North Korean Economy Watch

UPDATE 4 (4/13/2011): The Street adds some more information:

A delegation of 12 North Korean economic envoys flew back to Pyongyang on Sunday after spending two weeks touring companies that “represent main strands of the U.S. economy.”

The group visited Google (GOOG), Home Depot (HD), Bloomberg, Citigroup (C), Qualcomm(QCOM), Sempra Energy(SRE), Union Bank, and Universal Studios, as well as a mushroom farm, a seafood wholesaler, and the Port of Los Angeles, where they leaned about trade infrastructure.

Journalists were not permitted access to the visitors (they entered the Googleplex through a back entrance under tight security), and no mention of the trip appeared in the American media. I stumbled upon the story after striking up a conversation with a DPRK official at the North Korean embassy in Berlin, Germany.

Located on Glinkastraße, an avenue in what was once East Berlin, the North Koreans built an 87,788 square foot compound during the 1970s. After the Cold War ended, staff numbers were significantly reduced, and, according to the surprisingly friendly official I spoke with through the embassy’s rear gate, two of the DPRK’s three buildings were leased out to private companies.

In nearly-unaccented English, he pointed out the main tenant — a youth hostel which opened for business in 2008. Though the North Korean flag flies out front, the decision to become landlords was strictly capitalistic, as years of economic sanctions have taken a tremendous financial toll on the DPRK.

After learning I was an American, the embassy official told me that a group of North Koreans happened to be in the States at that very moment.

Before I could inquire further, he was gone.

One of the few sources providing any details regarding the affair, South Korean newspaper JoongAng Ilbo, managed to obtain a copy of the delegation’s itinerary.

According to the report, “Six director-level officials were in the group, including the delegation’s head, Yon Il, a director at North Korea’s trade ministry. The other directors work for the trade ministry, agriculture ministry, finance ministry and industry ministry.”

Other delegates included lower level North Korean directors and managers, two advisors, and a researcher from a North Korean trade bank.

While Russian news outlet ITAR-TASS maintained that “[T]he initiator of these meetings is unknown,” the North Koreans were in fact invited to the U.S. by Susan Shirk, director of the Institute on Global Conflict and Cooperation at the University of California, “to see firsthand what improved relations with the United States might mean in terms of economic cooperation.”

From 1997-2000, Shirk served as Deputy Assistant Secretary of State in the Bureau of East Asia and Pacific Affairs from 1997-2000, and is the head of the Northeast Asia Cooperation Dialogue, an organization engaged in “track-two” diplomacy.

As described by Tong Kim, a research professor with the Ilmin Institute of International Relations at Korea University and an adjunct professor at Johns Hopkins University’s School of Advanced International Studies, the track-two approach “refers to contact, exchange of views, and other conduit activities between civilian organizations or individuals of two countries that are in dispute with each other.”

An email to Shirk seeking further details of last week’s visit was met with a terse “Sorry, no comment.” But sources say the North Koreans attended lectures at Stanford University and NYU, where they learned about “the market economy, consumer protection, what a CEO does, corporate strategies in the U.S., and an overview of the western legal system.”

This is one of the pillars of the track-two strategy. In “North Korea Inside Out: The Case for Economic Engagement,” a December, 2009 policy paper from an independent task force chaired by Dr. Shirk and Charles Kartman, former director of the Korean Peninsula Energy Development Organization, the case is made that:

The United States should adopt a long-term strategy of economic engagement with North Korea. North Korea’s attitude toward the world is closely related to the underlying structure of its domestic political-economy: a closed, command economy that favors the military and heavy industry and is isolated from the sweeping economic and political changes that have transformed the Asian landscape in recent decades. Encouraging a more open and market-friendly economic growth strategy would benefit the North Korean people as a whole and would generate vested interests in continued reform and opening, and a less confrontational foreign policy. In other words, economic engagement could change North Korea’s perception of its own self-interest. China’s economic transformation stands as an important precedent, showing how a greater emphasis on reform and opening can have positive effects on foreign policy as well. Economic change has the potential to induce and reinforce the D.P.R.K.’s peaceful transition into a country that can better provide for its people’s welfare and engage with other countries in a non-hostile manner.

Some, more hawkish Korea-watchers brush aside track-two diplomacy as a rube’s game being played with a staunchly anti-American entity that already knows far more about the outside world than it lets on.

However, there aren’t many other options in this increasingly unstable era, as a North Korean power handoff from Kim Jong Il to his son, Kim Jong Eun, is said to be in the offing.

