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Challenges remain over inter-Korean economic cooperation

Expectations for inter-Korean economic cooperation are rising with talks of cross-border projects on infrastructure and environment, but challenges remain amid the persistent economic sanctions on the reclusive regime.

Starting from the talks on reconnecting inter-Korean railways and subsequent meetings on reforestation of North Korea, the discussion over the joint projects raises the prospect of pursuing broader economic cooperation between the two Koreas.

While the inter-Korean summits and the first-ever US-North Korea summit have improved the outlook for engaging in joint projects with North Korea, the initiative should proceed with caution as there are still obstacles at home and abroad, business leaders and analysts said.

“Expectations on inter-Korean economic cooperation is so high that some sectors tend to be a bit impatient,” said Park Yong-maan, chairman of Korea Chamber of Commerce and Industry, during a conference in Seoul Tuesday.

“We should be cautious about competing ourselves without sufficient information and sound judgment… We need to shape conditions for economic cooperation in an orderly manner until economic sanctions on North Korea are lifted.”  

Mount Kumgang. Yonhap
Mount Kumgang. Yonhap

Under the current international sanctions and Seoul’s own punitive measure against Pyongyang’s nuclear ambition, South Korea is restricted from pursuing massive economic cooperation with North Korea -- such as the resumption of Kaesong Industrial Complex and Mount Kumgang tourism. 

Those joint projects have long been blamed for providing cash to North Korea’s state coffer without proper oversight over what the workers actually earned. Debates persist that some of the hard currency had been channeled into the country’s nuclear program.

Even after holding a historic summit with the reclusive regime’s leader Kim Jong-un, US President Donald Trump has recently decided to renew sanctions on North Korea, citing an “extraordinary threat” from its nuclear weapons. 

“The previous projects of inter-Korean economic cooperation clashes with the UN sanctions imposed on North Korea” said Lim Soo-ho, a senior researcher at the Institute for National Security Strategy, a Seoul-based think tank.

“I believe it is still difficult for the government to pursue development projects on North Korea unless there is significant progress on North Korea’s denuclearization and relations between North Korea and the US.”

Given that challenges facing the economic cooperation, the government appears to focus on laying out a broader blueprint for the joint projects with North Korea, rather than coming up with a specific business plan. 

Following the meeting on inter-Korean railways on Tuesday, the Unification Ministry said the two sides exchanged “practical and effective measures” over how to reconnect and modernize suspended railways in the eastern and western corridors.

A similar result was announced after the working-level military talks designed to restore the military communication line. Instead of hammering out a specific timeline, both sides wrapped up their one –hour meeting with an agreement to “quickly” restore the suspended communication channel.

“The meeting was not designed for reaching a conclusion. It was more of making sure where we are right now and how do we move forward,” a military official told reporters after the meeting under the condition of customary anonymity.

The barrage of cooperative moves -- along with the scheduled reunion of separated families by the Korean War -- have significantly lowered military tensions between the two Koreas and are conducive to building trust for deeper economic cooperation,

While the Moon Jae-in administration refrains from seeking full-fledged economic cooperation, they appear to believe that the inter-Korean talks on infrastructure and humanitarian issues would open up more engagement opportunity.

Additionally, the ongoing cooperation is more about building trust than providing cash for North Korea’s concession on its nuclear program, and therefore is less likely to clash with international sanctions imposed on the country, analysts said.

“When we are talking about whether inter-Korea economic cooperation clashes with international sanctions, we have to consider what is the purpose of economic cooperation,” Hong Min, a researcher at the Korea Institute for National Unification. 

“What the government is pursuing is more about building trust following the two Koreas’ leaders pledge to cease cross-border hostilities. The current cooperation between the two Koreas is like a follow-on measure on the joint declaration after the summit.”

By Yeo Jun-suk(