North Korean Economy Watch

According to the Korea Times:

In Oct. 2006, a nuclear test was conducted in the remote mountainous area of North Hamgyeong Province, North Korea. This test did not come completely out of the blue. The North Korean government issued an official warning, thus becoming the first nation in history that gave prior notification about a coming nuclear weapons test. This openness might sound strange since we are talking about the world’s most secretive country, but it agrees well with the general character of the North Korean nuclear program. From its inception, the program was largely (but not exclusively) for show, it was aimed at impressing the outside world in order to manipulate it and get what the North Korean leaders wanted to get.

Even though North Korea joined the nuclear club only recently, its nuclear program has long history. It has remained the center of international attention since around 1990, but it began much earlier.

It was the mid-1950s when the first North Korean scientists arrived to work and study in the Joint Institute of Nuclear Research in the Soviet city of Dubna, not far from Moscow. This institution was created by the USSR or former Soviet Union for joint international research in nuclear physics, and until the early 1990s some 250 North Korean scientists underwent training there. Soon afterwards, in 1959 the former Soviet Union and North Korea signed their first agreement on cooperation in nuclear research. A similar agreement was concluded with China as well (Pyongyang never puts all its eggs in one basket!).

In the 1960s, the North Korean version of Los Alamos began to take shape. This role was assigned to the city of Yongbyon, a rather small town, located some 90 kilometers to the north of Pyongyang. It is interesting that, for reasons of greater secrecy, the nuclear research facility was called the “Yongbyon furniture factory.” The major article of infrastructure of this “furniture factory” was not a saw-mill but rather a small Soviet-designed research reactor, completed in 1965. In the 1970s, the North Korean scientists independently modernized the reactor, increasing its output.

There are few doubts that from the very early stages Pyongyang leaders seriously considered the possible military applications of their nuclear research program. But it seems that the North Korean nuclear program made a decisive turn towards military applications in the 1970s. At that time, South Korea was working hard to develop nuclear weapons of its own. For the North, which has always had good intelligence about its arch-enemy, these intentions was hardly a secret, so it seems that around 1975 the North Korean political leaders decided not to lag behind and sped up their own nuclear program.

However, the major obstacle on the path to the acquisition of nuclear weapons was the position of the former Soviet Union. Moscow took non-proliferation seriously, and did everything to control Pyongyang’s nuclear ambitions (incidentally, Washington treated Seoul’s nuclear plans in much the same manner). China also did not want a nuclear power across its border, so the usual North Korean strategy of playing Beijing against Moscow would not work in this case.

The Soviets made their continuing cooperation conditional on full-scale participation in the non-proliferation regime. In exchange for compliance, North Korea was promised technical assistance in building a nuclear power station of its own. Such a station was indeed a good option for a country which heavily depended on imported oil for power generation. Thus, Pyongyang bowed to the Soviet pressure complied and in 1985 signed the Non-Proliferation Treaty while secretly continuing with its nuclear weapons development efforts.

But soon the world changed. The communist bloc that both controlled Pyongyang’s nuclear ambitions and provided it with aid, collapsed around 1990. The foreign aid almost disappeared, and Pyongyang had to survive somehow in an increasingly hostile world.

The North Korean leaders came to a conclusion that in their peculiar situation the Chinese style policy of reforms would be too risky. Indeed, in a divided country, with South doing so much better than the North, attempted reforms were likely to produce German-style collapse, not Chinese-style economic boom. So, in order to keep their power and privileges the North Korean leaders had to avoid any changes in the system. It was a rational choice for them, even though this policy choice condemned hundreds of thousands to death by starvation and completely ruined the already weak economy.

Since the country was stuck with a remarkably inefficient economic system, it could not feed itself, so it badly needed foreign aid ― a lot of it. But the ruling elite, the few hundred families around the Kim’s hereditary dictatorship, also knew that the aid should come without too many conditions attached and, above all, with as little monitoring as possible. They needed food, above all, to feed the privileged and politically significant regions and social groups, leaving others to their sorry fate. Since a riot in the capital would be deadly dangerous for the regime, Pyongyang should be given some food. The police and elite military units should eat well, too, since their loyalty was vital for the stability of the regime. At the same time, the survival of, say, miners at some distant mining town was never a high priority for Pyongyang decision makers.

However, getting large-scale aid without many conditions would be a difficult, almost impossible task had not Pyongyang had in its disposal the already well advanced military nuclear program. From around 1990, the program became the major diplomatic tool which was used with the greatest skill in order to insure the continuous influx of foreign aid.

This is not to say that the nuclear program had no military significance whatsoever ― Pyongyang had some reasons to be afraid of a foreign attack. Pyongyang leaders were correct when they say privately that Hussein would probably still be living in his palace, if Iraq indeed had nuclear weapons. Nonetheless, from the early 1990s the major rationale behind the program has been not military deterrence, but rather diplomatic blackmail.

From around 1990, Pyongyang began to arrange leaks about its nuclear weapons program, while officially denying its existence. It threatened to withdrew from the non-proliferation treaty, and its officials promised to transform Seoul into a “sea of fire” if their demands would not be met.

