* This is my column in BusinessWorld last February 27, 2019.
The second Trump-Kim Summit in Vietnam this week, February 27-28, points to many good and optimistic scenarios not only for both US and N. Korea but also for the ASEAN, East Asia and the rest of the world.
The first Trump-Kim summit last June 2018 was held in Singapore. Mr. Kim Jong Un (KJU) and N. Korea officials saw there that even a small country with just 5.7M people, very poor until the early ‘60s when it was kicked out of the Malaysia federation, and no nukes but market-and globally-integrated can become so prosperous and politically-respected worldwide.
KJU went to Vietnam (VN) last Monday or two days before the summit and had talks with officials there. VN is indeed a perfect venue for the summit and for KJU to learn lessons for at least six reasons.
(1) VN is politically socialist, a one-party state but economically capitalist, (2) VN was very poor until 1975 when the devastating Vietnam War ended then managed to grow fast via market-oriented reforms like privatization of many state enterprises and trade liberalization, zero tariff with ASEAN neighbors, (3) VN was a former US enemy and later embraced the US as economic and military partner, (4) VN has no nukes yet politically secure, (5) VN is not far from Pyongyang, perhaps only 4 hours by plane, and (6) VN is an ASEAN member like Singapore, the association is 3rd biggest consumer bloc in the world (about 650M consumers) with many friends all over the world.
Let us go back a few decades and see what N. Korea has missed all these years by being a hermit-like economy. A mid-point 1995 is included below because that’s the year where (1) Vietnam normalized ties with the US, and (2) WTO was created that year and global trade has improved. Data are from the World Bank’s World Development Indicators (WDI) and the IMF’s World Economic Outlook (WEO) but both institutions do not have data for N. Korea. The multiples are computed from the GDP size (see table).
So what N.Korea missed: (1) Fast growth of S. Korea for 3.5 decades, economy expanded about 140x from 1960 to 1995, (2) From 1995 to 2010 or just 1.5 decades, China economy expanded 8.2x while VN economy expanded 5.4x, and (3) sustained growth until 2017, China and Vietnam economy expanded 2x in seven years.
So while N.Korea denuclearization will be the center of the Trump-Kim meeting, a second most important topic will be the transition of N. Korea to VN-like economy. And in the process, to reduce dependence from China which has growing toxic relations with many neighbors like Japan, Taiwan, S. Korea, India, Vietnam and Philippines.
Speaking of this topic, Stratbase-Albert del Rosario Institute (ADRi) organized a forum on “Corrosive Capital? The Political Economy of Chinese Foreign Investments in the Philippines” last week February 21 at the Tower Club, Makati. The speaker was Alvin Camba, a PhD Sociology candidate at Johns Hopkins University. Reactors were Dr. Rene de Castro of DLSU and myself.
Alvin said, “Current iterations of Chinese foreign capital is corrosive, bypasses and transforms pre-existing procedures, concentrates profits in specific groups, and strengthens and generates new patronage networks.”
I agree with that assessment. I cited the case of the Kaliwa Dam project, originally an integrated PPP but later converted to hybrid PPP by the Duterte administration upon the lobbying of China capital (China Eximbank) and contractors. Now Filipino taxpayers are indebted to China by at least P18B in this project alone when there should be no foreign loan if the original integrated PPP scheme was allowed.
I am not familiar how China companies, private and state-owned, deal with N. Korea enterprises but from various reports of how China’s Belt and Road Initiative (BRI) has trapped several poor countries to huge debt, it is safe to assume that N. Korea economy is controlled and restricted by China.
So a successful N. Korea transition to VN-like economy will see a good and promising outlook for the region and the world in at least three ways: (1) Soon Starbucks, McDonald’s, Marriott, Google, Apple and other American brands, also Toyota, Hyundai, Samsung and other Asian and global brands will be in N. Korea and its 26M consumers. (2) S. Korea with 51M consumers can then reduce its defense spending and use more public resources for inter-Korean industrialization, and (3) a N. Korea-ASEAN FTA may not be farfetched as KJU has become more familiar and comfortable with VN and Singapore.
BWorld 295, Growth and electric cooperatives, February 24, 2019
BWorld 296, Mandatory fare discount as socialistic policy, March 01, 2019
BWorld 297, The economics of coal, March 03, 2019