What would a Unified Korea look like?: The Costs, Benefits, and Global Ramifications following a reunited Korean State

It would be understandable if the idea of a unified Korean state in the foreseeable future was to be dismissed as an idea of pure fantasy. The leadership of  The Democratic People's Republic of Korea (North Korea) often speaks about a unified Korean state, albeit one that  would be on their terms.  Although the vast majority of the DPRK citizenry only has the most basic understanding of the world around it, its leadership understands that the idea of a unified Korea under DPRK leadership is one that lost all possibility decades ago, as its economy and military capabilities fell behind its Southern counterpart to a point where it where it no longer could reasonably expect to ever reach a point near-parity with it again.

As for the Republic of Korea (South Korea), its transition from a military dictatorship to democratic rule has coincided with a economic transformation in which it is now home to some of the most widely recognized corporations and manufacturers in the world.  While the ROK government periodically pays lip service to the idea of unification, many of its citizens fear that the costs of doing so will threaten the economic prosperity within South Korea that they have worked so hard to attain.

Yet unlike the current scenario that involves China and Taiwan, the vast majority of Koreans living on the peninsula both desire unification in some form, and for this factor alone raises the possibility of such an event taking place within our lifetime.  Assuming that Korean unification takes place in a relatively peaceful manner, what would it look like? And perhaps more importantly: What would it cost?


Potential Costs of Korean Unification 

One of the difficulties of compiling an accurate cost analysis of such an event is the lack of transparency from Pyongyang regarding its current economic state.  In January, South Korea's Finance Minister stated that the South expected initial costs of unification to be 7% of its current annual gross domestic product (GDP)  every year, for a minimum of ten years.  In 2012, 7% of South Korea's GDP would amount to $1,237 trillion won (1.15T), which amounts to $80.62 billion USD.  This figure tends to be a more conservative estimate on unification costs, as other think tanks and economic analysts tend to place the figure as high as $1.5 trillion over the first ten years.   Although there often is the comparison of Korean unification to the East-West German unification that took place at the end of the Cold War, the lack of infrastructure, industrial capability, and malnourishment within the North Korean state will make reunification in any form an expensive and daunting task. One example of this is the estimated cost that will be necessary simply to "stabilize" vast tracts of the North Korean population initially upon reunification.  Regarding the area of basic food supplies, one South Korean government estimate states the following cost:

In order provide 23 million North Koreans the recommended minimum of 1,600 calories per day for two months, it would require 13,000 tons of grain per day.  In addition, basic medial assistance would be necessary for large portions of the former DPRK population. This cost alone is estimated to be nearly $500 million USD. 

A Korean Unification would face a significantly higher number of obstacles than the East-West German unification following the Cold War. 

Another hurdle facing a new Korean nation is the fact that economic demographics are not on its side.  Where as West Germany had a 5-1 population ratio advantage upon unification with the less developed East Germany, South Korea merely has a 2-1 ratio, which means that it will have to absorb a much larger portion of North Koreans into its demographics, which will place its social services, educational systems, and job retraining services under significant strain.  There is also the issue of "severe division" between both Koreas.  Throughout its separation, East and West Germany minimized repercussions of political division by maintaining trade links, as well as signing over 30 treaties.  One estimate  states an estimate of $1.5 trillion USD over thirty years to simply bring North Korea's GDP to a comparable level to East Germany's GDP gap with West Germany prior to German unification. It will likely take generations before the economic gap is evened between the two Koreas:  The North-South economic gap remains in the United States since the end of its Civil War in 1865, in Italy, residents of Sicily today only have 1/3 the GDP of their counterparts in Milan, and even with its remarkable economic transformation, inland provinces continue to be left behind economically by the coastal provinces, a gap that is expanding annually, not decreasing.

There are also a number of additional areas in which investment must be made in order to successfully integrate Korea into a unified nation that would resemble some level of parity.
                                                                  

 Basic Housing and Living Standards

Medical Services

Massive agricultural investment: Decades of poor agricultural farming methods have left the North Korean countryside littered with soil unsuitable to sustain crops.

Poor economic planning will force any unified Korean government to begin industrial reform within North Korea from nearly ground level.

