A New Proposal for Korea's Reunification

By Dr. Lim, Yang-Taek
Professor of Economics, Dean, Hanyang University

The early 1990s witnessed the collapse of the East-West Cold War system with the fall of the Soviet Union and East European Communist bloc and the integration of East and West Germany. In its place, liberal democracy and the market economy system have taken root as universal values while liberalization, opening and cooperation among nations for mutual peace and prosperity have become the new world trends.

The biggest assignment of all for Korea is national reunification. As long as Korea is divided, the history must be distorted. Korea has been in a sense sacrificed and a great deal of energy has been expended. Since Korea's perpetual division has been a by- product of the Cold War, it is necessary to procure the support of the nations around the Korean peninsula. When the international situation is improved, the success and failure of Korea's reunification is up to national will and ability. Two Koreas became members of the UN (September 1991) and concluded an agreement on reconciliation, non-aggression, exchange and cooperation (December 1991).

The two Koreas, which have several points of common ground for unification (such as a single ethnic grouping, language and national identity), have seen a deepening of enmity due to their atrocious civil war and frequent acts of aggression by the North, resulting in an almost insurmountable ideological confrontation as the political rift between the two and their struggle for dominance on the peninsula has intensified over the years. The sharp discrepancy between the values of totalitarian socialism and free democracy and the significant gap in economic power and living standards between the two are expected to act as obstacles to reunification.

Unfortunately in North Korea, the suffering of the people has been increasing daily under their failing political system. In particular, the economic gap between South and North Korea has been increasing since the 1970s and it has made North Korea impatient and desperate, resulting in terrorist tactics such as the KAL aircraft bombing (November 1987) and the Myanmar bombing (October 1983) in an attempt to assassinate ex-president, Chun Doo-Hwan. North Korea has also been pursuing a nuclear development resulting from a perception of military and psychological inferiority. North Korea's decision to secede from NPT brought about much antagonism to the US and South Korea.

The division of Korea can be traced back to the peninsula's liberation from Japan in 1945 and has continued for over half a century, causing many problems for the Korean people which are not likely to be resolved. The 38th parallel was drawn for military convenience in connection with the surrender and disarmament of Japan on the Korean peninsula, with the American and Soviet armed forces dividing and occupying the South and North portions,1 and the two sides came to declare their independence individually as disagreement between their politicians and ideological conflict between the leftists and the rightists deepened.

During this period, political and social chaos was rampant in the South due to outbreaks of political struggle by the Communist Party whose activities had been legalized under the non-intervention policy of the US authorities, while the U.S.S.R. pursued indirect rule in the North through a policy of communization led by Kim Il-sung. Between 1948 and 1950, North Korea incited subversive movements in the South in the form of various uprisings and riots in Cheju, Yosu and Daegu utilizing leftist powers within the South, while instigating insurgent activities in the mountain ranges through the deployment of guerrillas.

The peace propaganda of the North evident in such efforts as the "Proposal for Peace" on June 8, 1950 and "Directives for the Establishment of Inter-Parliamentary Peace Policy" on June 18, 1950 proved to be insincere as it undertook an invasion of the South on June 25, 1950. The Korean people suffered huge losses as a result of the ensuing war, but the North has not completely abandoned its hopes of forcible reunification more than 40 years after the signing of an armistice in July 1953, as it has continued to fuel hostilities between fellow Koreans through numerous acts of aggression.2

North Korea maintains a dictatorship based on its 'Juche Ideology'. The basis for this political structure is the single-party system under the Labor Party. Thus, the power structure of North Korea is strictly centralized with an absolute concentration of power, and policy is determined by a single entity. The social structure, which is supported by strict supervision of citizens, has strong totalitarian, authoritarian and isolationistic characteristics which contradict the socialist principle of equality with its dual hierarchy of the governing and governed classes.3

1 Respectively Deployment of Soviet forces in North Korea, August 12, 1945; deployment of American forces in South Korea, September 8, 1945; and unconditional surrender of Japan, August 14, 1945.

2 Major acts of aggressions are Kidnapping of KNA airliner (1958. 2.16.), Ambush on the Korean Presidential Palace (1968. 1.21.), Kidnapping of US Pueblo (1968. 8. 5.), Uljin and Samchok Incidents (1968.11. 3.), Panmunjom Ax Murder Incident (1976. 8. 18.), Burma Aungsan Incident (1983.10. 9.), and 42 thousand other cases of armistices violation including espionagearmed incursionskidnapping of fishing vessels.

3 Ministry for Reunification, Korea White Paper on Reunification, December 1994. pp. 13-17.

<Table 1> is a comparison of the political and social structures of the North and the South. The salient characteristic of the North's socialist economic system is that private property is more restricted in scope than any other communist nation. Only the state and cooperatives may own means of production (Constitution, Article 20). It is noteworthy that North Korea's economic system is intimately tied to its goals of building up military power. The basis of North Korea's economic policy is as follows.4

< Table 1 > Socio-Political Structure of North and South Korea

Category North Korea South Korea
Political System
  • Communist/socialist national system
  • Single party system
  • Free democracy
  • Multiple party system
  • Power Structure
  • Kim Jung-il dictatorship
  • Single ideology system
  • Democratically elected president
  • Separation of administrative, legislative and judicial branches of power
  • Social System
  • Totalitarian social system linking President, Party and People
  • Public society where all citizens are required to take part based on a national party system
  • Hierarchical structure with priority for party members (approximately 3 million)
  • Idolization of leader (Jung-il Kim)
  • Controlled society with supervision of citizens and communications and travel limitations
  • Free society with guarantees of religion, press and assembly
  • Humane society with respect for individual rights
  • Capitalist society based on free competition
  • Moralistic society based on traditional conservatism
  • Characteristics
  • Long-term rule/dictatorship of Il-Sung Kim/Jung-il Kim
  • Deification of Il-Sung Kim/Jung-il Kim's guidance and Juche ideology as religion
  • Social system with unilateral, controlled, dogmatic and closed characteristics
  • Single-ideology society
  • Social system with democratic, open, diverse, creative and practical characteristics
  • Pluralistic practical society
  • First, it aims to establish an independent and socialist economy under the principle of self-sufficiency. This principle had been the single greatest obstacle to growth as it stifled specialization in areas of comparative advantage and also international cooperation through the introduction of the technologies and capital of advanced countries. As North Korea came to terms with the limitations of this policy in the 1980's, it has since realized the importance of external trade and economic cooperation and concentrated on expanding international exchange and cooperation.

    4 Yang-Taek Lim, Korea in the 21st Century, New York: NOVA Science Publishers, Inc., 2000, p. 258.

    Second, heavy industries have continued to be given priority. As a result, the imbalance between wasted resources and the business areas of concentration have only deepened, thus becoming a major factor in falling productivity at plants and enterprises. Heavy industries such as machinery and tooling are integral parts of defense industries.

