Archive for January, 2003

‘Seoul paid for summit with North’

Thursday, January 30th, 2003


South Korean government investigators have said that $200m was secretly transferred from a state-controlled bank to North Korea one week before a landmark inter-Korean summit in June 2000.

The summit was seen as a boost for outgoing President Kim Dae-jung’s policy of engagement with the North, but critics have dismissed the historic meeting as cheque-book diplomacy.

The government investigators’ report was the culmination of a three-month inquiry into loans granted to the South Korean conglomerate Hyundai.

Mr Kim, who has previously denied knowing about Hyundai’s dealings with the North, appeared to acknowledge the report’s findings on Thursday when his spokeswoman said that the money was justified “if (it) was spent on promoting South-North economic co-operation”.

“The unique nature of South-North relations has forced me to make numerous tough decisions as the head of state,” Park Sun-sook quoted him as saying.

Hyundai funding

Sohn Sung-Tae, an official with South Korea’s Board of Audit and Inspection which conducted the probe, said the 223.5bn won ($200m) was part of a loan from state-run Korean Development Bank (KDB) to a Hyundai subsidiary.

The BBC’s Seoul correspondent says the investigation has been frustrated by the company, which had refused to submit financial documents.

But threatened with legal action, the company finally complied this week.

In its report, the Board of Audit and Inspection confirmed that the loans of nearly $400m to Hyundai Merchant Marine were extended one week before the historic inter-Korean summit, and that half of the amount was then transferred to the Communist State.

Opposition politicians have alleged that the money was used as a bribe to induce North Korea to take part in the summit.

The Hyundai group has funded numerous inter-Korean economic projects and has played a key role in nurturing better ties between South Korea and the isolated Communist North.

But it has been badly affected by a joint venture tourism project with North Korea, and, in deep financial trouble at the time of the summit, insisted it used the loan to improve its financial position.

South Korea’s JoongAng Ilbo newspaper quoted an aide to President-elect Roh Moo-hyun on Thursday as saying that the Hyundai firm had transferred the money to the North with the help of the government’s National Intelligence Service.

“This proves that this government’s biggest achievement, the June 15 South-North summit, was bought with money,” opposition party spokesman Park Jong-hee said in a statement.

Mr Park called on Mr Kim to apologise.

The legacy of outgoing President Kim Dae-jung’s administration has been seen as his success in improving ties with the North.

He was awarded the Nobel Prize for Peace in 2000 following the inter-Korean summit.


Reforms Turn Disastrous for North Koreans

Monday, January 27th, 2003

Washington Post
John Pomfret
1/27/2003, Page AOl

Nuclear Crisis May Have Roots in Economic Failure

Six months after North Korea announced unprecedented wage and price increases to jump-start its miserable economy, runaway inflation is emptying millions of pocketbooks and bottlenecks in production are causing widespread shortages, according to Chinese and North and South Korean sources.

The black market price of rice, the staple of the Korean diet, has jumped more than 50 percent over the past three months in most parts of the country while tripling in others, according to North Koreans, Chinese businessmen and Western aid agency workers. Some factories in poorer parts of the country, such as the heavily industrialized east coast, have stopped paying workers the higher salaries that were a cornerstone of the reforms, recent North Korean arrivals to China said. Others have taken to paying workers with coupons that can be exchanged for goods, they said, but there are no goods in the stores to buy.

“Theft new economic policy has failed,” said Oh Seung Yul, an economist at the government-funded Korea Institute for National Unification in Seoul. “The hopes that were raised in July are today pretty much dashed.”

The apparent failure of North Korea’s attempt to promote economic activity and improve living standards constitutes an important backdrop for its recent threats to resume a nuclear weapons program, according to the sources.

On one hand, Oh and others said, North Korea’s isolated government needed a scapegoat. On the other, according to Chinese sources close to the secretive government of Kim Jong Ii, Pyongyang has determined that it risks economic collapse without security guarantees and access to international lending institutions such as the World Bank and International Monetary Fund, to which the United States holds the keys. So Kim manufactured a crisis to win concessions, they said.

“Now the economic situation is more precarious than before the reforms. They can’t do this halfway,” said Cui Yingjiu, a Chinese Korean economist and adviser to the North Korean government. “They risk social chaos and economic collapse.”

The crisis has been exacerbated by a drop in the humanitarian aid that had kept North Korea on life support since 1995. Because of a shortage of donations, the World Food Program has cut back the number of North Koreans it is assisting this year from 6.4 million to 3.5 million of the country’s estimated 22.6 million inhabitants. In September, the elderly and primary school-age children on the west coast were cut off. In October, kindergarten-age children, pregnant women and nursing mothers there lost out. In November, nurseries were scratched from the list.

