Just over a month after United Nations Security Council (UNSC) resolution 2371, aiming at cutting about one-third of the DPRK’s export revenues, was passed, the UNSC is most likely about to vote on an additional round of economic sanctions after North Korea tested what it claims was a thermonuclear weapon on September 3.
While experts and policymakers are still waiting to see the nature and scope of the next round of economic measures, there is strong reason to believe that these additional sanctions, coming on top of a dense and complex network of uni-and multi-lateral measures aiming at forcing the DPRK to denuclearize, might not bear fruit.
Although North Korea has one of the most sanctioned economies in the world, the Bank of (South) Korea recently estimated the DPRK’s 2016 GDP growth at 3.9%. And, obviously, sanctions have done little to stop Pyongyang from engaging in military provocations, leading Yonsei University Professor John Delury to write that economic sanctions were “futile, dangerous and counterproductive.”
THE FINE PRINT
And resolution 2371, passed last month, included one specific article that might prove counterproductive for completely different reasons: namely, the clause prohibiting “the opening of new joint ventures or cooperative entities with DPRK entities or individuals, or the expansion of existing joint ventures through additional investments,” unless pre-approved by the UN Sanctions Committee.
The word “reform” still constitutes a taboo for North Korean officials
Contrary to the widespread view of the DPRK as a sealed-off country with a closed, inward-oriented economy, North Korea has historically based its economic development strategies on the constant need to maintain ties with foreign countries to generate revenues from exports and bring in foreign technologies.
During the 1970’s, due to the gradual decline of Chinese and Soviet assistance, but also based on a political will to diversify its business partners, Pyongyang actively tried to attract foreign investment from both foreign public and private companies. Since then, there has been a discrete but consistent drive to further open the economy of the DPRK, officially kick-started by the adoption of a joint-venture law in 1984 largely inspired by China’s own 1979 JV law.
Although the word “reform” still constitutes a taboo for North Korean officials (who tend to prefer the official vocable of “new economic management measures” [새로운 경제관리조치; saeroun kyŏngjegwallijochi]), policies aimed at further opening the economy of the DPRK were Pyongyang’s favored option to put the country back on track after the “Arduous March” (famine) of the 1990’s.
SUPPORT FROM THE TOP
Kim Jong Un, although apparently a “hard-liner” when it comes to the North Korea’s nuclear development, has also in parallel championed the development of the economy through more active cooperation with foreign countries. Special Economic Zones, partly modeled after China’s, have proliferated to every single province of the country, are increasingly specialized in certain sectors, and have seen their number rise from four in 2011 to no less than 26 (including Kaesong) in 2017.
By trying to limit the North’s exports revenues, the UNSC might also, voluntarily or not, be putting Pyongyang’s current reformist drive in jeopardy. Earlier resolutions, like resolution 2270, have already have ended some potentially profitable three-way economic integration projects centered on the Rajin-Sonbong SEZ before they could properly start.
Special Economic Zones, partly modeled after China’s, have proliferated to every single province of the country
By also sanctioning jet fuel exports to North Korea, resolution 2270 might have played a role in the lack of visible development of the Kalma peninsula airport, indirectly hurting the development of the Wonsan-Kumgangsan Special Zone for Tourism.
This SEZ, encompassing the Masikryong Ski resort and, as its name suggests, the picturesque Mount Kumgang, is believed to be an important project for the North Korean government, as can be witnessed in the area’s rapidly developing infrastructure. Mount Kumgang, in the southern part of the zone, attracted no less than 2 million South Koreans until 2008, when it closed after a tourist was shot dead by a North Korean guard.
Joint-ventures and the attraction of FDI are formidable tools for developing companies to capitalize on their comparative advantages and benefit from more advanced technologies. Although one might argue, with reason, that dual-use technologies can contribute to the North’s ballistic and nuclear programs, the very low-valued added sectors in which North Korean manufacturing specializes makes this extremely unlikely.
On the other hand, by not only cutting the North export’s revenues, but also actively preventing it to continue its economic reform and development strategy, the UNSC might be conveying the wrong message.
By trying to limit the North’s exports revenues, the UNSC might, voluntarily or not, be putting Pyongyang’s current reformist drive in jeopardy
While western powers and the largest part of the international community, understandably, are not satisfied by the DPRK’s current policies, preventing North Korea from successfully implementing its own economic reform might prove to be counter-productive.
It would justify the belief, well-anchored in the North Korean collective psyche, that foreign powers hold a hostile attitude against the DPRK and do not want it to develop. This belief, fueled by the regime’s propaganda, does not need to be reinforced by heavy, broad sanctions, and would most likely leave Pyongyang with one single acceptable option: brinkmanship.
On the other hand, adopting a sanction regime that would specifically and explicitly leave some room for the economic reform to unfold would certainly be interpreted as a positive signal from Pyongyang.
This would obviously not be the key to the nuclear question and would certainly not trigger any Chinese-style “reform and opening” in Pyongyang, as both countries clearly seem to have different expectations from their own reform agendas.
But if the UNSC focuses on stopping the North Korean nuclear program at all costs, potentially putting the country’s economic reform in jeopardy, this will not only most likely bring limited results, but also send the signal to Pyongyang that efforts to open and reform the economy are not welcome.
Edited by Oliver Hotham
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Featured Image: by nknews_hq on 2015-09-04 17:10:02