    Third, the pursuit of both military and economic development should again be noted. In December 1962, North Korea declared its intentions of pursuing four major military directives, and has since pursued this policy after making it official in the Party Congress in 1966 in the midst of persisting small-scale conflicts with the South.

    II. Outline of the Existing Reunification Polices

    The Government of the Republic of Korea (South) declared its 'Directives for Unification' through a so-called 'Korean National Community' made up of Koreans from both home and overseas. A summary of the major points reveals the three principles of independence, peace and democracy, which signifies the intention to achieve unification through the independent will of the people, without the use of force and by democratic means by pursuing harmony amongst all Koreans. The process of unification would aim to establish an ethnically unified nation (a unified democratic republic) with the North and South uniting under the principle of co-existence and sharing prosperity. A North-South coalition would be formed as a transitional system and would serve the purpose of pursuing co-existence and sharing prosperity, union of society and the formation of a common living environment.

    Furthermore, a Joint Constitutional Committee would be formed through a summit meeting for the achievement of social, cultural and economic union with stipulations for the basic directives on unification, mutual non-aggression and the establishment of North-South coalition apparatuses. Such apparatuses would include a 'North-South Summit Council' to serve as supreme decision-making authority, a 'North-South Ministers' Council' for negotiation, coordination, and guarantee of execution purposes, a 'North-South Peace Council' to make preparations for unification, and a "Joint Secretariat" for the handling of administrative details, while the current DMZ (demilitarized zone) would be designated as a 'peace zone' and developed into a 'City of Peace' as the logical site for various organizations and apparatuses.

    The procedure of establishing a unified nation would be determined and announced by the North-South Peace Council, which according to the Constitution for Unification would follow the stages of general elections → establishment of a unified parliament and government → completion of the unified nation. The unified nation would be an ethnic union with the mandate of all Korean citizens, exist as a democratic state which guarantees freedom, human rights and the pursuit of happiness, constitute a single country, possess a bicameral system of parliament, promote the welfare of all its citizens (in the form of universal participation, guarantee of equal opportunity and freedom of ideology and expression) as its basic principle in a unified democratic republic, guarantee the security of the Korean people and maintain friendly relations with all nations to contribute to global peace.

    The directives for unification designate unification in three stages, by improving existing proposals for the unification process and unified nation, but still based on the principles of independence, peace and democracy; reconciliation and cooperation → North-South coalition → completion of the unified state under the basic guideline that the process of unification should proceed in a gradual and step-by-step manner.

    The first stage of reconciliation and cooperation would end the two sides' history of confrontation and their relationship of mistrust and opposition, and be a stage for the pursuit of reconciliatory co-existence by easing tensions through mutual trust and pursuing actual trade and exchange to speed up the process of reconciliation. In this preliminary stage, North and South Korea would begin to recover their national identity based on mutual trust and work towards preparing for unification in a more positive manner.

    The establishment and operation of a transitional North-South coalition was designated as the second stage in order to develop systematic coexistence towards the goal of a common nation and the eventual founding of an ethnically unified country. At this stage of North-South coalition, various cooperative apparatuses would be established and operated and their legal and organizational aspects would be systematized through mutual agreement.

    In the final and third stage of completing the unified state, the political systems of the North and South would be totally integrated through a systematic union in order to culminate the process of unification into a single state and a single nation. In other words, a unified government would be formed through general elections held under the Unification Constitution as peaceful reunification is finalized. Under the directives, the unified nation would have the mandate of all citizens involved and would constitute a democratic state in which individual freedom and welfare, and human dignity would be guaranteed.

    On the other hand, North Korea's proposal for 'Directives for Korea Democratic Federal Republic' was set forth as a finalized version for unification at the 6th Labor Party Congress held on October 10, 1980 by specifying in detail and systematizing existing directives. The North proposes the three principles of freedom, peace and ethnic integration as the logical basis and rationale behind a Korea Democratic Federation. The argument is that the most realistic and rational method for reunification under the principles of autonomy, peace and solidarity is one which grants autonomy as well as equal privileges and responsibilities to both sides by accommodating existing ideologies and systems.

    As for the organization, responsibilities and function of a federal apparatus, each side should have an equal number of representatives with an appropriate number of overseas Korean residents to form a 'Supreme People's Council' or 'Resident Federal Committee' to provide guidance to local governments and oversee joint undertakings, while the name of the nation, which would pursue a neutral foreign policy, would be the Korea Democratic Federal Republic.5 Such directives, however, have begun to show signs of change since Kim Il-sung's New Year Address in 1991.

    The points of specific changes to be noted are: first, differentiation with systematic unification6 by arguing for a federation based on 'one people, one nation, two systems, two governments'; second, elimination of possibilities for complete political unification by leaving systematic unification for posterity; third, dismissal of systematic unification as a way of 'annexing the weaker side' by taking the experience of East and West Germany; and lastly, strengthening the power of local governments.

    All the points have the shared characteristic of adding and emphasizing the element of a federation. However, the North's proposal has several inherent weaknesses for it to be seriously considered as a proposal for unification. In particular, the so-called 'four prerequisites for independent and peaceful reunification' constitutes serious problems.

    The four prerequisites of the realization of a democratic society (through the abolishment of anti-communist and security laws), the liquidation of the South Korean regime, the withdrawal of US forces in the South, and unification based on the principles of autonomy, peaceful unification and national solidarity are all aimed at forming a favorable environment for the 'South Chosun People's Revolution'. In effect, they signify the disarmament of the South Korean social order. Thus, the proposal for a

    5 The 10 major policy directives of the Democratic Coryo Confederate Republic are as: independent policy making; pursuit of universal democracy and ethnic solidarity; conduct of economic cooperation and guarantee for autonomous economic development; activation of exchange in the fields of science, culture and education and united development; of science and technology, national culture and arts and education; linkage of transportation and communication networks and guarantees for unrestricted usage of related facilities; stabilization of living for the working class including laborers and farmers and systematic improvement of welfare; easing of military tension and organization of a united army for resistance to external forces; support for the privileges and welfare of Koreans resident overseas; reassessment of pre-unification external relations and coordination for the foreign activities of the two autonomous governments; and, pursuit of a peace-oriented external policy

    6 'Systematic unification' is a terminology used by North Korea in referring to the unification of regimes proposed by the South's 'Directives for Unification', which calls for the establishment of a single democratic republic of 'one people, one nation, one system, one government' through the participation of all citizens in a democratic procedure and method, i.e. the establishment of a government and parliament through free elections.

    Korea Democratic Federation is but a cover for plans to achieve a communist unification through the establishment of a communist regime in the South. The plan simply calls for the eventual absorption of the South by the existing communist regime of the North.

    1. The Principles of Unification

    As the method of promoting unification, the formula lays down the formation of a 'national community.' This means that South and North Korea, as the same nation, should form a single community and thereby move toward national unification.