Professor John W. Lewis of the Center for International Security and Cooperation at Stanford, who has been involved in track-two negotiations with North Korea since 1986, told the Stanford News Service, “They would definitely prefer to have these talks and meetings with American officials. But since American officials won’t talk to them, we’re the only game in town. We have this weird access.”

A wholesale transformation of the North Korean political-economy would surely reap unprecedented benefits for the world at large. Of course, it would also benefit tremendously the foreign business concerns that manage to be first to market.

In this instance, Susan Shirk’s deep connections in Washington certainly bear mentioning. Shirk is a Senior Director at the Albright Stonebridge Group, a “global strategy firm that helps corporations, associations and non-profit organizations around the world meet their core objectives in a highly competitive, complex and ever-changing marketplace,” which happens to be led by former National Security Advisor Samuel R. Berger, former Senator Warren B. Rudman, and former Secretary of State Madeleine Albright — the first American official ever to visit North Korea.

The company “address[es] challenges for clients in any country, and work[s] with them to develop and implement winning strategies for long-term growth and success” — something that dovetails nicely with the goals of Albright Capital Management, an “emerging markets investment firm” of which Albright Stonebridge is “a significant shareholder” and “strategic partner”, “leveraging collective networks and skills to enhance each firm’s ability to serve as a trusted advisor in the emerging markets.”

The kind of access someone like Madeleine Albright provides cannot be understated.

“We see a lot of potential in emerging markets for economic growth,” Jelle Beenen, a portfolio manager at Dutch investment firm PGGM, told Bloomberg in 2007. “The reason that investing there is always a problem is there are issues like fraud and political instability, so that’s why there’s value in political-risk management and the involvement of Secretary Albright is a valuable one.”

Could the “DPRK 12” be sending a signal that the North “is finally getting serious about introducing more market-based economic reforms?” JoonAng Ilbo asks. “Has the reformist message that China, its closest ally, has been hammering home for years finally gotten across? Or is the envoys’ mission just a conciliatory gesture to try to woo food aid from the U.S. amid a deepening food crisis?”

The short answer is, no one knows.

David Straub, a former Senior Foreign Service Officer who spent 30 years focused on Northeast Asian affairs declined a request for comment, but in a recent paper, asserted that, “The fact of the matter is that no one, not even in Pyongyang, really knows what is going to happen there. I believe there could be dramatic change in the regime in North Korea even as you are reading this, but I also believe it is possible that the regime could last many decades more.”

Henry Rowen, Co-director of Stanford’s Program on Regions of Innovation and Entrepreneurship, Director emeritus of the Shorenstein Asia-Pacific Research Center, and a Senior Fellow at the Hoover Institution who gave a presentation to the North Koreans, said in an email that he knew “very little about the group and its mission,” though he added a caveat that, “My hunch is that it was less significant than you suggest.”

Most optimistic of all seems to be Dr. Siegfried Hecker, former director of Los Alamos National Laboratory (1986-97) and current co-director of Stanford’s Center for International Security and Cooperation.

Hecker, who has been granted access to North Korea’s Yongbyon nuclear complex, told an audience about an experience he had during a recent visit to Pyongyang.

As Hecker entered a subway station in the capital city, he encountered a young man “wearing a backwards baseball cap with a Nike(NKE_) swoosh.”

“When he gets to be 21 years old, they’re gonna have a hard time keeping him down on the farm,” Hecker said.

“Where there is ‘swoosh,’ there is hope.”

UPDATE 3 (4/2/2011): The Delegation spent the day in Silicon Valley touring Google headquarters and attending a talk at Stanford University.  According to Yonhap:

A delegation of North Korean economic officials toured Silicon Valley on Friday, as their rare two-week trip to the United States was heading to a close.

The 12-member delegation, comprising mid-level officials from the trade, agriculture and other ministries, has been in the U.S. since March 19 at the invitation of the Institute on Global Conflict and Cooperation at University of California, San Diego.

The group also had visited New York earlier this week.

On Friday, the North Koreans toured Silicon Valley which included a visit to the world’s largest Internet firm, Google, for about an hour and 40 minutes amid tight security. The delegation got into the building through a backdoor, and security guards restricted journalists from accessing the visitors.

Officials from the San Francisco-based Asia Foundation accompanied the North Koreans.

After the visit to Google, the delegation moved to Stanford University and attended a lunch seminar organized by the school’s Asia-Pacific Research Center.

