There are many hurdles ahead for North Korea as it tries to develop its slow-growing economy and gain significant foreign investment. But while quiet openings should be encouraged, it is now imperative for Pyongyang to acknowledge the structural problems of the current system if it really wants to gain investment confidence. That’s according to Aidan Foster-Carter, speaking at a Korea Economic Institute event this Thursday in Washington DC.
Launching a new paper on the prospects for North Korea’s economy, Aidan Foster Carter reminded audience members that there was once a time when North Korea’s economy had been well ahead of its southern neighbor. Having been geographically well positioned to continue growing and become a competitive and productive north east Asian country, he explained that decades of mismanagement had reversed the country’s early fortune.
Talking about the many potential advantages to the North Korean economy like extensive mineral deposits, well-positioned export zones, cheap labor, and a mass market of some 23 million potential customers, Aidan Foster-Carter said that military first politics and widespread corruption had long thwarted the potential for significant investment. As such, investors now need more than signs of quiet opening if they are to gain confidence. This is because presently the risks of being cheated by the North Korean system far outweigh the potential benefits of investing.
Famously known for being a rogue state that regularly misses debt-payments to foreign creditors and even engages in criminal activities, Foster-Carter said that in order to gain foreign confidence, North Korea could start by at least acknowledging structural problems. He explained that by doing so and conceding there are serious issues with the structure of its economy, the country might be able to start shifting perceptions that it is an “untrustworthy partner”.
Although few might think that North Korea might ever admit to such major flaws in governance, Foster-Carter pointed to a decade old United Nations Environment Programme (UNEP) report co-authored by North Korean officials as evidence that there was precedence for Pyongyang admitting to fault. Back then it accepted it was facing forest depletion, declining water quality, worsening air pollution and land degradation. Might North Korea now be able to take similar steps in the economic realm?
From within North Korea and among analysts outside, Foster-Carter said that the economic discourse in North Korea is not considered with the importance that it ought to be. He argued that the North Korean government now needs to “take ownership” of the economy and emphasize its potential to outside investors.
During questions, Foster-Carter examined the prospects for the Kaesong Industrial Complex and considered the possibility of similar ventures being carried out in future. He also explained that training and education in economics has long been present in North Korea, but that this education might not yet be in the hands of those holding the power to make economic decisions.
Aidan Foster Carter’s paper, “Keys to the Kimdom: North Korea’s Economic Heritage and Prospect after Kim Jong-il’s Death”, can be downloaded at the KEI website here.
Watch the full presentation here:
Event report by Sabrin Kassam & Tad Farrell