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Don’t give up on sanctions

There is no reliable data on the North Korean economy. There are presumptions.
July 27,2017
Bank of Korea data showing that the North Korean economy grew 3.9 percent last year — the fastest pace in 17 years — should stun governments around the world. The UN Security Council has imposed as many as seven sets of sanctions since Pyongyang carried out its first nuclear test in 2006. Yet the nation was still able to outperform South Korea’s growth of 2.8 percent last year.

There are many theories that try to explain North Korea’s surprising economic performance. Some experts said that a level of free-market activities by North Korean people — tacitly condoned by the Pyongyang regime — could have helped the economy grow. In fact, some enterprises were allowed to keep profits they made instead of surrendering them to the state. Other experts said that North Korea has built a general resilience toward international sanctions and strengthened its self-sufficiency.

Whatever the reason, the fact that North Korea was able to grow under multiple layers of sanctions could have a huge impact on policy toward North Korea. The critics of the sticks-only policy have gained the right to question the effect of sanctions on the North and to call for dialogue as a more effective way to solve the nuclear conundrum.

From my point of view, I question the validity of the data. There is hardly any reliable data on the North Korean economy. There can only be presumptions. South Korea’s state-run Korea Development Bank issues a “North Korea’s industry” report every five years after studying satellite pictures on Google Earth. Hyundai Research Institute derives gross domestic product growth rates from the numbers on infancy deaths and crop yields. The BOK relied on various kinds of data from the National Intelligence Service, South Korea’s spy agency.

Unsurprisingly, data differs greatly among agencies. Hyundai Research Institute estimated that North Korea’s nominal per-capita GDP grew 8.9 percent in 2015, while the BOK said the real GDP contracted 1.1 percent in the same year.

Even if there is truth in the BOK data, we cannot argue that sanctions on the North are useless. In fact, the data only backs the argument about China’s role in reining in the North. It underscores that China hardly obliged with sanctions last year.

After North Korea conducted its fourth nuclear test in January 2016, the UN Security Council passed Resolution 2270, whose keystone was a ban on the North’s coal exports, its biggest source of hard currency. The resolution, however, had a big loophole: The ban exempted coal exports for civilian use. The purpose for trading can easily be tweaked — or fabricated. Coal shipments were cleared based on documents from Pyongyang. It is no surprise that the North’s coal exports jumped 12.5 percent last year from the previous year.

Resolution 2321, issued after Pyongyang’s fifth nuclear test in September 2016, addressed the loophole. Instead of capping trade based on its purpose, coal shipments were prohibited based on numbers — beyond 7.5 million tons or a value of $400,870,000 a year. Coal exports to China more or less stopped from March. The sanctions finally had begun to work.

North Korea resorts to propaganda to show the world that it remains unaffected by the sanctions. It invited foreign journalists to show off a refurbished urban district in Pyongyang.

It is too rash to jump to the conclusion that sanctions do not work. That is like complaining that a medicine doesn’t work right after swallowing it. The government must bring North Korea to the negotiating table by ratcheting up pressure. Otherwise, the price could be dear. The Moon administration has no choice but to wait for Pyongyang’s reaction even when it completely ignores our proposal for dialogue.

JoongAng Ilbo, July 26, Page 30

*The author is an editorial writer of the JoongAng Ilbo.

Nam Jeong-ho