The strategy worked. In 1994 the strangely named “Agreed Framework” treaty was signed in Geneva. An international consortium where the U.S. and South Korea were major donors, agreed to provide North Korea with light water reactors for power generation (those reactors cannot be used for production of weapon-grade plutonium) and also promised regular shipments of fuel oil. In exchange, North Korea promised to freeze its military nuclear program and accept international inspections of its nuclear facilities. It is widely believed that the U.S. negotiators were ready to give generous concessions because at that time they assumed that the North Korean regime would collapse soon. They were wrong: to the surprise of foreign observers, Kim Jong-il managed to stay in control of his starving country.

The indirect impact of the nuclear program was great as well. In the late 1990s and early 2000s, North Korea got what it needed: a lot of foreign aid without too many monitors. One can doubt whether the amount of aid would have been so large, had North Korean not been seen as a potentially nuclear country.

The so-called “second nuclear crisis” erupted in 2002 when it was discovered that North Koreans were cheating: they were secretly pursuing a uranium enrichment program. This was used as a pretext to the discontinuation of aid. After few years of unsuccessful negotiations, the North Korean diplomats decided to raise the stakes, and in October 2006 the first nuclear test was conducted. It worked: in merely few months, the U.S. agreed to make important concessions and aid was resumed. A new hike in tensions produced a new nuclear test in 2009.

So, by now the nuclear crisis has continued for two decades, and it seems that it might easily continue 25 years. The North Korean government understands that a nuclear weapon is their major diplomatic card, and they are unlikely to surrender it under any circumstances. The outside world is disunited and, frankly, lacks any means to influence Pyongyang. So, we are quite likely to see more nuclear tests (largely successful) and more nuclear negotiations (largely unsuccessful) in the years or even decades to come.

Satellite imagery recently revealed new construction at the Yongbyon facility.

Read the full story here:
North Korea conducted first nuclear test in 2006
Korea Times
Andrei Lankov
10/10/10

Institute for Far East Studies (IFES)
NK Brief No. 10-10-4-1
10/4/2010

Trade between the two Koreas in the first half of 2010 totaled 980 million USD, 51.3 percent more than the 650 million dollars-worth of trade last year. North Korea’s trade with China was also up, by 16.4 percent, to 1.28 billion USD. Kim Jong Il has made two trips to China and the North has taken other steps to boost cross-border trade with the Chinese.

According to a recent report comparing inter-Korean trade to that between North Korea and China, North-South trade in 2007 equaled 91 percent of Pyongyang’s trade with Beijing, but as inter-Korean relations chilled, that number fell to 65 percent in 2008. This year, that number climbed back up to 77 percent, largely because the Kaesong Industrial Complex, which has avoided political entanglement, has grown 96 percent since last year. Textiles and home electronics top the list of goods in inter-Korean trade, while minerals are the top item traded across the DPRK-PRC border.

North Korea’s import of South Korean goods increased by 63 percent to 430 million USD, while the North’s Chinese imports rose a mere 25 percent, but still totaled 930 million USD. 36 percent of South Korean exports to the North are raw materials for North Korean textile production, while 120 million USD-worth of electronics make up the second-largest export industry. Making up the largest sector, 27 percent (250 million USD) of North Korea’s imports from China are made up of minerals and crude oil, while textiles make up 12 percent and base metal resources make up 8 percent. South Korean imports have also grown 43 percent, to 550 million USD, since last year. In comparison, Chinese imports from North Korea shrunk one percent to 340 million USD. Clothing and other ready-for-market textiles made up 44 percent of North Korean exports to the South, while electrical and electronic goods made up 17 percent. Coal, iron, and other key resources made up 51 percent of DPRK exports to China, while zinc and other base metals make up approximately 20 percent.

Ruediger Frank writes in 38 North:

“Finally,” one is tempted to say. The years of speculation and half-baked news from dubious sources are over. The leadership issue in North Korea has been officially resolved. Or has it?

The third delegate’s meeting[1] of the Worker’s Party of Korea (WPK) on September 28, 2010 answered a few questions. Still, it left some unanswered and posed quite a few new ones as well. In the end, Kim Jong Il emerged the undisputed leader. But has his legitimacy become more independent of his father than it used to be? Kim Jong Un has been introduced to the people. Does this mean he is going to succeed Kim Jong Il? Or will he succeed Kim Il Sung? Kim Jong Il’s sister Kim Kyong Hui has been promoted to the rank of general and is part of the party leadership. Is she supposed to support her nephew, or is this part of a strategy to more broadly enhance the family’s power? Her husband Jang Song Thaek is also on board. Will he share the caretaking job with his wife? Are there any other members of the extended Kim family on the team?

The Hard Facts

(1) On Monday, September 27, 2010, Kim Jong Un was mentioned for the first time in official North Korean media when he was promoted to the rank of general. Now, at last, we know for sure how to write his name (we use the official North Korean version for English; it would be Kim Jong-ùn according to McCune/Reischauer).

(2) On the same day, Kim Jong Il’s sister was promoted to the same military rank as her nephew.

(3) On September 28, 2010, one day later, the first delegate’s meeting of the WPK in 44 years and the biggest gathering since the last (Sixth) Party congress in 1980 opened after a mysterious delay. It had originally been announced for “early September.”

