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  • Posts Tagged ‘Korean peninsula’

    3 Reasons why North Korea repatriated 6 South Koreans

    October 29th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    South Korea’s Unification Ministry announced the return of the six men, aged between 27 and 67, at the truce village of Panmunjom Friday, along with the body of the South Korean wife of one of the defectors. The six South Korean citizens was a curious move by North Korea, in which the KCNA (Pyongyang’s official news agency) announced that it “leniently pardoned” the individuals prior to their release back to South Korea.
     
    In a continued series of predictably unpredictable (yet potentially rational) moves by one of the world’s most secretive and closed states, here are three things to know about North Korea’s latest move:
     
    1. COLD WAR CALCULUS: North Korea’s move was more than a mere “olive branch” based on good will for recent failed talks related to family reunions and other related efforts, as many have speculated. Instead, it is part of Pyongyang’s ongoing Cold War calculus, which somewhat resembles a multi-dimensional chessboard in which the country’s top minds game scenarios on how to maximize the chance of power perpetuation. In its Cold War calculus, Pyongyang has concluded that a perceived good will gesture at this point would maximize future economic and non-economic benefits in various forms, including bilateral and multilateral talks with members of the international community.
     
    2. EMPATHY EFFORT FROM THE INTERNATIONAL COMMUNITY: North Korea has repatriated six South Korean nationals to be perceived in a better light from the purview of the international community, both at the leadership level as well as the everyday person. The DPRK understands that such perception is one important piece among many complex moving pieces to garner possible support through efforts meant to garner empathy from those outside its traditional allies (namely, Beijing) in a form of international security hedge play.
     
    3. PROVOCATION PRECURSOR: One pattern from Pyongyang is that a perceived good will gesture can at times be followed by a direct or indirect act of provocation. This is somewhat akin to a finance play involving a perfect hedge that involves taking a risk position for potential gain that is completely (perfectly) hedged by another play to mitigate such related risk. If Pyongyang believes in that such international security hedge can work in reality, then it may actually incentivize North Korea to take even more risk now or in the future.
     
    For a related article by CNN.com by Tim Hume, in which Jasper Kim is quoted, CLICK HERE.

     
     
     
     
     

    Why North Korea is a risk-taker

    May 23rd, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    The analysis below is an excerpt based on the original piece, North Korea’s Risk-taking Explained (by Jasper Kim, Wall Street Journal, Korea Realtime, May 22, 2013), which can be read in full HERE.
     

    Most commentators who track the country say it would never aim to initiate a war with South Korea and its allies because that would inevitably lead to the end of the Kim Jong Un regime. Self-preservation is something the Pyongyang leadership has been very successful at over the last six decades.
     

    So what explains the North’s apparent affinity for risk in routinely confronting the South, mostly verbally but occasionally with deadly force?
     

    Mathematical modeling helps explain the counter-intuitive marriage of risk-taking and rationality at the heart of decision making in North Korea.
     

    Consider you have one of the two choices:
    A: Receive $80 guaranteed; or
    B: Receive a 90% chance to receive $100
     

    Which option should a rational decision maker chose? Studies show that most people would decide to take option A, the sure thing. The thinking is that it is generally better to receive a guaranteed return even if it means receiving less.
     

    But the rational choice is actually option B. Getting to the answer requires what’s called a standard expected value calculation. The expected value of option A is $80 (100% x $80 = $80). The expected value of option B is $90 (90% x $100 = $90). So, because $90 (option B) is greater than $80 (option A), option B would be the rational choice even though it involves taking a risk. 

     
    In the above example, the expected higher gains in option B — equivalent to regime survival — have incentivized risk-taking by North Korea, especially if it doesn’t believe an option A exists.

     
    * The U.S., South Korea and Japan are defensively postured and risk-averse because the aspiration point is primarily maintaining their current position (in terms of preserving military and economic interests);
     
    * North Korea is offensively postured and risk-seeking because its aspiration point is gaining more than its current position (in terms of actively pursuing economic and non-economic assistance and diplomatic recognition).

     

    Given the current incentive structure from North Korea’s view, the Stalinist state sees only incentives to take further risks. As a result, the DPRK’s provocation cycle will only continue, unless the current incentive scheme is changed.
     

    Korean Peninsula on edge – inside post-Gen X Kim Jong-Un’s head (Update)

    April 12th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    With the Korean peninsula on the edge of a possible multiple missile test, US Secretary of State John Kerry is scheduled to land onshore in South Korea today.
     
    The purpose of Secretary Kerry’s visit is to listen to the situation from an on-the-ground perspective and calibrate such views with those in Washington.
     
