North Korea reportedly wants a 'Vietnam-like' debut to the world economy
Reuters/KCNA
North Korean leader Kim Jong Un reportedly wants to follow a "Vietnam-like" opening of the country's economy.
Some analysts doubt that's possible given the country's troubled economic past and nature of the Kim regime.
It's also unclear if and when the US will lift sanctions on Pyongyang, which has gone back on vows to denuclearize before.
Could North Korea's economy, the most isolated in the world, ever follow in the footsteps of Vietnam's? Even as Pyongyang warms up to the leader of the free world, some analysts doubt it.
Seoul-based Maeil Business Newspaper reported Kim Jong Un said during a private summit with South Korea that he saw a "Vietnam-like" opening of the country, probably referring to Hanoi in 1986. Vietnam's ruling communist party dropped collectivism to pursue a "socialist-oriented market economy," under which the country's GDP growth increased by an average of 3% per year over the next decade.
But the chances of North Korea successfully emulating the Vietnam model are "slim," according to a team of economists at Capital Economics led by Gareth Leather. They think even if the economy is opened up, foreign investors are likely to be very cautious as they remember previous financial ventures in North Korea.
A few examples: Korean companies that invested in the Mount Kumgang tourist region and the Kaesong industrial complex saw their assets frozen after bilateral relations soured. And a joint venture by Chinese mining company Xiyang to build a mine in North Korea was terminated less than a year after production began.
On top of that, experts say it's unlikely the North Korean dictator would allow his regime to shift in the way they sometimes do when an economy opens. One potential reason Kim sees Vietnam as a model, according to Leather, is that their ruling party achieved economic development while maintaining a firm grip on power. But this isn't always the case.
"There are examples of other countries in Asia, most notably Korea and Taiwan, where development and the opening of the economy to the outside world have played an important role behind the emergence of democratic movements," he said.
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There are a number of factors that Pyongyang could capitalize on through open borders, including its geographical position next to major economies like China and Japan and access to natural resources. The country sits on rich, largely untapped reserves of zinc, iron and some rare-earth metals often used in electronics.
But it's unclear if or when US sanctions against North Korea could be lifted. Economic penalties the US imposes on Pyongyang relate to proliferation and human rights violations, issues North Korea has gone back on with the US in previous agreements.
An agreement signed by President Donald Trump and Kim early Tuesday said North Korea will "work toward complete denuclearization," but it did not provide details on when or how.
The president later told reporters he'd halt US-South Korea joint military drills, which stunned both Seoul and Washington. US officials in South Korea had "received no updated guidance on the execution or cessation of training exercises," the Associated Press reports.
Trump said the two leaders touched on certain human rights abuses, but did not offer any further details, and the subject was absent from the statement and opening remarks. A White House spokesperson did not respond to a request for comment.
"As expected, the historic meeting between President Trump and North Korean leader Kim Jung Un produced photo ops and statements of goodwill, but is only the first step in a long road of negotiations," said Chris Zaccarelli of Independent Advisor Alliance, a Charlotte-based firm. "The lack of specifics from the meeting — including a lack of timelines — leave little to trade on and so the impact on markets from the summit has been negligible."
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