(4) Contrary to western media speculation, Kim Jong Il did not step down nor did he hand over any of his powers to his son. Rather, he was confirmed as the current leader of the party, the military, and the country.

(5) From 1945 until 1980, the WPK held six Party Congresses and two conferences or delegate’s meetings. This means that on average, the WPK had one major Party event every 4.4 years. However, over the next 30 years, it had none. The 21st and so far last plenum of the WPK was held in December 1993. Now, the defunct leadership structure of the WPK has been restored and the delegates elected 124 members of the Central Committee (CC) and 105 alternates. From among the members, 17 were named to the Politburo (PB) of the CC, and 15 as alternates.

(6) The Politburo is headed by a Presidium or Standing Committee of five people, with Kim Jong Il at the top as the general secretary of the WPK.[2] It also consists of Kim Yong Nam (82 years old),[3] Choe Yong Rim (80 years old),[4] Jo Myong Rok (82 years old)[5] and Ri Yong Ho (68 years old).[6] The latter was promoted the day before the delegate’s meeting to the post of vice marshal. He ranks above Kim Jong Un and his aunt and is rumored to be a member of the Kim family, which if true, implies a particularly strong base for loyalty. Given the advanced age of most of its members, if the Presidium is not newly elected in a few years, who will remain? This makes Mr. Ri particularly interesting.

(7) All three known close relatives of Kim Jong Il received posts in the WPK. Kim Jong Un became vice chairman of the Central Military Commission (see below). His aunt Kim Kyong Hui became a member of the Politburo and her husband Jang Song Thaek was made an alternate. The names of regular and alternate members were not provided in alphabetical order, indicating a certain hierarchy. Kim Kyong Hui’s name was listed last out of 17 and Jang was 5th out of 15. A day later, he was 14th (out of 15) on a list of short bios of regular and alternate Politburo members. Kim Kyong Hui was the only member in addition to Kim Jong Il for whom no details were provided.

(8) Except for the Central Committee, there is not a single leadership organ where all three close relatives of Kim Jong Il hold a post. Kim Jong Un is excluded from the Politburo altogether; Kim Kyong Hui is not on the Central Military Commission; and Jang Song Thaek is only an alternate Politburo member. We could speculate that Kim Jong Il wants to prevent having too high a concentration of power in the hands of one of his relatives. He has made sure that the most crucial instruments of power are staffed with the most loyal of his followers who will be ready to walk the extra mile and fulfill his strategic decisions with all the energy of a family member and co-owner.

(9) As was expected, Kim Jong Un has not (yet) become a member or an alternate member of the Politburo, the second-highest leading organ of the party, but did receive a high-ranking post in the WPK’s Central Military Commission. As far as we know, this is essentially the organization through which the Party controls the military, and hence the most powerful of the WPK’s organs. It is no coincidence that this commission is chaired by Kim Jong Il himself. His son comes next in the hierarchy—he is the first of the commission’s two vice-chairmen. Jang Song Thaek is a member, too, but the one with the lowest rank, so it seems. His name was listed last out of 19. Kim Kyong Hui is not a member of the Central Military Commission.

(10) On September 29, 2010, an unusually long and detailed KCNA article was published with profiles of all Politburo members. In addition, a large group picture was published that showed the delegates and the complete Central Committee, including Kim Jong Un. The photo rather openly revealed the true hierarchy within the Party leadership; only 19 people were sitting in the front row, the others were standing. Kim Jong Un sat just one space away from his father, while Kim Kyong Hui sat five spaces away from the center. In a KCNA report on the taking of this picture, Kim Jong Un’s name came fourth after the Politburo Presidium members Kim Yong Nam, Choe Yong Rim and Ri Yong Ho. Kim Kyong Hui was number 18, and Jang Song Thaek was number 23 on that exclusive list of 33 leaders.

(11) A total of 14 department directors of the Central Committee were appointed, among them Jang Song Thaek and Kim Kyong Hui. However, contrary to predictions by many analysts, Kim Jong Un does not seem to have been appointed director of the Organization and Guidance Department (OGD), a post his father held before he was announced as Kim Il Sung’s successor.[7] This could be due to a number of reasons. Either, Kim Jong Un already effectively held that post—we may not know since the last time such positions were given officially was 1980—or the division of labor (and power) within the party has changed, for example in the context of the Military First Policy. In that case, the OGD post may simply not be as important as it used to be. This would imply that the Central Military Commission now makes all the important appointments, and the OGD is merely an administrative unit like any human resources department.

(12) The North Korean media published a message from China’s leader Hu Jintao only a day after the delegate’s meeting. He stressed the deep and traditional friendship, close geographical relationship, and wide-ranging common interests of the two countries. Hu pledged to defend and promote the bilateral relationship, always holding fast to it in a strategic view under the long-term discernment no matter how the international situation may change (KCNA, 29.09.2010). This was a message to the North Korean people and the international community: China is going to support the new North Korean leadership (model).

What Have We Learned?