Integration of the Korean Won: The cost of integrating the North Korean Won into South Korea's economy will be unparalleled in scope.



Benefits of Korean Unification 

Although the costs associated with Korean unification will be unmatched in modern times, the potential benefits that could be achieved by a unified Korean state would almost surely outweigh the costs over time. In a 2009 analysis by Goldman Sachs, its authors stated that a unified Korea had the potential to overtake Japan and Germany's GDP's within 30-40 years.  This statement is plausible due to certain benefits that North Korea would bring to a unified Korea, although it would be decades before the benefits would be fully realized.

Even though South Korea would be integrating nearly 23 million North Koreans who would need large amounts of medical and economic assistance, it would be inheriting a relatively young population, something that would aid in offsetting the South aging population, as well having one of the lowest reproductive rates in the world.  The North Korean population is also relatively well-educated for a country of its current condition, and many of its citizens could contribute relatively quickly within an integrated economy. In terms of size, the territory of a unified Korea would nearly double, and within this land lays a windfall of mineral wealth that could indeed vault Korea past Japan and Germany within 40 years.

There have been estimated of mineral wealth inside North Korea to be of an estimated $6 trillion USD.  Much of this wealth is in the form of rare earth goods that are used in the production of hi-tech goods: a South Korean specialty. The ability for Korea to have these minerals within their borders, as well as potentially moving production factories from China into former North Korean territory where abundant reliable and cheap labor could be found, would accelerate the Korean economy.

A unified Korea would also become less hindered by geographic restraints.  The development of a gas pipeline from Russia to Korea could finally become a reality for further development in Southern Korea.  Land shipments could also begin to China and Russia, significantly cutting transportation costs.  Additionally, the beautiful North Korean landscape could be developed by South Korean tourism industries, allowing for employment opportunities to be had by those living in the North.

With the absence of hostilities between a North and South Korea, large amounts of  economic investment could be diverted from military platforms, and towards domestic investment.  Mandatory military service could likely cease, allowing for millions of Koreans to begin employment years sooner than is allowed currently. 


The costs that a unified Korea will likely have to endure to have such a final outcome, however, will be high.  The RAND Corporation conducted a study in 2009 that recommended that an investment of $62 billion USD be made in order to just double the North Korean GDP within 5-6 years following reunification.  It also gave an estimate of $1.7 trillion USD to have overall parity that would take place decades later.  The costs will be high.  Yet the benefits of a unified Korean state should eventually allow such an event to occur.


Perhaps someday such images as the ones below will become a relic of the past on the Korean Peninsula

1965 Press Conference with ROC Minister of Defense Chiang Ching-Kuo and President Johnson

 Press conference from 1965.  The question about China's nuclear reactors was especially interesting because of today's parallels with a similar issue involving North Korea. Much in the same way that today's North Korea is seen as a "wildcard rogue state", China was in many ways even more rogue in 1965. While today's DPRK is at least partially contained by Beijing's economic leverage, China had no such state in which it deferred to regarding its military ambitions.  

The Newest Member of the Axis of Evil.....Bhutan?........

Three of the cold-hearted citizens of Bhutan 

With last week's tragic attack in Boston, recent provocative statements taken by North Korea, and the start of Major League baseball, it could be understandable that certain global events could have taken place beneath the radar of the American Intelligence community. Luckily, we have Congressman Michael McCaul (R-TX) to expose the growing threat to the American way of life that is the Kingdom of Bhutan.

Last week, Congressman McCaul co-sponsored a bill in the US House of Representatives that sought to have the United States normalize diplomatic relations with Taiwan.  On McCaul's Congressional website, there is a statement regarding the reason behind the bill. Within this statement were two sentences that caught this authors eye:

"Today, Taiwan is one of only five countries in the world with which the United States does not have diplomatic relations.  Taiwan does not deserve to be associated with bad actors such as Bhutan, Cuba, Iran, and North Korea."

Bhutan?

While this little-known Kingdom has always been of interest to me, I was needless to say shocked about this recent intelligence windfall that has shattered my perceptions of Bhutan.  As painful as it was, it became necessary for me to delve deeper into the newest member of the "bad actor club".

