While its economy has been easy to ignore for the last several decades, North Korea still holds sway in Asia. And although the region’s markets are currently strong enough to take a few knocks in stride, the death of North Korea’s “dear leader” Kim Jong Il this week could potentially bring a lasting new layer of risk to the area.
Asia has been a bright spot through the global recession and the economy’s underwhelming recovery, but it remains far from immune to danger. Stock markets in the region fell on the news that Kim had died yesterday, none more notably than the Korea Composite Stock Price (KOSPI) Index, which fell 4.2%. “The Korean stock market has reflected the sign of public concern and fear as to national insecurity,” said Kyle Choi, Esq. of Bluestone Law, Ltd. “Furthermore, the value of the Korean currency has, at least temporarily, depreciated right after the news.”
While these indicators are expected to recover quickly, the question mark in the area now becomes Kim’s son and successor, Kim Jong Un.
The younger Kim remains untested and inexperienced, and could face considerable difficulty in his attempts to take the same level of control that his father once wielded over nearly every aspect of the country. These difficulties could exacerbate the tortured relationship North Korea has with the world, and with its own people, creating bigger problems in the form of the nation's chronic food shortages, political challenges and military security.
“It all depends on the new North Korean leadership’s position,” said Choi. “If the new leadership decides to maintain the hostile attitude towards South Korea that the previous regime did, it can very much affect the economy adversely, either in the short-term or in the long run.” Security threats could very easily become an issue as well, as the new leader seeks to assert himself militarily, possibly in the form of another nuclear test, which would disrupt regional and market stability even further.
Investors and exporters are never excited about uncertainty, and while North Korea has been, economically speaking, a non-entity in the region, how the questions surrounding the country’s young new leader are answered could determine much of the continent’s future as an economic powerhouse.
Jacob Barron, CICP, NACM staff writer