    The formula calls for the pursuit of a peaceful and phased unification, and the creation and development of economic, social and cultural communities through dialogue and cooperation between the South and the North. It then provides for the ultimate accomplishment of complete political unification in a single nation and state.

    The national community unification formula sets forth 'independence,' 'peace' and 'democracy' as the basic principles that have to be valued in the course of promoting unification.

    The principle of 'independence' stresses that unification should be accomplished independently based on the nation's own efforts and national capabilities without allowing any interference by alien forces. This means that unification ought to be promoted according to the Korean people's own free will through talks between the authorities of the South and the North under the spirit of national self-determination.

    The principle of 'peace' means that unification should be achieved in a peaceful manner under all circumstances, not through war or the overthrow of one side by the other. Though unification is the paramount challenge facing the nation and the most ardent wish of the Korean people, neither force of arms nor violence that would sacrifice people can ever be tolerated in attaining unification.

    The principle of 'democracy' implies that unification should be attained democratically through the participation of all the Korean people on the basis of guaranteeing the freedom and rights of all the members of the nation. This means that the course of unification should follow procedures and methods based on democratic principles, and also that even after unification has been achieved, the unified society should be one in which all the members of the nation can be assured of freedom and the right to lead decent lives.

    2. The Process of Unification

    The national community unification formula envisions the framework to achieve political unification peacefully by constructing a single national community step by step. Based on this, the formula lays down three stages for unification: first, 'stage of reconciliation and cooperation'; second, 'stage of Korean commonwealth'; and lastly, 'stage of realizing a single, unified nation- state.'

    The first stage of 'reconciliation and cooperation' represents a stage where South and North Korea liquidate their relations of enmity and confrontation and pursue reconciliatory coexistence by promoting mutual confidence building and expanding substantial exchanges and cooperation. In other words, this is a stage where South and North Korea, while recognizing and respecting each other's systems, dispel mutual enmity and distrust through exchanges and cooperation in all walks of life such as the economy, society and culture and thereby steer inter-Korean relations in a peace-oriented direction.

    The second stage of 'Korean Commonwealth' is an interim unification system under which the South and the North form a provisional alliance to institute peace and form a joint social, cultural and economic community in the course of constructing a complete unified state. At this stage, legal and institutional devices should be systematized under mutual agreement and various ways to achieve national integration could be discussed through organizations to be jointly formed. The issues of what organizations are to be created and what functions they are to perform under 'Korean Commonwealth' could be determined concretely in a South-North agreement. Basically, however, a South-North summit meeting and ministerial conference are to take place regularly while parliamentary representatives of the two sides would meet to prepare legal devices for unification such as a unified constitution.

    The third stage of 'realization of a single, unified nation-state' is a stage where the two systems of the South and the North are completely integrated based on the community formed in the stage of "Korean Commonwealth" thereby resulting in the realization of a unified political community. In other words, this means the successful realization of unification into one state in one nation. At this stage, a unified government and a unified parliament would be formed in democratic elections held pursuant to the provisions of a unified constitution prepared by the parliamentary representatives of the two sides. Then the organizations and institutions of the two systems would be integrated to accomplish unification in one state in one nation. A more important task at this stage would be the pursuit of socio-cultural, economic and psychological homogeneity in addition to political unification so that all the members of the nation could participate in forming a genuinely integrated community.

    3. A New Model for Korea's Reunification

    Yang-Taek Lim (1993, 1994, 1997 and 1999) has presented a new model for Korean reunification based on the five-step approach: preparation → economic integration → social integration → political integration → military integration.7

    Ⅲ. A New Proposal of Five-Stage Reunification

    1. The Model

    The existing official plans and policies for the national reunification have all been products of the Cold War. They thus possess inevitable limits in accommodating the many changes in the present era of reconciliation and peaceful co-existence. North Korea's proposal is merely a 'wish list' reflecting their fears as the less-populated and less-developed side and is thus riddled with inconsistencies. South Korea's suggestions are more realistic, but seem to be inadequate for it simply has stated a present-mid stage-unification route without detailing what specific courses this route will entail.

    This chapter outlines an alternative plan by improving upon South Korea's suggestions for a Korean National Community (September 11, 1989) and North Korea's plan for a Korea Democratic Federation (August 15, 1960, June 23, 1973, and October 10, 1980). Further developments such as the joint entry of North and South Korea into the membership of United Nations and mutual agreements on reconciliation, non-aggression and economic exchange and cooperation very much warrants consideration of the proposed unification plan. The strategic plan entails economic integration, social integration, political integration and military integration which is summarized in <Table 2>. A comparative review of the new approach is contrasted with official plans by the two governments in <Table 3>. On the theoretical side, it borrows from D. Mitrany's functionalist theories8, and on the practical aspects, it draws upon Yemen's example.

    The functionalism of David Mitrany (1943) is built on the foundational premise that human beings achieve social unity in the process of seeking to satisfy their desires such as the pursuit of one's own livelihood and security. Similarly, widespread cross-national exchanges that arise due to the need for division or sharing of labor, information, medical knowledge and common efforts to overcome natural disasters can produce a sharp necessity for mutual cooperation. Such a process calls for a political integration and develops into grassroots social movements. This is an integration spontaneously generated, through movements that work themselves upwards.9

    7 Yang-Taek Lim, "A New Proposal for the Korean Reunification with a Special Emphasis on the Economic Cooperation between North and South Korea as the Crucial Step", DoSan Collected Papers, Vol. 3, Seoul: DoSan Academy Institute, August 1993.

    Yang-Taek Lim, "A New Proposal for the Korean Reunification and Economic Cooperation between North and South Korea", paper presented at the International Symposium Commemorating the 20th Anniversary of the Institute for Sino-Soviet Studies of Hanyang University, Seoul, September 1994 pp. 27~28.

    Yang-Taek Lim "A New Proposal for the Reunification of the Two Koreas: Economic Issues", Journal of Asian Economies, Vol. 8, No. 4, 1997, pp. 547∼578.

    Yang-Taek Lim, "Economic and Military Issues in A New Proposal for the Reunification of the Two Koreas", The Hanyang Journal of Economic Studies, Hanyang Economic Research Institute, March 1997.

    Yang-Taek Lim, "A New Korean Reunification Model and the Direction of Civilian Campaign for it", DoSan Collected Papers, Vol. 7, Seoul: DoSan Academy Institute, March 1999.

    8 David Mitrany, A Working Peace System, London: Royal Institute of World Affairs, 1943.

    Myron Weiner identifies five political meanings of integration.10 First, he assumes the existence of ethnically and culturally diverse societies and views integration as a process by which culturally or socially separated groups are joined into a single territorial unit and a national identity is established. This process has an intimate relationship with how citizens under distinct political regimes may be merged into a single territorial and national consciousness.

    Second, the meaning of integration is related with the establishment of an apparatus for objective control which subjects lower-level administrative units or regions governing distinct cultural or social groups under central national authorities.

    Third, integration is a matter of linking the newly formed government with its new base of subjects.

