Archive for the ‘Inter-Korean summit’ Category

Koreas Begin Talks on Shipbuilding Project

Tuesday, December 25th, 2007

Korea Times
Yoon Won-sup

The two Koreas began four-day talks in the southern port city of Busan Tuesday to discuss ways of establishing shipbuilding areas in North Korea, according to the Unification Ministry.

A sub-committee for shipbuilding and marine cooperation, part of an agreement reached at the inter-Korean prime ministers’ meeting last month, convened for the first time to map out the details of the shipbuilding project.



N. Korean airline to be used to ferry S. Korean tourists to Mt. Paektu

Sunday, December 16th, 2007


North Korea’s state-run airline is likely to be used to ferry South Korean tourists to the North’s Mount Paektu, a government official said Sunday.

The official, who declined to be identified, said Air Koryo planes may be used to carry tourists, owing to concerns about safety related to Samjiyeon Airport, about 30 kilometers southeast of the mountain.

He did not elaborate on the nature of safety concerns, but said it may be inappropriate for South Korean flag carriers like Korean Air and Asiana to use the airport.

Tours to the 2,744-meter-high mountain, held sacred by many Koreans, are the result of the summit meeting between South Korean President Roh Moo-hyun and North Korean leader Kim Jong-il in early October.

He added that flights would probably use Seoul’s Gimpo International Airport, fly over Gangwon Province, head out into the East Sea before turning north toward Mount Paektu, on the North Korea-Chinese border.

The official said Gimpo has been selected as it can easily handle greater numbers of people than provincial air terminals, and the high level of airport security that can be maintained.

Hyundai Asan, which is responsible for organizing tours to North Korea, said direct flights linking Gimpo and Mount Paektu should begin in May, 2008.

The company currently organizes tours to Mount Geumgang on the east coast, and the historic city of Kaesong just north of the demilitarized zone separating the two Koreas on the west coast.


N. Korean leader boosts Mount Paektu inter-Korean tourism project: report

Saturday, December 8th, 2007


North Korean leader Kim Jong-il has given warm encouragement to local workers developing Mount Paektu, the highest point on the peninsula that will be opened to South Korean tourists next year, the North’s broadcaster said Saturday.

South and North Korea agreed to open a direct flight route between Seoul and the North’s Mount Paektu during their second summit in October. The inter-Korean tour, set to start in May, is organized by South Korea’s Hyundai Group.

Kim “expressed his gratitude to officials and workers who have wholeheartedly supported the development of the Mount Paektu area,” the Korean Central Broadcasting Station, monitored in Seoul, said, naming technicians, researchers and factory workers involved in the project.

Hyun Jeong-eun, chairwoman of the Hyundai Group, agreed with North Korea during her visit to Pyongyang in early November to start in May sightseeing tours of the North’s 2,744-meter mountain, located on its border with China. A group of South Korean government officials and researchers have conducted an on-site inspection.

Mount Paektu will be the third inter-Korean tourism project organized by Hyundai Asan, a unit of the Hyundai Group in charge of North Korea business. North Korea opened its border city of Kaesong to South Korean tourists early this week, following the launch of a tourism program to the North’s east coast mountain of Geumgang nine years ago.

The Mount Paektu and Kaesong tour projects are part of agreements South Korean President Roh Moo-hyun and North Korean leader Kim Jong-il reached during their summit that sought to boost economic cooperation and reduce tension.


Koreas agree on daily schedule for inter-Korean freight train

Sunday, December 2nd, 2007


The two Koreas have agreed on the daily schedule for a cross-border freight train that will resume service later this month for the first time in over 50 years, the South Korean Unification Ministry said on Sunday.

The prime ministers of South and North Korea met in Seoul last month and agreed to restart the railway service, which will traverse the heavily armed border, on Dec. 11. The train will run between the South’s Munsan station and the North’s Bongdong station as a follow-up to the October summit between their leaders in Pyongyang.

