South Korea may have to reconsider its cross-border cooperation budget strategy following the sudden death of North Korean leader Kim Jong-il, sources said Tuesday.
The reassessment is necessary because Seoul is financially unprepared to handle sudden developments in the North that could require the injection of substantial funds, according to the sources.
In 2011, the government set aside a little over 1.01 trillion won ($861.5 million) to support inter-Korean cooperation, with slightly more than 1 trillion won reflected in next year’s budget.
The amount is woefully short of predictions by the Ministry of Unification that if South and North Korea unified in 2030, it would cost between 739 trillion won to 275.7 trillion won over the following 10 years to help merge the two sides into a single nation.
That total does not take into account the 79 trillion won that may be needed in the 20 years leading up to the unification date.
Even immediately after unification, estimates are that South Korea will have to come up with 27 trillion won to cover vital expenses. That amount is equivalent to 8.2 percent of the 327 trillion won budget requested by the government for 2012.
To overcome this, South Korea briefly considered the creation of a controversial “unification tax” but experts think a dedicated cooperation fund may be a more realistic way to address future outlay requirements.
The fund can be built up through contributions from both the government and the private sector. Money not used in proposed inter-Korean cooperation projects and other transferred funds can also be added to the fund so it can build up steadily in the coming year.
Experts, however, cautioned that Kim’s death on Saturday and uncertainty surrounding a smooth power transfer to his son Kim Jong-un may hasten the need to increase the money Seoul has available to deal with unexpected developments in the isolated communist country.