Moon has ordered his officials to start figuring out what economic engagement projects can be undertaken without contravening existing sanctions and to look at what should be delayed until after Kim and Trump meet.
This prospect is already causing heartburn among hard-liners in Washington who view the South Korean president as too willing to take Kim at his word. But supporters say Moon is no naif.
“South Korea has shown substantial enthusiasm to resume economic exchanges with the North,” said Cheong Seong-chang of the Sejong Institute, a government-affiliated think tank. But nothing will begin until “after substantial progress has been made towards denuclearization,” he said.
During the summit, Moon presented Kim with a booklet on the “Korean Peninsula New Economic Initiative” and a USB drive outlining the kinds of economic projects that could proceed if their relations improve.
These included plans for three “belts” — an energy belt, which would transmit electricity from South to North; an industry, logistics and transportation belt, which would build a railway line from the South to the North Korean port city of Nampo and the city of Sinuiju on the Chinese border; and an eco-tourism belt, allowing the resumption of tours to Mount Kumgang in the North, a short bus ride from the demilitarized zone.
“Moon’s new initiative for inter-Korean economic exchanges is full of ideas that Pyongyang would find appealing,” said Kim Young-hui, who escaped from North Korea and now analyzes its economy for the South’s Korea Development Bank. “This has noticeable common threads with North Korea’s own national economic development plan.”
After barely a year at the helm of North Korea, Kim in 2013 unveiled a “parallel development” policy to advance his nuclear program and the economy simultaneously, a significant shift from the previous “military first” policy that had prized guns over butter.
In a speech the week before the summit in which he pledged to stop nuclear tests and missile launches, Kim mentioned the economy 28 times. He told his apparatchiks to prioritize the economy by “tapping all the human, material and technical potentials of the country for economic development.” This would help “make the people’s laughter resound far and wide across the country,” he said.
His remarks showed that the North Korean leader was “aware of the strong demand in the country for economic progress,” said Kim Young-hui, the economist.
“Despite risks involved, the socialist regime will keep opening up its economy to the outside world,” she said. “Public sentiment among civilians in North Korea is increasingly positive towards having an open market.”
But the repeated rounds of crippling sanctions imposed last year in response to Pyongyang’s nuclear and missile tests pose a serious challenge to economic progress. The sanctions ban North Korean exports of its three biggest revenue earners — coal, seafood and garments — and the importation of a wide range of products, including metal.
China, North Korea’s biggest neighbor and trading partner, has been implementing the sanctions so stringently that nail clippers and whiskey-bottle tops have been blocked at the border, according to frequent travelers.
Data released by the Chinese customs department showed that China imported only $12 million worth of goods from North Korea in March, down 89 percent from the previous year, and exported only $143 million, half as much as in March 2017.
The economic pinch is almost certainly why Kim Jong Un is suddenly so eager to talk to the outside world, traveling to Beijing in March and then crossing the demilitarized zone to meet Moon.
“Why would he be doing this unless he was being constrained by sanctions,” said Stephan Haggard, professor of Korea-Pacific studies at the University of California at San Diego and a close monitor of sanctions. “I think he’s sweating.”
Getting information on North Korea’s domestic economy is extremely difficult, given the lack of reliable figures — or any figures at all.
But analysts generally agree that the sanctions must be inflicting serious pain on North Korea, a desperately poor country with a highly inefficient economy.
That has led to huge imbalances in which a doctor can earn exponentially more from selling medicinal herbs in China than he can from administering to patients, and in which there is no incentive for a worker to show up at a state factory where she earns $4 a month if she could earn 10 times that selling food in the town market.
Per-capita income in North Korea is $1,362, according to the South’s central bank.
The sanctions are probably putting a chill through both these economies. That has to be a huge concern for Kim, who once declared that North Korean people “would never have to tighten their belts again.”
“If I were Kim, I’d be much more worried about textile workers out of work, milling around doing nothing, than I would be about an American attack,” said William Brown, a former intelligence analyst focused on North Korea who now teaches at Georgetown University. Citing the kind of discontent that brought down communist regimes in Eastern Europe, he said, “The real dangers to the regime are internal.”
But Moon could pursue very little economic engagement without sanctions relief.
Not only has the U.N. Security Council imposed waves of sanctions on North Korea, but South Korea imposed its own direct punishment following two deadly North Korean attacks on South Korea in 2010.
Those measures are still in place, and conservative politicians are urging Moon to leave them there. Even if Moon overturned his predecessor’s order to close the Kaesong industrial park, an inter-Korean factory complex on the northern side of the border, transferring money or equipment to it would be almost impossible in the current sanctions environment.
“I think we’re jumping to conclusions,” Haggard said, noting the concerns in Washington. “It would be extremely difficult for the Moon administration to embark on anything significant before we see the outcome of the summit with Trump.”
Min Joo Kim in Seoul contributed to this report.