The two-hour seminar was about industry-university cooperation and also drew well-known U.S. experts on North Korea, such as nuclear scientist Siegfried Hecker and former Defense Secretary William Perry, according to a participant who requested anonymity.

The North Koreans were scheduled to leave for home on Sunday.

It is rare for North Korean officials to visit the U.S. The North and the U.S. fought in the 1950-53 Korean War and have no diplomatic relations. The two sides have also been at odds over Pyongyang’s nuclear programs and a series of provocations.

The Choson Ilbo also covered the visit to Google and Stanford–including a rather funny photo.

UPDATE 2 (3/27/2011): (New York, NY) According to Yonhap:

A delegation of North Korean economic officials arrived in New York on Sunday, saying that they want to explore the possibility of economic cooperation with the United States

The 12-member delegation, comprising mid-level officials from the trade, agriculture and other ministries, flew from San Diego, where they had stayed after arriving in the U.S. on March 19 at the invitation of the Institute on Global Conflict and Cooperation at University of California, San Diego.

The delegation’s trip to New York was organized by the Asia Society.

It is rare for North Korean officials to visit the U.S. The North and the U.S. fought in the 1950-53 Korean War and have no diplomatic relations. The two sides have also been at odds over Pyongyang’s nuclear programs and a series of provocations.

But the trip came amid recent talk of the possibility of the U.S. resuming food aid to the impoverished nation and as former U.S. President Jimmy Carter is preparing to visit the communist nation to broker rapprochement between the two Cold War foes.

“We’re an economic delegation. We’re here to discuss and look for the possibility of economic cooperation between us and the United States,” one member of the delegation said, without giving his name.

Washington has downplayed the significance of the North’s delegation, stressing that their visit is a privately organized event in which the government has played no part.

“Our assessment is that they are not here for talks between the North and the U.S., considering the agencies they belong to and their ranks,” a source here said. “It’s difficult to fathom the real intentions of the North, but for the U.S., it might have seen no reason to reject the North’s delegation coming to learn about the capitalist economy.”

In New York, the North Korean officials are expected to attend an Asian Society seminar and visit media firms and Wall Street. The Asia Society has strictly barred reporters from access to the North Koreans, saying their trip is part of private-level exchanges.

UPDATE 1 (3/26/2011): (San Diego, California)  According to the Joong Ang Ilbo:

A tour bus with black tinted windows pulled up to a hotel in La Jolla, San Diego, at 5:30 p.m. on Monday and from it stepped out 12 strangers from a strange land.

The 12 were so-called “economic envoys” from North Korea who, according to their host, came to learn about American-style capitalism for one week.

Susan Shirk, director of the Institute on Global Conflict and Cooperation (IGCC) at the University of California, San Diego, invited the envoys, all North Korean officials in charge of economic affairs.

The IGCC is one of the United States’ influential, private diplomatic channels for dialogue with the communist country.

The U.S. government calls the envoys’ mission a private trip, but some North Korea watchers are trying to read more into it.

Could it be a signal that the North is finally getting serious about introducing more market-based economic reforms as leader Kim Jong-il searches for substantial achievement to smooth his relinquishment of power to his youngest son Jong-un? Has the reformist message that China, its closest ally, has been hammering home for years finally gotten across? Or is the envoys’ mission just a conciliatory gesture to try to woo food aid from the U.S. amid a deepening food crisis?

One of the 12 North Koreans admitted to JoongAng Ilbo reporters that they came to the U.S. to study the market economy. But none answered why they wanted to.

The attempt to interview them was cut short when the North Koreans got nervous. The reporters only could ask one additional question about whether the envoys knew about the democratic movements in the Middle East.

“We are not deaf,” one replied.

For the week, they will study capitalism at the IGCC building, 10 minutes away from the hotel.

ORIGINAL POST (3/4/2011): According ot the Korea Times:

A North Korean economic delegation will visit San Diego and New York City for two weeks from March 20.

Susan Shirk, director of the Institute on Global Conflict and Cooperation at the University of California, San Diego, invited the ten-member delegation who will learn about Western economic systems and theory during their stay, the Voice of America (VOA) reported.

Between 1997 and 2000, Shirk served as deputy assistant secretary of state in the East Asia and Pacific Affairs bureau, and went to North Korea last year as a director of the institute, to discuss North Korea-U.S. cooperation on a private level.

Read the full story here:
N. Korean delegation to visit NY
Korea Times
Kim Se-jeong
3/4/2011