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In-depth Business Intelligence
Books on North Korea
REPUBLICAN REFERENCE
Area (sq.km)
120,540
Population
22,224,195 (July 2002 est.)
Capital
Pyongyang
Currency
North Korean won (KPW)
Leader
Kim Jong-il
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Update No: 021 - (31/01/05)
Waiting for something to happen
On the surface, the first month of 2005 was uneventful for North Korea.
Externally there was no clear sign of movement towards renewed six-party nuclear
talks, as Pyongyang waited to see the stand of the new Bush administration.
Within, a typically militant new year editorial had nothing fresh to say; it was
silent on economic reforms, which have turned many lives upside down - few yet
for the better - and are reported (in Seoul) to be about to enter a further
phase. Behind the scenes, fierce debate doubtless continued over whether to 'do
a Libya' and come in from the cold, or remain defiant. Associated power
struggles, not least for the eventual succession to Kim Jong-il, will not have
gone away.
No sign of nuclear talks resuming
As January ended, there was no sign of a resumption of six party talks - the
two Koreas, the US, China, Japan and Russia - on the nuclear issue. These last
met in June; a fourth round was due by September, but North Korea refused to
attend. Even now that the new US president is known (if unwelcome), Pyongyang is
still waiting to see the stance of the second Bush administration. It will
doubtless welcome the departure of its most vocal adversary, under-secretary of
state John Bolton. Condoleezza Rice, the new secretary of state, is more of an
unknown but is close to Bush. Her citing North Korea as an "outpost of
tyranny" at her confirmation hearings on January 19th will not have gone
down well in Pyongyang. Elsewhere, vice-president Cheney may continue to play a
blocking role; but so far the new line-up contains no known hawks with special
animus over North Korea.
In early January two separate US congressional delegations visited Pyongyang,
the first in 20 months. Neither officially represented the US government, but
both had the White House's blessing. Tom Lantos, the senior Democrat on the
House International Relations Committee, was a sponsor of the North Korean Human
Rights Act (NKHRA) signed into law by President Bush on October 18th; North
Korea sees this as a plot to overthrow its system. Despite this, he met senior
officials whom he reported as keen to resume talks and for better ties with the
US; he predicted "a new chapter." Significantly, Lantos also met the
Libyan leader Colonel Muammar Qadhafi last year, playing a key role in Libya's
agreement to give up weapons of mass destruction WMD and resume ties with the
US.
A short-lived olive branch
Days later, Curt Weldon - vice chairman of the House Armed Services
Committee, and a Republican who backs engagement with North Korea - led a
bipartisan group of six. Last in Pyongyang in 2003 - the White House vetoed his
bid to visit again last year - Weldon met higher-level figures than Lantos,
including Kim Yong-nam, the titular head of state - but not Kim Jong-il. He too
returned optimistic: with seeming justification, when on January 14th the
official Korean Central News Agency (KCNA), in unusually fulsome language,
summarized North Korea's position as taking "a future-oriented approach …
instead of repeating the unpleasant past;" adding that that "the DPRK
would not stand against the US but respect and treat it as a friend unless the
latter slanders the former's system and interferes in its internal
affairs." A "final solution" to not only the nuclear issue but
all outstanding bilateral concerns was possible - provided "what [the] US
congressmen said would be formulated as a policy of the second Bush
administration." As summarized by KCNA, the visitors' stance was that
"the US does not antagonize the DPRK nor has any intention to invade the
DPRK and overthrow its system."
In a flurry of excitement which one would think long experience had cured, the
world's media seized on the word "friend," ignoring its context of
conditionality, to proclaim a radical new turn in North Korean policy.
Subsequent reversion to form in later KCNA bulletins suggests caution is in
order. Thus on January 20th KCNA slammed Human Rights Watch, "which claims
to be a US non-governmental human rights organization", for "a string
of trite vituperations" in its latest annual report; calling this
"malignant mud-slinging … sheer sophism fully representing the US hostile
policy toward the DPRK." If North Korea really believes US NGOs are
government pawns, this does not augur well.
Latest reports allege that Weldon was told in Pyongyang that North Korea has a
working nuclear device, bought from an unspecified source. Meanwhile China, as
host, is seeking to convene at least a working-level meeting to prepare for
full-dress six-party talks. The omens currently do not look propitious even for
getting the parties around a table, much less for genuine progress on the
nuclear and other issues. But spring might bring a thaw.
