This paper reviews evaluates the current status of economic exchanges and suggests desirable policy options for economic integration between south and North Korea. The North Korean economy has been in a structural recession due to the chronic inefficiency of the socialist system. It is widely known that without a rapid structural reform of the system the North korean economy may not be saved. However, North Korea still insists its own socialistic approach and attempts to open very limited areas. This approach is only a sort of system-defending attempt and far from the actual reform of the system. Therefore, the recovery of the North Korean economy will not take place in near future. Rather South Korea should d be prepared for the gradual integration of the two economies. For the economic integration south Korea should let the North Korean economy more depend upon the south. South Korea should facilitate the economic exchanges of small-scale investment and utilization of North Korean labor in the North. The political strains should not block the private-level exchanges as much as possible. This options will be the best strategy for the gradual integration of two economies without enormous social cost of abrupt collapse of the North Koreas.