Working in Tourism, Farming Bombs, Divining Opacity

Marcus Noland is angry and so is Chad O’Carroll. While we think Noland was a little too flippant and harsh on the founder of NK News (and we endorse civil discussions), the “grumpy old man” does make some interesting points in regards to the moral dilemmas of tourism in North Korea.

In DPRK academic and business circles, there are always debates about the legality and morality of spending money in North Korea. This is especially true for Americans. On one extreme end of the spectrum is the hard-line starve-or-collapse-them sanctions people, and on the other are the overly-embracing friends-to-all who seem to ignore that there are real problems between the DPRK and US governments. It is important that, before I go on, to note that I think tourism and foreign investment is incredibly important in the DPRK, and advocate the expansion of both within qualified reason.

A few weeks ago, Robert Willoughby wrote an article arguing that any money, time, and manpower spent on building the tourism industry in the DPRK was good, as it took resources away from the controversial nuclear program. There are issues with Willoughby’s logic even before one begins to argue with the economics. As I said before, I support tourism and foreign investment as stabilizing factors on the Korean Peninsula, but some people support these ventures for questionable reasons or put too much faith in governments with significant and pervasive distrust between them.

Willoughby first presents the arguments that a) tourism takes resources away from military development and b) that tourism has a “very good rate of return”. He seems to be trying to convey that tourism is an energy intensive industry, so it will tie down resources, that will generate monetary returns that will be used in the upkeep and expansion of a tourism industry. He makes a good point that instability is bad for business and tensions are not always profitable, but he does not explain why this industry with good potential monetary returns could ‘tie down’ resources. Especially in a highly controlled and planned economy, a profitable venture’s returns are not guaranteed to be kept within the industry for expansion.

While a tourism blitz appears to be going on around North Korea, open source analysts are going to be hard pressed to prove where the returns are going. In particular, in a system that is known for pulling investments away from industries that are generating profit but which are not politically or strategically valuable, it is unreasonable to assume that capital and other inputs are going to stay within the tourism sector.

To definitively say that profit is being reinvested in the tourism industry, analysts would have to estimate the cost of expansion of new tourist facilities, which could only partially be tracked by finding the value of the Western-style roller coasters and related entertainment equipment showing up in state news and videos. Next, analysts would have to estimate the cost of maintaining facilities, equipment, and supporting logistics, which is more difficult, as the DPRK may not be adequately maintaining certain facilities, and the facilities that aren’t open to all tourists may not even be widely known enough to even show up in the estimates. In addition, the pay rate of workers, while dutifully tracked by analysts such as Curtis Melvin when the information is available, is not always available and can be incredibly difficult to gauge.

It’s unreasonable to say that “every dollar spent on a new hotel is a dollar not spent on centrifuges”, just as it’s unreasonable to go to the other extreme and say “every dollar spent on tourism is a dollar sent to a nuclear weapons program”. It is simply a paper trail that is incredibly difficult, if not impossible, for open-source analysts to definitively track and report as fact.

In the uncomfortably opaque economy of the DPRK, it isn’t unreasonable to say that every dollar returned from their investments could potentially go towards the military. There are two main instances in which money could be easily moved away from the tourism industry.

The first instance would be that the tourism industry has reached a comfortable level of profit, the level that Willoughby seems to say encourages the DPRK to get out of the missile business and stay in the tourism business, and does not need reinvestment of profits for continued existence and success. In this instance, the profits that are no longer being reinvested into the tourism industry are freed up for use wherever the government sees fit to put them, whether that be agriculture, heavy industry, weapons, or other sectors.

The second instance would be that the tourism industry is no longer politically or strategically relevant enough to warrant a continued reinvestment of profits. Without getting too deep into tangential political and strategic analysis, It is not unheard of for politics on the Korean Peninsula to sour or quickly reverse, and they could turn in a direction that makes it unrealistic or too internally destabilizing for the DPRK to continue investing its money. Profits that would, in a business environment, be reinvested to expand the industry could be pulled off for important national security projects, or really any project deemed more strategically important. If a dire enough situation were to arise, there would be little stopping the DPRK from shuttering even profitable businesses, as shown by the repeated closings of Kaesong.

