3Ps of Japan & North Korea Negotiation – Process, Price & Priorities`

Following Foreign Ministry talks in Sweden, North Korea has agreed to reinvestigate the cases of Japanese abductees, and Japan has pledged to remove some sanctions and offer humanitarian aid conditional on progress on the issue. While official talks were only announced on March 20, you can be sure that Japanese negotiators have been steadily working on the issue for the last 2 years ever since Shinzo Abe assumed the Premiership (and maybe even before). It also seems that Japan has been waiting for North Korea’s intelligence arm (Ministry of State Security) to reach out, to be assured that North Korean negotiators in Sweden have the authority to conclude a deal.

Given that the Japanese have been trying to untangle this issue for more than a decade, what continues to stand in the way, and why are things moving now? 3 Ps are important in understanding the issue:

Process

The last visit fell apart when Kim Jong Il admitted that kidnappings happened, apologized and offered to allow some of the abductees to visit their relatives (being assured that they would return to North Korea). The abductees never returned, and among the remaining abductees that North Korea admitted to, North Korea claimed that they had passed away. The Japanese public rejected the deal with North Korea, and both Koizumi and Kim Jong Il walked away from a failed process. Both sides took significant risks to make a deal happen. For North Korea, the admission splintered their supporters in Japan.

Both sides recognize that the next deal has to be the last deal on the issue, in that the Japanese public has to be certain that all abductees are accounted for, or the negotiations will collapse again. This is not a trivial obstacle. First, there is the question of verifying and confirming if the abductees claimed to be dead are truly dead. Second, there is no agreement on both sides on the true number of abductees. Third, it has to be assumed that any abductees (and their families) must be given the option of moving to Japan.

To placate the Japanese public, a process has to be created to ensure that the issue is addressed conclusively. There might even be a need on both sides for an ‘honest broker’ who can mediate between rival claims. As yet, neither side has seen the need to draw in a third party. Internally, North Korea will run up against vested interests in its investigation, as people could be made to assume responsibility for the kidnappings. Or maybe they could just lay that responsibility on some recently deceased uncle…

Price

North Korea seeks reparations for its colonization by Japan. In the case of South Korea, Japan has paid reparations for its colonization period. While both sides dance around the amount, using a mix of principles and figures raised in past negotiations in their arguments, this will at the end of the day be a realistic and necessary lever to get North Korea to agree to a resolution on the abduction issue.

For a North Korea beginning to think more about economic development, Japanese aid and investment is critical. Rapprochement with Japan could also pressure South Korea to engage more with North Korea. In fact, North Korea’s significant state investment in tourism facilities in Kangwon province (think Wonsan beach resorts, Sinphyong, Masikryong ski resort…etc.) seem strategically positioned to attract Japanese and South Korean tourists in the event of rapprochement. Perhaps a Japan-DPRK summit in Kangwon province (Masikryong or Wonsan), could be a good way to kick-off a potential epicenter of DPRK-Japanese grassroots and economic interactions in the future.

Priorities

Why are things moving under Shinzo Abe? Aside from the stability of his government, Shinzo Abe has been at the forefront of the abductee issue for more than a decade. Traditionally, abductions, North Korea’s missile program, and nuclear program, form an unholy trinity of obstacles between Japan and North Korea. Abe’s personal identification with the abductions, and drive to resolve it, has pushed abductions ahead of other DPRK-Japan issues.

For Japan, putting all three issues on the same level does not make sense, as the missile and nuclear issues cannot be solved bilaterally without US and South Korea at the table;  both allies have at times considered Japan’s obsession with abductees an idiosyncratic or at least peripheral complication in past negotiations. At the same time, there could be constituents in Japan who worry about how a bilateral deal deprioritizing the nuclear and missile program could affect the US-Japan alliance.

Politically, its clear how there is an opening for North Korea with regards to Japan. What is more opaque is how and whether domestic politics in North Korea is creating a reciprocal opening for Japan in North Korea. Either way, a deal can be in both countries’ interests, and more broadly beneficial to regional peace and security. 

Overheard at SEZ workshop: "People are here to learn"

Someone explain to me who put the windmills in Suzhou Industrial Park?

