North Korean Talk
Attended a talk by Bradley Babson earlier this week titled "Engaging with North Korea in a Post-Test World: Economic Perspectives".
A couple of interesting points:
- Babson suggested that North Korea had put all its eggs in one basket by placing too much of its financial resources in Macau. This made the Hermit Kingdom more vulnerable given U.S. crackdown in that area. This disruption in Pyongyang's foreign exchange has also made it more difficult for the regime to sustain its military program. But from the U.S. perspective, the crackdown is a successful U.S. policy since Washington had little control in areas such as food and fuel supplies which were mainly controlled by China and South Korea.
- Yet another vulnerability is the changing relationship between the people and the state. Consumers are now able to exercise their choices, and this is a significant change away from the old command structure. Indeed, being able to make individual choices is a huge psychological change. It is also an alteration of the social contract which when broken cannot be, much like Humpty Dumpty, put back together again.
- North Korea is the most corrupt country in Asia, and there are systematized incentives to cheat.
- North Korea's new year editorial (something which reflects the thinking of the leadership) spelt out the need to increase people's living standards, ensure technological upgrading of the economy, and an increased production of food and other consumer goods. It also spoke of the need to upgrade industries and transportation. In the editorial, Kim Jong Il was referred to as President and not as chairman of the Party. Does that mean anything? Maybe yes, maybe no.
Overall, Babson outlined four assessments of the country.
1. Basic economic challenge for the country is to manage 3 fronts at the same time
- external environment (as it impinges on security)
- economic reform (at least 8 to 10 per cent sustainable growth)
- internal political impact (the challenge of reforming while growing at the same time)
2. The decision to test has altered the economic equation and increased risks in North Korea's vulnerabilities.
3. Implementation of U.N. sanctions will have both positive and negative effects on the North Korean economy.
4. A two-pronged strategy of sanctions and economic assistance tied to the nuclear agreement could have a major positive impact on the North Korean economy.
And the implications:
- An opportunity for the six-party working group.
- The need for a new operational platform for development assistance.
- The importance of a holistic approach - perhaps even a U.N. special envoy?
- Failure could undermine the nuclear agreement.
A couple of interesting points:
- Babson suggested that North Korea had put all its eggs in one basket by placing too much of its financial resources in Macau. This made the Hermit Kingdom more vulnerable given U.S. crackdown in that area. This disruption in Pyongyang's foreign exchange has also made it more difficult for the regime to sustain its military program. But from the U.S. perspective, the crackdown is a successful U.S. policy since Washington had little control in areas such as food and fuel supplies which were mainly controlled by China and South Korea.
- Yet another vulnerability is the changing relationship between the people and the state. Consumers are now able to exercise their choices, and this is a significant change away from the old command structure. Indeed, being able to make individual choices is a huge psychological change. It is also an alteration of the social contract which when broken cannot be, much like Humpty Dumpty, put back together again.
- North Korea is the most corrupt country in Asia, and there are systematized incentives to cheat.
- North Korea's new year editorial (something which reflects the thinking of the leadership) spelt out the need to increase people's living standards, ensure technological upgrading of the economy, and an increased production of food and other consumer goods. It also spoke of the need to upgrade industries and transportation. In the editorial, Kim Jong Il was referred to as President and not as chairman of the Party. Does that mean anything? Maybe yes, maybe no.
Overall, Babson outlined four assessments of the country.
1. Basic economic challenge for the country is to manage 3 fronts at the same time
- external environment (as it impinges on security)
- economic reform (at least 8 to 10 per cent sustainable growth)
- internal political impact (the challenge of reforming while growing at the same time)
2. The decision to test has altered the economic equation and increased risks in North Korea's vulnerabilities.
3. Implementation of U.N. sanctions will have both positive and negative effects on the North Korean economy.
4. A two-pronged strategy of sanctions and economic assistance tied to the nuclear agreement could have a major positive impact on the North Korean economy.
And the implications:
- An opportunity for the six-party working group.
- The need for a new operational platform for development assistance.
- The importance of a holistic approach - perhaps even a U.N. special envoy?
- Failure could undermine the nuclear agreement.
posted by Maria Siow @ 3:36 PM
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