International Concern over divided peninsula. North Korea: in need of opening up the economy

By Selig S. Harrison, Le Monde diplomatique, November 2003

The death of Kim Il Sung and the handover to his son, Kim Jong Il, has added to the difficulties of the regime, already faced with an end to Chinese and Soviet aid and struck by serious flooding. North Korea is not on the verge of collapse but its leadership is divided over the path it should take. The pragmatists want to open up their economy like the Chinese, but the hardliners are blocking all reforms. By using food as a weapon against Pyongyang, the United States risks driving the regime into a corner and harming prospects for a peaceful transition.

To many foreign observers North Korea is on the verge of collapse, beset by insuperable problems attributable to a rigid Stalinist orthodoxy. General Gary Luck, the commander of United States and United Nations forces in South Korea, reflected a widespread US official view when he told a Congressional committee on 28 March 1996 that the question is not will this country disintegrate, but rather how will it disintegrate, by implosion or explosion, and when.

But North Korea is more likely to survive by moving toward a liberalisation of its economy broadly similar to what has been happening in China since the death of Mao. That, at any rate, is my assessment, having visited North Korea five times, most recently in September 1995, and having met frequently since then with high-ranking North Korean officials visiting the US, most recently in December 1996. The most likely long-term scenario is a steady erosion of political stability if North Korean leaders fail to carry forward the China-style reforms necessary to deal with their economic difficulties. In particular, the survival of the present regime will depend on whether Pyongyang can overcome a serious food shortage resulting from the loss of Soviet and Chinese subsidies and two successive years of flood damage.

Despite the death of Kim Il Sung in July 1994, the nationalist mystique associated with his memory continues to allow the country’s leaders to impose the totalitarian discipline of the ruling Workers Party. This discipline is reinforced by powerful Confucian traditions of political centralisation and obedience to authority. Facile comparisons between North Korea and the former East Germany ignore the historical differences. In East Germany, the Soviet occupation imposed a totalitarian system in a cultural environment relatively hospitable to democratic concepts. By contrast, the Confucian ethos has influenced in varying ways the political evolution of South Korea as well as North Korea, making it much easier to sustain authoritarian and totalitarian systems.

Another obvious contrast between Germany and Korea lies in the fact that the two Koreas fought a fratricidal war. West German Chancellor Willy Brandt did not have to overcome the bitter legacy of such a conflict when he initiated his Ostpolitik. It was the network of contacts and economic linkages between East and West Germany that set the stage for the upheaval triggered in the East by Gorbachev’s perestroika 25 years later.

Unlike eastern Europe, where western television, short-wave radios and cassettes have leapfrogged national frontiers, North Korea is tightly insulated from outside influences. All television and radio sets must be registered and have fixed channels. Only the top echelon of the Workers Party has more than an inkling of what the rest of the world is like.

Kim Jong Il’s position as the anointed successor to his father and the principal link to his memory makes his presence in the forefront of leadership essential to legitimise the Workers Party regime. The North Korean Ambassador to the United Nations, Kim Hyong U, told me that Kim Jong Il will assume the posts of President and General Secretary of the Workers Party by the end of 1997. However, he is not the charismatic, revered figure that his father was.

Personal and interest group rivalries within the regime have also become visible, leading to tortuous processes of accommodation and delays in decision-making. The armed forces and the internal security services play an increasingly assertive role. Cutting across these divisions is an intense policy conflict between an orthodox old guard and a younger generation of reform-minded pragmatists with greater cosmopolitan exposure, identified with Kim Jong Il.

The nuclear freeze rewarded

The policy struggle began to emerge during the last years of Kim Il Sung and is the result, in part, of American, Japanese and South Korean policies. Thus, when the US promised in 1994 to give North Korea economic and political aid in return for freezing its nuclear programme (1), the pragmatists in Pyongyang were strengthened. Similarly, the failure of the US to honour its pledge vindicated hard-liners who were opposed to the freeze.

In setting the pace of change, the Workers Party faces political risks in going down the road of reform too rapidly, that may be as great as the risks of moving too slowly. Equally important, in terms of the stability of the regime, would be the growth of disruptive social tensions. Until now, discontent over the food shortage and other economic hardships has been cushioned by the absence of visible economic inequities. Blatant corruption could trigger a tragedy like that of Tiananmen Square in 1989. Just as corruption in China has grown in tandem with the expansion of foreign economic ties (2), so the emergence of a comprador class could prove destabilising to the Pyongyang regime.

The removal of US economic sanctions is a precondition for the overall liberalisation of relations with the West and Japan that the North seeks as the key to solving its economic problems. It was primarily because the US promised to remove these sanctions that Pyongyang decided to conclude the nuclear freeze agreement. Article Two of the agreement negotiated with Washington explicitly stated that within three months of the date of this document, both sides will reduce barriers to trade and investment. This provision was unconditional and was not linked to performance on other issues.

Nevertheless, by January 1997 all that the US had done to implement Article Two was to lift sanctions on the exports of one commodity, magnesite, and to grant permission to American Telephone and Telegraph (AT&T) to open up telephone and fax communications. The few US companies that have gone to Pyongyang and shown interest in investing cannot get Treasury Department licences.

Except for AT&T, the only company that has received a licence so far is Cargill, the giant grain conglomerate. For the past nine months Cargill has been discussing a barter deal with Pyongyang to provide up to two million tons of food grains in exchange for minerals. The US granted a licence to Cargill in January as a reward to Pyongyang after it expressed deep regret when a spy submarine ran aground off the South Korean coast last September.

