Restructuring of Industrial Enterprises in the Course of Privatization in East Germany
Gerhard Heimpold
H.-G. Jeong and G. Heimpold (eds.): Economic Transition in Unified Germany and Implications for Korea. Policy References 17-13. Sejong: Korea Institute for International Economic Policy,
2017
Abstract
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Economic Transition in Unified Germany and Implications for Korea
Hyung-Gon Jeong, Gerhard Heimpold
H.-G. Jeong and G. Heimpold (eds.): Economic Transition in Unified Germany and Implications for Korea. Policy References 17-13. Sejong: Korea Institute for International Economic Policy,
2017
Abstract
The reunification of Germany, which marked the end of the Cold War in the 20th century, is regarded as one of the most exemplary cases of social integration in human history. Nearly three decades after the German reunification, the economic and social shocks that occurred at the beginning of the reunification process have largely been resolved. Moreover, the unified Germany has grown into one of the most advanced economies in the world.
The unification process that Germany underwent may not necessarily be the way that the Republic of Korea would choose. However, the economic and social exchanges between East and West Germany prior to unification, and the cooperation in a myriad of policies based on these exchanges, served as the crucial foundation for unification. The case of Germany will surely help us find a better way for the re-unification of the Korean Peninsula.
In this context, this is the first edition of a joint research which provides diverse insights on social and economic issues during the process of unification. It consists of nine chapters whose main topics include policies on macroeconomic stabilization, the privatization of state-owned enterprises in East Germany, labor policies and the migration of labor, integration of the social safety nets of the North and South, and securing finances for reunification. To start with, the first part covers macroeconomic stabilization measures, which include policies implemented by the federal government of Germany to overcome macroeconomic shocks directly after the reunification. There was a temporary setback in the economy at the initial phase of reunification as the investment per GDP went down and the level of fiscal debt escalated, reverting to its original trend prior to the reunification. While it appears the momentum for growth was compromised by reunification from the perspective of growth rate of real GDP, this state did not last long and benefits have outpaced the costs since 2000.
In the section which examines the privatization of state-owned enterprises in East Germany, an analysis was conducted on the modernization of industrial infrastructure of East German firms. There was a surge in investment in East German area at the beginning stages but this was focused on a specific group of firms. Most of the firms were privatized through unofficial channels, with a third of these conducted in a management buy-out (MBO) process that was highly effective. Further analysis of a firm called Jenoptik, which was successfully bailed out, is incorporated as to draw implications of its accomplishments.
In the section on migration, we examine how the gap between the unemployment rates in the West and East have narrowed as the population flow shifted from the West to East. Consequently, there was no significant deviation in terms of the Gross Regional Domestic Product (GRDP) per capita in each state of East Germany. However, as the labor market stabilized in East Germany and population flows have weakened, the deviation will become larger. Meanwhile, if we make a prediction about the movement of population between the North and the South, which show a remarkable difference in their economic circumstances, a radical reunification process such as Germany’s case would force 7% of the population of the North to move towards the South. Upon reunification, the estimated unemployment rate in North Korea would remain at least 30% for the time being. In order to reduce the initial unemployment rate, it is crucial to design a program that trains the unemployed and to build a system that predicts changes in labor demand.
It seems nearly impossible to apply the social safety nets of the South to the North, as there is a systemic difference in ideologies. Taking steps toward integration would be the most suitable option in the case of the Koreas. We propose to build a sound groundwork for stabilizing the interest rates and exchange rates, maintain stable fiscal policies, raise momentum for economic growth and make sure people understand the means required to financially support the North in order to reduce the gap between the two.
This book was jointly organized and edited by Dr. Hyung-gon Jeong of the Korea Institute for International Economic Policy (KIEP) and Dr. Gerhard Heimpold of the Halle Institute for Economic Research (IWH). We believe that this report, which examines numerous social and economic agendas that emerged during the reunification of Germany, will provide truly important reference for both Koreas. It is also our view that it will serve as a stepping-stone to establish policies in regard to South-North exchanges across numerous sectors prior to discussions of reunification. KIEP will continue to work with IWH and contribute its expertise to the establishment of grounds for unification policies.
