North Korea is perhaps the most hermetic, closed off and isolated country on the planet.
A country that now, in 2018, seems to be living in 1960.
However, now this entire story may be about to change.
Here at VISUALPOLITIK, we’ve already talked about how capitalism is reaching North Korea
by following popular markets, how an entire entrepreneurial revolution is taking place
and how today more than 50% of North Koreans make a living from the private economy.
However, a couple of questions remained on the table...
What does one of the most totalitarian governments on the planet think about this particular
capitalist revolution?
What are its plans?
And another very, very important question.
Who the hell would be willing to invest in North Korea?
Listen up.
(THESE AREN’T THE BEST OF TIMES)
On June 12th, 2018, a historic meeting was held in Singapore...
For the first time, the US President, in this case Donald Trump, met with a North Korean
leader.
Why?
Supposedly to denuclearize North Korea.
Perhaps the actual goal?
Well, in addition to taking a couple of pictures – hey! more pictures never hurt - starting
a dialogue, cooling down the enormous tension that had been growing between them, and preventing
North Korea from continuing with a nuclear program that could have given it the ability
to attack even the United States.
Of course... just a moment because theory is one thing, and truth, something very different.
Check out the latest news:
( “U.S. spy agencies: North Korea is working on new missiles.
Washington Post)
(“Secretary of State Mike Pompeo acknowledged during Senate testimony that North Korean
factories “continue to produce fissile material” used in making nuclear weapons”.
Washington Post.)
And nowadays, as we told you here on VISUALPOLITIK, it seems a bit difficult for the Pyongyang
regime to agree – at least in the short term – to get rid of all its nuclear weapons,
which are, after all, their best life insurance.
But... of course, that doesn’t mean that he won’t accept making concessions to normalize
his relations with the rest of the world and end international sanctions.
Because, you see... since Kim Jong Un came to power in 2011, he’s had two priorities:
developing the nuclear bomb... and something far less sinister... reforming the economy.
Yes, you heard that right.
Although it seems hard to believe, one of the objectives that Kim Jong-Un, the North
Korean dictator, has set himself is to change his country’s bad economic situation by
copying some of the changes that have taken place in countries like China and Vietnam.
And, check this out, once they develop their nuclear capabilities…
Pyongyang’s number one priority is precisely this-- to advance in economic development.
Of course... to achieve this they need to end international sanctions... which are causing
enormous damage.
Yes, we’ll see how, though it may seem hard to believe, North Korea’s situation could
get worse.
For example, check out what happened to the trade relations between North Korea and Latin
America... between the sanctions and the sinking of Venezuela - one of the few countries that
had allied itself with North Korea - relations have collapsed:
But... of course... when we talk about North Korea and the economy, we need to talk about
China: 80% of all North Korean trade and foreign exchange occurs here.
And what’s happened is that China has been pushing Pyongyang for years to get some reforms
going once and for all.
And since those changes have been slower than a turtle with rheumatism, well… last year
Beijing decided to start applying international sanctions...
This is what was happening in August 2017:
(China to Implement UN Sanctions on North Korea”.
Fox News)
( China bans North Korean iron, lead, coal imports as part of U.N. sanctions.
Washington Post)
As you can imagine, considering the enormous dependence that North Korea has on China this
has been a disaster.
Just in the first 6 months of 2018 Chinese purchases of North Korean products have plummeted
by more than 90%... and Chinese exports to North Korea by 40%.
All this, of course, in the official market... as we’ve seen, there’s a parallel market,
the black market, but that's a different story.
The fact is that all this has led North Korean industrial and mining production to go through
its worst time in years.
And if we add the disastrous state of the country’s infrastructure to all this...
with their continuous blackouts, less than 1,000 km of paved roads throughout the country
and decrepit trains that, in many cases, don’t go over 20 km or 12 miles per hour... it’s
clear that this country urgently needs a 180-degree turn...
And you know what?
They know this in Pyongyang.
(CAN NORTH KOREA BECOME THE NEW VIETNAM?)
In 1986 Vietnam launched the well-known Doi Moi policy, a set of economic reforms similar
to those of Deng Xiaoping in China, which had the mission of setting communism aside
to jump-start a market economy.
To achieve this, agricultural cooperatives were dissolved, price controls were eliminated,
land ownership was allowed, and policies were put in place to attract foreign investment.
So what was the result?
Over the following 30 years, Vietnam's economy grew at an annual average of almost 7%.
Today Vietnam is transforming at a breakneck speed and its exports are already larger than
those of countries like Brazil or Australia.
Well... at the last inter-Korean summit in April between Kim Jong Un and the president
of South Korea, Moon Jae-in, the North Korean leader expressed an interest in following
the model of....
Vietnam.
And following this line, the North Korean government has approved some significant measures
in recent years:
for example, it has promoted the creation of private markets, has given more autonomy
to public companies and has granted land parcels for the peasants’ private exploitation.
However... despite all this, there are two questions we need to answer: Who on earth
would be willing to invest in North Korea?
And what else is the Pyongyang government willing to do?
Listen up.
(WHO WOULD INVEST IN NORTH KOREA?)
If you were asked which countries you’d like to do business in, North Korea would
probably be one of your last options...
Investing in such a totalitarian country, where the leader makes and unmakes at will,
where the government acts with brutality and dedicates itself to threatening the rest of
the planet?
