by
Ruediger Frank
[Professor of East Asian Economy and Society,East Asian Institute, University of Vienna]
posted December 20, 2007
|
|
|
|
|
 Preface : |
|
|
|
|
|
|
|
Article : |
International Conference on
A New Era of Peace and Prosperity on the Korean Peninsula and in Northeast Asia (Nov. 19th. 2007)
Interpreting the major results of the 2007 summit
The summit meeting of October 2007 between the leaders of South and North Korea has been long expected and anticipated, not least because it had been promised seven years ago by Kim Jong-il. Not surprisingly, but not ideally, either, the public’s evaluation of President Roh’s visit has mainly taken place against the background of the last (and first ever) summit of June 2000. In such a comparison, it is natural that the results looked much less impressive, the public reacted much less excited, and professional analyses were much more sober. In economics, this is called the law of diminishing marginal utility: the more often one does the same thing, the smaller the additional effect this action generates.
Therefore, rather than pointing at the lack of spectacular agreements, we should focus on what has been reached. While much still has to be done, a number of remarkable achievements can be noted. The most important point has just been mentioned: both leaders obviously concluded that they could politically afford the absence of big-bang announcements. This is of particular importance if we try to understand Kim Jong-il and his position. The essence of the joint declaration and the other summit results is that economic, political and security cooperation are to be continued. This continuity, if it indeed materializes in the next years, will lead towards a normalization of inter-Korean relations as it can only be reached by everyday, working level contacts over real projects that eventually become routine business. If symbolism is gone, pragmatism takes over.
Such a scenario is far away; however, it sounds much more realistic than the lofty but ambiguous demand for a gradual rapprochement that has been part of many moderate visions for a Korean unification. From this perspective, the second summit has contributed significantly and visibly to making a non-absorptive end to national division more tangible. History has shown that even the best prepared plans were often thwarted by reality; however, this has never discouraged people from demanding far-sighted policies, and politicians from trying to develop and execute these.
Among the other and more concrete results of the summit, two stand out: The determination of both Koreas to actively push for a peace treaty, and the plans to develop North Korean ports along the Yellow Sea.
A peace treaty is long overdue; the more than five decades old cease-fire is almost an oxymoron and an anachronism. The problematic issues have been well known for many years; most importantly, it is the missing signature of the Republic of Korea on the 1953 document (signed by China, North Korea and the USA) that has ever since served as the justification of the DPRK’s demand to exclude the South from peace treaty negotiations. If Kim Jong-il says that “three or four” parties should take part in related talks, the North for the first time publicly declares that it does not consider Seoul’s direct participation in peace talks impossible. This is a strong sign of appreciation and a product of the sunshine policy. Moreover, it shows that the North for the first time considers the South as being a potentially useful partner in the peace talks, rather than an enforcement of the U.S. side. Still, South Korean participation remains a risk from Kim Jong-il’s perspective; we can therefore also conclude that Pyongyang does not trust Beijing, at least not as much as it did in the past, and needs another partner to increase its chances of reaching an agreements on its own terms. Speculations that by saying “three or four”, Kim Jong-il wanted to exclude China or the United States make little sense.
The other issue - rehabilitation of North Korea’s infrastructure - is hardly a new topic. South Korean progressives and conservatives, moderates and extremists in one way or the other understand that in order to revive the once shining North Korean industry, transportation and communication networks must eventually be modernized. The current government, following its policy for peace and prosperity, has decided doing so before unification. Telecommunication and, as it turned out, railway networks are still too sensitive from the point of view of North Korea’s security organs. It is therefore not a bad idea to start with projects that have geographically limited effects, such as harbors. The rehabilitation of existing or the construction of new airports would, by the way, be a similarly useful and realistic project.
The decision to expand two major ports on the West coast makes sense from a North Korean perspective, assuming that the focus is on China. The South, however, should at least consider some possible negative consequences. They include a growing economic dependency of the DPRK on its big neighbor. While this is, in the long run, an inevitable development that not even South Korea can avoid for itself, it is nevertheless a trend that has too many serious implications for Korea’s political sovereignty and should hence not be artificially accelerated.
Another difficulty I see is competition with the harbor of Incheon. The threat to the lofty plans of benefiting economically from shipping Gaeseong-made goods to the world via Incheon is the lesser problem. Much more serious is the prospect of seeing a North Korea that has both the production and the distribution of goods produced in Gaeseong with South Korean capital and know-how in its hands. While with regard to Haeju, shipbuilding has so far taken the center stage of discussion, it would be naive to expect that developing this port and the one of Nampo will stop there. As the construction of the West Sea Barrier illustrates, North Korea has for long tried to develop its major hub in the Yellow Sea and is now getting closer to this goal.
In terms of comparative advantages, investing into Wonsan at the East coast would have been much better for the South Korean economy and much less dangerous. It seems the North Korean plans are different; they develop Cheongjin with Chinese and Russian help, while developing Haeju and Nampo is to take place with South Korean support. In the end, there will be two competing projects that, once more in this never-ending story, will provide North Korea with the leverage to manipulate its donors. The ROK government now has the important task to manage the port rehabilitation along the North’s West coast well and under consideration of its own strategic interests.
