The South Korean government said it will establish a “unification fund” under the current inter-Korean cooperation fund to prepare for reunification with North Korea in the future.

The Unification Ministry said the fund will be run separately from the inter-Korean cooperation fund so that it can be used for a stable integration of the two Korean regions and social security.

The unification fund will be raised through government funds, private sources, money left over from the inter-Korean cooperation fund and other donated funds, the ministry said.

“We will discuss with the Finance Ministry and decide when the government should put some of the government funds and inter-Korean cooperation funds into the unification fund,” the ministry said.

The ministry will reflect its unification fund plan in a revision bill on the inter-Korean cooperation fund, which is currently pending at the National Assembly.

The ministry plans to accumulate at least 55 trillion won ($48 billion) through the fund, news reports said.

According to the government’s assessment, it will cost about 55.9 trillion to 277.9 trillion won in the first year of reunification.

The government allocates more than 1 trillion won to the inter-Korean cooperation fund every year and 82 percent of the fund was executed in 2007.

After President Lee Myung-bak took office in 2008, only 18 percent of the fund was used due to soured relations between Seoul and Pyongyang.

The used portion continued to decline to 9 percent in 2009 and to 8 percent in 2010.

As of the end of August, only 2.6 percent of the inter-Korean fund has been expended.

A unification tax, once floated as an idea to collect money for the unification fund, had not been mentioned in the government’s plan.

“As Korea is at an important point to seek fiscal balance, we didn’t put much focus on tax. We will keep open the possibility of levying a unification tax but I don’t plan to implement it right now,” Unification Minister Yu Woo-ik was quoted as saying by the Yonhap news agency in Beijing, after meeting with China’s State Councilor Dai Bingguo and other officials.

By Kim Yoon-mi (yoonmi@heraldcorp.com)