North could be like Hong Kong: Study

North Korea would be better off economically if it is made a Hong Kong-style autonomous area in case of unification with South Korea, rather than full integration of the two sides as in the case of German unification, a report showed yesterday.

The report by Bank of Korea’s senior researcher, Moon Sung-min, and Soongsil University professor, Yoo Byung-hak, looked into the economic aspects of Korean unification based on three possible scenarios - full integration, a federal system in which the labor market is separated, and the so-called one-nation, two-systems model based on China and Hong Kong.

If the two Koreas are fully integrated politically and economically, it would cause high unemployment in the northern part of the peninsula because North Korean workers are less competitive than their South Korean counterparts, the report showed.

In that case, the average unemployment rate of the northern part of a unified Korea would amount to some 36.4 percent over two decades after unification, while the northern region’s economy is expected to grow at about 3.35 percent annually, the report showed.

Should the North be made a Hong Kong-style region, it would leave North Korean workers to compete among themselves and lower the unemployment in the region - an average of only 1.6 percent - and help their wages rise gradually in line with their productivity, the report said.

The region’s economy is also expected to grow at 5.21 percent on average annually, it said.

The per-capita gross national income in the northern region is estimated at $2,399 in case of full integration, and $3,370 in case of a Hong Kong-style autonomous system, 20 years after unification, the report showed.

The authors cautioned that the report only looked into the economic side of unification, and political and social aspects should also be studied.

Yonhap