미얀마의 대외관계 정상화 경험과 북한에 대한 시사점(Myanmar’s Experience of Normalization of Foreign Relations and Its Implications for North Korea)

189 Pages Posted: 1 Oct 2020

See all articles by Jangho Choi

Jangho Choi

Korea Institute for International Economic Policy

Yoojeong Choi

Korea Institute for International Economic Policy

Bumhwan Kim

Korea Institute for International Economic Policy

Mi Lim Kim

Korea Institute for International Economic Policy

Date Written: September 6, 2019

Abstract

North Korea has been recently concentrating all its efforts into economic development, changing its economic strategies and appointing new personnel to key positions. The North convened the Party Conference of the Central Committee of the Workers’ Party of Korea on April 21th, 2018 and proclaimed the completion of two long-time commitments (the parallel pursuit of both economy and nuclear armed forces), and proposed the intensive strategy of constructing an economically powerful socialist state. In 2019, Chairman Kim Jong-un stressed once again the denuclearization of the Korean Peninsula and the construction of a socialist economy in his new year’s address for 2019. In addition, former Prime Minister Park Bong-ju, an official who served as prime minister for a lengthy period of time (June 2013 – April 2019) since Chairman Kim became leader of the country, has been found to be leading the “7.1 Improvement Measures for Economic Management” announced on July 1, 2001. Such a series of measures is raising hopes that North Korea is moving toward a transition of its economic system.

Most people associate the transition of North Korea with the Vietnamese or Chinese experience of reform and opening. This is because not only was it reported how Kim Jong-Un has informally mentioned the Vietnamese reform and opening, but also an impression has been given that economic delegations of North Korea were learning about Chinese reform and opening by inspecting the special zones of China. However, there is no guarantee that North Korea will necessarily undertake either a Vietnamese or Chinese path of reform and opening, and therefore it will be difficult to claim the North will achieve the economic performance Vietnam and China have achieved. After all, many countries have faced socio-economic turmoil following such a major transition.

The purpose of this study is to derive implications to North Korea from Myanmar's experiences of normalizing foreign relations and transition. The internal and external situations Myanmar have faced in the transition process share similar aspects with those currently in North Korea. After being sanctioned by the US and EU, Myanmar eventually lifted these sanctions by normalizing its relations with the US and actively introducing market economy systems. However, contrary to expectations that this measure would bring about Myanmar’s economic growth, Myanmar's GDP growth rate remains relatively low compared to that of China and Vietnam. The Myanmar experience may be a valuable lesson for North Korea.

To explain the contents of this report in more detail, Chapter 2 compares the political and economic situation of Myanmar to those in North Korea and Southeast Asian countries. Myanmar is mentioned as a country which has peacefully established democracy in the international community, but at the same time it has been criticized that the introduction of democracy is only a formality that falls short of substantive democracy. Myanmar, along with Cambodia, Laos and Vietnam (CLMV), is classified as a Southeast Asian Transition Country and evaluated as having an economic environment similar to that of North Korea. Its GDP (2017) is 70 billion dollars – 0.3 times of Vietnam, 2.4 times of North Korea, 3.4 times of Cambodia and 4.3 times of Laos.

The nation’s trade volume (2018) is 37.1 billion dollars, similar to Cambodia (31.7 billion dollars), but larger than Laos (12.8 billion dollars) and North Korea (5.7 billion dollars). Myanmar's business environment ranked 171 out of 190 countries in terms of Doing Business, receiving a lower evaluation than Vietnam in 69th place, Cambodia in 138th place and Laos in 154th place.

Chapter 3 analyzes the contents of the US and EU bilateral sanctions imposed on Myanmar and the effects that economic sanctions have had on Myanmar's economy. Unlike North Korea, where multilateral and bilateral sanctions were imposed, only US and EU bilateral sanctions were imposed on Myanmar. When we look at US sanctions against Myanmar, there are sanctions on trade, finance, investment, aid, and visas. The trade sanctions began with the discontinuance of mostfavored-nation treatment and eventually led to bans on imports of Myanmar products. Financial sanctions banned financial transactions with Myanmar and froze assets. Investment sanctions prohibited new investments in Myanmar, aid sanctions restricted bilateral assistance to Myanmar as well as multilateral assistance through international organizations, and visa sanctions took the form of restrictions on US visas for individuals and organizations. We can see that the EU's economic sanctions were carried out in a similar way with the United States.

