North Korea’s rocket launch a test for Asia’s leaders

July 31, 2016

By Dhara Ranasinghe, CNBCGlobalPost Writer

This picture, released from North Korea’s official Korean Central News Agency on April 9, 2009, shows a Unha-2 rocket launch. The country said it would launch another rocket into orbit next month.
AFP

A successful rocket launch by North Korea could prove to be a key test not just for China's new leaders but also the politicians that will come into power in South Korea and Japan in elections that take place over the next week, experts tell CNBC.

Wednesday's rocket launch put a weather satellite into orbit, North Korea said. But to the US, Japan, and South Korea, the rocket is a test of technology that could be used one day to deliver a nuclear warhead capable of hitting targets including the continental United States.

The launch, almost a year after the death of former leader Kim Jong-il, puts North Korea and the risks it holds to regional stability in focus just days ahead of general elections in South Korea and Japan.

"The rocket launch is a reminder to us all to take North Korea seriously," Andew Gilholm, head of Asia analysis at consultancy Control Risks told CNBC Asia's "Squawk Box."

"The timing is probably most key in South Korea, and as far as the elections there are concerned, the North Koreans hope this test will underline the perceived failure of current President's Lee Myung-bak's hardline approach," he said.

Under Lee's presidency, South Korea has pushed hard for the North to give up its nuclear program.

"He has had the hardest line approach of any president in South Korea, yet at the end of his term the North Koreans are able to successfully launch a long-term missile, so the message there is that this hardline approach will not work," Gilholm added.

South Korea votes in presidential elections on Dec. 19, with the two leading contenders, Park Geun-hye of Lee's conservative new Frontier party and Moon Jae-in of the liberal Democratic United party, both saying they will pursue fresh talks with North Korea if elected.

According to Bruce Klinger, a senior research fellow at the Heritage Foundation in Washington, the developments in North Korea could give an edge to the conservatives in next week's vote.

"The liberals, will say this (rocket launch) is what happens when you have a conservative leader, the conservatives will say this is the kind of North Korea the liberals want to deal with. I think it will give a slight edge to the conservatives," he told CNBC.

Klinger, a former CIA deputy division chief for Korea, said the rocket launch could also strengthen the hand of Shinzo Abe, the head of Japan's opposition Liberal Democratic Party and leading in the polls to become prime minister in this weekend's elections.

Abe, prime minister between 2006 and 2007, favors revising Japan's post-war pacifist constitution to drop a self-imposed ban to exercise Japan's right to self-defense or helping an ally under attack. This means Japan's military would be able to shoot down a North Korean missile, analysts say.

"In the Japan elections, it (the North Korean rocket launch) will affirm the move to the right and support for Abe," Klinger said.

Time to Talk?

Analysts said that while the market and economic implications of renewed tensions with North Korea were limited, they were a cause for concern, especially when seen in the context of broader tensions in the region and a territorial spat between Beijing and Tokyo.

"They are all in focus and it would be unwise to ignore the tensions. These things have the potential to be exacerbated and have major political and economic ramifications, so need to be watched closely," said Robert Prior Wandesforde, Director, Asian Economics Research at Credit Suisse.

Whether or not to take a tough stance against North Korea is something the new leaders in South Korea, Japan and China will have to weigh against the past pattern of a North Korea being open to dialogue after rocket tests, experts said.

"Normally you would expect to see belligerence with a conciliatory tone and the timing may help that, especially with new leaderships in most of these countries which may give some leverage for a shift in policy and a new approach," said Gilholm, including the US in the list of countries that would be involved in talks with North Korea that have undergone or about to hold elections.

Analysts said they were watching China's response to North Korea closely following the start of a key political transition to a new leadership team."China is always a key factor … this time around it is a test of the new leadership and which way they will go, but so far we are not seeing a big difference in their response," Gilholm said.