Feasibility of FTA between South and North Korea : Through Analysis of Intra- State Trades and North Korea's Economic Reformation Scheme

Liberalists has declared that economic trade brings about political cooperation and peace between two countries through enhancing the economic benefits, promoting conversation, and removing misunderstanding. On the basis of this declaration, the policy on North Korea has been pushed ahead by the Korean government which tries to transform the relationship with North Korea from mistrust and hostility to reconciliation and cooperation. It has been twenty three years since the economic trade between South and North Korea began in January, 1989 under President Noh Taewoo which was triggered by the Declaration of July 7 and the North-South Korean Economic Relation Measure of October in 1988. The total turnover between South and North Korea was about 15.9 billion USD during the period from the beginning of January, 1989 to the end of September, 2011, out of which 13.2 billion USD is for commercial trade and 2.6 billion USD is for economic aid. However, the controversy is being aroused in South Korea about the policy on North Korea because North Korea tends to keep hostility towards South Korea through nuclear experiment, blowing up the Cheonan ship, shooting a South Korean tourist in Keumkang Mountain, and shelling of Yeonpyeong Island. It seems to the realists that the economic trade between South and North Korea brings about reinforcing the North Korean military power and weakening the security in South Korea, which results in hindering the peace in Korean Peninsular. From the point of this issue, this paper aims to analyse the effect of trade and economic aid on easing conflicts between South and North Korea empirically. The result of this study can be summarized as follows. First of all, the increase of total turnover is significantly effective on creating the cooperative relationship between South and North Korea, which means that the increase of total turnover will decrease the conflict index. Secondly, the increase of commercial trade does not significantly affect the conflict index. Thirdly, the increase of non-commercial trade is significantly effective on the conflict index, which means that the increase of non-commercial trade will bring about creating the cooperative relationship between South and North Korea. Finally, the multi-variable analysis shows that rate of change in non-commercial trade is significantly effective on the conflict index, but rate of change in commercial trade is not. To sum up the results of the empirical analysis, the increase of total turnover and/or non-commercial trade is significantly effective on creating the cooperative relationship between South and North Korea, but not in the case of the increase of commercial trade. In other words, the economic trade between South and North Korea does not necessarily reduce the conflict in Korean Peninsular. In fact, it has been happening in the real world since fifty years ago. Social welfare in North Korea should be enhanced to reduce the conflict in Korean Peninsular through the economic support and trade from South Korea. The amount of social welfare increase in North Korea should be enough to offset the amount of social welfare decrease due to the cessation of the economic support and trade. Therefore, the economic trade between South and North Korea needs to be vitalized more and more so that North Korea be economically dependent upon South Korea. Limits of this paper, which are left to be studied in the future, are as follows. First of all, it needs to be analyzed how much social welfare has been enhanced in North Korea through the economic trade between South and North Korea for the past twenty three years. Secondly, it also needs to be studied what is the level of dependence of North Korea on South Korea, and whether the economic sanction toward the North Korea of the Lee Myung-bak administration is significantly effective or not.

