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A United Korea? Reassessing North Korea Risks
Goohoon Kwon, CFA
Tel: 82-2-3788-1775
[email protected]
Key topics
 North Korea: Risks and opportunities
 North Korea’s economy: At a crossroads
 North Korea’s long-term growth potential
 A united Korea: Projections and integration costs
 Appendix
Goldman Sachs Global ECS Research
2
North Korea risks
Intraday KOSPI reactions on May 25,2009 to the 2ndnuclear test by
North Korea terms
1420
1400
1380
1360
1340
1320
-2.6% in a m inute
Goldman Sachs Global ECS Research
2:31 PM
2:01 PM
1:31 PM
1:01 PM
12:31 PM
12:01 PM
11:31 AM
11:01 AM
10:31 AM
10:01 AM
9:31 AM
9:01 AM
1300
3
North Korea Risks
The day of the event
D ate
1998/08/31
1999/06/15
2002/06/26
2004/09/23
2006/07/05
2006/10/09
2009/04/05
2009/05/25
2009/06/01
Event
Daepodong-1 rocket launch
Naval firefight in Yeon-pyong-do
Naval clash on the Yello Sea
Ballistic missile fire test
Daepodong-2 missile launch
Nuclear test
Long-range missile launch
Nuclear test & short-range missile fire
Short-range missile fire
D ate
1998/08/31
1999/06/15
2002/06/26
2004/09/23
2006/07/05
2006/10/09
2009/04/05
2009/05/25
2009/06/01
Event
Daepodong-1 rocket launch
Naval firefight in Yeon-pyong-do
Naval clash on the Yello Sea
Ballistic missile fire test
Daepodong-2 missile launch
Nuclear test
Long-range missile launch
Nuclear test & short-range missile fire
Short-range missile fire
Goldman Sachs Global ECS Research
KOSPI
0.3%
-2.2%
-7.2%
-0.6%
-0.5%
-2.4%
1.1%
-0.2%
1.4%
U SD
1.0%
-0.4%
-0.8%
0.1%
0.4%
1.5%
-2.4%
0.1%
-1.4%
KOSPI
turnover
KTB 3 yr
-10 bp (close: 11.40)
no chg (close: 6.70)
-3bp (close: 5.83)
+3bp (close: 3.55)
-4bp (close: 4.85)
+2bp (close: 4.59)
+4bp (close: 3.95)
-4bp (close: 3.81)
-2bp (close: 3.81)
+57.2%
-1.4%
+21.2%
-14.3%
-3.5%
+54.3%
+1.1%
+9.7%
-9.8%
KOSPI2 1 M
A TM Vol
NA
NA
+0.6%
-1.9%
+2.8%
+25.4%
-0.3%
+6.2%
+0.7%
D ays tak en to recover to the level of the day before the events
KOSPI
KOSPI2 1 M
KOSPI
U SD
KTB 3 yr
turnover
A TM Vol
NM
1 day
5 days
5 days
3 days
5 days
NM
5 days
NA
1 day
NM
NM
11 days
4 days
13 days
NM
4 days
NA
NM
NM
NM
4 days
NM
9 days
1 day
NM
NM
0 day
1 day
4 days
1 day
2 days
0 day
NM
NM
1 day
NA
NA
2 days
NM
13 days
5 days
NM
10 days
2 days
4
A United Korea could overtake France, Germany
and possibly Japan in 30-40 years in terms of GDP
World in 2050 and a United Korea: GDP in USD terms (2007)
2007 US$ bn
80000
70000
60000
50000
40000
30000
20000
10000
Ira
n
Ar
ab
ia
ud
i
Sa
re
a
ly
Ko
Ita
ut
h
So
ia
Br
az
il
R
us
si
In
a
do
ne
sia
M
ex
U
ni
ic
te
o
d
U
Ko
ni
te
re
d
a
Ki
ng
do
m
Tu
rk
ey
Ja
pa
n
Fr
an
ce
G
er
m
an
y
N
ig
Ph eria
ilip
pi
ne
s
C
an
ad
a
In
d
St
a
U
ni
te
d
C
hi
n
a
te
s
0
Source: GS Global ECS Research.
