Tag Archive | "aid"

What the United States Can Do to Help North Korea with the Coronavirus

By Troy Stangarone

In response to the outbreak of the coronavirus in China, North Korea has closed its border to tourists and commerce with China and Russia to prevent the spread of the disease in North Korea. But helping North Korea address the crisis would not only be the right thing to do, it could also serve as an entryway for the United States build trust needed for future talks on other issues.

Officially, North Korea’s self-imposed quarantine has worked. It has not reported any cases of infection to the World Health Organization.  However, North Korea is an opaque society and there have been indications that the disease has spread to North Korea. Five North Koreans reportedly died in the area of Sinuiju from symptoms similar to the coronavirus, while there are reports that a North Korean in Pyongyang may have contracted the virus as well.

While North Korea has made progress in some areas since its healthcare system went into decline in the 1990s, it still lacks the tools that other countries have to deal with contagious viruses such as the coronavirus. At this critical moment, North Korea likely needs access to facial masks and sanitizers to prevent the virus from spreading. For those who have contracted the virus, North Korean doctors would need equipment and supplies such as ventilators, medication to stabilize blood pressure, and intravenous fluids to treat the virus.

It is unclear in recent years if North Korea has put the proper resources into building up its healthcare infrastructure. Moreover, access to these supplies has been made more complicated in recent years as aid organizations have faced additional challenges in working in North Korea from international sanctions.

The U.S. Centers for Disease Control and Prevention (CDC) does recommend facial masks for travelers, but it notes that proper sanitation is also an important part of preventing the spread of the coronavirus.  While North Korea has increased domestic production of facial masks to try and meet demand, it is unclear if it is producing versions of facial masks that most effective and it would likely also need help in ensuring proper sanitation products are available.

This is where the United States could provide assistance to North Korea. Sanctions were never intended to inhibit the shipment of non-dual use medical supplies and it will be much more difficult to contain the virus if it there were to be a serious outbreak in North Korea.

The United States could offer to provide North Korea with additional supplies of hand sanitizer and facial masks to help prevent the spread of the disease. Or, if that were objectionable to North Korea, the United States could work help facilitate their provision from NGOs willing to provide North Korea assistance.

In addition to providing supplies, the United States could offer to have the CDC consult with North Korean doctors via phone or programs such as Skype. Should there be a wider outbreak, then the CDC could also coordinate other needed supplies that North Korea may need to treat the infected.

While the United States should not offer this assistance with the hope of it inducing North Korea to return to talks on its nuclear weapons programs, it could help in improving the relationship in the long-term. Building mutual trust requires taking steps that demonstrate that one party in a dispute is willing to help the other rather than just continue a cold stalemate.

However, if the United States did reach out to offer North Korea help, it should be done through discreet channels to allow North Korea greater latitude to accept the aid. Public pronouncements might be misperceived in North Korea as U.S. efforts to suggest it cannot contain the spread of the coronavirus on its own. Discrete cooperation, instead, is likely better for both countries.


Troy Stangarone is the Senior Director and Fellow at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Uri Tours’ photostream on flickr Creative Commons.

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How Should the International Community Respond to North Korea’s Request for UN Food Aid?

By Robert R. King

The North Korean Permanent Representative to the United Nations, Ambassador Kim Song, last week made an urgent request on behalf of his government to the United Nations and its affiliated humanitarian agencies to provide food assistance to his country.  The request said the looming food crisis is the result of a forecast sharp drop in agricultural production this year, but also a result of stringent international sanctions imposed on the North because of its nuclear weapons and missile programs.

North Korean officials at the United Nations in New York made their request for humanitarian food assistance quite publicly.  NBC News reported that it had obtained a copy of the memorandum to United Nations officials from the North Korean UN Mission in New York.  A UN spokesperson said publicly on March 7th that North Korea had made the request to UN assistance agencies.  Pyongyang told UN officials that it is facing a shortfall of 1.4 million tons of food production this year, particularly in key crops of rice, wheat, potato, and soybean.

The timing of the request was not random.  It was made just ten days before the ill-fated Hanoi Summit between U.S. President Donald Trump and Korean leader Kim Jong-un at the end of February.  North Korea was seeking removal of international sanctions as a key objective at the summit.  Giving the request for sanctions relief a humanitarian twist was probably a key reason for the plea to the United Nations and the timing and publicity for the request.

The Effect of Sanctions on Food Supply

The North Korean narrative that sanctions are denying North Korea access to much-needed food imports for its hungry population is largely fictitious.  The sanctions regime approved by the UN Security Council are focused on limiting Pyongyang’s access to goods and financing needed for enhancing its military capability, particularly its nuclear and missile programs.  The current UN sanctions, which strengthened sanctions imposed earlier, followed the missile test of November 27, 2017 when the North tested an intercontinental ballistic missile with longer range and higher elevation than it had ever previously tested.  One month later the UN Security Council approved a series of mandatory sanctions, the toughest ever imposed on North Korea.  (The Council on Foreign Relations recently published a good primer on the sanctions.)

Security Council resolution 2397 coupled with previous sanctions still in place explicitly sought to limit Pyongyang’s expanding military capacity.  The Security Council sanctioned the importation of these products into North Korea:  aviation fuel, refined petroleum products, crude oil and natural gas;  helicopters, naval vessels, military arms, and “any item contributing to military capabilities, excluding food and medicines”;  and items related to weapons of mass destruction and dual-use items that could be used for the building of such weapons.

The sanctions on the importation of such goods by North Korea or the export of such goods to North Korea by UN member states is not the cause of severe food shortages in the North.  Even the sanctions on petroleum products likely have minimal impact on agricultural production because farms in the North are not highly mechanized.  Restrictions of farm equipment and spare parts for farm equipment also have minimal impact for the same reason, and exceptions for farm equipment are possible if the North can provide end-use assurances to be certain that such equipment is not for military use.

The sanctions also ban the export to North Korea of luxury goods, such as high-end automobiles, expensive liquors, designer clothes, etc.  Time Magazine discussed North Korea’s import of luxury goods during Kim Jong-un’s first year in office in an article entitled: “North Korea’s Kim Spending Big on Cars, Cognac, and Pianos.”  In that first year as Supreme Leader, Kim Jong-un reportedly spent $645 million with some estimates suggesting as much as $800 million spent on luxury goods.  Obviously that was part of the effort by the newly installed leader to win the “loyalty” of his supporters in the elite.  According to a South Korean lawmaker, in 2017 Pyongyang spending on luxury goods was still some $640 million.

Sanctions also prohibit key North Korea exports, and this has reduced resources available to Pyongyang for the purchase of goods from abroad—both military equipment and raw materials needed for domestic production of military goods, and also for food, if the regime makes the decision to purchase food for the masses rather than just luxuries for the elite.

Prohibited goods from North Korea include raw materials mined there—coal;  iron, lead, copper, nickel, zinc, and rare earth minerals, either processed or ore;  North Korean-produced monumental statues (an important North Korean export to dictatorships, particularly in Africa) or other manufactured goods, unless approval is granted in advance by the UN Sanctions enforcement committee.  Export of seafood is also prohibited.  Seafood has been a lucrative export in the past.  Furthermore, the export of North Korean labor to foreign countries has been prohibited.  All foreign laborers working abroad when the sanctions were imposed are to return to North Korea by December 2019.  (Russia appears to be violating this sanction provision, which suggests that enforcement of UN sanctions is far from perfect.)

