North Korea committed to luring foreign capital

North Korean Foreign Minister Ri Yong-ho addresses the 73rd session of the United States General Assembly, early Sunday (Seoul time) at U.N. headquarters in New York. AP-Yonhap

By Kim Yoo-chul

North Korea is committed to inviting foreign capital to sustain the country as its leader Kim Jong-un is apparently departing from its decades-long “military first” approach and instead engineering a highly articulated policy to advance the economy.

The latest agreement between Kim and President Moon Jae-in included measures and details on how the two countries will work toward a permanent peace, with Pyongyang promising to allow international inspectors into the reclusive state to verify the process of closing a key missile test site and a launch pad.

Negotiations are only just starting and more details are still to be worked out as Kim's reaffirmation on denuclearization didn't address different views with Washington, the largest stakeholder for denuclearization talks, in what that process would involve.

But South Korea is prepared to help the North to get more foreign capital in a structured way as President Moon revealed the North hopes to join international financial institutions such as the International Monetary Fund (IMF) and World Bank.

The remarks came after President Moon was invited to a discussion hosted by the Council on Foreign Relations (CFR), the Asia Society Policy Institute and Korea Society, where he confirmed Seoul's intention to support the North's national economic development but only after “substantive denuclearization.”

A few days after the announcement, North Korea's Foreign Minister Ri Yong-ho called for the repeal of economic sanctions in a speech at the United Nations, Sept. 30 (Korea time).

“As North Korea has sufficiently consolidated national defense capabilities and war deterrence to handle the nuclear threats against the United States that have lasted over several decades, concentrating all efforts on economic construction has come up to North Korea as a historic agenda,” Ri said through an interpreter, stressing North Korea won't “unilaterally disarm” its nuclear weapons programs without concessions from Washington first.

The significance of the comments by the high-profile figure is that North Korea is looking to win over skeptics in the United States and the international community by delivering its repeated promises and prioritized “next agenda” for economic growth with assistance from foreign capital.

“Based on the summary of talks with people accompanied with President Moon for his third summit in Pyongyang, it's evident Kim is grinding out top-down economic reforms because the North is fully ready to focus on the other policy goal of the regime, which I believe is economic development,” said Lee Jong-seok, a former unification minister. “I was told Kim paid greater attention to Samsung's de facto leader Lee Jae-yong when the Samsung's top scion had been introduced.”

Many further details relating to economic development programs and initiatives on the North will be discussed when U.S. Secretary of State Mike Pompeo visits Pyongyang this month, Lee said.

If the North's specific “implementation plans” see rapid progress, this could create political momentum for a partial lifting of economic sanctions, potentially starting with some easing of China's unilateral economic sanctions on North Korea. Also, political analysts say after deal-making moves forward, given the resumption of the joint inter-Korean industrial complex in North Korea, South Korea is set to play a role towards that move.

“If North Korea gets funding from U.S. companies, then that would have a legitimizing effect and may include infrastructure, tourism and some technology guidance,” said Yang Moo-jin, a professor at the University of North Korean Studies in Seoul.

The North Korean economy is currently one of the poorest in Asia, and stands to gain considerably from a durable peace process and denuclearization. Last year, the per capita GDP of the North was estimated at $1,200 compared with $30,000 per capita for South Korea, according to a recent analysis by IHS Markit, a market research firm.

“The reopening of the Gaeseong Industrial Complex, combined with international aid flows, could trigger a period of rapid economic growth in the North's economy so long as the denuclearization process in genuine and verifiable. Eventual lifting of U.N. and U.S. sanctions would allow key sectors of the North Korean export economy, including mining, textiles and fisheries industries that were hit by sanctions, to rebound strongly,” said Rajiv Biswas, chief Asia-Pacific economist at IHS.