The ministry said a freight train will depart from Munsan at 9:00 a.m. each weekday and reach the North Korean border station of Panmun before returning to the South at 2:00 p.m.

The train, which will not operate during weekends, will extend its route to Bongdong once the construction of a cargo-handling facility there is completed, the ministry said. The Bongdong station serves as a gateway to an inter-Korean industrial park in Kaesong.

The soon-to-be-resumed service is expected to facilitate transportation of raw materials and manufactured goods between South Korea and the North’s Kaesong park, the ministry said.

The 19.8-km route between the two Koreas was severed in the midst of the 1950-53 Korean War and has since remained closed.


Seoul to Help N. Korean Officials Learn Capitalism

Thursday, November 29th, 2007

Korea Times
Lee Hyo-sik

The government has decided to finance training programs next year to educate North Korean officials and scholars about the free market economy as part of efforts to smoothly implement planned cross-border business projects.

According to the Ministry of Finance and Economy Thursday, the government has set aside 300 million won ($322,000) in next year’s budget to financially support education programs through which North Korean officials can learn about market economy principles and the financial market system.

The ministry is considering organizing a series of workshops for North Koreans to study how former communist countries, including China and Vietnam, opened their doors and successfully transformed into market economies.

It is also planning to arrange study tours to Europe to offer North Koreans opportunities to learn first hand about macroeconomic policies and the government’s role in advanced economies.

“It will be the first time for the government to help North Korean officials and scholars learn about market economic management and development experiences. If it bears fruit, we plan to expand the economic education program in the future to have more North Korean participants,” a ministry official said.

The government will not be directly involved in the training, and instead it will entrust the program to a private education institution, he said, expressing hope that the training will help government officials carry out scheduled inter-Korean business projects more smoothly with their northern counterparts.

During the second inter-Korean summit early October, President Roh Moo-hyun and North Korean leader Kim Jong-il agreed on a number of cross-border development projects, including the establishment of a special peace zone in the West Sea and operation of the inter-Korean railways.

On its own, the communist state has been dispatching a large number of government officials to Germany and other European nations over the past few years on economic training programs. The government estimated the number of North Korean officials visiting advanced economies in Europe totaled 220 in 2004, compared with 237 in 2003, 227 in 2002, 186 in 2001 and 158 in 2000.


Market Economy for NK
Korea Times


Seoul’s Program to Help Pyongyang Learn New System

The South Korean government plans to launch an education program next year to help North Korean officials and scholars learn about the market economy. It is the first time that Seoul has organized such a program. The plan followed recent developments in improving inter-Korean relations after the second South-North summit held in Pyongyang from Oct. 2-4.

According to the Ministry of Finance and Economy, a budget of 300 million won ($320,000) has been set aside for the 2008 program, which will include cross-border information sharing workshops and education on a transition to a market economy and how to adapt to the new system. The budget is only a small sum at this initial stage. But it could increase if the program produces tangible results.

We welcome the education program as it is expected to encourage the stalwart socialist country to shake off its aversion to the market economy system. And furthermore, the program could create a favorable atmosphere for North Korean policymakers and economists to usher in reform and an open door policy. It’s time for the North to realize that inter-Korean economic cooperation packages cannot succeed if it fails to introduce economic reform.

South Korean officials are well aware that it is still difficult to change the mindset of the North Korean leadership that sticks to the old ways of socialism. Regrettably, President Roh Moo-hyun was disappointed that North Korean leader Kim Jong-il and his inner circle refused to discuss reform and openness during the summit.

However, we have to be more patient with the hard-line North Korean regime and make more effort to persuade it into acknowledging the need to join many socialist countries in their effort to move toward a market economy. During the summit, President Roh agreed to build railroads, ports and other infrastructure in the North as well as an industrial park and a peace zone for inter-Korean cooperation. These development packages require huge investments from the South.

Such big-budget projects are expected to inject fresh air into the moribund North Korean economy. But they are not enough for the North to realize its ultimate goal of economic reconstruction. In addition to massive investment, the South will have to teach North Koreans how to do business, make money and become rich.