North Korea is aware that American investment might not amount to much until it has begun to pay back outstanding debts to European and Japanese banks, now totalling $3.2 billion. But it believes that the removal of US economic sanctions would have an important symbolic value, stimulating Japanese, west European and South Korean interest in barter deals and subcontracting arrangements that would help to jump-start its stagnant economy (3). Pyongyang recognises that some US sanctions can be removed only with Congressional approval but points out that President Bill Clinton could strike North Korea from the list of proscribed countries in the Trading With the Enemy Act by executive order.

Part of the explanation for the US administration’s paralysis on the sanctions issue lies in domestic political concerns. When the freeze agreement between Washington and Pyongyang was concluded on 24 October 1994, the US had intended to initiate a relaxation of sanctions within the required three months by permitting General Motors, for example, to invest in North Korea. But the unexpected Republican sweep of Congress less than one month later aroused administration fears that the removal of sanctions would stir up opposition to the freeze agreement as a whole and endanger the congressional support needed to implement it.

North Korea is carefully regulating the influx of foreign trade and investment by drawing a sharp line between sweeping liberalisation measures in its new Rajin-Songbong free trade and investment zone and more limited concessions in the rest of the country. In the new zone, foreign investors can establish fully foreign-owned enterprises, get a five-year tax holiday and a 14 percent tax rate and enter the zone without visas. Elsewhere in the country, the terms for joint ventures and other forms of collaboration are negotiated painfully on a case-by-case basis, but officials say that additional free trade zones will follow if Rajin-Songbong is successful.

The most urgent priority for North Korean reformers is shifting from collective farming to a more market-oriented agricultural economy. But the old guard bitterly resists such a shift, pointing out correctly that the current crisis has resulted largely from factors beyond North Korea’s control.

The impact of the 1995 and 1996 floods has been crippling because the areas most severely damaged were the breadbasket provinces in the south and west. Moreover, even before the floods struck, North Korean agriculture had been paralysed by the loss of the Soviet oil that had fuelled its tractors and its fertiliser factories.

North Korea is a mountainous country with only 25% of its land arable and has thus faced food scarcity since its inception. Despite ambitious irrigation and mechanisation programmes that have brought impressive increases in food production, Pyongyang has always relied on food imports, especially concessionary imports from China. Beginning in 1989, China toughened its terms but continued to be a reliable source of food grains, shipping 600,000 tons of corn in 1994.

Then in 1995, rising domestic demand led Beijing to cut off grain shipments to North Korea abruptly, which left Pyongyang in the lurch just as the floods struck. In April 1996, China extended 120,000 tons of emergency food grains aid and signed a five-year agreement with Pyongyang to provide 500,000 tons of grain annually, half of it as a grant and half at concessionary prices. But this will still leave a projected gap in 1977 of at least one million tons in the amount of food needed to provide nine ounces of grain per person per day.

The most serious crisis is expected in isolated North Hamgyong province in the northeast corner of the country, where near-famine conditions already prevail. In North Korea’s nine other provinces, malnutrition in varying degrees is pervasive, with the exception of the capital city of Pyongyang. In response to the food shortage, Kim Jong Il is making changes in agricultural policy similar to those adopted by China and Vietnam.

The most important announced change is an increase in production incentives. Until now, farmers in government-controlled cooperative farms have been organised in work teams made up of as many as 25 members. Since payment is made by the state to the team as a group, hard workers and laggards benefit equally from increases in output. Under the new system, work teams will consist of eight members, which will put pressure on the laggards to produce. Each work team will be permitted to keep up to 30% of what it harvests, with the amount retained dependent on the extent to which the team meets or exceeds production targets.

Introducing private markets

What makes this modest reform significant is that it goes together with an unannounced decision by local authorities in some areas to permit private markets where work teams can sell their surplus and individual farmers can sell food grown on their household plots. This is clearly being done with the approval of Kim Jong Il but without any formal doctrinal justification that would upset the Old Guard.

As the Seoul-based journal North Korea Report has perceptively observed, the emergence of private markets and land contracts in North Korea represents reform by stealth. Pyongyang’s reformers just aren’t powerful enough to challenge the Old Guard head-on. So what do they do? They just wait. Wait for the sheer desperation caused by two years’ flooding to force the diehards to allow change on the ground. Just an emergency, you understand. But the reformers realise that once market practices are in place, there’ll be no going back (4).

A consortium of six UN agencies is currently appealing for $43.6 million in flood-related food aid and other assistance to cover the most urgent needs in North Korea. So far, only $18 million has been pledged, with the US contributing $8 million and Japan $6 million. Tokyo also provided 500,000 tons in direct food aid in 1995 and was planning to give more last year until South Korea objected. Seoul gave 150,000 tons of food aid in 1995 but now wants Japan and the US to join in denying further aid until Pyongyang agrees to a North-South dialogue on Seoul’s terms.

Opponents of food aid have questioned whether the crisis is genuine. But experts from the UN, the Red Cross and other international relief agencies have been allowed to tour the countryside without hindrance. They unanimously agree that the 22 million people of North Korea are victims of a grave humanitarian tragedy. Over time, the crisis may be alleviated if Japan and South Korea decide to resume aid, if the Cargill deal is successfully negotiated and if US sanctions are relaxed. Nevertheless, the need for an expanded interim UN aid effort is increasingly clear. Would it not be morally indefensible to apply ideologically-motivated criteria for food relief to a country that is a victim of famine?

Notes

(1) See Selig Harrison, L’atout nucl?aire du r?gime nord-cor?en (North Korea’s nuclear trump card), Le Monde diplomatique, February 1994.

(2) Gabriel Kolko, Moscou, P?kin, Hanoi: Les pr?dateurs au pouvoir (Moscow, Beijing, Hanoi: the predators in power), Le Monde diplomatique, December 1995.

(3) See report by Jacques Decornoy, Tricky armistice on the Korean peninsula, Le Monde diplomatique, November 1994.

(4) North Korea Report, Seoul, December 1996.