By Bradley Babson
The Oct. 4 declaration is being touted as an important milestone for inter-Korean relations, while also enhancing prospects for transformational change in North Korea and improving North Korea’s image in the international community as willing to move forward with progressive change.
But can these desirable objectives be achieved by inter-Korean commitments and agendas for cooperation alone? Balancing a forwardlooking economic agenda for the two Koreas with a well-conceived multilateral economic engagement framework could offer the best hope for realizing peaceful managed transformations on the Korean Peninsula that can improve the welfare of all Koreans.
While the declaration emphasizes that a “spirit of by-the-Korean-people-themselves” will guide the shared aspiration to resolve the issue of unification by Korean initiative, this does not mean that the international community has no constructive role to play in the process.
South Korea has pursued an outward-oriented economic development strategy since the early 1960s and its great economic achievements are rooted in its commitments to international trade and investment.
South Korea also benefited from decades of official development assistance provided through multilateral institutions and bilaterally before rising to join the OECD in 1995.
While North Korea through its juche philosophy has in the past pursued an inwardly-oriented economic strategy, this has changed in recent years as economic relations with South Korea and China in particular have expanded.
An economic success story for North Korea will require a more intentional and welldesigned outward-oriented economic development strategy that can embrace opportunities for aid, trade and investment not only with South Korea and China, but also Japan as a major regional economy, and the United States, Europe and ASEAN.
The inter-Korean economic relationship should thus be aligned to advance and not impede this type of economic development strategy for North Korea. This would help reduce the gaps between the two economies over time and provide incentives for North Korea to adopt economic management practices that will attract foreign investment from other countries, stimulate trade and become more integrated in the global economy.
This can only enhance the prospects for eventual Korean unification. To do this, multilateral economic engagement with North Korea can compliment inter-Korean economic projects and cooperation by helping the North Korean authorities to design and manage an economic development process for themselves.
This is important for adoption of market mechanisms and building capacities to develop policies and economic management that will help them succeed and not fail in their efforts to manage change in a genuine partnership with South Korea and the rest of the international community. Multinational organizations such as the IMF, World Bank, Asian Development Bank, the European Commission, and the United Nations economic agencies all have valuable roles to play in this process, along with coordinated involvement of other bilateral economic partners and non-governmental organizations.
Finding the right balance between inter-Korean ambitions and economic cooperation with multilateral economic processes and engagement seems to be the best formula for success for the two Koreas. Kim Jong-il may understand this better than some South Korean political leaders. President Roh Moo-hyun’s comments about Kim Jong-il’s reluctance to talk about “reform and opening up,” and the declaration’s statement that South and North Korea agreed “not to interfere in the internal affairs of the other,” reveal more than just a reluctance to put North Korea’s future political and economic decision-making at South Korea’s disposal.
It is clear that North Korea faces a fundamental dilemma that appears not yet to have been resolved. This is how to amplify economic relations with South Korea in a meaningful way in a spirit of cooperation and mutual advantage, and also to manage domestic economic system evolution and the internal political economy implications of such changes that are inevitable if new dynamics are unleashed by scaling up and diversifying collaborative economic activities.
Addressing these internal challenges may be easier to pursue through neutral multilateral partners than a highly invested stakeholder such as South Korea or a powerful neighbor such as China. Finding ways to pursue needed discussions on policies and institutional developments that are important for managed evolution of the North Korean economic system thus will likely become a major area for future collaboration among North Korea, South Korea and international partners.
Mechanisms to pursue these types of collaboration should be sought as a new administration in South Korea takes up the summit results and seeks a way forward that will lead to genuine advances and not a mirage of false hope for the future of the Korean Peninsula.
Bradley Babson is a retired World Bank expert on the North Korean economy and chair of the Stanley Foundation project on Future Multilateral Economic Engagement with North Korea. .. ED.