While the North Korean regime is tyrannical, it is also well armed, with a possible nuclear capacity. To isolate it further could have two important consequences.
One is to close off diplomacy as a preferred option in dealing with such a regime and changing it.
Another is to send it into such desperation as to make it engage in unwanted acts of aggression against South Korea or Japan.
In either case, the US might find itself in a more difficult position than it may have calculated.
If there is one new reality that we must acknowledge in this new epoch it is that ultimate power is to be found in the power of persuasion or, as the American thinker Joseph Nye has termed it, “soft power”.
Raw power, or military might, is critical. But it is not, in the end, decisive.
If Western thinking – democracy, the rule of law, market economics – is to prevail, it will have to persuade the North Korean regime that it offers an effective and attractive method for North Koreans to reach their potential.
Pyongyang must be persuaded that it has more to gain by opening up to the outside world than by threatening it with a nuclear offensive.
Thus, there is a need for engaging and politically taming the North Korean regime.
The new South Korean President, Roh Moo-Lyun, said, “The way to deal with North Korea is through engagement, rather than confrontation”.
In other words, he endorses the “Sunshine Policy” of engagement developed by his predecessor, Kim Dae-jung. It is possible that this engagement could lead to economic reforms in North Korea.
It seems, however, that the North cannot move towards reform unless the huge military-industrial establishment can be attracted to market economies and that, in any such process, the South Korean chaebols (giant conglomerates such as Samsung and Hyundai) will play a leading role. They have worked with a military industrialising regime in the South.
The challenge for the South will be for them to find ways to work with the regime in Pyongyang.
It is reasonably fair to say that the rise of the Korean economy is significant due to government protectionism and conglomerate expansion.
In particular, the argument of chaebol-government duality is held as the key to the economic development and growth of the country.
Chaebol has become the most powerful group of domestic capitalists in South Korea.
They dominate the society and market in several ways.
As a significant positive contribution, they employ a large number of workers. This reduces the unemployment rate and keeps the economy at its phenomenal level.
Under the chaebol system’s guiding hand, South Korea built its infrastructure, raised an educated but inexpensive work force and developed science and technology.
Koreans became the world’s steel makers, ship builders and semi-conductor technicians.
Before the emergence of North Korea’s nuclear crisis, South Korean chaebols took the lead in exploring business opportunities in North Korea. Hyundai and Daewoo were the first into the North.
A number of the other chaebols, including Samsung, LG (Lucky-Goldstar), Sunkyong, Kolon, Hanhwa, made modest investment plans.
Hyundai, acting as a tour operator, took tens of thousands of South Korean tourists to Mount Keumkang, a beauty spot in the North. Hyundai Group founder, Chung Ju-yung, also on a business trip to North Korea, met Kim Jong-il.
This tourism, if resumed, could raise almost $1 billion in foreign currency earnings for Kim Jong-il’s regime over six years.
The company was interested in creating a series of joint ventures to export billions of dollars-worth of products from North Korea.
The number of South Koreans visiting the North, businessmen among them, did increase sharply.
The North’s regime formally recognised the farmers’ markets, and also accepted the concepts of “profit” and “cost”.
The Chung-Kim meeting showed the North Korean leader’s willingness to get himself directly involved in the country’s major economic projects, while indicating his attempt to open its economy partially and pull the North out of economic hardship with help from South Korean business leaders.
The projects Hyundai wanted to undertake in the North were the Mt Kumgang tour projects, including the construction of a hotel, an airport in and around the scenic mountain, and oil exploration in the West Sea.
Other projects included an auto assembly plant, a car radio assembly factory, construction of a thermal power plant, development of an industrial complex, use of North Korean workers at Hyundai’s overseas construction markets, mineral water development, and scrapping of aged ships.
Hyundai also showed an interest in building a vast export zone in, and in running tour buses to Kaesong, an ancient capital just over the border that could become to Seoul what Shenzhen is to Hong Kong.
The Samsung, LG, Daewoo and Tongil groups also took steps to initiate joint ventures with the North.
Samsung was trying to obtain permission from Pyongyang to set up and operate a telecommunications centre in the Rajin-Sonbong Free Trade Zone.
LG, which already assembles colour TVs in the North, is planning to set up a colour TV plant and scallop farm there.
Daewoo is also considering setting up a home appliance assembly plant in the Nampo industrial estate, and is also interested in setting up hotels in the Rajin-Sonbong zone.
These developments support a view that is gaining strength in the South, which indicates that North Korea, following the Chinese example, is willing to open up its economy.
Pyongyang has revised its constitution to create more business opportunities for foreign investors.
Chinese-style agricultural experiments are taking place in rural cooperatives. While not called reforms, they have regime endorsement.
This trend is indeed encouraging. North Korea must attract foreign investment.
It would bring them not only capital, but also superior management skills and access to overseas markets, and would help raise the creditworthiness of a country badly in need of it.
New multilateral initiatives should be taken to bring North Korea into the international community and make Pyongyang an integral part of the Western-oriented economic system.
This is consistent with a common Asian perspective that, to change a society, one must engage it and influence it through a wide spectrum of multilateral initiatives.
The United States, Japan and South Korea should also be considering ways and means to involve North Korea in regional cooperation.
Regional economic cooperation could help relax political tension in the region and in the world as a whole, and accelerate the Asia-Pacific region’s integration with the world economy.
- Sharif Shuja