The North Korean economy could grow 10 to 12 percent a year if the communist regime opens up to outside world, a report said Thursday.

While Pyongyang is under the helm of new young leader Kim Jong-un, observers’ views have been split over whether the overseas-educated young leader in his late 20s would conduct economic form to quickly bring in foreign capital.

The report by the Bank of America-Merrill Lynch said an annual growth of 10 to 12 percent would narrow the income gap between South Korea and North Korea to 3.2-fold in 40 years from the 40-fold gap that could occur if the North does not take any action to open up.

The gap in the gross national income per capita would shrink from a 19-fold to a 1.8-fold in 40 years, the report said.

The report said an open economy in North Korea would bring a similar success story to that of South Korea, which emerged from a war-torn country to the world’s 13th-largest economy in just several decades.

North Korea’s opening up could also help South Korea rid itself of its so-called “Korea Discount,” Bank of America-Merrill Lynch said.

“Easing tension over the Korean peninsula is likely to cut South Korea’s funding costs. The North’s abundant labor and South’s capital are also likely to create synergy effects,” it said.

By Kim Yoon-mi (yoonmi@heraldcorp.com)