The Party meeting provided final proof of what has often been doubted since Kim Jong Il took over as leader of North Korea after 1994. All the other things one might say about him notwithstanding, Kim Il Sung undisputedly was an able politician. He did not choose his eldest son Kim Jong Il as his successor by chance. Despite his health problems, Kim Jong Il is (still) able to play the power game. He paved the way for a new leadership without turning himself into a lame duck. He did so by not leaving any important posts to somebody else—although, at the same time, he did not monopolize those positions. He distributed power among a core group of family members and his father’s loyalists, while also ensuring that none of them can be certain to be significantly higher-ranking than any of their colleagues. As in juche, where in the end everything depends on the judgment of the leader, power in North Korea remains Kim’s sole domain. At the same time, he has done what any good CEO does: delegate authority to avoid energy-consuming micro-management of each and every aspect of his job.

The most important decision regarding human resources has been the introduction of Kim Jong Un as a member of the top leadership of the Party and of the military. He will now have to quickly develop a record (at least on paper) of spectacular achievements, so that he can be quickly presented to the people as the most logical and capable candidate for the next leadership post. Since Kim Jong Un was appointed with a clear reference to the military, Kim Jong Il appears to be following the same strategy his father did after 1980. At that time, North Korea analysts noticed that the late O Jin U, the top military official, was always standing close to Kim Jong Il. It would now be logical to expect that like his father before him, Kim Jong Un will be responsible for the promotion of top military officers, thereby ensuring their loyalty.

In terms of strategic decisions, its seems that the succession from Kim Jong Il to Kim Jong Un will be different from the last changing of the guard in 1994. As early as 2008, it seemed likely that the role of the Party would be strengthened substantially. The restoration of the WPK’s formal power organs and the many biographical details that were provided on the top leadership circle, including the group photo, indicate that the new leader will not be as autocratic as his predecessors. The new leadership will have more faces; we could observe something similar a few months ago in the case of the National Defense Commission. This is the reflection of a trend, not a spontaneous event.

What seems most notable is the renewed emphasis on Kim Il Sung as the sole source of legitimacy in North Korea. Kim Jong Il is not going to replace him, which would have been a precondition for the perpetuation of the current system of leadership. Therefore, in a sense, Kim Jong Un and all those who come after him will be, like Kim Jong Il, successors of Kim Il Sung.

Concerning the process of power transfer, as expected, a multi-stage approach is unfolding. At least one more stage will be needed. Chances are good that this will take place at the Seventh Party Congress, whose date is as of yet unannounced. 2012 would be a good time considering the health of Kim Jong Il and that year’s auspicious meaning—the 100th anniversary of Kim Il Sung’s birthday. As stated above, Kim Il Sung was a capable politician. He was clearly aware of the fact that sooner or later, his son would face the succession issue. It would be a great surprise if he hadn’t talked about this with him and jointly developed a rough plan as to how create a sustainable model of power succession. The two problems Kim Il Sung could not consider, simply for technical reasons, were who exactly would show the necessary capabilities to become the next successor, and how much time Kim Jong Il would have to oversee and guide that process.

The year 2008 indeed marked a watershed when, because of his illness, Kim Jong Il realized the need for a quick solution. The last thing an autocrat wants is to create the impression of being forced to act, and of time running out. So he used the already fixed year 2012 not only as the year of the celebration of his father’s 100th birthday, but also as the year when great changes will happen and the gate to becoming a Strong and Prosperous Great Country will be opened. From this perspective, I would argue that Kim Jong Il is indeed fighting a “speed battle,” but in the form of compressing a process that was planned long ago and supposed to last longer, rather than creating such a process from scratch and hastily.

The China Factor

The message of support from Hu Jintao along with the two visits of Kim Jong Il to China before the delegate’s meeting immediately lead to the question: What type of North Korea will China support? Clearly, the last thing China wants is for North Korea to collapse. Such a situation would create a serious dilemma for Beijing. It could either do nothing and watch the U.S. sphere of influence expand right to its border, or it could actively interfere. This would instantly shatter all Chinese efforts to display itself to the carefully watching countries in the region as a peaceful giant that is a real alternative to protection by the United States. In the end, this is what North Korea is all about—competition between Beijing and Washington. Pyongyang knows this.

A third path may be open to China. The North has realized that the economic reforms of 2002, which focused on agriculture and hence closely resembled the Chinese example of 1979, were in principle a good idea, but that conditions were so unlike those in China that the results inevitably differed. In principle, the understanding that economic reform is necessary remains but reservations against the political side effects of such reforms have grown substantially due to the chaos that emerged in the aftermath of the 2002 measures. Given North Korea’s structure as an industrialized economy, reforms need to take place in industry.

There is a well-established blueprint for this; we call it the East Asian model. In short, it consists of a strong state that controls a few big players in the economy—zaibatsu or keiretsu in Japan, chaebol in Korea, and the state owned companies in China. A core requirement for this model to succeed is a huge source of finance, coupled with a strong political partner that, for a while, is willing to turn a blind eye on protectionism. The United States played that role partly for Japan, and very strongly for South Korea. China is now willing to do this service for North Korea under certain political conditions.

