Intervention of Dr. Pablo Sanz Bayón in the Webinar on 25 June 2022

Good afternoon. Thank you very much for your invitation.

It is a pleasure for me to share some reflections with you in this forum.

The aim of my presentation is to offer some constructive ideas on actions that could facilitate and incentivize economic development on the Korean Peninsula and lay a foundation for future peaceful integration.

The purpose is to share my perspective on what steps should be taken, both by North Korea and the rest of the world, to obtain the mutual benefits that international trade potentially offers them.

I firmly believe that the reunification of Korea is possible and necessary. Of course, It is an ambitious project, not exempt from many challenges and risks.

For an economic approach to the reunification of the two Koreas, it is necessary to be based on the reality. Realism is required. Realism tells us that the reunification of Korea from the creation of an open common market will take a long time, but it is possible to start it now.

As you know, the income per capita in North Korea in 2017 was 700 dollars, which is number 180 on the world ranking. Income per capita in South Korea is 46 times higher and number 3 in the world. In the year 2000 South Korea’s economy was 53 times bigger than that of the North, and in 2017 this gap had increased to 97 times. This shows that the longer we wait, the longer it will take to unite the two Koreas.

The first question is to ask why North Korea is so poor.

It has abundant natural resources, an educated people and many factories.

The problem is low productivity, and this is due to the command economy system.

The industrial and agricultural economies have not been replaced by a market system, and this has led, in part, to past famines.

Reforms need to happen first before opening the North Korean economy to the world. The proper order is critical. Opening with the rest of the world is important but opening before reforms are done could be a very bad idea.

If we look at the resolutions made by the Eighth Party Congress in January 2021, Chairman Kim Jong-un´s explanations do not indicate pragmatism or market reforms have been chosen as solutions. In fact, from 2019 to 2020 North Korea’s imports decreased by 45 percent and exports decreased by 72 percent.

Openness will benefit North Korea’s economy. However, North Korea fears that if it opens itself to the world, it may be influenced by ideas from “outside,” particularly from South Korea.

Nevertheless, both Vietnam and China opened to the world, despite being communist regimes. Therefore, the way for Kim Jong Un to promote trade and business activities in North Korea is to find a way to open his country without endangering himself.

North Korea is fortunate in having most mineral resources for operating its own metal and chemical industries, but there is a need for capital, technology, and export markets.

Compared to South Korea, which has almost no raw materials, North Korea owns an important amount of raw materials that can be used for its industry. However, North Koreans need capital and technology to develop their industry.

In this sense, I would like to discuss here how North Korea can integrate itself peacefully into the world economy while overcoming complex geopolitical and historical conflicts.

The first point is that North Korea is not a member of the United Nations’ International Labour Organization (ILO), which says that countries should pay workers’ wages with money. Joining the ILO should be part of any deal.

North Korea also should join the World Trade Organization (WTO) which oversees global tariffs on exports. These would help North Korea to play more fairly as a step toward integration. For this reason, North Korea should be allowed to become a member of the WTO.

If North Korea were a free market, life would change dramatically. North Korea has had foreign investment, but the problem is the dual pricing system and the lack of property rights. North Korea is bankrupt and would not get credit if it tried to open now. For this reason, North Korea needs to convert its assets to credit.

If we want to see real changes, we have to open the international economy to North Korea. However, from a Western point of view, it is also necessary to do self-criticism and review the sanctions policy. North Korea is a country which has an enormous economic potential, but sanctions have limited these prospects.

United Nations sanctions are blocking the country’s trading capacity and have been counterproductive. The United Nations sanctions are now ruining workers who earlier could return with the money earned abroad and start small businesses in many sectors. By imposing sanctions, the international community loses the opportunity to engage with North Korea, to engage in a legal, predictable and sustainable way.

The only way forward is to engage in a dialogue with North Korea and try to persuade them toward a more peaceful path.

Then I would like to raise a reflection. History always has lessons to teach us.

The wisdom of countries and their leaders consists in knowing history well, their own and that of others. In this sense, the reunification of Germany and Vietnam are examples to take into account, but also the reforms carried out in South Korea itself or also in China, in some aspects. There are two reforms that North Korea could learn from

Firstly, ROK President Park Chung-hee created a new money and banking system in 1962-63 which rewarded savings and allowed people to invest.

In 1962 South Korea was the worst saving country in the world, but by 1980 it was the best saving country.

