North Korea's New Master Plan

Wolf Richter

Known under the official misnomer Democratic People’s Republic of Korea (DPRK), North Korea is an inscrutable, unpredictable, armed-to-the-teeth thorn in just about everyone’s side, a pariah ready to lob nukes, starve its own people, or hold out an olive branch, only to yank it back. But now something is going on that reeks of the dreaded phrase, “this time, it’s different”: secret discussions in Germany.

North Korea is seeking the advice of German economists and jurists, the German paper FAZ was told by a source, an academic and one of the presumed experts who has been participating in these hush-hush discussions.

“There is a master plan,” he said. North Korea is planning to open up its economy to foreign investors in 2013. They’re particularly interested in modern investment laws. But they’re not looking at the Chinese model with its special economic zones for foreign investors. Instead, they’re looking at the “Vietnamese blueprint,” the source said, where the government selected foreign companies and investors. The advice of German experts would pave the way for German companies and investors. The lure of the familiar. North Korea had a busy relationship with communist East Germany.

But special economic zones for foreign investors are already under way in North Korea along the Chinese border, including at Rason city, which North Korean officials hyped last September during an investment conference in China as “North Korea’s Shenzhen,” and the islands of Hwanggumphyong and Wihwa in the Yalu river, which would become the “blessed land for investors to get rich.” There would be incentives, such as duty-free imports and a 14% income-tax rate.

Irresistible. Xiyang Group, a large Chinese mining company, invested $40 million in North Korea to build an iron-ore mine. But the government sabotaged the deal, stole its knowhow, and seized the mine, Xiyang claimed last fall. It was a “nightmare” running the place. North Korean managers, when in China, demanded top-shelf alcohol, cars, and pricy prostitutes. Accusations that the North Korean side met with counter accusations. The investment may be lost. So the Chinese are leery. But they know how to slip in and take advantage of opportunities [It Wasn’t Supposed To Be This Way: Chinese Oil Companies Apparent Victors in Post-Saddam Iraq].

There have been other signs—or hopes of signs—of an opening. Kim Jong-un, who was declared Supreme Leader in December, 2011, announced in his New Year’s address last Tuesday, the first such address by a Supreme Leader in 19 years, that 2013 would bring a “radical rerouting” of the country’s economic policies. Agriculture and light industry would be at the center. He had a vision: “An important issue in putting an end to the division of the country and achieving its reunification,” he said, “is to remove confrontation between the north and the south.”

The peace offer was largely brushed off as mere rhetoric. Similar verbal gestures had been made before only to dissolve into missile launches, nuclear tests, and aggressive tirades. But the other divided country, Germany, had successfully reunified. It was expensive for West Germans, and a sea change for East Germans. Dissatisfaction in some circles led to the not-always tongue-in-cheek outcry, “We want to have our Wall again.” But Chancellor Merkel is from former East Germany—perhaps a model, or an illusion, for Kim Jong-un, who is young, worldly, and ambitious.

He went to school under an alias in the German-speaking part of Switzerland near the capital Bern. From 1993 to 1998, he attended the private “International School” where English was the school language, then continued until 2000 at a public school where German was spoken. Poor grades and absenteeism dogged his experience. He flunked natural sciences, barely passed math and German—pretty good for a kid in a foreign country where his classes were held in two foreign languages.

So, how serious could Kim be in trying to open up his country and strive for reunification? Now even former governor of New Mexico, Bill Richardson, and Google Executive Chairman, Eric Schmidt are heading to North Korea. Neither publicly divulged his intentions. The State Department expressed its opposition. There were rumors—likely a pretext—that they’d try to disentangle human rights activists as Kenneth Bae, an American who’d engaged, according to propaganda outfit, Korean Central News Agency, in “hostile acts against the republic.”

The US defense industry would vigorously oppose any resolution of the Korean conflict as it would eliminate a major strategic concern—and the associated wealth effect. South Koreans, if they look at Germany, might wonder if they can even afford to pay for reunification. And the Chinese have their own concerns, including the outright collapse of the North Korean regime, and the chaos it would bring.

But the Chinese won’t be discouraged. They’re on a quest for natural resources. Even in places like Africa, where China is going after oil, it surpassed the US and Europe as largest trading partner. Read…. China in Africa: Partners in the Year of the Snake.

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