Competition for Influence: The Impact of the Nuclear Issue on International Business in North Korea

Introduction

When the nuclear crisis broke out on the Korean Peninsula in 2002, the expectation was that North Korea’s pursuit of nuclear weapons would position it on a path toward further isolation and economic hardship. This was particularly the case given that the leadership in Pyongyang stuck to its songun or military-first politics that offered few economic opportunities and required its population to sacrifice its limited resources toward the development of a nuclear deterrence (Ha & Jo, 2012).

The picture today is somewhat different from what may have been expected at that time. Far from being completely isolated, North Korea has opened up somewhat to the outside world, albeit through China, and in recent years has even experienced a degree of economic growth (Noland, 2015). Much of this is to do with crucial business ties between North Korea and China and the way in which the ongoing nuclear crisis has shaped this bilateral relationship. Even more importantly has been its effect on inter-Korean relations which at the onset of the nuclear crisis offered so much hope and expectation. Crucially though, Pyongyang’s nuclear program remains active and has even advanced.

This chapter will explore the impact of the nuclear crisis on international business in North Korea by specifically examining the question of how did the emergence of the nuclear issue shape the economic engagement efforts by South Korea and China. While this chapter is predominantly focused on the cases of China and South Korea, their experiences provide important lessons for businesses from other countries. Furthermore, there are even implications for similar cases of economic engagement strategies with outlier states.

Developing an accurate understanding of international business on the Korean Peninsula is very crucial for the future. Much of this is due to the fact that the cases of South Korea and China represent not just different approaches to the nuclear issue, but also emerging competition for influence over Pyongyang with a view to the long-term future of the Korean Peninsula. In seeking to address the question mentioned above, this chapter will present the background to the crisis, then it will outline the engagement efforts by South Korea and China, before addressing the current situation and providing policy recommendations for the future.