The “Vietnam Model” for North Korean Reform

Posted by DavidDay on Dec 21, 2011 in Articles, Blog, Myanmar/Burma, Myanmar/Burma, North Korea, North Korea, South Korea, South Korea, Vietnam, Vietnam | 0 comments

Immediately following the death of Kim Jong Il, the U.S. and South Korean military forces went on alert simultaneously. This is the natural reflex on the tactical side to the perceived new instability on the Korean peninsula occasioned by the leadership transition in Pyongyang. This is a good, careful approach. There is, however, a strategic side to the Korean situation that also needs attention as well.

Setting aside the dark, doomsday potential for a collapse of the Regime in Pyongyang for a different discussion, what about the strategy for a hopeful future for North Korea? When the timing has been right, have we not seen former Communist regimes reinvent themselves and emerge with a hybrid of economic reforms that have worked reasonably well? Both China and Vietnam have moved successfully in direction economic liberalization and reform. Is there any hope for North Korea at all?

Jong Un with DPRK military leadership

In the past, it was often thought that North Korea’s Stalinist family dynasty and autocratic rule differed too much from the Communist Party oligarchies like that in Hanoi to allow a “Doi Moi”-like economic liberalization, such as we have seen in Vietnam, to take place. The current reality on the ground in North Korea is that Kim Jong Un is a young, likely more- impressionable leader with an unconsolidated power base. We need to remember that his Father had two decades to consolidate his own position and young Jong Un has barely had 2 years, if that. This all means that, notwithstanding his promotion this past September to a 4-star General (begrudgingly accepted in the Confucian military hierarchy by his fellow octogenarian 4-stars), Jong Un has a fragmented power base. His ability to lead and rule will require much more consensus-building and therein is the strategic opportunity for change.

Moving beyond the stumbling blocks of denuclearization on the peninsula, this change could necessarily include economic reforms which could be reinforced and encouraged by humanitarian assistance, sanction modification (following the Myanmar approach), and, in due course, economic assistance. This is the “Vietnam Model.” The key piece of this puzzle requires both technocrats and reform-minded leadership within the DPRK.

In Vietnam’s case, Hanoi, in the mid-1980′s had the benefit of a few brilliant economists who had a hand in the construction of the Party’s 1986 “Doi Moi” economic platform. The key architect was Dr. Nguyen Xuan Oanh, who came out of retirement as a former capitalist central banker under the defeated South Vietnamese regime and managed to turned himself into the Communist party’s favorite economist. I knew Dr. Oanh, a Harvard-educated economist. He was even South Vietnam’s Prime Minister for a few turbulent months in the coup-ridden 1960s. Somehow, after the fall of Saigon and eight months of house arrest, Oanh managed to persuade the communists that he was a technocrat and a patriot who had stayed on to serve his country. Rehabilitation allowed Oanh to become the architect of Vietnam’s “Doi Moi” economic reform platform in 1986. However, it was the combination of his education and prior government leadership that gave Dr. Oanh the political firepower with the Communist Party in Hanoi to listen and follow his direction for the future of the country.

So where is North Korea’s Dr. Oanh? This is the interesting piece of the puzzle that is difficult to see at this juncture. While it is early for North Korea’s own “Dr. Oanh” to emerge, the seeds for a Oanh-type economic reform leadership or expertise in North Korea already exist in the form of 2 groups: (1) during the 1990′s and prior, a number of North Korean elites were educated in economics in Australian universities before Australia shut down its North Korean visa program; and (2) there are a number of young, North Korean refugees that are currently studying economics in Seoul, the U.S. and the U.K., who are preparing themselves to assist in the North Korean “Doi Moi” in the future.

This “Vietnam Model” is a strategy that both Washington and Seoul need to encourage. It may well be North Korea’s only hope.

Myanmar’s Dance

Posted by DavidDay on Nov 18, 2011 in Articles, Blog, China, Indonesia, Myanmar/Burma, Myanmar/Burma | 7 comments

Myanmar sits between India and China, a key strategic position combined with extraordinary natural resources.

