y. Currently, North and SouthKorea engage only in some indirect trade through Hong Kong, Singapore and Japan. Between1988 and 1992 there were only some $ 450 million worth of exports and imports between thetwo countries.(Sung Yeung Kwack, 1994). In Germany’s case, trade had steadily been growingbetween the two countries prior to unification, facilitated by a generous financial facilityextended by the West German government.North Korea is suffering from severe shortages of goods. In 1991, it produced 4.4million tons of grains but consumed 6.5 million tons. Part of the short fall was made up by adonation from South Korea. Following a possible unification, South Korea as the strongereconomy will have to take care of 22 million North Koreans, requiring substantial funds. (SungYeung Kwack, 1994). The North Korean economy is far more distorted than the East Germanyeconomy was at the time of unification. It is also much more geared towards meeting militaryrequirements than East Germany ever was. This may also complicate the eventualdemobilisation of military personnel following unification.Regarding labor costs, the gap between East and West Germany was probably higherthan is the case for Korea. In Germany, gross labor costs increased following unification dueboth to the assimilation of wage levels towards levels prevailing in the West and to theintroduction of the costlier social security system of the West. The Korean social securitysystem is not very costly compared to German. In general, South Korea has not the capacity tobear the full cost of unification and might need to resort to higher domestic taxation and externalborrowing on a large scale. Furthermore, South Korea is not in a position to offer generous aidprograms to other countries in support for reunification.Possible Re-Unification Scenarios for KoreaSeveral possible developments should be considered in any discussion of Koreanunification. In particular, ther...