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Zehn Fragen zur Deutschen Einheit
Gerhard Heimpold
Wirtschaft im Wandel,
Nr. 3,
2014
Abstract
Internationale Medien haben ein anhaltend großes Interesse an den wirtschaftlichen Entwicklungen nach der Herstellung der Einheit Deutschlands. Dies gilt in spezieller Weise für Südkorea, das die Erfahrung eines geteilten Landes mit Deutschland gemeinsam hat. Dort wird der 25. Jahrestag des Mauerfalls zum Anlass genommen, über die deutsche Entwicklung zu berichten und wenn möglich für die Zukunft des eigenen Landes Lehren zu ziehen. Am 20. März 2014 wurde Dr. Gerhard Heimpold, kommissarischer Leiter der Abteilung Strukturökonomik des IWH, von einem Team des Fernsehsenders „Korean Broadcasting Systems“ (KBS), einem öffentlich-rechtlichen Fernsehsender in der Republik Korea, zur Deutschen Einheit sowie zum wirtschaftlichen Aufholprozess der Neuen Länder und speziell Sachsen-Anhalts interviewt. Eine Schriftfassung dieses Gesprächs wird nachfolgend wiedergegeben.
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Kann Korea vom deutschen Einigungsprozess lernen?
Ulrich Blum
Wirtschaft im Wandel,
Nr. 4,
2011
Abstract
Auch wenn die Ausgangsbedingungen der Deutschen Einheit und einer möglichen koreanischen Vereinigung zunächst äußerst unterschiedlich erscheinen, ergeben sich aus ökonomischer Sicht einige gemeinsame Muster, die es zu analysieren lohnt. Hierzu zählen die Interdependenzen zwischen weltwirtschaftlichen Integrationsprozessen, binnenwirtschaftlichen Anpassungen und den Aufgaben des Staates, den Einigungsprozess zu finanzieren und die Wirtschaft – seinerzeit des Ostens, künftig des Nordens – zu transformieren. Das Vernachlässigen dieser
Interdependenzen im deutschen Einigungsprozess führte zu erhöhten Kosten. Der Beitrag stellt zunächst die Ausgangsbedingungen entlang wesentlicher ökonomischer Zahlen dar. Im Anschluss erfolgt eine theoretische Einordnung
des Integrationsprozesses, der sich im Wesentlichen in den Veränderungen der Preisstrukturen ausdrückt, und des Transformationsprozesses, der als Verschiebung der Produktionsmöglichkeitenkurve der Wirtschaft gesehen wird. Im Zentrum steht dabei die Mengen-Preis-Interaktion zwischen lokalen und international handelbaren Gütern. Anschließend wird gezeigt, welchen Beschränkungen die Transformation unterliegt, da die Investitionsmöglichkeiten durch die Ersparnisbildung und die Fähigkeit, auswärtiges Kapital zu mobilisieren,
begrenzt sind. Schließlich wird verdeutlicht, dass öffentliche Transfers zur Unterstützung des Aufbauprozesses das Problem, dauerhafte Leistungsbilanzdefizite abzubauen, nur begrenzt zu lösen vermögen.
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28.04.2011 • 15/2011
Kann Korea vom deutschen Einigungsprozess lernen?
Südkorea wird sich kaum gegen das Bestreben des ökonomisch abgewirtschafteten Nordens nach Einheit wehren können, sollten sich die politischen Bedingungen dafür ergeben. Vor dem Hintergrund deutscher Erfahrungen untersucht Ulrich Blum, Präsident des Instituts für Wirtschaftsforschung Halle (IWH), die wirtschaftlichen Probleme einer möglichen koreanischen Vereinigung. Nach seiner Schätzung müsste Südkorea jährlich etwa ein Viertel seiner Wirtschaftsleistung transferieren, um die Vereinigung mit dem nördlichen Nachbarn zu stemmen – eine Überforderung, die das Projekt der koreanischen Einigung zur Aufgabe für die gesamte Region macht.
