Looking beyond the sabre rattling

Photo: AFP

All eyes are now firmly fixed on the Korean peninsula. Going by the sustained bellicose statements coming out of Pyongyang, one would think that war is truly imminent. The war jitters are being felt mostly by the South Korean (ROK) economy. Indeed, South Korea's stock market index has slipped to its lowest levels since November, 2012.
It is not just Korean companies that are thinking of moving production elsewhere. Going by media reports, Philippines and Thailand who have large concentrations of expatriate workers employed in the country are drawing up contingency plans to evacuate their nationals if push comes to shove. Similarly, large multinationals like the American automobile manufacturer General Motors were also looking into options to move production base outside of ROK.
The North Korean (DPRK) leadership has hedged its bets that it can intimidate its southern neighbour and allies into resuming much needed aid. Its recent action to block South Korean men and material from entering the town of Kaesong, home to a jointly-run industrial complex, would ultimately end up hurting the North more than the South. Some 123 South Korean companies operate there and four out of five have been forced to stop production. As pointed out in an article of the Wall Street Journal recently "with the loss of around $90million in wage income for the foreign-currency starved country, that is almost certainly true."
By putting a halt to cross-border movement of workers and raw materials, DPRK ends up depriving its economy of both employment and foreign exchange earnings. Some 50,000 DPRK citizens are employed by the Kaesong complex each of whom earn an average of $100-105 per month. While this is a mere 10% of what an average ROK worker may earn, that measly salary puts these workers from the north in a much better income bracket in their own country.
Yet there is method in the North's madness. The ratcheting up of military manoeuvrings coupled with economic pressurewhich may initially point to a losing scenario for DPRK is not necessarily true. ROK President Park Geun-hye was re-elected on the promise that he would bolster the country's flagging economy and rebuild relations with North Korea. It appears that Kim Jong-Un has decided to play the economic card alongside the usual threat of nuclear annihilation -- North Korean style. The South Korean leadership for its part is all too aware of markets dipping and any erosion in confidence on the economy.
Though ROK's economy is far stronger than DPRK's on any given scale, it suffered badly during the global recession of 2008. The ROK economy took a turn for the worse again in 2011 when its growth rate dipped from 6.2% to 3.6%. Latest forecasts point to a further downturn. This has been brought about by booming Chinese exports. Again the weakening of the Japanese yen has seen a surge in Japanese exports. Hence, according to recent forecasts the economy is now projected to grow at a more conservative 2.3% in the current fiscal.
DPRK's brinkmanship cannot last. It is effectively under tightened UN sanctions. It cannot risk open war with its southern neighbour given the sorry state of its conventional forces. It will be outmatched on land, sea and air. This time round the North Korean leadership cannot rely on traditional allies like Russia and China to back up its claims. Indeed, from the signals coming out of Beijing, it appears that the Chinese leadership is in no mood for DPRK theatrics.
Pyongyang's threats of starting a nuclear war in the region has met with sharp rebuke from President Xi of China who went on record to state that no country "should be allowed to throw a region and even the whole world into chaos for personal gain." This is perhaps the strongest worded statement ever to come out of China on its traditional ally North Korea. As former Ambassador to China John Huntsman said on CNN: "It suggests to me, as I've watched the ratcheting up of frustration among Chinese leaders over the last many years, that they've probably hit the 212-degree boiling point as it relates to North Korea."
Despite the fact that the North has moved two medium-range missiles to its east coast, the 1.2million strong military has not been mobilised to war footing. All these signs point to nothing more sabre rattling on the part of Kim Jong-Un. However, time has arrived for the young leader to face up to certain realities. With its largest and most trusted ally China joining the growing ranks of other powers in the region in its irritation over Pyongyang's shenanigans, the young Kim would be well advised to come to the negotiating table, end the North's isolation and embark on a Chinese-style economic reform programme.

The writer is Assistant Editor, The Daily Star.