Global: Korean unification – the long and short of it
North Korea can go four ways from here. 1) Nothing changes. 2) Voluntary unification (German style). 3) Implosion. 4) Or development along the lines of the Chinese model 20 years ago. This is the most likely scenario (60% probability). Much of the cost would be transferred from the South Korean budget to the private sector, leading to outward flows of FDI and repatriation of profits. There is no diaspora as there is no free movement of labour between North and South. Under this scenario South Korean equities would be the major beneficiary. And the budget and the won don’t suffer much.