“Of 60 Trillion Won Needed for Next Decade, 30 Trillion Won Will Come from Public”

Expecting that the second South-North summit talks will be held within the year, the government estimates that for the next 10 years from 2006 to 2015, the cost of inter-Korean economic cooperation payable by the South will total 59.94 trillion won (USD 65.02 billion).

However, over half of it, 30.2 trillion won or so, will likely be procured by increased taxation and issuances of government bonds, which will be a burden to the public. This method of financial procurement for South-North economic cooperation will cause a major stir.

On August 9, Yim Tae-hee, a Grand National Party lawmaker, made public a report of the Korea Development Bank titled, “Financial Procurement Measures to Pursue Mid-to Long-term South-North Economic Cooperation” after acquiring it from the bank. According to it, the government predicted that a total of 59.9480 trillion won would be needed for economic cooperation procurement projects in several phases from 2006 to 2015. The phases are Phase I: the North’s continued nuclear crisis (2006-2007); Phase II: the North’s nuclear disablement and disposal (2008-2010); and Phase III: the North’s nuclear disposal project (2011-2015). The phases will cost 4.619 trillion won, 13.876 trillion won and 41.453 trillion won, respectively.

The report, made at the request of the Ministry of Finance and Economy, was written by the Korea Development Bank, a state-owned policy bank, and submitted to the government early last year off the record. It predicted that the second summit talks would take place at the end of President Roh Moo-hyun’s tenure in Phase I.

Industry-wise, the report viewed the following expenditures: 14.0144 trillion won for constructing social infrastructure, including the Gyeongui Line (Seoul - Munsan) and the Donghae Line (Eastern Line), 13.664 trillion won for the Gaesong Industrial Complex, 2.2493 trillion won for the Geumgang mountain tour, 10.0037 trillion won for energy aid, including power transmission facilities and light water reactors, and 20.0166 trillion won to help normalize industries in North Korea.

However, 50.4 percent of it, that is, 30.2 trillion won, will be procured by national taxation and by issuing “South-North economic cooperation bonds” (16.5 trillion won) and increasing taxes (13.7 trillion won), which will possibly face harsh resistance from taxpayers.

Besides, the report noted that 66.7 percent of the total resources, about 40 trillion won, will come from means of requiring social consensus, including the budget conversion of military costs (5.8 trillion won), establishing “funds to support the South-North economic cooperation” (2.8 trillion won), and issuing “peace lotteries” (500 billion won). The remaining 19.948 trillion won will have to be procured by attracting private or foreign capital.

Deputy Prime Minister and Minister of Finance and Economy Kwon O-kyu said at a regular briefing on August 9, “Once the agenda for the South-North summit talks are confirmed, various channels to procure financial resources will be reviewed.”

ddr@donga.com