Goldman Sachs Global ECS Research
5
A United Korea could overtake France, Germany
and possibly Japan in 30-40 years in terms of GDP
World in 2050 and a United Korea: GDP in USD terms (2007)
(excluding China, US, India and Brazil)
2007 US$ bn
8000
7000
6000
5000
4000
3000
2000
1000
ia
n
Ar
ab
Ira
ud
i
Sa
Ko
re
a
ly
Ita
ut
h
So
da
an
a
pi
ilip
Ph
C
ne
s
ria
y
ig
e
N
m
an
ce
G
er
n
pa
Ja
Fr
an
y
rk
e
U
ni
te
d
Tu
Ki
n
gd
Ko
r
d
ni
te
U
om
ea
o
ic
M
ex
es
on
In
d
R
us
s
ia
ia
0
Source: GS Global ECS Research.
Goldman Sachs Global ECS Research
6
The North Korean economy is at a crossroads
North Korea’s real GDP is still lower than
its 1992 level
N. Korea’s economy is stagnating
recently
Output correction and recovery in formerly planned economies (real
GDP, 1992=100)
% chg yoy
Index
180
8
6.2
160
Transitional economies (median)
6
North Korea
140
3.8
3.7
4
3.7
Russia
Kazakhstan
120
1.8
2
1.3
2.2
1.2
0
-1.1
-2
100
-1.1
-2.1
-4
-3.7 -3.5
80
-4.2
-2.3
-4.1
-3.6
3-year moving average
-6
-6
60
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-6.3
-8
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: Bank of Korea, IMF, GS Global ECS Research.
Goldman Sachs Global ECS Research
7
The North Korean economy is at a crossroads
Per capita income of North Korea in USD is similar to that of
Vietnam and India
N orth Korea* Vietnam M ongolia
India China Cam bodia Philippines
Laos
1995
1033
288
631
384
603
297
1055
382
1996
989
338
598
410
701
295
1152
388
1997
812
361
528
426
772
281
1122
357
1998
572
357
480
423
819
253
867
255
1999
714
374
441
449
865
281
992
286
2000
757
402
455
451
949
288
989
329
2001
706
413
482
459
1042
309
906
327
2002
762
440
518
480
1135
327
958
331
2003
818
492
582
559
1274
349
973
380
2004
913
553
720
645
1490
394
1040
433
2005
1056
639
905
734
1715
455
1159
485
2006
1108
723
1224
816
2028
513
1352
582
2007
1151
834
1503
1035
2567
649
1624
675
2008
1067
1034
1981
1005
3267
818
1845
841
* Bank of Korea's estimates in KRW, w hich w e have converted to USD at market exchange rates.
Note: Caution is needed in its direct comparison with those of other countries as the estimates are based on South Korean price
and cost structures.
Source: CEIC, IMF, Bank of Korea, GS Global ECS Research.
Goldman Sachs Global ECS Research
8
The planned economy system in N. Korea appears
to be on the verge of collapse
Unofficial exchange rates are 20 times higher than the official rates
10000
120
Black market premium (x) (RHS)
100
Official NKW/USD rate (in log)
1000
Unofficial rate (in log)
80
100
60
40
10
20
1
0
1985
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2007
Source: Korea Development Institute, Korea Trade-Investment Promotion Agency, GS Global ECS Research.
Goldman Sachs Global ECS Research
9
North Korea’s closer economic ties with South
Korea
South Korea is North Korea’s largest export market
Exports of North Korea in US$bn including exports to South Kora
US$ bn
2.5
South Korea
Japan
2.0
China
Others
1.5
1.0
0.5
0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Korea Development Institute, Korea Trade-Investment Promotion Agency, GS Global ECS Research.
