RISK MANAGEMENT

Understanding the Implications as Kim, Moon and Trump Meet in Singapore

Making Korean bindaetteok is a messy endeavor. Beans are ground in a mill until they form a paste, scattering debris everywhere. The batter is then mixed with vegetables and formed into pancakes, which are fried in oil that spatters everywhere.

The process is hardly neat, but the outcome is amazing. Dipped into a little vinegar and garlic, the disks are delectable.

Relations between North and South Korea have been messy for the past 75 years. The countries were separated at the end of World War II and fought one another in the 1950s. As recently as six months ago, the North was executing tests of missiles and nuclear warheads.

This week, by contrast, the leaders of the two countries are participating in a summit meeting with the United States. Hopes are high for better relations, which could release a significant amount of economic activity. 

The economic activity and potential that peace in the Korean peninsula would release is a tasty prospect for Asia, and for the rest of the world

A tale of two Koreas

The Koreas were rather evenly matched until early 1970s, at least in terms of gross domestic product (GDP) per capita. After that period, the two economies drifted so far apart it is hard to believe they were once at parity. 

Despite the destruction of most of its industrial facilities during the Korean War, South Korea has achieved a lot in the last half a century, becoming the 11th largest economy in the world. South Korea is a member of the “trillion dollar club” of world economies with a GDP of US$1.5 trillion. North Korean GDP is estimated to only be around US$18 billion. 

South Korea is also regarded as a regional safe haven. It carries a low and declining level of external debt alongside a sizeable current account surplus. The South Korean won was the best performing major currency in Asia last year. 

By contrast, North Korea is considered one of the most isolated and backward nations in the world today. The country is facing tight international sanctions and severe economic distress. Conditions worsened when China limited oil exports to North Korea and suspended coal and textile imports from the country.

Although the North Korean economy continues to receive essentials and aid from international bodies, it will remain in a fragile state unless international sanctions are lifted. 

  • 1
  • 2
  • 3
  • Next page

Related Articles

The CNBC Global CFO Council's global economic outlook remains rosy despite...
Retail sales growth is forecast to grow 8% in 2018
Red flags are more prominent for Hong Kong than even during the peak of the...
The tit-for-tat escalation roiled the capital markets and added to corporate...