic cooperation.Dawn of Economic CooperationAlthough trade between two Koreas began in late 1980s, first meaningful event in inter-Korean economic cooperation occurred on January 13, 1998, when Chung Ju-young, founder of Hyundai chaebol, traveled to North Korea through China and signed an agreement with North Korea on what would later be known as Mt. Kumgang tourism project. Chung's visit to North Korea was made possible by election of Kim Dae-jung as President of South Korea in December 1997.During his inaugural speech on February 25, 1998, President Kim Dae-jung announced his Sunshine Policy for dramatic improvement of inter-Korean relations, which led to President Kim winning Nobel Peace Prize in 2000. …