Historically, in its post-British colonial era, Myanmar has “danced” in its foreign policy and sought to maintain its neutrality, wary of foreigners. Myanmar’s dance continued throughout the Cold War as a strategy necessary to preserve its own sovereignty. This wariness extended to Western diplomats and China alike. However, as the General Than Shwe/Junta era began to take hold and the resulting U.S. sanctions began to bite, Myanmar “leaned” heavily towards China as its sanctions bypass route.

The new Thein Sein government started to shake the West with its political reforms and the release of political prisoners, including Aung San Suu Kyi. These reforms also included legal changes that would now permit Aung San Suu Kyi to run for political office. Indeed, her party, the National League for Democracy, has seized upon this legal change, re-registered under the new law, and Aung San Suu Kyi herself has formally announced that she would run in the next elections.

Then there is the pushback against China commenced with the abrupt decision to suspend the construction of a controversial China-backed hydroelectric dam that would have flooded an area the size of Singapore. Given the magnitude of Chinese investment and influence in Myanmar, this has been a stunning move.

The question then becomes, what is the next step in Myanmar’s dance? That step will be heavily influenced by Myanmar’s bid to assume its leadership bid as ASEAN’s chair in 2014. However, Myanmar’s bid for the 2014 ASEAN chairmanship means that it will have to present itself as an ASEAN member and not China’s little client. In order to accomplish that by 2014, we are going to see a number of previously unthinkable reforms coming out of Naypyidaw. The notion that Suu Kyi will now run for election is but one example of the previously unthinkable.

Indonesia, interestingly, is playing a key role from its ASEAN leadership chair position, steering Myanmar in a reform-minded direction so as to position and prepare Myanmar for its own 2014 ASEAN chair. Coupled with Jakarta’s efforts, the current United States efforts on the” pivoting” front to re-engage with Asia, such as entering the East Asia Summit and cultivating stronger ties with Southeast Asia, also contains a strategy designed to encourage Myanmar into further reforms. To that end, Secretary of State Hillary Clinton recently dangled the bait that Myanmar would find a partner in the U.S. if further reforms were made. The possibility of removing sanctions and promises of cooperation will assist in expanding U.S. influence with Myanmar,and likely move the country into a more balanced relationship between the U.S. and China.

Myanmar took Clinton’s bait, Suu Kyi and her party are now planning to participate in the next elections, and Clinton herself is now “pivoting” and enroute to Myanmar. The winds are now shifting in the U.S./Myanmar relationship. New partners and new steps are now in play.

The China relationship is still out there. While there is a certain frostiness to the current relations between China and Myanmar, it must be remembered that Myanmar must live with China next door and its dance in the future will always need to maintain considerable weight on that foot.

Hawaii’s Surprising Gains in International Business Development

Posted by DavidDay on Oct 13, 2011 in APEC in Hawaii, Export Development, Indonesia, Intl Business in Asia, Japan, Our Media, Uncategorized | 0 comments

In this television show, David Day hosts the U.S. Assistant Secretary of Commerce and Director General of the U.S Commercial Service, Mr. Suresh Kumar. David and Suresh engage in a lively discussion over the surprising improved performance of Hawaii business in international exports and business. During this program, the discussion also features specific Hawaii companies that have won national export awards, the role of the U.S. Commercial Service in supporting American business here in the Asia Pacific Region, and the business opportunities flowing to Hawaii business out of the 2011 APEC Conference in Honolulu.

Suresh Kumar, Assistant Secretary of Commerce and Director General of the U.S. Commercial Service .

The Negotiations Master—Kim Jong Il still has it

Posted by DavidDay on Aug 27, 2011 in Blog, China, China, Energy, Japan, Japan, North Korea, North Korea, Russia, Russia, South Korea, South Korea | 0 comments

The Negotiations Master—Kim Jong Il still has it

By David Day

Over the past year, we have watched the Dear Leader’s private train slide into China on several occasions with educated speculation that he was paving the way for a baton hand-off in Pyongyang to Kim Jong Eun. There was a need, it was argued, for Beijing to bless the heir apparent. Some of these China visits included factory tours, fueling the speculation that the Kim Regime was preparing to “open up” and was ready now for some type of economic liberalization. These visits were followed by, more recently, announcements of large China-fueled infrastructure projects just inside the North Korean border.

