A gradually change in theeconomic situation and emergence of a nascent market systems in North Korea could hold the key to improving inter-Korean relations, a senior official at South Korea’s Ministry of Unification said on Wednesday.
The remarks, coming as US President Donald Trump's swing through Asia turns investor focus to the Korean Peninsula, offers an optimistic note at a time of concern about Pyongyang's nuclear programme.
“North Korea is a socialist country and adopts a planned economy, but we are seeing signs that free market forces are gradually playing a bigger role in the North Korean society,” said Oh Choong Suk, director of the international cooperation division at the Ministry of Unification. “In the long-term, this will be beneficial to improving our relations because this forms the basis of potential economic cooperation.”
Oh was referring specifically to as many as 450 market places that have been set up in the North Korean community over the past few years, indicating that market forces are gradually changing the everyday lives in the North. According to South Korean intelligence, more than 80% of daily consumer goods can be purchased through these free markets.
“These markets are not officially accepted by the North Korean regime, but there is no sign that the authority is clamping down on them,” Oh explained, seeing this as a signal that Pyongyang may be gradually accepting changes to its market structure.
These gradual market changes could be one of the drivers for the South, under a new left-leaning government, and the North to restart economic cooperation following the closure of Kaesong Industrial Complex in February last year.
The industrial zone, located just across the demilitarised zone from South Korea, had been the only venue for economic cooperation across the Korean peninsula since it was established in 2004. It allowed more than 130 South Korean companies to employ some 53,000 North Koreans at an average monthly cost of $130 per worker, or about one-tenth of South Korea’s national minimum wage.
Work at the Kaesong Industrial Complex was suspended in February 2016 amid heightened tensions resulting from the development of nuclear weapons in the North.
Oh believes that the existence of these black markets show that the North’s directed economy may not be working as good as planned, potentially allowing Seoul to enter into economic cooperation once the geopolitical tension is eased.
Game-changers
One of Seoul’s inter-Korean economic initiatives is building an environmental and tourism belt along the demilitarised zone between the two Koreas. In the longer term, South Korea also wants to develop an energy and resource belt towards the east of the Korean peninsula, and an industry and logistics belt towards the west.
Separately, Oh believes the forthcoming Pyeongchang Winter Olympics – scheduled for February 9 to 25 next year in the South – could be a game-changer for diplomatic relations in the Korean peninsula as North Korean athletes have been invited to join. Pyongyang has yet to respond to the invitation, according to Oh, but any acceptance could potentially cool off the tensions.
At the same time, Seoul has proposed humanitarian aid worth $800 million to North Korea through UNICEF and United Nations’ World Food Programme, hoping to push forward civilian exchange with the North without undermining international sanctions on Pyongyang.
Oh was speaking at the Invest Korea Week in Seoul on Wednesday, a day after Trump met new South Korean president Moon Jae-in in Seoul. The US president urged North Korean leader Kim Jong-un to return to the negotiating table and restore inter-Korean dialogue after a 21-month hiatus.
