Moon looks to build economic bridges
The South Korean leader wants to give the North a boost through projects that don’t contravene sanctions, writes Anna Fifield
The ink on the inter-Korean agreement is barely dry and the definition of “complete denuclearisation” is far from clear, but there is already plenty of talk in Seoul about how to help North Korea’s economic development. But first, there’s the question of those pesky sanctions.
South Korean President Moon Jae In, fresh from his historic meeting last Friday with North Korean leader Kim Jong Un, is banking on Kim’s summit with United States President Donald Trump going well and on maximum pressure giving way to medium engagement.
Moon has ordered his officials to start figuring out what economic engagement projects can be undertaken without contravening existing sanctions and to look at what should be delayed until after Kim and Trump meet.
“The study is to set in motion the programmes that are not subject to sanctions, while exploring what the two Koreas could do when the sanctions are lifted in the future,” a spokesman for Moon said this week.
This prospect is already causing heartburn among hardliners in Washington, who view the South Korean President as too willing to take Kim at his word. But supporters say Moon is no naif.
“South Korea has shown substantial enthusiasm to resume economic exchanges with the North,” said Cheong Seong Chang of the Sejong Institute, a governmentaffiliated thinktank. But nothing will begin until “after substantial progress has been made towards denuclearisation”, he said.
During the summit, Moon presented Kim with a booklet on the “Korean Peninsula New Economic Initiative” and a USB drive outlining the kinds of economic projects that could proceed if their relations improve.
These included plans for three “belts” — an energy belt, which would transmit electricity from South to North; an industry, logistics and transportation belt, which would build a railway line from the South to the North Korean port city of Nampo and the Chinese border city of Sinuiju; and an eco-tourism belt, allowing the resumption of tours to Mount Kumgang in the North, a short bus ride from the demilitarised zone.
“Moon’s new initiative for interKorean economic exchanges is full of ideas that Pyongyang would find appealing,” said Kim Young Hui, who escaped from North Korea and now analyses its economy for the South’s Korea Development Bank. “This has noticeable common threads with North Korea’s own national economic development plan.”
After barely a year at the helm of North Korea, Kim in 2013 unveiled a “parallel development” policy to advance the nuclear programme and the economy simultaneously, a significant shift from the previous “military first” policy that had prized guns over butter.
Now, having claimed — with some credibility — to have completed his nuclear weapons programme, Kim appears to be turning his attention to economic development.
In a speech the week before the summit, in which he pledged to stop nuclear tests and missile launches, Kim mentioned the economy 28 times. He told his apparatchiks to prioritise the economy by “tapping all the human, material and technical potentials of the country for economic development”. This would help “make the people’s laughter resound far and wide across the country”, he said.
His remarks showed that the North Korean leader was “aware of the strong demand in the country for economic progress”, said Kim, the economist.
“Despite risks involved, the socialist regime will keep opening up its economy to the outside world,” she said. “Public sentiment among civilians in North Korea is increasingly positive towards having an open market.”
But the repeated rounds of crippling sanctions imposed last year in response to Pyongyang’s nuclear and missile tests pose a serious challenge to economic progress. The sanctions ban North Korean exports of its three biggest revenue earners — coal, seafood and garments — and the importation of a wide range of products, including metal.
China, North Korea’s biggest neighbour and trading partner, has been implementing the sanctions so stringently that nail clippers and whiskey bottle tops have been blocked at the border, according to frequent travellers.
Data released by the Chinese customs department showed that China imported only US$12 million ($17m) worth of goods from North Korea in March, down 89 per cent from the previous year, and exported only half as much, at US$143m.
The economic pinch is almost certainly why Kim is suddenly so eager to talk to the outside world, travelling to Beijing in March and then crossing the demilitarised zone to meet Moon.
“Why would he be doing this unless he was being constrained by sanctions,” said Stephan Haggard, professor of Korea-Pacific studies at the University of California at San Diego and a close monitor of sanctions. “I think he’s sweating.”
If I were Kim, I’d be much more worried about textile workers out of work, milling around doing nothing, than I would be about an American attack. The real dangers to the regime are internal.
William Brown
Getting information on North Korea’s domestic economy is extremely difficult, given the lack of reliable figures, or any figures at all.
But analysts generally agree that the sanctions must be inflicting serious pain on North Korea, a desperately poor country with a highly inefficient economy.
Although it is technically a communist country, a parallel market economy has been flourishing in North Korea, tolerated in no small part because the state can no longer provide for the people.
That has led to huge imbalances where a doctor can earn exponentially more from selling medicinal herbs in China than he can from administering to patients, and where there is no incentive for a worker to show up at a state factory where she earns US$4 a month if she could earn 10 times that selling food in the town market.
The average income in North Korea is US$1362 per capita, according to the South’s central bank.
The sanctions are probably putting a chill through both these economies. That has to be a huge concern for Kim, who once declared that North Korean people “would never have to tighten their belts again”.
“If I were Kim, I’d be much more worried about textile workers out of work, milling around doing nothing, than I would be about an American attack,” said William Brown, a former intelligence analyst on North Korea who now teaches at Georgetown University. Citing the kind of discontent that brought down communist regimes in Eastern Europe, he said, “The real dangers to the regime are internal.”
But Moon could pursue very little economic engagement without sanctions relief. Not only has the United Nations Security Council imposed waves of sanctions on North Korea, but South Korea imposed its own direct punishment following two deadly North Korean attacks on South Korea in 2010. Those measures are still in place and conservative politicians are urging Moon to leave them there.
Even if Moon overturned his predecessor’s order to close the Kaesong industrial park, an interKorean factory complex on the Northern side of the border, transferring money or equipment to it would be almost impossible in the current sanctions environment.
“I think we’re jumping to conclusions,” said Haggard of the the University of California at San Diego, noting the concerns in Washington. “It would be extremely difficult for the Moon Administration to embark on anything significant before we see the outcome of the summit with Trump.”