    Most likely, North Korea’s actions of belligerent and bellicose rhetoric is another attempt to put fear into the international community as a strategy to bring South Korea, the US, and other states to the bargaining table, as it has done with success in the past. South Korea has indirectly hinted yesterday that it is willing to seek dialogue with North Korea. So it seems that North Korea’s negotiation strategy of bipolar brinksmanship (good DPRK, bad DPRK), is a moderately effective one.
     
    We believe, despite the odds against it, that a possible “black swan” event exists in which a low probability event can occur that results in high levels of potential damage. Neither side of the DMZ wants a war. But the risk is of possible miscalculation by either or both sides. From North Korea’s perspective, artillery shelling of an island or warship killing military personnel and civilians did not lead to a military response from South Korea (e.g., the attack on South Korea’s Cheonan warship and Yeongpyeong Island, both in 2010). Similarly, two missile launch attempts last year in 2011 and nuclear weapons tests in 2006 and 2009 also yielded no military retaliation, only diplomatic consternation. Thus, its assumption (which may no longer be valid) is that a similar, or even slightly amped down action, will likely lead to the same type of direct military non-response from South Korea and/or the U.S. According to the DPRK’s possible war game calculus, at most, only more mere sanctions may be imposed upon it. This would sway most states, but not so much with the DPRK, an already super-sanctioned state.
     
    In theory, economic sanctions should deter a “rational” state. But North Korea is not a fully rational state–rather, the DPRK is an emotional, Stalinist state. Thus, economic sanctions–counter to its intended purposes–has made North Korea more belligerent. Further, indirect recent criticism of North Korea from China’s new president, Xi Jinping, may add to North Korea’s paranoia that the international community is against it. If the DPRK feels like it is being backed into a corner, rational behavior can be trumped by fear, which then leads to action that is viewed as “reasonable” and “defensive” from its perspective, but “unreasonable” and “provocative” from an outside perspective.
     
    It’s been said that North Korea’s post Gen-X dictator, Kim Jong-Un, does not want to commit suicide by attacking South Korea, the U.S., or their allies. But what about the possibility of an “accidental provocation” that was neither intended or foreseen?
     
    If a single bullet triggered conflict in Europe and World War 1, could not a small yet unlikely “black swan” miscalculation–defined to include such iterated or non-iterated acts as artillery shelling, transboundary incursions, military technology testing, cyberattacks as well as traditional military provocations–occur and lead to another conflict in South Korea in the future?
     
    Hopefully not. But just like we have life insurance for remote, statistically unlikely possible events, we should also consider the insurance (foreign/military) policy in the event of such unlikely yet possible future black swan events as it affects geopolitics and our highly interconnected global capital markets.
     
    Some may argue this is overly contrarian and alarmist. But such views were also heralded prior to the subprime crisis. As a geopolitical risk management solution, however unlikely or not, contingency and exit plans in the short-run carry little downside, while buying opportunities may exist soon thereafter as the markets become overly discounted due to such inter-Korean tensions.

     

    See below media clips on this issue:
     
    WSJ: Korean War 2? Tiger Tails and Black Swans – by Jasper Kim

     
    – Austria Broadcasting Corp (FM4): South Koreans “on edge”

     
    Australia Network News (ABC), Newsline with Jim Middleton interview segment
     
    CNN TV interview – with Jasper Kim (Power of the Kim dynasty):

     
    – CNBC TV interview – with Jasper Kim (Worldwide Exchange):
     

     
     
     

    North Korea’s “war” declaration: made for domestic consumption but potential for “black swan”

    March 30th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    North Korea has just declared “war” on South Korea.
     
    This is the latest in a streaming series of increasingly bellicose statements from the DPRK and its 20-something leader, Kim Jong-Un.
     
    While many commentators are taking a bet (position/view) that North Korea will not do anything that will provoke war on the Korean peninsula, we believe that a certain amount of attention must be focused on a possible “black swan” event in which a small foreseen or unforeseen event can trigger retaliation by the other side per the responding country’s rules of engagement. Unlike recent skirmishes and attacks along the inter-Korean border region, this time both Koreas are on extremely high levels of military alert akin to two sprung traps in which even a small event can trigger a larger-scale conflict.
     
    We also believe that most of North Korea’s rhetoric is for the public consumption of North Korea’s military brass and general public, in that order. Such acts are in part an effort, perhaps even a desperate one, to secure domestic support, implying that Kim Jong-Un may be losing support at home. Because of Kim Jong-Un’s age (under 30), and inter alia, that he is the nation’s 3rd-generation ruler from the Kim dynastic clan (a “3-3” risk factor), North Korea’s leader has to take a constant “hyper-hawkish” stance to dispel any notion that he may be weak and dovish towards the nation’s historic enemies. Within a Korean cultural context, even one day difference between two people can vastly change relational dynamics.
     
