Archive for November, 2003

S Koreans’ first visit to Pyongyang

Saturday, November 15th, 2003

Charles Scanlon

A hundred South Koreans are visiting the North Korean capital, Pyongyang, for the first time since the peninsula was divided in 1945.

They left on the first commercial flight between the two Korean states.

South Korean tourists have already travelled to an isolated mountain resort in North Korea in recent years, but this is the first time they have been able to see the capital of the communist state.

Nearly 120 people signed up for the five-day tour, at nearly $2,000 a head.

For that they will be able to see monuments to the ruling Kim dynasty, visit a model farm, the railway station and see a state-run kindergarten.

A company official said the idea was to let South Koreans see how Northerners live.

But they are not expecting to be allowed much contact with ordinary citizens.

Despite growing economic links, the North Korean regime goes to extraordinary lengths to block outside ideas and information.

One of the tourists said she had not been able to see relatives in the North for half a century, and did not expect to be allowed to see them during the visit.

Another, a professor of North Korean Studies, said he hoped the visits would help unification.

The travel company, Pyeonghwa, is an affiliate of the Unification Church of Moon Sun-myung, which recently opened the first car assembly plant in North Korea.

It hopes to take 2,000 visitors to Pyongyang before the end of the year.


S&P Highlights Costs of Korean Reunification

Monday, November 3rd, 2003

According to the Financial Times:

John Chambers, managing director for sovereign ratings at S&P, told reporters in Seoul that state collapse in North Korea was just a matter of time and could cause a bigger shock to the South’s economy than the 1997 Asian financial crisis.  He urged South Korea to build financial reserves to cope with the cost of reunification.

North Korea has started to reform its rigid command economy in recent months by liberalizing prices and wages but S&P said the regime was too rigid to emulate the market openings adopted by communist governments in China and Vietnam.

“Although some other Asian nations that used to have centrally planned economies have successfully moved to a market-based system, the North Korean leadership probably lacks the flexibility and the vision to undertake such a change,” said S&P in a statement. “Unless South Korea has substantially built up fiscal reserves in the meantime, its [credit] ratings would fall from their current level upon sudden reunification of the peninsula.”

Analysts have been predicting collapse of the North Korean regime since 1989, when communist states started to fail in eastern Europe. The state has proved more resilient than many expected, surviving a famine in the mid-1990s that killed at least 1 million people and recording modest economic growth over the past three years. However, dwindling international food aid to the country and U.S. attempts to block some of the regime’s most important sources of cash, such as exports of arms and drugs, has prompted fresh doubts about the durability of the world’s last Stalinist state.

Mr. Chambers said reunification with the North could cost South Korea up to 300 percent of its annual gross domestic product, considering the reconstruction and welfare provisions that would be necessary.

South Korea’s policy of engagement with its neighbor – including humanitarian aid and economic co-operation – is designed to prevent economic failure in the North and encourage gradual reform of its economy and political system.

In a recent report, Dominique Dwor-Frecaut, economist at Barclays Capital, said state failure in North Korea need not lead to credit rating downgrades in the South. She said the cost of reconstruction would be spread over many years and would be offset by the economic benefits of reunification.

“The Korean peninsula could become a new Asian economic powerhouse if it could associate Chinese-level labor costs in the North with OECD-level financial and legal systems and R&D in the South,” she said.