Goldman Sachs Global ECS Research
10
North Korea has abundant and competitive labour
force
Rural population in North Korea is at the level of South Korea
in the late 1970s
90%
80%
70%
Vietnam
China
60%
South Korea
50%
North Korea
40%
30%
20%
10%
0%
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Source: CEIC, National Statistical Office, GS Global ECS Research.
Goldman Sachs Global ECS Research
11
The North Korea’s industrial structure is also
similar to that of South Korea in the late 1970s
Industrial structure of N. Korea vs. S. Korea
N orth Korea
('0 8 )
Agriculture and fishing
Mining
Manufacturing
Light
Heavy and petrochem
Electricity, gas and w ater
Construction
Services
Government
Others
Total
21.6
12.1
22.5
6.7
15.8
3.4
8.3
32.2
22.8
9.4
100.0
South Korea
('0 8 )
2.5
0.2
28.1
4.6
23.5
1.8
7.0
60.3
10.7
49.6
100.0
South Korea
('7 9 )
21.3
1.1
24.7
...
...
2.2
7.9
42.7
...
...
100.0
Source: Bank of Korea, GS Global ECS Research.
Goldman Sachs Global ECS Research
12
Strong synergies between South and North Korea
- Mineral resources
North Korea is rich (and South Korea is poor) in mineral
resources
Unit
bn ton
Magnesite
bn ton
Limestone
000 ton
Uranium ore
bn ton
Lignite
bn ton
Anthracite coal
bn ton
Iron
000 ton
Gold
000 ton
Zinc
000 ton
Lead
000 ton
Copper
000 ton
Silver
000 ton
Molybdenum
Rosette graphite 000 ton
Tungsten trioxide 000 ton
000 ton
Barite
000 ton
Fluorspar
000 ton
Talcum
000 ton
Kaolinite
000 ton
Manganese
000 ton
Nickel
000 ton
Asbestos
Total (times 2008 GDP)
Sout h Korea
Nort h Korea
Im port %
Reserves V alue (KRW t rn) Reserves
6.0
100
4,000
16
4.5
5.0
2
21,000
10,600
2,900
3-5
54
2,000
246
2,100
500
700
2,000
100-300
10-20
13
1,376
996
628
343
257
214
45.3
12.6
9.12
5.41
1.86
1.13
0.75
0.39
0.22
0.08
0.06
0.03
0.01
0.00
0.00
142
10
1.4
0.02
0.04
588
404
56
1.58
22
121
127
842
477
8,152
106,335
176
511
100
1
100
100
65
99
93
100
100
100
95
99
100
89
100
100
92
11
100
100
-
Note: Reserves for the South Korea are the sum of confirmed and estimated reserves as of 2007. North Korean data are
potential reserves, based on the latest North Korea data
Source: Korea Resources Corporation, Korea Institute for National Unification, Hyundai Research Institute, IAEA, EIA, GS Global
ECS Research.
Goldman Sachs Global ECS Research
13
Strong synergies between South and North Korea:
demographic
North Korea has more favorable
demographics than the South (2007)
Population of a United Korea could
near 80million at its peak in 2030
80
Sout h
Korea
Dem ographic com position (in % of total)
0-14 years
18
15-64 years
72
65 or over
10
Birth rate per 1000
9.9
Death rate per 1000
6.0
0 .4
Annual population growth
Nort h
Korea
23
68
9
15.1
7.2
0 .8
Unit ed
Korea
20
71
9
11.6
6.4
0 .5
2.5
70
60
23
24
26
25
27
2.0
27
25
27
28
50
1.5
40
1.0
30
48.1
48.9
49.3
49.3
49.1
48.6
47.7
46.3
42.3
20
0.5
10
0
0.0
2005
2010
2015
South Korea
Source: UN, CIA, GS Global ECS Research.
Goldman Sachs Global ECS Research
2020
2025
North Korea
2030
2035
2040
2050
South/North ratio (RHS)
Source: UN, National Statistical Office, GS Global ECS Research.