The key question regarding sanctions and their impact on access to food for the North Korean people is this:  Would Pyongyang buy food or devote resources to the development of the agriculture and food production sectors of its economy if greater resources were available?  Past experience clearly indicates no.  A key conclusion of the 2014 UN Human Rights Council Commission of Inquiry on North Korea’s human rights situation, concluded:

“The State [North Korea] has consistently failed in its obligation to use the maximum of its available resources to feed those who are hungry.  Military spending—predominantly on hardware and the development of weapons systems and the nuclear programme—has always been prioritized, even during periods of mass starvation. . . . Large amounts of state resources, including parallel funds directly controlled by the Supreme Leader, have been spent on luxury goods and the advancement of his personality cult instead of providing food to the starving general population.”  (Paragraph 51, Report of the commission of inquiry on human rights in the Democratic People’s Republic of Korea, UN Human Rights Council, 7 February 2014.)


Though the Commission of Inquiry report was issued five years ago, there is nothing even to suggest that its conclusions are no longer valid.  The regime of Kim Jong-un has continued the same practices followed by his father and grandfather toward vast majority of the inhabitants of North Korea.  There nothing to suggest that lifting sanctions against Pyongyang would free resources that would be used to improve access to food and medicines for the people of North Korea.

Natural Disasters and Failure to Prepare for Them

The other cause of food shortages in North Korea cited by the memorandum from North Korea’s permanent representative to the United Nations is natural disasters—record high temperatures, drought, and heavy rainfall.

Agriculture in the North has inherent problems.  The country is more mountainous than the southern half of the peninsula.  But decades of poor agricultural practice and lack of proper investment under the Kim regimes have contributed to lower output.  South Korea, which has more favorable land for farming, has much the same temperatures and rainfall, and is subject to the same drought and floods as the North.  The South, however, has followed better agricultural practices and put greater investment into the rural sector.

Thus, the problem is not greater natural disasters and climate difficulties in the North, but rather an inadequate response from Pyongyang than what we have seen from Seoul in dealing with these same issues.  North Korea has neither prepared for nor effectively dealt with the predictable natural disasters.  The North has failed to provide adequate investment in agricultural infrastructure and sufficient inputs.  Instead, government funds have gone to the military, nuclear and missile programs, and investment in projects to entertain the elite (Masikryong Luxury Ski Resort, the Dolphinarium and riding stable in Pyongyang among other luxuries in the capital city).

The UN has confirmed the food shortages in the North, and the problems are serious.  The United Nation’s resident coordinator for UN programs in North Korea, Tapan Mishra, reported that there is a “significant food gap” in the North.  He said that 10.9 million people in the country, or 43 percent of the population, need humanitarian assistance, some 600,000 more than last year.  The UN reported that “widespread undernutrition threatens an entire generation of children, with one in five children stunted due to chronic undernutrition.”

UN officials were not explicit, but the figures they are using have been provided by the North Korean government, which does raise questions.  At the same time, however, Benjamin Katzeff Silberstein, a North Korean agricultural specialist, suggests that agricultural output between 2017 and 2018 dropped by 19 percent.  The problem is indeed a serious one.

Appeals by UN humanitarian agencies for UN member states to aid the North have received less support than needed.  Just a few days ago, the UN made an urgent appeal for $120 million “to urgently provide life-saving aid to 3.8 million people.  Last year the UN appealed for $111 million to help 6 million of North Korea’s most vulnerable people.  The appeal received only 24 percent of what was requested—one of the lowest levels of response to a UN appeal in the world.  The March 2018 similar forecast and appeal for urgent humanitarian assistance was preceded by a similar appeal in March 2017.

The tepid international reaction to UN appeals for aid to North Korea is in part the fault of the policies of the North.  The significantly increased attention and focus on human rights violations in the North since the UN Human Rights Council’s commission of inquiry into North Korea’s human rights issues have raised international concern.  Pyongyang’s increased nuclear and missile testing under Kim Jong-un since 2012 has further eroded international support and sympathy for Pyongyang.  The priority of Kim Jong-un in testing and building nuclear weapons and missile delivery systems has made it much more difficult to gain international sympathy, even in the face of serious humanitarian threats.

Humanitarian Assistance Can Be Delivered in Appropriate Ways

The Kim regime wants food assistance, but providing food to the masses is not a high enough priority for that government to reorder its priorities or change its policies to provide the food through its own resources.  Simply eliminating the budget for elite luxuries, for example, would provide more than five times the amount the UN seeks to raise through voluntary contributions.

Nevertheless, something can be done.  It is important to keep in mind that the suffering people of North Korea—particularly children who are its most tragic victims—are not responsible.  A national election was just held in North Korea, but there was no choice of candidates for the Supreme People’s Assembly.  Even if there were real choices, the rubber-stamp Assembly has no power to alter the policies of the Kim regime.  It is difficult under these conditions to hold the victims responsible for their lack of food.

The United Nations has provided food assistance to North Korea for decades, and the UN humanitarian agencies, particularly the World Food Programme and UNICEF, have experience in delivering nutritional aid to children and families in ways that assure it reaches the intended recipients.  Pyongyang will struggle to control the distribution, but UN agencies have dealt with such problems in North Korea and elsewhere for decades and are effective in doing so.  The United States and other UN members should respond positively to the appeal from UN agencies.  The UN agencies have a track record of assuring that aid for those in need gets those who need help.

Furthermore, the United States should not oppose UN assistance to North Korea, and the UN sanctions regime should not be used to limit food and other humanitarian aid to the North.  It is likely that Congress will balk at the United States providing direct food assistance to North Korea, even by providing funds through experienced UN humanitarian agencies.  But there are other ways the United States can help those most in need in North Korea.

In the lead up to the Hanoi summit between President Trump and supreme leader Kim Jong-un, U.S. government officials indicated they were easing restrictions on private American humanitarian organizations providing aid to North Koreans.  There was hope that this might allow private assistance efforts to help fill the gap.  There are indications, however, that the U.S. administration is backsliding on its commitment.  The United States should encourage responsible private humanitarian efforts to continue and support, not obstruct, those efforts.  These organizations understand North Korea and are experienced in assessing need and assuring appropriate distribution of assistance.

The United States can—and should—work actively and aggressively to move North Korea to nuclear disarmament and reduce tensions with North Korea.  At the same time, the U.S. can—and should—provide humanitarian food, medical, and other assistance to the people of North Korea.


Robert R. King is a Non-Resident Fellow at the Korea Economic Institute of America. He is former U.S. Special Envoy for North Korea Human Rights.  The views expressed here are his own.

Photo from Todd Mecklam’s photostream on flickr Creative Commons.

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Why the United States Won’t Provide Financial Aid to North Korea

By Troy Stangarone

In trying to sell Kim Jong-un on giving up his nuclear program, the United States and South Korea have tried to entice North Korea with the promise of a better economic future. As part of this push, the Trump administration has suggested that the U.S. private sector, along with China, South Korea, and Japan, will provide financial assistance to North Korea. However, it has also been made clear that no U.S. tax dollars will be used as an economic inducement for North Korea.