“It’s a tough call deciding who has to be deprived,’ said Gerald Bourke, an official with the World Food Program in Beijing. Bourke said the recent “very rapid inflation” of rice prices is “putting food way beyond the pale for a lot of people.”

The World Food Program has 25,000 tons of food in North Korea and pledges of 75,000 additional tons, he said. It needs 511,000 tons this year.

North Koreans traveling over the border to Yanji, about 700 miles northeast of Beijing, said an initial wave of hope triggered by the changes announced in July is gone in almost all parts of the country except the capital, Pyongyang.

Lee Xiangyu, a North Korean refugee in China, was arrested by Chinese border police and returned to North Korea last summer, when the changes began. After a short stint in jail, the 19-year-old returned to her home town, Musan, along the border with China. By October, she said, the lumberyard where her father worked had stopped paying him and other workers the huge raises they had received as part of the effort to promote some aspects of a free-market economy.

But prices continued to rise. “There was no money in my house, and now the prices are so high,” she said. Lee sneaked back into China in December. “It’s not like it was in 1997 when people were starving to death,” she said, speaking of the famine that cost hundreds of thousands of lives. “But it’s worse in a way. Because everybody had hope for a little while and now they are desperate again.”

North Korea’s announcement of economic reforms was front-page news, in part because the measures fit into a series of other moves that led some observers to conclude Kim was ready to lead his country out of isolation. The steps included expression of regret following a clash between North and South Korean naval forces in June, the suggestion that North Korea would hand over Japanese Red Army members wanted in Japan for hijacking a Japanese airliner in 1970, an informal meeting in July between North Korean Foreign Minister Paek Nam Sun and Secretary of State Cohn L. Powell, transportation links between North and South Korea, a summit between Kim and Japanese Prime Minister Junichiro Koizumi and talk of establishing as many as five special zones for foreign investment.

The economic changes included raising prices and wages, devaluing the North Korean won against the dollar and cutting state subsidies for failing businesses. Wages were increased between 900 percent and 1,500 percent. Prices, which are in theory set by the state, went up as well. Rice went up 4,000 percent, corn 3,700, pork 700, diesel fliel 3,700, electricity 5,900, apartment rent 2,400 and subway tickets 900.

The government announced that factories with bloated workforces could effectively lay off unnecessary workers so they could concentrate on making things again — a step North Korean industry had not taken since economic troubles began in 1995.

The main motivation for increasing the price of rice was to prompt farmers to plant more food. But Cui, who attended a conference on North Korea’s economic changes last fall in Pyongyang, said farmers were not happy.

“Grain prices went up, but so did prices for inputs like fertilizers and seeds,” he said. ‘So all gains were canceled out.”

Another issue, Cui said, is electricity. North Korea has good hydropower resources, but as farmers become interested in planting more crops, they will want to use water in reservoirs for irrigation, not for power generation. “There are a whole series of these conundrums and Catch 22s,” Cui said.

He said North Korean factories have yet to begin producing goods people want to buy. That is why trucks rolling into China from the Dandong border crossing, 350 miles southwest of Yanji, now carry clothes, television sets, shampoo and other consumer goods.

The changes befliddled Western and Chinese economists from the beginning. Chinese experts noted that when China undertook its first major economic reform in 1979, it increased the price of grain by only 25 percent. Second, they said, when China began this process, 80 percent of its population lived in rural areas, so there was a huge pooi of potential beneficiaries from the liberalized agricultural policies. But North Korea is highly industrialized: Two-thirds of its people live in cities.

Marcus Noland, at the Institute for International Economics in Washington, speculated that the changes were either a desperate attempt to jump-start a half-dead economy or a backhanded attack against North Korea’s nascent private economy. Increasing prices would reduce the value of currency held outside the state system, breaking the back of private entrepreneurs.

But then again, he said in a recent paper, “the possibility that economic decisions are being made by people who do not grasp the implications of their actions should not be dismissed toohastily.”

Correspondents Doug Struck and Peter £ Goodman in Seoul contributed to this report


Koreas progress on border links

Monday, January 27th, 2003


North Korea has made a key concession on cross-border road and rail links with South Korea, South Korean officials have said.

The move means that tourists and businessmen from the South could be able to cross over to the North Korea within weeks.

