Why Kim Jong Un Might Not Want the Riches Trump Is Promising

(Bloomberg) -- President Donald Trump has spent a lot of time trying to convince Kim Jong Un that great wealth awaits if he gives up his nuclear weapons and opens North Korea's economy. Yet that carries big risks for the young leader.

While Kim's calls for relaxing the sanctions cutting off North Korea from the global economy helped sink talks with Trump last month, it remains unclear whether he wants to follow other Asian tigers like Singapore and Vietnam and welcome a rush of foreign investment. That's especially true if that means giving up his nuclear weapons -- the regime's so-called treasured sword.

“North Korea sees foreign businesses as the carrier of a highly contagious germ that could infect workers,” said Andrei Lankov, a director at the Korea Risk Group consulting firm who has studied in North Korea and written extensively about the country. Openness could bring in a flood of outside information that finally loosens Kim's grip, Lankov added.

The failure of Trump's second summit with Kim shows the limits of the U.S.'s economic appeal in nuclear talks. Test-launching a rocket or missile -- something satellite imagery suggests Kim may be planning -- would only drive home the point that he still sees his nuclear deterrent as more valuable than the investment opportunities on offer.

Kim Jong Un Seen Having More to Lose Than Gain If He Tests Missile

North Korea became one of the world's poorest countries after decades of economic mismanagement, an island of futility in a region comprised of powerhouses China, Japan and South Korea. The country's annual car production equals the amount that South Korea churns out in about 7.5 hours.

In Hanoi, Trump touted Vietnam as an economic example of what North Korea could become. Both a communist nation and a former U.S. adversary, Vietnam now boasts one of Asia's fastest growth rates. U.S. National Security Adviser John Bolton said last week that North Korea had a choice between a “bright economic future” if it disarmed or tighter sanctions if it didn't.

But Kim wants to develop North Korea's economy on his own terms, without giving up a nuclear deterrent that took generations to build or loosening his grip over one of the most repressive regimes on Earth. Even foreign investment on a level tolerated by North Korea's socialist peers could prove too destabilizing for Kim.

“It's about control,” said Mike Green, a former Asia director at National Security Council under President George W. Bush who's now at the Center for Strategic and International Studies in Washington. “There's no evidence to support the assertion that Kim Jong Un wants to become the next Vietnam or China any more than his father or grandfather.”

Kim has promised to eliminate his nuclear weapons program on at least six occasions, Secretary of State Mike Pompeo said, telling Houston broadcaster KRIV in an interview Tuesday the North Korean leader has repeatedly made the pledge directly to him. Pompeo added that “talk is cheap” and “what we'll need to see is action, and that's what we're counting on.”

Enticing Investors

North Korea has long enticed investors with its cheap workforce, vast untapped mineral resources and a strategic location near rich neighbors. The challenge of rebuilding North Korea's ageing infrastructure would be huge: Its rail lines are in disrepair, its highways are scant and it can't produce enough electricity to light the country at night.

Still, North Korea's business landscape is littered with foreign ventures gone bad. An Egyptian telecommunications giant doing business there can't repatriate its profits. Even companies from the country's economic patron, China, have been burned.

Whether U.S. businesses could eventually profit, as Trump has speculated, is another matter. More likely, firms from adjacent countries South Korea and China would be the first on the ground.

China was the only country South Korean President Moon Jae-in mentioned when cautioning about the need to get in fast if North Korean sanctions are relaxed. “It's extremely important for South Korea to not miss its timing,” Moon told a news conference in January.

Invest in North Korea! Great Upside, Cheap Labor and Oh So Risky

Moon had been hoping the Hanoi talks would achieve progress on two frozen inter-Korean projects: a mountain resort and a factory park in the North Korean border city of Gaeseong operated by South Korean firms. The complex, which was supposed to be a model of economic cooperation for a unified Korea, was shut down due to political acrimony about three years ago. Kim wants it open again, providing his government with hard currency.

The sanctions imposed to punish Pyongyang for its pursuit of nuclear weapons and missiles severely restrict commerce with North Korea, the import of technology and oil as well as access to global capital.

One model that might be more attractive to Kim is the Middle East, where families enrich themselves while still opening up to international investment, according to Richard Fenning, chief executive officer of Control Risks Group.

“What the North Koreans understand above all else is that countries are at their most vulnerable when they start the process of reforming,” Fenning said. “He knows that what he wants to achieve economically is a baby step compared with what President Trump is trying to demonstrate to him is on offer.”

To contact the reporter on this story: Jon Herskovitz in Tokyo at jherskovitz@bloomberg.net

To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Daniel Ten Kate

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