North Korea has recently shown interest in Vietnam. In October, a Hong Kong-based weekly reported that Kim Jong-il expressed the intention of following Vietnam’s reforms and openness during a meeting with Nong Duc Manh, secretary-general of the Vietnamese Communist Party. A delegation from the North led by Prime Minister Kim Yong-il visited Hanoi to learn about the “Doi Moi” reform policy.

The Seoul government plans to select a research institute that will take charge of the education program for the North. An official said candidate institutes might include the Chinese Academy of Social Sciences in Beijing. We hope the North will learn a lesson from Chinese or Vietnamese style reform to end its isolation, bring prosperity to its people and promote peace on the Korean Peninsula.


North Korea Said “The South Invests in the North Due to Its Bankruptcy”

Saturday, November 24th, 2007

Daily NK
Yang Jung A

It turns out that the North Korean regime asserts to its people that the South has decided to invest in the North because the South’s shipping industry is doomed.

The North Korean authorities argued such at public lectures held in October to report on the results of the second Inter-Korean Summit, according to a report released on Wednesday by Good Friends, a Seoul-based aid organization for North Korea.

The report says that a cadre from Pyongsung delivered a public lecture saying, “South’s shipbuilding industry is on the verge of doom, and that is why it has decided to build a shipyard in Anbyun of Kangwon and to establish cooperative complexes for shipbuilding in Nampo in the West Sea.” The cadre also announced that two Koreas have agreed to transform the military demarcation line in the waters of the West Sea into ‘peace line’ and create a joint fishing zone there, the report says.

Nevertheless, the report says, “Most participants had no interest in the lecture. They could only care about putting some bread on the table and making money, instead of wasting time on discussing the country’s affairs”

According to the report, the North Korean people strongly oppose the recently market regulatory measures. It has been reported that the number of individuals who violate the measures is increasing.

“Lately, the chairman of People’s Committee in Pohang district of Chongjin was fired and demoted to a regular worker’s position because the chairman had complained about the state’s measure, which bans females under 45 years old from doing business in the market starting with December 1st this year,” the report says. The chairman is quoted as saying, “In today’s society, women are breadwinners. If women under 45 are banned from making a living in the market, who is going to earn bread and butter for their households?”

“In Sinam district of Chungjin, a female was arrested after having expressed discontent about the regulation. She was pulled along to a Social Safety office and underwent all sorts of hardships. Later, she was made to take criticism at a regular evaluation meeting of a women’s unit in her district, and then released,” says the report.

“In Pyongyang, agents on a mission to crack down anti-socialist activities are going the rounds of the households of individuals who do business in the market. The agents ask the individuals when and how they started business, what their children do, and where they procure sales items,” says the report.

The report also tells an account of an old couple who has retired from the party and recently visited by inspection agents. The report says, “Although the couple spent most of their life serving the party, they had to come to the market to make a living at their old age. The old couple felt very bitter about their situation. They grumbled against the regime saying that it frequently regulates the market and inspects those engaged in the business. The old couple was at a loss what to do.”


Joint Korea Prime Ministerial meeting wrap up

Thursday, November 15th, 2007

Korean PMs ‘agree rail-link deal’


A regular freight train service over the heavily-armed border between North and South Korea could start before the end of the year, officials say.

The deal, on the second day of talks between prime ministers from the two countries, marks the first agreed schedule for the train link.

The South has pushed for reliable transport links to supply the factories its firms run in the North.

It follows an agreement made last month at a summit of the countries’ leaders.

‘Shared understanding’

North Korean Prime Minister Kim Yong-il and his counterpart from the South, Han Duck-soo, are spending three days in discussions in the South’s capital, Seoul.

The South’s Unification Ministry spokesman, Kim Nam-shik, said the two sides were now trying to set a specific date for starting the rail service.