Last month, we ran a workshop on Special Economic Zones in Wonsan, with people from 5 provinces attending. Workshop leaders were practitioners, focusing on the nuts and bolts from an investor perspective, rather than on academic theories on SEZs. One such practitioner, a British with over 15 years of experience investing in North Korea, shared Singapore’s experience developing the Suzhou Industrial Park (SIP) in China. He was a big fan of the project, and called it the “go-to place for businesses looking to set up in China.” He also spent considerable time explaining Irish SEZs, which he also recommended as another model for North Korea to study.

The $30B SIP generated significant controversy in Singapore in its early years. Local Chinese officials undermined the project by building a competing park next door. From a financial point of view, the project lost money in its early years. But as a special zone, it established its reputation as a good location for businesses.

Perhaps in Singapore, lessons from this experience laid the foundation for future projects. The experience definitely did not deter Singapore from getting involved in developing a string of industrial parks, high-tech zones and other SEZ-type projects in India, Vietnam and China. SIP is more relevant to North Korea than Shenzhen, given that the sizes of the proposed SEZ corresponds more to an industrial park than to an entire region.

Singapore’s experience from these projects will be highly relevant as North Korea continues to focus on developing its SEZs. A Singaporean friend who visited North Korea in 2009 mentioned how the government officials he met had studied SIP and quizzed him about Singapore's experience developing it. It is this practical knowledge, good managers, and strong political support that is very much needed to ensure SEZs in North Korea stand a chance of taking off.

We hope to see more efforts by North Koreans to send their SEZ managers overseas for extended training and research and would like to support them in doing so. We have often pressed our partners on the need for DPRK policymakers to focus not just on the short-term, but understandably urgent, goal of attracting investments, but also on laying a proper foundation by ensuring that their managers are well-equipped with international knowledge and experiences. Frequently, we fail to recruit the best managers for long-term scholarships, as their organizations need them for more immediate projects. At the national level, we have yet to see significant efforts made to ensure the process for sending people abroad for programs is more easy, efficient or transparent.

And the best part of the workshop last month? A workshop leader who was terribly cynical about the SEZ effort felt he was self-censoring. He did not think the investment conditions or infrastructure was anywhere near ready for foreigners, but did not want to be brutally honest. We brought his concerns to a young Korean partner, who told us that workshop leaders should be direct and honest in replying to questions. “People are here to learn,” he said.

Update: Calvin, our resident urban planning expert, adds:

The main learning points for SIP are strong leadership, good management, strategic implementation in phases. Physical scale wise, SIP is almost a city / region actually, much larger than other typical industrial parks developed by Singapore and even Kaesong.

SIP: 8000ha

Bintan: 270ha

Wuxi: 340ha

Batam: 320ha

Kaesong: 300ha approx.

Calvin previously wrote a post comparing Rason and SIP.

News and Pyongyang's Middle Class

In our last post, we dated a propaganda shift to 2012, but, after further thought, we wonder if perhaps 2009 is another notable moment related to the coverage this tragic building collapse. That might be the first time that decision-makers realized that Pyongyang's citizens needed to be kept (somewhat) in the loop and that policies need to keep them happy - having the last functioning remnants of the PDS isn't good enough. The needs and aspirations of Pyongyangers now needs to be taken into account. There is a feedback mechanism through which their opinions filter upwards fairly quickly and the authorities need to decide how to respond to public opinion - especially the opinions of Pyongyangers - on particular issues.

This release of information about the collapse , vague and delayed though it was, reflects that awareness on behalf of the leadership. This understanding was birthed in the firey rage of the Pyongyang middle class that felt betrayed in 2009 after the sudden currency reform seriously damaged the savings of so many people. Pyongchon is central Pyongyang, they can't be aloof, especially on something so symbolic: housing is one thing that the central government still supplies and controls, despite an emerging property market.

Remember, five days is pretty rapid for the North Korean system. Once they realized that they needed to control the narrative on an event that is clearly going to get around not only town, but the countryside as well, they did take action. The article took five days to come out, once the preliminary story was set, though it wasn't front page news and they don't appear to be following up in the media. The story doesn't appear to have made an appearance on TV.

Regardless, the authorities want gossipers to be saying, "they've done a really good job fixing this tragedy." Their messaging, not just from this weekend, but in the days and weeks going forward will be interesting to watch.

