Economic Opportunities Amid Improving Inter-Korean Relations and Denuclearization Talks

Abstract

The progress we are seeing in the denuclearization talks is leading to hopeful anticipation among North Korea's neighbors for prospective economic investments within the country. A successful conclusion to the denuclearization talks is likely to be followed by North Korea's economic transition to a market economy. North Korea has many advantages to attract foreign direct investment (FDI), such as its cheap labor, abundant mineral resources, and geographical location. At the initial stages of the economic transition, FDI to North Korea will likely suffer from the poor infrastructure conditions within the country and lack of understanding about laws and institution systems of market economies. However, FDI to North Korea will show high profits over the mid- to long-term. In the words of a Bloomberg report, "North Korea looks like Vietnam in 1986, and the economy is a bit more industrialized." According to World Bank statistics, Vietnam's GDP rose from 6.3 billion in 1989 to 205.3 billion US dollars in 2016, averaging approximately 13% annual growth in its GDP following the Doimoi economic reform policy carried out in 1986.