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North Korea

Resolve the North Korea standoff with economic cooperation and everyone is a winner

Anthony Rowley says the flurry of summits between Kim Jong-un and other world leaders means there is an opportunity to revive economic cooperation in the region, with all players standing to benefit

PUBLISHED : Wednesday, 04 April, 2018, 5:07pm
UPDATED : Wednesday, 04 April, 2018, 9:25pm

Who is winning the new “great game” on the Korean peninsula – North Korean leader Kim Jong-un with his nuclear diplomacy, South Korean President Moon Jae-in with his “sunshine policy”, US President Donald Trump with his scare tactics, Chinese President Xi Jinping with his carrot and stick approach or Japanese Prime Minister Shinzo Abe with his focus on finance?

Political analysts are indulging in speculation as to who is outsmarting whom in the competition to find a solution to the decades-old Korea problem. Yet the ultimate winner (if there is one) will be none of them individually but all collectively.

If ever there were a win-win situation, it would be the promised birth of a new economic zone in Northeast Asia in the wake of the current flurry of diplomatic activity. Even if no dramatic breakthrough is achieved, reverting to the status quo is unlikely given the changing balance of power in East Asia.

The Trump-Kim summit scheduled for May could fail – or not take place at all – resulting in a renewal of tensions and limiting the chances of a meeting between Kim and Abe. These would be serious setbacks but Trump seems anxious to declare a “done deal” and may well compromise on the nuclear disarmament issue, forcing Japan to do likewise.

Relations, meanwhile, between North and South Korea appear set for several years of improvement (unless Moon is replaced in South Korea’s often volatile political environment), and both Moon and Kim appear to have mended fences with Xi’s China. Against this backdrop, it is not too optimistic to see light in the Eastern sky if not yet a full dawn.

This light could reveal unseen implications in recent events. The North Korea issue is usually viewed in terms of security, and whether Northeast Asia can live with a rogue state that could precipitate a nuclear confrontation, or a collapse sending floods of refugees into the region. The economic dimensions are often overlooked and yet are potentially huge.

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Northeast Asia (defined to include China’s northeastern provinces, the two Koreas, Japan, Mongolia and the Russian Far East) is a neglected area in terms of cooperation for economic development compared with Southeast Asia. It is not accorded the same attention, for example, that the Mekong Delta enjoys, nor does it have its own subregional organisation such as Asean.

This is partly a result of political differences that have long divided the countries in Northeast Asia (making it possible for outside powers to “divide and rule”), and also because some of these nations have relatively recently become members of multilateral institutions.

North Korea is only part of the story. The challenge of developing the rest of what Stanley Katz, the former Asian Development Bank vice-president, once termed the “last major economic frontier” of the Asian continent is huge, as are the obstacles to such development. Russia’s dispute with Japan over the four “northern islands” is one example and territorial disputes also embroil China and Japan, and South Korea and Japan, to name a few.

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Also, problems of divergent ideologies within the region explain why cooperation has been so difficult for so long, as noted by Zhang Yunfang, former head of a research centre within China’s State Council, while former Kyoto University professor Takao Fukuchi observed that “only Northeast Asia lacks a clear picture for its development”.

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Formidable though the obstacles to development are, they appear well worth overcoming. Given its resource complementarities, Northeast Asia is a “natural economic territory”, as Katz suggested. As the Northeast Asian economy is developed, it will “contribute significantly to Asia’s value-added chains, and become a participant in world trade and industry”, he noted.

Development of transport linkages is essential. Lack of adequate port, railway and highway systems presently hinders the ability of the region to exploit its natural resource base (oil and natural gas, metallic minerals, timber and other commodities) for manufacturing industries. Barriers to free movement of people, caused by transport deficiencies and administrative obstacles hinder economic development and tourism.

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Efforts to realise the economic potential of the region have been under way for several decades at a non-governmental level. The Northeast Asia Economic Forum was created in 1991 to “sponsor and facilitate research, networking and dialogue relevant to the economic and social development of Northeast Asia”. It brought together some 40 institutions from China, North and South Korea, Japan, Mongolia, the Russian Federation and the ADB, World Bank, the United Nations Development Programme (UNDP), and others.

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Predating the Northeast Asia Economic Forum, the foundations for cooperation were laid in 1988 by a group of Asian statesmen whose initiatives have not been matched since. The late Japanese minister of foreign mffairs, Saburo Okita, and Lee-Jay Cho, an adviser to several Asian governments, sought to bring together the nations of the Japan Sea Rim at a time when China’s state science and technology commission (now the Ministry of Science and Technology) was considering development of the Tumen River basin which is bordered by China, North Korea and Russia. The UNDP undertook studies of the Tumen River Area Development Programme.

Overcoming the development problems will, of course, cost money – lots of it – and that is why a recent meeting between Asian Development Bank president Takehiko Nakao and South Korea’s president in Seoul is significant. The ADB (along with the World Bank and Asian Infrastructure Investment Bank) is a possible source of funds for exploiting the potential that could be unleashed in Northeast Asia by settlement of the Korea issue.

Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs