 Shanghai-based Paul French is Chief China Representative of business intelligence company Access Asia. He is the author of the newly updated and revised North Korea The Paranoid Peninsula – A Modern History (Zed Books, 2007). The reissued book provides an intriguing insight into North Korea’s politics, economics and history. New chapters deal with recent events, and an updated foreword examines why North Korea remains a major global issue.
Since February 2007 there has been a roadmap between Washington and Pyongyang in place. It isn’t called a roadmap but it walks like one and quacks like one. A year ago the idea of a bi-lateral agreement seemed almost inconceivable. But now we not only have an agreement but have moved a significant way along the road to a de-escalation of nuclear tensions on the Korean peninsula since 2002 and Pyongyang’s admission that it’s nuclear programme was still in place.
Pyongyang’s aim was always to break free of the six-party multi-lateral approach and negotiate directly with Washington. Finally Christopher Hill, America’s point man on talks with the North was given the freedom to find a deal. As with all roadmaps it is full of stages and confidence building measures (CBMs). Nobody said a roadmap with Pyongyang would be easy and it hasn’t been – the initial sticking point of the North’s US$25mn stuck in a Macanese bank took time to resolve. However, it was and IAEA inspectors gained access to the Yongbyon reactor, inspected it and Pyongyang appears to be complying with the demand to shut it down.
At the same time the South Koreans have started the scheduled shipments of heavy fuel oil to the North and now America must deal with the issue of economic sanctions and the normalization of diplomatic relations between the DPRK and the USA. That the North is less nuclear than it was in February is a major positive, that America has continued to engage Pyongyang and that Kim Jong-il has by-and-large reciprocated is also positive.
What can’t be forgotten is that the North’s economy remains in as bad a state as it did before February, if not worse, and that it seems unlikely that American lifting of sanctions will make much difference to the immediate situation for ordinary North Koreans. Systemically, the North’s economy remains weak, in a state of collapse and unable to support or feed it’s people.
So the question will be how to bolster the North’s economic sufficiency to ensure that that there is no ‘drift’ back to the nuclear bargaining chip? On the surface there have been economic improvements – but these have been felt only in Pyongyang and the special industrial zone in Kaesong. On average factories are running at only 30% of capacity. Across the DPRK things have worsened, a situation exacerbated by wide-scale survival mechanisms of asset stripping and deforestation. The cumulative effect is to make any national economic recovery more difficult. At the same time food supplies remain tight and following spring shortages the price of rice has increased. Simultaneously where there have been growths in the economy, such as in fish and seafood exports, they have worsened the local food situation.
Two measures that could help normalise relations between Washington and Pyongyang as well as boosting the North’s economy and Pyongyang’s impetus to continue economic reform are Kaesong and financing.
Crucial to any normalisation will hopefully be the inclusion of products from the Kaesong Industrial Complex in any Korea-US Free Trade Agreement. This would greatly encourage South Koreans companies to expand in Kaesong while also encouraging Pyongyang to expand and replicate the model in a more relaxed way. From circumscribed Kaesong to more open Chinese-style foreign investment zones.
Secondly, normalization should allow the DPRK to gain loans and funding from the World Bank, IMF and Asian Development Bank – institutions that are currently closed to the North. However, Pyongyang has seen China’s development and that lending for infrastructure projects and other forms of technical assistance is crucial. Pyongyang realises that there are political strings attached to World Bank loans but also notes that one-party states such as China and Vietnam have managed to accommodate. Pyongyang is also aware that unless it can reach a point where the ‘catalyst’ lenders invest then it has no chance of securing investment from nongovernmental banks potentially opening the floodgates to investment from not just US investors but others from the EU, Japan and around Asia.
Right now cautious optimism is the state of play – for too long as regards North Korea we were on the road to nowhere, now we are on the road to somewhere…and that’s something to be supported.
Last update : Monday, 20 August 2007
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