While the refusal to provide aid is in line with President Donald Trump’s desire to ensure that greater costs are born by other states, there is a practical reason why the United States will not provide significant aid to North Korea. The administration is limited in its ability to provide economic assistance.

When Congress legislates sanctions on foreign countries, it generally includes a provision in the legislation that allows an administration to waive the sanctions if it determines that doing so in the national interest. Most of the U.S. sanctions on North Korea contain national interest waivers, but in most cases they do not to apply to the prohibitions on providing aid to the regime in Pyongyang.

In recent years, Congress has inserted specific language into the annual appropriations legislation explicitly forbidding the use of funds for North Korea. These restrictions include credits, loans, or guarantees by the Export-Import Bank. While there are exceptions for humanitarian aid and some other circumstances, it is unlikely that Congress will change course and remove the prohibitions in the near future.

While the administration could request Congress grant it an exception to the prohibitions on aid or to remove them permanently, it would also need to persuade Congress to appropriate the necessary funds. Doing so could be challenging. If the United States intends to provide security assurances to the North Korean regime through a treaty in the U.S. Senate, as has been suggested by Secretary Pompeo, persuading Congress to also waive sanctions on aid will be dependent upon progress on the nuclear issue, and perhaps other issues. Even if the administration can secure an agreement with North Korea on the nuclear issue that would gain the support of two-thirds of the Senate that would be needed for passage of a treaty, Congress may be reluctant to appropriate funds for North Korea if progress is not made on issues that could include North Korea’s chemical and biological weapons programs, its cyber activities, and human rights.

The history of the Agreed Framework suggests that even if Congress agrees to appropriate funds there will be limits. As part of the Agreed Framework, the United States committed to providing 500,000 metric tons of heavy fuel oil a year until a light water reactor was completed. The Clinton administration had promised Congress that the costs would not exceed $30 million a year, and when they did the needed extra funds were not forthcoming. In the case of the Agreed Framework, the funds were designed to serve as a bridge to a new energy resource for North Korea. While it is reasonable to expect that if a deal is struck Congress might appropriate funds for dismantlement of North Korea’s nuclear program, funding that is focused on economic development as opposed to dismantlement is unlikely.

Practically speaking, the Trump administration does not have the authority to provide economic assistance to North Korea and is unlikely to seek it from Congress. It goes against Trump’s broader philosophy and is something Congress would most likely be reluctant to provide. While North Korea will need assistance in developing its economy, there is unlikely to be political support in the United States in the near future for economic aid for North Korea.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo by Pictures of Money on flickr Creative Commons.

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Drought in North Korea — What Should Be the Response?

By Robert R. King

Just a few days ago, the UN Food and Agriculture Organization (FAO) issued a report that North Korea is facing its worst drought in 16 years.  The report, prepared by the FAO in cooperation with the European Union’s Joint Research Center, concludes that the period April through June of this year was particularly dry, which has delayed planting and stunted plant growth in key crop-growing areas.  Food security in the DPRK has been precarious since the famine of the late 1990s and early 2000s, and now the UN agency is warning that “cereal output may decrease significantly.”

The other shoe that has yet to drop this year are floods.  North Korea frequently faces late summer monsoon rains and occasional typhoon rains in September that complicate farm production.  Because North Korean government policies limit private farming on good farm land in the flatter bottomlands, farmers end up over-cultivating hillsides.  Then when the late-summer rains come, they can accelerate the runoff, causing devastating damage to the hillsides through erosion.

The late August 2016 floods along the Tumen River on the northern DPRK border with China and Russia were caused by Typhoon Lionrock.  In North Korea, the floods killed over 500 people, left over 100,000 homeless, and did major damage to farmland in the area.  Flooding such as this is an all too common occurrence, and exacerbates existing food scarcity.

Unfortunately, food shortages in the North are not unusual.  Even in an average year, the country has to stretch to meet the food needs of its 25 million people.  The government provides only limited resources for agricultural inputs and equipment, farming methods are not the most modern or effective, and central planning generates further inefficiencies.  Some improvements have been made in recent years with better farming practices that reward individual efforts to encourage greater efficiency, but shortages are still serious.

In the 1980s, annual grain production (principally rice and corn) averaged around 8 million tons.  During the famine (1996-2003), annual production averaged 3 million tons, with some years considerably lower.  For the last five years, it has averaged just below 5 million tons.  Furthermore, gaps between regions and a poor transportation system make it difficult to adjust for regional differences.

The suffering of the North Korean people is certainly not their own fault.  They have little, if any, ability to influence the decisions of the tyrants that control their fate.  The food shortages are the responsibility of the regime.

In fact, the regime provides ample food and luxuries for the elite in Pyongyang, and the military leadership and elite military units will have sufficient food.  Resources that could provide much-needed inputs for agricultural production will be spent for nuclear and missile development and maintaining the military, and of course the supply of luxuries will continue to flow to the privileged.

Certainly UN agencies will appeal to member states to help North Korea. However, humanitarian assistance from the UN, particularly the World Food Program, will likely be difficult to secure.  There are great demands on UN humanitarian resources in other parts of the world right now, and in recent years special appeals to provide aid to the North Koreans have secured only limited help.  North Korea has lavished resources on missile and nuclear capabilities, despite the urgent humanitarian needs of its own people and the condemnation of its military actions by the UN Security Council.  Thus, aid to North Korea will be a particularly difficult case to make to elected political leaders.

In addition, the U.S. government is unlikely to be responsive.  A sharply divided Congress, preoccupied with healthcare, taxation, and other divisive domestic issues, will find it very difficult to support humanitarian aid to a country which has announced that its nuclear and missile programs are aimed at Washington.  Furthermore, the Trump Administration has indicated its intent to significantly cut back on all U.S. foreign assistance.

The new government of the Republic of Korea is likely to give the most serious consideration to the humanitarian needs of the North.  These suffering Koreans are their cousins, and many Koreans in the South have roots in the North.  In fact, Seoul has put forward an initial proposal for engagement with Pyongyang.  Based on previous experience, the North will likely expect to be paid to engage, and in the past humanitarian aid has been a place to start.

Another avenue for assistance in coping with the effects of drought is private humanitarian groups.  A good number of them are American Non-Governmental Organizations (NGOs), which have a good record and experience in aiding the North.  Unfortunately, these NGOs face serious difficulties raising funds.  These groups are well-organized and managed, do extremely good work, and have dedicated and compassionate leaders.  The DPRK, however, has become such an international pariah because of its nuclear and missile programs, its periodic provocations, and crude verbal outbursts that large and small donors alike are reluctant to be involved.

In considering a possible response by governments, international organizations, and private non-profit organizations to the growing signs of an impending food shortage in the DPRK, two considerations are important.

First, they must assess the need for help.  Our satellite imagery is remarkable, and we can make reasonable estimates about the extent of the need from afar.  But on-the-ground assessment is essential to determine the reality.  What crops and which regions are most affected?  What steps is Pyongyang taking to deal with this problem?  What are the transportation issues?  Does the North have the capacity to move aid from ports to affected areas?