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Can Korea Learn from German Unification?
Ulrich Blum
IWH Discussion Papers,
Nr. 3,
2011
Abstract
We first analyze pre-unification similarities and differences between the two Germanys and the two Koreas in terms of demographic, social, political and economic status. An important issue is the degree of international openness. “Stone-age” type communism of North Korea and the seclusion of the population prevented inner-Korean contacts and contacts with rest of the world. This may create enormous adjustment costs if institutions, especially informal institutions, change. We go on by showing how transition and integration interact in a potential unification process based on the World Bank Revised Minimum Standard Model (RMSM) and on the Salter-Swan-Meade model. In doing so, we relate the macro and external impacts on an open economy to its macro-sectoral structural dynamics. The findings suggest that it is of utmost importance to relate microeconomic policies to the macroeconomic ties and side conditions for both parts of the country. Evidence from Germany suggests that the biggest general error in unification was neglecting these limits, especially limitations to policy instruments. Econometric analysis supports these findings. In the empirical part, we consider unification as an “investment” and track down the (by-and-large immediate to medium-term) costs and the (by-and-large long-term) benefits of retooling a retarded communist economy. We conclude that, from a South-Korean
perspective, the Korean unification will become relatively much more expensive than the German unification and, thus, not only economic, but to a much larger degree political considerations must include the tying of neighboring countries into the convergence process. We finally provide, 62 years after Germany’s division and 20 years after unification, an outlook on the strength of economic inertia in order to show that it may take much more than a generation to compensate the damage inflicted by the communist system.
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Potential Effects of Basel II on the Transmission from Currency Crises to Banking Crises – The Case of South Korea
Tobias Knedlik, Johannes Ströbel
Journal of Money,
Nr. 13,
2010
Abstract
In this paper we evaluate potential effects of the Basel II accord on preventing the transmission from currency crises to banking crises by analyzing the South Korean crisis of 1997. We show that regulatory capital reserves under Basel II would have been lower than those under Basel I, and that therefore Basel II would have had adverse effects on the development of the crisis. Furthermore we investigate whether the behavior of rating agencies has changed since the East Asian crisis. We find no evidence that rating agencies have started to take micro-mismatches into account. Thus, we have reservations concerning the effectiveness of Basel II.
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Korean Unification and Banking System - An Analysis in View of German Experiences and Korean Differences
Ralf Müller
IWH Discussion Papers,
Nr. 139,
2001
Abstract
One of the reforms that have to be launched in a future unification process in Korea, which seems possible after the political negotiations last year, is the transformation of the North Korean banking system. The question arises whether Korea could profit from the German experience where banking transformation was one of the rather few success stories in unification. In 1990 the East German banking transformation was achieved relatively fast and uncomplicated due to considerable direct investments of the West German banks compounded with state guarantees for bad loans resulting from the credit business with existing GDR-corporations. Unfortunately, South Korea currently lacks some major prerequesites that contributed to the German banking unification, among them – and probably the most important one – is the lack of a sound and efficient banking
system that could become active in the North. Consequently, depending on the circumstances of a future Korean unification either a more gradual process is recommended or, if inner-Korean migration requires a more dynamic transition, considerable investment by foreign banks and assistance from international organisations is recommended.
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Foreign Banks in Economic Development: Experiences from the Regulated Financial System of South Korea
Ralf Müller
IWH Discussion Papers,
Nr. 110,
2000
Abstract
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The Financial System in South Korea: Intermediation In-Efficiency, Crisis and Reform
Ralf Müller
Externe Publikationen,
1998
Abstract
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