Europe could lose out in North Korean bonanza

Indeed, ongoing marketisation is now irreversible as the ranks of middle class North Koreans continue to swell. And Europe risks missing out if North Korea continues to reform its economy and investment flows into the country.

Since Kim came to power he has been pursuing the development of North Korea's nuclear programme and economy in parallel.

Now that Pyongyang has achieved a nuclear deterrent, Kim is free to focus on economic reform.

Actually, this is what he announced at a recent meeting of the North Korean Workers' Party. And this is one of the key reasons why Kim launched a diplomatic offensive including two summits with South Korea, two visits to China and the summit with President Trump.

Pyongyang is aware that economic reform can only be fully successful with foreign investment and technology. He is looking for both.

Others have noticed.

South Korean president Moon Jae-in wants to improve relations with North Korea not only for ideological reasons. He sees the great economic promise that a reformed North Korea would bring to his country.

South Korean businesses including Hyundai and Samsung are already scoping investment opportunities.

Likewise, China and Russia are supportive of the flurry of North Korean diplomatic activity, among others, because their companies stand to benefit from it.

Even president Trump has stated that he foresees American investment in North Korea if rapprochement between both countries continues.

A growing number of European companies in sectors ranging from construction and energy to food and textiles have also seen this change. Subsidiaries based in Seoul are reporting back to their headquarters.

European NGOs still operating in North Korea are being asked about tangible changes on the ground. European embassies in Pyongyang are reporting these changes to their home countries.

This shows that many in Europe stand ready to support North Korea's economic reform process, and make a profit in what could become a 'new Vietnam or China'.

Unfortunately for Europe, policy could derail this process. The EU maintains bilateral sanctions on North Korea going well beyond the UN's multilateral regime.

The official line of the EU is that removal of bilateral sanctions or work to ask for the withdrawal of UN sanctions is not on the agenda.

This is a mistake. Sanctions made sense when North Korea was scaling up its missile and nuclear programme.

They are counterproductive to European business interests now. Likewise, the refusal of some member states to allow the rekindling of the official EU-North Korea dialogue suspended in 2015 is at odds with the current policy of its strategic partner – South Korea.

Without such a dialogue, the EU's diplomacy (or lack thereof) could harm its own economic interests.

The argument that Brussels should not prioritise economics over its key goals in North Korea also misses an important point. Namely, these goals can be better achieved by supporting its reform process.

The EU's 'critical engagement' policy seeks to prevent Pyongyang's proliferation of weapons of mass destruction and nuclear technology. North Korea's proliferation is a cash-generating exercise.

Pyongyang would not need to continue with it once it attracts foreign investment. Likewise, improvement of the human rights of the average North Korean is far more likely with economic reform.

'New Vietnam'?

The cases of Vietnam and China prove this. Today, ordinary Vietnamese and Chinese are freer and richer than previous generations. Middle classes demand and get more freedoms. There is no reason to think that North Korea would be an exception.

Some European businesses could always find ways to benefit from North Korea's opening up even if the EU does not change its policy. Aid, for example, could be used to send much-needed medical equipment or fertilisers to the country.

Construction firms could be part of infrastructure building projects that the South Korean government, the AIIB and others stand ready to implement. Sectors not covered by the current sanctions regime such as tourism also offer investment opportunities.

Ultimately, however, North Korea could be a 'new Myanmar' for European businesses.

In other words, Brussels' slowness in adapting its policy to the changing circumstances in North Korea could mean that European firms find investment opportunities gone because others got there first.

As Kim continues to push for economic reforms and the rest of the world seeks engagement partly out of economic interest, the EU should consider the interests of its own firms and allow them to compete on a level playing field.

Dr Ramon Pacheco Pardo is KF-VUB Korea Chair at the Institute for European Studies of Vrije Universiteit Brussel, and senior lecturer in International Relations at King's College London