pacific forum History of Pacific Forum

Issues and Insights Vol. 16, No. 1 – Development Cooperation with North Korea: Expanding the Debate Beyond the Political Horizon

Policy makers in the United States, South Korea, China and other countries continuously craft plans of action for a potential future scenario when North Korea becomes more open, either by collapse or through a gradual process. This paper seeks to spark a similar discussion but about development cooperation with North Korea. To do this, it draws upon lessons from both success stories and pitfalls of the development of the post-communist transitions in countries like Mongolia and Vietnam, and regions such as Eastern Europe.

This paper makes eight policy recommendations to be included in contingency planning for development cooperation with the country, to be implemented in a future where political sensitivities have decreased. The policy proposals are made on two different time horizons: relatively short-term proposals that are less politically sensitive and complicated, and longer-term ones with greater political sensitivity and more complex implementation.

The first policy area is food security and the markets. The policies proposed here are intended to support the efficiency of markets. In the short-run, a relatively apolitical policy of assistance to the markets is suggested. Scales, storage space, stall structures and other practical material support should be considered to make the markets function better. Such support would increase the efficiency of the markets and benefit both consumers and producers. In the longer run, the international community should give capacity-building assistance and help create a nationwide authority that controls market-trading permits. This would be an important measure to decrease the corruption and arbitrary administration surrounding the markets.

The second policy area is the financial system. This paper suggests trial attempts at microfinance services for North Korea’s nascent market entrepreneurs. It also advocates that the country be offered membership in international financial institutions such as the World Bank and the International Monetary Fund once political conditions are ready to receive assistance to build up its own financial system.

International trade and foreign investment are the third policy area. In the short run, assistance to construct an international arbitration institution is suggested. Such an institution would need to publish its findings for the general public, and to be able to show a record of going against the government’s interests in impartial judgments. In the longer run, capacity building support for North Korea’s mining industry is suggested because revenues from its most abundant natural resource will undoubtedly be crucial to boost its economy in a transitional stage. Such support needs to be conditioned on transparent records about these revenues, and membership in organizations like the Extractive Industries Transparency Initiative.

Finally, two policy proposals are made in the area of governance, in practical and administrative forms rather than democracy and popular influence. In the short run, assistance is advocated for North Korea’s statistical agency and data gathering capacity. Solid data is a prerequisite for informed decision-making. The international community and the North Korean regime have a shared interest in improving data collecting capacity in the country. In the long run, the international community should offer broad support to build up the administrative capacity of North Korea’s provincial and local government institutions.