How to reunite Korea without going broke or creating chaos

If the death of Kim Jong-il hastens reunification of North and South Korea, the two long-hostile neighbors may be better served by a go-slow approach like Hong Kong's return to China rather than Germany's swift union.

Knowing when or if the two might be rejoined is impossible, and modeling the costs and benefits is not much easier. The paucity of data from North Korea means even the most basic assumptions on economic growth are guesstimates.

While unification still is a remote possibility, the leadership change in Pyongyang only intensifies speculation about it.

This much seems clear: reunification could lift millions of North Koreans out of poverty and boost average income by at least tenfold. But it would probably slow South Korea's growth rate for a decade or more.

Estimates on what reunification might cost range from tens of billions of dollars to more than $1 trillion - roughly equal to South Korea's annual output - depending on the speed and depth of integration. A relatively quick and extensive union, like Germany's, would be far costlier than a limited re-engagement along the lines of Hong Kong's return to China in 1997.

"Put crudely, the economics come down to the movement of Southern money north, or the movement of Northerners south,"Marcus Noland, a senior fellow at the Washington-based Peterson Institute for International Economics said in an emailed response to questions from Reuters.

A gradual, phased integration may be easier on paper than in reality. If reunification comes suddenly, like what happened after the fall of the Berlin Wall, it may be impossible to control the flow of people or money.

Germany is often cited and frequently studied as the obvious precedent. Like the two Koreas, East and West Germany were divided by war, political ideology and economic models. South Korean media has reported that German academics and former officials came to Seoul in November to consult on reunification.

But Germany's model of swift integration may be prohibitively expensive for Korea. When the two Germanys reunited in 1990, East Germany's population was about one-quarter the size of West Germany's, while per capita income in the West was nearly four times higher than in the East.

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