'Japan cannot compete with united Korea'

Rogers expects worst-ever financial crisis in 2 to 3 years

By Kim Jae-kyoung

SINGAPORE ― Following the historic summit between U.S. President Donald Trump and North Korean leader Kim Jong-un, hopes are running high that unification will come sooner rather than later.

Most countries are welcoming thawing relations between the two Koreas as they want peace and stability on the Korean Peninsula. For many, unification would be considered an ideal solution to end the North Korea nuclear crisis.

However, not all countries are seemingly espousing the two Koreas' unification because a unified Korea will become much stronger and more competitive.

Legendary investor Jim Rogers believes that unification would bring great prosperity for Korea but it would be a nightmare for Japan, which has shown a lukewarm attitude toward the South Korean and U.S. decision to halt joint military exercises.

“Japanese companies want to invest in North Korea but Japan is against it because Japan cannot compete with a united Korea,” Rogers, chairman of Rogers Holdings, said in a recent interview with The Korea Times at his residence in Singapore after the June 12 summit.

The 75-year-old multimillionaire investor thinks that the two Koreas can create great synergy by just combining each other's strengths.

“A united Korea has 80 million people on the Chinese border, lots of cheap, disciplined, educated labor, huge natural resources, lots of capital, and lots of expertise,” he said.

“Japan has declining population and huge internal debt but they don't have cheap labor anymore so Japan doesn't want unification. Japan would do everything it can to fight it. They would use every excuse”

The Singapore-based investor thinks that although there are pros and cons, other great powers surrounding the peninsula, such as China and the U.S., would benefit from unification.

“The Chinese would like it because it would get rid of American troops,” he said.

“America doesn't have to spend money on troops anymore. I'm an American taxpayer. I don't like paying for 30,000 troops in Korea every year,” he added. “The war has been over for 65 years. Why are we still occupying Korea?”

The following is an excerpt from the interview.

Q: Kim Jong-un has shown his eagerness to develop North Korea into a tourist destination by housing a casino resort in the Wonsan-Kalma coastal tourist zone. If you are asked to make an investment, are you willing to do it?

A: It depends. I would need to know a lot more than that. If there is a good investment in North Korea then I am willing to explore everything. North Korea doesn't have anything. They don't have tables, they don't have electricity, and they don't have anything. So if you know what you are doing, we will probably be successful in the North.

Q: Is there any specific area where you would like to invest in North Korea?

A: Well I do know a little bit about finance, so I would be more likely to look at finance first. They've been learning about stock markets, they've been learning about the banking system, so there will be probably a stock market soon. So that would be a place where I would be interested. The opportunity in North Korea is for everything. They want to live like you do.

They have rich natural resources. They have educated, cheap, disciplined labor in North Korea. So now it is a kind of opportunity that doesn't happen very often. They are much better than China in 1981. That time in China, nobody knew anything, including the Chinese. But in North Korea they have rich neighbors in the South; they know about capitalism; they know about prosperity; they want to be rich. The Chinese didn't know anything in the 1980s but North Koreans know, they have seen the black market, the DVDs, they know what can happen and they're excited to do it.

Q: In a previous interview, you said that Kim is different from his grandfather and father. From your perspective, do you think Kim is seriously pursuing denuclearization and opening up North Korea?

A: I have never met Kim Jong-un but I know who he is. I've read enough and I heard from the people who have spoken with him enough. You see what he says in the press and what he does. Even Donald Trump says this man is ready to go; this man is serious and he is. He wants to live like you (South Korea), he doesn't want to live like North Koreans. He lived in Switzerland. He knows there is a whole different country.

Q: Still many are raising questions about Kim's seriousness about denuclearization and market opening. They claim that Kim is trying to polish his international image. What is your view on this?

A: Okay, let's say that's right. Let's say he doesn't do it. Then he's ruined, he's a shame, he's a disgrace. He makes it even worse if three years from now he's done nothing and he's going to be scorned and ridiculed. That does not make any sense to me unless he is a fool.

Q: You have met many leaders in your career. From your perspective, how is Kim Jong-un different from his father and grandfather in terms of leadership?

A: He is a vastly different person because of his experiences. His father has never been anywhere. Kim has done some of the very first things. He started free trade zones, he started an international ski resort and his father did not know how to ski. He started international bicycle races, international marathons, and his father didn't know anything about these. The kid knew a whole different world and he wanted to bring a new different world to North Korea.

Q: If you are invited to meet Kim Jong-un in Pyongyang, are you willing to do it?

A: It depends on what the invitation says. If the invitation is right and the right thing I would listen to the invitation. If he said come here but first he's got to pay me because I'm not going for free. But it's got to be that I'm going to meet with people who will listen. I have spoken to government officials all over the world and most of them are pretty hopeless.

Q: If Kim asks you for advice about market opening, what kind of advice would you give him?