    Fourth, integration implies the achievement of a minimum degree of consensus needed for the maintenance of social order.

    Last, integration entails the ability of society to form new organizations for the achievement of new goals.

    In summary, integration refers to the process of uniting different functional organizations or systems operating under distinct lines of authority and merging them into a single organization or system under a united line of authority.11

    Joseph S. Nye (1971)12 lists the following four elements required for the unification of a state. First, institutional integration is vital, at least in part. Second, coordination of policies is needed. Third, willingness on both parts to accept and understand the other side is required. Last, the formation of a Community of Security in which neither side would ever use violence on the other has to be stipulated.

    9 Yong-soon Yim, "The Logic of Approaching Unification in Stages," Myong Bong Chang ed., Structure and Prospects of North and South Korean Politics, Seoul: Han-ol Academy, 1992, pp. 459-483.

    10 Myron Weiner, "Problems in Integration and Modernization Breakdowns", Jason Finkle and Richard W. Gable (eds.), Political Development and Social Change, New York: John Wiley and Sons, Inc., 1966, pp.551~553. Referred from Lee Sung-ju, "North and South Korea's Approach Based on Integration Theory", Transitional Issues for a Separated Nation, Institute for Social Science Research, August 1991. pp.55~56.

    11 Ibid., Hong-ki Chang, Ryang Lee and Man-jong Lee, A Study on Military Integration between North and South Korea, Seoul : Korea Institute for National Defence, 1994, p. 89.

    12 Joseph S. Nye, Peace in Parts: Integration and Conflict in Regional Organization, Boston: Little Brown and Co., 1971.

    < Table 2 > Proposed Five-Stage New Reunification Model

    Stage One: Normalization of Relations and Promotion of Mutually Beneficial Economic Cooperation
    one people, two systems, two nations, two governments

    Stage Two: Economic Integration (one mixed form of national economy, enhancing of a self-reliant national economic structures
    one people, one economic system, two social systems, two political systems, two nations, two central governments

    Stage Three: Social Integration (the construction of an advanced democratic welfare society)
    one people, one economic and social system, two political systems, one confederate country, one central government with two regional governments

    The name of the country: The Democratic Confederate Republic of Korea

    Stage Four: Political Integration (the enactment of the reunification constitution by the National Reunification Council)
    one people, one economic, social and political system; one federal country; one central government with two regional governments

    The name of the country: The Democratic Federal Republic of Korea

    Stage Five: Military Integration (establishment of a reunified nation through free general elections)
    one people, one system, one country, one government

    The name of the country: The Democratic Republic of Korea

      North Korea South Korea New Proposal
  • Democratization in the South; easing tensions; removal of war risks; and US renouncement of two Korea policies and its intervention in domestic affairs
  • None
  • Mutually beneficial trade and economic cooperation
  • Philosophy for Unification
  • Self-reliance, peace, unity of Koreans
  • Self-reliance, peace, and democracy
  • Unity and reconciliation of the ethnic Korean community; construction of an industrial democratic welfare society; and peace
  • < Table 3 > Comparisons of the New Reunification Proposal with the Official Approaches to Unification

    1. Victory thru battles on unification fronts 1. Functional unification favoring an internal collapse of the North thru a full opening 1. Political, social, and economic system based on a consensus
    2. A radical approach without intermediate steps 2. A gradual approach with intermediate political integration 2. A gradual five-step approach with intermediate economic and political steps
    3. Priority on political and military talks 3. Importance on multi-contacts in economic, social and cultural areas 3. Importance on mutually beneficial economic cooperation, promotion of a special economic zone and capital & technological cooperation
    4. Pursuit of unification through direct North-South efforts disregarding surrounding major powers 4. Awareness of changes in the environment but linkage to its proposal not strong enough 4. Positive response to changes in Northeast Asia, link between changes in the environment and unification process
    5. Emphasis on territorial integration under 'one Chosun' doctrine, emphasis on class rather than national identity 5. Pursuit of unification under the notion of an ethnic Korean community 5. The same as the proposal of South Korea

    Procedures for Political Integration Lack of details Enactment of a reunification constitution at a North-South Council, and formulation of unification legislation and administration through free elections Pursuit of a gradual economic, social, political and military integration based on experiences in mutual cooperation (for the final stage, the same as the proposal of South Korea)
    Form of Reunified Country Neutral federal state Non-federal bicameral democratic republic Non-federal bicameral democratic welfare society

    Proposals of the South and the North

    Source : Yang-Taek Lim, A New Proposal for the Korean Reunification Based on Its Economic Integration, Seoul: Mail Economic Daily Press, November 1993.

    2. Economic Integration

    A. Importance of Economic Integration

    Stage One of the proposed approach to the Korean reunification must aim at recovering mutual trust and pursuing economic integration into a single self-reliant national economy across the peninsula. In the follow-up stage, the two sides would experiment with a post-unification economic system by creating a North-South Special Economic Zone in Changdan County at the DMZ. Through joint administration of this zone, South and North will accelerate their respective experiences in capital and technological cooperation. Indeed, it would be a learning curve toward achieving effective economic integration. A closer cooperation will be promoted through joint ventures in the manufacturing sector and joint development of mining, maritime and tourism resources.

    The economic union would progress in the following order: the construction of a Special Economic Zone to be followed by the establishment of an alliance on tariffs (liberalization of trade and application of common tariff policies), the creation of a common market with complete opening of the two markets and free flow of production elements, the formation of an 'economic union' (free flow of labor, capital, goods and services across the peninsula), and the denomination of a 'currency union' (the establishment of a single currency and the central bank).

    The free trade zone would be designed to allow for a free movement of goods and services between the two Koreas of the economic union through a sharp and progressive reduction and eventual elimination of all tariffs and non-tariff barriers. The creation of the zone will mark the beginning of the economic union. It follows that the economic union of South and North Korea will maintain an independent tariff and non-tariff system towards non-member countries13. The creation of the free trade zone will be followed by a Customs Union and the establishment of a Common Market. A customs union ensures unrestricted trade of merchandise and a single tariff system towards non-member countries; a common market ensures free flow of production elements, labor and capital.

    The German Economic Union, which was a precursor to the West German absorption of the Eastern socialist economic system, defined market economy as the common economic order. Under such a Union, East Germany was required to accept the basic system of the West and to forgo its former centralized economic system. The German Economic Union put an end to the inter-German trading system (Innerdeutscher Hadel), which had gone on for some 40 years after Germany's partition under the First State Treaty and replaced it with free trade within the Union.

    13 According to the extent of elimination of tariffs, the common zone could be classified as a 'Preferential Trading Club' or a 'Free Trade Area'. The former simply reduces tariffs whereas the latter eliminates them. There is, however, a similarity in that both systems maintain an independent tariff system towards non-members.

    Examples of each can be found in the 1932 British Commonwealth. Further examples of free trade areas include the Latin American Integration Association and the North American Free Trade Agreement. Because an autonomic character is assigned to free trade areas, these do not take part in the GATT as single negotiation units.