14
Strong synergies between South and North:
productivity gains
Output decline and recovery in transition economies
Trough
year in
real GD P
A r m enia
1993
A zer baijan
1995
Belar us
1995
A lbania
1992
Geor gia
1994
Kazakhstan
1995
Ky r gy z Republic
1995
Bulgar ia
1997
M oldov a
1999
Russia
1998
Tajikistan
1996
Tur km enistan
1997
Ukr aine
1999
Uzbekistan
1995
Czech Republic
1992
Slov ak Republic
1993
Estonia
1994
Latv ia
1993
Hungar y
1993
Lithuania
1994
Cr oatia
1993
Slov enia
1992
M acedonia, For m er Yugoslav Republic
1995
Poland
1991
Rom ania
1992
Europan average
Tot al declines
A vg grow t h
Real GD P in
since 1 9 9 2 f rom t he t rough
2008
bef ore year or 1 9 9 2 t o
(1 9 9 2 = 1 0 0 )
recovery
2008
-14.1%
8.8%
305
-46.3%
12.1%
236
-27.6%
7.5%
185
NM
6.4%
269
NM
6.5%
242
-27.2%
6.6%
168
-34.2%
5.1%
125
-27.5%
5.2%
126
-41.9%
5.9%
98
-29.2%
6.8%
137
-41.5%
7.3%
137
-42.8%
14.1%
243
-50.4%
6.8%
90
-8.3%
5.3%
180
NM
3.2%
167
NM
5.2%
229
-1.6%
6.2%
201
-11.4%
5.6%
201
-0.6%
3.6%
168
-24.4%
5.9%
170
-8.0%
4.3%
172
NM
4.3%
195
of
-10.2%
2.8%
129
NM
4.5%
211
NM
3.5%
173
-2 4 .8 %
6 .1 %
China
na
M ongolia
1993
Vietnam
na
A sian average
A sian and European average
M em or andum item :
United States
Nor th Kor ea
South Kor ea
na
1988
na
NM
-3.0%
NM
-3 .0 %
-1 3 .9 %
10.2%
5.5%
7.6%
7 .8 %
6 .9 %
470
217
323
NM
NM
NM
2.9%
2.0%
5.0%
159
98
219
Source: IMF, GS Global ECS Research.
Goldman Sachs Global ECS Research
15
Strong synergies between South and North Korea
- productivity gains
Growth Environment Scores for BRICs and N-11 (2008)*
9
8
7
6
5
4
3
2
1
In
di
a
In
do
ne
si
a
Eg
yp
Ba
t
ng
la
de
sh
Pa
ki
st
an
Ni
ge
No
ria
rth
Ko
re
a
n
Ira
l
Tu
rk
ey
Vi
et
na
m
Ru
ss
Ph
ia
ill
ph
in
es
Br
az
i
M
ex
ic
o
Ch
in
a
So
ut
h
Ko
re
a
0
* The North Korea score is a tentative one, based on our estimates of the 13 GES indicators.
Source: IMF, GS Global ECS Research.
Goldman Sachs Global ECS Research
16
Strong synergies between South and North Korea
-currency appreciation
Currencies in most transition
economies strengthened more rapidly
than output growth
%
Real appreciation accounted for 80% of
USD GDP growth in transition
economies over 1993-2007
100
Real Appreciation and Real GDP Growth: Transitional Economies
(average per annum,1993-2006)
35
USD GDP Growth in Transition Economies
80
30
7
25
Real Exchange Rate
Real GDP
Real appreciation
3
Real GDP
60
5
20
4
97
3
1
1
5
40
6
3
15
6
25
1
23
10
3
5
19
18
18
3
1
18
16
15
0
14
5
14
13
12
11
11
9
9
9
8
8
14
4
5
7
6
3
6
5
2
Source: IMF, GS Global ECS Research.
