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1. See No Evil: South Korean Labor Practices in North Korea

Author:
Marcus Noland
Publication Date:
04-2014
Content Type:
Policy Brief
Institution:
East-West Center
Abstract:
Economic engagement between South and North Korea is often justified as a means of encouraging economic and social evolution in North Korea, with the ultimate goal of national unification. The South has invested heavily in the North, and firms have employed more than 50,000 workers. Yet expectations of a transformational impact rest on unexamined assumptions. The North recognizes the Trojan horse nature of the engagement policy: results of an original survey of South Korean employers show that the North Korean government has largely circumscribed the exposure of its citizens to both South Koreans and market-oriented economic practices, in the process violating labor rights defined by covenants to which both countries belong. The problem seems intractable, given that South Korea's diplomatic commitment to engagement with North Korea trumps labor rights concerns and South Korean firms perceive that the North Korean status quo confers benefits. As the experience of labor rights movements elsewhere shows, conditions will likely improve only if an aroused citizenry—here, the South Koreans—demands change.
Topic:
Diplomacy, Economics, Human Rights, Bilateral Relations, and Reform
Political Geography:
Asia, South Korea, and North Korea

2. Going Beyond Economic Engagement: Why South Korea Should Press the North on Labor Standards and Practices

Author:
Marcus Noland
Publication Date:
04-2014
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In recent years, despite a history of enmity and armed conflict that never really ended after the Korean War more than 60 years ago, South Korea has been a major investor in North Korea, and South Korean firms have employed more than 50,000 North Korean workers. South Korea's stated goal has been to encourage sufficient economic progress by North Korea, emboldening it toward establishing a meaningful basis for reconciliation and, ultimately, national unification. The expectation, or at least the hope, has been to use economic engagement to lessen the North's direct state control over the economy and to encourage the development of a middle class that might demand greater internal opening. The goal, as enunciated by former South Korean President Kim Dae-jung, has also been to foster a rise of interest groups with an enhanced stake in peaceable external relations.
Topic:
Economics, Human Rights, International Trade and Finance, and Bilateral Relations
Political Geography:
Asia, South Korea, and North Korea

3. Economic Crime and Punishment in North Korea

Author:
Stephan Haggard and Marcus Noland
Publication Date:
01-2013
Content Type:
Journal Article
Journal:
Political Science Quarterly
Institution:
Academy of Political Science
Abstract:
STEPHAN HAGGARD and MARCUS NOLAND describe North Korea's prison system. The system includes not only the infamous penal camps for political prisoners but detention facilities that permit short-run incarceration for economic crimes. They find that those with greater involvement in the market are more likely to face incarceration in such facilities and that the criminalization of economic activity allows the state to extract bribes.
Topic:
Economics
Political Geography:
North Korea

4. Gender in Transition: The Case of North Korea

Author:
Stephan Haggard and Marcus Noland
Publication Date:
06-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper uses a survey of 300 North Korean refugees to examine the experience of women in North Korea's fitful economic transition. Like other socialist states, North Korea has maintained a de jure commitment to women's rights. However, the authors find that women have been disproportionately shed from state-affiliated employment and thrust into a market environment characterized by weak institutions and corruption. As a result, the state and its affiliated institutions are increasingly populated by males, and the market, particularly in its retail aspects, is dominated by women. Among the most recent cohort of refugees to leave North Korea, more than one-third of male respondents indicate that criminality and corruption is the best way to make money, and 95 percent of female traders report paying bribes to avoid the penal system. In short, the increasingly male-dominated state preys on the increasingly female-dominated market. These results paint a picture of a vulnerable group that has been disadvantaged in North Korea's transition. Energies are directed toward survival, mass civil disobedience is reactive, and as a group, this population appears to lack the tools or social capital to act collectively to improve their status.
Topic:
Corruption, Economics, and Gender Issues
Political Geography:
Israel and North Korea

5. The Microeconomics of North–South Korean Cross-Border Integration

Author:
Stephan Haggard and Marcus Noland
Publication Date:
05-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Economic integration between North and South Korea occurs through three modalities: traditional arm's-length trade and investment, processing on commission (POC) trade, and operations within the Kaesong Industrial Complex (KIC). In order, these three modalities are characterized by decreasing exposure of South Korean firms to North Korean policy and infrastructure. Through a survey of 200 South Korean firms operating in North Korea, the authors find that these modalities of exchange matter greatly in terms of implied risk. For example, firms operating in the KIC are able to transact on significantly looser financial terms than those outside it. The authors find that direct and indirect South Korean public policy interventions influence these different modalities of exchange and thus impact entry, profitability, and sustainability of South Korean business activities in the North. In effect, the South Korean government has substituted relatively strong South Korean institutions for the relatively weak Northern ones in the KIC, thus socializing risk. As a result, the level and type of cross-border integration observed in the survey is very much a product of South Korean public policy.
Topic:
Conflict Resolution, Economics, International Trade and Finance, and Infrastructure
Political Geography:
South Korea and North Korea