Many signs point in the direction of North Korea “returning” to the path of orthodox socialism, or at least to its East Asian version. “Rule by the Party”—a collective with a first among equals at the top—is not only a key component of any socialist textbook case, it is also characteristic of the Chinese model since 1978. After two leaders of the Mao Zedong type, North Korea may now be getting ready for one similar to the position that the current Chinese President, Hu Jintao, occupies in China—that is, a strong leader who rules as the head of a collective. With some luck, Kim Jong Un might even turn out to be a Deng Xiaoping—a man who has the power and vision to use this post to initiate and execute crucial reforms.

For the same reasons that President Obama has a tendency to take visiting dignitaries to my favorite hamburger restaurant in Arlington, VA, the North Koreans have designated “friendship farms” for countries the North Koreans enjoy or expect to enjoy cozy relations.  Below I have identified a few for you to check out on Google Earth.

DPRK-Iran Friendship Ripsok Cooperative Farm

Coordinates: 39°28’34.69″N, 125°29’48.92″E
This farm has been mentioned in this capacity in KCNA four times: here, here, here, and here.
Date first mentioned: May 17, 2007

DPRK-Russia Friendship Kochang Cooperative Farm

Coordinates: 38°58’3.82″N, 125°36’4.67″E
It has been mentioned in KCNA at least 26 times.  See here.
Date first mentioned:  June 23, 1999

DPRK-China Friendship Thaekam Cooperative Farm

Coordinates: 39°15’4.41″N, 125°41’53.06″E
This farm has been mentioned at least 29 times in KCNA.  See here.
Date first mentioned: June 1, 1997

I have also located friendship farms for: Laos, Poland, Cuba, Bulgaria, Vietnam, Malaysia,  Indonesia, Germany, Palestine, Cambodia, Mongolia, India, Syria, Nigeria, Libya, Egypt, New Zealand, Yugoslavia, and Pakistan.

The United States does not yet have a friendship farm in the DPRK, but maybe someday it will be Osan-ri in Sunan-kuyok, Pyongyang. This is where the Fuller Center plans to launch a housing project. Their planned location and site plans are posted below.

Jimmy Carter, who founded Habitat for Humanity, has recently endorsed this project. (UPDATE: more here and here)

Thanks again to Google Earth and GeoEye.

According to Yonhap:

North Korea’s economic dependence on its strongest ally China is growing as its economy slips further into deeper isolation from the international community for its nuclear ambition, a report said Friday.

According to the report compiled by the Samsung Economic Research Institute, bilateral trade with China accounted for 52.6 percent of the North’s cross-border trade last year.

“North Korea’s so-called self-reliant economy is collapsing, and China is emerging as the communist state’s key supplier of economic goods,” the report said.

The report said China’s investment in North Korea surged to US$41 million in 2008 from a meager $1.1 million in 2003. China is also planning to spend $2.37 billion on construction of a transportation network that links the two countries, it said.

But the report said it is hard to characterize the countries’ economic ties as “subordinate,” as the North is also involved in trade with South Korea and other countries.

As with most Yonhap stories, they do not provide a link to the report, or even its name, so I cannot say much about the numbers. 

Here is the English webpage of the Samsung Economic Research Institute.  I have been unable to locate this partuclar study, but maybe you will have better luck.

Yonhap also tells us that the Chinese are working to create a trade zone along the North Korean border.  According to the article:

China is seeking to build an economic zone in the northeastern region bordering North Korea, aiming to promote trade with the world’s most reclusive country, officials said Friday.

Thirteen cities in the Dongbei region, commonly known as Manchuria, issued a joint proposal Thursday to build the “Yalu River Economic Zone” and to boost trade with North Korea. The Yalu River or the Amnok River in Korean is a river on the border between China and North Korea.

The participating cities include Dandong, Dalian, Tonghua and Mudanjiang, all of which are located either in the Liaoning province, the Jilin province or the Heilongjiang province. The three provinces make up the Dongbei region.

North Korea has long been reported as planning to build a free economic zone near the bordering river. A number of ports already exist on the river, used for border trade between the two countries.

Dandong in Liaoning Province, which borders the North Korean city of Sinuiju, has become the largest logistics hub for North Korean trade, handling 70 percent of bilateral trade.

Read the full Yonhap stories here:
N. Korean economic reliance on China further growing: report
Yonhap
10/1/2010

China eyes economic zone for trade with N. Korea
Yonhap
Kim Young-gyo
10/1/2010

Aiden Foster-Carter has written an long piece in the Asia Times on North Korea’s geopolitics.  It is a fairly long piece, so here is the punch line:

So there’s our winner. Its rivals’ missteps have helped, but Beijing has long played a skillful, patient game. Like Moscow, it irked the North by recognizing South Korea (in 1992), but unlike the abrupt Russians it worked hard to soothe sensitivities.

Eighteen years on, guess which power is the top trade partner of both Koreas? Now, there’s subtle hegemony for you. No prizes either for guessing who’s snapping up North Korea’s mines, and beginning the lengthy, costly process of modernizing its decrepit infrastructure.

Face it: who else has the motive, or the means? As all agree, China’s overriding worry about North Korea is not Kim’s nukes but fear of collapse, and the chaos this could cause on its own borders. Beijing’s consistent strategy is not to paint Kim into a corner, no matter what.

