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DONG Yong-Sueng

Dropping from Terrorism Blacklist is Just a Start

DONG Yong-Sueng

Oct. 31, 2008

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On October 11, the US formally removed North Korea from its list of state sponsors of terrorism, ending a long diplomatic tug-of-war over how to reward Pyongyang's cooperation in dismantling its nuclear capabilities. In conjunction with the removal, North Korea no longer falls under the US Trading with the Enemy Act. That opens up possible economic exchanges between North Korea and the US as well as the two Koreas.

For example, rules will be eased for double-purpose items and strategic goods entering the North. Thus far, equipment and raw material needed at Gaeseong Industrial Complex and other North-South cooperation projects have been limited to labor-intensive usage since as simple assembly. With the lifted ban, exchanges involving capital and technology-intensive areas may be considered.

Still, it is too early to make rosy predictions. The Pyongyang regime seems to believe that it will have no difficulty gaining a seat at international organizations, and massive investment involving high-tech equipment will come to the regime. What it fails to realize is that the US action opens doors but at a price. It will be held up to global standards in deals and to qualify, the North must first enact reforms and open up its economy. In short, the “march of suffering” to improve external economic relations has just begun for the North.

To become a member of international bodies, North Korea cannot avoid reform issues because entry entails disclosure of policies and statistics, and changes in line with global standards. To attract foreign capital, the North will have to compete with the international community, breaking with its exclusive attitude over foreign capital, and this means actively opening doors. However, the regime is still strongly resistant to reform and opening. It even asked not to use those two words in inter-Korean summit on October 4, 2007. The previous South Korean administration went so far as to refrain from using the words. Not surprisingly, the regime unequivocally denounced the Lee administration's “Vision 3000: Denuclearization and Openness” goal for the Korean peninsula.

From now on, the North will stand at a crossroad where it has to make numerous choices. Companies that do business with the North will no longer take into account the extraordinary nature of the North. For example, they will not take it for granted that it is difficult to visit the regime or that they should be careful in mentioning the North. That is because they will demand the North to behave according to global standards. There should be no obstacles in visiting the North, and visitors should be able to go practically anywhere in the North. It is not that the North chooses somewhere to show but allows investors to see wherever they want to see. They should be allowed to open a letter of credit for authorization for payments. North Korean banks should restore credit rating in the international financial market.

Communication networks should be established for business partners to contact with each other anytime. In fact, the North is almost the only country where people have difficulty freely making phone calls. The North should also guarantee verifying reliability of statistics and field visits needed for business decision. Pyongyang should no longer be difficult to visit. The North should allow long-time stay or management activities in the North for business purposes. It should roll up its sleeves to accommodate foreign investment from all over the world, competing against other countries for capital.

To this end, the North absolutely needs to consider utilizing its southern counterpart. One of the main reasons that China succeeded in economic reforms was capital from overseas Chinese entrepreneurs, including that from Hong Kong. Moreover, Chinese government offered bigger benefits to overseas Chinese capital than to other foreign capital entering China. The North should give preferred treatment to capital from the South. By showing the world that business can be successful even in North Korea, it can produce effect of real economic development. The North is aiming to becoming an economic powerhouse by 2012. To be a true member of the international community, it should demonstrate higher competitiveness than others. The moment the North gives up its own extraordinary nature for itself, it will see tangible effects from its removal from the US terrorism blacklist.

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