Kim Jong-un's New Year Speech
On January 1, North Korean leader Kim Jong-un delivered his annual New Year’s address. Like in past years, Kim addressed a domestic audience and summarized key developments and goals of the North Korean regime.
One of the most important themes of Kim’s speech was North Korea’s advancements in its nuclear and missile programs during 2017. Kim stated, “Our country’s nuclear forces are capable of thwarting and countering any nuclear threats from the United States, and they constitute a powerful deterrent that prevents it from starting an adventurous war.” He further stated that “a nuclear button is on my office desk all the time; the United States needs to be clearly aware that this is not merely a threat but a reality.”
U.S. President Donald J. Trump has already reacted strongly to Kim’s assertion, Tweeting “I too have a Nuclear Button, but it is a much bigger & more powerful one than his, and my Button works!” Trump’s Tweet received a mixed response, with many commentators on social mediadecrying the tone and the implied nuclear threat.
While Kim’s tone was assertive towards the U.S., he took a softer tack towards South Korea. Kim, among other appeals to inter-Korean unity, stated that “[a]s for the Winter Olympic Games to be held soon in south Korea, it will serve as a good occasion for demonstrating our nation’s prestige and we earnestly wish the Olympic Games a success. [...]. Since we are compatriots of the same blood as south Koreans, it is natural for us to share their pleasure over the auspicious event and help them.” He stated that North Korea is willing to dispatch a delegation to South Korea.
Kim’s outreach was warmly received by the South Korean government under President Moon Jae-in, who quickly arranged for high-level in-person talks to be held with North Korea. On Jan 9, 2018, the two delegations will meet at the Peace House, which is located in the inter-Korean demilitarized zone village of Panmunjom. The talks will focus on North Korea’s possible participation in the upcoming Winter Olympics held in South Korea and in reducing tensions on the Korean Peninsula.
The U.S. has warily welcomed the talks between the two Koreas, with the U.S. envoy to the UN Nikki Haley stating that the U.S. would not take any talks seriously unless North Korea abandoned its nuclear arsenal. President Trump called the upcoming talks a good thing and took credit for them, Tweeting “With all of the failed ‘experts’ weighing in, does anybody really believe that talks and dialogue would be going on between North and South Korea right now if I wasn’t firm, strong and willing to commit our total ‘might’ against the North. Fools, but talks are a good thing!”
Visions for Japan-South Korea-China in 2018
As North Korea is expected to continue testing ballistic launches and defying international law, the China-South Korea-Japan trilateral cooperation would be one of key factors to improving regional prosperity and stability in 2018. There are several critical issues that would affect the trilateral relations, including the South Korea-Japan comfort women agreement, South Korea’s deployment of the Terminal High Altitude Area Defense system (THAAD), China’s Belt and Road Initiative, and the U.S. involvement in the Asia-Pacific region.
The comfort women issue, regarding Japan’s abduction and sexual slavery of Korean women during World War II, could further dampen South Korea-Japan relations. Since President Moon Jae-in has stated that the 2015 comfort women agreement is flawed and asked for follow-up measures, Japanese Prime Minister Shinzo Abe may not participate in the opening ceremonies of the 2018 Pyeongchang Winter Olympic. Japanese Foreign Minister Taro Kono also said that Japan “strongly demands” that South Korea stand by the agreement.
While China-South Korea relations have been repaired since South Korean President Moon met with President Xi Jinping in Beijing, China expressed its dissatisfaction over the Korean deployment of the U.S. anti-ballistic missile system. These issues are expected to affect the China-South Korea-Japan trilateral high-level summit planned to be held this year.
Despite the political issues at hand, trilateral economic cooperation could increase in 2018. On one hand, South Korea and Japan may join the Belt and Road Initiative (BRI), which was proposed by Chinese President Xi Jinping in 2013. In December 2017, Japan has claimed its willingness to join the BRI by supporting BRI’s financial sector. Chinese media Xinhua alsoreported that South Korean politicians has announced their desire for their country to join the BRI.
How the U.S. interacts with the three countries will also play a significant factor for the three Northeast Asian countries. The U.S. has been a crucial partner for Japan and South Korea as threats from North Korea have grown. Japan and South Korea would aim to build a robust military collaboration with the U.S. Yet, China will be upset if the U.S. increases its presence in the region, especially when the U.S. is able to monitor Chinese military activities.
The missile was launched in a lofted trajectory, that is, almost straight up in the air. However, if the missile had been launched on a standard trajectory, it could have had a range up to 8,000 miles, potentially even reaching Washington, D.C.