Kim Jong Il’s current trip to Russia was not just to provide a change of scenery or demonstrate that there are places he can visit other than the PRC. Despite his age and frail health, the Dear Leader still retains his tactical genius. The Russian trip suggests the timing and the key trump card that Kim Jong Il may soon play—the Trans- Siberia/Korean pipeline.

Russia and South Korea have already entered into a MOU for a huge US$90 billion deal between Russia’s Gazprom and South Korea’s state-owned KoGas. The latter, the world’s largest single buyer of natural gas, will take 10 billion cubic meters annually for 30 years – via a pipeline to be built across North Korea. The sticking point in this enormous energy deal is, of course, North Korea. This week, North Korea also inked the same accord.

The tactical genius of Kim Jong Il is now beginning to surface.  2012 is a Presidential election year in South Korea and President Lee Myung-bak, an uncomfortable hard-liner for the North, is now on his way out. 2012 is also the magical, propagandized, “Mighty and Prosperous Nation” year (the 100th anniversary of the birth of the Great Leader, Kim Il Sung, the 70th birthday of the Dear Leader, Kim Jong Il, and the 30th birthday (give or take) of the heir apparent, “Brilliant Comrade,” Kim Jong Eun—the 100, 70, 30 numbers are significant in the North Korean culture).

There is one other piece to this puzzle and that is Japan. Fukushima and Japan’s nuclear domino shutdowns/decommissionings have left certain parts the country desperately short of energy. This Summer, Tokyo Electric has been able to manage as a result of drastic austerity measures. In the reasonably short term future, Japan will find it impossible to fill its resulting power gap with renewables. Natural gas and coal are the only practical alternatives, with the cleaner, natural gas being the preferred choice. Russian natural gas piped to Busan, South Korea is going to open up critical and easier access for Japan.

As for the tactical genius, Kim can balance China’s growing influence on North Korea with both Russian and South Korean financial influence in the form of a mixture of pipeline lease rent and energy which the North Korean grid sorely needs. A deal to move forward with a pipeline has the added bonus of fitting squarely with the needs of the Pyongyang “Mighty and Prosperous Nation” propaganda machine to have something significant to announce for 2012.

A key issue which Russia and South Korea will undoubtedly have to be concerned with is the pipeline “valve” question (see, the North Korean shutdown of the Mt. Geumgang resort as an example).

Perhaps the economics will force the valve to remain open, but they need to be prepared that Pyongyang will be maneuvering to retain control. Yet another flash of Kim Jong Il’s tactical genius is in the works.

Vietnam

Posted by DavidDay on Jun 23, 2010 in Blog, Vietnam | 0 comments

65 years Ago -While Japan surrendered aboard the Battleship Missouri in Tokyo Bay, Vietnam Declared Independence with the words of Thomas Jefferson

By David Day September 3, 2010.

Happy 65th Independence Day (September 2, 1945) to all of my Vietnamese friends and colleagues in Vietnam and abroad.

Most Americans do not know that it was on this date, as the formal Japanese surrender ceremonies were taking place aboard the battleship Missouri in Tokyo Bay, that Ho Chi Minh declared Vietnam’s independence from colonial rule. He stepped up to a rostrum in Hanoi’s Ba Dinh Square and, carefully borrowing the key portion of the precise text of Thomas Jefferson, delivered the Declaration of Independence of the Democratic Republic of Vietnam. The English translation of this portion Ho’s exact text is as follows:

” ‘All men are created equal. They are endowed by their
Creator with certain inalienable rights, among these are Life,
Liberty, and the pursuit of Happiness….’

