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Economy Planning
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2000-07-31 22:30:00-04
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South Korean Reform essential for Unification
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As the possibility of North and South Korea reunifying becomes a greater possibility, Paris OECD says continuance of South Korean reform essential
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The Paris-based Organization for Economic Cooperation and Development says that South Korea must continue its economic reforms to be in a dominant position to help North Korea move toward reunification. Specifically, the OECD said that South Korea must move ahead with its corporate and banking sector reforms if it is to cement its recovery from the 1997 financial crisis. The report was completed before the recent warming trend between the two Koreas had occurred. The OECD based its views on the assumption that, as in the case of Germany and East Germany, there will be at some point, a tremendous pressure on capitalist South Korea to aid down and out North Korea. The OECD said that South Korea had studied the German experience closely and knows that sudden unification is difficult and costly. The approach of Seoul is to reduce the cost by widening the contact between the two countries to help North Korea recover from its economic crisis and avoid sudden trauma. The income gap between the two countries is estimated at 12 to one. South Korean investments in the North is seen as necessary down the road and in order to insure that happening, South Korea needs to continue further market opening, regulatory reform and privatization to improve competition. The report emphasized the need for further corporate restructuring, especially of its major conglomerates, the chaebols, was needed. The OECD sees South Korean economic growth slowing to 6% in 2001, down from 8.5% this year and 10.7% in 1999.
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