-1
-11
2
16
2
1
2
3
3
3
-9
6
-3
4
6
8
9
11
11
8
10
6
6
10
-18
-1
-5
Goldman Sachs Global ECS Research
0
4
Ar
Ka me
za nia
Tu k
rk hst
m
a
en n
Az i sta
er n
ba
Li i jan
th
ua
ni
R a
u
Ta ssia
j ik
is
ta
n
La
tv
U ia
kr
ai
Be ne
la
r
G us
eo
rg
Al ia
ba
n
Es ia
to
M nia
ol
d
R ova
om
an
Bu ia
Sl lga
ov r i
ak a
R
U
zb ep
ek
is
ta
n
C
Ky ze
rg ch
yz
st
a
C n
M r oa
ac tia
ed
on
Vi ia
et
na
Po m
la
H nd
un
ga
ry
C
hi
na
U
SA
Ko
re
a
-1
20
16
10
5
3
0
40
3
1
12
46
20
8
3
-20
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: IMF, GS Global ECS Research.
17
Strong synergies between South and North Korea
- currency appreciation
Price structures of North and South Korea differ widely
Item
U nit
South Korea
(KRW;2 0 0 8 )
N orth Korea PPP rates
(N KW;2 0 0 2 ) (KRW/N KW)
Electricity
kw h
26
55
2.1
Diesel
kl
39
1,465
38
Rice
kg
63
2,705
43
Bus Fare
1 use
500
1,000
2.0
Subw ay fare
1 use
500
1,000
2.0
House rent 1/
m^ 2
19,697
2.0
9,848
House rent 2/
m^ 2
89,670
179,341
2.0
1/ Pyongyang for North Korea, and minimum nation- w ide Apt prices for South Korea.
2/ Pyongyang for North Korea, and average Seoul Apt prices for South Korea.
Source: IMF and SNU (2009), GS Global ECS Research.
Goldman Sachs Global ECS Research
18
A United Korea – growth potential
The GDP (in USD terms) of a United Korea could exceed that
of France, Japan and Germany in 30-40 years
US$ bn (2007)
7000
6000
5000
United Korea
4000
Japan
Germ any
France
3000
2000
Transition phase
Consolidation phase
M aturing phase
20
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
20
32
20
34
20
36
20
38
20
40
20
42
20
44
20
46
20
48
20
50
1000
Source: GS Global ECS Research.
Goldman Sachs Global ECS Research
19
A United Korea – the potential size of the economy
Indicative long-term projections
Real GD P Index (2 0 0 8 t rn KRW)
U nit ed
Sout h
N ort h
Korea
Korea
Korea
2010
1090
1062
28
2015
1353
1317
35
2020
1609
1559
49
2025
1855
1786
69
2030
2097
2001
96
2035
2324
2197
128
2040
2570
2405
165
2045
2793
2600
193
2050
3027
2812
215
yoy% (average per annum )
U nit ed
Sout h
N ort h
Korea
Korea
Korea
2%
2%
1%
4%
4%
5%
4%
3%
7%
3%
3%
7%
2%
2%
7%
2%
2%
6%
2%
2%
5%
2%
2%
3%
2%
2%
2%
Per capit a incom e (2 0 0 7 U SD 1 0 0 0 )
U nit ed
Sout h
N ort h
Korea
Korea
Korea
2010
$13
$19
$1
2015
$22
$32
$2
2020
$28
$40
$4
2025
$34
$47
$10
2030
$43
$54
$23
2035
$55
$64
$40
2040
$66
$74
$53
2045
$76
$84
$62
2050
$86
$96
$70
Real appreciat ion yoy%
U nit ed
Sout h
N ort h
Korea
Korea
Korea
-2%
-3%
1%
7%
7%
7%
1%
1%
12%
1%
0%
12%
1%
1%
11%
1%
1%
6%
1%
1%
1%
0%
0%
0%
0%
0%
0%
U SD GD P (2 0 0 7 U SD bn)
U nit ed
Sout h
Korea
Korea
2010
$943
$917
2015
$1,643
$1,596
2020
$2,077
$1,964
2025
$2,574
$2,299
2030
$3,280
$2,645
2035
$4,176
$3,051
2040
$4,956
$3,448
2045
$5,519
$3,747
2050
$6,056
$4,073
yoy% (average per annum )
U nit ed
Sout h
N ort h
Korea
Korea
Korea
-1%
-1%
2%
12%
12%
12%
5%
4%
19%
4%
3%
19%
5%
3%
18%
5%
3%
12%
3%
2%
6%
2%
2%
3%
2%
2%
2%
Tot al populat ion (m n)
Sout h
U nit ed
Korea
Korea
(m n)
2010
73
49
2015
74
49
2020
75
49
2025
76
49
