Will sanctions have big effect on N. Korea?
The 15- member UN Security Council unanimously approved new sanctions against North Korea on August 5, the seventh set of UN sanctions imposed on the country since it conducted its first nuclear test in 2006. The latest sanction measures include banning exports of coal, iron, lead and seafood products, which are reported to represent one- third of the country’s total exports.
The resolution is “the single largest economic package ever” imposed on North Korea, and also “the most stringent set of sanctions on any country in a generation,” according to US Ambassador to the UN Nikki Haley. According to the US, North Korea’s nuclear program requires a huge amount of resources, so in the past the country failed to use its export revenues to improve people’s lives. In this sense, the tough sanctions on North Korea will restrain it from obtaining resources, creating economic pressure to force it to give up the nuclear program.
Nevertheless, it remains unknown what the actual impact of the new sanctions will be and whether they can achieve the desired results. Moreover, North Korea’s economic development over the past few years indicates that its economy seems to have changed, showing relatively strong economic resilience and a certain degree of “endogenous” momentum.
According to data released on July 21 by the Bank of Korea, South Korea’s central bank, despite international sanctions, GDP in North Korea rose 3.9 percent in 2016, marking the first time its economic growth exceeded 3 percent since 2008.
The North Korean economy is estimated to grow at an annual rate of 1 to 5 percent, according to a report by The New York Times in April. If the real economic growth is at the top of the range, as in 4 percent or so, then the country may have surprising economic resilience even if the UN sanctions are enforced. The New York Times report also described some economic phenomena in the country: Since 2010, the number of government- approved business centers has doubled to 440, and satellite images reveal that they continue to grow in size; more than 1 million people are working as retailers or managers at these business centers; at least 40 percent of the population are engaged in some sort of private enterprise; some grocery stores sell Coca- Cola, which used to be condemned as “cesspool water of capitalism”; more than 3 million people use cell phones; and Pyongyang, the capital, is undergoing a construction boom, and there are more cars on the streets.
The impression given by these signs is that despite an energy shortage and economic isolation amid international sanctions, North Korea is getting out of economic depression its own way, with accelerated development already seen in eastern coastal cities. This raises questions, such as: Where does the economic impetus come from? Will the UN sanctions work if the
North Korean economy has its own “endogenous” momentum? And what will be the effect of the country’s economic resilience on its future moves?
First of all, the reports of North Korea’s economic growth and resilience appear to be credible. In addition to South Korea’s statistics, mutual verification of various media reports, including Western media coverage, shows that signs of economic growth in the country are authentic.
Second, where does the economic impetus come from? As in the early days of China’s reform and opening- up, North Korea’s relaxation of market economy regulations can release vitality, allowing for the sprouting of a market economy, which should be helpful for solving livelihood problems at low economic levels.
Third, given its comparatively poor economic base, it has become much easier for North Korea to solve livelihood problems at low levels amid global overproduction. During a famine in the 1990s, about 610,000 people reportedly starved to death. But now North Korea seems self- sufficient in food supply. While the North Ko
rean economy is a closed system on the whole, even limited exchanges with the outside world could help a lot with the domestic economy.
Fourth, if the economic growth in North Korea is real, what impact will the UN sanctions have? In our opinion, North Korea’s economic resilience has been underestimated. The “marching through suffering” did not devastate its economy in the past, and UN sanctions will not have that effect now. The UN sanctions might inhibit North Korea’s economy, weakening its ability to obtain foreign exchange, make use of the international financial system and support its industrial and military manufacturing. But the sanctions will only be effective if they are implemented strictly over the long run.
Fifth, if North Korea doesn’t soon feel the pain or sufficient pressure from the UN sanctions, it will continue its nuclear testing and missile launches. But under pressure from the international community, it may adjust the timing and frequency.