The 25km (16 mile) track runs from the heavily-guarded border to a joint industrial complex in the North’s city of Kaesong.

“Both sides shared an understanding that it would be meaningful in further vitalising the Kaesong industrial complex,” said the spokesman.

The meeting – the first at prime ministerial level for 15 years – follows October’s historic summit in Pyongyang between the two countries’ leaders.

Divided families

The summit between the North’s Kim Jong-il and the South’s President Roh Moo-hyun was only the second such meeting since the Korean peninsula was partitioned over half a century ago.

The two leaders signed an accord calling for greater peace and economic partnership, despite the two countries remaining technically at war with each other.

They also agreed in principle for the regular cargo rail service to be established.

The prime ministers are using their meeting to discuss more specific proposals.

One key issue is the establishment of a joint fishing area around the disputed western sea border – the scene of naval clashes in the past – and a new economic zone around the North Korean port of Haeju.

The South also hopes to increase the number of reunion meetings for families separated when the peninsula was split.

Prime ministerial meetings between the two Koreas were suspended in 1992 amid growing concern over Pyongyang’s nuclear ambitions.


Ministerial infidelity
Joong Ang Daily

Lee Yang-soo

The prime minister of North Korea holds one of the top positions in the country’s hierarchy, officially fourth in political power.

Many believe, however, that the prime minister may actually be about 20th in actual influence, as there are plenty of hidden power elites in the political and army circles.

The post of prime minister in North Korea was created after the introduction of the state president in 1972. Since then, eight people have occupied the post. Among them, the person who impressed us the most was Yeon Hyung-muk, who held the job from 1988 to 1992.

The prime minister of North Korea faces tough and dangerous working conditions.

Kim Il Sung emphasized the significance of the post by insisting that the “prime minister is the general of the nation’s economy.” The prime minister, in turn, has often been made the scapegoat for the people’s discontent about the country’s struggling economy.

And to make a bad situation worse, the public economy always took a backseat to the military economy, which led to nuclear and missile development.

One after another, numerous ministers have stepped down in dishonor or suffered incurable illness.

After the dishonorable withdrawal of former Prime Minister Li Gun-mo (1986-1988), Li’s successor, Yeon Hyung-muk, was demoted after four years to the post of candidate member for the Political Bureau Presidium, or secretary of Jagangdo Provincial Party. In addition, Prime Minister Park Bong-ju was demoted last April to manager of a small-town company.

Since assuming the reins of government, Kim Jong-il has recruited people who know the economy well to the top posts.

However, he took a “military first” attitude whenever the cabinet, the Workers Party, and army were in discord over the issue of opening and reform.

In contrast, the president of the People’s Republic of China, Jiang Zemin, gave Zhu Rongji, premier of the state council, a carte blanche to decide every affair in public administration and the national economy.

For example, when rumors spread that the yuan would be further devalued, he consulted Zhu. At that time, Zhu’s nickname was “emperor of the Chinese economy.” China has shown great fidelity to the principle that the “prime minister is the general of the national economy.”

Come to think of it, South Korea has had 27 prime ministers since 1972, representing its own infidelity to the prime minister. Six of one, half a dozen of the other.


Koreas agree to open cargo railway, but key issues remain unresolved

Kim Hyun

South and North Korea agreed Thursday to open a cross-border cargo railway by the end of this year — resuming the service halted more than half a century ago — as part of economic cooperation projects agreed upon in their leaders’ recent summit.

Seoul proposed Dec. 11 as the date to start the railway service through the demilitarized zone, a Unification Ministry official said on condition of anonymity. But North Korea’s response was not yet known.

The agreement to open a freight railway came on the second day of talks between South Korean Prime Minister Han Duck-soo and North Korean Premier Kim Yong-il in Seoul. The rare prime ministerial talks were aimed at devising concrete plans to implement wide-ranging accords reached between the leaders of the Koreas.

