As Duterte Heads to Seoul, The Philippine President Should Also Consider Longterm Economic Ties With The DPRK

Philippine President Rodrigo Duterte will arrive in the South Korean capital for talks with President Moon Jae-in between the 3rd and 5th of June. Incidentally, South Korean officials will meet with their DPRK (North Korean) counterparts just days before. Duterte is set to secure further South Korean investment for the redevelopment of the Cebu International Container Port in the form of a loan from Seoul worth nearly $200 million.

As the robust South Korean economy is set to enter a new era on several fronts, the healthy partnership between Manila and Seoul remains as vital as ever. South Korea’s increasingly strong trading and diplomatic ties with both China and Russia have come at a time when Seoul’s traditional US ally is pivoting towards an increasingly protectionist policy. This new stance from the Trump White House has seen multiple Asian allies of Washington including in Tokyo and Seoul come under the threat of tariff barriers just as rival superpower China has also been threatened with a trade war that for the moment has subsided, due primarily to the substantial reliance of US businesses on Chinese goods.

South Korea’s solution to the US tariff problem has been to enhance trading partnerships throughout Asia. The forthcoming investment in The Philippines is one positive outgrowth of this new reality. At the same time, the inter-Korean peace process has opened the door to a divided peninsula that sooner or later will become a major hub of regional trade. Today’s positive meeting between the DPRK’s head of state Kim Jong-un and Russian Foreign Minister Sergey Lavrov helped put in motion further discussions which will likely lead to the formation of a Russia-Korea Transport Corridor that will also inevitably link to China via a new eastern terminus of One Belt–One Road.

This means that future trading routes from ASEAN into South Korea now have a potential of growing into trade routes that can lead into central Asia and the wider Eurasia space via the new integrated Korean transport corridor while goods from ASEAN flowing into South Korea will be able to easily flow into northern China via the DPRK. The Philippines is well placed both geographically and geopolitically to take advantage of an increasingly integrated Korea as a new and improved trading hub linking ASEAN to north east Asia and Eurasia.

As The Philippines looks to increase productivity under Duterte’s much needed pro-enterprise economic reforms, the country can and should look for new trading partners across an array of new markets. As the DPRK appears to be on the verge of opening its economy to new partners in what looks to be a ‘post-sanctions environment’, the DPRK could become a valuable market for Philippine exports just as sure as South Korea is and will remain an important partner for infrastructural investment in The Philippines.

Duterte has already hinted at the possibility of an open door from Manila to Pyongyang when he recently said the following about Kim Jong-un’s handling of the current peace process:

“He has become my idol. Kim Jong Un. For all of the time, he was pictured to be the bad boy of the community. But with one master stroke, he is now the hero of everybody. He appears to be amiable, jolly good fellow, and very accommodating.

I hope he remains to be that way because nobody is really after him. Just a matter of historical divide which was created there… So I think that, to me, the man of the hour would be King Jong Un. And someday, if I get to meet him, I’d like to congratulate him.

I will tell him ‘I admire you. You have a sense of timing.’ Heroism is sometimes left to chance, otherwise it’s purposely timed. He should just treat me as a friend because this will promote – the impact is really, there is less stress now in the Korean Peninsula. And maybe, just maybe, we can avoid a war which nobody can win anyway”.

While Duterte has clearly embraced the win-win mentality of peace and reconciliation that is enveloping the Korean peninsula, there is also a potential for The Philippines to develop a productive win-win economic relationship to a North Korea that may shortly be opened up to new bilateral economic relationships.

In spite of a great deal of dishonest propaganda about the economic state of the DPRK, North Korea’s economy is in fact booming. Far from the economic doldrums of the mid 1990s, in 2018, North Korea’s economy is incredibly strong in terms of aggregate growth rates, infrastructural development, consumer technology development, the building of modern housing and the building of public leisure, arts and entertainment centres. Without much international fanfare, Kim Jong-un has modernised the economy in ways that are far less radical than what Deng Xiaoping did in China, but are nevertheless indicative of a shift towards some of the characteristics of market socialism.

Because of this and because of the weak Philippine Peso (PHP), there could actually be a great deal of productive economic connectivity possible between Manila and a post-isolation Pyongyang. At present North Korea’s increasingly competitive electronic goods will be of little value in China, South Korea or Japan, three countries whose domestic markets are filled with high quality domestically produced goods.  But because of North Korea’s low labour costs and the increase in quality of North Korea products that will doubtlessly accompany an easing of economic sanctions against Pyongyang, The Philippines could become an important market for North Korea exports, particularly in the realm of finished electronic goods.

Likewise, because low currencies are friendly to exporting nations, The Philippines could take advantage of an ‘opening up’ of North Korea’s internal markets and export a variety of goods produced in The Philippines to a North Korea market where the value of Japanese, South Korea and many Chinese goods would still be cost prohibitive in the short term.

In the long term, there is every chance that a post-sanctions North Korea could become a major east Asian economic powerhouse along the lines of its southern neighbour. If anything, because even in spite of sanctions, North Korea’s economy continues to grow and gradually modernise, a post sanctions North Korea could become a new so-called ‘Asian tiger’ economy that enjoys a pace of development more rapid than that of South Korea and Singapore during the 1970s and 1980s.

Because The Philippines is not only the most investment friendly economy in ASEAN, but according to US News and World Report, the most investment friendly economy in the world, a Pyongyang/Manila economic partnership could be among the most fruitful of all the important North East Asian/ASEAN relationships in the near future. What’s more is that such a relationship could be one where both sides enjoy parity in terms of an import to export ratio.

According to South Korean officials, in private Kim Jong-un is affable, intelligent and possesses a clever and at times self-deprecating sense of humour. As Duterte also possesses many of these same qualities while being equally misunderstood by some observers, there is every possibility that the healthy personal warpath felt between Kim Jong-un and Moon Jae-in could also be felt between Kim and Duterte.

For a country like the DPRK which will likely soon emerge onto the world’s stage as never before, good personal relations between heads of state is crucial. Thus, Duterte’s use of the word “friend” to describe what he hopes will be a good relationship with Kim, is crucial because this could be the beginning of not just a personal friendship but a win-win economic friendship for both the DPRK and The Philippines.

What was unthinkable just months ago is now a reality that could begin to blossom before the close of 2018. As Moon Jae-in is increasingly the man who must balance the DPRK and its northern allies Russia and Chian vis-a-vis the ambitions/interests of the United States, a healthy relationship between Duterte and Moon will be essential not only for a continued healthy relationship with Seoul but for a potentially game changing future relationship between the DPRK and The Philippines.

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