【52】US Promises N. Korea Economic Investment after Nuclear Deal

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US Promises N. Korea Economic Investment after Nuclear Deal

May 14, 2018

FILE - North Korean leader Kim Jong Un shakes hands with U.S. Secretary of State Mike Pompeo, May 9, 2018, released by North Korea's Korean Central News Agency (KCNA) in Pyongyang.

The United States has said it may let American businesses invest in North Korea if the two sides reach a nuclear agreement. But even if U.S. economic restrictions against the North are lifted, the country would likely still present a difficult environment for foreign investment.

The U.S. government wants North Korea to end its nuclear activities. Secretary of State Mike Pompeo noted on Sunday that President Donald Trump has called for the complete, verifiable, and irreversible denuclearization of the North.

Pompeo added that, if North Korean leader Kim Jong Un agrees to disarm, the U.S. could offer foreign investment “in spades.”

Pompeo told Fox News, "This will be Americans coming in…not the U.S. taxpayer…to help build out the energy grid.” He added that American businesses could help the North develop its infrastructure, (and) all the things that the North Korean people need...so they can eat meat and live healthy lives.”

Trump-Kim meeting

The secretary of state recently returned from a trip to Pyongyang, where he met with the North Korean leader. The meeting was set up to prepare for Kim’s talks with Trump. The two leaders are to meet in Singapore on June 12. The North Korean government released three American prisoners to Pompeo as a humanitarian gesture.

The Trump administration is increasingly hopeful it can work out an agreement with the North Korean government.

Administration officials say the goal is to make sure the government can no longer threaten the U.S. or its allies. They want the North to end its nuclear program, destroy its supply of ballistic missiles and no longer have the ability to make chemical weapons.

Last month, the North Korean leader met with South Korean President Moon-Jae-in. During that meeting, Kim agreed to the denuclearization of the Korean Peninsula. Kim said that he wants an end to the U.S.-led restrictions, which ban 90 percent of North Korea’s trade exports. Those measures were announced because of his country's repeated nuclear and missile tests.

The North Korean government recently announced it would take apart its nuclear bomb test area between May 23 and 25. However, the North has argued for a slower denuclearization process that would provide immediate actions for each step taken. It is not clear how North Korean and U.S. officials can resolve the differences over their positions.

FILE - People walk by a screen showing the news reporting about an earthquake near North Korea's nuclear facility, in Seoul, South Korea, Wednesday, Jan. 6, 2016.

Investment issues

It is also unclear if foreign investors would be prepared to put millions of dollars in investments into North Korea after sanctions are ended and a nuclear deal is in place.

"The administration is perhaps inflating expectations of what the North Koreans can expect in terms of private investment,” said Andray Abrahamian. He was once involved in developing business training programs for North Koreans.

Abrahamian noted that banks and financial companies will have concerns about the business climate in the North.

Under Kim Jong Un, the government has carried out a number of market reforms. Under those measures, North Korean farmers can keep some of their crops, while state-owned businesses are now permitted to earn a profit.

Foreign investors might be interested in expanding North Korea's mineral exports, such as coal and iron. Historically, North Koreans have been paid very low wages. This might prove appealing to clothing manufacturers and light industry.

But unlike mainland China, which successfully opened its economy to foreign investment, North Korea remains a complex business environment with unclear tax and investment laws. The North Korean government sees the outside world with distrust and restricts its own people from contacting that world.

FILE - South Korean President Moon Jae-in and North Korean leader Kim Jong Un, left, are about to shake hands on their first meeting at the truce village of Panmunjom inside the demilitarized zone separating the two Koreas, South Korea, April 27, 2018.

Hope across Asia

The possibility of peace in Korea has raised expectations that economic conditions in East Asia will soon improve.

China and South Korea also agreed to provide economic aid if North Korea completes denuclearization.

The South Korean government has already suggested developing modern railroads that would connect the Korean Peninsula to China and Russia. Shares of South Korean manufacturing and railway stocks have risen. In addition, land prices are said to be rising near the neutral area between the two Koreas as the possibility of cross-border business activities increases.

I’m Jonathan Evans.

VOA’s Brian Padden reported this story. Susan Shand adapted his report. George Grow was the editor.

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