An angry stand-off with Japan
One possible spanner in the works is whether North Korea will agree to sit
down with Japan, with which relations have never been worse. KCNA on January
18th quoted the cabinet's daily paper Minju Joson: "the DPRK feels no need
to have inter-governmental contact with Japan any longer .. there should be only
'strong counteraction' against it and the DPRK should not rule out even physical
counteraction, if necessary." This anger is mutual, reflecting an impasse
over the abductions issue. As noted in last month's Update, DNA tests showed
that two sets of supposed remains of kidnap victims returned by North Korea are
not genuine. Pyongyang insists they are, and accuses Tokyo of a plot. Japanese
public opinion is outraged; it will be hard for prime minister Junichiro Koizumi
to resist calls for economic sanctions, which North Korea says it would treat as
an act of war. It is hard to see how either side can back down and move on
without severe loss of face.
New year editorial shrieks stale old tunes
Despite the seriousness of the nuclear issue, the domestic dimension is just
as important. As usual in the decade since the death of Kim Il-sung, a joint new
year editorial of three daily papers - Rodong Sinmun (party), Josoninmingun
(army) and Chongnyonjonwi (youth) - set tasks for "Juche 94"; as North
Korea calls 2005 in its own calendar, based on the great leader's birthdate.
Again as usual, this was a militant and politicized piece: the watchword of
Songun (military-first politics) was repeated 41 times, with calls to
"protect the unity and cohesion based on the Songun idea of Juche as our
own eyeballs".
Economics, conversely, received relatively short shrift, with largely familiar
themes. A "leap in production not seen in recent years" was claimed
for electricity generation and
railway transport, with headway also made in the "seeds revolution"
and land rezoning. As ever, calls for "an unprecedented boost in
production" did not say how to effect this. The defence industry was hailed
as "the foundation of the nation's military and economic potentials,"
with calls to "increase the country's military capacity in every way [and]
sincerely assist the People's Army … everybody should actively learn from the
People's Army's fighting spirit, work style and traits." Yet it was
agriculture that was called "the main front of socialist economic
construction this year," with calls for "a signal turn" in seed
improvement (still) and potato farming. Also emphasized were double cropping,
high-yield varieties, fertilizers and other chemicals, mechanization - and
beans.
This seems more a checklist of everything than a set of priorities, much less a
strategy. In similar vague vein, the editorial called on electricity, coal
production, the metal and light industries, and railway transport to "take
the lead in effecting a great surge in high spirit." There was a need to
"spruce up" Pyongyang, and "build many more modern dwelling
houses in urban and rural areas." Ominously, there was no mention of
markets or reform; just an oblique reference to "the need for the Party
organizations to give sincere help to economic work as party work and properly
combine political and administrative affairs."
Further reform is on the cards
And yet other reports suggest that further reform is imminent. On January
16th the Dong-A Ilbo, South Korea's oldest daily newspaper, citing anonymous
"multiple well-informed sources", reported that two days earlier,
North Korean factory and corporate accounting managers were summoned to
provincial-level meetings and told to expect a second round of reform from early
February, plus tighter enforcement of existing norms. Specifically, the new
measures are reported to include the complete abolition of central price
controls. Enterprises - Dong-A Ilbo says "companies," but that begs
the vital question of the legal autonomy of what in almost cases remain
technically state-owned firms - will instead henceforth be able, or indeed
compelled, to sell their wares at market prices; presumably to the buyer of
their choice. The system of the past two years of dual pricing - a state-set
price at state-owned stores, and a market price at markets - will be scrapped.
This will apply at all levels: not just smaller local enterprises but throughout
the system, including the state. One of the Dong-A's sources gave the example of
the state deciding to buy steel at the market price from the Kimchaek mill in
the northeast, the country's largest. This begs major questions: why is the
state still doing the buying, rather than a particular ministry or agency? Or
perhaps that is implied; greater autonomy for different organs of government
follows naturally in this process. A different doubt is political. If the
government demands all the steel it can get for the defence industry, that must
be an offer that cannot be refused, at any price, by any good loyal subject of
Kim Jong-il who did not want to risk an abrupt termination - possibly of more
than just his or her career.
As is logical, but radical, state planning of production and sales will also
cease: from now on these are to be "entrust[ed] to corporate
judgment." In a further blow to the old central planning system,
settlements "without exception" will now be made through banks, and
regular payment of taxes will be enforced. Fixed wage scales, too, will be
replaced by "autonomously decided piece rates by corporations." Even
the education and training of scientists and engineers (as well as workers) and
the development of new technology, tasks hitherto of government, will be
entrusted to factories and corporations; which will also be allowed to attract
foreign capital, establish joint ventures, and trade as they see fit.
