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Potential for huge profits may prompt North Korea nuclear deal

Potential for huge profits may prompt North Korea nuclear deal
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In the “hermit kingdom” of North Korea that few people have seen in recent decades, big changes are beginning to take place.

Despite the isolation cultivated by the Kim regime, the basic human self-interest to seek out profits, wherever they may be, has led to historic happenings in this impoverished nation of roughly 25 million people. Having stepped into the limelight of the world stage, third-generation dictator Kim Jong Un now wants to make development and rapid economic growth the centerpiece of his domestic agenda.

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Potential investors are starting to take notice, but there are a few obvious problems.

First, for the foreseeable future, the rest of the world — and especially the United States — must remain alert to the North’s nuclear weapons and missile programs that continue to grow. Second, no one can overlook Pyongyang’s horrific human rights record. And yet, other nations and multinational corporations are thinking ahead to the day when North Korea becomes one of the fastest-growing emerging markets.

In fact, this might be the foundational reason for the fundamental change in attitude from players as diverse in interests as China, Russia, Japan and even the United States, especially the change in tone from President TrumpDonald John TrumpTrump admin to announce coronavirus vaccine will be covered under Medicare, Medicaid: report Election officials say they're getting suspicious emails that may be part of malicious attack on voting: report McConnell tees up Trump judicial pick following Supreme Court vote MORE.

Simply stated, don’t be shocked if a nuclear and missile deal comes together soon, for one reason: there is a lot of money to be made in North Korea.

When I visited Seoul two weeks ago, attending events related to the third inter-Korean summit between Kim and South Korea’s President Moon Jae-in, the experts, government officials and business leaders with whom I talked did not hide their enthusiasm for what they consider a potential gold mine on the other side of the peninsula’s Demilitarized Zone. With Japan just across the water, North Korea is sandwiched between two of the world’s largest economies with plenty of money to invest.

One project touted on state-of-the-art digital advertising boards was the potential relinking of rail lines to connect North and South Korea. Putting aside the U.S. goal of denuclearization before development, such a project would make sense: to begin heavy investment in the North, there must be modern infrastructure to carry materials, goods and even the machinery needed to begin the massive task of rebuilding North Korea’s roads, bridges and ports.

Although the costs might be high, this would be the essential down payment to start the process. And with the South essnetially cut off from Asia, a land corridor through the North indeed would be appealing.

Rail lines also would allow the South (and likely international partners) to begin projects that could generate trillions of dollars in profits by tapping into North Korea’s massive mineral deposits, worth as much as $10 trillion. That money could go a long way toward rebuilding the North or reunifying the Koreas, which itself would cost trillions of dollars.

The North might even have oil to dangle before international investors. According to one report, the North “does have good hydrocarbon potential, both on and offshore, and for those who are prepared to take ‘first mover advantage,’ the rewards are there to be had” through “relatively low-cost and low-risk exploration opportunities in a low-competition environment.”

Yet, despite these and other possible lucrative business opportunities, three potential problems stand out:

  • North Korea has an atrocious track record of participation in business dealings;
  • the sanctions imposed because of its illegal weapons of mass destruction rule out, for now, any major economic development; and
  • the Kim regime’s human rights violations would scare off most investors.

These challenges can’t be understated, although the first two issues seem the easiest to correct. If Trump and Kim could craft an agreement that leads the North take concrete steps towards denuclearization, even if it takes years to achieve, the international sanctions might be lifted so that money can flow north. The North would need to reassure investors it would not nationalize or tamper with business operations, and would allow some form of private property.

Then there is the issue of how the Kim regime treats its people — a potential deal-breaker. The North can’t expect large corporations, which have large public reputations, to invest in a nation where at least one prison camp is said to be three times the geographic size of Washington, D.C. No company will put capital into a country that brainwashes its citizens and places them in prison camps. This, above all else, would need to end to coax investors to consider opportunities.

Still, many similar arguments arose regarding the challenges of investing in China decades ago — the Communist Party under Mao Zedong had killed perhaps 40 million or more people. While no one should excuse such heinous crimes, it’s the uncomfortable reality of investing in such regimes.

Others see the parallels to China as well. “North Korea is now where China was in the 1980s,” Jim Rogers of Rogers Holdings Inc. recently told Bloomberg. “It’s going to be the most exciting country in the world for the next 20 years. Everything in North Korea is an opportunity.”

If Rogers is right, and the potential bottlenecks can be eliminated, fortunes are about to be made.

The race to Pyongyang may be on.

Harry J. Kazianis (@grecianformula) is director of defense studies at the Center for the National Interest, founded in 1994 by President Richard M. Nixon, and executive editor of its publishing arm, The National Interest. He previously worked on the foreign policy team of the 2016 Ted Cruz presidential campaign and as foreign policy communications manager at the Heritage Foundation, editor-in-chief of The Diplomat, and as a fellow at the Center for Strategic and International Studies. The views voiced in this article are his own.