hankyoreh

The South Korean financial market has been recovering quickly since suffering a shock at news of the sudden death of North Korean leader Kim Jong-il. Yesterday, the won-to-dollar exchange rate began dropping again on the foreign exchange market, and the stock market rebounded somewhat from its fall the previous day. There have been no signs of foreign investors quickly pulling their money out, either. Even the businesses at the Kaesong Industrial Complex, symbol of inter-Korean economic cooperation, are reported to be operating normally for the most part. This is all very fortunate, but we are not out of the woods yet.
At some point, the South Korean financial market stopped responding quickly to unexpected developments in North Korea. Essentially, it has picked up a kind of resistance to geopolitical risks on the peninsula, which could be attributed to a learning curve based on several such experiences.
It certainly is true that uncertainty with the South Korean economy has grown as a result of Kim's death. There is some danger that unforeseen variables might erupt during the transmission of power in Pyongyang. At a time when overseas conditions are not great owing to economic crisis in the US and Europe, an emergency in North Korea, or geopolitical risk factors resulting from inter-Korean tensions, could send the South Korean economy on a runaway train. Another problem here is that it is difficult to understand and prepare for such variables in advance.
It is important that the government establish a sense of trust, putting to bed any concerns among economic participants. Specific response strategies need to be developed for the different possible scenarios, and preparations must be undertaken so that we can respond swiftly, just in case. In the longer term, it is essential that we revive the inter-Korean economic cooperation and exchange that have dried up under the Lee Myung-bak administration. This is the most effective means available for reducing the geopolitical risks to the peninsula.

Please direct questions or comments to [englishhani@hani.co.kr]