North Korea Eyes Foreign Investment

Posted: Oct 03, 2013 12:01 AM

North Korea: According to a report in the Daily NK, the Kim Jong Un regime has ordered provincial authorities to submit proposals for limited opening of cities to foreign investment and technology.

Sources from the northern provinces bordering China said that the authorities in each of the North's nine provinces have received orders to prepare proposals for two cities in each province that might be attractive to foreign investors. This will create a pool of 18 cities as potential candidates to become open cities, in competition with each other.

Central officials will review the proposals, the locations and the demographics. According to the sources, the division of effort would require foreign companies to bear most of the risks, to control management and to control production issues. North Korean authorities would provide and control the personnel, including security.

Comment: The Daily NK is the only source of this information, but it has unique, reliable sub-sources. The report appears credible.

If it is accurate, it would seem to provide belated corroboration of the optimistic opinions that a Swiss-educated leader such as Kim Jong Un would relax internal restraints and open up North Korea. It also would add perspective to North Korea's decision to reopen the Kaesong industrial complex. Kaesong is one of the models for the legal and administrative documentation and other requirements for dealing with foreign investors.

Nevertheless, considering Kim's brutal purges and provocative behavior last February and March, his definition of "opening" is not likely to be congruent with that of a western scholar. This is not the bow wave of political reform. The Rason Free Trade Zone in the northeast, the Kaesong complex and the Mount Kumgang tourist center, which are the only non-Stalinist economic ventures in the North, are surrounded by tight security. Access is tightly controlled. Worker interactions with foreigners are limited and controlled by party cadre and security personnel. Open primarily means receptive to foreign money and technology.

This looks like another of Kim's brainstorms, like the construction of a winter sports and entertainment resort on the east coast, which has encountered serious problems resulting from shoddy construction. North Korea lacks the infrastructure, even in Pyongyang, to meet the power, information technology, telecommunications and transportation needs of modern businesses.

Kim does appear to be trying to modernize glacially, apparently to raise national income. The historic doctrine of self-reliance, known as chuche, receives much less emphasis. However, his decisions show he is almost clueless about how to plan and prepare for national economic development. For example, North Korea might be more attractive to foreign businesses if it had a reliable national electric power grid or transportation systems.

More importantly, his continuing movement on economic development projects means that nuclear weapons programs are developing as well, under the North's dual strategy of economic and nuclear development. That is the bargain Kim made with the Korean People's Army leadership.

Iraq: Update. The UN Assistance Mission for Iraq (UNAMI) reported that 979 Iraqis died in sectarian violence in September. Over the weekend more than 150 people were killed in a variety of attacks. Other sources that closely track losses report the real total was 1,271, based on daily government reporting.

Comment: Deaths in these numbers spread over Iraq are unavoidably imprecise. UNAMI numbers tend to understate the death toll. Daily announcements tend to overstate. Still, the numbers make September and July the worst two months of killing in five years, possibly longer.

Cumulatively, using UNAMI figures, more than 3,500 people died in the fighting in the past four months. The total since January exceeds 5,900 or about 20 a day.

Iraq has extensive unfinished business from the Western intervention, including the role of Islam in the state, fair representation of Sunnis in government, discrimination against Sunnis by the government, even the nature of the state as unitary or federal, with implications for the fair distribution of oil wealth.

Iraq analysts have noted several features of the latest surge that make it distinctive. One of the most dangerous fighting groups is the Islamic State of Iraq and Syria (ISIS). Al Qaida-linked fighting groups have restored their position as leaders in fighting the Shiites in Iraq.

Another feature is that there is nowhere for Iraqi refugees to flee. During the fighting in the 2000s, hundreds of thousands of Iraqis fled to Syria, but that is not a safe option. Jordan is overwhelmed with refugees. Iran is not an option for Sunnis and Kurdistan is not an option for Arabs.

The fighting is no longer containable in Iraq. The al Maliki government openly acts as an agent for Iran in facilitating support to the Baathist government in Damascus. The ISIS and affiliated fighters do not recognize the boundaries of Iraq and Syria and fight on both sides of the border.

One astute Iraq analyst observed that ISIS is the first political-military organization to treat Syria and Iraq as a single political entity since before World War I. The Syrian fight now exerts influence on the fighting in Iraq. Iraqi Sunni refugees in Syria add weight to that influence.

A fourth aspect still emerging is that the Baghdad government no longer has sufficient security forces and resources to maintain security in all the places under stress.

Sudan: Update. Around 700 people have been arrested during violent protests in Sudan, the government said on Monday.

President Bashir told a military graduating class on 1 October that the austerity measures were essential to prevent the collapse of the economy. "The latest economic measures aim at preventing the collapse of the economy following the increase in inflation and instability in the exchange rate," according to theSUNAthe official news agency. He blamed the disorders on foreign conspiracies and saboteurs.

On 30 September, the leaders of the opposition National Umma Party (NUP) Al-Sadiq Al-Mahdi, and the Popular Congress Party (PCP) Hassan Al-Turabi openly called upon their followers to join the protests.

Comment: Bashir's statement is his first since the protests began on 23 September. Likewise, the statements by the two opposition political leaders are the first by any opposition politicians in support of the protests. The official parties are co-opted into Bashir's system and have too much to lose in a revolutionary situation.

The movement still lacks leadership, but it has a martyr. One of the activists killed in Khartoum on 27 September was Salah Sanhouri, a young pharmacist from a wealthy family, who was shot in the back while trying to keep a demonstration peaceful. He has become a symbol for the protestors, who chanted his name in protests over the weekend. That is a start to developing a unique identity. Bouazizi's martyrdom helped the Tunisian protests become a revolutionary movement in January 2011.

End of NightWatch for 1 October.

NightWatch is brought to readers of Townhall Finance by Kforce Government Solutions, Inc. (KGS), a leader in government problem-solving, Data Confidence® and intelligence. Views and opinions expressed in NightWatch are solely those of the author, and do not necessarily represent those of KGS, its management, or affiliates.

A Member of AFCEA International