IntroductionThe North-South Korean economic cooperation has been expanding since it was made official in 1988. The amount of trade between the two Koreas has increased from $18,724 in 1989 to $190 million in 2009. The sustained development of the two Koreas' economic cooperation is a result of efforts by not only the private sector but also the public sector, academia, nongovernmental organizations (NGOs), and the Korean public. This cooperation represents more than just practical results from economic cooperation between the two Koreas; it is a barometer by which the possibility of Korean unification may be gauged.The North-South Korean economic cooperation started off by trading restricted items and by the consignment processing of manufacturing industries, and in 2002, a joint Korean industrial park, the Gaeseong Industrial Complex, was established in North Korea. For South Korea, Gaeseong is an opportunity to utilize North Korea's low-wage workers, which would enhance the competitiveness of South Korean companies. On the other hand, North Korea could achieve much-needed economic growth by attracting South Korea's investment in the North's special economic zones (SEZs). At present, 116 companies have moved to the Gaeseong SEZ, employing 40,000 North Korean workers. The accumulated production volume between January 2005 and November 2009 was $729 million, and the exports were $120 million. The Gaeseong SEZ is planning to include 2,000 companies with 350,000 workers and is targeting an annual production volume of $16 billion.Previous studies on the North-South Korean economic cooperation have approached the topic mainly in the context of domestic and foreign policies, not in the business context.1 That is, previous studies have generally regarded well-organized business models and management ability as exogenous variables. Based on this assumption, an examination of the North-South Korean economic cooperation in the business context should yield a deeper understanding of the project's sustainability. Further, such an approach may induce higher levels of participation in the project by all sectors of Korean society.This paper examines how the North-South Korean economic cooperation and firms in North Korea could achieve success. In addition, the paper illustrates a profitdriven North-South business model and provides applicable cases for each model. The paper also determines the types of firms that would most likely succeed for each of the four SEZs and discusses the practical implications.North-South Korean Economic Cooperation Business ModelsThis paper classifies the business types of the two Koreas by using productive combinations of economic resources. The neoclassical school looks at labor, capital, and natural resources, among others, as main economic resources.2 Today, such resources also include production and technology/management know-how. These added factors are essential in explaining not only the issue of trade but also the phenomenon of foreign direct investment.3 As stated above, the North-South Korean economic cooperation has developed from consignment processing to direct investment, which would be difficult to explain only through the natural resources indicated by the neoclassical school.4In this regard, this paper assumes four economic resources-natural resources, labor, technology/management know-how, and capital-as the factors in the classification of North and South Korea's business types and stages of business development. Although hundreds of combinations could be made from the four economic resources because of duplicate use, classifying every possible model is not practical in the real-world context. Therefore, only seven types of businesses are discussed.The first business type is the Indirect Manufacturing Model, which combines North Korean labor with South Korean capital. The second type is the Direct Manufacturing Model, which combines North Korean labor with South Korean technology/management know-how. …

Economists have expressed their opinion that the economic trade between countries brings about economic prosperity as well as peace. Their opinion is based upon that the trading countries do not want to face the situation of decline in their welfare and benefits due to not participating in economic trade. They argue that economic trades between countries give them the opportunities of conversation, decrease misunderstanding, and leads them to peaceful mind and behavioral attitude to adjust the political conflicts. On the basis of this kind of opinion and the reunification of Germany, the economic trade between South and North Korea has been suggested as the most efficient measure to maintain the peace in Korean Peninsula. It has been twenty four years since the economic trade between South and North Korea was triggered in January, 1989 under President Noh Taewoo’s Declaration of July 7 in spite of several crises. The total turnover between South and North Korea is about US$ 18.3 billion from 1989 to 2012, out of which US$ 9.2 billion is the export to the North and US$ 9.1 billion is the import from the North. Since the end of cold war, South Korea and China have established diplomatic relations on July 24, 1992, and they have become strategic cooperative partners. The total turnover between South Korea and China was US$ 6.4 billion in 1992, and it increased to US$ 215.2 billion in 2012. On the other hand, the total turnover between North Korea and China amounts to US$ 5.9 billion in 2012, which is around three times as much as that between South and North Korea. The results of theoretical analyses are summarized as follows. First of all, exports and imports between South and North Korea turned out to ease the conflicts between two countries. Therefore, ‘theory of peace through trade’ by the liberalists was supported here. Secondly, it turned out that the economic trade between North Korea and China affects to easing conflicts between South and North Korea only if South Korea and China are in friendly partnership. It implies that China induces North Korea to ease the conflicts between South and North Korea. Thirdly, exports from South Korea to China affects to easing conflicts between South and North Korea only if North Korea and China are friendly partners politically. Imports from China to South. Korea affects to easing conflicts between South and North Korea only if North Korea and China are in antagonistic relationship politically. Empirical analysis shows that the difference quotient in the total turnover between South and North Korea turned out to have a significant positive relationship with the conflict index of the former year. It implies that the increase of the difference quotient in the total turnover between South and North Korea is likely to ease the conflicts between two countries. On the other hand, the difference quotient in the imports turned out to have significant positive relationship with the conflict index of the former year. It tells that the increase of the imports is likely to ease the conflicts between South and North Korea. While the expand of trade with China will ease the conflicts in Korean Peninsula from the theoretical viewpoint, empirical analyses present opposite results. It implies that the relationship between North Korea and China since the end of cold war is not the same as that before the end of cold war. It also tells that North Korea puts the higher political priority to developing the nuclear weapon and long-range missile. Inter-Korean policy has to keep consistency focusing economic cooperation apart from political issues. Long-term goal of inter-Korean policy should be unification, although short-term one is peace and stability in Korean Peninsula.

Last orders in Pyongyang

IntroductionThe KIC is emerging as a matter of interest both domestically and internationally-displaying characteristics of being North Korea's national development project to resolve its economic troubles after the Rajin-Sunbong and Sinuiju special economic zone projects fell through. North Korea can use the KIC as a testing ground for possible economic reform that could eventually lead to the complete liberalization of North Korea's economy, and also as a strategic means of easing military tensions between the two Koreas.It is essential for North Korea to open up its doors for its long-term survival. Leaders in Pyongyang deem that a limited opening of the North Korean economy through the establishment of special economic zones is the best plan of action for regime preservation and economic rehabilitation. However, the KIC's potential for success has to be assessed in a more prudent manner. First, North Korea is unable to procure enough funds to autonomously establish the infrastructure necessary to maintain foreign capital in the special economic zone. Second, the country's limited domestic market provides very few incentives to attract foreign investors. Third, the related industries are underdeveloped, making production costs relatively high for potential investors. Fourth, there is a lack of skilled workers who understand the market economy and who are equipped with the latest technology. Finally, there is not enough confidence that North Korea will be able to make the wholesale changes needed or to establish the legal and institutional infrastructure that conforms to international standards. This paper focuses on the issues of attracting foreign investment to the KIC and building a legal and systematic infrastructure that will help maintain this investment. These key indicators can predict the stability and sustainability of the KIC's development henceforth.The North Korean authorities' attitude toward the KIC is very favorable, regardless of how slowly they have met various demands made by South Korea. Most transitional states have been able to experiment with flexible institutional incentives in SEZs, where possible political and economic side effects could be contained within the zones. For example, China's experimentation with liberal market reform was too politically dangerous on a national level, but was possible in SEZs. Based on experience, China began to reform its laws and institutions, creating more diverse SEZs nationwide, such as the Shanghai-Podong Development District, the Weihai Torch High-Tech Industries Development Zone, and free trade zones (Ministry of Justice, 2005).North Korea has also shown deep interest in learning market economics and capitalism from China's model of SEZs. Frequent visits to China's most successful SEZs by North Korean leader Kim Jong Il and the North Korean elite are a good indication that North Korea is benchmarking China. The KIC is a melting pot of capitalism and socialism.The Current State of DevelopmentLaunched full-scale in 2004, the KIC consists of 6,535 acres of land in Kaesong, Panmun-gun, and Jangdan-gun, and 9,803 acres of land in nearby areas. Currently in the first stage, 817 acres of land are being developed for small- to medium-sized labor-intensive businesses. Despite a variety of unfavorable conditions, such as the North Korean nuclear test in 2006 and the subsequent rise of negative public opinion within South Korea, the KIC has been developing steadily as an economic enterprise for the co-prosperity of the two Koreas, grounded on the principle of keeping politics and economics separate. The KIC is expected to gain all the more momentum from two major events. On October 4, 2007, South Korean leader Roh Moo-hyun and North Korean leader Kim Jong Il signed the eight-point Joint Declaration for Advancing Inter-Korean Relations and Peace and Prosperity, after a three-day summit from October 2 to October 4, 2007. The Second Session of the Sixth Round of the Six-Party Talks was held in Beijing, amongst China, Japan, North Korea, Russia, South Korea, and the United States, from September 27 to September 30, 2007. …