Will there be ongoing coverage of firings of officials and heroic rescuer's tales? Will Kim Jong Un visit and show the human touch that has characterized his public image? Will they decide they don't know what to do about it and leave it at a single news release?  

Don't be surprised if any of those things happen - the authorities will be keeping an ear to the ground, no doubt, deciding how the message should evolve. Though perhaps we shouldn't read too much into it if there isn't much more coverage - our news environment has conditioned us to expect wall-to-wall coverage. North Koreans don't have the same expectations, even the middle class, with their TVs and tablets.

Phyongchon-gate and what it means for North Korean propaganda

North Korea’s state media, Rodong Sinmun, recently reported on “a serious accident in the construction site in Phyongchon District, Pyongyang on May 13,” and on subsequent rescue operations. Senior public officials were cited by name and took responsibility for the accident. This article (or “Phyongchon-gate”) is unusual in that North Korea media rarely reports publicly on errors attributed to the government. Even more rarely has it publicly attributed these errors to specific government officials.

Some commentators link this to an attempt by North Korea to contrast its efforts against South Korea’s Sewol Ferry Disaster, while others claimed that North Korea couldn’t hide the accident from foreigners, and needed to seize the media initiative. Of course, the fact that the accident happened on May 13 (5 days earlier), and is only known to global media through North Korea’s announcement, calls into question the latter claim.

Instead, people are missing out on broad shifts in North Korean propaganda over the last 3 years. The propaganda narrative, and this specific Phyongchon-gate article, captures fairly dramatic shifts in the context of State-Grassroots relations in the country. Accidents and mistakes do happen in North Korea, as in any other country, but have traditionally been glossed over in domestic media. In the past, problems highlighted in public media were attributed to foreign causes (e.g. saboteurs, spies and sanctions) or natural disasters (e.g. droughts). Phyongchon-gate reflects a new propaganda style, where the government acknowledges a mistake, have senior-level officials or party cadres assume responsibility, and highlight corrective measures.

This shift started in 2012, when North Korea publicly admitted that its attempted rocket launch in April did not succeed. North Korea mentioned at that time that its scientists were assessing what caused the failure. Kim Jong Un followed up on this narrative when he castigated officials for failing to properly maintain Mangyongdae funfair in May that year, pointing to the funfair’s dilapidated state, even pulling weeds from the ground himself. Last month, Kim Jong Un during a military exercise, “severely criticized the [artillery] sub-unit for failing to make good combat preparations.” It is the public nature of such criticism and the blame attributed to government officials that should draw our attention.

Phyongchon-gate and similar stories reflect a government trying to portray itself as accountable and responsive to its grassroots. The top leadership acknowledges public concerns, and shows that it is standing with the grassroots by holding middle- or senior-level management responsible. This message is not just reactive. It is also proactive. Economic development is an area where the leadership is assuming responsibility for progress, by saying it is possible despite sanctions. In the past, sanctions were blamed for a stalled economy. This style also appears to have filtered down to the grassroots. Younger participants in Choson Exchange's workshops ask us to be more blunt with our advice on economic or business issues, even though they might reject or argue with our criticisms.

Skeptics might argue that this propaganda shift is a belated acknowledgment of a richer information environment in which the government has to defuse potential public dissatisfaction by taking the initiative, and that the shift is focused more on optics than action. A more hopeful assessment includes rising government accountability, tied to a shift in the basis of political legitimacy to government performance. We highlighted the shifting basis of legitimacy back in 2011 in the Harvard International Review, focusing on economic performance.

North Korea is changing its public image, domestically, and this approach is a defining trait of the new leadership team under Kim Jong Un.

Patronage Post-Jang

Author/poet Jang Jin-Sung has been splashed across the media this past week as his new book, "Dear Leader", has just come out in English. Meanwhile, over at New Focus International, he has a post from a couple weeks ago about government appropriation, distribution and...well, a whole bunch of things - it kind of meanders around like an off-the-cuff lecture from an aging professor. But near the bottom of the ironically unfocused post is an interesting nugget:

"But above all, in the wake of Jang Song-thaek’s execution, the mood has remained savage; and cadres consequently have not had the stability and confidence to extort bribes the way they have done before."

