Comment on “North Korea: Sanctions, Engagement and Strategic Reorientation”

Abstract

The core questions addressed by Noland (2019) are how, and whether, engagement could foster market-orientation in the Democratic People's Republic of Korea (DPRK) and reduce direct state control over the country's economy. Noland presumes that the DPRK regime's objective is to obtain revenue with minimum changes to its internal practices and associated risks to political stability, and argues that the nature of engagement is important in inducing desired changes in the country. Noland highlights the modality of economic exchange in the Kaesong Industrial Complex (KIC), and analyzes whether the KCI model could serve as a means of transformative engagement. Through his analysis, Noland demonstrates that the labor practices in the KIC appear to be both exploitative and limit the extent the DPRK workers are exposed to new ways of organizing work, and concludes that it is unlikely to generate the desired changes. In order to encourage real institutional change, Noland concludes that the DPRK's partners must emphasize “more transformative approaches,” especially by means of introducing international norms and voluntary codes into the country. Otherwise, Noland assesses that the economic growth would merely enable the DPRK to achieve its status of “a de facto nuclear state.” In order to promote “effective transformative engagement,” Noland focuses on the means to expose DPRK workers to “new ways of organizing work.” To advance this argument further, it is also necessary to address the broad question of how the empowerment of workers could lead to real institutional changes in the country. As Babson (2019) notes, for the DPRK's economic growth, the regime would need to reform the economic system by embracing the role of markets, stimulating private initiative, and transforming international relations. The reformative measures include (but are not limited to) building institutions for legal and financial systems, trade and macroeconomic management; state-owned enterprise (SOE) reform; and shaping the economic leadership and core agencies as well as the role of the international financial institutions. Additionally, it should be noted that “animal spirits” among the empowered workers and entrepreneurs are an essential ingredient for any market growth. What options are available for external partners to affect such a reformative process? How can these countries help the empowered DPRK workers challenge state control over the economy and promote a desired realignment of the incumbent domestic coalition? These broader questions may deserve scrutiny as well. In this regard, experts are debating the extent to which the SOE reform since 2014 and the increasing level of private business activities could affect the DPRK's future economic development and relations with its external partners. Sakai (2018) argues that the DPRK regime does not intend to pursue a Chinese-style of economic reform and continues to oblige all DPRK citizens and entities to obey absolutely the “leadership,” while emphasizing the importance of “self-development spirit,” as opposed to international cooperation. Sakai offers a cautious view with regard to the opportunities for external partners to affect the DPRK's reformative process. To the contrary, Mimura (2017) highlights a possible window of opportunity to affect the DPRK's thinking about foreign partnership by focusing on the internal debate surrounding the new economic strategy since January 2018. Mimura observes that SOE autonomy is a key subject in the debate and focuses on the increasing autonomy for SOE managers, as opposed to the state planners, in making decisions on issues related to human resource management and production and sales of excess commodities. Babson (2019) also points to an increasingly blurred boundary between SOE and private business activities, referring to the emergence of successful entrepreneurs in both SOEs and private ventures. Babson recommends to explore options for enterprise organization models that would best support the DPRK's future economic development and relations with its partners. Such endeavor would complement Noland's proposal on the empowerment of DPRK workers. The DPRK's new line of economic policy is surely intended to secure the survival of the regime which would reject any external pressure if it felt threatened. The transformative engagement approach could succeed so long as the DPRK leadership became confident of its merits, which would likely require a prolonged period of adjustment, at a minimum. The DPRK's future decision to abandon its nuclear weapons, if it ever happens, would be affected by the regime's confidence in the security environment in which the economy is a crucial, but not necessarily the sole, factor. Political rapprochement is also another essential element in undertaking effective transformative engagement.