남북한이 상이한 사회적 규범체계 하에 분단국가로 장기화될수록, 건설기술에 대한 이론적 기술적 차이가 많이 발생하게 된다. 따라서 남북한이 화해의 국면에서 상호 교류시, 공동으로 사용하는 철근콘크리트 도로교의 성능수준도 명확히 차이가 발생한다. 이에 본 연구는 북한의 철근콘크리트 도로교 설계기준과 관련된 자료를 면밀히 비교 분석하고, 철근콘크리트 슬래브교에 대한 표준설계 제원과 사례를 토대로 구조해석을 수행했다. 특히 남북한의 설계트럭하중에 대하여 활하중 영향을 분석함으로써, 북한의 철근콘크리트 슬래브교에 대한 수준을 추정하였고, 이를통해 통행에 대한 안전성을 사전에 검토할 수 있도록 기초 연구를 수행하였다. 따라서 향후 남북한이 화해국면에 접어들어 교류가 활발히 진행되거나, 더 나아가 통일국가로 준비하는 단계에서, 공통의 철근콘크리트 도로교 설계기준을 작성하는데 기초자료로 활용될 것으로 기대한다. If North Korea continuously remains an isolated nation without social interaction with South Korea, the gaps in the theoretical and technological status in construction technology become greater between North and South Korea. Therefore if interactions between North and South Korea can be made, there will be significant improvement in infrastructure technological performance can be made(i.e., Reinforced Concrete bridges). This study was performed to compare and analyze data related to the design standards of North Korean RC bridges and to execute a structural analysis based on standard design specifications of RC slab bridges. Especially, basic study of analyzing the influences on design truck loads of North and South Korea was conducted for the purpose of predicting the performance of North Korean RC slab bridges and the safety levels of traveling vehicles in advance. It is expected that the results of this study can be used as fundamental data for the set-up of South-North RC bridge specification when South and North Korea enter a stage of cooperation and interaction between South and North Korea are actively pursued to prepare for reunification.

통일 후 남북한 산업구조 재편 및 북한 성장산업 육성방안 (Ways to Reform Industrial Structure of North and South Korea and Nurture Growth Industries in North Korea after Unification)

Changzoo Song (bio) Perspectives on Korean Unification and Economic Integration, edited by Young Back Choi, Yesook Merrill, Yung Y. Yang, and Semoon Chang. Cheltenham, U.K.: Edward Elgar, 2001. 193 pp. $85.00 cloth. The collapse of the Communist bloc in Eastern Europe and the consequent unification of Germany in 1990 opened new prospects for Korea's reunification. Especially with the grim economic situation in North Korea, German-style "absorption" unification seemed a natural course for the two Koreas. Nonetheless, the difficulties experienced by Germany after the unification called for more practical assessments of the costs and benefits of Korea's unification. This was the background when unification discussions in Korea actively began to embrace economic, cultural, and social considerations in the 1990s. In the past, the discussions had been very much dominated by political discourse. The book under review reflects such a change in unification discussion. Composed of twelve articles, the book can be roughly divided into three parts: the first three articles examine security issues of the Korean peninsula; the next six articles deal with economic integration and cooperation between North and South Korea; and the last three articles analyze the costs and benefits of unification. While the book covers several different issues from different angles, the contributors have a relatively unified view. This is that an abrupt collapse of North Korea will result in huge costs. They therefore advocate gradual integration. In this respect, the book supports the "Sunshine Policy" of South Korea's former president Kim Dae-Jung. Such a view is well represented in Tony Hall's introduction, in which he observes that North Korean people's perception of foreigners (especially Americans) became much more favourable in the late 1990s after food aid programs. Such changes in "ordinary people's thinking can play an important role in its leaders' reaching out," he states (p. XV). In a similar vein, Young-Sun Lee argues that gradual unification would cost less (chapter 10), and Young-Back Choi suggests immediate unification would not bring any good either to North or South Korea (chapter 12). One of the most controversial articles in the book is "Cost and Benefits of Unification" by Choi. This article argues that, contrary to the belief of Korean nationalists, South Korea would not benefit from unification in terms of natural resources, cheap labor, bargaining power, or defense budget reduction. Choi estimates that South Korea will have to assume all the costs to develop North Korea, to produce welfare provisions, and to solve social conflicts if the two countries are unified. Based on this assessment, Choi carefully, but confidently, contends "no unification" is a "superior alternative" for both Koreas (p. 175). While the idea that unification would be too chaotic and costly is not totally [End Page 140] new, it is rare to see such a daring view openly declared. As most Koreans believe that unification is an absolute necessity, Choi's argument is innovative and makes this book rather special. A further important article is "Can Reindustrialization of North Korea Support a Sustainable Food Supply?" This article maintains that North Korea, in its comparative disadvantage in agricultural production, would be able to import grains if it hosted labor-intensive light industry such as textiles and footwear manufacturing from South Korea (p. 83). By so doing, this article directly supports the Sunshine Policy and South Korea's project to build industrial complexes in North Korea. While the book poses good arguments for a functionalist approach to national integration, it suffers from some defects. Although the book focuses on economic cooperation between the two Koreas, including telecommunication cooperation, the possible benefit of the Trans-Korean Railway if connected to the Chinese and Russian railway systems is not covered. In addition, some of the articles in the book are too short to be able to offer a sustained argument. For example, chapters 3 and 2 are only four and six pages each. In chapter 12 some footnotes are numbered incorrectly. A more serious problem, however, lies in the volume's heavily economic orientation. While this is understandable if we consider that most of the contributors to the book are economists, some readers may find this volume's orientation...

