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Saturday, February 16th, 2019

Tale of Two Cities: Hanoi May Offer Example of Reform to Pyongyang During Summit

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by February 11, 2019 General

WASHINGTON In 1986, when William Brown, a onetime U.S. intelligence official and government economist, was stationed in Seoul, he ran into a Vietnamese delegation at the Plaza Hotel. They were in town for the Asian Games.

Once the delegation learned Brown was an American official, they immediately became formal and, as if they had approved diplomatic instructions told Brown they were very impressed with how the U.S. had built up Seoul and said their government wanted to bury the hatchet with Washington so the U.S. could do the same for Vietnam. They wanted Hanoi to look like Seoul, recalled Brown, now an adjunct professor at Georgetown University.

They had it all wrong, Brown told VOA Korean, adding that he told the Vietnamese that while the U.S. had helped, the hotel and everything that they could see in Seoul skyline was South Korea’s effort and productivity, not American.

The exchange took place during the year that Hanoi undertook its doi moi liberalization policy to reform Vietnam’s economy. Doi moi means renovation in Vietnamese.

Since then, Vietnam has improved relations with the U.S. and opened its economy to the international community, and now enjoys economic prosperity.

Vietnam’s changed economy will be part of the backdrop for President Donald Trump’s second summit with North Korean leader Kim Jong Un which is set to take place in Hanoi, Vietnam on Feb. 27 and 28. The leaders first met in June in Singapore, a meeting widely criticized for vague results.

A model ‘miracle’

The economic path that Vietnam took has been widely touted as a model that North Korea should follow even before Trump announced it as the summit venue. But the announcement has rekindled questions about how Hanoi’s lessons could be relevant to the reclusive country built on Juche, the ideology of self-sufficiency rooted in socialism.

When U.S. Secretary of State Mike Pompeo was visiting Hanoi last July, he suggested North Korea should follow Vietnam’s economic path.

In light of the once-unimaginable prosperity and partnership we have with Vietnam today, I have a message for Chairman Kim Jong Un, said Pompeo.

President Trump believes your country can replicate this path. It’s yours if you’ll seize the moment. The miracle could be yours; it can be your miracle in North Korea as well, he said.

The choice of Vietnam as the location of the second summit carries political and economic symbolism for both Washington and Pyongyang, according to experts.

Vietnam embodies the future the United States hopes that North Korea embraces, said Troy Stangarone, senior director of the Korea Economic Institute, because it was a former adversary who has transitioned to a friend of the United States and undertaken economic reform.

For North Korea, Brown said Vietnam is a model that Kim would like to promote because it is a country that defeated the U.S., unified North and South under a Communist government if not a Communist economy, and is now a friend of its former enemy.

Michael O’Hanlon, a senior fellow and director of research at the Brookings Institution, a Washington-based think tank, suggested it may just be logical convenience that explains the choice of venue for the summit.

O’Hanlon, however, believes that the general model [of the Vietnamese economy] is of huge relevance to North Korea.

Andray Abrahamian, a Korea expert at the Walter H. Shorenstein Asia-Pacific Research Center at Stanford University, agrees.

There is much that Vietnam has done that could be applied to North Korea, said Abrahamian, who is an advisor to Choson Exchange, a non-profit with offices in Singapore and Vietnam that trains North Koreans in economic policy and entrepreneurship.

Changed Vietnam

Vietnam was one of the poorest countries in the world before its reform, but now the country reported a gross domestic product (GDP) growth rate of 6.88 in 2018 which is double the 3.40 GDP growth rate of the U.S. in the same year. A country’s GDP indicates its monetary value of final goods and services produced and its economic well-being.

By comparison, North Korea’s economy in recent years is similar to Vietnam’s economy in 1985, a year before it embarked on the doi moi route to reform. According to U.N. figures, Vietnam’s GDP per person was 1 percent of America’s in 1985, and North Korea was in an identical position relative to America in 2015.

Brown, who now heads the Northeast Asia Economics and Intelligence Advisorysaid, North Korea is exceedingly poor, one of the poorest [countries] in the world. He continued, But that hides an important aspect of their economy. Relatively speaking, they have high levels of physical and human capital, excellent geography, and natural resources. North Korean poverty is thus the result of extraordinary weak productivity in the use of those assets.

Much of Hanoi’s economic development is attributed to the end of the country’s strongman era which ended with the death of Le Duan, the successor to Vietnam’s founding president Ho Chi Minh, in 1986 which led the country to undertake doi moi reform.

Can Kim change?

By contrast, the Kim dynasty has ruled North Korea since 1948. The country’s founding leader Kim Il Sung died in 1994, but his son Kim Jong Il took control of the government and its people until his death in 2011. The current leader, Kim Jong Un, continues to maintain a tight grip over North Korea.

Kim expressed in his New Year’s speech that he will focus on developing North Korea’s economy and improving the lives of its people. North Korean Foreign Minister Ri Yong Ho visited Vietnam last December to study its economy, and Vietnam’s foreign minister Pham Binh Minh is expected to visit North Korea from Feb. 12 to 14, days before the planned second summit between Trump and Kim.

Abrahamian said when he led a group of North Koreans to Vietnam in 2014 to study land use and public-private partnerships with Chosen Exchange, the North Koreans showed intense interest in how Vietnam uses market forces to aid development.

Experts said if Kim envisions embracing a Vietnam-styled economy for North Korea, he will need to take significant reforms that will require him to loosen the control over the economy.

Korea Economic Institute’s Stangarone said, If Kim Jong Un does want to see economic development and fulfill his promise to ensure that no North Koreans’ belly goes hungry, he needs to undertake reforms to boost economic growth.

He continued, The most significant steps that North Korea could take to reform its economy would be to end the public distribution system, fully legalizing the market economy, allow state-owned enterprises to function in a market-based system.

Begin optional trim: Abrahamian said changing rules around property rights and land use will have to happen in North Korea adding that both issues are ones that Hanoi has tackled and been successful at.

Brown cautioned, however, unlike Vietnam, North Korea needs to rely less on foreign investment and reform first domestically before opening its economy.

Vietnam and China have relied on lots of foreign investment, ironically much of it, South Korean, and less on domestic reform on their own capital markets, said Brown. This is much better than their old socialism but is not quite as sharp and runs into trouble as China is currently experiencing. End optional trim

When looking for an economic model, Brown said Pyongyang needs to look no farther than its southern neighbor Seoul which focused on building a modern banking system with indigenous savings and investments, and strong property rights before foreign investments played a big role.

The key aspects of economic development and growth are domestic, not external, said Brown. It takes hard work, risk-taking, and many decentralizing reforms. Kim needs to understand that.

Source: Voice of America

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