United Korea: bigger than Japan?

September 21, 2009

North Korea, one of former President George Bush’s “axis of evil” countries and one of the few remaining Stalinist states, deserves to be re-evaluated given the prospect of a power succession and the changing economic landscape in the region, according to Goldman Sachs.

Apart from the robust military establishment (absorbing at least 20-30% of GDP vs 3% of GDP in South Korea),  Goldman says North Korea has large untapped potential, including rich human capital, abundant mineral resources (valued at around 140 times 2008 GDP) and significant room for productivity gains.

“We project that the GDP of a united Korea in dollar terms could exceed that of France, Germany and possibly Japan in 30-40 years, should the growth potential of North Korea, notably its rich mineral wealth, be realised,” the bank’s economist Goohoon Kwon says in a paper.

“This projection would put the size of a united Korea in 2050 firmly on a par with, or in excess of, that of most G7 countries, except for the U.S.

Readers of Global Investing may be aware that there are investors who are already looking at North Korea’s potential.

Chosun Fund, for instance, targets North Korea’s extractive industries and energy sector.

9 comments

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Leave it to Goldman Sachs to evaluate a country primarily in terms of their potential to feed/impact their greed. They’ll never learn.

Posted by Feed Me $eymour | Report as abusive

If U.S. military support were to be removed from South Korea then what percentage of their GDP would South Korea need to spend?

Posted by Keith | Report as abusive

Sure…jump on a nation’s untapped wealth (if that were remotely possible in this case), throw in billions to set up the infrastructure and facilities…then watch (again) as a country either arbitrarily gives you the boot or offers to “buy” the company.

What ever happened to investing in *this* country, anyway??

Posted by Brian | Report as abusive

Lots of ifs and maybes laden in that Goldman – Lets be realistic though:

North Korea closed down its largest market in June in the Communist government’s latest attempt to curb capitalism in the country, a monitoring group in South Korea said Monday.
http://www.cbc.ca/world/story/2009/09/21  /north-korea-closes-market-capitalism.h tml

The United Nations says some 8.7 million North Koreans – more than one third of the population of 23 million – are in need of food aid, marking the country’s worst food crisis since a famine in the late 1990s that by some estimates claimed the lives of three million people.
http://www.theglobeandmail.com/news/worl d/north-korea-starving-in-silence/articl e1278941/

Posted by Fiona | Report as abusive

Really now, Unified Korea with 110 million people? Funny Goldman Sachs, funny.

Posted by Jeff | Report as abusive

The phrase “North Korean GDP” alone was good for a laugh-out-loud-(and-look-embarrassedly-a round-the-coffee-shop) moment.

There are so many things wrong with this picture it really is funny to contemplate them. Briefly. [If I were a young and underemployed Goldman analyst, I might spend more time, chuckling madly to myself ...]

well. Don’t need to be sensitive.

One critical pre-requisite Sachs set for the pink-colored future in the peninsula is “North Korea should give up its nuclear ambition in order to reform communist system into opposite way.”

Who knows it’ll happen tomorrow?
Who knows it won’t happen till 2050?

Who knows about the future of North Korea?

Posted by YJ | Report as abusive

Some optimists are even predicting reunification in within this generation. But I think their ideal is unlikely to be realized for the time being. Of course, there is no knowing what the future may bring forth. However, before we -I guess, the world- gets too carried away with United Korea story, we should think what the obstacles are that face them. I want to raise two points and bring some reasons forward.
■ Political issues: The US refused to offer new concessions to bring back North Korea to a new round of talks and Bush took a view labeling North Korea part of an “axis of evil,”several years ago. He was partly in the right. It was also true that even Myanmar broke off diplomatic relations with North Korea in 1983, after North Korean agents set off a bomb in Yangon that killed visiting South Korean officials, including cabinet ministers. Experts on politics are always warning that civil war could break out in the province. There is also language difficulty between the South and the North. Have they had the language in common? Nope! North Korea couldn’t have broken through conventionalities.
■ Economic problems: South Korea, without any question, in this century is becoming the developed nation of Asia, also in the world of technology and science. But North Korea is the world’s poorest nation, still lack access to sea trade-if it would be possible, we could bring in inexpensive items from the Far East. North Korea’s economy is on the brink of breaking down but analysts don’t believe that the regime will take steps to bring in more foreign investment. Material well-being is thing of the utmost importance to human happiness, and it is thing that only North Korea’s government can bring about-no one can’t threaten to bring down his/her government.
Like the preceding, there is a widening gap between the South and the North. These factors are believed to be hampering efforts to form a national unity government in the Korean Peninsula. I think we could know what to set your priorities straight. The six party talks, which bring together the US, South and North Korea, Japan, China, and Russia, started in 2003, but are currently stalled. The first job is not to reunificate but to keep North Korea on track. It is like that when they leave their cars, they should lock all valuables in the trunk or glove box to avoid tempting a thief to break in.
Additionally, funny Goldman Sachs will bring out a new project in October-when people bring up negatives, you divert the negative.

Posted by Charlie | Report as abusive

looks like the Korean people have a bright future ahead of them

Posted by George | Report as abusive