2016년 대북제재 이후 북한경제 변화와 신남북협력 방향 (Changes in the North Korean Economy and Guidelines to New Strategies of Inter-Korean Cooperation after UNSCR since 2016)

We analysed daily precipitation data at the rain gauge stations in North Korea over a period of 25 years from 1983 to 2007, and in South Korea over a period of 35 years from 1973 and 2007. We found a striking trend of decreasing summer precipitation across North Korea. By contrast, in South Korea, the trend is opposite: there is a major increase in summer precipitation. Also, the number of dry days in summer showed an increasing trend in North Korea and a decreasing trend in South Korea. For the number of days with heavy precipitation (i.e. days with above 50 mm/day daily precipitation) during summer, a decreasing trend was detected in North Korea, but no trend in South Korea. However, in South Korea, there was a significant increase of days with heavy precipitation over the whole year. These opposite trends in summer precipitation between North and South Korea were further confirmed using four global/regional satellite and rain gauge datasets of CPC Merged Analysis of Precipitation (CMAP), the Global Precipitation Climatology Project (GPCP), Precipitation REConstruction over the Land (PREC/L), and the Asian Precipitation‐Highly Resolved Observation Data Integration Towards the Evaluation of Water Resources (APHRODITE). Copyright © 2011 Royal Meteorological Society

COVID-19 is an infectious respiratory disease that first appeared in December 2019 in Wuhan, China and first spread throughout the country and then worldwide. WHO Director-General Tedros Adhanom Ghebreyesus, concerned about the rapid spread of COVID-19, officially declared a global pandemic on March 11, 2020. North Korea (Democratic People’s Republic of Korea) barred foreign tourists from China on January 21, 2020, and then completely closed its border with China. In this article, I will explore the impact of COVID-19 on North Korean society and research the cooperation plan between South and North Korea. I will also briefly introduce in the post-COVID-19 period. To better understand the health care system and health conditions in North Korea, I will first analyse the infectious disease management system and, in the context of this, then try to investigate in detail how COVID-19 has affected North Korea. From an economic point of view, I will examine the changes in economic cooperation between North Korea and China, and then try to explain the social changes caused by restrictions on movement and lack of goods, and the political situation in North Korea during the COVID-19 crisis. Finally, I will try to research the situation facing North Korea and suggest a way for cooperation between South and North Korea in the future. The basic aim of this research is to find a useful alternative for joint cooperation in the field of health care and safety and to improve cooperation between South and North Korea in the post-COVID-19 era.

