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After Years of Dim Prospects, New Possibilities for N. Korean Economy


FILE - A man reads a newspaper story about U.S. President Donald Trump opening dialogue with North Korean leader Kim Jong Un, at a brokerage house in Beijing, Jan. 8, 2017. North Korea has signaled its interest in opening up its economy.

North Korean leader Kim Jong Un has been signaling his desire to open up the reclusive state's economy, ushering in what some analysts believe could be a "reform and opening up era" similar to what happened in China four decades ago. But how far North Korea is willing to go and what concrete measures it is willing to or could take remain unclear, especially with sanctions still firmly in place.

Next week's Singapore summit between Kim and U.S. President Donald Trump is expected to shed light on what steps Pyongyang is prepared to take toward denuclearization and that, in turn, could pave the way for a possible boom in economic activity after sanctions are removed.

Though many hurdles and much uncertainty remain, the glimmer of opportunity for business options in North Korea is an improvement, said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics.

"Given how hermetically closed North Korea has been for decades, any uncertainty about the future and any potential opening up is actually an improvement on the status quo for foreign businesses," Kirkegaard said in an emailed response to VOA.

FILE - People watch a TV screen showing an image of North Korean leader Kim Jong Un during a news program at the Seoul Railway Station in Seoul, South Korea, April 21, 2018. The signs read: "North Korea says it has suspended nuclear tests."
FILE - People watch a TV screen showing an image of North Korean leader Kim Jong Un during a news program at the Seoul Railway Station in Seoul, South Korea, April 21, 2018. The signs read: "North Korea says it has suspended nuclear tests."

Mission accomplished

In a key address in late April, Kim declared that North Korea had completed the development of its nuclear arsenal and would no longer carry out nuclear or missile tests. In the speech, he also proclaimed that the "new strategic line" for the ruling "Workers' Party" would be developing the economy.

That shift toward focusing more on improving the people's livelihood has been a key driver behind the North's about face in recent months, analysts note. And its stated shift of priorities from nuclear weapons to economic development presents an opportunity for more fundamental changes.

Lu Chao, a North Korea expert at the Liaoning Academy of Social Sciences, said that if sanctions are loosened, areas likely to see a boom in investment are ones with fewer hurdles such as travel and tourism.

Infrastructure is likely to be another key area of focus, he said, with the majority of initial foreign investment expected to come from China and South Korea.

"Currently, power and transportation are two areas that are in urgent need of transformation [in North Korea] from an economic perspective. In the near future, developments are likely to focus on this area," Lu said.

FILE - Trucks cross the friendship bridge connecting China and North Korea in the Chinese border town of Dandong, opposite side of the North Korean town of Sinuiju, Sept. 4, 2017.
FILE - Trucks cross the friendship bridge connecting China and North Korea in the Chinese border town of Dandong, opposite side of the North Korean town of Sinuiju, Sept. 4, 2017.

Neighbors first

Analysts said that China and South Korea are likely to benefit the most in the beginning from any opening up of the economy. Few see the United States playing a significant role inititally, let alone taking up a significant portion of North Korea's trade.

China currently is North Korea's biggest trading partner and investor, but analysts see Seoul also playing a key role.

South Korea's economy is massive by comparison to its northern neighbor. The total value of goods and services produced and sold in South Korea in 2016 was $1.34 trillion. North Korea's gross domestic product, or GDP, for that same year was estimated to be just under $30 billion.

South Korea's vast resources could provide crucial investment support to North Korea. But to get investors into the country, Pyongyang will not only need to make policy adjustments, but pass legislation that provides guarantees for investors as well, said Jia Qingguo, a political science professor at Peking University.

"When companies look to invest, they are not just pursuing a vision, but more than that they are looking to grow profits," Jia said. "And if there is no way to make profits, why would they go in the first place?"

FILE - A North Korean worker carries a reel of thread at the Pyongyang Sock Factory in Pyongyang, North Korea, Jan. 9, 2017.
FILE - A North Korean worker carries a reel of thread at the Pyongyang Sock Factory in Pyongyang, North Korea, Jan. 9, 2017.

Adapting to change

Analysts said that as North Korea looks to transform its centrally planned economy, it will adopt some measures from China and other countries, but will never admit that it is doing so.

"North Korea won't adopt a China, Vietnam or Cuba model," Lu said. "In the beginning, [North Korea] is likely to create development zones where special economic policies can be put into place."

Lu said that such zones would have some similarities to those in China, but would be completely cut off from the broader economy and public — fenced in by barbed war.

Starting in 2013, Kim Jong Un began stepping up efforts to open more than a dozen special economic zones, but international sanctions have seriously slowed the development of those projects, analysts said.

North Korea has cautiously approached such changes in the past and that is not likely to change going forward. Jia Qingguo said Kim will need to do more than create a narrative to explain why the country is shifting its focus toward economic development.

"As he tries to open up North Korea's economy, he will also need to pay attention to political stability and make adjustments to the country's system [of governance],"Jia said. "Whether he can do that or not is uncertain."

VOA's Saibal Dasgupta and Joyce Huang contributed to this report.

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