This at first seems like a good thing. Less corruption is good, right? Well, not necessarily. You will have heard this case made already if you're a fan of Ha Joon Chang, an overseas compatriot (to use a very North Korean phrase) and Cambridge reader in Economics (to use a very British phrase). In his 2007 book, Bad Samaritans, he argues that corruption is not inherently bad for economic growth, unless the money taken in bribes is not invested productively in the economy. Bribery can also sometimes "enhance the efficiency of an over-regulated economy by reintroducing market forces" (p.150), allowing productive businesses to get moving when otherwise they would bog down in red tape. The related question Chang brings up is, "what would have been done with the money had there been no corruption"?

The DPRK has, officially, no private sector at all and is perhaps the definitive over-regulated economy. In reality, an increasingly vibrant grey market exists because reports indicate that officials can be convinced to look the other way or actively facilitate market activities if they benefit from the actions. This greasing of the wheels is what allows North Korean businesses to run and has driven tremendous social change in the last decade.

If post-Jang officials are scared and there has been a disruption in established patronage channels, this temporary paralysis could cut both ways. It could either turn into: 

a) an opportunity for Kim Jong Un to consolidate influence over key enterprises and make sure they invest profits into areas that go towards the national good, as he sees it. This would be not dissimilar to what Park Chung-hee, his Granddad's rival and pops of the current ROK President, did in the South. Key officials would still get enriched, but would be on notice that their wealth is subordinate to the concerns of the state. 

b) some of the efficiencies created by patronage channels being reduced, stalling economic growth. Businesses will find it more difficult to get permission to produce products, move goods or make other decisions. Eventually over time, pathways of patronage will probably re-emerge and look the same as they once did, though profits may end up with different patrons along the way.

It's not yet clear how disrupted the DPRK's economic sphere has become since the ouster of Jang. Like businesspeople everywhere, the emergent business classes in North Korea will be seeking predictability and stability in their environment. They'll have to wait to see if things will go back to 'normal' or if some new modus operandi will be forged.

Review of "NK Travel" app

A version of this was originally written for the Beijing Cream Blog. 

A new North Korea travel app hit the stores today. Niche? Fore sure, but not as niche as targeting fans of Playboy who literally do “buy it for the articles”. How does it work?

The creator, Chad O’Carroll, who runs the indispensible NKnews website, told CNN that the app “is designed for armchair travelers as well as people who are actively interested in visiting”. Armchair traveling is fine and the app certainly is good for that: it has great pictures, interesting tidbits about the locations and facilities and geo-tagging by Curtis Melvin, perhaps the world’s foremost North Korea satellite imagery expert.

However, if you’re living in Beijing – or, God forbid, disgusting vapid Shanghai* – the cost is relatively low and Pyongyang is really quite easy to get to. So is this app useful for people thinking of actually visiting the Democratic People’s Republic of Korea?

 In short: useful. In particular the “custom tour” section is uniquely worthwhile and is a better interface than any of the DPRK tour operators have for putting together such tours. Really, without this app, you have to get on the phone with someone and talk through options. Here, one neatly chooses what one wants to see and then sends out requests to tour companies to get back to you with pricing.

For group tours – which are quite a bit cheaper – I couldn’t get the results to pop up, though I think this was a first-day-in-the-app-store-glitch. It promises to be a handy one-stop shop for comparing the offerings of the various tour agencies rather than wading through the websites of individual tour companies. (Who has the time, right?) This glitch was the main problem with my experience. I’ve given feedback to the developer and they’re on the case. (note: this glitch was fixed by 8 p.m. CST on the first day of the app's release.)

Just for the fun of nitpicking, the language section could be more focused: I don’t really need to know how to say 10,000,000,000,000,000 in Korean. Indeed, I’m not sure what it is in English. Nor is a section on “asking directions” much needed when visiting a country in which you don’t have freedom of movement.

Other useful sections include a comprehensive FAQ and an “ethics” section, which is essentially an essay by the eminent professor Andrei Lankov, making the case for the positive effects of tourism in North Korea.

Still, if you're a non-American businessperson, economist or lawyer and feel uneasy about “just touring”, one can also travel to North Korea with Choson Exchange, a Singaporean non-profit that runs workshops in entrepreneurship, economic policy and law. Um. I may work for that organization.

*sorry, I just wanted to get stuck into this silly expat faux-rivalry.