North Korea - Cryptocurrency Mining and Hacking
In the face of increasingly stringent international sanctions, North Korea has turned to Bitcoin tofinance its missile and nuclear weapons programs. Bitcoin mining and hacking is North Korea’s latest method to earn hard currency, in addition to smuggling drugs and counterfeiting foreign currency.
Bitcoin is a cryptocurrency traded through online exchanges that can be used to purchase merchandise and services. A Bitcoin is created through a process of “mining”--that is, by using a special computational software to solve complex mathematical equations that reward “winners” with Bitcoin. Unlike fiat currencies, Bitcoin’s value is determined solely by trading on exchanges. Although trading data for Bitcoin is available publicly online, it and other cryptocurrencies are used to profit from or to finance criminal activities on the “Dark Web.” Troy Stangarone of the Korea Economic Institute (KEI) in Washington stated, “North Korea is an ideal country to use hacking and financial tools like [B]itcoin.” Cryptocurrencies are fast, easy, cheap and relatively anonymous way to move money. This makes cryptocurrency an ideal tool for North Korea toevade international sanctions.
In 2017, Bitcoin’s value rose by 1600% from just under $1,000 USD on Jan 1, 2017 to over $13,000 USD on Dec 31st, 2017. The rise in prices is largely being driven by Japan, South Korea and Vietnam, which accounted for 80% of global Bitcoin trading activity by the end of November 2017. In addition to evading sanctions, North Korea’s weapons testing and cyberattacks creates instability and uncertainty internationally, pushing up the price of cryptocurrency assets even higher. These activities create a vicious cycle in which North Korea demands ransom in Bitcoinsfor cyberattacks, then turning to use these funds to plan future illicit activities.
One example of this was the “WannaCry” ransomware attack, which crippled computers and took down servers at the U.K.’s National Health Service in October 2017. The Trump administration recently attributed these attacks to the Lazarus Group, a cybercrime group supported by the North Korean government. In April and December 2017, one of South Korea’s largest cryptocurrency exchanges Youbit was also attacked, leading to the company declaringbankruptcy. Bithumb, another South Korean exchange was attacked in February 2017 and had$7 million USD stolen. The incident was somewhat similar to the theft of funds from the Bank of Bangladesh's U.S. Federal Reserve Bank account in February 2016.
These activities represent a new and dangerous pattern of behavior by North Korea, which threatens economic and political stability across the globe. Their attacks put at risk critical infrastructure including communications, finance, and hospitals. North Korea does this with the intent to fund their missile and nuclear weapons programs.
South Korea's Move to Regulate Cryptocurrency
South Korea’s new regulations banning anonymous cryptocurrency exchanges will go into effect on January 20. The new regulations were announced earlier in late December and will only allow cryptocurrency exchanges with real-name bank accounts for deposits and withdrawals and ban new virtual accounts. People will be only allowed to withdraw money from their cryptocurrency accounts via separate banks but not make deposits. The regulations further strengthen “know your customer” rules common among banks, where cryptocurrency users will be required to identify themselves when depositing and withdrawing money. South Korea’s government also has the authority to shut down cryptocurrency exchanges within the country. The regulations will be implemented by South Korea’s Financial Intelligence Unit and the Financial Supervisory Service (FSS) by inspecting exchanges and banks.
The move to regulate can be seen as a response to the “Bitcoin craze” that has been happening globally. Bitcoin is the most popular type of cryptocurrency and its price reached a historic level at $20,000 in December after starting at $1,000 earlier last year. Due to South Korea being considered one of the most wired countries, it has become the world’s third largest market in Bitcoin trading after Japan and the United States. South Korea is also home to other major cryptocurrency exchanges, such as Ether, Bithumb, and Coinone and estimated to have one million registered traders in virtual currency. Choe Heung-sik, Governor of FSS warned of a Bitcoin bubble that can cause prices to plunge in the future. South Korea’s government also warned of the risks of cryptocurrency speculation that can lead to financial losses since virtual currency is not considered "legal tender whose value is guaranteed by the central bank." Thereare currently no regulations to protect virtual currency investors as it is not considered a financial product. Earlier in September, the government banned ICO (initial coin offering), in which blockchain-based digital currency is made to buy and sell products that is beneficial to startups’ fundraising.