    It is unclear whether Korean unification will take the form of absorption (as in the case of Germany) or unification by conference (as in the case of Yemen); chances are that it will have an element of both. It will be a Korean model with its own distinctive features. There is no doubt that a capitalist economy is more productive than a socialist one, and that North Korea will inevitably carry out Chinese-style reforms. The Korean economic union will lead to a gradual transition of the North Korean socialist economy into a capitalist one with emphasis on the role of the respective governments in providing infrastructure and welfare systems.

    As is apparent in the German case, caution must be exercised in carrying out a currency union. Germany implemented the policy dictating the abolition of the East German Ostmark and its replacement by the West German Deutsche Mark. Ostmarks were made convertible into Deutsche Marks at a 1:1 ratio. Such an unprecedented measure was carried out since the unified government decided to overlook the functions of the market and concentrated instead on the political effects by way of strengthening national solidarity. Provision for the post-unification costs came to haunt the Germans. This measure only further weakened the competitiveness of East German products, discouraged investment and contributed to widespread adverse reactions. Indeed, there is much to learn from the German experience.

    A currency union for the two Koreas must be based on a convertibility ratio which reflects the real value of the two currencies. There is hardly a case for a replication of the German model in Korea. Indeed, the Korean case does not have to adhere strictly to any predetermined model. Peoples in the two Koreas are a homogeneous people seeking reunification. In addition, the creation of a customs union presupposes the conversion of the North Korean economy into a market economy. At present, North Korea does not even have a clear-cut definition or system of tariffs and taxes. Therefore, implementation of a shared tariff system will necessarily require North Korea to acknowledge free economic activity involving individual right to personal property, and private businesses' rights to maximize profit.

    Consequently, interim steps towards an economic union such as the creation of a customs union and a common market, are not necessarily applicable to the Korean case. The creation of a free trade zone along the DMZ will enable both regions to gain lessons in economic cooperation, maintaining their independent economic structures and systems of foreign relations. There will be no serious threat to the North Korean economic system. The foundation of a North-South free trading zone at Changdan County should be aggressively expedited as an institutional apparatus for mutual trade.

    B. Changdan County Special Economic Zone

    Yang-Taek Lim (1991, 1992, 1993, 1994 and 1995) proposed the establishment and management of a SEZ in Changdan County, an area in Korea's DMZ. The opening and reform of North Korea and the reduction of reunification costs, much of it through cuts in South-North military expenditures, need to be accelerated. Exchanges between South and North Korea entail many obstacles that have to be overcome. One of the core issues will be the international recognition of economic exchange in the SEZ as intra- regional rather than inter-state, in nature. A special economic area that is non-political and non-military and transcends ideology has to be established. Changdan County is recommended as the most appropriate area.14

    Most importantly, this plan is realistic. North Korea has plans to develop the Mount Kumkang and Mount Baekdu regions into international tourist spots; Nampo, Wonsan, and Chongjin into SEZs; and the area connecting Habsan Island at the mouth of the Tumen River, China's Hunchun and Russia's Posiet into a SEZ. North Korea, however, is going through a systematic conflict and has not been successful in inducing the inflow of foreign capital due to problems with accumulated foreign debt and international credit and internal conflicts. Establishment of the SEZ would have the following effects;

    First, a joint venture in the Mount Kumkang-Wonsan tourist development could be pursued by facilitating the push for a further opening of North Korea in the future. The SEZ would be able to induce foreign capital, improve balance of payments, increase employment and GNP for North Korea. It would also be a path to which its doors could be opened. North Korea could administer the SEZ as a foreign enclave similar to special economic zones of China; this would minimize the risk of collapse of the ruling regime in North Korea. An independent economic policy, different from that for other areas of North Korea, could be applied to the SEZ. North Korea would be able to receive South Korea's capitals and technology, plus substantive inflow of know-how without language barrier. The joint ventures with South Korea would indeed be much tangible economic aid to help North Korea overcome its economic crisis.

    14 The following are the reasons why Changdan County was selected as the most appropriate region to establish a North-South Korea special economic zone. The five grounds for selection are as follows: a base on the DMZ, on a region within or close to the DMZ; a region that is suitable for building a city, according to its topography; a potential place to become a transportation center when traffic between the two countries are connected and facilities laid; a region that can be the centrifugal and expediting force for the development of nearby regions, and; a satisfactory region of the basic's concept of the North-South Korea SEZ and its functions.

    Following the above basis for selection, Kyodong Province region, Kanghwa District region, Changdan County and Kaepung County were chosen according to an urban engineering approach. The four regions were researched again to select the best region which fit the conditions of a North-South Korea special economic zone. The following conditions of the four regions were researched with the aid of an urban engineering specialist: natural conditions, foundation establishments, economic conditions, and socio- political conditions.

    There were few differences in natural conditions. Kanghwa District ranked the best in foundation establishments. Changdan County had the optimum conditions for economic and socio-political backgrounds. Thus, it has been concluded that Changdan County has the best conditions to establish a North-South Korea SEZ.

    Second, from a nationalistic perspective, the most significant aspect of the SEZ is the initiation of economic cooperation between South and North Korea. South-North Korean economic cooperation may follow China's Xiamen SEZ (near Taiwan Strait). Complementarily of the major trade items for the two Koreas must reinforce the case for establishing the SEZ. As much as 95% of South Korea's total exports are processed manufactured goods. For North Korea, the ratio is just 25% (of which processed minerals make up 21%). The rest of North Korea's exports are primary goods. North Korea's work force and natural resources can be made productive with South Korea's capital and advanced technology.

    Third, the SEZ can be used not only as a place for economic reform and opening up of North Korea but also as an experimental laboratory of a reunified Korea, as an experimental progress from a free economic trade area to alliance in taxation, to economic community, to economic integration, to political integration, and on to one reunified nation-state of Korea.

    The realistic progression of stages in economic cooperation between South and North Korea may include the facilitation and promotion of exchange activities and trade deals in processing of low-tech products, the investment ventures inclusive of construction of industrial plants, and the establishment of organic industrial structures. Currently, South and North Korea have agreed to pursue effective economic cooperation through the transfer of South Korea's light industries toward enhancing intra-Korean competitiveness. However, the absence of adequate institutional structures encompassing political relations and guarantees for investment still persist. Thus, economic cooperation continues to remain in its preliminary stages.

    For North Korea, its initiatives to establish exclusive industrial plants for South Korean corporations is a welcome step. This is expected to minimize intra-Korean frictions stemming from differences in the two political and economic regimes in the South and North. Therefore, if and when the nuclear problem is resolved, closer forms of economic cooperation, involving the establishment of exclusive plants in Nampo, Haeju, Chongjin, the development of Tumen River and Mount Kumkang, joint development of natural resources and the building of social infrastructure will expectedly follow.