    Below is a quote from a recent CNN story and video clip related to North Korea’s increasing threats, featuring Jasper Kim of the Asia-Pacific Global Research Group:
    “First and foremost, it’s for his domestic audience,” said Jasper Kim, founder of the Asia-Pacific Global Research Group in Seoul, South Korea. “Because without the support of the military, he won’t be around for much longer. And so he has to bolster his support with the brass.”

     

     

    North Korea’s missiles & markets – why DPRK defiance dips are market opportunities

    February 13th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    North Korea’s underground “mini” nuclear test may have rattled the financial markets. But financial history has shown that short term market dips directly following the defiant DPRK’s provocative acts often lead to buying opportunities.
     
    This is assuming that a “black swan” event does not occur in which a small provocation can escalate, purposely or accidentally, into a larger-scale conflict.
     
    Shares of defense companies skyrocketed by the daily limit of 15 percent at the news of the North’s test. Shares of Speco jumped by 15 percent and closed at 3,795 won. Victeck surged by 14.94 percent to close at 2,500 won and Firstec closed at 2,495 won, up 13.41 percent.
     
    Here’s a recap of North Korea’s recent provocative acts, and how the financial markets have dipped and then strengthened (based on publicly available sources).
     
    DPRK’S NUCLEAR TESTS:
     
    – North Korea’s third nuclear test yesterday (2/12/2013): had a minimal impact on the South Korean stock market. South Korea’s Kospi closed at 1,945.79 at 3 p.m. yesterday, down 5.11 points from Friday. (The market was closed on Monday for the Lunar New Year holiday.) During the day, the Kospi slipped slightly by 0.08 percent to 1,949.39 at 12:10 p.m. after news reports that the South Korean government detected man-made seismic activity in North Korea’s North Hamgyong Province at 11:58 a.m. The test also had meager influence on the local foreign exchange market as foreign dealers said the Korean won depreciated to 1,095,8 won against the dollar at 12:17 p.m., but rebounded to 1,091.25 won at 1:11 p.m. and closed at 1,090.80 won yesterday.
     
    – North Korea’s second nuclear test on May 25, 2009: the Kospi plummeted as much as 6.31 percent during trading hours but it recovered to 1,400.90, down 0.2 percent from the previous day. In the three months after that test, the Kospi jumped by 20 percent and reached the 1,600-something level.
     
    – North Korea’s first nuclear test on October 9, 2006: KOSPI fell 2.41% but was up 0.96% ten days afterwards;
     
    DPRK MISSILE LAUNCHES:
     
    – Launching of Kwangmyongsong-3 on April 13, 2012: KOSPI gained 1.12% on launch date, but was down 0.57% ten days after the launch (relative to the KOSPI on launch date)
     
    – Launching of Kwangmyongsong 3-2 on December 12, 2012: KOSPI fell 0.55% on launch date, but was up 1.65% ten days after the launch (relative to the KOSPI on launch date)
     
    OTHER EVENTS:
     
    – Death of Kim Jong-il, former DPRK leader, announced in December 2011: the Kospi shed 4.86 percent during trading hours but finished at 1,776.93, down 3.43 percent. The Kospi subsequently gained 10 percent and reached the 1,915 level just a month after Kim’s death, market observers said.
     
    – North Korea firing of artillery shells at South Korea’s Yeonpyeong Island on Nov. 23, 2010: the Kospi managed to rebound just three days after the attack and it jumped by 8 percent a month later.
     
    So as a possible investment strategy, when the “herd mentality” and “group think” of the markets are exiting (selling), one low risk strategy would be to buy i.e., be greedy when others are fearful.
     
    For a clip of Jasper Kim (founder, Asia-Pacific Global Research Group) featured on Bloomberg TV on this topic, see below:
     
     

     
     

    North Korea’s Nuclear Test – predictably unpredictable (4 Impacts)

    February 12th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    1) North Korea’s motivation for the nuclear test
     
    North Korea’s objective with today’s nuclear missile test is to put the international community on edge vis-a-vis its predictably unpredictable acts. By such acts, North Korea will garner the attention, frustration, and fear of the international community, which the DPRK hopes it can convert into diplomatic talks, either bi- or multilateral, which is a forum in which it can solicit economic and non-economic aid, a critically important factor given the dire internal conditions of North Korea today.
     
    2) What to look for now that North Korea has gone through with its nuclear test

    This is North Korea’s third missile test since 2006. There are two things that could be of potential risk going forward. First, whether the DPRK’s nuclear test was based on plutonium or uranium enrichment technology. While North Korea’s plutonium stockpile is relatively fixed and limited–thus placing a potential ceiling on the number of nuclear warheads it can produce with plutonium–a successful uranium enrichment nuclear test would signal that North Korea could continue with producing more weapons grade nuclear material for many years to come. Second, expect the DPRK to continue its saber rattling and brinksmanship, especially in the early days of South Korea’s new incoming president, Park Geun-hye, given the unique history between her father, Park Chung-hee (South Korea’s president from 1962-79) and the DPRK’s leadership in the 1960s and 1970s. In short, North Korea will test President Park’s mettle early.
     
