Kwon Goo-Hoon, Goldman Sachs’ Chief Economist in South Korea, just took up a new role as head of President Moon’s Committee on Northern Economic Cooperation. This role includes North Korea, as well as infrastructure projects that would connect South Korea with Russia and Eurasia through North Korea.
Who is Dr Kwon? We first came across him in 2009, when he wrote this Goldman Sachs research briefing on the economic potential of a unified Korean economy. 2009 was an interesting time to write this, given that it was at the start of the end of the sunshine years, close to a year into President Lee Myung Bak’s term. In his research note, Kwon writes:
1. North Korea risks, ranging from war to huge unification costs, warrant a re-evaluation, given the prospect of a power succession in North Korea and the changing economic landscape in the region.
2. The North Korean economy is at a crossroads: growth has stagnated and the planned system is near collapse, but it has large untapped potential, including rich human capital, abundant mineral resources (valued at around 140 times 2008 GDP) and significant room for productivity gains.
3. We project that the GDP of a united Korea in USD 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.
4. We expect a gradual integration between the North and South, similar to the pattern followed in China-Hong Kong, rather than an instant German-style unification. The costs of the integration of South and North Korea could be reduced to an affordable level, if backed by appropriate policies.