Knowing that, how did policymakers in Seoul or Washington delude themselves that China would hurry to join a chorus of condemnation over the Cheonan? No way. Beijing squirmed a bit, but the game was worth the candle. Let Washington and Seoul huff and puff. All that achieved was to push an ever-more isolated North Korea further into China’s orbit and influence.

Nothing is certain, especially about North Korea where forecasts (this writer’s not least) have a habit of turning out wrong. I expected North Korea to collapse long ago: guilty as charged, m’lud. I understimated this tough regime’s staying power, or the horrors it would impose on its people – including famine – to cling to power while refusing to see sense.

But this can’t go on forever. The old game of militant mendicancy is finally up. Kim Jong-il’s frail health, a delicate succession, and an empty treasury – United Nations sanctions have hit arms exports, and crime doesn’t pay like it used to – make defying the entire world just too risky.

North Korea needs a sugar daddy. There is only one candidate left standing, and one who fits the bill perfectly. It may not be a marriage made in heaven, mind you. Pyongyang will keep squawking, and even try the old game of playing off its interlocutors – as in its latest thaw with Seoul.

But at the end of the day Beijing is making an offer no one else can match, and which North Korea can’t refuse. It goes roughly like this: Okay, we’ll bail you out, we’ll guarantee your security, we’ll even stomach your weird monarchical tendencies – unless the kid turns out to be a complete klutz, in which case you know what to do. Jang Song-taek (brother-in-law to Kim Jong-il) knows the score.

You can count on us too not to shame you by spelling all this out and giving the game away. But yes, we do need something in return. Two things. First: markets. For goodness sake just leave them alone, nay let ’em rip – as we’ve been telling you to, ever since Deng Xiaoping.

Look where we are now, and where you are. We’ll do the heavy lifting of investment, so you have functioning factories and railways again. But you have to let it happen. No going back.

Second: no more trouble. We know it may take time for you to give up your footling pesky nukes. But we need an absolute guarantee of no more tests, or else. No other provocations, either. Our People’s Liberation Army will teach your Korean People’s Army how to adapt and how to make money. The new North Korea will be a good global citizen, trading like we do. The returns are good. It beats mugging any day.

And guess what? You’ll love it, all of you. You’ll prosper. No more worries. Your people will eat; your elite will make money. What’s not to like? Just stop all that shouting and marching; what a relief, eh? The rest of the cult can stay, if you must. All hail the young general Kim Jong-eun, finally fulfilling grandpa’s dream of peace and prosperity for all! (With a bit of help from his friends, but we’re modest.) You’ll love him. You really will.

This seems to me a plausible scenario for North Korea’s future. In fact, I struggle to imagine any other. Korean reunification? Maybe in the very long run – but right now, who wants it?

Not the North, whose elite know the fate of their East German counterparts after unification. Can we really expect them to put their faith in the tender mercies of Lee Myung-bak? Even under Kim Dae-jung or Roh Moo-hyun it would have been tricky. What place would there be for most of them, frankly, in a reunified peninsula? Not a privileged one, that’s for sure.

Ordinary North Koreans, too, have learned, from the trickle who have made it to Seoul, that South Korea is no land of milk and honey. True, they’d like a life, and to eat. But China, or a North Korea open to and learning from China, might look a better bet on that score.

Nor is the South enthusiastic, despite all the rhetoric. It would be embarrassing and galling to see the North become a Chinese satellite – yet perhaps also a huge relief. Let Beijing bear the brunt, the burden, and the costs of transforming the madhouse they have long sustained.

Further down the line, blood could prove thicker. By 2040 or so, a by then semi-transformed North Korea may tire of great Han chauvinism, slough off the Chinese yoke, and embrace the cousins south of the demilitarized zone (which would long ago have become more permeable). They’d be easier to absorb, too, now smoothed by a few decades of Chinese-style modernity.

Speculative, to be sure. But what other scenarios are there? And though from one viewpoint China has edged out rival powers as argued above, presumably to their chagrin, might some of them in truth be quietly relieved to be spared the responsibility? Let China take it on and deliver a new-style North Korea, vibrant and fit for a new century. It could last a long time, and spare the region and world much headache and risk. Does anyone have an alternative?

Aidan Foster-Carter is honorary senior research fellow in sociology and modern Korea at Leeds University, and a freelance consultant, writer and broadcaster on Korean affairs. A regular visitor to the peninsula, he has followed North Korea for over 40 years.

You can read the full article here:
How North Korea was lost – to China
Asia Times
Aidan Foster-Carter
9/16/2010

According to the Associated Press:

Taiwanese investigators raided a local company after it shipped banned machinery to North Korea via a Chinese firm with ties to Pyongyang’s military, a Taiwanese official said Tuesday.

The owner of the Taiwanese company, Ho Li Enterprises, said that two computer-controlled machine tools used in the manufacture of engines were shipped to North Korea earlier this year, but said he was unaware he had broken the law. Huang Ting-chou said that his company’s premises were raided in July by Taiwanese law enforcement officials acting on a tip from the U.S. government.

A Taiwanese law enforcement official confirmed the shipment and raid had taken place but did not discuss U.S. involvement. The de facto American Embassy in Taiwan declined to comment on the claim.

The raid took place as the Obama administration was working on a new set of sanctions against North Korea that were unveiled last month, targeting the assets of individuals, companies and organizations allegedly linked to support for its nuclear program.