The Government of Bhutan:

In 2005, Bhutan's King Jigme Singye Wangchuck announced to his nation that national elections would take place in three years time that would dilute the powers of Bhutan's absolute monarchy, and transition into a constitutional monarchy.  The power hungry King followed through on this decree and elections peacefully proceeded in 2008.  Wangchuck further consolidated his power by declaring that himself and future kings could be impeached by a two-thirds vote in Bhutan's National Assembly.

The ego of King Wangchuck is equal to the size of his country

Human Rights:  In the past decade, Bhutan has introduced a brutal method of suppression in which it can closely monitor even the most closely  guarded feelings of its people.


Armed Forces: 
It is without question that  the budget and resources of Bhutan's military forces is just cause for America's top military brass to endure sleepless nights.  It is believed that Bhutan's military budget is in the neighborhood of $13.7 million, or a little less than half of the 2013 salary to Yankees inactive third baseman, Alex Rodriguez.

Below are some photos of Bhutan's elite military units

Bhutan's feared 2nd artillery corps

The 7th armored division of Bhutan's Army is widely feared throughout Central Asia.

Bhutan's basic training for its marines is known to rank among the most grueling of the world's military units

 As shown by this picture, Bhutan's government's complete disregard for the environment allows for heavy layers of smog to hide many of its reported chemical and biological storage facilities.

One can only hope that Congressman McCaul's raising of the issue regarding this bloodthirsty nation's ambitions does not fall on deaf ears in Washington before it is too late.

Not Ready for Prime Time: China's Relationship with North Korea

Yesterday US Secretary of State John Kerry met with Chinese government officials to press for that country's assistance in lowering the temperature in the region that has been caused by increasingly bellicose behavior by North Korea.  While Beijing has been concerned regarding the increased American military buildup in the region over the past few weeks, it only needs to look inward for whom to blame. 

Over the past month the United States has been forced to respond to the escalating diplomatic and military posture of the Democratic People's Republic of Korea (aka North Korea) in a carefully calculated fashion.  It is during this time that the United States has reassured two of its closest allies in the region the Republic of Korea (ROK) and Japan by both words and actions that it will not be pushed into the diplomatic trap that the DPRK has laid out to be fallen into.  Although the United States has taken some precautionary measures in the form of missile defense batteries in Guam and in the near future for Alaska, it has thus far shown considerable restraint towards further military posturing in the region towards North Korea possibly with the thought process that further actions could back North Korea's leader Kim Jong-un into a corner in which he could feel forced to respond with military action towards it---or be faced with a potential backlash from his military commanders who remain skeptical of his military credentials. 

While the United States has been forced to show its commitment to not only its allies in the region, but to maintaining overall stability in the region itself, China has thus far elected to remain in the background and refusing to take responsibility in not only a leadership role in the region; but it has also done little to use its considerable influence with North Korea in lowering the temperature of an increasingly heated situation.

The current situation on the Korean Peninsula is once again presenting a clear choice for states in the region to view two distinct policies between those of the United States and China regarding regional stability.  In recent years China has used its increasingly strengthened economic portfolio and modernizing military to push territorial claims in the South and East China Sea, which has in turn forced states such as Japan, the Philippines, and Vietnam  to reconsider the level of trust that it is willing to place in China's long term regional ambitions, with the results being increased cooperation with the United States on a variety of levels, including enhanced military cooperation.  In October, the Philippines announced that it would allow the United States navy to return to Subic Bay  on a semi-permanent basis--likely the result of China's increased maritime activity in the Scarborough Shoal  area.  Vietnam has also made overtures to the US regarding use of its deep water port in Cam Ranh Bay.  Such actions taken by these states are not the result of American actions, but rather due to Beijing's. 

The current situation on the Korean Peninsula offers an opportunity for China to show that it is willing to take on the role of a responsible leader in the region; instead it has shown that it is not ready to embrace such a position.  To date, the Chinese leadership has only offered token statements, urging restraint and calm directed at both North Korea and the United States.  China holds considerable leverage over its long-time ally, with the DPRK dependent upon nearly 70% of its total trade with China.  Such leverage gives Beijing myriad options in pressuring Pyongyang to reign in its provocative behavior.  Yet to date, the only major known activity that the PRC has taken regarding the current situation is that it has looked to fortify its border  with North Korea in the scenario that conflict takes place and it can potentially stop millions of North Korean refugees from flooding across the Yalu River border that separates the two countries. 