    3) What to expect from North Korea now that it has conducted its third nuclear test?
     
    Expect North Korea to follow-up its nuclear test with further provocative acts, up to the very limit of what it thinks can be done without military repercussions. North Korea’s confidence in this respect is based on the international community’s interest in keeping the Northeast Asian region peaceful and stable. After all, if socio-political conditions deteriorate, international security as well as economic conditions can spiral downward quickly and rapidly, given that the Asian markets could turn into another “Asian contagion” effect based on such “black swan” event. The risk of North Korea’s stance is that things may go over the edge, purposely or accidentally, since the two Koreas are on high alert, akin to two sprung traps ready to snap at any given moment.
     
    4) More sanctions against a super-sanctioned state
     
    Several UN resolutions have been enacted against North Korea with little effect. This is not entirely surprising given that North Korea is a super-sanctioned state–that is, one of the world’s most sanctioned states. So more sanctions on top of a plethora of already existing sanctions will not likely be effective. As a Stalinist state, North Korea is seeking legitimacy and respect among its neighbors. Yet it also harbors a deep fear and suspicion of such neighbors. A carrot and stick approach of, for instance, a Reaganesque ramping up of military defense spending along with strategic carrots in the form of performance-based incentives and aid through verifiable and sustainable calibrated expected future behavior, for the benefit of both Koreas, among others, could be one step in the right direction.
     
     
     

    re: North Korea and cyberattacks – 4 Factors

    January 17th, 2013  by  Asia-Pacific Global Research Group - Jasper Kim

    The Q&A below is taken from a radio interview with a local South Korean broadcaster (interview date: Jan. 17 ’13).

     
    1) How come North Korea is frequently accused of targeting South Korea’s cybersphere? What have been some of the major online attacks
    so far and what?

     
     For North Korea, engaging in cyberattacks represents a greater strategic advantage compared to traditional military or paramilitary attacks using armed military personnel, bombs, and aircraft.
     
     Today, South Korea’s JoongAng Daily (JAD) newspaper concluded that the hacking of its servers was in fact linked to North Korea. This was the fifth time an alleged North Korean cyberattacks were detected, following distributed denial-of-service (DDoS) attacks on websites of government agencies and financial institutions in July 2009 and March 2011; the hacking of Nonghyup’s banking network in April 2011; and additional hacking of email accounts belonging to students at Korea University in November that year. There were also alleged cyberattacks from the DPRK targeting South Korea’s Incheon International Airport that could have potentially caused confusion with the airport’s heavy air traffic as well as a relatively recent cyberattack on the GPS systems many Seoulites depend upon to navigate Seoul’s busy and often complicated street ways. More concerning, cyberattacks were also aimed at the Blue House and National Assembly. One estimate by the Hyundai Research Institute puts the loss value for FY 2009 alone at $33.7-50.5 million.
     
    2) How big of a threat is it to be attacked by North Korean hackers, assuming that their internet technology is far behind that of South Korea’s? Describe North Korea’s internet culture.
     
    No one really knows for sure, but as far as we can tell, there’s not much internet technology to speak of in North Korea, apart from a couple of universities, which are most likely closely monitored by the North Korean government. North Korea, much like South Korea, actively recruits top students to become part of the governments’s military cybercommand units. So it seems, in a sense, that all those hours of video gaming could actually pay off, since some overlapping skill sets exist.
     
    3) Cyberattacks are perceived by some to be less harmful than conventional military attacks. So should the public be fearful?
     
    Yes, since cyberattacks can often inflict just as much damage as attacks using “kinetic” weapons such as missiles, bombs, and bullets. For instance, a cyberattack could be aimed at an electric grid, which could then cut off the power source for hospitals in a city or country, wreaking havoc on the system.
     
    4) How does the global community or the international law under the UN Charter, specifically, properly address such cases of cyberattacks and cyberwar?
     
    As of now, little legal infrastructure exists to reflect the burgeoning capabilities of cyberattacks and cyberwar.
     
    Article 51 of the UN Charter, originally drafted right around the end of WWII, states that a state has the right to collective self-defense if “an armed attack occurs.” But this language was written when PCs and the internet did not exist. So the question becomes: Does a cyberattack inflicting military and/or non-military personnel constitute an “armed attack” under Article 51 of the UN Charter? If yes, then a state can in theory preemptively attack another state for purposes of collective self-defense, as was the case in the Middle East in the past when one state pre-emptively attacked another state
    s nuclear weapons production facilities, claiming self-defense.
     
    Expect more cyberattacks in the Korean peninsula for 2013–leading to greater potential economic and non-economic losses – it is the future of warfare in the 21st century, for better or worse.