[Viewpoint] Let’s spread the burden around

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[Viewpoint] Let’s spread the burden around

South Korea is poised to resume rice aid to flood-stricken North Korea after a two year hiatus. President Lee Myung-bak proposed in his Aug. 15 Liberation Day address to discuss creating a tax to finance unification costs. We are now at a crossroads and have to choose between taking up unification costs in advance through vigorous cross-border economic cooperation or continuing with the stalemate and frustration of inter-Korean relations.

We first should consider if there are ways to economize on the colossal projected costs of unification. The bulk of the unification costs will be spent to narrow the ocean of differences between living conditions here in South Korea and across the border.

We would have to pay for the nuts and bolts of human and social development, such as education, health care, housing, and to upgrade income levels of North Koreans living in impoverished conditions. Other monies will be invested in industrialization and social infrastructure to create jobs and income.

South Korea’s financial burden should be partly eased by humanitarian aid from foreign countries and through inter-Korean economic joint-ventures. But these activities lack efficacy and would play a minor role in shaving the cost of unification. Inter-Korean economic cooperation would have to expand in the future, even if th in the past it has not been small. The money that went to an inter-Korean economic cooperation fund averaged $600 million a year, which exceeded South Korea’s aid to 130 underdeveloped economies between 2004 and 2007.

There must something wrong if no tangible benefit has come out of such heavy investment. Our economic aid to North Korea bypassed international aid norms and procedures. For example, there was no agreement to study the feasibility of economic cooperation. Even the agreed terms were either disregarded or violated by North Korea. The troubles for companies doing business at the Kaesong Industrial Complex are the best example. We have to provide emergency aid to North Korea to help it recover from flood damages, but at the same time we must review previous inefficient pre-unification activities. Economic cooperation and humanitarian aid between the two Koreas lack efficiency.

We should seek a different path to reduce unification costs. Aid through multilateral platforms or international development banks can be a way. It’s similar to conferring authority to resolve inter-Korean security issues through six-nation negotiations.

In a multilateral structure, both Koreas can avoid emotional clashes and one party won’t be able to unilaterally call off or violate agreed terms in fear of losing face. The other countries also can serve as witnesses and supervisors to enforce both parties to agree and abide by the terms.

Moreover, when many countries are involved, the scope and capital for development projects can be enlarged and that can reduce South Korea’s financial burden. If South Korea initiates a trust fund to help develop North Korea, other countries with a stake in the Korean Peninsula will likely join. The government should seriously consider proposing to the World Bank or Asian Development Bank a multilateral trust fund to support North Korea’s development.

South Korea currently invests a combined $200 million in nine trust funds at international development banks committed to assist development programs in various underdeveloped economies. There is no reason why we should not set up a fund for North Korea, which is nearest to our heart and interests, while we help other poor countries.

Investment in the trust fund can be done with trade goods as well. South Korea can deposit its rice surplus.

The fact that North Korea is not a member of global financial institutions should not pose a problem. Palestine and East Timor benefited from development funds from the World Bank when they could not get direct aid from foreign countries due to diplomatic and political issues even without membership.

North Korea has already knocked on the doors of international development institutions to inquire about its chances of joining. A multilateral trust fund committed to help North Korea will encourage Pyongyang to seek membership with these institutions. It will be a way to draw the reclusive country onto the world stage and also share the financial burden for unification with the international community.

*The writer is a professor emeritus at the Hankuk University of Foreign Studies.

by Lee Kye-woo
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