In their summit in early October, President Roh Moo-hyun and North Korean leader Kim Jong-il agreed on a slew of economic cooperation and peace projects. They also agreed that the agreements should be implemented through two follow-up talks — one between prime ministers and the other between defense ministers.

“There is a growing understanding between the sides for the start of the cargo rail service,” Kim Nam-shik, a spokesman for the Unification Ministry, told reporters. He said that the project “seemed highly possible,” even though more consultations are needed to secure a military guarantee by North Korea.

The 20-km cross-border route between South Korea’s Munsan and the North’s Bongdong will allow the mass transport of goods from a joint industrial complex in North Korea to the South, Seoul officials say.

The Koreas also agreed to set up a joint committee to create a peace zone in the disputed border area in the West Sea, part of key summit accords to reduce tension, the ministry spokesman said. Bloody skirmishes occurred in 1999 and 2002 near the disputed sea border, which North Korea does not acknowledge. The western sea border was unilaterally drawn by the U.S.-led United Nations Command at the end of the 1950-53 Korean War. Pyongyang has called for a new line to be drawn further south.

The peace project in the West Sea will likely include the creation of a joint fishing area in the western sea border area, and the establishment of an economic special zone in Haeju in southwestern North Korea, which will transform the naval base area into an economic stronghold.

The Koreas also made progress in social and cultural areas, the spokesman said, without elaborating on specifics.

But key issues remained unresolved.

The top item on North Korea’s agenda is South Korea’s heavy investment in the renovation of its antiquated railways and roads, said the Chosun Sinbo, published by ethnic Koreans in Japan.

The North Korean premier said in the talks that such South Korean support will help implement the summit accords “in a relatively short amount of time,” the paper said.

Pyongyang also expects Seoul’s money to develop shipbuilding facilities in the country, Seoul officials said.

South Korea is expected to seek North Korea’s support in improving the business environment in the Kaesong industrial complex, where communication facilities are poor and border customs inspections are highly restrictive.

The Kaesong complex, where scores of South Korean factories produce garments, shoes and other labor-intensive goods with North Korea’s cheap but skilled labor, emerged from agreements at the first-ever inter-Korean summit in Pyongyang in 2000. But business restrictions and political strains have limited its development.

Other issues include reunions of families separated since the 1950-53 Korean War, with South Korea pushing to regularize the sporadic events.

The two Koreas are expected to issue a joint statement wrapping up their three-day talks on Friday. To settle outstanding details, Seoul has proposed to hold follow-up economic talks between vice prime ministers in the second week of December, a Unification Ministry official said on condition of anonymity.

The Koreas held eight rounds of prime ministerial talks until 1992, when they signed an accord calling for an end to Cold War hostilities on the Korean Peninsula. But the talks were suspended afterward as relations soured over a dispute on North Korea’s nuclear weapons program.

This week’s talks, covering economic projects, will put aside thorny issues on military tension, which will be dealt with in defense ministers’ talks set for Nov. 27-29 in Pyongyang, Seoul officials said.

Unification Minister Lee Jae-joung said on the first day that this week’s talks were “a bit more flexible, a bit more amicable” than previous inter-Korean meetings.

South Korea expects that improved inter-Korean ties will facilitate progress in ongoing multilateral talks to persuade North Korea to abandon its nuclear ambitions.

The communist nation has shut down five key nuclear facilities under an aid-for-denuclearization accord signed in early October in talks involving the two Koreas, the U.S., Japan, China and Russia.

Pyongyang is also supposed to disable its key nuclear facilities at Yongbyon and submit a full list of its nuclear programs by the end of the year in return for the normalization of ties with the U.S. and Japan, as well as economic and energy assistance from the other parties involved.

N.K. asks for help in repairs to facilitate implementation of summit agreement: report

Byun Duk-kun

North Korea has asked South Korea to help repair its dilapidated railways and roads so the agreements at the recent inter-Korean summit can be quickly implemented, a pro-Pyongyang newspaper published in Japan reported Thursday.