2030
76
49
2035
76
48
2040
75
46
2045
73
45
2050
71
42
N ort h/Sout h rat io
N ort h
Korea
$26
$47
$113
$274
$635
$1,125
$1,508
$1,772
$1,982
N ort h
Korea
(m n)
24
25
26
27
27
28
28
29
28
Populat ion
49%
51%
52%
54%
56%
58%
61%
64%
67%
per
capit a
incom e
6%
6%
11%
22%
43%
63%
72%
74%
72%
U SD
GD P
3%
3%
6%
12%
24%
37%
44%
47%
49%
Source: Bank of Korea, UN, GS Global ECS Research.
Goldman Sachs Global ECS Research
20
A United Korea – Growth potential of the mineral
sector
North Korea’s mineral wealth could provide sizeable income
in the long run
W trillion (2008)
W trillion (2008)
250
250
Mineral sector income under even use of mineral wealth
Non-mineral sector income
200
200
Total Incomes under incremental use of mineral wealth
Benchmark GDP projections
150
150
100
100
50
50
0
0
12 014 016 018 020 022 024 026 028 030 032 034 036 038 040 042 044 046 048 050
20
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
Source: Korea Resources Corporation, GS Global ECS Research.
Goldman Sachs Global ECS Research
21
A United Korea – comparison with other economies
Selected indicators of North and South Korea
1994
Population (million)
Per capital income (US$)
Gross National Income (US$bn)
External trade (% of GNI)
Exports ($ bn)
Exchange rate against USD
Government budget (US$ bn)
2008
N orth
South
N /S
N orth
South
23.0
923
21.2
9.9
0.9
2.16
n.a.
44.5
10076
448.4
52.5
96
802
88.3
51.7%
9.2%
4.7%
18.9%
0.9%
0.3%
n.a.
23.3
1064
24.9
15.4
1.1
130
3.5
48.5
19231
928.7
92.3
422
1100
212.6
1989
N /S East Ger West Ger
48.0%
5.5%
2.7%
16.6%
0.3%
11.8%
1.6%
16.7
12700
212
50
n.a.
n.a.
46.5
61.4
38500
2364
80.9
n.a.
n.a.
78.7
E/W
27.2%
33.0%
9.0%
61.8%
n.a.
n.a.
59.1%
Source: Bank of Korea, UN, OECD.
Economic growth of two integration economies
East Germany
West Germany
Before Integration
(-5 to -1 year)
2.7
2.3
Hong Kong
China
4.9
12.4
A fter
(1 to 5 years) (6 to 1 0 years)
1.4
1.9
-0.5
1.8
1.4
8.2
6.4
10.6
Source: Bank of Korea (2009)
Goldman Sachs Global ECS Research
22
Integration costs: vary a lot depending on the
speed and policy assumptions
Inter-Korea integration costs – survey of literature
Sources
Research
year
Int egrat ion
period
Cost s
N ot e
Korea Development Institute
1993
2000-2010
$286bn
German style unification
Korea Development Institute
1994
2000
$1000bn
Korea Development Bank
1994
1994-2004
German style unification
German style unification
(60% income differential)
Korea Development Institute
1997
FitchRatings
2003
1995-2005
Over 10-15
years
$805bn
9-11% of GDP for the first 5
years;7.5% of GDP for the
second 5 years
50% income differential
Rand Institute
2005
Over 5 years
$50bn-$670bn
To double North Korea GDP
w ithin 4-5 years
Samsung Economics Research
2005
2015
$546bn
To provide for social safety
net and industrialization
Over 13-39
years
German style: $500-900bn
over 22-39 years; Economic
zone style: $300-500bn over To reach North Korea' s per13-22 years
capita income of $10,000
Bank of Korea
2007
$15-20bn per year
Source: Korea Tax Institute (2008), GS Global ECS Research.
