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Love Thy Neighbour: prosperity and reconciliation between North and South Korea

Kang-Hyup Lee explores the potential benefits of lasting peace on the Korean Peninsula

On the 25th of June, 1950, North Korea invaded South Korea – The war for the Korean Peninsula began. What ensued was a bloody and costly conflict that claimed the lives of thousands. Homes were burned to the ground and key infrastructure, including roads, bridges and hospitals, was decimated. The economic impact of such destruction would last for decades. It eventually became evident to both sides that continuing the war, which pitted populations with a shared ethnic background and cultural affinity against each other, would only serve to cause more severe losses and heighten animosities. On the 27th of July, 1953, a truce was reached in Panmunjon, a village just north of the de facto border between the two countries. 

Despite ongoing tensions since the end of the war and the combative attitude of North Korea, both sides appear to have heeded the warnings from history. A summit between the two countries recently took place in Panmunjon, during which a declaration of peace, prosperity and Korean reunification was signed. In September of this year, South Korean President Moon Jae-in reiterated the sentiment of reconciliation between north and south in a speech delivered to the UN.

The Reunited States

Friendly relations between North and South Korea represent the healing of divisions. They also represent an economic opportunity that could have consequences well beyond the peninsula. The dissolution of the land barrier between South Korea and the rest of the Asian continent will give rise to new transportation routes. For example, the trans-Siberian railway may extend to South Korea whilst the airspace above North Korea may open for commercial and cargo flights travelling to and from the south. The availability of more direct routes out of South Korea will lower transportation costs and, thereby, promote exports and imports passing through North Korea. Moreover, the costly hold-ups caused by hostilities will significantly reduce, accelerating trade between the two countries. Southward migration of North Korean citizens will likely increase the supply of cheap labour and increase demand, benefiting South Korean businesses. 

North Korean citizens also stand to gain. The wealth of mineral resources in the country, such as iron ore and magnesite, would likely be exported in vast quantities and at lower prices than are seen today. Such resources are in high demand. Interest will continue to grow with the widespread adoption of technologies designed to fight climate change, which rely on many of the resources abundant in North Korea. The likely initial exodus of North Korean citizens may increase the supply of low-skilled, cheap workers to labour markets across the globe. This diaspora could help to alleviate acute labour shortages seen in many countries today. Of course, from the perspective of North Korean emigrants, life beyond the peninsula almost guarantees a higher standard of living. 

Financial markets are also likely to prosper. Peaceful relations between the north and south will help to mitigate the uncertainty inherent in any investment in the Koreas. Military exercises, such as the testing of ballistic missiles by North Korea, and altercations have caused aggressive selling of Korean assets by foreign investors. Commitment to peace will contribute to stability in an otherwise volatile market and, therefore, limit the risk of investments. In turn, this may increase foreign capital flows into the peninsula, to the benefit of businesses in both North and South Korea. 

Make K-pop, Not War

The cultural interplay between North and South Korea will reignite with a free exchange of ideas and the movement of people between the countries. The melding of unique yet similar ways of life, languages and varieties of food will likely generate an extraordinary cultural export. South Korea has already had great success in leveraging its distinct entertainment and food industries for export; K-pop, in particular, has become a global phenomenon. The influx of North Korean tastes and styles may enhance the appeal of South Korean cultural exports—securing the region’s status as one of the most culturally influential in the world. 

The exchange of ideas will likely foster advances in scientific research, offering a potential catalyst for innovation and economic growth. There is particular optimism around biodiversity research: over 2100 species of wild animals and plants, including approximately 30 endangered species, inhabit the demilitarized zone between North and South Korea. This well-preserved area could become a focal point of biological and environmental research and could even contribute to the understanding of environmental conservation.

Promises of Peace

In short, what began as the first steps towards de-escalating conflict at the end of the Korean war may eventually result in a prosperous period of harmony between the two Koreas. A silver lining for the people of North and South Korea, as well as the world.

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