Second, agreements must be reached to allow on-the-ground monitoring by designated representatives of the country or organization providing the aid.  In the past, South Korean and international organizations delivered food aid to the border or to the ports, and Pyongyang determined where the aid was sent.  Some was apparently sold on the black market and the payments may have helped fund the military. Other funds subsidized the lifestyles of the rich and infamous.  If aid is provided, foreign donors and the international community need to be assured that humanitarian assistance is going to those most in need.

The longsuffering North Korean people have limited alternatives for humanitarian help.  Unfortunately, the bad decisions and self-destructive policies of its own leadership, over which they have little or no control, make it very difficult to find help for them.

Robert R. King is a Non-Resident Fellow at the Korea Economic Institute of America.   He is former U.S. Special Envoy for North Korea Human Rights.  The views expressed here are his own.

Photo from (stephan)’s photostream on flickr Creative Commons.

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Prospects for Stronger Ties with Africa for the Next South Korean Administration

This is the fourth in a series of blogs looking at South Korea’s foreign relations in the run up to the next Korean administration taking office on May 10. The series also includes blogs on relations with the United StatesChina, North Korea, the European Union, Japan, Russia, the Middle EastASEAN, and Latin America

By Jennifer Cho

For the longest time, South Korea has not prioritized Africa within its foreign policy. The main exception was in the 60s, when the South competed with North Korea to earn more votes in the United Nations. Recently, however, interest in Africa has significantly increased because of its abundant natural resources and huge oil deposits. Although Korea embarked on closer diplomatic relations across Africa in recent years, Seoul has tended to focus on short-term projects that lack continuity.

In the past, each Korean president came up with similar approaches with different titles, but some projects were forgotten with changes in the administration. With a new administration in Seoul after the May 9 election, it remains to be seen whether this short-term approach will continue – so far, none of the presidential candidates have clearly stated any plans for Africa policy once they are in office.

Despite some governmental efforts toward economic cooperation, South Korea’s engagement with Africa started late compared to other countries. For example, China’s trade volume with the continent increased from $10 billion in 2000 to $300 billion in 2015. However, South Korea’s trade volume remains at about $19 billion. Along with trade volume, South Korea also lacks investment in Africa. To fill these gaps, the Korean government is looking to play a significant role in backing up domestic firms and companies.

One way Korea has done this is through President Roh Moo-hyun’s “Korea Initiative on Africa’s Development,” which began in 2006. Through this project, Korea hosted several Korea-Africa Fora to establish partnerships and strengthen economic and political cooperation in the future. The past three fora provided South Korea with opportunities to build economic relationships with more African countries, including a cooperation framework called the Korea Africa Economic Cooperation Framework (KOAFEC), which provides aid to Africa and chances to collaborate with the African Development Bank. The most recent forum was held last December in Addis Ababa, Ethiopia, where the African Union (AU) headquarters are located. More than 150 people, including cabinet ministers and representatives from 14 African countries, participated in the fourth forum and discussed challenges for establishing peace and stability and also how to tackle joint economic development projects.

Besides economic opportunities, these fora provided a space to discuss security policy in regards to North Korea. During the fourth forum last December, South Korean Minister of Foreign Affairs highlighted the importance of security issues on the Korean peninsula. South Korea asked for cooperation from various African countries in regards to North Korea and requested support for U.N. Security Council Resolution 2331 that strengthened sanctions measures against the DPRK. Last month, the South Korean defense vice-minister visited Egypt to sign an MOU on defense cooperation for security issues related to the DPRK. Because Egypt is located between Africa and the Middle East, a stronger relationship with Egypt will expand South Korea’s influence on both continents.

Continuous dialogues on targeting mid- to long-term projects will play a significant role in Korea-Africa relations in the future. Africa has ample natural resources and extensive potential for economic and energy development. In addition, the continent’s increasing population has greatly increased demand for infrastructure and has creased possibilities for the development of manufacturing, which can reach a huge group of consumers. South Korea’s effort to strengthen ties with various African countries, including Egypt, Kenya, and Angola, will not only strengthen previous diplomatic ties but also promote businesses development across the continent. It will be important for the new administration that takes power in May to review previous policies and continue recent dialogues to create lasting, long-term partnerships.

Jennifer Cho is a graduate of Kalamazoo College and an intern at the Korea Economic Institute of America (KEI). The views expressed here are the authors’ alone.

Photo from Korea.net’s photostream on flickr Creative Commons.

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Korea Aid: How Seoul is Increasing its Connections in Africa

KEI Communications Director Jenna Gibson, host of Korean Kontext, recently interviewed Valerie Dabady Liverani, manager of the Resource Mobilization and External Finance Department at the African Development Bank. After President Park Geun Hye made the first visit by a Korean president to the African Union this spring, South Korea is increasing its efforts to connect with the continent. With this in mind, Gibson and Dabady Liverani discussed Korea’s development aid to Africa, trends in the aid sphere, and what more Korea can do to collaborate with Africa in the future. The following is a partial transcript of that conversation. The rest of the conversation can be found at http://keia.podbean.com.

Jenna Gibson: To get us started off, South Korea joined the African Development Bank in 1980, and since then they have contributed millions of dollars to a variety of efforts, including knowledge sharing, education, infrastructure projects and more. Could you give our listeners maybe a brief background of Korea’s cooperation with the Bank since it joined?

Valerie Dabady Liverani: Sure. By way of background, Jenna, Korea joined the Africa bank in 1980 and so they’ve been a longstanding partner of the institution. The most recent contribution that they made was to the African development fund back in 2013, where they made a pledge of about $81 million dollars. We would say that Korea is a big friend to the African Development Bank; they are one of the few bilateral donors to have a cooperation framework something called the KOAFEC, Korea Africa Economic Cooperation Framework, which was created back in 2006. It provides if you will for a context for aid to Africa and also for collaboration with the African development bank. The first meeting was a ministerial level meeting held in 2006 and it has been held biannually in Seoul since then, with the exception of 2014 when the Ebola crisis made planning for the event a bit difficult. We’re quite excited in fact planning out the next KOAFEC meeting which will be held October 2016 in Seoul, and preparations are in high gear.

Korea has one of the most important trust funds with the institution, [as well as] a co-financing framework. The difference is that co-financing provides support to projects, and the trust funds provide grants in 6 priority areas: infrastructure, green growth, knowledge sharing, human resource development, ICT, and agricultural and rural development. Also in terms of collaboration I think what doesn’t get talked about perhaps as much as financing, but which is equally important, is exchange of staff. Currently we have about 12 Korean staff working at the bank. Recently someone from KEXIM, the export bank of Korea joined us – about two or so months ago. We’re quite happy in terms of the collaboration, and we feel there is a lot we can learn from a country like Korea in terms of its own growth trajectory; Korea was once a recipient of aid and is now a provider of aid.

Jenna Gibson: You mentioned a lot of these really important key areas including infrastructure, ICT, green growth…so within those, are there any programs or projects that Korea tends to gravitate towards? What, on the ground, do these projects look like?