Secondly, from China and his leader Deng Xiaoping, North Korea could learn how de-collectivization in agriculture enhanced productivity. Collectivization in Russia, China and North Korea has only brought about starvation. One-third of the North Korean population are working on farms. So, North Korea needs to introduce a reward system based on productivity.

North Koreans are hardworking and disciplined, and they build things incredibly fast, but the system does not reward them. North Koreans are business-minded.

For instance, many who migrated from North Korea have been successful in the South, such as the founder of Hyundai. But the environment is important. If the political environment changes and the sanctions are lifted, there is potential for private development in North Korea.

Now we can focus on some economic and commercial strategies that could help the reunification of Korea. Reversing the current situation is very complicated because North Korean situation today is characterized by increasing isolation and economic stagnation. If we look the origins of this tragedy, Korean conflict resulted from a clash of global forces. Even today, the division is still latent.

Under the 1953 Armistice Agreement, the Korean Peninsula is still at war. Korean Peninsula is a buffer between the two geopolitical camps led by China and the United States. So, the reunification of the Korean Peninsula should be the world’s concern.

A strategic priority could be working with North Korea through technology, competence and human resource partnerships with South Korean firms. The South Korean firms could leverage technologies, products and services from all over the world.

On the one hand, South Korea would contribute to the delivery of end products made in North Korea, and on the other hand, it would enable buy-in or awareness from the international marketplace that they are part of the reunification goal, thus enlivening the prospect of reunification as a target within their business time horizon.

Easing North Korea's access to the global business community should be the priority.

North Korea's best partner for this would be South Korea.

At that stage, the normalization of relations would come about and the perceived risk in dealing with North and South Korea as a single entity would decrease.

In my opinion, it is necessary to recover institutions that promote industrial and commercial synergies. North Korea established 13 economic zones in 2013 to attract foreign investors, but it was not successful because of incompetence and also because of stricter sanctions from the international community. An example of business cooperation between North and South Korea was the Kaesong industrial complex in North Korea (close to South Korea), which started production in 2004 but closed some years ago. A total of 250 companies were established there, and about 50,000 North Koreans worked there. North Korea provided land and labor, and South Korea invested capital, infrastructure, technology, and materials.

Resuming these integration cooperation initiatives should be a priority to continue with the peace process on the Korean Peninsula

For economic exchanges to restore mutual trust between the parties and lead to peace, a change of mentality is necessary. All Koreans have to make an effort to understand each other and focus on what unites them and not what divides them.

In fact, the people of North and South Korea are both hard working and strive for excellence. So they have to learn to forgive each othe as Germany and France managed to do over time, allowing for European construction.

In this sense, the European construction can serve to illustrate an example of reconciliation.

A reconciliation based on common interests and needs of an economic nature that has given rise to a single market. The European unification, from the European Coal and Steel Community after World War II to the European Economic Community, and finally today’s European Union, can be an example that Koreans can take into account. In the 1970s, long before the fall of the Iron Curtain, a series of dialogues between Eastern and Western Europe had begun known as the Helsinki Process.

This led to real cooperation and later to the integration of Eastern Europe.

A similar process would be helpful on the Korean Peninsula. The role of Europe is an inspirational model for many countries in the world, but it was not an easy project to achieve and sustain. The reunification of Korea will require a long period of peaceful coexistence, during which economic cooperation and security guarantees can build trust between the two countries. In this sense, the EU should share its vast experience in confidence-building measures, soften the sanctions imposed on North Korea, and provide humanitarian, financial, and technical assistance. Europe can support the process of reconciliation on the Korean Peninsula from a non-partisan position, unlike the United States, but will maintain its strong stance on human rights.

I want to end my presentation with an optimistic approach.

Prospects for a united Korea could be very positive if a common agenda is drawn up on some of the criteria indicated above. The Korean Peninsula, when the 38th Parallel opens, is going to be the single most exciting place in the world, partly because of the union of the labor and the resources in the North with the capital and the manufacturing in the South. North Korea’s path toward reunification must be progressive in order to allow the two nations to adjust economically and culturally and result in a balanced process. As I pointed out before, International trade is a powerful tool for communication and peacebuilding between peoples and nations and can contribute to easing tensions on the Korean Peninsula. As Europeans, we know from our own experience that the impact of market-based innovation is a primary source of solutions for critical challenges in the environment, health and education, among other global challenges.

The most pressing problems in Korea Peninsula are going to require a partnership with the private sector and which brings to it efficiency and innovation. Therefore, a peaceful reunification of the two Koreas should be grounded on mutual economic development.

Thank you

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