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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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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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