Only Xi Jinping can help Kim Jong-un unlock a bright economic future for a denuclearised North Korea
- Given the Chinese president’s personal history and China’s pivotal role in North Korea’s economy, Xi is well placed to convince Kim that economic reform is his best option. A US$300 billion fund, financed mostly by China, could get the ball rolling
A prosperous, denuclearised North Korea, integrated with the world economy and ensured of spectacular economic growth would benefit all stakeholder nations, including the US. Survival of the regime – preventing the collapse of the North Korean state and resultant regional catastrophe – is consistent with the security interests of all members of the six-party talks: North Korea, South Korea, Japan, Russia, the US and, especially, China.
Kim is now faced with a choice: enact system reform and open up the economy, following in China’s footsteps, or watch his country dissolve into economic chaos and social instability, thus bringing on his own demise.
At this juncture, only North Korea’s closest ally is capable of providing Kim with the key to embracing economic reform without nuclear weapons, ensuring a bright future for the region for generations to come.
Chinese President Xi Jinping is exceptionally equipped to lead and facilitate North Korea’s transition from a closed, centralised system to an open, market-oriented economy because, unlike other world leaders, he understands the unique situation in which Kim now finds himself.
Once spurned by his own party and having borne witness to the horrors which were inflicted on members of his family, Xi has a concrete understanding of the many distortions of the communist system. This makes him uniquely qualified to provide counsel to Kim through the turbulence of system reform.
The very fact that Xi withstood harrowing repression to ultimately rise to the helm of the Communist Party serves as an excellent example to North Korea of the possibilities for prosperity that are well within reach.
North Korea needs a blueprint for economic development, as this is the only measure which can ensure domestic legitimacy and internal security
If China were to provide sufficient economic aid to stabilise North Korea in the shocks that would follow denuclearisation, Kim could take full advantage of the opportunity to reform the system, open up the economy and integrate it with the world economy, creating a new source of domestic legitimacy and ensuring internal security for the regime.
To control the shocks and instability instigated by reform and opening, a robust economic growth rate – an average of 10 per cent annually for a decade – must be achieved. To lay the groundwork for such rapid growth and radical reform of the system, sufficient funds are needed.
An economic development fund, extending US$30 billion per year across the 10-year period, a total of US$300 billion, must be provided and allocated towards the development of infrastructure, human resources and institution building.
As a nation that stands to benefit enormously from a prosperous North Korea, China must supply the bulk of this fund, while securing considerable participation from South Korea and the support of the other stakeholder nations. Any economic package deal, however, must be preceded by a paradigm shift on the regime’s part – only then can tangible reform and opening up take place.
Openness is critical to achieving sustainable economic modernisation, the main purpose being to attract foreign investment, which allows for creating employment, acquiring foreign currency through export promotion, exchanging and transferring knowledge, and acquiring technology and experience for modern enterprise management.
North Korea should to initiate what Hungarian economist Janos Kornai defines as “reform of the system” – as opposed to attempting “reforms within the system” that do not challenge the socialist ideology – so as to eliminate fundamental defects and inherent contradictions.
The core of the reform of North Korea’s socialist system is the privatisation of state-owned means of production, the liberalisation of the labour market, freedom of economic activities, and the formation of autonomous prices according to supply and demand.
It should also include legalisation of private market operations, estimated to account for more than 60 per cent of GDP, and the opening of commercial banks to replace today’s illegitimate moneylending operations by the entrepreneurial donju or “master of money” class.
Kim’s legitimacy will then no longer stem from the self-reliant Juche socialist ideology promoted by Kim Il-sung, but will be cemented through the building of an affluent welfare society, substantial system reform and spectacular growth.
No degree of external security can guarantee Kim’s security and legitimacy. Staring down impending famine and unrelenting economic sanctions, Kim must decide which way to turn: towards economic crisis, humanitarian calamity and ultimate illegitimacy, or towards reformation of the system and the establishment of permanent prosperity.
To follow in the footsteps of its closest ally, North Korea needs a blueprint for economic development, as this is the only measure which can ensure domestic legitimacy and internal security – and Xi is the only head of state who holds the key to unlocking this path.
Dr Chan Young Bang is president of KIMEP University, principal investigator at the DPRK Strategic Research Centre, and a former economic adviser to the former president of Kazakhstan Nursultan Nazarbayev. This is an edited and abridged version of his keynote speech at the Chinese Academy of Social Science forum, “Cooperation in Northeast Asia Under New Circumstances”, on April 29