    Taking into account South Korea's present adverse trade situation characterized by high domestic production costs, rigidities in commerce with many import regulations and deterioration of international competitiveness from the rise of newly industrializing economies of Southeast Asia and China, the Korean reunification policy should be directed towards cooperation for the utilization of natural resources and trade in processing low-tech products.

    Commodity exchanges through processing-on-consignment is a method in which the South provides raw and secondary materials to the North, where they are processed before being shipped back to the South. Therefore, this is a method which can serve to deepen cooperative relations between the South and the North.

    An increasing number of industries are engaged in processing-on-consignment projects with the North, taking advantage of know-how enriched through early-stage textile processing on consignment. The projects include the assembly of color television sets, automobile electric wiring and the assembly of bicycle wheels. A total of 34 industries, large and small, promoted such projects in 1996 alone.

    The sharp expansion of processing-on-consignment projects was attributable to low wages in North Korea, the relatively high skill level of North Korean workers and also the belief that the promotion of such projects could help pave the way for future full-fledged investment in North Korea.

    It also seems that the North prefers this method as they can earn foreign currency while only using labor without making investment, not to mention helping them to develop their underdeveloped light industries.

    3. Social Integration

    Kim Dae-jung Administration has actively promoted intra-Korean exchanges in various socio-cultural fields, particularly in academic, cultural, religious and journalistic areas. The underlying policy in such efforts was to increase contact, to have more dialogue and to expand cooperation with North Koreans. So far, this administration has made much greater progress in this area than what was achieved over several years in the past.

    The government has given top priority to the issue of divided families in its North Korea and unification policy, asking the North to resume official dialogue on the issue.

    Due to a constant decrease in agricultural productivity North Korea has been short of a million to two million tons of grain every year since the mid 1980's. Therefore, North Korea's food crisis is caused by structural problems such as the inherent, inefficiency of the socialist economy and the failure of the North Korean government to improve agricultural productivity of the country. Unlike many African countries, therefore, North Korea can overcome a large part of the crisis if it works hard to do so.

    Regrettably, North Korea refuses to direct its resources to overcome the crisis and wastes them on military expansion and political propaganda instead. North Korea will be able to feed its people if it saves even a small fraction of what it spends on such counter-productive activities. A simple calculation shows that if the North Korean regime saves as little as 3% of its military spending, which is as much as US$150 million in total, it will have enough money to purchase one million tons of corn from abroad.

    This is why it is impossible to resolve the North Korean famine with one-time humanitarian assistance. It will require a more fundamental approach which may include technical assistance and encouragement on North Korea's self-efforts to overcome the crisis.

    Notwithstanding the financial difficulties in its domestic economy, the South Korean government resumed humanitarian aid to North Korea both at the government and civilian levels. Along with the emergency aid, the South Korean government also provided various agricultural materials including fertilizer and promoted agricultural cooperation with the North in an effort to help North Korea find a fundamental solution to its chronic food shortage.

    Academic exchanges between the South and the North, an area which contributes to enhancing mutual understanding between the two sides and improving inter- Korean relations, have been developing steadily. The area of exchanges has become more diversified and some of these exchanges have become regularized. However, they have yet to develop into direct exchanges between the two sides of Korea. In most cases, they take place in the form of joint participation in third countries together with Korean resident scholars and organizations abroad.

    Cultural and art exchanges between the South and the North should be realized actively not only to surmount the heterogeneity that has deepened between the two sides as a result of ideological difference and to restore national homogeneity, but also to minimize the aftermath of cultural and psychological friction likely to arise after unification.

    However, it has not been possible for cultural and art exchanges between the two sides to take place actively or regularly due to passivity on the part of North Korea, differences in the perception of culture and art between South and North Korea and also to the nature of performing arts, which require a large number of =persons, significant expenses and a long preparatory period. Some contacts in this area have taken place in third countries under the aegis of Korean communities abroad.

    4. Military Integration

    This section explains the literal meaning of military integration which inevitably follows the unification process and outlines the practical aspects which should be considered in depth in the course of such integration in light of the Korean peninsula's past history of armed conflict and present state of military confrontation.

    A. The Concept and Types Military Integration

    Integration of the military functions requires emphasis on the element of systematic unification rather than the simple bringing together of integration. Accordingly, military integration is a process of merging the various functions and organizations of different military forces into a single unit as well as a process of systematic unification of military activities, which results in integration between as well as within the militaries. Such integration can not be conducted through the internal planning of the militaries involved but must be done so in a parallel manner with integration in the political, economic and social arenas.

    In considering the possible timing of such integration between North and South Korea, it is obvious that the methodology will be a byproduct of the political integration and will be governed by developments in the unification negotiation process. One clear point is that the military integration will be among the final stages of the Korean reunification encompassing integration in political, social and military fields as it will necessarily have to follow an agreement on political unification. If it may be assumed that North-South relations will follow the stages of coexistence → cooperative coexistence → reunification, the environment for such reunification may be differentiated into one where the North undergoes drastic changes and another in which it follows a more normal path and provides a stable situation.

    The former scenario may again be divided into a case where a temporary governing power emerges internally and normalizes the situation on its own and one in which no such power emerges and the country is thrown into chaos; in the second case, a method for political reunification, whether it be by force or agreement, will inevitably arise and in turn determine the suitable method of military integration. As for the latter, military integration will be determined by the extent or degree of privileges and rights the South is willing to grant to its partner in negotiations, and whether a merger or absorption type of reunification will ensue.

    In either case, the method of military integration will range from one based on political agreement to one which occurs hierarchically, but it is certain that it will have to be part of the many practical tasks facing the two Koreas in their quest for reunification.

    <Table 4> demonstrates the different types of military integration processes based on the examples of Vietnam, Germany and Yemen.15 In the case of Yemen which had been classified as a case of one-to-one merger, forcible unification through absorption took place four years after the original unification by agreement.

    B. Considerations for Military Integration between South and North Korea

    On the military side, North Korea is now the fifth largest power in the world in quantitative terms as a result of its 1962 policy of military augmentation. As of January 1994, the standing armed forces is estimated at 1.03 million (900,000 army, 46,000 navy and 84,000 air force personnel) as the country is known to be the second most intensively militarized in the world after Israel in terms of military personnel density.16

    15 Ibid., Hong-ki Chang, Ryang Lee and Man-jong Lee, p. 92.

    16 Ibid., pp. 253-257.

    Type Scenario Characteristics Case
    Forcible Unification through Absorption War or involvement of force
  • Unconditional submission and disarmament of subordinate nation
  • Military integration centered around dominant nation
  • Abolishment of the military of the subordinate nation and non-compensation for related assets
  • Vietnam
    Unification through Consensual Absorption Unilateral unification by agreement
  • Unconditional submission and disarmament of subordinate nation
  • Military integration centered around dominant nation
  • Abolishment of the military of the subordinate nation and compensation for related assets
  • Germany
    Unification through One-to-One Merger Consensual merger on an even basis
  • Agreement on military integration on even terms
  • Military integration centered around both countries involved
  • Military integration in which unification has lesser significance than integration
  • Inherent potential for future coercive conflict
  • Yemen

    < Table 4 > Types of Military Integration Processes

    The characteristics of the structure of North Korea's military forces is that it remains unchanged for both war and peacetime situations. In times of war, the supreme command oversees all armed personnel including reserve forces such as the Laborer's Army, with little movement in lower-level frontline troops and only slight shuffles in the mid-level command.

    Even at the present, army, navy and air force troops are deployed on the frontline areas with 200 pieces of large-caliber artillery including 170 mm and 240 mm guns, deployed at the very forefront in direct contradiction with the traditional principle of artillery as cover fire from behind the lines, in order to threaten Seoul and its metropolitan areas all the way down to Suwon. In the 1980's, however, it has been reported that North Korea has come to realize the limitations of conventional weapons and has stepped up concentrated investments in strategic weapons as missiles and biological weapons. It has already succeeded in test-firings of missiles to carry chemical and nuclear weapons for ranges over 1,000 kilometers, and is also pursuing the development of long- range artillery and medium and long-range missiles for mass-destruction purposes.

    North Korea's ground forces are organized into 2 artillery and 4 mechanized armies, 10 regular armies, 18 army commands and special command centers coordinating transport, artillery and special forces functions.17 There are also 60 infantry divisions and brigades, 25 mechanized brigades, 13 tank brigades, 24 special forces brigades and 30 artillery brigades for a total of 152 divisions and brigades. Major equipment includes over 3,800 mechanized units including 2,760 units of T-54/55/59 tanks and 800 armored vehicles including the latest model T-62 and over 12,500 pieces of artillery including 10,800 pieces of field artillery composed of 8,200 pieces of combat artillery of various calibers (76.2/100/122/130/152/160 mm) and 2,600 pieces of cover artillery (107/122/132/240 mm) and others used for the defense of strongholds and strategic positions. <Table 5> shows a comparison between North and South Korea's military power.

    17 Ministry of Defense, Korea, White Paper on Defense, October 1994, pp. 254~255.

    Category Sub-category South Korea North Korea
    Manpower (in 1,000 troops) Army
    Air Force
    Ground Forces Armies 11 20
    Divisions 50 54
    Brigades 21 99
    Tanks 2,050 units 3,800 units
    Armed Vehicles 2,250 units 2,500 units
    Field Artillery 4,700 guns 11,800 guns
    Navy Destroyers 180 430
    Support Vessels 50 335
    Submarines 4 35***
    Air Force Tactical Fighters 530 840
    Support Crafts 160 510
    Helicopters 630 290

    < Table 5 > North and South Korea's Military Power

    Note: * Does not include reserve forces, includes marines forces.
            ** Marines forces included in army.
          *** Includes small submarines.

    Source : Ministry for Defense, Korea, White Paper on Defense, 1996.

    In their militaries and their respective social statuses in the two, North Korea's state-run system and socially privileged military class differ greatly from those of the South, and disparate military systems, ideologies and equipment will present difficulties to integration. As already mentioned in this section, the method for military integration will necessarily be determined by political developments leading up to an agreement on unification and the subsequent choice of a methodology thereof, but the task is undoubtedly a practical one which must be achieved as part of North-South integration.

    Furthermore, military integration cannot be achieved solely through internal planning and must naturally be done in a parallel or complementary fashion with, and as a continuation of integration in the political, economic and social fields. The military is an armed but politically subordinate organization by its very nature and has a pyramid-shaped command structure which implies that it can only function properly as a single unit in terms of line of command, due to its lack of flexibility as an organization and its need for strict adherence to regulations.

    As for possible problem points to consider in military integration, integration of systems, ideologies, equipment and logistics may first come to mind, but it can be asserted with a degree of certainty that the greatest challenge will be the integration of personnel, or the attainment of a common identity. Organizational restructuring, personnel management, education and training, the draft system and the management of reserve forces will all be greatly affected accordingly. Preliminary preparations should be made so that national support which will enable the sustained pursuit of directives for the alleviation of conflicts and legal systems and measures to facilitate the completion of a single, united army will be secured so that military integration may proceed in line with integration in other fields.

    IV. Conclusion

    National Reunification

    As for national reunification, there are bound to be many external variables involved, but recent changes in international and South-North Korea relations indicate a heightening of possibilities. The more important question is whether the citizens of the country can handle their given roles until these three national objectives are met. A division of roles is required before anything else. The respective roles of politicians, the government, entrepreneurs, laborers, educators, the press, and other parts of society are all important.

    Historically, one language and one shared socio-cultural heritage remain a strong positive factor for a unified Korean regime. The economic rationale for Korean reunification provides an articulate agenda, much beyond any and all normative idealization.

    As the reunification of Germany is compared to that of Korea, it should be stressed that the former was fulfilled despite the difficulty of the Germans in resolving their problems independently. The desire for reunification runs strong among the Korean people, yet there has not been enough effort. The task of the reunification of Germany after 1945 was fully under the responsibility and claim of the four Western powers: the US, Great Britain, France, and the U.S.S.R. Militarily, West Germany was bound to NATO, and East Germany to the Warsaw Treaty. Economically, West Germany was part of the European Community, and East Germany of COMECON. Such circumstances did not make it easy for the two Germanys to act on their own accord. Thus, the reunification of Germany on October 3, 1990, was almost an achievement of what was thought to be impossible.

    On the other hand, there is more flexibility in the interests of the involved international powers regarding the relationship between South and North Korea. In addition, Korea has a long history as a united nation, with same culture, language and lifestyles of the peoples of the Two Koreas. This by itself, however, does not solve the conditions that are less favorable than they were for Germany.

    First of all, Korea went through a tragic civil war which deepened the rift of distrust between the South and the North.

    Second, unlike the people of East Germany who were well informed of West Germany's free and prosperous living conditions, North Koreans are living in one of the world's most closed societies with little access to information about the economic prosperity in South Korea.

    It follows that rational thinking from both sides is critical for the revival of trust and the resolution of conflict and hostility and for solving the problems on the Korean peninsula. It needs to be reiterated that the reunification of Germany should enable Koreans to realize the importance of building the fundamentals of a peaceful reunification, which can be done through the increase of exchange and cooperation on an economic agenda. A path to regain national homogeneity of Korea must be laid out in tangible progressive steps.

    In conjunction with the cost of reunification of the Two Koreas, much has already been paid in the maintenance of the present divided status, and much is still being or yet to be paid. Net gains from the expected economic effects of reunification will far outweigh the cost. Ever since the withdrawal of the American forces from Asia following the declaration of the Guam Doctrine in the 1970s, military spending in South Korea has seen a rapid increase, accounting for 4-6% of GNP. North Korea spends 20-25% of its GNP on defense expenditures under its present policy. In total, South and North Korea are spending about US$12-billion annually just on direct military expenditures. Furthermore, the Two Koreas are paying countless other costs of division due to ineffective use of land, military draft of the young workforce, and ideological conflicts, not to mention the pain of separated families. Reunification is not just a normative rule, but also necessary for pragmatic reasons.

