Kim Jong Un’s game-plan is pretty clear
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https://www.statista.com/chart/10380/north-korean-economy-growing-despite-sanctions/
by Kumar David-May 12, 2018, 6:32 pm
A fortnight ago the gathered masses hollered "Nobel! Nobel!" at a Trump rally loud enough to be heard in Oslo. The thought then crossed my mind that it would be like awarding a Nobel Peace Prize to a bacterium for the invention of antibiotics. A common view is that Trump’s braggadocio intimidated North Korea with threats of obliteration even though (if) it could have taken two or three US cities down with it. The Nobel Committee, red faced by Aung San Suu Kyi’s disgraceful complicity in genocide, is most unlikely to be stampeded into making an ass of itself again by embracing the most controversial big-power leader of the day, and one despised by more than half his compatriots. This columnist has to confess to joy at the time of the award to Suu Kyi; in hindsight utterly premature.
Let’s examine, albeit speculatively, the current state of play, but first let me say sorry if you find the caption "landscape undergoing sea-change" oxymoronic. Kim’s game-plan is pitched at three levels of depth and complexity; the wily roly-poly has already achieved 1(a). The step by step design I attribute to Kim is:
1. (a) Defuse all possibility of a US first-strike and secure the import of fuels and consumer goods. (b) Fish for capital injection, albeit on a limited scale, from the South and China to support a mini-Deng Xiao Ping (mini-DXP) initiatives.
2. Campaign for the lifting of sanctions in exchange for "complete denuclearisation; a complete nuclear free Korean Peninsula" to which Kim and Moon Jae-in committed in the Panmunjom Declaration of 27 April 2018.
3. Secure reunification of the Peninsula on a formula that will guarantee the regime, its principal functionaries and the military, safety for say 50 years – One Country Two Systems but very different from Hong Kong-China or East-West Germany.
Part (a) of objective 1, making a US first-strike impossible, has been achieved. Whatever the outcome of the Kim-Trump talks, so long as the Kim-Moon dialog is in progress, US military action is out of the question. Not even a surreal oddity like Trump can press the button. The talks involve a raft of issues – return of prisoners, lowering military tension, joint liaison bodies, meetings at "all levels; central and local governments, parliaments, political parties and civil organisations" etc. This will drag on beyond Trumps term of office. Fire and fury has been stamped out.
[All quotations are from the Panmunjom Declaration widely available on the web].
Part (b) in item 1 of Kim’s game-plan is not as simple as (a). He knows that formal lifting of Security Council sanctions is a complex grind, but he hopes to play side-games with China, the South and Russia in the meantime. They will indulge in trade because he has mentioned denuclearisation and the latter two will gladly stabilise an anti-American regime in the region. 1(b) starts with easing restrictions on fuel, machinery and consumer goods imports, short of sanctions busting. It is not still clear how this will roll but the South will turn a blind eye to consumer goods "smuggling" in addition to food and medicines already permitted. China never cut oil flow and will now be more brazen. All this will have near universal third-world support.
A new turn in the economy
Something not so well known outside the Peninsula is that Kim has kicked off on a mini-DXP economic strategy. Small private trade is prospering and minor capitalists are encouraged. Some state enterprises are no longer rigidly controlled and allowed a degree of management independence. There are many reports that shelves are well stocked in Pyongyang. The capital is another world from the rest of the country. A reliable number is the South’s Bank of Korea (BoK) estimate that in 2016 the North’s GDP grew at 3.9% and probably higher in 2017. The economy collapsed after the Soviet Union went bust; GDP halved from 1990 and 1999. There was a see-saw till 2015, but sustained growth seems to have resumed.
"North Korea’s economy grew at its fastest pace in 17 years in 2016, South Korea’s central bank said on Friday, despite the isolated country facing international sanctions aimed at curbing its defiant pursuit of nuclear weapons" said a Reuters’ report of 21 June, 2017 echoed in a CNBC report of 20 July quoting the same BoK source - see graph. But don’t be fooled by near 4% growth from an abysmally low base. It will need double digit growth for a decade to pull the country out of the mire.
Kim, having for now tethered the American hunter-killer, needs a breathing space to build the economy. The guarantee of survival is a nuclear deterrent and delivery capability. For that, parleying with the South must be sustained. In the past the North has been adept at making promises that it does not keep. Kim knows he must retain his nuclear capabilities, or else he will be Gadhafied, Saddam Husseined or screwed like Iran; he is a dictator, not a goof.
Forerunners to reunification
Complete denuclearisation, in Kim’s parlance accepted by Moon for inclusion in the Declaration, is governed by the adjective "Complete". What is Complete? Is it when US troops in Korea and their nuclear umbrella is gone? Also recall that US Okinawa bases (seven in the island chain) were used to attack Korea, Vietnam, Cambodia and Iraq. Arguably Okinawa is a nuclear threat! This implies that the negotiating gap between 1(b) and 2 will be unending. Kim is aware and probably bargaining on it being prolonged while he hangs on to his atomic toys and enjoys reduced import restrictions short of formal sanctions lifting. Negotiations with Trump are not important except to buy time and keep the wolf at bay; that’s my take.
Before reunification the North’s economy must be recapitalised and vitalised. Literacy is high and the work-force well-trained, the country is endowed with natural resources; investment is taking place in infrastructure. However the hybrid currency system – separate domestic and foreign monies - will have to go. The ration-coupon system which functions side by side with money wages will have to be replaced by a wage system throughout the economy. Land will have to open to peasant owners so that agricultural output can boom. China and Vietnam are trail blazers and can serve as exemplars.
With reunification the North will enter the world trading system and WTO and join international bodies. Doing this as an extension of the already integrated South will ease flow. Crucially the relationship of the economically dominant central state in the North to a free-wheeling capitalist system in the South will be a Gordian knot to unravel. For this reason the Korean One Country Two Systems recipe will be like Hong Kong and China, not German reunification, but with elephant and tail inverted. I imagine economic integration will be a bigger headache than political horse trading. Kim’s nuclear chips give him goodies to bring to the latter bargaining table.
Whither the United States?
We are passing through a defining moment not only in US-China relations but in US-East Asia affairs because the big picture is not only about trade, it’s about strategic positioning for the remainder of this millennium; it’s about the future. Thomas Friedman says in the New York Times of 1 May that in one corner stand Trump and his hardliners who want to engage in the struggle before it’s too late and China gets too big. And he thinks Xi Jinping and the Party want the fight now because it’s already too late, China is already too big.
Trade threats are everyday fallout; a high-level US trade delegation was in Beijing last week. One can’t paint a blow-by-blow picture of winners and losers, but the big picture so far is ‘advantage-China’. China exports four times as much to the US as it imports, seemingly it has more to lose, but its economy is younger and more robust and people who remember recent hardship are resilient and better able to ride through rough times. With no elections and with a one-party state China is located on different plane from the US. Long term, China can’t lose.
As a new détente emerges in the Far East (the two Koreas, China and Japan) the US becomes somewhat redundant; the cards are stacked against it. My instinct says time is not on its side. This is a reading of the tealeaves, not an expression of choice, endorsement of one-party power or affidavit in support of Xi Jinping absolutism. My travels in China often bring me upfront against an overbearing state. You can’t buy a train or museum ticket without proof of identity, huge posters supporting the government are ubiquitous, the Internet is politically filtered and bloggers beware. It’s intrusive.