Thatcherism with North Korean characteristics?
This last is odd, in that it is not new. For some years now firms have had
great autonomy to earn hard currency by whatever means; though they have found
few foreign partners. That detail may cast doubt on the overall reliability of a
report which, if true, suggests a radical embrace of Thatcherism with North
Korean characteristics. Such a 'big bang,' all at once strategy also
characterized the July 2002 measures: introduced overnight at one fell swoop
rather than phased in gradually. While one may admire such boldness, it also
smacks of an assumption that everything can be done by administrative fiat: the
state has but to snap its fingers, and everyone jumps. Yet that may no longer
work; especially as the state is busy sawing off the branch, or even trunk, on
which it sat for half a century and which is what gave it the clout to issue and
enforce such diktats.
This is to speak only of the specifically economic contradictions of a process
which, it goes without saying, will also have profound social and political
effects. Market economy and Stalinist-militarist polity really do not mix. As
firms and citizens grow used to being able, or forced, to look after themselves
and become autonomous economic actors, it can only jar all the more to be still
constrained politically by a state which now gives them nothing materially; yet
continues to make extreme demands on everyone in the name of loyalty to a
leadership and system which (until this belated U-turn) had manifestly failed.
Besides, even in the economic sphere this process has limits: the Songun policy
means the military's secret 'second economy' will still gobble the lion's share
of resources.
Militarism constrains reform
Not for the first time in Pyongyang, we see a curious, contradictory, and
surely unviable compartmentalisation. Technocrats are ordered to deliver the
goods (literally) - but must try to do so within a sacrosanct framework of
militarism and militancy, even if now this confined space is allowed to
introduce market principles. This cannot ultimately add up; even if the circle
is squared and the waters muddied by the fact that, as in China until recently,
the well-placed economic actors rushing pell-mell into crony capitalism and
making money include not a few connected to the armed forces.
Another unanswered area, if and as North Korea gears up to embrace more market
forces, is the status and enforceability of the kinds of overall sectoral
priorities set out (in broad terms) in the new year editorial. It is political
diktat, not market forces, which prioritises the defence industry, or declares
agriculture the "main front." Evidently the economy's most fundamental
strategic directions will continue to be set from the top and centre, on
political criteria. These in turn will determine budgetary allocations of which
sector gets what: again, no sign of market-led decisions here. Against this
background of ferment and contradictions, March's budget will be watched more
keenly than usual for any signs of change. A few real numbers, missing entirely
for the past two years, would be a start.
Elite and grassroots rumblings
Politically, hints of rumblings behind the scenes continue. Kim Jong-nam,
Kim Jong-il's eldest and reportedly estranged son, the subject of a rumoured
murder plot in Austria in November, briefly made email contact in December with
Japanese journalists who had spotted him at Beijing airport and given him their
cards. He denied being in exile: he was working for his country (he would not
say more) and "shuttling between Pyongyang and foreign cities for personal
reasons." Asked about the succession, he said no decision had been made -
"my father has absolute power on this issue" - before breaking off
contact; possibly piqued because the Tokyo press, even as they reported this,
doubted his identity.
Elsewhere, the February issue of Monthly Chosun, a leading and usually reliable
Seoul magazine, makes the amazing claim that in 1997 Kim Jong-il, his mistress
Chung Il-son, and a secretary named Park, obtained US entry visas using false
east European passports. Chung and Park allegedly visited several times, before
US intelligence spotted the ruse. The magazine also claimed that Ko Yong-suk - a
sister of Kim's now deceased consort Ko Young-hee - defected to the US in May
1998 with her husband, via the US embassy in Switzerland. She then tipped off
authorities that the dear leader was investing in the New York stock market, and
his investments were frozen. If true, this suggests that at a desperate time -
the throes of famine, with his succession not yet firmly assured - Kim was
pondering exit strategies; although the US seems a far less likely haven than
Russia, China, or Switzerland. Even now, some would argue, exile would be an
imaginative way to resolve the North Korea question - if it could be done. Some
generals might fight on.