In either case, the point is that profits and income can be pulled away from tourism ventures. What would be considered ‘normal business sense’ is not always applicable in situations when national security is put in jeopardy or there is even a mere threat of putting national security in jeopardy.

Furthermore, Willoughby’s assertion would require assuming that the DPRK would essentially abandon its nuclear ambitions, something which the government has repeatedly tied to national survival. The DPRK has repeatedly asserted that it has a sovereign right to build a nuclear weapons program and has been, to say the least, fairly emphatic over the years about keeping it. In addition, the nuclear disarmament of Libya and the subsequent fall of the Libyan regime probably has done little to convince the DPRK that disarmament leads to peace. While Brazil and South Africa may provide good examples of forgoing nuclear weapons for civilian ventures, Libya and arguably Iraq provide heavy counterexamples, showing what happens to countries unfriendly to the US when their nuclear deterrence (or perceived nuclear deterrence) is eliminated.

Willoughby also seems to be greatly oversimplifying, if not neglecting, serious issues between the governments of the DPRK, ROK, and USA. He claims that “geopolitics got in the way” of the Kumgangsan resort, as if only tensions and political gaming got in the way of business. For those unfamiliar with the incidents at Kumgangsan, in July of 2008, a South Korean tourist was shot to death after trespassing into a military area. This was the catalyzing event for South Korea’s suspension of Kumgangsan tours, and the escalation of issues that have kept the resort closed to South Korean tourists.

While an argument could be made that internal tensions between isolationist military factions and military-owned (or endorsed) commercial entities and factions affected the decisionmaking process, that is not the argument presented. The argument presented is that “geopolitics” stopped a specific money-making tourism venture, when at best politics contributed to keeping it closed. A shooting death incident closed Kumgangsan, and tensions over both the physical safety of South Korean tourists and the military situation on the Peninsula kept it closed.

The main point of all this is that there are serious issues among all the actors involved on the Korean Peninsula, and it’s ignorant and misleading to say that the encouragement of tourism in the DPRK saps strength away from the weapons and nuclear industry. Profitability in a single sector does not mean that a vast economic shift will occur, leaving previously stated legitimate national security objectives behind in favor of a risky and potentially threatening new industry.

There is simply not enough information available in the open-source analytic realm to make such a definitive claim.  Using proxies and economic modelling, trade analysts and economists probably can create fairly reasonable estimations or scenarios, but to make definitive claims and assertions is naive and misleading.

That being said, Willoughby is correct in saying that tourism and foreign investment both bring information flow and, especially if expanded, can work to decrease distrust and misunderstanding among all peninsular stakeholders. Things like an expanding tourism industry and the various impressive Tumen Triangle-type initiatives can help integrate economies and bring up the absolute number of international interactions.

While it is highly unlikely this would solve all problems, especially security issues, at a minimum new channels for interaction and discussion can be established. Tourism and foreign investment aren’t catch-alls for the reduction of tensions and arms on the Korean Peninsula. Taking vacations or tours is educational, but isn’t going to lead to a peaceful Peninsula without concrete steps in numerous other fields and sectors, and is irresponsible to think that simply visiting a country, spending some money, and taking some pictures is going to solve one of the most pressing and dangerous security issues in Northeast Asia.

On a more lighthearted note, the DPRK Food Policy Blog encourages all our interested readers to check out the increasingly amusing comment section of Noland’s response to Willoughby.

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2 Responses to Working in Tourism, Farming Bombs, Divining Opacity

  1. Pingback: Reintroducing the Blog | Rice and Iron

  2. Pingback: North Korean values, universal principles, and Ruediger Frank | Rice and Iron

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