The apparent breakthrough in the long-running negotiations came as South Korea’s top national security adviser, Lim Dong-wan, arrived in Pyongyang seeking to resolve tension over the Stalinist state’s nuclear programme.

Mr Lim, a former unification minister, said he hoped to avert war, but warned he did not have a quick solution.

“My visit to Pyongyang is designed to lay the ground for dialogue on the peaceful settlement of the North Korean nuclear issue that will help avoid war,” Mr Lim said before leaving Seoul on Monday.

The BBC’s Caroline Gluck in Seoul says North Korea’s decision to allow the visit indicates it is now willing to accept mediation from its neighbours. Before, it had said it would only discuss the nuclear issue with Washington.

North Korea’s concession in the separate, cross-border talks ends months of wrangling over who should control the so-called Demilitarised Zone (DMZ) that separates the two Koreas.

Analysts said North Korea might be pushing for progress with the South as a way to undermine South Korea’s alliance with the United States, which favours a much harder line policy on engaging with the North.

‘Cat’s paw’

The South Korean delegation includes Lee Jong-suk, an advisor to President-elect Roh Moo-hyun, who takes office next month.

Its visit comes a day after the US said it had no intention of attacking North Korea but warned the nuclear standoff was a danger to Asia.

Mr Lim is expected to meet North Korean leaders and other top officials during his visit.

North Korea on Monday hit out at the United Nations nuclear watchdog, describing the International Atomic Energy Agency (IAEA) as the “cat’s paw” of the United States.

“It is… an objective reality that the secretariat of the IAEA is not in a position to discuss the DPRK’s (North Korea) issue and the days are gone, never to return, when it could unreasonably handle it,” reported the official Korean Central News Agency.

The Vienna-based IAEA has said it will hold an emergency session on 3 February to decide whether to refer the nuclear issue to the UN Security Council.

The crisis started last October, when the US said North Korea had admitted it was working on a banned nuclear weapons programme.

The US stopped fuel aid to North Korea in protest, and that led to North Korea expelling United Nations weapons inspections and announcing it was reactivating a previous nuclear programme.

Earlier this month North Korea announced it was pulling out of the Nuclear Non-Proliferation Treaty.


Inside the DPRK’s ruling elite

Wednesday, January 1st, 2003

“Inside North Korea’s Ruling Elite”
Aidan Foster-Carter
January 2003

As the international community struggles to find an appropriate response to North Korea’s moves to restart its nuclear programme, the questions of how key decisions are reached, and who by, have become of paramount importance. The received opinion is that “Dear Leader” Kim Jong-il is the omnipotent and omniscient genius responsible for everything – as was his father before him, the DPRK’s founding Great Leader Kim Il-sung. Pyongyang’s ineffable media endlessly praise the greatness of these two. Lesser figures, by contrast, remain in the shadows or shine only with reflected glory: success is due to following the leader loyally. Yet it misleads to take this at face value.

By all accounts Kim Jong-il is an active micro-manager. (He is nocturnal, too, and waiting for his midnight faxes causes much anxious ministerial insomnia.) He insists on being the node and centre of many separate chains of command. As in the spokes of a bicycle wheel, these are all linked to the hub yet have minimal lateral contact with one another.

Like his late father, but less energetically, the Dear Leader is also given to “on the spot guidance”: visiting all manner of places and making free with “expert” advice which of course cannot be ignored.

But this is not the whole picture. The public spectacle and personality cult serve to mask a more private sphere: one of smoke-filled rooms, where a few men (and a very few women) grapple with the political, economic, and military choices which confront all states, even those blessed by the Juche philosophy. Moreover, the choices are growing harder and starker, not least between war and peace and between market reform and further stagnation. North Korea cannot feed itself, and its economy lies in tatters. Now even its old allies, Russia and China, have joined the chorus of foes urging it to end its renewed nuclear programme.

So, even if Kim Jong-il is the ultimate decision maker (and even this cannot be accepted with absolute certainty), there are important questions about in what forums, formal or informal, policies are discussed and decisions made, and about who aids him – whether with policy input, advice, chewing the fat, or even daring to disagree. Who, in a word, are North Korea’s power elite, and do their minds really move as one? Or are there – as in any political system – divisions, perhaps profound ones, which could precipitate power struggles or even potential conflict?