Valerie Dabady Liverani: So in infrastructure for example, Korea has financed both the hard and the soft parts of infrastructure In terms of the soft parts they have, for example through the trust fund, improved the private sector regulatory and business climate in East Africa. On the infrastructure side they have financed some roads also in East Africa. On the knowledge side, which I think is also one of the more important components of the collaboration, there is a strong link between our econ department and certain Korea institutes such as the Korea International Economics Policy Institute – that’s a mouthful! – and essentially what that really tries to do is to learn from the lessons of Korea’s own economic development and essentially try to see what lessons we can learn from that. Finally, Korea has generously offered scholarships at the Korea Development Institute to Africa Development Bank Staff.

Jenna Gibson: That’s great to hear – a way of investing in the human resources and creating long-term growth…

Valerie Dabady Liverani: Exactly. Which I think one needs to really have if you want to talk about development. I think ultimately development is a very big word, and a very vague word. I think that in that, one must also focus on the hard and the soft and honestly one needs to be able to treat one’s neighbors, one needs to provide internet services and reliable energy and everything else. You also need to have a scope in your workforce in order to handle development from manual labor to things that require a bit more specialization. All those things count very much.

Jenna Gibson: Right, absolutely. Do you also see any particular openings for future cooperation and future projects where Korea could be helpful?

Valerie Dabady Liverani: I do indeed. You’ve mentioned the first visit by the Korean president recently, and I think you know we have a fairly new President, Akinwumi Adesina, who came in last year in September. I think he was able to make a trip out to Korea back in March. I think it was one of the first trips he made and I think it’s important in that it shows the value that he has for that particular relationship. During that trip back in March he was able to set out what we call the “high fives”, which is essentially the areas in which the bank is going to focus on. Those areas are energy, to light up and power Africa; agriculture, which is to feed Africa; to industrialize, which is to lead to better trade for Africa; it’s to innervate Africa; and finally it’s to improve the lives of Africans. These are what we call the “high-fives” and for us we see an opportunity for Korea to support each one of these pillars. But if I had to pick maybe two in which we see Korea being strongest, it would be industrialize Africa in terms of trade and lighten up Africa in terms of energy. I think industrialization is one of the areas where Korea has the most lessons to teach Africa, since its own growth was based on industrialization.

Jenna Gibson: One project that caught my attention, it’s not through the AfDB but is quite interesting – it’s called Korea Aid.  It’s basically a mobile clinic that promotes maternal health services, helps educate people on hygiene and nutrition, and more. Its pilot program at the moment that they started in Kenya and eventually hope to expand. The interesting element to me is that it also includes a cultural component. In these mobile clinics there is a K-meal truck to provide Korean-inspired dishes, and it also includes a K-culture vehicle that will introduce elements of Korean pop culture including music and TV programs. So, I’m very curious from the perspective of someone working on development, how do you see this intersection between aid and cultural promotion? How do you think these things will work together?

Valerie Dabady Liverani: I think actually it’s a very good idea to combine the two things, because aid sometimes happens at levels where the ordinary person maybe doesn’t have exposure to it, at least to the human side. If you build a road for example that’s obviously a good thing, but you maybe may not know who is behind this particular road, who financed it, who worked on it. I think once you put together some sort of cultural exchange you put a face to a donor, and I think whenever you do that one of the benefits will be that you learn more about a particular culture. You know sort of what the people eat, what they appreciate on television. Obviously culture is something that is shared very quickly these days. I’m trying to remember the incredibly popular pop song that my 14 year old son was singing two years or so ago – Gangnam Style! – you know, one does get snippets of culture and things like that but I think what’s important in what you’re mentioning is that one gets to choose essentially what you put out. I see this may have an audience that may be younger than your traditional segment of society whether or not that’s people working at ministries or what have you, you may reach an audience that is younger and receives information in a different way.

Jenna Gibson: I think that’s a great way to end on a forward-looking note, but before we go is there anything that you think would be important for our listeners to know about Korea’s work with the AfDB and with the African continent?

Valerie Dabady Liverani: I think that I would probably want to add is that the continent had a history back when it was still the axis between America and Russia, the sort of two poles. And obviously we see that as the cold war fell away, much more interest developed in other development poles that are interested in the continent. Today, for example, the Indian president is visiting the Ivory Coast, the Exim Bank is opening an office in Cote d’Ivoire. You’ve got lots of other players – Korea, India, China are all there as well – and Turkey is a big player too. I think it’s important at this level that those that want to participate in the sphere of development on the continent also need to coordinate between themselves. I’m still somewhat biased but I still believe that the multilateral development bank context is the best context for aid to flow through. There will always be room and space for bilateral channels, I don’t think anyone is saying that UK and France and the like will close their embassies, but I’m simply saying in terms of wanting to have the best effect for development, it’s the multilateral development channel that one should go through.

Photo from the Republic of Korea’s photostream on flickr Creative Commons.

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Unfriending North Korea…With South Korea’s Help

By Jenna Gibson

On June 16, Uganda officially kicked North Korea to the curb, asking approximately 60 DPRK troops and state security officials to leave the country. Uganda was playing host to the North Koreans as part of a military exchange program – the UN recently reported that the North Koreans were providing police training to their Ugandan counterparts, including lessons on the use of AK-47s and pistols.

Why kick them all out now? It may be yet another sign that South Korean President Park Geun-Hye’s so-called Summit Diplomacy is working.

According to 38 North, South Korea described President Park’s recent international trips as “part of diplomatic efforts to enlist the international community to the effort to bring about change in North Korea on all fronts.”

Uganda is a perfect example of the strategy’s success. Ugandan President Yoweri Museveni first promised to cut military ties with the DPRK after his summit meeting with President Park. During her visit to Uganda, which was the first visit by a South Korean president to the African nation since 1963, President Park also signed 10 agreements to cooperate on defense, health, rural development and communications technology.

While South Korea has long invested in development aid in sub-Saharan Africa, the timing of this visit and Uganda’s subsequent split with Pyongyang is noteworthy, in part because it is hardly the first country that has recently given preference to Seoul after a visit from the Korean president.

In fact, Park’s 2016 itinerary almost reads like the most recent UN General Assembly vote on North Korean human rights. Uganda – abstain. Ethiopia – abstain. Kenya – abstain. Iran – no. It seems clear that President Park’s administration is focusing on those who still support North Korea, whether actively or by staying silent.

Take Iran, for example. In one of the most high-profile diplomatic moves of her administration, Park recently travelled to Tehran for the first bilateral summit between South Korea and Iran since the two countries established diplomatic relations in 1962.

Iran has long been seen as a friend to North Korea, purchasing arms and backing the Kim regime in the international sphere. In 2002, U.S. President George W. Bush famously linked the two as part of the “axis of evil,” along with Iraq. To see Iranian President Hassan Rouhani stand next to a South Korean President and declare his opposition to nuclear development on the Korean peninsula is no less than a sea change.

 In a recent KEI podcast that examined the historic trip, Iran expert Alex Vatanka clearly saw an opportunity for South Korea to make inroads with Iran.

“Much of what Iran has done in recent years in terms of outreach to certain countries around the world was driven by an almost ideological desire to as they would put it, challenge the global system,” Vatanka said. “Rouhani is very different. This Iranian president’s view, and why he was elected in 2013, is those countries are great, but they actually have nothing to offer us. They can’t contribute to the most important thing we are trying to fix, which is the Iranian economy.”

