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Study on the Direction of Seoul’s Inter-Korean Economic Cooperation

In-Chul MunㆍHye-In Kim

It is the view of the Moon Jae-in administration that improvement of inter-Korean relations promotes resolution of the North Korean nuclear issue. For this reason, the government proposed a ‘New Economic Map’ for the Korean peninsula and has actively sought to pursue inter-Korean economic cooperation since the beginning of the Moon administration. Economic cooperation will be pursued in earnest when the North Korean nuclear issue is resolved and the sanctions on the North are lifted. North-South Korean economic cooperation, when led primarily by the central government, has its limitations. The Gaeseong Industrial Complex and the Geumgangsan Tour program are cases in point. 
In order for economic cooperation to be successful and maintained, it is important that local governments, relatively less sensitive politically, take on a greater responsibility. Local governments tend to be more consistent in their pursuit of projects than the central government, and are more oriented toward political publicity. Furthermore, local governments are more politically flexible. Above all, economic cooperation can be a boost to sluggish local economies. 
It is against this backdrop that the Seoul Metropolitan Government (SMG) and other local governments have taken a keen interest in cooperation. They are, however, more focused on identifying new projects than on finding out more about the North and what it needs or learning what we can do and if we can indeed succeed. In any project, the first and foremost job is to study the target. It is only with such information that a project can be a success. 
As is as the case in the South, North Korea is a state with an overarching system comprised of political economic, societal, cultural, and other sectors. Each of these sectors is then made up of myriad sub-sectors. We, however, do not even have an accurate understanding of the North’s political and social realities, which are the most fundamental information to understanding a country. Inter-Korean economic cooperation is closely related to North Korea’s decision to open its doors. It is therefore undesirable to pursue cooperation without an accurate understanding of the North. 
In May 2016, North Korea held its seventh Party Congress in 36 years. Chairman Kim Jong-un announced the Five-year Economic Development Strategy (2016 – 2020). The North has sought to pursue balanced growth of different sectors to boost its economy. Knowing that it cannot achieve its goals on its own, Pyongyang aims to attract foreign investment. The Five-year Plan addresses core strategic industries, which governs the international economy that is closely related to economic development zones. To date, North Korea has designated 27 economic development zones. One of the main objectives for these zones is to develop the national economy by attracting foreign investment and introducing advanced technology.
This document is a pre-study with the primary aim of examining North Korea’s economic development zones and the relevant laws and systems. Inter-Korean economic cooperation should not be based on one-way assistance as it has been in the past. For the relationship to become sustainable, it should be mutually beneficial. The ultimate objective of this study is to explore the way forward for Seoul’s inter-Korean economic cooperation to revitalize the sluggish local economy.
For Seoul, the way forward may be as follows: first, Seoul should align its plan with the ‘New Economic Map’ for the Korean peninsula and the central government’s policies on North Korea; second, Seoul should work closely with the three northeastern provinces of China in its pursuit of inter-Korean economic cooperation; third, inter-city cooperation between Seoul and Pyongyang should be aligned with inter-Korean economic cooperation; fourth, Seoul should focus more on the North’s textile industry, as it has a relatively better production infrastructure and uses better technology than other industries in its pursuit of cooperation; fifth, Seoul should develop tour programs that involve tours in Seoul as well as in North Korean tourist development zones; sixth, Seoul should develop itself as a global financial hub by developing investment funds or insurance products that utilize North Korea’s economic development zones; seventh, Seoul should place its priority on the construction of infrastructure (e.g., civil engineering, railways, roads) required for economic development zones; eighth, Seoul should work with affiliated public institutions in its pursuit of cooperation; lastly, Seoul should ensure that inter-Korean economic cooperation is environmentally-friendly and safe.