9:49 AM, Jun 5, 2018 — A June 12 summit between US President Donald Trump and North Korean leader Kim Jong Un in Singapore is seen as a calculated gamble that could end almost seven decades of hostility that started with the Korean War in June 1950.
If successful, the summit could transform economics on the Korean Peninsula.
Some business-minded North Koreans already have ties to Singapore, however, where the iconic Marina Bay Sands Hotel fronts the dazzling Gardens on the Bay on land reclaimed from the sea.
Singapore citizen Geoffrey See, who studied at Wharton School — as did Trump — created the Choson Exchange in 2007, which has grown into a program that brings North Korean entrepreneurs to the wealthy city-state for “mini-MBAs” and holds practical business workshops on business planning in the hermit kingdom. The program also takes business owners on field trips to Malaysia and Vietnam.
See’s associate program manager Ian Bennett told MT Newswires that thousands of policymakers, entrepreneurs and business managers in North Korea eager to understand the mysteries of balance sheets, networking, business law and economics.
“We see huge entrepreneurial spirit in North Korea right out in the open,” Bennett said in a telephone call from his home base in London. “The days of hiding goods for sale under a blanket gone. The gray economy is very big now.”
The country faces UN-backed economic sanctions on imports and exports as well as financial transactions. The sanctions are effective in limiting trade in some areas, but arms shipments and commodities are still moved, Bennett said.
Banking and money transfers too are surprisingly easy and “quicker than Western Union” under a system of transfers where a call from North Korea to money changers worldwide gets cash to places from New York to Seoul, he said.
“It’s still largely a cash system dollars, euro and North Korean won and Chinese yuan – but it has efficiencies,” he said.
That’s a bit different than the picture painted in the CIA World Factbook that says North Korea’s economy had an estimated gross domestic product of $28 billion in 2013 for its 25 million citizens who have a per-capita income of $1,700.
“Since 2002, the government has allowed semi-private markets to begin selling a wider range of goods, allowing North Koreans to partially make up for diminished public distribution system rations,” the Factbook says. “It also implemented changes in the management process of communal farms in an effort to boost agricultural output.”
By contrast the 51 million people in South Korea have a $1.5 trillion GDP and a per-capita income of $39,400, making it a member of the Organization of Economic Cooperation and Development.
“There is a lot that needs to be fixed in North Korea, but economic sanctions and other controls have also sparked local products like electricity surge protectors that are surprisingly robust,” Bennett said. “There are a surprising number of such companies as there are mobile phones, point-of-sales transactions and technology despite a largely cash society.”
Initial public offerings on the Kospi, Hang Seng or the Shanghai Composite may be some ways off. But plenty of property and services firms in China, Singapore, Seoul and Hong Kong would rush to North Korea for planned cities with Shenzhen-listed Vanke and Singapore’s City Development regularly on the hunt for such mega projects in developing Asia.
Bennett said much of the infrastructure in North Korea is linked to the Japanese occupation of the Korean Peninsula in World War II. One way the country is trying to grow is by state-backed plans such as theWonsan-Kalma beach resort that’s now under construction “to make our people enjoy the highest civilization at the highest level,” Kim was quoted as saying by state-run news agency KCNA.
For his part, Trump said it’ll take work to make North Korea great again.
“North Korea has a chance to be a great country and it can’t be a country under these circumstances they are living right now,” he said in May. “I think they should seize the opportunity. His country would be very rich.”
Richard Koo, chief economist at the Nomura Research Institute in Singapore, however, said there’s skepticism about trusting the authoritarian regime in North Korea. Started by Kim Jong Un’s grandfather, Kim Il-Sung, and handed to son Kim Jong-Il under a cult of personality, North Korea operates an economic order known as juche (self-reliance). It is regularly cited for systemic human rights abuses, including the kidnapping of Japanese citizens and the death of US student Otto Warmbier.
But Koo said the grandson could be attempting to change the economic dynamic for the country in profound ways, which makes this summit particularly important, especially any perceived shift to influence by the US and regional players like Singapore.
“It really is high stakes,” Koo said in an interview. “China is certainly concerned about how far the younger Kim will go in talks with Trump. This could be an unprecedented diplomatic event.”
Still, China has its own aces in its Belt and Road Initiative to re-open the legendary Silk Road trading routes in greater Asia and its main backing of the Asian Infrastructure Investment Bank — a companion of sorts to the Japanese-backed Asian Development Bank for big regional development projects.
“China could bring a lot of money to bear on any major redevelopment of North Korea, taking the heat of South Korea to foot a costly aid effort that the US would be reluctant to spend too much on,” Bennett said. “More than a few companies in Asia, and elsewhere, would like to see that happen.”