North Korea has repeatedly tried to circumvent international strictures designed to stymie its production of missiles and nuclear material and other weapons of mass destruction.

Taiwanese companies are no strangers to sanction-busting attempts. In early 2009, Shanghai’s Roc-Master Manufacture & Supply Company ordered pressure gauges with possible nuclear weapons applications from Taiwan’s Heli-Ocean Technology Co. Ltd. Using backdated purchase orders, the Chinese company had Heli-Ocean ship them to Iran. The transaction violated international sanctions on exporting sensitive equipment to Tehran, which many in the international community suspect is trying to make nuclear weapons.

In an interview with The Associated Press, Huang said the machine tools were originally ordered “more than a year ago” but were shipped only after Ho Li’s Chinese client, Dandong Fang Lian Trading Co. Ltd. in northeastern China’s Liaoning province, was able to pay for them. While acknowledging that the tools ended up in North Korea, he said he had no idea how they would be used or why they would appear on any list of sanctioned items.

The North Korean machine tool deal was first reported Tuesday in Taiwan’s Liberty Times newspaper.

A Taiwanese official, speaking on condition of anonymity because he is not authorized to deal with the press, said that the machine tool shipment violated international sanctions and Taiwanese trade laws. He did not identify the items in question or specify why they violated sanctions.

The official works for the Taipei branch of the Ministry of Justice’s Investigation Bureau — roughly equivalent to the Federal Bureau of Investigation in the United States.

He said that Dandong Fang Lian is managed by a North Korean national with an unspecified connection to the North Korean military, and that the machine tools had ended up in the country’s Sinuiju region, across the Yalu River from Dandong. Sinuiju is the funnel for most Chinese goods entering North Korea.

“Ho Li sold two machine tools … without reporting to the authorities that the equipment was really going to North Korea,” the official said. “We became aware of the violation and when we raided Ho Li in late July we found e-mails and money transfer documents to prove our case.”

Huang said that Dandong Fang Lian specializes in diesel engines and power generators, and that while he had done business with the company before, this was his first venture with them in the machine tool sector.

“I am cooperating with the government in its investigations,” he said.

Neither Ho Li nor Dandong Fang Lian appears on an American list of sanctioned companies.

The Taiwanese official declined to confirm Huang’s assertion that an American tip led to the raid on Ho Li’s premises. The American Institute in Taiwan — the de facto U.S. Embassy on the island — said it would not comment on specific cases but emphasized it cooperates closely with the island on enforcing export controls and stemming the proliferation of weapons of mass destruction.

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Taiwan firm raided after illicit sale to NKorea
Associated Press
Debby Wu
9/7/2010

According to the Choson Ilbo:

North Korea and China are already starting economic cooperation projects in the border area across China’s northeast and the North’s Rajin-Sonbong region.

The Chinese Ministry of Transport recently designated Jilin Province as a pilot region for international trade and logistics encompassing the three northeastern provinces of China and the Duman (or Tumen) River area, the China Shipping Gazette reported last Friday.

The decision is aimed at facilitating transport of goods from China’s northeast to Shanghai and the south via customs points in the Chinese city of Hunchun and the North’s Rajin-Sonbong Port, the weekly added.

A representative of the Yanbian Korean Autonomous Prefecture in Jilin also signed an agreement on bilateral economic cooperation with Kim Su-yol, the chairman of the Rajin-Sonbong special city people’s committee, at the sixth Northeast Asia Trade Expo in Changchun last Thursday.

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N.Korea, China Promote Business in Border Area\
Choson Ilbo
9/6/2010

According to the Choson Ilbo:

Chinese President Hu Jintao told North Korean leader Kim Jong-il in strong terms to reform the North’s failed socialist economy and open up the country, a senior South Korean government official said Wednesday.

He made the call during a meeting when Kim visited China last week, using rather more direct terms than Chinese Premier Wen Jiabao had used during Kim’s last visit in May, according to the official. Wen told Kim, “I’d like to introduce to you China’s experience in the reform and opening drive.”

But the official quoted Hu as saying, “Socialist modernization is based on China’s three-decade-long experience in reform and opening. Although self-reliance is important, economic development is inseparable from external cooperation.”

According to a Chinese official, Kim too directly used the terms “reform and opening”  this time. He reportedly told Hu, “Since its launch of the reform and opening drive, China has achieved rapid development.”

Up until recently, top Chinese leaders had regarded the terms as taboo words at bilateral summits for fear of upsetting North Korea’s delicate feelings, but Wen first broke the taboo in May, and Hu in his advice to Kim even used language such as “enterprise,” “market mechanism” and “external cooperation.”

A diplomatic source in Beijing said China’s insistence on talking about reform shows how concerned China is with the North’s mismanagement of the economy.

China’s business media made upbeat observations about the North turning toward reform, quoting Kim as saying he was “deeply impressed” after touring major cities in China’s northeastern region such as Changchun, Harbin and Jilin.

