What North Korea Could Learn From Vietnam

Tuesday, 19 February, 2019 - 08:15 Issue Number [14693]

Vietnam is more than a convenient neutral site for the second summit between U.S. President Donald Trump and North Korean Kim Jong Un, which is slated for later this month. The Southeast Asian nation is being held up as a model for what Kim’s isolated country could become if he adopts sweeping market reforms. It’s an especially apt comparison, one which Kim himself reportedly noted last year -- but not necessarily for the reasons you might think.

The choice facing Kim at the Hanoi summit is the same as it’s always been: weapons or wealth. The U.S. has long offered North Korea a chance to develop its moribund economy in exchange for abandoning its nuclear program. Trump is so confident Kim will finally accept that he recently tweeted “North Korea will become a kind of Rocket -- an Economic one!”

Like his father and predecessor, though, Kim has so far left the deal on the table. Clearly he’s worried about losing his iron grip on the country if it opens up to the outside world. Moreover, it’s not entirely clear that the model of export-driven growth that Vietnam and other Asian tiger economies followed can work for the North, given the current rollback of free trade.

Vietnam’s experience, even more so than the famous example of China’s “reform and opening up,” would address both these concerns. Like China and fellow tigers Singapore, Malaysia, Taiwan and South Korea, Vietnam has posted an impressive record of growth since launching its “doi moi” reforms in the 1980s, lifting national income per capita from less than $95 in 1990 to $2,342 in 2017. Like China and Singapore, it’s managed to do so while maintaining firm one-party control over the political system and avoiding political and social unrest.

Uniquely, though, Vietnam could also show Kim how opening up could actually bolster his regime’s strength. At the moment North Korea, shunned by much of the world, is almost entirely dependent on its gargantuan neighbor and ally, China. Vietnam has been able to translate reform into strategic independence by balancing improved ties to the U.S. against China’s unavoidable economic influence. More of its exports go to the U.S. than China, while Japan, South Korea and Germany are also important customers. That’s allowed Vietnam some room to push back against China, for instance, on its incursions into the South China Sea.

Even more, Vietnam proves that the old Asian development model can still work. The country has skillfully enlarged its role in the global economy even as globalization has retreated. Exports expanded to more than 100 percent of national output in 2017 from about 70 percent a decade earlier. The secret has been an aggressive pro-trade policy that’s propelled Vietnam into numerous free-trade agreements, including the revamped Trans-Pacific Partnership. That, combined with an improving business environment and low costs, has made Vietnam a sound alternative to China for labor-intensive manufacturing, such as apparel and mobile phones.

A low-wage North Korea could readily achieve the same. It might even have an edge over Vietnam in attracting such factories, given that its neighbors China, Japan and South Korea share a keen interest in ensuring Kim’s reforms work.

Most of all, Vietnam highlights the true lesson of Asia’s record of modernization: Any poor economy, no matter what its history and cultural background, can alleviate poverty and industrialize with the right mix of policies.

Bloomberg