By Yoon Ja-young
A unified Korea could surpass economic powers such as France, Germany and Japan in terms of gross domestic product (GDP) in only a few decades, Goldman Sachs said in a report Monday. It pointed out that North Korea's mineral riches could especially help the South.
"Investors have long considered North Korea as a key risk factor when investing in South Korea," analyst Kwon Goo-hoon said in the report.
However, Kwon said the risks posed warrant re-evaluation, citing the prospect of a power transfer there and the changing economic landscape.
He commented that the North ― far behind its former socialist peers such as Mongolia and China ― appears to have no alternative other than economic reform and cooperation with neighboring countries. Its per capita income was estimated to be $1,067 in 2008, and the unofficial exchange rate to the dollar surged to 30 times the official rate in early 2009.
"Thanks to a decade of concerted efforts on the part of the South to improve economic links with the North, Seoul is already Pyongyang's largest export market, replacing China for the first time in 2007," Kwon said.
He expects a gradual integration between the North and South, similar to the pattern of China and Hong Kong, rather than an instant German-style reunification.
"One of the most striking findings of our study is the potential size of a united Korea in the long term. We project that a united Korea could overtake France, Germany and possibly Japan in 30-40 years in terms of GDP, should the growth potential of North Korea be realized. This projection would put the size of a united Korea in 2050 firmly on a par with, or in excess of, that of most G-7 countries, except for the United States," Kwon said, estimating the GDP to surpass $6 trillion.
He expected strong synergy between the South and North, especially thanks to minerals. "North Korea has large potential deposits of minerals, including magnesite, coal, uranium and iron ore, valued at around 140 times North Korea's 2008 GDP at current market prices," the analyst said, adding that the South has virtually no such resources.