The current situation in North Korea shows yet another example why the PRC leadership is not yet ready to take on a trusted leadership role in Eastern Asia.  Some US government officials, scholars, and think tank officials have theorized that by bending to China's position on specific issues, such as Taiwan, human rights, and other positions taken by Beijing that run counter to American interests, China will be more willing to take on a leadership role in cases such as using its influence on North Korea to maintain stability in the region.  While the citizens of China have increasingly begun to question its governments relationship with North Korea, perhaps CCP leader Xi Jinping should do the same.

North Korea: A Political Primer

     Over the past month, numerous media outlets in the United States have responded to statements and posturing from inside the Democratic People's Republic of Korea (DPRK) by labeling the course of events as "the crisis on the Korean peninsula", complete with the standard video footage of  goose-stepping North Korean soldiers marching in unison down Kim il-Sung Square,rocket testing , and cheering throngs of DPRK citizens appearing to be joined in unison with the mission of supporting their leader to their death if it required.

While there has undoubtedly been a substantial increase in threatening rhetoric from Pyongyang over the past few months, as well as diplomatic-military actions that should be taken seriously by it's neighbors (and of course, the United States), the question  that should be asked is actually twofold: Just how dangerous is the present situation on the Korean Peninsula, and why is the DPRK electing to take what many analysts see as provocative actions now?

While the first question posed can be answered at least to some degree by simply having an understanding of the military capabilities of the major actors in the region, the second question is perhaps more important, and requires a deeper look into the political structure of the DPRK.

The Major Political-Military Actors  within the DPRK

Kim Jong-un: The supreme leader of the DPRK since 2011.  Kim was preceded as leader  by his father, Kim Jong-il, who ruled from 1994-2011, and Jong-un's grandfather, Kim Il-sung, who founded the DPRK in 1948.  The bloodline of Kim's family has been the only leadership known to the people of North Korea since its inception, and it is important to note that while Kim Il-sung had unquestioned revolutionary credentials (at least with savvy rewrites of history, courtesy of party officials) upon his ascension to lead the DPRK following his military struggles against the occupying Japanese forces in the early half of the 20th century, both Jong-il and Jong-un have had to undergo risky power consolidation procedures in which gaining support of the military leadership was paramount to a permanent succession.  Although Kim Jong-il lacked the romantic biography of his father, Kim Il-sung implemented his succession in deliberate phases throughout the span of nearly three decades, allowing for key military leadership positions to be filled with Jong-il loyalists, as well as cultivating a personality cult that would solidify his legitimacy among North Korea's populace. Kim Jong-il did not plan his succession with the same foresight as his father, and analysts questioned for years who would actually take the reigns of the country upon his death.  While many speculated that it would be Jong-il's oldest son, Kim Jong-nam who would preside as the next DPRK leader, the bizarre episode of Jong-nam attempting to visit Tokyo's Disney World under a Dominican Passport reportedly embarrassed Jong-il to the level that he decided upon Kim Jong-un. Jong-il only had a very short time (under two years) to begin the delicate process of grooming his son as his successor, and as a result of his sudden death, was not able to fully ensure his son's smooth transition to power.

Jang Sung-Taek: One of the more acute political decisions made by Kim Jong-il before his death was to appoint his brother-in-law, Jang Sung-Taek as a behind the scenes "caretaker" of Kim Jong-un to aid in the power transition, along with Jang's wife Kim Kyong-Hui.  Jang was a long-time trusted political confidant to Jong-il, and was also in charge in leading the military units responsible for protecting the highest echelons of North Korean leadership.  Jang could be seen as a political moderate (at least in North Korean terms), as he has previously made numerous trips to Chinese cities with the mission of finding aspects of the Chinese economic system that could be implemented into the antiqued DPRK model.

Kim Kyong-Hui: Sister of the late Kim Jong-il and husband to Jang Sung-Taek who welds considerable power within the DPRK military structure, and is often considered a hard-liner who is likely one of the chief architects behind the DPRK's increasingly aggressive posture. While disappearing from view for over five years (2003-2009), she reappeared to take part in the transition role with Jong-un prior to her brother's death.  It would appear that Jang Sung-taek and Kim Kyong-hui provide a counterbalance to each other  regarding economic liberalization and military hard line stances.