Needless to say, no definitive answer to such questions is possible. As with much else, North Korea has succeeded in keeping its politics well hidden. If anything, things have grown more opaque over time (glasnost in reverse), especially under Kim Jong-il, when even the already minimal due process – for example the brief annual meeting of a rubber-stamp parliament to pass the budget – ceased. In 1998 the state apparatus was overhauled, the constitution revised, and normal service resumed, after a fashion. Yet the officially ruling Korean Workers’ Party (KWP) remains in limbo, with no sign that its Politburo or Central Committee have even met since the death of Kim Il-sung in 1994; nor has it held a full Congress since 1980, when Kim Jong-il was proclaimed as successor.

The Dear Leader has scant regard for formalities, ruling instead via a kitchen cabinet of trusted cronies, the most important of whom is his brother-in-law Jang Song-thaek. Meanwhile a third estate, the military, has risen to rival the usual communist party-state dyad.

Rise of a dynasty

It helps to know how North Korea got this way. In 1945 the young ex-guerrilla Kim Il-sung came home in Soviet uniform. Moscow’s support and his own ruthless skills helped him kill off rivals, including three other communist factions: local, Soviet-Korean, and pro-China. The last overt challenge to him was in 1956, and thereafter his Kapsan (partisan) faction monopolized power. Most of today’s Pyongyang elite are descended from, or have married into, this group.

As medieval history east and west attests, dynasties have their own internecine strife. Kim Il-sung’s first choice as heir was his younger brother Kim Yong-ju, who vanished in the 1970s but resurfaced on the Politburo in 1993: a hint that Kim Jong-il’s succession was in trouble. But then the Great Leader died, and YJ has hardly appeared since. The Dear Leader has also seen off his hated stepmother Kim Song-ae, who used to head the women’s union, and her sons. One, Kim Pyong-il, a potential rival, lives in quasi-exile as ambassador in Warsaw.

By contrast, Kim Jong-il is close to his one surviving full sibling, his sister Kim Kyong-hui, and her husband Jang Song-thaek. She runs the party’s light industry section; he is a vice-director of the KWP Central Committee. As often in Pyongyang, an anodyne nominal title belies real rank. In November Jang visited Seoul with an economic delegation, to great excitement there. One day he overslept but none of his compatriots dared wake him; a South Korean had to do it.

Kim Jong-il turned 60 last year, so his own succession is a real if not yet a public issue. Given a tangled marital history, this too risks conflict. His Swiss-educated elder son Kim Jong-nam, 31, who runs the DPRK’s IT activities, was front-runner until caught on a covert trip to Japan last year. That embarrassment might make JN’s half-brother Kim Jong-chol, 20, the favourite.

A party preserved?

All this, of course, is behind the scenes. Officially North Korea is ruled by the KWP, but as noted this seems oddly frozen. The most important Politburo member is ex-foreign minister Kim Yong-nam, 74, who as presidium president of the Supreme People’s Assembly (SPA) is the titular head of state. (The DPRK’s “eternal president” remains Kim Il-sung, mortality notwithstanding.) It was Kim Yong-nam who met foreign dignitaries before the Dear Leader began to do so, selectively, in 2000. He is also a unifying bridge between generations in the party.

Other full Politburo members each have specific oversight responsibilities. Jon Byong-ho, 76, as head of the secret Second Economy Committee, runs an arms industry which is bigger than, and has priority over, the civilian economy. Han Song-ryong, 75, has the poisoned chalice of heavy industry; while Kye Ung-tae, 77, oversees public security.

Alternate members (a rank lower) of the Politburo include Yon Hyong-muk, 71, a technocrat who impressed as prime minister a decade ago on several visits to Seoul. Demoted, after North-South ties worsened, to run the remote northerly Jagang province, he showed his mettle by a campaign to build local power stations, and he is now a rare civilian on the National Defence Commission (see below). Other alternate Politburo members are the current premier Hong Song-nam, 78, a former chief planner; Yang Hyong-sop (76) and Choe Thae-bok (73), respectively vice-president and chair of the SPA (in effect, speaker); and Choe Yong-rim, 76, the prosecutor-general.

Several of the above are also among the KWP’s secretaries. Others include Kim Kuk-tae, 78, who monitors the elite; Kim Ki-nam, 76, in charge of propaganda; and the best known, Kim Yong-sun (68), who after years in charge of international relations now has the hot potato of North-South ties. Here the stakes are high: a Seoul daily claims Kim was jailed last year after the new Bush administration chilled the atmosphere, until Kim Jong-il ordered his release.

All the above, as their ages attest, have been around for a while. (Some even older figures in their 80s, including the last survivors of Kim Il-sung’s guerrilla band, play a merely honorific role.)