In a rare report from Seoul, the Chosun Shinbo said North Korean Prime Minister Kim Yong-il proposed the modernization of North Korea’s railway between the border town of Kaesong and the northwestern city of Shinuiju at his talks with South Korea’s Han Duck-soo.

Kim, 63, was also quoted as saying that projects to modernize railways and roads will enable the joint declaration from the inter-Korean summit to be implemented “in a relatively short amount of time.”

The North Korean arrived here Wednesday for three days of talks to follow up on the summit held in Pyongyang on Oct. 2-4.

At the summit, President Roh Moo-hyun and North Korean leader Kim Jong-il called for a quick expansion of economic cooperation and an end to military hostilities between the divided Koreas.

This week’s talks had been expected to focus on economic issues as separate talks between the defense ministers of the two countries are to be held in Pyongyang later this month.

Seoul is also calling for an early opening of cargo rail service between the North’s border town of Kaesong, where dozens of South Korean businesses are producing over US$1 million worth of goods each month, and its border town of Munsan.

Still, the Seoul government is placing more weight on the opening of other areas in the reclusive North to South Korean businesses as well as establishing a joint fishing area in the West Sea, where a maritime border dispute led to deadly clashes between the navies of the divided Koreas in 1999 and 2002. The Koreas technically remain at war as the 1950-53 Korean War ended with an armistice, not a peace treaty.

Seoul officials are also calling for easier access for South Korean businesses to the South Korea-funded industrial complex in Kaesong as well as the relaxing of customs and quarantine inspections at the border.

The North Korean premier said his country is ready to resolve the difficulties facing the South Korean businesses operating in Kaesong, according to the report.

“The North side believes what the leaders (of the two Koreas) agreed are not mere economic cooperation projects, but projects that will lead to the reconciliation, unification and prosperity of the nation,” the report said.


N. Korean prime minister visits South Korea for first time in 15 years

Wednesday, November 14th, 2007


North Korea’s prime minister arrived here Wednesday to hold talks with his South Korean counterpart on implementing agreements reached at the second-ever inter-Korean summit last month.

In last month’s summit in Pyongyang, President Roh Moo-hyun and North Korean leader Kim Jong-il called for denuclearization of North Korea, the establishment of a permanent peace regime on the peninsula and a range of economic cooperation and rapprochement measures.

Kim Yong-il is the first North Korean premier to visit here in 15 years. The prime ministers of the Koreas held eight rounds of talks until 1992. Inter-Korean minister-level talks resumed in 2000 following the first-ever summit between the leaders of the Koreas earlier that year.


Premier aims to build North Korean economy with inter-Korean cooperation


North Korea’s prime minister is expected to make inter-Korean economic projects a top priority in the prime ministerial talks this week, watchers forecast on Wednesday.

Kim Yong-il, North Korea’s top official in overall economic policy, was due to arrive in Seoul on Wednesday for three-day talks with South Korean Prime Minister Han Duck-soo.

The talks follow last month’s inter-Korean summit held in Pyongyang, as well as Kim’s trip earlier this month to Vietnam, Malaysia, Cambodia and Laos. Kim’s Southeast Asian trip was aimed at finding ways to boost North Korea’s failing economy through regional cooperation.

Kim replaced his predecessor, Pak Pong-ju, as prime minister earlier this year after spending most of his career in maritime affairs and transport.

The 63-year-old career administrator served nine years in the military beginning in 1961 and graduated from the Rajin University of Marine Transport, leading to his bureaucratic career as a rank-and-filer in the Ministry of Land and Marine Transport.

He became head of the ministry in 1994, a position he held until he was appointed as prime minister on April 11.

The premier was praised by the North Korean people in 2005 for successfully modernizing the Ryongnam Ship Repair Factory near the western port of Nampo.

Kim is also well-known for having forged maritime communications and transportation agreements with North Korea’s allies, including China, Pakistan and Syria.

Some South Korean experts say Kim’s background represents a shift in North Korea’s economic policy, suggesting a move from isolation to economic expansion in the international community, as well an emphasis on reform and technology.