South Korea, in contrast, has much to offer Iran economically. In fact, Park Geun-hye left Tehran with promises to triple trade between the two countries from $6 billion to $18 billion annually. Using this leverage to her advantage, Park has been able to turn a former DPRK ally away from Pyongyang.

Across the world, the pattern may be repeating itself again in Cuba. Earlier this month, Foreign Minister Yun Byung-se visited Havana, despite a lack of formal ties between the two countries. Cuba has long supported its fellow communist country, making this visit particularly key for Seoul. “For an exceptionally long 75 minutes, our talks were very friendly, serious and candid,” Yun told South Korean reporters after the meeting. “We had a broad exchange of views on bilateral, regional and global issues.”

This strategy is hardly limited to high-level visits, though. Seoul has announced they will provide $1.5 billion in development assistance to Vietnam from 2016-2020, for example. And the South Korean administration has been working to turn Myanmar away from the North with infrastructure projects and trade deals since the country began opening to the international community in 2011.

These moves have not gone unnoticed in Pyongyang. In response to Park’s recent trip, the DPRK sent Kim Yong Nam, the country’s nominal head of state, to Africa as well. There, he met with leaders from nine countries, including Chad, Gabon, Congo, Burundi and Mali. Another high-level official visited Vietnam and Laos in June.

“Pyongyang tries to maintain positive relations where it can, with countries less closely tied with its rivals,” John Grisafi, NK News director of intelligence, said in a recent NK News article. If South Korea can continue to narrow the list of countries willing to side with Pyongyang, they may be able to successfully remove what remains of North Korea’s room to maneuver in the international sphere.

And it seems like that’s exactly what Seoul is doing. It’s too soon to tell how widespread and long-lasting these shifts will be. But for now, it seems North Korea’s isolation may finally be cemented, allowing sanctions to take their full effect.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Korea.net’s photostream on flickr Creative Commons.

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North Korea’s Hunger Problem

By Mark Tokola

Five years of relatively good harvests have pushed the issue of malnutrition in North Korea down the list of international concerns. Reports of visible improvements in Pyongyang (but much less in the countryside), nuclear and missile testing, cyber-attacks, and Kim Jong-un’s public appearances have dominated recent media coverage and have caused memories of North Korea’s agricultural problems to fade. Now, however, hunger in North Korea may be reemerging as a concern.  We are unlikely to see a repetition of the 1994-1998 famine that killed somewhere in the range of a half-million North Koreans. Instead, the situation now may be more like earlier in the decade when the UN Food and Agriculture Organization (FAO) made international appeals for food assistance and the conditions under which the United States would be able to assist were being negotiated.

The FAO’s “Global Information and Early Warning System on Food and Agriculture” (GIEWS) warned on April 27, 2016, that North Korea’s food security situation was deteriorating and could lead to a deficit of 394,000 tons of cereals for marketing year 2016, the highest since 2011 and four times the size of the gap in 2014. The accuracy of the FAO’s warning seemed borne out in a June 10 Voice of America interview with Cristina Coslet, the FAO’s GIEWS office in charge of Far East Asia. She told the VOA that the North Korean government had reduced the country’s food rations for July to 310 grams per person, a 25 percent decrease since June and far below the DPRK’s target of providing 573 grams per person per day. The United Nations World Food Program recommends a minimum diet of 600 grams per person per day.

In June, North Korea’s official media acknowledged the problem, blaming it on “the worst drought in 100 years,” that is “causing great damage to the country’s agricultural fields.” The European Commission’s Joint Research Center (JRC) confirms that rainfall in North Korea during mid-April through June 2015 was well below average and had considerably reduced the country’s rice planting area. A 26 percent drop in rice production has been offset to some extent by planting crops that require less water, such as soybeans, millet, and sorghum. But simultaneously, production of potatoes and winter wheat will also fall by more than 20 percent from last year, creating an overall shortage. Furthermore, there is no equal substitute for rice in a Korean diet.

There are indications that drought isn’t the only problem afflicting North Korean agriculture, and that government choices have exacerbated the problem. Crop production could be increased if there was a larger shift from oxen to more mechanized farming. Currently, 40  percent of North Korea’s arable land is farmed using oxen.

In addition, fuel consumption for farming, according to the DPRK Ministry of Agriculture, declined from 71 thousand tons of diesel and gasoline in 2013 to 61 thousand in 2015. Similarly, fertilizer use dropped from 750 thousand tons in 2014 to 623 thousand tons in 2015. Under drought conditions, fewer inputs might be used, of course, but the year-by-year figures show that the DPRK has underinvested in its agricultural sector and has mismanaged agricultural policy. International donors, who have been asked to provide food assistance during many of the past twenty years, might well ask whether they are responding to a series of natural disasters or are being asked to make up for North Korea’s own failure to reform its agricultural system..

One factor which may make the food shortage less grave is the increase in small, family-run vegetable plots which the government now encourages. And an increase in ‘market’ activities may mean that families can find some supplemental items for sale. However, none of this will make up for the hundreds of thousands of tons of cereals which will be absent from North Korea for the coming year, unless there is a response to an international appeal or North Korea decides to use some of its resources to buy food to feed its people. Fortunately, according to the FAO, it appears that next year’s harvest will be better than this year’s. The question is whether this year’s shortages will encourage the DPRK to reform its agricultural sector with the same zeal with which it is building weapons.

Mark Tokola is the Vice President of the Korea Economic Institute of America. The views expressed here are his own.

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South Korea’s June 9 Surprise: Economic History Worth Replicating in North Korea

By William Brown

September, 1961 was not a happy time in South Korea, at least according to the US Intelligence Community.  See how CIA described the dismal situation soon after junta commander Park Chung-hee’s coup d’état, in a declassified National Intelligence Estimate.

“The greatest threat to South Korea, at least in the near term, comes from within South Korea. The country lacks a sense of national purpose and faces both tremendous economic problems and a brittle political situation. The military junta seeks to provide the drive and stability which was lacking in the previous civilian government but is subject to internal factionalism and lacks general public support in confronting these enormous problems. … U.S. aid will probably succeed in preventing economic collapse. However, even under the most favorable circumstances, progress will be slow and South Korea will continue to require large-scale foreign aid for the indefinite future if it is to remain an independent nation allied with the West.”[i]  

The longer-term threat was North Korea, seen then as a vibrant economic entity, pu­­­lling the frustrated South into the communist orbit.   

“One thing seems fairly clear; both the South Korean people and the leadership face many disappointments, frustrations, and failures in the years ahead.  In such a situation, the desire for economic progress and for an end to hopeless temporizing, rising interest in unification, and continued enticements offered by the [more prosperous] North Korean regime could lead to some movement in the south toward an accommodation with the north.” 

National Intelligence Estimate 14-2/42-61, 12 September, 1961.[ii]

Within months, South Korea had set forth on what now must be seen as one of the world’s most remarkable economic and political development paths. And within about a dozen years, North Korea would default on foreign credits and begin a long decline into famine.