The future of Inter-Korean Economic Cooperation, its Relevance for Northeast Asia and vice versa
Neorealist observers of International Relations find it hard to believe in international cooperation for its own sake. In order to be sustainable, to be lasting and to be of sufficient scale and scope, either cooperation must serve the interests of both sides, or non-cooperation must be harmful. Nice words, lofty ideals, personal trust between leaders or short-term domestic political interest might be able to start cooperative projects; they will, however, not be able to keep them alive.
So what are the interests that move both sides? Since it seems to be much easier to understand the South’s motivation, let me start here. As the Japanese example of “normalization” shows, the need to become more flexible and self-sustainable in terms of foreign policy and maneuverability has grown dramatically with the end of the Cold War and the collapse of the bipolar world system. International relations are now much more complex, which increases both opportunity and necessity for single states to pursue their interests more actively and more individually.
The latter of course has its limits, leading to a remarkable upswing in world wide regionalization tendencies. The explosive development of the EU since 1993 is just one example; for different particular reasons, but driven by the same logic, the Americas show remarkable tendencies towards joining forces economically and politically. The crucial role of the USA as either facilitator or perceived constructive threat is obvious. The same is true for East Asia, where APEC has lost significantly and the once ridiculed ASEAN has become the core of what many see as the resuscitation of China’s cultural empire. Korea, Japan, Russia and the United States are desperately trying to find their own role in this development. It took East Asia a while. The first East Asian Summit meeting has been held only in 2005, the Chiang Mai initiative of 2000 not only enlarged ASEAN but also focused on the very specific task of securing the future of financial stability in the region, and the Shanghai Cooperation Organization of 1996/2001 develops into a formidable and, regarding membership, rather unique regional forum of security and economic cooperation. Obviously, the financial crisis of 1997/98 was as helpful as a catalyst as the “War on Terror”. North Korea has managed to become part of that equation and benefits accordingly.
A regional alliance usually serves an external purpose. Internally, it functions like a micro-cosmos of world politics. It has the benefit of consisting of a limited number of participants and hence providing better chances for making the particular interests of a single member state become those of the group. Nevertheless, as in world politics, the individual state’s power (economic, military, soft) determines how well it can pursue its interests within the alliance. Per se, a divided nation is in a less than perfect situation in such a competition. If we consider the costs of division as well as the potential gains from unification including access to the North’s resources, it makes good sense for Seoul to regard improving ties with Pyongyang not only from an emotionally driven nationalist perspective, but also as part of a very sober, realistic calculation. If South and North would decide to join forces, Korea as a whole would benefit strongly.
Meanwhile, non-cooperation is getting increasingly costly. Unless they become part of unified Korea’s arsenal, the North’s nuclear weapons are a liability that makes investment less attractive and serves as an excuse for potential competitors such as Japan to increase their military potential. Moreover, Chinese companies are winning mining and other concessions that South Korean chaebeol have been hoping for, trading networks develop, and the virgin North Korean market is flooded with cheap Chinese goods. Tastes and brand images are built almost without South Korean participation. While not impossible, it will nevertheless be difficult and take a long time to replace these without a cultural revolution in marketing. Also, rather than being one of the few leading economies with a direct and short overland access to the world’s biggest market and producer, South Korean companies still operate on an island and have to handle their trade with China via sea and air.
Although the many analyses of German unification and its relevance for Korea differ on many issues, they tend to agree on one point: A quick unification by absorption will be enormously costly for South Korea and hence must be prevented as long as other options are on the table. East Germany’s only comparative advantage, its low wages, was gone overnight with a single currency and harmonized incomes. It is hard to imagine how this could be prevented in a unified Korea, so despite all political uncertainties, it makes good economic sense to develop the North Korean economy as long as it exists on the territory of another state and is not subject to South Korean legislation.
South Korea can only benefit from full-fledged and reliable cooperation with North Korea, no matter whether this takes place under the label of unification or not. The danger of being overtaken by the unattractive, repressive political system of the DPRK is nil, while the benefits in all areas abound. The more interesting question is, therefore, what does and can Pyongyang expect?
While still many people in North Korea might think that their system is superior and that they live in a worker’s paradise, the enlarged leadership including the Kim family and all the higher and most medium cadres in party, government and supposedly also in the military have a much more realistic view of their own country in a global context. They know that the current system can by no means be transferred to the South.
However, with the exception of a few cynics, these typical classical socialists continue to believe in the superiority of their ideas but have come to understand that they do something wrong. Their strategic goal can be summarized in the old 19th century Donghak slogan of “Eastern Way, Western Technology” (dongdo seogi). Still lacking the understanding that the absence of private ownership is the core problem of their socialist economy, and after typical perfection attempts like Cheollima, Cheongsanri and Daean have failed, they still try to make socialism work by selectively introducing alien “technology” including markets, rational accounting standards, and a price reform. They want to improve the state’s ability to manage the economy by developing macroeconomic indicators and having something like a monetary policy. They try to generate revenue by opening to international trade and by introducing special economic zones, and hope to pay for the overdue modernization of their infrastructure and facilities through access to international finance. As I have emphasized elsewhere, all this will inevitably lead to true reforms; the goal is certainly different, just as it has been in China, in Eastern Europe or in Gorbatchev’s Soviet Union.
The North Korean strategies for maintaining a maximum level of independence despite this risky interaction are diversification and multilateral bilateralism. Pyeongyang still seems to follow Li Hongzhang’s advice to King Kojong and tries fighting poison with poison. Relations are kept strictly bilateral to avoid being in a minority position, but many such bilateral activities of similar kind take place, both to avoid unilateral dependency and to be able to play one partner against the other if needed.
South Korea is part of that calculation. Many years of Seoul’s hard work since 1988 have convinced more and more decision makers in Pyongyang that the South is much less of a direct threat than it used to be under Presidents Rhee, Park or Chun. Although not living in a democracy themselves, the North Korean elite well understands the limiting effects such a political system has on the ability to wage war, and knows the strong distaste of democracies for instability and abrupt changes. Having read the shocking South Korean studies on the costs of German unification and having witnessed the South Korean fear of a collapse during their “arduous march” of 1995-1997, the North Korean leaders now seem to have enough reason to believe that indeed, the South is not interested in their system’s sudden implosion.
Furthermore, rising nationalist tendencies in South Korea as reflected by the debates about the comfort women, history textbooks, Yasukuni shrine visits, Dokdo island and Goguryeo feed the North’s hopes for finding some common ideological ground. They feel safe and superior here, although this might turn out to be a grave misperception.
It is common knowledge that the strongest fear in the North is an unstoppable and uncontrollable process of economic opening and reforms. Any domestic or international assumption that this might be the case is aggressively countered. In terms of actual policy, we witness the typical stop-and-go attitude of a leadership that knows it must do something but is afraid of the results of its own actions. The successful Chinese example might calm some, but surely not all concerns of Pyongyang’s leaders.
Northeast Asia as a potential regional alliance is not an explicit part of North Korea’s calculations; however, it makes good strategic sense. In the past, Kim Il-sung has actively (though not very successfully) tried to pursue a leadership role within the non-aligned movement to decrease his dependency on Moscow and Beijing. Given the economic weakness of North Korea and the discredited state of the socialist idea in the region, there is little reason to expect a better prospect for such a policy under present conditions. The Six Party Talks have, on the other hand, shown that the DPRK is able to handle a complex and hostile diplomatic environment with some success, so there might be hopes that something similar can be achieved in a regional context.
Only the North’s possession of nuclear weapons and its stubborn David-Goliath fight against the United States can make the Pyongyang leaders hope for some respect or even sympathy among smaller Southeast Asian nations. However, regionalization in the region will be driven by big players, namely China, so there is little space for smaller nations to influence the outcome. An alliance with the South could be a good chance for utilizing the latter’s power to pursue the North’s own interests much more effectively. Most importantly, a Northeast Asian regional alliance without the United States and with a politically weak Japan removes a number of hitherto mounting obstacles and makes a North Korean entry onto the international stage via the backdoor possible. Economic cooperation with Northeast Asia could be a safe entry door of the DPRK into international business.
Being an accepted member of a Northeast Asian alliance could also reduce external reform pressure on North Korea and hence appear as a welcome environment for a slow and gradual modernization without the potential disruptive dynamics that many Pyongyang leaders fear. From a larger strategic point of view, North Korea has usually felt better in a loosely knit multilateral environment where it could pursue its bilateral goals on a competitive basis, which is another point that would speak in favor of regionalization from Pyongyang’s perspective.
Summary and Conclusion
What seems obvious is that there are few economic arguments that would make Northeast Asia an attractive concept for North Korea, but many political ones. Form a South Korean perspective, the balance is more even. The region itself will clearly benefit both economically and politically from reduced tension and increased cooperation on the Korean peninsula.
South Korea can hope for cost- and burden sharing when it comes to modernizing the North Korean economy. More participation from other regional partners will not only increase the available capital but also reduce the unhealthy one-sided dependency on China. It will also open future economic relations that a unified Korea will be able to utilize. With enough regional support, a North Korean membership in the Asian Development Bank will be much harder to prevent.
The region is diverse, and so are the effects of increased inter-Korean economic cooperation. However, if South-North trade, investment and R&D after the summit continue to develop positively, the region can benefit from reduced security risks, a new market, cheaper transportation networks and better chances for a more balanced economic development.
Ruediger Frank is Professor of East Asian Economy at the University of Vienna in Austria. He is an Adjunct Professor at the Graduate School of International Studies of Korea University and the Director of the Vienna School of Governance. His first visit to North Korea was in 1991 for one semester as a language student at Kim Il-sung University. The core of his current research is on the transformation of state socialism in East Asia and Eastern Europe with a focus on North Korea. He can be reached at ruediger.frank@univie.ac.at
|
|
|
|
|
|
|
|
|
|
|
|
|