Investing in a country where the rule of law and legal security are pure fantasy?
Come on!
Well... folks, the truth is that not everyone sees it this way.
See, some of South Korea's largest companies such as Hyundai, Lotte Corporation and Samsung
have already set up workgroups to investigate and analyze potential business opportunities
in North Korea.
And according to polls, three-quarters of South Korean companies would be willing to
invest in the north if sanctions were lifted.
Hyundai, for example, is already preparing an early reopening of the industrial Kaesong
zone, an industrial zone next to the border of South Korea that was created in 2004 to
house foreign companies – mainly South Korean – and which employed more than 80,000 North
Koreans...
But in 2013, given the growing tensions between the two Koreas, it was closed by the Pyongyang
government.
Even recently, Jim Rogers, one of the most important and well-known investors of all
time, has lamented the fact that the United States doesn’t allow him to invest in North
Korea and has made statements such as these:
(“Korea is now going to be the most exciting country in the world.
Kim Jong-Un does not want war.
Kim is not North Korean.
He was educated in Switzerland.
He knows there’s a different world out there.
“They need everything … electricity … soap … tablecloths,...
[...] If you’ve got any kind of expertise you’re going to make a fortune.”
Jim Rogers)
But wait just a moment... the question we have to ask ourselves is, what the hell do
they see in a country like North Korea?
Well... fundamentally, opportunities.
Allow me to explain.
North Korea has a relatively young, very entrepreneurial population with very low labor costs.
In addition, the country seems to be quite rich in natural resources: gold, zinc, copper,
rare earth elements… the estimated value of all mineral resources is more than 6 billion
dollars.
Then, as Jim Rogers says, the country is being built.
It needs everything.
And if that weren’t enough, it’s also located between two economic powers, China
and South Korea.
See, at the last inter-Korean summit, the South Korean President gave Kim Jong-Un a
pen drive that included lots of the investments that South Korea would be willing to make.
Do you know what investments were included on this pen drive?
Well, for example, Seoul would be very interested in building trans-Korean railroads that, in
addition to boosting the North Korean economy, would allow South Korea to export goods much
more quickly to China.
And the same with roads, oil pipelines, etc., etc.... these would be billion-dollar plans.
Of course... not everything is so simple and enthusiasm is far from widespread.
North Korea is a brutal dictatorship, corruption is huge and the government can do, literally
whatever it wants.
For example, expropriate:
(TEXT: Well, be careful with your answers, you know?
Because you’re telling me that the bank isn’t for sale but I can expropriate it
if I want.)
(“This is where the money is to be made… if you can figure out how not to get expropriated.”
Justin Hastings, an associate professor at the University of Sydney)
And then, of course, there’s the issue of international sanctions... as a consequence
of the nuclear program.
And, until they are lifted… any change will have a very short run.
Now, it’s precisely at this point that China can play a very important role.
You see, Xi Jinping has managed to do what China’s been planning for years: getting
Pyongyang going.
Which could obviously mean big business for Chinese companies.
That’s why we now see headlines like this.
(China suggests sanctions relief for North Korea after Trump-Kim summit.
CNBC)
And not only that, China has allowed the black market between both countries to flourish,
has accelerated the development plans in the border area and is already studying the imminent
opening of special economic zones on the North Korean border...
And then there’s tourism... which is precisely one of Kim Jong Un's government’s greatest
priorities.
Listen up.
(NORTH KOREA, A HOLIDAY SPOT?)
The arrival of Chinese tourists has continued growing in recent years and since May 2019
the number of daily arrivals has more than doubled.
(“We are going to run at least seven or eight tour routes to North Korea this year,
including a one-day tour to Nanyo and a trip of four to five days to Pyongyang, Kaesong
and Panmunjom”.
- Che Jing, a deputy manager of a chinese travel company.)
Well... tourism is precisely one of the Pyongyang government’s top priorities... for several
reasons:
first it generates employment – remember this is a very labor-intensive sector – attracts
investment and helps obtain foreign currency quickly.
On the other hand tourism could change the regime’s image… and, the truth is that
swapping nuclear parades and nuclear threats with exotic beaches and seaside dinners…
would be good for business.
Due to this, in 2014 the North Korean government created the Special Tourist Zone of Wonsan,
a special economic zone where foreign investment is allowed and where in principle, the regime
would allow more freedom for developing tourism.
Yes, this is the same area where until recently the army did things like this.
You know, North Korean things.
The fact is that with the nuclear program and the sanctions, results have been very
scarce... however Kim Jong Un wants to step on the gas.
Without going any further, in 2017 the North Korean government sent a delegation to Spain,
which is one of the major tourist powers of the world, to check out places like Benidorm
or Marina d'Or [Marina Door], to learn from them and get some ideas.
You heard that right.
Apparently, Pyongyang’s goal is to attract more than 1 million tourists per year in the
short term and 5 to 10 million in the reasonable future.
The question is, will Kim Jong-Un really be willing to carry out all the reforms that
the country needs so that all these plans can come to life?
Folks, only the future can answer that question.
For now, what seems clear is that we have the best opportunity to leave the North Korean
nightmare behind, which isn’t only a threat to the rest of the world but above all a punishment
and a great prison of fear and repression for North Koreans themselves.
But now... it’s your turn, are you in favor of lifting sanctions against North Korea?
Leave your answer in the comments as well as in the survey.
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