South Korea will raise $500 billion to fund reunification with North Korea and another $175 billion to build North Korean Infrastructure

South Korea plans to raise US$500 billion largely from the public sector, without raising taxes, to help North Korea prepare for a future reunification, the top financial regulator said Tuesday.

In a financial blueprint for a future North-South unification, the Financial Services Commission (FSC) said an estimated $500 billion is needed to raise North Korea’s gross domestic product (GDP) per capita from $1,251 in 2013 to $10,000 within 20 years after a possible unification.

It will also spend an additional $175 billion on infrastructure and industrial development, it added.

North Korea’s GDP totaled 34 trillion won ($31 billion) as of end-2013, a level equivalent to that of South Korea in 1971 and a mere 2 percent of the South’s GDP in 2013.

The South’s GDP was 42.5 times higher than the North’s in 2013, much higher than the 9.7-fold difference between West Germany and East Germany ahead of their 1990 unification.

The FSC said state-run policy financing agencies, including the Korea Development Bank (KDB) and Korea Exim Bank, will play a major role in raising the funds, as Germany’s government-owned development bank, or the KfW, did 24 years ago.

The state agencies will take responsibility for up to 60 percent of the total expenses by running development projects in North Korea, while the rest will be raised by collecting overseas development aid (ODA) and private and public investments.

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