The change of president in the Republic of Korea (ROK) brought a new approach towards some foreign policy matters. President Lee Myung-bak set out to restore what he claimed were damaged relations with the United States (US) and Japan, while hoping to avoid offending other countries such as the People's Republic of China (PRC) and Russia. Negotiations with the European Union on a free trade agreement (FTA) continued, with little result. Throughout the year, the PRC continued to play a leading role in keeping the Democratic People's Republic of Korea (DPRK) engaged on the nuclear issue. The abduction issue dominate DPRK-Japan relations. Russia continued to call for moderation in dealing with the DPRK, and to play its part in supplying fuel oil. It also gave some food aid and signed agreements relating to railway rehabilitation in the Rajin area, the site of the DPRK's first special economic zone. Keywords: Democratic People's Republic of Korea (DPRK); DPRK-Japan relation; foreign policy matters; free trade agreement (FTA); Republic of China (PRC); Republic of Korea (ROK)

North Korea's Economic Integration and Growth Potential

North Korea's Economic Integration and Growth Potential

IntroductionSince the South Korean government dramatically departed in October i988 from its conventional of prohibiting trade or economic cooperation with North Korea, a low level of economic cooperation began on a small scale and con - tingent basis by private firms. However, it accelerated more rapidly during the early 1990s, under the Agreement on Reconciliation, Non-aggression, and Exchanges and Cooperation between South and North Korea, which was enforced on February 1992 after their joint entry into the United Nations.Unfortunately, during the mid-1990s, economic cooperation between these two parties has been hampered primarily because of structural di∂erences in their economic and political systems. Another reason for lack of progress is that North Korea's policies limited its role in economic cooperation to private companies and avoided government-level communication with South Korea, which is indispensable for easing tensions and finding the solution for identifiable problems.However, the sunshine policy introduced by the Kim Dae Jung government created a more propitious environment for mutual cooperation between the two parties and successfully induced a new breakthrough in South-North relations. Since the South-North Joint Declaration on June i5, 2000, during the historic inter-Korean summit and the follow-up agreement on a variety of inter-Korean economic issues, the level of economic cooperation reached a new turning point, thereby resulting in a drastic change in South-North Korean relations since then (Table i).Special Economic Zones: The Major Playground for Economic CooperationMore recently, North Korea added three Special Economic Zones (SEZ) to the established Rajin-Sonbong area to accelerate the economic cooperation between the two parties and to spur more foreign investment in North Korea. In particular, the newly promulgated law for Kae-sung Industrial District explicitly allowed investment from the South for the first time. The prospects of the Kae-sung Zone are particularly more promising than any other Zones for a number of reasons. First, both parties have been working diligently for the last couple of years to develop a clear and detailed road map for this special district. Second, more than i00 firms from South Korea have displayed their clear intention to make some kind of investment in this district. Third, the close proximity of this district to Seoul will ease various logistical problems and take advantage of a high quality infrastructure, something not always present in the rest of North Korea.The establishment of four special economic zones has been considered one of the most significant signs of the North Korean's willingness to experiment with a new open-door policy. The prime motivation for this experiment is to promote the inflow of foreign investment, technology, and management know-how. However, this experiment, long-term, is to obtain the indirect experience of a market-oriented economy in a controlled environment and to pass these experiences gradually on to the rest of the country, thus avoiding major political repercussions.Special Economic Zones is a term describing designated legal and geographic areas in which commercial activities, including manufacturing, exporting, processing, banking, and assembly, take place between local and foreign companies under the special conditions that provide a variety of incentives that are not available in other parts of the country. More importantly, an investment environment has to be developed that is considerably more liberal than elsewhere in the North. Additionally, foreign firms would be given high level of autonomy in managing operations, face minimal controls in capital and goods movement, and be allowed to export and import freely whenever it is needed. Two considerations seemed to motivate the North Korean decision to establish the SEZs. First, the opening of these SEZs is understood to be the first major step in the North Korean overall open-door and practices. …