Goldman Sachs Global ECS Research
23
A United Korea – income convergence
Illustrative scenario of a North-South income convergence
(Number of years for North Korea’s per-capita income to reach half of the South Korea level)
45
41
40
Case I: North Korea's output is growing 6% points faster than
South
Case II: Case I and the North Korean currency is appreciating 6%
faster than the South currency
35
Case III: North is growing 3% points faster than South, and the
North currency appreciating 5% faster than the South currency
plus annual transfers of 1% of South Korean GDP to North Korea
30
25
21
20
15
13
10
5
0
Case I
Case II
Case III
Source: Bank of Korea, GS Global ECS Research.
Goldman Sachs Global ECS Research
24
Appendix: Korea at a glance
Population
Real GDP yoy growth rate
S Korea (RHS)
N Korea (RHS)
N Korea to S Korea
12
(000)
50%
50,000
S Korea
10
45,000
N Korea
8
49%
40,000
6
35,000
Source: Bank of Korea
Goldman Sachs Global ECS Research
2008
2007
2006
2005
2004
2003
2002
-8
2001
-
2000
-6
1999
5,000
1998
-4
1997
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
45%
10,000
1996
46%
-2
1995
15,000
0
1994
20,000
1993
47%
2
1992
25,000
4
1991
30,000
1990
48%
Source: Bank of Korea
25
Appendix: Korea at a glance
North Korea’s GDP yoy growth (% chg
by industry)
Gross National Income per capita
(W 10K)
20%
2,400
S Korea (RHS)
N Korea (RHS)
15
Agriculture, Foresty, Fishery
N Korea to S Korea
2,000
16%
M ining & M anufacturing
GDP
10
5
1,600
12%
0
1,200
-5
8%
800
-10
Source: Bank of Korea
Goldman Sachs Global ECS Research
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
-20
1992
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
-
1990
0%
-15
1991
400
1990
4%
Source: Bank of Korea
26
Appendix: Korea at a glance
North Korea’s industrial structure
South Korea’s industrial structure
100%
100%
Services
80%
Services
80%
Construction
60%
Construction
60%
Electricity,Gas &
water
40%
Electricity,Gas &
water
40%
Mining &
Manufacturing
Mining &
Manufacturing
20%
Goldman Sachs Global ECS Research
2008
2007
2006
2005
2004
2003
2002
2008
2007
2006
2005
2004
2003
2002
2001
2000
Source: Bank of Korea
Agriculture,
Foresty, Fishery
0%
2001
Agriculture,
Foresty, Fishery
0%
2000
20%
Source: Bank of Korea
27
Appendix: The Gaesung Industrial Complex
The GIC’s output is growing rapidly
Investment in the GIC
(in US$mn and in % of N. Korea exports)
(Investment in KRW bn)
300
25%
In KRW bn
500
250
In US$ million
20%
In percent of total exports (RHS)
450
400
200
350
15%
300
150
250
10%
200
100
150
5%
50
100
50
0
0%
2005
2006
2007
2008
0
Private companies
Government
Land corporation
KEPCO
Korea Telecom
Source: Ministry of Strategy and Finance, GS Global ECS Research.
Goldman Sachs Global ECS Research
28
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