North Korean Military Leadership: 
In spite of  the long-standing economic woes of the DPRK, the practice of the country's leadership has been to provide resources, incentives, and "perks" to its military leadership at the expense of economic development within the country.  As a result of this practice, support of the DPRK military is paramount to regime survival within the state.  During the initial transition phase for Kim Jong-un, the 2010 torpedo attack on a South Korean naval vessel and the North Korean artillery bombardment of the South Korean island of Yeonpyeong were widely seen as moves approved by Kim Jong-il taken with the goal of securing military support for the eventual leadership transition.  North Korea's Defense Minister, Kim Kyok Sik, is believed by analysts to be a hard-liner who has unquestioned support throughout the DPRK's military structure.


So Why Now? 
Although there are myriad  factors that are likely behind the recent actions-statements coming from the DPRK, there appears to be a highly calculated method behind what could appear to be reckless military posturing.

The DPRK does not fail to vociferously oppose the annual  military joint training exercises between South Korea and the United States.  This year, however, the exercises were preceded by another DPRK underground nuclear test, as well as a series of missile tests.  Despite warnings of military action from the DPRK, the joint exercises took place without incident. The North Korean leadership has once again shown its ability to manufacture a crisis with outside forces in order to garner political support from both its domestic population, as well as its military leadership.  Jong-un has been able to use the manufactured crisis to portray himself as a confident and caring leader of the DPRK, as shown below....

As well as a capable military tactician...

These carefully crafted public relations pieces are made not only for the DPRK's public and military viewing, but for international consumption as well with a message that is becoming increasingly apparent: Kim Jong-un is in charge of the DPRK and has the support of its military.  Yet the issue remains as to why the DPRK is choosing the present time to raise the tensions to the current level.  This is where the complexities of the North Korean political system need to be understood.

Diplomatic Currency

If the DPRK does not have the intention of embarking on a military adventure that would likely spell its demise, then what is it doing? The idea of using  multilateral state talks regarding its nuclear program to extract economic concessions appear to be an impossibility due to two factors.  The first is the DPRK's public statements referring to its nuclear capabilities as the "country's life", and that it would not trade the capability for concessions.  The second is a factor that has not been widely reported in global media coverage regarding the crisis, which is the April 1st meeting of the DPRK Supreme People's Assembly in Pyongyang.

In this meeting, a series of laws were passed in which not only make it a crime  for DPRK officials to even negotiate the country's nuclear capability, but the laws also ensure the country's nuclear capabilities will remain intact for the foreseeable future.  Perhaps even more importantly, the DPRK coded the usage of its nuclear weapons into law as being that of a defensive nature.  Some portions of the laws include:

 "They serve the purpose of deterring and repelling the aggression and attack of the enemy against the DPRK and dealing deadly retaliatory blows at the strongholds of aggression until the world is denuclearized"

"The DPRK shall neither use nukes against the non-nuclear states nor threaten them with those weapons unless they join a hostile nuclear weapons state in its invasion and attack on the DPRK"

"The DPRK shall strive hard to defuse the danger of a nuclear war and finally build a world without nukes and fully support the international efforts for nuclear disarmament against nuclear arms race"

Upon looking at the recent laws passed within the DPRK assembly (laws that need to have the consent of the current Jong-un faction prior to being voted upon), the fog begins to lift from the decision making process in the DPRK political leadership, in which the Jong-un camp is stating to the military leadership:

"The country's nuclear weapons program (a primary deterrent in the country's resistance to foreign military action as well as source of pride within the military) will not be negotiated away and will remain a major aspect of the DPRK's military capabilities........ you can place your trust in us"

Yet many analysts may pose the question: "If the North Korean leadership is now stating that it does not wish to even discuss its nuclear program, what does it have left to bargain with?" The DPRK's solution could be one in which it looks to "print diplomatic currency", much in the same fashion that countries left without capital print physical currency in the wake of an economic crisis. The DPRK leadership could discuss the following in the near future (all of which were "diplomatic currency" that it did not hold prior to 2013):

1. The reestablishment of communication between the DPRK and ROK-US military forces at the Demilitarized Zone (DMZ) checkpoint on the North-South Korean border

2. Stating that it will not resume production at its Yongbyon nuclear facility

3. Cease long-range missile testing

4. Negotiate a resumption of its 1953 armistice agreement with South Korea

All of these potential talking points were made possible by the DPRK by creating a crisis scenario in which it could take away such agreements in order to bring them back when the political climate was suitable.