Not known for its prescience in such matters—just eleven years earlier the brand new CIA had boldly said China would not enter the then flaming Korean War[iii] — this pessimistic Estimate may have served as a useful warning to the Kennedy Administration which went on to put some of its best minds together to change the nature of U.S. assistance to Seoul.  Instead of commodities aid—free food—that was ruining South Korean agriculture, the aid program focused on fixing the overvalued monetary system and developing exports. Who did this and why would be a good topic for historians to revisit and our countries to honor. But I’d like to look at the take-off from the perspective of peering back into the past with an eye toward the future. How did this intelligence forecast turn out so incredibly wrong, and wonderfully so? And what can we learn in order to convince North Korea to make a similar about-face.

An excellent new book, The Korean Economy: From a Miraculous Past to a Sustainable Future, by Eichengreen, Lim, Park, and Perkins[iv], provides what is probably the school view of South Korea’s remarkable turnaround.  In looking for an up-to-date book for my ­Georgetown University course on the two Korean economies, I was pleased to discover this work, not the least because it includes a chapter on North Korea. But I must say I was disappointed in reading what it has to say about what caused the economic take-off. This is not to say that they might not be right; it just doesn’t fit with my pre-conception and I’d like to see a new, more full, academic discussion.  Perhaps objective economists in South Korea, that is academics not predisposed to punish Park for his authoritarian rule, can help with this.

At its essence this is a chicken and egg discussion.  Eichengreen and others say that it was Park’s shifting the economy from import substitution to export-led industry that allowed savings and investment to blossom, raising the productivity of Korean workers.  Exports, from a subsistence-level economy, were possible only because foreign aid provided the surplus needed to attract investment.  The pull from abroad thus lifted the economy.

In contrast, I have thought it was reforms to the money and banking system that provided incentives to save, even out of very low incomes, that created an exportable surplus which then pulled in the foreign investment that jump-started the economy. In other words, an outward push from inside Korea provided the lift.  Foreign aid was less important. An arcane, perhaps, but I think important distinction, especially as we look towards North Korea’s current predicament and to its penchant for nationalist self-reliance.

My view stems from a personal memory—admittedly a dangerous source of analytical vigor. I was a young American boy living in Kwangju, capital of South Chulla province, during this time—fortunately, my Presbyterian missionary parents had not read the secret CIA document. Early one rainy season morning in 1962, my mother got me up to search our neighboring American doctor’s house for a stash of hwan cash. The doctor and his family were away but had rung up (that is the way the old phone system worked) to say he had a bunch of South Korean money that needed to be turned in; he just couldn’t remember exactly where it was, probably in his library. Exciting in a way I’ll never forget, I found the stash of cash, in cut-away books just like you see in spy novels. The bigger story, of course, and unknown to us at the time, was the change to the monetary system and to Korea’s economy that this currency reform signaled.  The initial phase was not completely successful; apparently not enough new won notes had been secretly printed in England and brought by ship to Korea, but within months the new cash had taken hold.  So if I was to make a point estimate, June 9, 1962 was the day that made modern South Korea. It should be a holiday. Everyone was given a few days to take their hwan money, at least up to a pretty high limit, and go down to the Cheil bank and exchange it for newly printed won notes at a 10-to-one ratio; after that hwan would be useless.  Larger amounts of money had to be deposited for a year at a high interest rate but most of the hwan was converted and prices changed accordingly.  And to encourage the public to deposit and save their new won, something like 20 percent annual interest rates were offered.  Even in days before calculators, I remember figuring out how fast the money would grow and how soon I could be a millionaire—forgetting the problem of inflation that this new policy was meant to address.

I wasn’t the only one thinking this way and very quickly South Koreans shifted from being just about the worst savers in the world to being the best. Poor people stopped spending on weddings and funerals and instead saved money, and the banks used these saved resources to lend to farmers to buy small tractors, assembled from kits made in Japan, revolutionizing agricultural productivity.

The tractor that replaced the cow. Park’s Memorial Museum, Seoul

Elimination of U.S. food aid, and government support to higher agricultural prices, as well as subsequent deals with Japan and the World Bank helped, but the driving force was a decent money and banking system that gave the right incentives to the Korean public to save and invest in the future. At least that is the way I have remembered and taught the story.

Textile workers support exports. Park’s Memorial Museum, Seoul

Eichengreen and the other authors, however, use the data to paint a slightly different picture.

“Domestic savings remained in the single digits (share of GDP) in the first half of the 1960s, the takeoff period. … The most dramatic change was, in fact, the rapid growth in exports. Exports at constant prices grew by 35 percent per annum from the end of 1963 to the end of 1969.[v]

The data shown in their text, however, are at five-year intervals so I question the interpretation of the leads and the lags.  Looking at annual household savings data, (graphic below) it seems that the savings growth kicked-in in 1962 and 1963, simultaneously with the money change and a year before exports began their upward spiral from a tiny base.[vi] Admittedly 5 percent household savings are not much but it is the change from nothing that arguably sparked Korea’s real revolution.

Household Savings Graph

As I say, a chicken and eggs argument. If my memory serves, it was human hair (wigs), plywood, and leather goods that started the export push, not products that required foreign investment.  But clearly Eichengreen is right about what happens next; general and soon-to-be “president for life” Park got on the export bandwagon and the rest is history. Export growth soared giving the economy a huge boost even as savings and investment rates rose, allowing the import of capital goods for South Korean industry.  Park’s most controversial policy was then to shift from light industrial exports, especially textiles and footwear, to heavy and chemical industry, despite what appeared to World Bank and U.S. economists as a comparative advantage in labor intensive products.  By now it would be hard to argue that Park wasn’t correct but, whatever the case, on the basis of this surge in investment, South Korea’s comparative advantage has shifted, for the time being, to heavy industry.  I say for the time being since China looms as a tough competitor in all of these products and is investing even more heavily than did Korea.  Another important step, as is hinted at in the old NIE, was Park’s creation of an objective and expert Economic Planning Board that supervised the creation and publication of data that his and subsequent governments could use as the road map and guide for economic policy making (and which makes possible our current analysis of what caused the economic takeoff).  The U.S. role was critical as well.  Despite missteps with respect to aid, the U.S., soon after liberation from Japan, had supervised the fundamental change in Korea from a tenant based agricultural economy to a capitalist one with massive land reform giving land to the tenants, and, of course, by providing the security shield that protected the country from the Communists.  While initially skeptical of the currency reform—U.S. officials had not been notified in advance even though the U.S. was financing about half of the South Korean budget—U.S. balance of payments support that followed allowed the new won to achieve credibility.

But the real genius of the Park administration, it seems to me, was those early courageous and risky steps in changing the money and using the change to create a sound currency and a high-interest banking system that encouraged savings and that recognized the high returns on capital if used only in high productivity endeavors.  Now seen as a textbook solution to be sure but one that must have been complicated and risky for the generals to manage. Subsequent Seoul governments have relied too much on banking and not enough on more efficient direct capital markets—stocks and bonds—but all of that is a different story, well told in Eichengreen.