This immortal statement was made in the Declaration
of Independence of the United States of America m 1776. In
a broader sense, this means: All the peoples on the earth are
equal from birth, all the peoples have a right to live, to be
happy and free.” (–President Ho Chi Minh).

Most Americans do not know this history. They also do not know that Uncle Ho carefully worked over this portion of his text with his American OSS colleagues some of whom were there in the crowd when he delivered this famous Declaration of Independence.

Ho Chi Minh and Vo Nguyen Giap (in white suit) with American colleagues in the OSS "Deer Team" at Pac Bo Vietnam in the Summer of 1945

Another interesting pinprick of history here is that elderly people (now) in Hanoi who were on hand to witness Uncle Ho’s Declaration of Independence have told me that during the course of Uncle Ho’s speech, they looked up in the sky above his head and could see the insignia on an American warplane flying overhead (to presumably witness this historic event or to show support).
We were friends with Uncle Ho then and today, he would be pleased that the United States and Vietnam are now friends once again.

Happy 65th Independence Day!

Vietnam Looking to Elbow a Place with China and India with Foreign Investors

For Vietnam, stepping onto the world stage in recent years has meant admission to the WTO, a Nonpermanent seat on the UN Security Council, launching the country’s first telecommunications satellite (Vinasat 1 built by Lockeed Martin) and hosting the APEC Summit in Hanoi.

Lockeed-Martin's Vinasat 1

Vietnam continues to weather the global recession in reasonably well with foreign investment possibly doubling to $15 billion this year. Its largest export market is now the U.S. with over $12 billion last year. This Fall will see Intel’s new $1 billion chip assembly plant open outside Ho Chi Minh City.

Vietnam is now poised for yet another breakthrough. Political tensions in Thailand are helping Vietnam to get onto contingent plan target lists of foreign investors seeking political stability. Political stability is one factor working in Vietnam’s favor now. Another is labor costs. Vietnam is attempting to capitalize on the 30 to 40% labor differential with manufacturing plants in China. This is a huge incentive for China-based operations to begin looking to the south. The labor cost differential with China has been compounded by other problems nagging China operations: labor strikes and shortages.

Outside of the tech industry, where Vietnam has done very well in terms of attracting foreign investment, its aging colonial infrastructure has been a hindrance to all kinds of foreign investment.

There are two recent developments in Vietnam that will catapult the country forward in terms of attracting foreign investment at this critical juncture during the global recession. The first is the development of a number of major superhighway systems north of Hanoi that will link into highway systems in southern China. These new highways will allow a supply chain linkage between Chinese and Vietnamese manufacturing operations.

The second is a proposed Shinkansen-like bullet train between Ho Chi Minh City and Hanoi. The proposed bullet train, which would be completed by 2035, would travel the 1,600 km from Hanoi in the north to Ho Chi Minh City in the south in less than six hours. Vietnam’s current charming but woefully outdated trains take more than two days to make the trip. While this $56 billion project has recently been rejected by the National Assembly, Japan’s Transport Ministry continues to voice support for the project and has promised assistance should the Vietnamese government ultimately decide to proceed with the project once concerns of National Assembly members are adequately addressed (we believe that this is likely to occur despite the current clamor). Vietnam Railways Corp. was planning to use Japanese technology to build the high-speed train line. Sumitomo Corp. had teamed with Mitsubishi Heavy Industries Ltd. to bid on the project. Itochu Corp. was heading a competing group with Kawasaki Heavy Industries Ltd.

Proposed Vietnamese "Shinkansen" Linking Hanoi & HCMC

Given the importance of a high-speed rail link between Hanoi and Ho Chi Minh City, and the challenges Vietnam Airlines, and its related carriers have in meeting the staggering business traffic demands between the two cities, a Vietnamese “Shinkansen” would be an enormous contribution to the national infrastructure. No question that Vietnamese officials are eyeing the success of the Tokyo-Osaka Shinkansen as a precedent for a sorely needed rail upgrade in their own country. Financing the north-south linkage is another matter.

Articles

Posted by DavidDay on May 24, 2010 in Articles | 0 comments

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