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Analysis: Two Koreas, One Economy?

Council on Foreign Relations

August 13, 2007
Prepared by: Lee Hudson Teslik

When officials from North and South Korea convene in Pyongyang for an August 28-30 summit, their discussions will mark a historic meeting of minds—only the second summit between the countries since1953, when the Korean War’s frontline froze into a bitter cold border. This summer’s summit will focus broadly on efforts to establish a permanent peace (Korea Times) between the two Koreas, following decades of North Korean isolation examined in-depth in this CFR.org Crisis Guide. Preparatory discussions, intended to set the groundwork for the talks, seem to indicate the meetings will not ignore the nuclear issues that animate officials in Washington, but may focus more specifically on economics (Yonhap).

Ahead of the summit, details emerged of a plan to pump millions of dollars of South Korean capital into North Korea’s crumbling infrastructure. Officials in Seoul say they will unveil a plan for injecting “social overhead capital” (Korea Times), which means funds will target social infrastructure like schools and hospitals, rather than focusing on more direct aid like rice and fertilizer provisions. It remains unclear precisely what the scale of this investment will be, but a UPI news analysis goes so far as to call the summit a likely “bonanza” for Pyongyang.

The economic focus of the meetings highlights incremental shifts underway in a nation long known for maintaining rigid central command of its economy. This Backgrounder notes the North Korean government has gradually lightened its restrictions on “small-scale trade and barter” operations as a spiraling, decades-long economic crisis has made these activities increasingly common, despite government clampdown attempts.

Read the rest of this article on the cfr.org website.

Copyright 2007 by the Council on Foreign Relations. This material is republished on GlobalSecurity.org with specific permission from the cfr.org. Reprint and republication queries for this article should be directed to cfr.org.