At the grassroots, meanwhile, things may at last be stirring too. On January
18th a South Korean human rights NGO released what it claims are the first video
images of dissident activity in North Korea. The 35-minute tape, shakily shot,
shows two handwritten posters on a wall and a bridge. They read: "Down with
Kim Jong-il! People, let's all rise up and drive out the dictatorship!" An
unnamed leader of Youth Solidarity for Freedom, said to be one of 10 underground
groups, urges North Koreans to awaken from the "personality cult that has
made us fools" and stage "violent and nonviolent struggles. It's
legitimate … [to] refuse to go to work when your factory does not provide food
and living allowances." The tape is said to have been made in November,
apparently in the city of Hoeryong near the Chinese border. Its authenticity was
at once queried; previous reports of dissent have never been fully authenticated
(nor disproved). Yet it is hardly surprising if, at long last, amid extreme
privation and growing contradictions the worm is finally starting to turn.
Life remains grim
Earlier, the JoongAng Ilbo, a leading Seoul daily, obtained a 90-minute
videotape of daily life in Chongjin, the main city in North Korea's north-east.
Filmed last September, it was given to Japan's Nippon Television Network (NTT)
by a KPA officer assigned to border patrol, apparently to show the suffering
caused by a decade of economic crisis. Strange as this provenance sounds, unlike
other videos filmed covertly this has clear, stable scenes, suggesting that it
was shot openly. The remarkable footage includes a detention centre for
repatriated defectors, street children - one with a liquor bottle, barefoot and
toeless - and brisk public trials for prostitution, rape, robbery and using
forged US money (ironically, as dollars are believed to be counterfeited
officially in Pyongyang.) A woman who sold sex for W1,000 (66 US cents at the
market rate, or the price of a kilo of rice) was sent at once to a labour camp;
the report did not give her sentence, nor the fate of her partner.
Less graphically, a dismal picture of hunger and poverty was reiterated by the
UN World Food Programme (WFP), which has been feeding 6.5 million North Koreans
- nearly a third of the population - for almost a decade with no end in sight.
On January 27th WFP appealed for US$202 million to buy 500,000 tonnes of grain
and other aid for this year, despite the best harvest for a decade. WFP's
country director, Richard Ragan, was blunt: "Millions of children, women
and elderly people are barely subsisting because they lack both the quantity and
quality of nourishment they deserve." Two-thirds of the population, mainly
urban, remain dependent on the state's Public Distribution System (PDS), which
has been cut to a mere 250 grams daily: enough to meet only half their calorie
needs.
A sad paradox (if familiar from market transitions elsewhere) is that economic
reform, in the long term North Korea's only hope, in the short term aggravates
poverty. On top of its longstanding aid to children, mothers and the elderly,
WFP is now also targeting the new urban poor: many de facto unemployed, as the
end of state subsidies closes factories that cannot pay their way. Lat year the
market price of cereals tripled. WFP fears things may be worse in the 49 out of
203 counties (most in border areas) with 17% of the population where it is
denied access on security grounds, and which therefore receive no food aid.
In sum, both at home and abroad dark clouds loom over North Korea, with no
glimpse of blue sky. While such gloom is hardly new, increasingly one wonders
whether or when the long pent-up storm may break - unless Kim Jong-il has the
vision and clout to follow the Libyan example, and chart an unambiguous new
course towards sunnier climes.
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ENERGY
Aminex in North Korea deal
Aminex, the oil and gas exploration company, has agreed to buy 10 per cent of
Kobril, North Korea's state-controlled natural resources company, the Financial
Times reported recently.
The deal marks a rare foray for a western business into the reclusive communist
regime and reflects the country's growing desire to develop its oil and mining
assets.
For its 10 per cent stake in Kobril, Aminex said it had agreed to pay new shares
worth £200,000 to the North Korean government. Aminex would also pay a 5 per
cent royalty on revenues from future oil and gas discoveries in the country.
The first trance of shares, worth £100,000, would be issued immediately at 12p
each, Aminex said. The second £100,000 instalment, to be paid in cash or
shares, would be issued after a licence or production-sharing agreement is
signed.
Aminex said Kobril was North Korea's "vehicle for international cooperation
in the development of many areas of natural resources, including not only oil
and gas but also gold, coal, iron ore and coal-bed methane."
Brian Hall, chief executive of Aminex said: "This agreement cements our
excellent and constructive relations with the Democratic People's Republic of
Korea and represents a broadening of our existing advisory role in connection
with the creation of an international petroleum law for the country."
In September last year, Aminex signed a 20-year contract to help develop North
Korea's oil industry and modernise its ageing petroleum assets.
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