The Korean Economic Forum
Financial Reform of Transitional Economies and Implications to Inter-Korea Financial Cooperation
E-Sub Choi (KAMCO Research Center) and Yoonsok Lee (Korea Institute of Finance)Year 2020Vol. 13No. 3
This paper analyzes the financial reforms of Eastern Europe, where rapid economic transition took place and the case of China and Vietnam where transition is still in place and draws implications to future Inter-Korea financial cooperation. Financial reform such as introducing two-tier banking systems,establishing stock exchanges, resolving NPL issues, strengthening financial supervision are universal among transitional economies. In the case of Eastern Europe, promoting new entry of banks and seeking large scale financial assistance thru international financial institutions economic reform packages took place. China pursued the reform and open door policy by utilizing special economic zones and using Hong Kong as a means to attract foreign capital.Vietnam introduced various measures to cope with dollarization of the economy.These characteristics of transitional economies give rise to the following implications. First, enhancing the capacity of human financial resources in North Korea is imperative for tackling bad loan issues and calls for the need of Inter-Korea financial cooperation to meet this demand. Second, ideas to assist North Korea’s reform and liberalization thru the use of ‘special economic zones for unification’ are needed. Third, we must contemplate on methods to institutionalize the funds of the underground economy in North Korea via utilizing the South Korean financial markets. Lastly, given that the countries will form a single market in the future, ways to cope with the ‘dollarization’ problem in North Korea should be dealt with.