If South Korea, which has emerged as the world's 10th largest economy, and North Korea, which has fallen to the level of one of the world's poorest countries, combine, will there be any North Korean companies that can survive with competitiveness?

One of the important integration tasks during the unification of the two Koreas is the economic sector, and this time, let's look at what the North Korean industries will look like after unification.



Hints on this can be found in the past inter-Korean economic cooperation.

The fact that we imported goods from North Korea through trade in spite of the significant economic power gap between the two Koreas is because North Korean products were competitive.



Among North Korean products, the most competitive are primary products


Let's take a representative look at data from June 2006, during the Roh Moo-hyun administration, when inter-Korean trade was relatively successful.

Looking at the data from June 2006, it seems that this was a period when North Korea's first nuclear test was carried out in October 2006, and inter-Korean trade was going relatively well regardless of political events.



According to data from the Ministry of Unification, agricultural, forestry and fishery products, steel and metal products, and mineral products accounted for 94.4% of the US$27,875,000 of general trade between the two Koreas during this period (93.8% of imports from North Korea).

Specifically, agricultural, forestry and marine products accounted for 48%, steel and metal products 33.7%, and mineral products 12.7%.



It is clear that agricultural, forestry and marine products and mineral products are primary products, and you may be wondering what steel and metal products are.

Steel and metal products are also a concept of primary products that can be used as raw materials for production rather than high value-added products.

After all, the most competitive products among North Korean products are primary products such as agricultural, fishery and livestock products and minerals.


Inter-Korean economic cooperation using low-wage North Korean labor


In addition to general trade, the two Koreas also conducted trade in the form of consignment processing, in which raw materials were sent to North Korea for processing.

According to the Ministry of Unification data, in June 2006, of the USD 14,176,000 in consignment trade, textiles accounted for 75.5% of the total and electrical and electronic products accounted for 18.8% of the total.

It is said that they mainly processed clothing, etc. using low wages in North Korea.

If you look at the electrical and electronic products category, TV or refrigerator parts, radio cassettes, and communication wires take up a significant proportion, which can be interpreted as meaning that low-cost North Korean labor was used to assemble home appliances that require a low level of skill.



In addition to the above general trade and consignment processing trade, the form that occupies an important share of inter-Korean trade is the Kaesong Industrial Complex.

As you know, the Kaesong Industrial Complex is a form of business conducted by Korean companies based on North Korean low-wage labor.



Competitiveness of North Korean Industries: Primary Products or Low-Wage Labor Force


Combining the above-mentioned forms of inter-Korean trade, there are two major sectors in which North Korea can remain competitive even after unification.

Whether it's selling primary products or using low-wage labor.

Like Pyongyang's Okryugwan Naengmyeon, the food industry with North Korean characteristics will be able to have competitiveness in the primary industry.



It will be difficult for other types of companies to secure competitiveness in the competition with South Korean companies because the quality of North Korean products is inferior.

After all, many North Korean companies that are not competitive may have to be sold or liquidated to South Korean companies through restructuring.

In the next article, we will look at what problems a reorganization centered on South Korean companies can bring in the process of unification.