A United Korea? - Reassessing the Risks

A man looks at reunification banners displayed on the fence of the Freedom Bridge, near the DMZ separating South and North Korea, in Paju on June 2, 2009.  (Philippe Lopez/AFP/Getty Images)

SEOUL, November 17, 2009 - Speaking at the Lotte Hotel here, Goohoon Kwon, Vice-President and Executive Director at Goldman Sachs, addressed the risks currently posed by North Korea, ranging from the threat of all-out war to the potential costs of unification. Overall, Kwon emphasized that the possible benefits of long-term peace and stability for the Korean peninsula far outweigh any costs that might result from reunification.

Addressing a crowd of more than 100, Kwon looked ahead to a long-term, "win-win" scenario for both North and South Koreas based on a gradual integration along the lines of the China-Hong Kong situation rather than instant German-style reunification. A "one-country, two-systems" approach could be more applicable, he argued, in that it might reduce integration while also (possibly) leading to easier capital mobility, an abundant labor pool, domestic demand, the potential for greater direct foreign investment, and loosened border controls.

Kwon concluded by suggesting appropriate government policies that could reduce the costs of integration, particularly the introduction of sustainable investment schemes for mineral resources in North Korea, given the mining sector’s major role for job growth and investment in its economy.