Hyundai Group chief, N. Korean officials discuss business projects: report

Thursday, November 1st, 2007


The chief of South Korea’s Hyundai Group met with North Korean officials in charge of inter-Korean cooperation on Thursday to discuss the group’s business projects in the North, the North’s Korean Central News Agency (KCNA) reported.

The KCNA said Hyundai Group Chairwoman Hyun Jung-eun held talks with North Korean officials, including officials from the North’s National Economic Cooperation Federation.

The two sides took notes on an industrial park in the North Korean city of Kaesong and the building of a tourist resort near Mount Paekdu, according to the KCNA. Prior to the talks, Hyun’s delegation also toured Mount Paekdu, the North’s highest mountain on the border with China, the KCNA said.

The KCNA, however, stopped short of reporting the outcome of the talks.

At Thursday’s talks, Hyun is believed to have discussed the Mount Paekdu tourism project and the second-stage development of the Kaesong industrial complex with the North.

The South Korean company said earlier that Hyun and Yoon Man-joon, head of Hyundai Asan, a Hyundai subsidiary that runs Hyundai’s business in North Korea, visited Pyongyang on Tuesday via Beijing to discuss inter-Korean projects with North Korean officials. Hyun and Yoon are to return home Saturday, according to Hyundai officials.

Hyun’s visit this week marked her second trip to North Korea in a month, as she accompanied South Korean President Roh Moo-hyun on his historic inter-Korean summit with North Korean leader Kim Jong-il from Oct. 2-4.

At the summit, Roh and Kim agreed their two countries would work together on a wide range of economic projects, even though the two states are still technically at war since the 1950-53 Korean War ended in an armistice, not a peace treaty.

After the summit, Hyun said she expects tours to Mount Paekdu to start as early as next April. At the summit, the two leaders agreed to establish direct flights from Seoul to Mount Paekdu.

Hyundai maintains close business ties to North Korea. One of its major cross-border projects is tours of scenic Mount Geumgang on the North’s east coast. More than 1 million South Koreans have visited it since 1998.

Hyundai’s business with North Korea was started by its late founder, Chung Ju-yung, in the early 1990s.

Hyun took the helm of Hyundai in 2003 after her husband, Chung Mong-hun, the Hyundai founder’s fifth son, committed suicide by jumping from a window of his high-rise office in Seoul, apparently under pressure from a lobbying scandal involving a North Korean project.


Economic Implications of Summit Agreement

Tuesday, October 30th, 2007

Nautilus Institute
Stephan Haggard and Marcus Noland

The success of economic cooperation projects depends on the intentions of North Koreans.

The Arabs have a proverb: “He who foretells the future lies.” The recent summit announcement may make many people liars, not the least its authors. The problem with the summit announcement is that its ultimate impact depends on three major unknowns: the attitude and commitment of the next South Korean president; the willingness of the North Koreans to embrace reforms; and progress-or lack thereof-on resolving the North Korean nuclear issue.

The summit and the nuclear controversy are inextricably linked, even if Roh Moo-hyun and Kim Jong-il may have wished to downplay it, and the summit announcement must be evaluated in the context of the nuclear matter. The nuclear issue provides a great opportunity for North-South reconciliation but also sets limits on how fast progress on other fronts can be made.

On the one hand, aid from Seoul may act as inducement for Kim Jong-il to resolve the nuclear issue; this has long been the claim of proengagement politicians. On the other hand, Seoul will receive little support for its diplomacy from the United States, Japan, and other countries if it moves forward aggressively on economic cooperation before the North Korean regime shows a genuine willingness to abandon its nuclear weapons program.

Indeed, the risk is that aid from the South could reduce economic incentives on the North to cooperate and undercut the negotiations. Pyongyang’s celebration of the first anniversary of its nuclear test underscores that achieving this goal could prove an arduous march of its own.