The parallels to North Korea today are interesting and I would hope officials and scholars in Pyongyang are carefully studying Park’s success.  I say carefully since they tried something similar to the South Korean currency reform in 2009 but bungled it badly.   On paper what is known as the 2009 currency redenomination must have looked similar but with critical differences. Citizens were told to change about a third of their cash into a redenominated currency of the same name at a 100-1 ratio. That ratio doesn’t matter but the fact that only a small share of cash could be converted, and the absence of a name change, are important.  North Koreans immediately saw most of their money devalued by 99 percent over the span of a few days and naturally associate that disaster with the North Korean won notes.  It isn’t clear what was supposed to happen with their bank accounts but these were artificial anyway since cash can’t be withdrawn from a bank except with special permission—maybe like a 401k that never matures—and that policy has not changed.  By sharply reducing the money supply, the move might have been designed to bring black market prices down close to the fixed ration price levels and end the arbitrage that was and continues to destroy the planned, fixed price, economy.  That didn’t work since market prices immediately soared, leading to an even larger gap between official and market prices.

Whatever the reasons for the redenomination, it backfired—even strongly socialist PRC commentators called this a theft of the people’s money.  The Kim Jong-il government executed the party finance chief and, a first, offered an apology to the public.  But once done such a deal cannot be undone and North Korean won quickly became essentially worthless, with foreign money, U.S. dollars and RMB, seeping into the circulation in large amounts. Pyongyang by now has stabilized the won at prices significantly above the pre-2009 level but the foreign money circulates without impediment, an astonishing development in a so-called Marxist and “self-reliant” economy.  To hire a taxi, you now need something like two U.S. dollars.  To buy an apartment, you need $30,000 US.

In these respects, the situation now is probably not so different than South Korea in 1961.  At least a market now exists and the command economy seems to have lost some of its sting.  Entrepreneurs make dollars buying and selling in the street markets, and former (maybe current) officials and military officers might be hoping to make it big, using their government connections and licensing abilities to make millions of dollars by building apartment buildings and selling the flats, carefully keeping enough dollar cash handy to pay off the authorities.

In fact, it is interesting to think that the 1961 NIE might work well today, simply exchanging “North” for “South” Korea. Land reform that gives farmers’ ownership rights; stopping the inflow of disrupting foreign aid that discourages export development; and an export push all are within the capabilities of even a sanction-limited Pyongyang government. But most important is creating a money and banking system that allows the North Korean people to do their own saving and investing.  If Kim Jong-un wanted to link such a policy to his grandfather, all of this could be placed in a “juche” nationalist and self-reliance context.  Clearly, against the advice of many non-Koreans, Park Chung- hee managed to change South Korea from a beggar, aid-dependent country to a self-reliant lending and aid giving powerful and well-liked country.  One would think the young Kim would like to do the same. But before any of this can work, he needs to fix his rapidly dollarizing monetary system and adopt capitalist tools to raise savings and create private incentives to invest in the future. A decent bank and a decently positive real interest rate would do wonders.  And like Park, Kim might be able to use a little American and Japanese help to get this done.

So, where is the briefing book that we can give the young General that will properly explain what he needs to do?  I’m pretty sure the junta leader’s daughter can give the lecture.

William Brown is an Adjunct Professor at the Georgetown University School of Foreign Service and a Non-Resident Fellow at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photos courtesy of the author.

[i]  http://www.foia.cia.gov/sites/default/files/document_conversions/89801/DOC_0000661631.pdf

[ii]  ibid

[iv]  Barry Eichengreen, Wonhyuk Lim, Yung Chul Park, Dwight Perkins; The Korean Economy: From a Miraculous Past to a Sustainable Future,  Harvard Press, 2015

[v] Ibid. p. 64.

[vi] http://kosis.kr/eng/statisticsList/statisticsList_01List.jsp?vwcd=MT_ETITLE&parentId=L#SubCont

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Five Surprising Ways South Korea and the United States are Working Together

By Jenna Gibson

This week, South Korea became the first Asian country to sign a space cooperation pact with the United States, the first step for the two countries to collaborate on projects like Mars exploration, launching a moon lander, and expanding possible uses of the International Space Station. This announcement strengthens what is already a robust relationship between South Korea’s space program and NASA, which KEI has discussed extensively through our podcast and other research projects.

This announcement may come as a surprise to those who see the U.S.-Korea relationship mostly in terms of security cooperation. However, there are many arenas where the United States and South Korea work together outside of the military alliance. Here are five surprising places where these two countries collaborate.

 1.      Improving maternal and child health

The United States and South Korea have a long history of cooperation on development assistance, beginning with American help in the wake of the Korean War to South Korea’s entry into the donor community in the 1990. South Korea’s development assistance agency, which celebrated its 25th birthday recently, has close ties with USAID. A joint project launched in 2013 focuses on combatting maternal, newborn and child health concerns across sub-Saharan Africa. Another new project will look into ways to promote sustainable development in Southeast Asia through science and technology.

2.      Developing wireless charging technology for electric cars

A grant from the US Department of Energy is helping fund a project to develop wireless charging capabilities for electric vehicles. The Hyundai-Kia America Technical Center (based in Ann Arbor, Michigan) and American company Mojo Mobility are collaborating on the project, which aims to improve the speed and convenience of charging for electric vehicles.

3.      Curing cancer

In 2015, the Korean National Cancer Center signed an agreement with the U.S. National Institutes of Health to share information and work together on cancer treatment and prevention. According to the Korea Herald, “The NCC seeks to set up a database of medical records of its 1.2 million patients who have suffered or survived cancer. Once the database is complete, the NCC plans to analyze the ‘big data on cancer’ for preventive measures and post-recovery treatment of the disease.”

4.      Stopping wildlife traffickers

South Korea and the United States have been working on a range of environmental issues, from climate change to sustainable fishing. But one interesting area of collaboration is on wildlife preservation. According to a Work Program adopted by the two governments in 2013, they are working to “Improve collaboration and communication among judicial, law enforcement, customs, and border security personnel in seizing illegal shipments of wildlife products, investigating wildlife crime, prosecuting wildlife traffickers, and dismantling transnational organized criminal networks.” In a related field, the Work Plan also includes a provision to engage in information exchange and dialogue with the goal of fulfilling wildlife management responsibilities, with an emphasis on the preservation of waterbirds and their habitats, and the restoration of habitat. This includes birds that migrate between the United States and the Republic of Korea, and threatened and endangered species of birds.”

5.      Cooperating on nuclear energy technology

In 2015 the United States and South Korea signed a new nuclear cooperation agreement, or 123 Agreement to replace the original agreement that had been in place since 1984. The two countries have already began to cooperate on “shared objectives such as spent fuel management, assured fuel supply, promotion of cooperation between our nuclear industries, and nuclear security.” An extensive KEI report written last year by former Department of Energy and Department of State official Dr. Fred McGoldrick delves into the details of this new agreement.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from K putt’s photostream on flickr Creative Commons.

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About The Peninsula

The Peninsula blog is a project of the Korea Economic Institute. It is designed to provide a wide ranging forum for discussion of the foreign policy, economic, and social issues that impact the Korean peninsula. The views expressed on The Peninsula are those of the authors alone, and should not be taken to represent the views of either the editors or the Korea Economic Institute. For questions, comments, or to submit a post to The Peninsula, please contact us at ts@keia.org.