As in the traditional communist model, the party takes priority over the state. Cabinet ministers, therefore, are a lesser breed unless like Hong Song-nam they also hold party positions. To complicate matters, at the eight rounds of inter-Korean “ministerial” talks since the June 2000 Pyongyang summit, North Korea has sent not ministers as such but a “cabinet advisor”, Jon Kum-jin (70), leading a younger team whose precise jobs and status are unclear.

Similar oddities apply in foreign affairs. Whereas Kim Yong-nam as foreign minister had real clout, the incumbent now, Paek Nam-sun (formerly Paek Nam-jun: name changes are another quirk), mainly does smile diplomacy – as at the ASEAN Regional Forum in Brunei, where he had coffee with Colin Powell. But for serious talks his nominal deputy Kim Kye-gwan takes over, or the real heavy hitter, first vice-foreign minister Kang Sok-ju. Kang negotiated the 1994 Agreed Framework, and it was reportedly he who in October defiantly boasted to the US of North Korea’s new nuclear programme. By all accounts, he is one of Kim Jong-il’s closest confidants.

Soldiers on the march

Other emissaries to foreign lands are military. Two years ago, when Kim Jong-il sent a special envoy to Washington, he picked vice-marshal Jo Myong-rok, who took tea with Bill Clinton in the White House in full Korean People’s Army (KPA) uniform. That choice bespeaks the rise of the KPA under Kim Jong-il as a third elite, alongside or even above the party and state. Not only have the military as such gained status, but ups and downs in the ranks contrast with the KWP’s stasis.

For example the ex-air force chief Jo, 72, who in 1995 ranked 95th on one funeral committee (a vital index of political snakes and ladders for Pyongyang-watchers) by 1997 had shot up to 7th. His post as KPA political chief belies his role as Kim Jong-il’s top military ally and North Korea’s number two.

Similarly, Japanese sources report an unnamed general as central to secret talks to arrange Prime Minister Junichiro Koizumi’s visit last September. Amid the debris of that abortive initiative, this figure told his Japanese counterpart: “At worst, you may lose your job” and drew his hand across his throat.

Whatever an individual’s fate, there are many signs of the KPA’s new clout overall. Formally, the revised 1998 constitution made the military-dominated National Defence Commission the highest state body, above the cabinet. Kim Jong-il rules North Korea as NDC chairman. An “army-first” policy is proclaimed; last year the army even replaced the proletariat as officially the core force of the revolution. Theory and practice point the same way. North Korea’s hard line on many issues is widely attributed (including by some DPRK diplomats, sotto voce) to military veto. The KPA would have much to lose from an outbreak of peace on the peninsula.

Besides Jo, the two main military figures are defence minister Kim Il-chol (69), a navy man, and chief of staff Kim Yong-jun (66 or 70; sources vary). Both have shot up the ranks, at the expense of others like O Guk-ryol, chief of staff in the late 1980s who was seen then as Kim Jong-il’s key ally in the KPA.

The crucial question of the Dear Leader’s precise relations with the military remains unclear. Many must have resented his being foisted on them, without any military experience, as commander-in-chief, his first official role. Then again, the success of his succession (so to say) was not predetermined; this testifies to his own political skills, even after paternal protection ceased. So he might have tamed the KPA – or have they tamed him? He has certainly promoted generals en masse and lavished gifts to buy their loyalty. It is just not known whether the current crisis reflects their stubbornness, or the limits of his horizons.

All change?

What next for North Korea’s political elite? At a well-lubricated lunch in happier times two summers ago, Kim Jong-il told visiting South Korean press magnates that a KWP congress would be held that autumn (it was not), which could remove a clause pledging it to communize South Korea. But there was a problem: “Among the top officials…are several who worked with President Kim Il-sung, so I find it’s difficult to revise. If the platform is changed, a lot of officials here will have to quit their posts. Some may claim that if I initiate the revision of the platform, I am trying to purge my opponents”. The laughter around the table was nervous.

Will there ever be another KWP congress? Maybe it is neither necessary to Kim Jong-il – nor possible for fear that desperation might unleash real debate over the country’s tragic trajectory. Many in Pyongyang must dread their future. If debate between hawks and reformers is barely audible, this reflects not only fear of getting out of line, but a shared stark awareness that they might all sink together.

If and when real change begins, by whatever means, then the chances of it evolving into a complete unravelling of the regime and state as such grow ever greater. Who, in 2003, would even want to save the foul shell that the DPRK has become? And how could they do it? But North Korea’s eventual agents of change, be they KPA colonels or workers goaded beyond endurance by hunger, still have no names that we yet know.