Responses were varied to the new regulations. A Seoul-based law firm, Anguk Law Offices filed a constitutional appeal on December 30, claiming that the new regulations violate property rights. According to the law firm, the regulations were made without legal grounds as there is no legal basis in current financial law affecting cryptocurrency, and the South Korean government does not consider it as a legitimate financial product or currency. They argued thatcryptocurrency should therefore be treated as goods and commodities that are allowed to be traded freely. When the regulations first were announced in late December, Bitcoin and other cryptocurrency prices fell varying from 8% to 12%. Cryptocurrency exchanges, such as Bithumbmoved to revise their terms of services to comply with the new regulations, such as prohibiting access to minors and foreigners.
Analysts said that while cryptocurrency prices will be volatile, eventually cryptocurrency will stabilize as part of a legitimate financial market. They said the South Korean government needs to encourage ways to stabilize and legitimize the cryptocurrency market that protects investors as there are many benefits to digital currency. Analysts worry that the regulations can impede innovations in blockchain technology which Bitcoin is made from. Blockchain is a technology that can be used to exchange and store money information without the need for a third party to verify information. Governments and banks globally are looking into how the technology can transform banking and how government can operate. Analysts said that South Korea’s government should look into encouraging the growth of blockchain along with regulations for responsible use of digital currency in line with the Moon Jae-in’s administration’s goal of a “sharing” economy.
Fewer South Korean Students Studied in the U.S. in 2017
According to the Institute of International Education’s (IIE) annual report, Open Doors, the number of South Korean students who studied in the United States decreased for the sixth year in a row in 2017. Although South Korea reclaimed its spot as a top 3 sending country of international students to the U.S., the number of students fell to 58,663, the lowest it has been in over 10 years.
In contrast, South Korea is ranked as number 20 for the U.S. in terms of destinations for American exchange students. The number of American students who study in South Korea has steadily risen since 1999 and, according to IIE, 3,622 American students studied in South Korea in 2016. The top 5 study abroad destinations for American students in order from top to bottom are the United Kingdom, Italy, Spain, France, Germany, which collectively account for over 40% of all American students abroad, or 133,123 students.
While fewer students from South Korea have come to the U.S. over the past decade, the number of overall South Korean students who study abroad has gone up in recent years. Between 2015 and 2016, South Korea’s Ministry of Education reported that over 9,000 additional students studied abroad. A large factor affecting South Korea’s outbound study abroad trends is money. As study abroad in the U.S. becomes more expensive, many South Korean students choose closer and more affordable options such as China and the Philippines.
Another likely reason for the decline in South Korean students in the U.S. is South Korea’s low birth rate and changing age demographics. Fewer South Korean students in the U.S. also means a smaller economic impact. The U.S. Department of Commerce estimated that international students from South Korea contributed $2.3 billion to the U.S. economy in 2014 through tuition, fees, and living expenses. The study abroad market players in both countries will need to capitalize on alumni networks, create and strengthen institutional partnerships, and market to specific academic majors to expand in 2018 and beyond.
This Week in History: South Korea's Ban Ki-Moon Starts Term as New Secretary General of the United Nations
On Jan 1, 2007, South Korea’s former foreign minister, Ban Ki-Moon officially succeeded Kofi Annan as the eight United Nations Secretary General. He was the first Asian to be UN Secretary General since U Thant of Burma who served 1962-1971. He was first appointed in October 2006 by the UN General Assembly. Ban, in his first term, faced numerous challenges such as the nuclear weapons issue in both North Korea and Iran, the humanitarian crisis in Darfur, and UN reform. Ban’s accomplishments include organizing the 2017 Climate Change Summit, raising the issue of climate change, helping create the UN Women, an agency that works on gender equality, and successfully appealing to G20 countries for $1 trillion in aid for developing countries during the 2008 global economic crisis. He was unanimously elected for a second term in 2011.
Shifting Perspectives: South Korean Views of the Alliance, North Korea, Japan and China
12:00 PM- 1:30 PM, Tuesday, January 9, 2018
Korea Economic Institute
1800 K Street, NW Suite 300
Washington, DC 20006
Security Challenges in East Asia
2:00 PM- 3:30 PM, Tuesday, January 9, 2018
Woodrow Wilson Center
One Woodrow Wilson Plaza
1300 Pennsylvania Ave., NW
Washington, DC 20004-3027
2018 Multi-APA New Year Networking Happy Hour
Hosted by DC Asian Pacific American Film
6:00 PM- 8:30PM
801 E Street Northwest
Washington, DC 20004
2018 SID-Washington Career Fair
Hosted by Society for International Development- Washington Chapter
10:00 AM- 5:00 PM, Tuesday, January 30, 2018
Marvin Center Theatre - George Washington University
800 21st Street NW
Washington, DC 20052