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Rebuilding North Korea Will Cost $2 Trillion

North Korea leader Kim Jong-un may demand a very large financial commitment from the rest of the world to secure complete denuclearization
Estimates suggest the value of North Korea’s basic minerals—coal, copper, etc.—ranges from $6 to $10 trillion total,  not counting the rare earth metals.Estimates suggest the value of North Korea’s basic minerals—coal, copper, etc.—ranges from $6 to $10 trillion total,  not counting the rare earth metals.

A study by two British economists this week estimated that the reconstruction of North Korea to bring it into alignment with South Korea in the case of reunification would cost at least $2 trillion, money that South Korea would largely be responsible for.

As foreign investors and international corporations begin to prepare for the possibility of investing in non-nuclear North Korea, allies of Pyongyang, like China, are beginning to suggest that the United States invest heavily in “rewarding” Kim Jong-un for not flagrantly violating international law, Bloomberg reported.

Researchers Stephen Jen and Joana Freire of the UK’s Eurizon SLJ Capital Ltd. compared the cost of unifying Germany to the population and economic size differences of the two Koreas, according to Bloomberg. Unifying Germany, they found, cost West Germany $1.4 trillion at the time, equal to about $2 trillion today.

A similar amount of funds would have to pour into North Korea if the countries reunified to create a stable state, they conclude. The two researchers posit that the amount of money Kim Jong-un could demand may be even greater, as the potential for a nuclear disaster to occur without coming to an agreement is such a large risk that there is a greater incentive for the parties seeking to bring North Korea to the table—the United States, South Korea, Japan—to offer more.“Given the threat presented by the nuclear arsenals, Kim Jong-un is in a position to demand a very large financial commitment from the rest of the world to secure complete denuclearization,” the researchers wrote about their study. “We stress that we are not arguing that North Korea should or will demand such a large financial assistance. We are merely thinking out loud about what the order of magnitude of that figure might be.”

  Different Estimates

The amount of money necessary for successful reunification appears to have doubled since the Economist attempted a similar study in 2016. At the time, South Korean newspaper Chosun Ilbo reported, reunification would cost at least $1 trillion. The newspaper noted that the Economist’s estimate was nearly 75% of South Korea’s entire gross domestic product when the piece was published.

The Christian Science Monitor put out an even bigger number this week on the potential cost of reunifying Korea: a $5 trillion weight on the South Korean economy.

The Economist study noted that North Korea is rich in rare earth metals, which technology companies have a heavy demand for to use in digital products. Estimates suggest the value of North Korea’s basic minerals—coal, copper, etc.—ranges from $6 to $10 trillion total, not counting the rare earth metals. Coal is a critical export of the North Korean economy; recent sanctions on the purchase of North Korean coal have reportedly significantly crippled that economy.

  Reunification Concerns

South Korea would also benefit from a boost in the number of eligible workers in their economy, though significantly less than they would be hurt by taking on the burden of modernizing North Korea. Corporations in South Korea—including some of its biggest, like Hyundai—have begun preparations to profit from this new workforce. A poll cited in South Korea’s daily, Chosun Ilbo, on Friday found that nine of ten South Korean companies are interested in doing business in South Korea.

South Koreans, recent polls have found, are rightfully skeptical of reunification, and growing numbers of Korean citizens oppose the move, feeling ethnically and nationally separate from the people born and raised in the North.

A 2017 national poll found that 57% of South Koreans support reunification, but 71% of South Koreans in their 20s oppose it, having grown up with the constant threat of nuclear annihilation from the other side of the DMZ. Seoul National University found in a poll in January that only four of ten South Koreans would brand reunification “necessary”.

Concerns about the exorbitant cost of reunification also increased in the aftermath of the 2018 PyeongChang Winter Olympics, in which South Korean taxpayers were forced to foot the bill on food, lodging and all other expenses for a hundreds-strong team of North Korean athletes, performers, diplomats, and assorted affiliates.

With South Koreans unwilling and unable to bear the burden of modernizing the impoverished state north of them on their own, President Moon Jae-in, with the eager help of the Chinese government, appear to be attempting to convince the United States to spend taxpayers’ dollars on North Korea.

In a meeting this week attended also by Japanese Prime Minister Shinzo Abe in Tokyo, Moon and Chinese envoy Li Keqiang issued a statement demanding that “the international community, including the United States, must actively take part in ensuring a bright future for North Korea through a security guarantee and support for its economic development.”

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