Why North Korea’s pursuit of foreign investment could loosen Kim’s grip on power

January 7, 2013
January 7, 2013

In a bid to revitalize his country’s moribund economy, North Korean leader Kim Jong-un wants to ramp up foreign investment. This should be cause for celebration among the long-suffering North Koreans—but is it a good move for Kim? Considering that foreign money and capitalist enterprise directly contradict “self-reliance,” the founding tenet of the North Korean state, the country’s young dictator’s strategy might be a dicier idea than he realizes.

Of course, Pyongyang has cautiously allowed a small amount of international investment in the past. But Kim now looks to be planning an economic overhaul geared toward attracting foreign capital, tapping German expertise to lay the groundwork for that influx, according to German media. This marks the latest sign that Kim is extending experiments with global trade that picked up at the end of the tenure of his late father, Kim Jong-il. As of a year ago, around 30 European companies had invested in North Korea, Businessweek reported. And after years of inertia in the Rason special economic zone, which borders China and Russia, which Kim Jong-il established two decades ago, a paved road has finally been completed. Now a flurry of new activity surrounds the long-stalled project, which even has a Hong Kong-funded casino.

However, all this promising business contradicts the theory of economic self-reliance that underpins Pyongyang’s hardline nationalism. Known as “juche,” it was one of Kim Il-sung’s philosophical cornerstones, and the state has promoted the concept in conferences and study sessions since the 1950s. Under the guiding principles of “rejecting dependence on others,” as this paper (pdf) in the Stanford Journal of East Asian Affairs put it, North Koreans have long been told that capitalism and global trade are abominations. The Pyongyang regime has “successfully wielded the juche idea as a political shibboleth to evoke a fiercely nationalistic drive for North Korean independence and to justify policies of self-reliance and self-denial in the face of famine and economic stagnation,” according to the Stanford Journal essay. And given the absence of any competing information in the tightly controlled country, the North Korean people are largely thought to have accepted this.

Though his enthusiasm for foreign investment might suggest a flexible interpretation of juche, Kim hasn’t permitted the same open-mindedness among his people. In fact, the ruling family’s juche stance has strengthened as Kim prepared to replace his father, said Victor Cha, a North Korea expert at the Center for Strategic and International Studies, in a March 2011 testimony (pdf) to the US house of representatives. “The ideology which accompanies Kim Jong-un’s rise appears to look backwards rather than forwards,” Cha said. “[Pyongyang is, more than ever, promoting] the conservative and hardline ‘juche‘ (self reliance) ideology of the 1950s and 1960s—harkening back to a day when the North was doing well relative to a new richer and democratic South.”

Cha concludes that this “leaves no room for opening.” If so, it’s unclear whether Kim Jong-un’s regime could survive the crumbling of its ideological justification, particularly as the country’s hungry population has few other reasons reasons for conviction in the state’s legitimacy and competence.

But Kim’s grip on power might be secure in the short term, considering the amount of work it will take to overcome North Korea’s lousy track record for attracting and retaining foreign investment. The country experimented with global trade briefly in the early 1970s, but when Pyongyang defaulted on its debts to Japanese and Western banks, it achieved economic pariah status (report, pdf. p.2) that narrowed the list of willing economic partners to the Soviet states and China. Following the collapse of the Soviet regime, China has been its main trading partner. (Intriguingly, the German media reports suggest that Kim hopes to adopt the “Vietnamese model”—meaning, investing in companies—as opposed to the Chinese development strategy that channelled funds to special economic zones.)

But even that relationship hasn’t been free of strife. Take Xiyang Group, a giant Chinese mining conglomerates, which became one of North Korea’s biggest investors back in 2007. The deal concerning an iron ore treatment plant in North Korea is now in tatters. Xiyang has claimed North Korean officials only allowed it to operate long enough to steal its knowledge, before sabotaging its project and seizing its mine. North Korea, meanwhile, maintains Xiyang did not fulfill its side of an investment agreement.

In addition to its credibility problems, North Korea suffers from some sizable logistical hurdles to attracting foreign investment. The impoverished state lacks reliable electricity, has decrepit infrastructure and does not offer internet access. Plus, foreigners cannot travel in and out freely.

Still another formidable challenge to bringing in foreign capital are the international sanctions against North Korea. If Kim does intend to push hard for global investment, he’ll need to get the US and other countries to lift sanctions—much the way the US recently did for Myanmar after that country implemented democratic reforms. Perhaps a sign of whether Kim hopes to follow Myanmar’s path in opening widely to foreign investment will be if he loosens his regime’s grip on his peoples’ minds. And he might soon get an opportunity: Google chairman Eric Schmidt reportedly plans to visit North Korea soon, and while Google has not given reasons for the trip, it is possible Schmidt may try to convince Kim to relax restrictions on access to the internet. (At the moment, only top Pyongyang officials are permitted to use the web.)

But reasons why North Korea will not soon become the next Myanmar abound. For example, in Myanmar, the military junta that governed the country for decades ceded power to a semi-civilian government—something not likely to happen in North Korea any time soon. Plus, unlike Myanmar’s leader, Thein Sein, Kim Jong-un is not a new broom in Pyongyang—he is a member of a dictatorial dynasty.

Regardless of how he goes about it, though, Kim seems bent on bringing in outside capital, and, as the economy and society become increasingly open, it will become ever-more difficult for Kim to publicly break with juche while making the case for his dictatorship. After all, doing so would remove the justification for the policies that have starved the people and the economy since the 1950s—and that would happen at the same time as growing exposure to the outside world showed North Koreans the sort of prosperity they had been missing out on.

There is a chance that, having managed so far to heavily control the nation’s minds, Pyongyang could convince North Koreans that juche and foreign investment do not actually conflict. It is hard to overestimate the level of thought control the regime has already achieved. North Koreans have been remarkably isolated for decades, and isolation is a key technique used by, for example, religious cults. It’s conceivable, therefore, that Kim could pull off the downplaying or redefining of juche on the strength of his ideological authority alone.

But as this columnist argues, North Koreans may not be as “brainwashed” as many assume. Instead, people may simply have learned, through fear, to act as if they love the regime and believe what it says wholeheartedly. The tears they shed when Kim Jong-il passed away may well have been of the crocodile variety. Maybe not, maybe so—the country is so closed off that no one can ask any actual North Koreans. What will happen, though, when they can? Courting foreign investment in North Korea will necessitate exploring the answer—putting the scion of a dictatorial dynasty in a tough position indeed.

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