Economics before politics

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Economics before politics


Jung Tae-yong
The author is a professor of sustainable development at Yonsei University Graduate School of International Studies.

A remarkable meeting was held between the leaders of North Korea and the United States at the truce village of Panmunjom last June. It was a short meeting, but live footage of the two leaders and the South Korean president spread around the world, boosting hopes for peace on the Korean Peninsula. Yet Pyongyang has recently resumed its short-range ballistic missile testing.

If progress is made in Pyongyang-Washington negotiations, the two countries may begin discussions on North Korean economic development and the easing of international sanctions on the regime. In this process, South Korea and the rest of the international society can start talks on providing humanitarian aid to the North and engaging in various economic initiatives with the country, through which participants can gain economic profits.

It is imperative for Seoul to reflect the change of circumstances inside and outside South Korea in establishing a basic principle for economic cooperation with North Korea; in designing programs and projects that the public and private sectors between the two Koreas can engage in; in meticulously reviewing matters that need cooperation, support and investment from the international society; and in creating a consultative structure with North Korea to discuss these issues.



Twenty years ago during the Kim Dae-jung administration’s Sunshine Policy of engagement with the North, I had several chances to cooperate with North Korea on various fronts. Inter-Korean cooperative projects continued in the following Roh Moo-hyun administration. In the 66 years since the Korean Peninsula was divided into two nations following the Korean War, South Korea only had 10 years of experience substantially exchanging with the North. Inter-Korean relations were sour throughout the rest of that period due to several internal and external factors.

The two Koreas did not have much time or many opportunities to build trust with each other. They share the same language and had the same history and culture before the Korean War, but in the decades following that tragedy, the countries lived by different economic structures. In order for these countries to cooperate with each other in the economic sector, they must go through a phase of learning about each other and building trust.

Among the key principles of economically engaging with North Korea through the Sunshine Policy was the idea that economics comes before politics — that South Korea would provide the North with basic supplies first — and that the private sector would lead the way, with the public sector following behind. Seoul tried to cooperate with Pyongyang through the building of confidence. But 20 years after that sunshine period, the two Koreas failed to substantially build trust with each other due to various reasons.

So much has changed throughout the past 20 years. South Korea has grown into a country that relied on aid from other countries after World War II into a country that provides aid to others. And now, in order for South and North Korea to seek economic cooperation, it has to start with South Korea contributing to the international society first. The economic experiences and expertise South Korea has amassed are very special.

Many developing countries hope to learn from South Korea. Seoul can apply the same principle it applies to other developing countries when dealing with North Korea, which is also a developing country. It is important for the South to inform its own public and North Korea about its basic principle for supporting developing countries. This is the first step in engaging in cooperative projects with the North based on mutual trust.

The North is in desperate need

For the South, North Korea is not an ordinary developing nation. Not only can Seoul provide Pyongyang with aid via its official development assistance program, it also has a fund entirely set aside for inter-Korean cooperation, called the Inter-Korean Cooperation Fund. The fact that Seoul has a fund for North Korea humanitarian assistance, cooperation and economic engagement proves that the North is in special need of aid.

It is not important how large the fund is. Pyongyang must realize that Seoul is the only partner it has to quickly and accurately teach the country about the customs and norms of international society, when the time comes one day and it wishes to interact with the rest of the world after resolving its issue with nuclear weapons and missiles. That is not only because South Korea uses the same language and shares the same historical and cultural background, but because it once lived in North Korea’s dire economic situation, yet managed to grow out of it to seek economic prosperity through cooperation with the international society.

Plus, North Korea must realize that it is responsible for its own economic development. The only country that can sincerely help North Korea seek economic development as it fulfills its international promises is South Korea. The two Koreas must establish a new relationship based on trust, not nuclear weapons or missiles.

Cooperation must be win-win

In order for the two Koreas to carry out economic cooperative projects based on mutual trust, the balance sheet of people participating in those initiatives from both countries must be clear and transparent. In South Korea’s market economy, people make decisions based on various standards and circumstances. Simply put, companies in South Korea’s private sector decide whether to invest in North Korean projects by calculating the possible gains. On the other hand, a government decides whether to invest in a project based on long-term and public standards, rather than short-term economic profits.

In economically cooperating with the North, South Korea can play some part in vouching for North Korea, connecting the regime with international finance organizations and securing funds from other nations on North Korean social overhead capital projects or other businesses that are related to North Korean public goods or serve a public value like environment protection. By joining hands with North Korea in the public sector, the South can pave the way for private sectors in other countries to consider investing in North Korea.

South Korean companies can reduce labor costs by employing North Korean workers, and also cut production costs by entering North Korean industrial zones like the Kaesong Industrial Complex. If the South and North successfully seek economic cooperation through mutual trust, then South Korean companies will be able to broaden their business prospects to the North.

In terms of manpower training, Seoul can consider inviting North Korean students to the South to receive education and training here, like how South Koreans traveled to developed countries, including the United States, back in the South’s early phase of economic development. In the shorter term, the South can devise educational programs for North Korean government officials and experts, and, if needed, could even operate those programs with the help of other organizations. All of these steps are premised on trust and are a way towards building trust.
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