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Title Economic Opportunities Amid Improving Inter-Korean Relations and Denuclearization Talks
Author CHOI Jangho
Date 2018-06-12
File KIEP opinions_no135.pdf 

Summit diplomacy to resolve the denuclearization issue of North Korea is proceeding at a breathtaking pace. The progress we are seeing in the denuclearization talks is leading to hopeful anticipation among North Korea's neighbors for prospective economic investments within the country.
A successful conclusion to the denuclearization talks is likely to be followed by North Korea's economic transition to a market economy. First, the North Korean economy will likely show double-digit growth for at least 10 years after transitioning to a market economy. Second, North Korea has abundant mineral resources and labor wages which are cheaper than Vietnam. Third, conducting FDI to North Korea carries the significance of entering the enormous markets of China, Japan, and Korea, due to cultural similarities and the geographical location of North Korea, which bridges China, South Korea, and Japan.
Even though potential FDI projects to North Korea are eliciting positive expectations, many obstacles will have to be overcome before the actual implementation of these projects. First, most economic sanctions against North Korea must be lifted to implement FDI. Second, North Korea has a very weak infrastructure. Third, entering the North Korean domestic market in the form of FDI projects is unfeasible because the income level is too low. Fourth, unfortunately, North Korea has no free trade agreement with any country except Korea. Fifth, North Korea's legal systems and institutional development remains at a low level, thus limiting the entry of FDI.
 We can safely conclude that progress toward the denuclearization of North Korea, and the subsequent resumption of economic cooperation, will serve as a significant factor contributing to peace and prosperity in Northeast Asia.  

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