Even if and when  Kim Jong-un and his faction elect to lower tensions with outside actors, it will not be a rapid process.  Recent United States military actions in response to DPRK statements and actions have included short-term responses (the stationing of F-22 Raptor's in South Korea and missile interceptor systems on its military bases in Guam) to long-term (announcement of missile interceptor systems to be placed in Alaska estimated to be in place by 2015) will not likely be reversed anytime soon.  The political temperature has reached a point to where it will take a series of measures on both sides to lower it to acceptable levels.  In the likely scenario in which tensions do gradually ease between the DPRK and the United States, it will likely be Kim Jong-un who scores the greatest political victory---as he will be portrayed to the people of North Korea, as well as its military--as the fearless leader who successfully stopped American aggression towards their beloved homeland (albeit aggression that was masterfully concocted by the DPRK leadership).  Yet one question remains unanswered.  Although North Korean posturing has taken place in various forms over the years to secure its leadership's standing domestically, why has Jong-un's faction taken it to such dangerously high levels?  The answer may lie in the leadership's long term plans of economic liberalization.

A Dangerous Domestic Game: 

In order to raise North Korea's economy from the dead, the Jong-un faction realizes that changes must be made.  Before such changes are made there are two factors to be considered.  The first is that military loyalty and support must be unquestioned.  Any changes in the economic system could jeopardize the current "military first" arrangement that is in place of monetary allocation given towards the military compared to the rest of North Korean sectors.  Before any changes take place in the current economic system in North Korea, the military leadership would have to feel secure that its place in the DPRK's societal pecking order would remain unchanged.  The Jong-un faction has looked to secure this loyalty judging by its recent actions.

Secondly, the most rapidly growing sector of the North Korean economy is not in its agricultural or industrial sectors, but rather, in an area in which it is difficult to measure in either monetary or social terms: the black market.

Heavy unregulated economic activity within the borders of the DPRK likely sends shivers down the spine of the leadership, as it is increasingly losing its ability to monitor the daily activities of its citizens, as well as the flow of unfiltered information both entering and leaving North Korea.  The flourishing of the North Korean black market has taken place primarily around the areas of its border with China at the Yalu River. It is here that cellular phones, radios, DVD and VHS recordings (many which show a flourishing South Korea), and nearly anything else with monetary value is available to an ever-growing black market consumer base.  While attempting to put the genie back into the bottle completely is not likely for the DPRK ruling class, it must at least attempt to provide an economic alternative to its citizens if it is to stave off a rapidly growing alternative economy.

Author and North Korean expert Bradley Martin, stated a similar point in an article printed yesterday:

"Some foreign analysts say his theory is that the nuclear deterrent gives him sufficient job security that he can economize on the conventional military and plow the resulting peace dividend into improvement of the civilian economy."

Having his uncle Jang Sung-taek by his side certainly raises the possibility that such thoughts may be behind the Jong-un camp's rationale behind such recent moves.  Additionally, the fact remains that although the rhetoric coming out of Pyongyang recently has been colorful and fierce, unlike past cases of tension between the DPRK and its rivals, there has not yet been a shot fired (unless one wishes to count the DPRK's nuclear testing and missile tests, which would not be unreasonable).  Tensions do remain high, however, and it would not take a major incident to light the tinderbox, resulting in a potentially terrifying military scenario---heightened tensions tend not to allow for smaller mistakes or misunderstandings to go without a response.  Yet if the Jong-un regime feels that it has sufficiently made it point to its domestic audience--both civilian and military--then it could choose to gradually lower the temperature and declare itself the victor in the diplomatic standoff.  Such an outcome would be quietly welcomed by Washington, Seoul, and Beijing.  And perhaps in the not-so-distant future, the people of North Korea would benefit economically as well.