Yahoo Finance Why secretive North Korea is edging towards a new crisis
The assassination of Kim Jong-nam could have been taken from the pages of a spy novel: secretive killers, an outlandish murder weapon, mystery over the culprits, and even a high-stakes family feud.
Engrossed by the drama, the world has once again turned its attention to North Korea.
The fact that Kim Jong-nam’s death came just days after the reclusive nation had test-fired a ballistic missile served to intensify the spotlight on Kim Jong-un, the country’s leader and Jong-nam’s half-brother.
The truth behind Kim Jong-nam’s death in Kuala Lumpur may never be fully known.
The obvious suggestion is that North Korea is behind it. However, the situation has been complicated by a series of conflicting claims, including North Korea blaming Malaysia and the “unfriendly attitude” of its government.
In short, it’s messy. However, the murder, and the missile test preceding it, are having very real global and economic implications.
Most notable of those was the move by China to announce that it would halt all coal imports from North Korea for the rest of 2017.
China says the decision was made to comply with a UN security council sanction last year, but the timing suggests that other factors are at play.
There is speculation that the new US President, Donald Trump, is considering “secondary sanctions” on countries that deal with North Korea, rather than just North Korea itself.
Dr John Nilsson-Wright, a senior research fellow on the Asia programme at the foreign policy think-tank Chatham House, said: “One of the potential targets [of secondary sanctions] are Chinese banks, which provide a lot of finance and support the North Korean economy.”
Last summer, in response to the growing threat of North Korea’s military programme, the US and South Korea agreed to deploy the Terminal High Altitude Area Defence anti-missile system.
Dr Nilsson-Wright says: “The Chinese worry about that because they see it as undermining their own strategic position and their own security in the region.
Kim Jong-un | A history of executions - family, allies and rivals
So the existence of a continuously provocative North Korea has a knock-on effect.”
China is comfortably North Korea’s most important economic partner, covering nearly 90pc of its exports going there, and nearly 90pc of its imports, figures from the BACI International Trade Database show.
The significance of the sanctions has not been lost on the North Koreans, who issued a statement last Thursday accusing a “neighbouring country” of “dancing to the tune of the US”.”
It can be hard to measure the North Korean economy by traditional methods.
However, Professor Hazel Smith, the director of the international institute of Korean studies at the University of Central Lancashire and a member of the UN global expert panel on Korea, says there are more than enough socio-economic indicators to paint a colourful picture of the country’s economy.
Prof Smith, who lived in North Korea for nearly two years, says international organisations have been collecting data in the country for more than two decades that show small but significant improvements in the economy since the 1990s, when the country was ravaged by a catastrophic famine that took the lives of an estimated one million people, out of a population of around 23 million.
“The North Korean economy has stopped being in freefall, which it was throughout the 1990s, when it just plummeted,” Prof Smith says.
That famine was so devastating partly because of North Korea’s success in eradicating the private sector.
“In North Korea you could only get food through the state and through rations, and that is one of the reasons the famine hit everybody so hard and why the death rate was so high,” Prof Smith says.
With the state failing, and the people dying, a private market began to develop. It grew to involve workplaces, local governments, farms, and essentially everyone who wanted to survive.
North Korean life expectancy at birth
In the time since, mortality rates have steadily decreased, while life expectancy has gradually climbed. The improvements, Prof Smith says, mean that, on average, children in North Korea today are “significantly” better off than if they lived in India or Pakistan.
An unregulated private sector has emerged, one which Prof Smith terms “gangster capitalism”, and it has created a nation of traders. They all trade with China, which has long argued that it should be able to engage with North Korea because it does not want to see it fall back into famine.
The big extractive industries, notably coal, are among the few areas still controlled directly by the North Korean government, so it is the pockets of Kim Jong-un that will be directly hit by the latest sanctions.
North Korean infant mortality rate
But as the private market grew, it made people wealthy. These people became more and more involved with influential government figures in Pyongyang, North Korea’s capital.
If these wealthy traders, who are making the big money in Pyongyang, start to find business that much harder to come by because of sanctions, they are going to know where the blame lies: with their erratic leader, who has pushed the boundaries far enough, on enough occasions, to finally prompt a reaction from China, North Korea’s most important friend.
In a climate where executions are increasingly commonplace for anyone who steps out of line, speaking out against the leader is not a wise move.
But the political landscape is extremely volatile, and there is also the added complication that the power base around Kim Jong-un remains shrouded in mystery.
It is not known which of the elites he is aligned with, and there are serious doubts over how much individual control he possesses.
Crucially, Kim Jong-un has not visited China since becoming the country’s supreme leader in 2011. “China is basically what is keeping them going,” Prof Smith says.
“And politically, China is stopping the worst of the sanctions, so not going there implies to me that whoever is around Kim Jong-un fears exposure, that he would be exposed as simply not knowing what is going on."
It is noteworthy, too, that North Korea has long held a strong relationship with Malaysia, where the killing of Kim Jong-nam took place.
During the 1990s, when North Korea was not completely cut off from the capitalist world, it traded through the south-east Asian country.
The death of Kim Jong-nam, combined with the North Korean leadership’s hell-bent push for nuclear power, risks burning bridges with Malaysia.
That could spell danger for North Korea’s economy, and for Kim Jong-un’s position. “It is very fragile, this mild economic recovery, because there has been no serious money spent on infrastructure,” Prof Smith says.
“So if the Chinese clamp down, and Malaysia too, it would not take much for North Korea as a whole to go back into the sort of crisis we saw in the 1990s.”