    The existing official plans of the two sides are both products of the Cold War and thus display inevitable limitations. Those plans simply state a present to mid-stage to unification route without presenting details. However, the author presented an alternative five-step unification plan which not only corrects their deficiencies but also copes with recent developments through a preliminary normalization of relations, which then progressively moves on to economic integration, social integration, political integration, and military integration. This author focused on an exposition of the economic issues relative to Korean re-unification. An examination of social, political and military issues involved are also important and must be independently undertaken.

    North Korea is well aware of internal conflicts that may result following the execution of ambivalent policies such as the hermit policy of 'Socialism Our Way' on one hand and enactment of laws and institutions systems to attract foreign capital and technology on the other. North Korea had devised 'hyper belt-tightening' fiscal plans for the year 1993 by minimizing investment in new facilities and concentrating instead on optimization of production in existing facilities through increased supply of energy and raw materials. It also resorted to using nuclear powers as a morale-booster for its labor and thus as a means for elevating production. However, the final results were grim. Production fell due to decline in raw material sources such as coal mines and the metalworking industry.

    North Korea's economic crisis can be traced primarily to its socialist system of planned economy. In addition, much of the crisis can be attributed to the following characteristics unique to the North Korean system: (1) insistence on a closed self-sufficient economy, (2) the burden of excessive military spending, (3) lack of direction in policies, (4) unrealistic establishment of large-scale enterprises, and (5) the breakdown of the external economic relations. In particular, estranged relations with the former Soviet Union, which had provided North Korea with continued aid for economic and technological development, has dealt the North Korean economy a big blow.

    From an economic point of view, it would be desirable for North Korea to succeed in its Chinese-style economic reforms, and for the process of reunification to progress slowly and gradually. However, there is a possibility, as was the case with Germany, that South Korea would have to take charge of the North Korean economy.

    Under such circumstances, it would be helpful for Korea to refer to the policies adopted by Germany in regard to the integration of currency, the process of integration of the economy, and the issue of property ownership.

    First, for the integration of currency, the exchange rate should be thoroughly based on the real economic value of both currencies. Because Germany allowed the free movement of its citizens, the integration of currency and rise in wages at a 100% ratio was inevitable. For Korea, the South should find investment to the Northern regions economically profitable, matching their investment with the availability of labor forces in the North. This must not be an open invitation for a southward movement of North Korean residents, which would imbalance the process. Provision of investment subsides, various tax reductions, and massive investments of social overhead capital need to be reviewed in order to achieve this.

    Second, in the process of integration of the economy, North Korea's absorption into the capitalist market economic system must be a necessary precondition, irrespective of what form of reunification may finally take place. It has been proven that the capitalist economic system is superior to that of the socialist economic system, and North Korea will have little choice but to accept reforms, as has recently been the case in China.

    Third, in regard to the issue of property ownership during the process of social integration, the following course of action is recommended. The government of united Korea should not make refunds or compensation to the original owner, but rent or sell the real estate after making it the property of the state, and thus generate funds for reunification. Following Germany's policy of returning seized real estate would become a large barrier for investment in North Korea. As the legal ownership of real estate becomes unclear, there is a tendency for investors from the South to shy away from taking charge of national corporations in the North.

    Finally, it must be stressed that South Koreans must make continuous efforts in the preparation for reunification. These include: the formation of a highly scientific, technological resource pool; the development of an independent economic structure; and the establishment of a developed democratic welfare society. Successes in such areas will definitely change North Korea's attitudes toward the South, and provide a basis for the cooperative pursuit of reunification. As evidenced in the discussion of the unification experiences of Germany and Yemen, many difficulties had to be overcome until a unified state was established. In the case of Germany, while it is true that there was the external development of a realignment in the international order following Gorbachev's pursuit of a new ideology and the ensuing collapse of the Soviet Union, it cannot be denied that internal factors such as the formation of a strong economic basis and the buildup of mutual trust and national identity based on continued exchanges and cooperation with East Germany finally paid off in one historic moment.

    Major References:

    Chang, Hong-ki, Lee, Ryang and Lee, Man-Jong, A Study on Military Integration between North and South Korea, Seoul : Korea Institute for National Defence, 1994.

    Chang, Myong Bong, "Research on the Unification Constitution of North-SouthYemen," Research on Public Law, No. 21, 1993.

    Lim, Yang-Taek, A Study on the Technological Innovation of Korean Machinery Sector, Seoul: Korea Economic Research Institute, No. 48, April 1988.

    ----------------, "A Study on a North-South Korea Special Economic Zone", Economic Studies, Korean Academy of Economic Association, Seoul, Korea, December 1991.

    ----------------, "Step-by-Step Strategies for inter-Korea Economic Exchanges", Studies on the North Korean Economy, Vol. 3, June 1992.

    ----------------, "A Study on the Strategies for the Establishment of the inter-Korea Special Economic Zone", paper presented at Korean Academy of Economic Association, Seoul, Korea, December 1992.

    ----------------, "A New Proposal for the Korean Reunification with a special emphasis on the Economic Cooperation between North and South Korea as the Crucial Step", DoSan Collected Papers, Vol. 3, Seoul: DoSan Academy Institute, August 1993.

    ----------------, A New Proposal for the Reunification of Korea based on its Economic Integration, Seoul: Mail Economic Daily Press, November 1993.

    ----------------, The People Perish Where There Is No Vision, Seoul: Mail Economic Daily Press, September 1995.

    ----------------, Vision and Challenges for Korea in the 21st Century: Toward the Construction of a Reunited Korea, Seoul: Mail Economic Daily Press, September 1995.

    ----------------, How to Utilize DMZ for Korean Reunification, Seoul: Korea Ministry for Reunification, December 1995.

    ----------------, "A New Proposal for the Reunification of the Two Koreas: Economic Issues", Journal of Asian Economics, Vol. 8, No. 4, 1997.

    ----------------, Korea in the 21st Century, New York: NOVA Science Publishers, Inc., 2000.

    ----------------, "A New Proposal for a Northeast Asian “Peace City” for Securing Peace and Cooperation on the Korean Peninsula”, The Bi-Monthly Journal of The BWW Society, Vol. 1, No. 2, November/December 2001.

    Mitrany, David, A Working Peace System, London: Royal Institute of World Affairs, 1943.

    In view of the new developments which are coming to pass day-by-day in the Korea peace process, Dr. Lim will be offering an up-to-the-moment commentary in the May-June 2002 issue of the Journal, citing the current environment following the terrorist attacks on the United States in September on through President's Bush's visit to Korea in February 2002. For related articles refer to "A New Proposal for a Northeast Peace City on the Korean Peninsula."

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