Dilemmas of Trustpolitik

Stephan Haggard (PIIE) and Jaesung Ryu (East Asia Institute)
October 16, 2014 6:45 AM

Now that The Incheon Visit has come and gone, the politics of the upcoming North-South talks and what will be on offer will be front-and-center. We argued that the North has brought—and will bring—surprisingly little; simply holding talks will be framed as a concession worthy of some reciprocity. What is the thinking in the South?

First, the Park government appears to have made a decision to keep the border skirmishes in a larger strategic perspective. These took an escalatory turn this week as they moved from the ritualized—but nonetheless dangerous--exchanges on the Northern Limit Line to live fire along the DMZ itself. North Korean forces fired machine guns at propaganda balloons sent across the border by South Korean activists. Shells landed in the South, the ROK military responded in kind and the administration made the appropriate statements. But the balloons now give Pyongyang an exit option if anything does not go according to script; the North quickly floated a statement, although not official, that the balloons could be held in reserve as an excuse to scuttle the dialogue. Park clearly would like to move forward.

Second, the Park administration at least signaled that moving forward might entail a lifting of sanctions. This week, the Unification Preparatory Committee held its second plenum, where Park personally underscored her commitment to continue dialogue with Pyongyang and hinted at the change. You can view a video of the full proceedings here (in Korean)Hankyoreh quickly issued an editorial reflective of the opposition view that the lifting of sanctions is overdue.

We actually concur, but for somewhat different reasons. If the May 24th sanctions are lifted, they should be accompanied by a strict “separation of politics and economics,” as Kim Dae Jung called it, forcing firms outside Kaesong to make their own commercial judgments about interaction with the South. However, we are also skeptical about the ease of lifting these sanctions given that they were tied so directly to the unresolved issue of the Cheonan; that may prove a harder pill to swallow than is thought.

Third, there is ongoing thinking about how various forms of economic cooperation may be phased in (the English version of the plenum provides a summary; the Korean version has some more details). Simply put, the committee offered a three-stage process based on the degree of trust-building—from basic trust-building formation to maturation, and finally towards the establishment of full trust between North and South. During the formative period, inter-Korean economic cooperation would remain limited to smaller projects, then moving on to larger projects with the end objective of deeper economic integration.

To provide a concrete example, the committee considered a three-stage plan where one or two townships in North Korea were initially chosen to receive assistance not only including basics such as improving the water supply, but even extended to home improvements such as sanitation. The next step would scale up to target 10,000 households over an entire province. Finally, a full-fledged project would aim to provide assistance to 100,000 households over a 10 year horizon. The committee even came up with a budget plan where it would consider spending about KRW 9 billion (~$8.4 million) in the first stage rising to as much as KRW 9 trillion (~$8.4 billion) in the third stage. This is a staggering sum, but the committee suggested that with appropriate capacity-building, costs could be lowered.

Fourth, as part of the Park administration's Eurasia Initiative, the committee once again raised the prospect of connecting the Trans-Siberian Railway (TSR) through Rajin. Here, the committee expected the costs at about KRW1 trillion (~$930 million) but with the expectation that such infrastructure investment could lead to as much as a two percentage point increase in North Korea’s growth rate. Other large-scale projects floated include developing the Musan mine, agricultural cooperation with Russia, expansion of China's Chang-Ji-Tu project to Rason, reviving the Greater Tumen Initiative, and even establishing a Northeast Asian Development Bank; for our views on the latter, see an earlier piece on the idea of a Peace and Security Mechanism that raises pertinent doubts.

Finally, we were interested in a proposal to pilot a project at Kaesong providing maternal and child healthcare assistance. Earlier in the week, Marc Noland posted on how the North Koreans were likely to have reservations about such initiatives, but it is always worthwhile to keep standards at Kaesong on the front-burner.

Trustpolitik is a hard slog, and we applaud President Park for giving it a go. But North Korea’s policy toward the South currently seems as rudderless and unclear as the policies of the five parties toward the North. But those policy problems ultimately trace back to the North. How far and in what direction is Pyongyang willing to go?

Other Witness to Transformation posts on Trustpolitik can be found here.

(UPDATE: As this post was going to press, reports surfaced that the North and South held highly unusual military-to-military talks in Panmunjom on Wednesday, the first such talks in seven years. In deference to North Korean wishes, the agenda, names of the participants and even the staging of the meeting have not been officially confirmed. Although the agenda could be wider, two immediate incidents are possible triggers:the naval firing incident off the west coast, but more significantly North Korean anti-aircraft and machine gun fire at South Korean balloons carrying propaganda leaflets to the North.)

Comments

Roland

There is no need of a "prospect to connect the TSR with Rajin", because it´s done.
And look at the Chinese-Northkorean trade fair, which was opened today at Dandong. 2.000 (two thousand !!) Chinese companies taking part and 100 from North Korea.
South Korea is behind the curve and under a lot of pressure not to get sidelined completely.

shaggard

The South has two interests in Rason; to exploit it as a transshipment center; and to connect to the Trans-Siberian Railway to Europe. The latter has obviously not been done; the post has been corrected to read "connecting the Trans-Siberian Railway (TSR) through Rajin."

Roland

Stephan, of course it´s done. Rajin is connected with Vladivostok. That´s starting-/endpoint of one line of the TRS.
And next week you will see some more large scale investment projects finalized in Pyongyang with Russian partners.
Especially in railroad, power industrie, coal, agriculture

shaggard

Roland:
Talking past each other. Rason is of course connected; South Korea is not. The Eurasian policy of the Park administration is to ultimately have rail links from South Korea--not just Rason--to Europe via the Trans-Siberian. The Russians are doubling down on North Korea, including in infrastructure. Let's see how it pays out; I would honestly like to see it work.

Roland

Thanks Stephan.
Seoul government agreed using Rajin port in November for a first trial shipment of POSCO steel getting Russian coal. Coal arriving at Rajin port via the Transsib.
As soon as Japanese corporations are able to using Rajin as ice-free gateway to Europe, South Korean companies have to react. It will be a "must" to follow - or loosing competition against Japan.
Goods to Europe will be shipped from Japan and/or South Korea by ship to Rajin and loaded on trains.

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