6. Networks, Trust, and Trade: The Microeconomics of China–North Korea Integration

Author:
Stephan Haggard and Marcus Noland
Publication Date:
05-2012
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although the authors cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
Topic:
Foreign Policy, Economics, International Trade and Finance, and Bilateral Relations
Political Geography:
China, Israel, and North Korea

7. Networks, Trust, and Trade: The Microeconomics of China-North Korea Integration

Author:
Stephan Haggard and Marcus Noland
Publication Date:
06-2012
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
A central hope of engagement with North Korea is that increased cross-border exchange will encourage the strengthening of institutions, and eventually, a moderation of the country's foreign policy. An unprecedented survey of Chinese enterprises operating in North Korea reveals that trade is largely dominated by state entities on the North Korean side, although we cannot rule out de facto privatization of exchange. Little trust is evident beyond the relationships among Chinese and North Korean state-owned enterprises. Formal networks and dispute settlement mechanisms are weak and do not appear to have consequences for relational contracting. Rather, firms rely on personal ties for identifying counterparties and resolving disputes. The weakness of formal institutions implies that the growth in exchange does not conform with the expectations of the engagement model and may prove self-limiting. The results also cast doubt that integration between China and North Korea, at least as it is currently proceeding, will foster reform and opening.
Topic:
International Trade and Finance and Bilateral Relations
Political Geography:
China, Israel, and North Korea

8. Gender in Transition: The Case of North Korea

Author:
Stephan Haggard and Marcus Noland
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
East-West Center
Abstract:
This paper uses a survey of 300 North Korean refugees to examine the experience of women in North Korea's fitful economic transition. Like other socialist states, North Korea has maintained a de jure commitment to women's rights. However, we find that women have been disproportionately shed from state-affiliated employment and thrust into a market environment characterized by weak institutions and corruption. As a result, the state and its affiliated institutions are increasingly populated by males, and the market, particularly in its retail aspects, is dominated by women. Among the most recent cohort of refugees to leave North Korea, more than one-third of male respondents indicate that criminality and corruption is the best way to make money, and 95 percent of female traders report paying bribes to avoid the penal system. In short, the increasingly male-dominated state preys on the increasingly female-dominated market. These results paint a picture of a vulnerable group that has been disadvantaged in North Korea's transition. Energies are directed toward survival, mass civil disobedience is reactive, and as a group, this population appears to lack the tools or social capital to act collectively to improve their status.
Topic:
Corruption, Gender Issues, Markets, and Labor Issues
Political Geography:
Israel and North Korea

9. The Winter of Their Discontent: Pyongyang Attacks the Market

Author:
Stephan Haggard and Marcus Noland
Publication Date:
01-2010
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
On November 30, 2009, North Korea announced a reform to replace all currency in circulation with new bills and coins. North Korean officials have made no bones about their motivations: The “reform” constitutes a direct attack on the emerging market economy and the independence from state control that it represents. In an interview following the conversion, an official of the North Korean central bank noted that the reform was aimed at curbing private trade and underlined that North Korea is “not moving toward a free market economy but will further strengthen the principle and order of socialist economic management.”
Topic:
Economics, Markets, and Monetary Policy
Political Geography:
North Korea

10. Economic Crime and Punishment in North Korea

Author:
Stephan Haggard and Marcus Noland
Publication Date:
03-2010
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The penal system has played a central role in the North Korean government's response to the country's profound economic and social changes. As the informal market economy has expanded, so have the scope of economic crimes. Two refugee surveys—one conducted in China, one in South Korea—document that the regime disproportionately targets politically suspect groups, particularly those involved in market-oriented economic activities. Levels of violence and deprivation do not appear to differ substantially between the infamous political prison camps, penitentiaries for felons, and labor camps used to incarcerate individuals for a growing number of economic crimes. Such a system may also reflect ulterior motives. High levels of discretion with respect to arrest and sentencing and very high costs of detention, arrest, and incarceration encourage bribery; the more arbitrary and painful the experience with the penal system, the easier it is for officials to extort money for avoiding it. These characteristics not only promote regime maintenance through intimidation, but may facilitate predatory corruption as well.
Topic:
Crime, Economics, Markets, and Prisons/Penal Systems
Political Geography:
North Korea