In an editorial Tuesday, the Global Times, a sister newspaper of China’s official People’s Daily, wrote, “Living in the shadows of South Korea, Japan and the U.S., North Korea has to wrap itself up tighter in order to fend off military threats, and threats of political and cultural infiltration. North Korea’s opening-up will help relieve tensions in Northeast Asia. But, the knot does not only lie on the North’s side. Other countries in this region must redouble their efforts to untangle the knot.”

It is unclear whether Kim will listen. The North Korean leadership is afraid of any reform that could weaken its stranglehold, and at the moment tight control is essential if the regime is to officially establish Kim Jong-il’s son Jong-un as his father’s heir.

Kim has paid lip-service to the Chinese economic development model before. After returning from a trip in the early 2000s, he introduced some timid elements of the market economy but swiftly clamped down when markets became too brisk and a new class of successful businesspeople began to look like a threat to his regime.

Han Ki-bum, a former deputy director of the National Intelligence Service in charge of North Korean affairs, in his doctoral thesis quotes Kim as telling economic officials in June 2008, “If you think I’m talking about reform and opening as if I were going to introduce the market economy you’re completely mistaken.”

At the moment, Kim apparently wishes to stick it out, but the North’s dire straits amid international sanctions will make it difficult to ignore Chinese demands.

At the meeting, Hu pointed out that economic cooperation between the two countries would be a “win-win strategy” where “the government takes the initiative, enterprises play a leading role, and the market mechanism is set in motion,” according to the South Korean official.

“That means that if China gives the North something, it should also pay in return,” a South Korean security official speculated.

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Hu ‘Told Kim Jong-il It’s Time for Economic Reform’
Choson Ilbo
9/2/2010

According to Medical News Today:

In a country where good news is scarce, a pioneering agroforestry project in the Democratic People’s Republic of Korea is restoring heavily degraded landscapes and providing much-needed food for communities living on the sloping lands.

Jianchu Xu, East-Asia Coordinator for the World Agroforestry Centre, which has been providing technical expertise and training for the project since 2008, said agroforestry – in this case the growing of trees on sloping land – is uniquely suited to DPR Korea for addressing food security and protecting the environment.

“What we have managed to achieve so far has had a dramatic impact on people’s lives and the local environment,” Jianchu explains.

“Previously malnourished communities are now producing their own trees and growing chestnut, walnut, peaches, pears and other fruits and berries as well as medicinal bushes,” Jianchu explains. “They have more food and vitamins and are earning income through trading”.

Following the collapse of the socialist bloc in 1989 and a lack of subsidies for agriculture in DPR Korea, famine and malnutrition became widespread in rural areas.

DPR Korea is a harsh mountainous country where only 16% of the land area is suitable for cultivation. In desperation in the 1990s, people turned to the marginal sloping lands but this had a price: deforestation for cropping land and fuelwood left entire landscapes denuded and depleted of nutrients.

In an effort to reverse the situation, an innovative and pioneering project began in 2002 involving the Swiss Agency for Development and Cooperation (SDC) and Korea’s Ministry of Land and Environmental Protection. The World Agroforestry Centre was later brought in to provide technical advice.

Suan County has since expanded to 65 user groups in seven counties, with several hundred hectares of sloping land now under sustainable management. And the project is still growing.

A system of establishing user groups with one representative from each family has enabled demonstration plots to be set up and a large number of households to benefit from knowledge about growing multi-purpose trees. Such trees can improve and stabilize soils as well as provide fertilizer, fodder or fruits.

Most of the people farming the sloping lands are pension workers with little agricultural experience. The agroforestry systems they are now implementing and the techniques they have learnt are significantly increasing tree cover on the slopes as well giving them a diversity of crops.

Several of the user groups have started their own nurseries so that they can be self-sufficient and produce their own planting materials.

Initially a European consultant was engaged to provide advice on sloping land management, but in 2008 SDC brought the World Agroforestry Centre’s China office into the project.

“With similar experiences and history, our Chinese staff were well-placed to work in DPR Korea,” explains Jianchu. “It was important to have people with an understanding of the technical, institutional and socio-political context.”

There are very few international organizations operating in DPR Korea, and most of these are providing emergency relief. “With our strong focus on capacity development, we have established a good reputation,” adds Jianchu. So much so that the Centre is now negotiating a memorandum of understanding with the government and there are plans to establish an office in the country.

According to Jianchu, one of the most important aspects to ensuring the project is sustained is capacity development at all levels.

“As well as the user groups, we are providing training to multi-disciplinary working groups comprising representatives from the national academy, agricultural universities, forestry research and planning institutes, and staff of the Ministry.”

“There is an enormous need to improve knowledge and skills in DPR Korea in the area of natural resource management and to nurture young scientists,” says Jianchu. SDC is now investing in this area. Each year over the past few years, a handful of students from DPR Korea have undertaken studies with the Center for Mountain Ecosystem Studies, jointly run by the World Agroforestry Centre and the Chinese Academy of Sciences and hosted by the Kunming Institute of Botany in China. Some could be considered for a doctoral program in the future.

To further support the up-skilling of DPR Korea scientists and the up-scaling of agroforestry, the Centre will soon publish an agroforestry manual. Work is also underway on an agroforestry policy for sloping lands management and an agroforestry inventory.

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Agroforestry A Success In North Korea
Medical News Today
Kate Langford
8/31/2010