A: First thing, I will say, “Open the DMZ on your side.” If South Koreans want to come over, let them come, don't stop them, don't have any more barriers to people coming to your country and see what happens. The facts are that everything they need to do is already in place. They have a guarantee for foreigners, they have regulations to allow foreigners to come and invest. North Korea has a whole new set of laws and regulations to encourage foreigners to invest there, but as I said nobody trusts them, and because there are sanctions, nobody does much. So the first thing that I would do is to tear down the DMZ on their side.

The second thing I would do is to let everybody know we are open for businesses. He has to dismantle the nuclear weapons first, let the foreign press come in to see the dismantling, and he's starting to do that. Then I would say do not spend too much money on the military. You know South and North Korea have spent huge amounts of money on the military. And you said that South Koreans are afraid of how much money they have to spend (for unification) but they would save a gigantic amount of money on their own military.

Q: How many times have you visited North Korea? Where is the most promising area in terms of investment?

A: Only twice. Once to the capital, and the DMZ. I saw the DMZ from both sides, first North and then South. And I went to Rason, an ice-free port city and a free economic zone at the northeastern part of the North. It's a year round port so that's why Russia and China are building new docks there. The Russians rebuilt the rail road down into Rason because they know what's coming. Great opportunities are everywhere. The Rason port is a great opportunity. The railway doesn't work yet, but they're going to rebuild it. Rason will be an extremely important port and transportation hub in the future

Global economy and financial markets

Q: What is your outlook for the global economy and financial market? Do you still believe that the world is heading toward the worst-ever financial crisis?

A: Yes. We have always had periodic crises for thousands of years so I know we're going to have more. We're going to have economic crisis again. I don't know when, but I know the next one is going to be very, very, very bad. The last one was because of very high debt in the world, and now the debt is much, much, much higher. In America, the central bank alone, its balance sheet bounced up 500 percent in the last 10 years. That's the case all over the world. So the next economic crisis is going to be horrible. It is going to be the worst in my lifetime.

Q: Do you think the crisis will be coming soon?

A: Certainly. It will be here in two or three years, there's no question about that. It's been 10 years since the last one. Normally, it is four to eight years, you know, only a few years between economic problems but it has been over 10 years. So I think it's the longest ever in American history that we've got with economic expansion.

Q: The U.S. central bank has raised its interest rate? How do you think this will affect the global economy and financial markets?

A: The interest rate should go much, much higher. The interest rate has gone to the lowest level in recorded human history. This has been totally absurd and it has never happened before because the bureaucrats don't know what they are doing. We are all going to pay horrible price to bring it back to normal. A lot of people are going to go bankrupt. I hope I'm not one of them.

Q: U.S. rate hikes have caused a reversal of interest rates between the U.S. and South Korea. Do you expect a massive capital outflow?

A: I would not be concerned about that. There might be a temporary flow but interest rates are going higher everywhere. Maybe some people might take their money out of South Korea for a while, but no others. If I were the Korean central bank, that would not be my major concern.

Q: What is the biggest threat to the global economy right now?

A: Washington D.C. The Fed doesn't know what it is doing. The central bank throws the interest rate to the lowest level in recorded history. The American central bank has increased its balance sheet by 500 percent in ten years. Historically, it is impossible. So what the American central bank has done is incomprehensible in historical terms. This is like an experiment. I hope it's going to work. They're going to find out it's not going to work. If the interest rate will go higher, all these people will increase their debt. If the interest rate is so low, many of them will go bankrupt.

Q: Trump is in conflict with leaders of many allies over trade policies. What do you think of Trump's trade policies and how do you think the ongoing trade war will unfold down the road?

A: A trade war has always been bad for everybody, not just people in the trade war. Nobody ever wants a trade war. Like I told you the next bear market would be the worst one in my lifetime. That's the reason because we're going to have trade wars too. We are going to have high interest rate, bankruptcy, trade wars. It is going to come all together at a very bad time.

Q: Will Trump's policies cause a negative effect on the U.S. economy as well? Are you against his trade policies?

A: Yes, I'm against trade wars. In the end, it causes a loss of trade for everybody. So for instance, the U.S. says we are going to put a tariff on steel and aluminum, so then the price of steel and aluminum goes up. There are a few thousand people who make steel and aluminum; they're going to have more prosperity. But to 300 million Americans who use steel and aluminum, if we buy a refrigerator or a lamp, the price for everything will go higher because now we have these tariffs. Yes, a few thousand people are better off. But 300 million people are worse off, plus all the other people all over the world too.

Q: What's your plan for the next 5-10 years in investing?

A: I know it is going to be a big bear market. I hope I would be smart enough to buy things at the right time. And if North Korea opens up, I would invest money there because I know the North would do well even if most of the world are suffering badly from bad debts.