Although the sanctions did not affect Myanmar’s economy in quantitative terms, they had negative effects restricting the general process of industrialization in terms of quality. During the sanctions period, Myanmar recorded a positive GDP growth rate, and trade volume continued to expand. The first reason that the sanctions did not have a big impact on Myanmar's economy is that Myanmar has abundant energy and mineral resources, which could offset the US and EU trade restrictions by increasing their exports. In addition, the main economic sector of Myanmar is agriculture, so the economic scope in which economic sanctions on trade, finance, investment could influence the economy was limited. Second, the US and the EU tried to impose economic damages on Myanmar's military through economic sanctions, but it was the garment industry in the private sector that was mainly affected by the sanctions. During the sanctions period, the military halved the damage by developing the energy and mineral fields, which were given exceptions to the sanctions. Nonetheless, economic sanctions against Myanmar have resulted in Myanmar's macroeconomic economy remaining in primary industries such as energy and minerals, and hampered industrial advances in the manufacturing sector.

In Chapter 4, we analyzed the process of lifting the sanctions and the changes in Myanmar's economy around that time. Domestic factors that could be lifted quickly were the willingness to reform Myanmar's democracy and the diversification of foreign policy. Among the external factors involved, the change in US policy in Asia and its measures to check the expansion of Chinese influence played a major role. The reasons that the sanctions were lifted quickly were mainly due to the Myanmar military’s willingness to democratize its political system and diversify its foreign policy. The United States has changed its policy toward Asia, and its efforts to check the expansion of China has also played a major role. The lifting of US sanctions against Myanmar progressed in a phased manner, beginning with preemptive measures by Myanmar, followed by US’s suspension of its sanctions, additional measures carried out by Myanmar, and additional suspensions on the part of the US. Recently, the issue of human rights in ethnic minorities has been rekindled, and the EU is discussing the resumption of sanctions against Myanmar.

Myanmar's economy has been steadily growing since the sanctions were lifted, but it has been confirmed that there has been no rapid growth in GDP. According to our findings, the major causes for this lack of growth include the following: (1) lack of skilled human resources, (2) inefficient resource allocation, (3) failure of reform policies (lack of government capacity), (4) poor infrastructure, and (5) the failure of balanced diplomacy between the US and China. Prices have stabilized since 2009, and the exchange rate has been rising rapidly since 2012. The country’s trade volume has been growing steadily, but its deficit in commodity balance has been gradually deteriorating. FDI has been growing in absolute terms, but FDI-to-GDP ratio has remained at a low
level among the CLVM countries.

In Chapter 5, we summarize the implications of Myanmar’s experience for North Korea. First, there are implications for North Korea that the Myanmar sanctions were lifted quickly over five years (2012–16). Myanmar has the desire to contain the excessive expansion of China's influence in its country, while the United States wishes to control the expansion of China's influence in the region at the same time. These common interests led to the sanctions against Myanmar being lifted in a short period of time. North Korea seems to have a geopolitical environment similar to Myanmar, and this environment is likely to be used in the process of denuclearization and lifting sanctions.

Second, Myanmar and the United States were able to build mutual trust by adopting a step-by-step process of lifting sanctions. North Korea faces more complicated situations than Myanmar because there are multilateral, bilateral sanctions, secondary boycotts against the North and denuclearization and human rights issues are combined as justifications of the sanctions. However, considering the fact that the United States is leading the sanctions against North Korea and that the human rights issue can be settled relatively easily in comparison with the denuclearization problem, it seems that there is room for lifting sanctions against North Korea in a similar way to Myanmar.

Third, economic sanctions on Myanmar seem to have had little impact on Myanmar's economy in terms of quantity, but they have adversely affected Myanmar's economy in qualitative terms in that they weakened Myanmar’s growth potential. Myanmar's economy continued to grow in quantitative terms during the period of sanctions, but the sanctions have made the industries of Myanmar lean too much towards the energy and minerals industries. If sanctions against North Korea are prolonged, the growth potential of North Korea will weaken and its industry structure will inevitably remain underdeveloped.

Fourth, Myanmar has failed to show remarkable economic performance in the process of transition, because it could not sufficiently enact laws and institutions to support this momentum, nor have the laws enacted been implemented properly. There is a lack of trained skilled bureaucrats to lead the transition. North Korea also needs to develop sufficient human resources to prepare for reform, and it must improve and implement laws and systems that meet international standards.

Finally, Myanmar has not effectively utilized the high expectations of major countries such as Japan and China, which have shown interest in investing in Myanmar during its economic opening process. As North Korea also focuses on the self-sufficiency of its economy in their policies, it is likely that the North will miss such opportunities from outside like the experience of Myanmar. Therefore, in the process of opening up the economy, North Korea needs to abolish its former practices and actively attract investment from major countries.

Suggested Citation

Choi, Jangho and Choi, Yoojeong and Kim, Bumhwan and Kim, Mi Lim, 미얀마의 대외관계 정상화 경험과 북한에 대한 시사점(Myanmar’s Experience of Normalization of Foreign Relations and Its Implications for North Korea) (September 6, 2019). KIEP No. Policy References 19-06, Available at SSRN: https://ssrn.com/abstract=3697202 or http://dx.doi.org/10.2139/ssrn.3697202

Jangho Choi (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Yoojeong Choi

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Bumhwan Kim

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

Mi Lim Kim

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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