Yet there are signs of hope. The summit document did make a reference, however brief, to resolving the nuclear question and in the context of the six-party talks the North Koreans have-almost simultaneously-agreed to a timetable for the dismantlement of existing nuclear facilities. The summit agreement also contains some important confidence building measures, including most notably a commitment to address conflicts over the disputed boundary in the West Sea that has led to military engagements in the past.

However, all parties have to date studiously avoided mention of what will be done with North Korea’s stocks of nuclear weapons and fissile material. And talk of a final peace settlement to replace the armistice puts the cart before the horse; in the absence of a resolution to the nuclear question it would make little sense to negotiate a broader peace agreement.

If these issues can be resolved the next hurdle is North Korea’s willingness to embrace economic reform. The summit document lays out a number of economic cooperation projects that could be beneficial to both North and South Korea: reestablishment of trans-Korean transportation links; expansion of the Gaeseong Industrial Complex and its replication in other locations; and cooperation in specific industries such as shipbuilding where complementarities would seem to exist between North and South Korean capabilities. All of these are positives.

Yet the projects, while desirable, will have a limited impact as long as North Korea avoids the challenge of broader opening and reform. North-South discussions appear to have avoided the basic building blocks of a market economy-operation of markets, enterprise management, agricultural reform-which would allow the North Koreans to make the most of the aid that they will receive. The long history of aid to other developing countries suggests that aid can be futile, even counterproductive, in the absence of complementary reforms.

Moreover, South Korea’s engagement-in contrast to China’s-remains bottled up in physically and economically delimited projects such as Gaeseong and the Mount Geumgang tourism venture. This situation is regrettable because it is only by broadening contacts with profit-oriented South Korean firms that their North Korean counterparts will learn about the operation of a market economy. Pyongyang continues to resist broader opening, presumably due to concerns that more contact with South Korea could be politically destabilizing.

South Korean analysts are already calculating the costs and benefits of the program outlined in the summit announcement, with one press account describing the costs as “astronomical.” Even the high-end estimates, on the order of $11 billion and more, are a mere drop in the bucket compared to the ultimate costs of rehabilitating the North Korean economy and providing a stable basis for eventual unification. If nothing else, such analyses should stimulate a serious discussion in South Korea of the long-term costs and benefits of different contingencies on the peninsula including the possibility of regime collapse, a discussion that, regrettably, has largely been avoided.

The resolution of outstanding security issues on the peninsula is an important precondition for broader reforms to really work. It is unlikely that foreign investors from the United States, Japan, or Western Europe are going to take a serious interest in the country in the absence of a resolution of the nuclear question. The summit announcement is unlikely to have much of an impact on the passage of the Korea-US free trade agreement (KORUS FTA) in the US Congress. But if North and South Korea push forward with the phase II expansion of the Gaeseong complex in the absence of resolution of the nuclear issue, it would make passage of the KORUS FTA agreement in the US Congress more difficult.

Ultimately, these issues will be laid at the doorstep of the next South Korean president. One contender, Lee Myung-bak, has already expressed reservations about the open-ended nature of South Korean commitments. But whoever enters the Blue House in February 2008, the president-elect will have to make their own decisions on how to approach the North and may not be bound by a document negotiated by an unpopular lame duck president. The 2007 summit announcement may end up like the 1991 North-South Denuclearization Accord, amounting to little more than a statement of good intentions rather than a map for subsequent policy.

The two agreements differ in one significant respect, however. The big budget projects of the summit announcement may create constituencies in South Korea in favor of expanded engagement for purely self-interested reasons. The next South Korean president may confront South Korean corporations lobbying for expansion of contact for the contracts or subsidies they bring regardless of the broader political or diplomatic ramifications.

Ultimately the success of the program sketched out in the summit announcement will depend on the intentions of the North Koreans. Pyongyang could use the assistance offered by the Seoul to leverage its own reform program. However, it could take the aid and simply retreat into its shell, avoiding real reform and a verifiable resolution to the nuclear issue. Only time will tell.