ICAS Spring Symposium
Asia's/Koreas' Challenges Ahead
Rome Auditorium, The Paul H Nitze School of Advanced International Studies
Johns Hopkins University
1619 Massachusetts Avenue, NW
Washington, D C 20035
June 21, 2001
Institute for Corean-American Studies, Inc.
965 Clover Court, Blue Bell, PA 19422
Tel : (610) 277-9989; (610) 277-0149
Fax: (610) 277-3992
DREAMING OF HIGH-TECH ---- SUBSISTING ON HAND-OUTS
Ten Years of Decline
The problems started in 1991 with the collapse of the Soviet Union, a watershed event of the 20th century that was to spell the end for most of the communist countries around the world, exempting only China, Vietnam, Cuba and North Korea. For North Korea, however, the blow was worse than it was for the other three surviving Communist regimes.
The drop in Soviet-subsidized North Korean imports of oil and fertilizer in 1991 proved catastrophic to North Korea's agriculture, much more so than was probably anticipated. Its agriculture is intensive agriculture, relying on inputs of fertilizer and irrigation. Oil had been used in North Korea's petrochemical fertilizer plants and was crucial in its irrigation system. Without irrigation and fertilizer, agricultural yields dropped precipitously.
The acute shortage of electric power quickly led to the closing of factories and coal mines. Without Soviet energy imports, North Korean factories began to run sporadically and many of them not at all. The country's aging Soviet-built infrastructure its roads and railroads also began to suffer badly.
Two years later, in 1993, as a result of the drop in Soviet aid, North Korea was receiving almost a third of its food imports, about a third of its oil imports and almost 90% of its coking coal imports from China. But with the reforms in China, Chinese aid began to falter. North Korea needs six million tons of grain annually to feed its people. It produces three to four million tons. Since 1993 China has been supplying only about 500,000 tons. The country needs at least another one to one-and-a-half miilion tons, which costs about $ l billion. International humanitarian aid from the U.S., South Korea, the European Union and other countries has been keeping North Korea afloat barely with most of the food going to Pyongyang and cities on the eastern coast, where the government has maintained firm control over the distribution system.
1994 was even more disastrous. With the sudden, unexpected death of Kim Il-song in July, the country lost its mainstay, its long-time, beloved leader who had micromanaged every aspect of the economy and the society for one year short of fifty years. With the nation in shock and deep mourning and perhaps feeling the loss of his father every bit as deeply as his fellow countrymen, Kim Chong-il chose to observe a three-year official public mourning period, eschewing any assertion of his new leadership during that time. In hindsight, his succession appears to have been secured from the start. However, at the time, with the onslaught of new problems in 1995-97 that would have tested any regime, his conspicuous absence from the scene understandably led to widespread speculation of dissension within the leadership which, again in hindsight, probably never existed.
In 1995 came the floods and in 1997 the drought. Coal mines were flooded, and in drought the hydroelectric plants could not operate. There was no oil or gas. In 1995 the grain ratio was cut from 167 to 107 kgs. Farmers began to divert food from the government distribution system. Famine was spreading, especially in the cities, and especially in the cities in the northeast. There were reports of many, many thousands, if not a million, dead and reports of martial law being declared in some places.
The government was trying to exercise control It was issuing orders. No doubt, Kim Chong-il was in control, though it was hard to see that from afar, but things were happening so fast, one catastrophe after another, with such dire consequences, that it would have been hard for any regime to survive, especially one with so few patrons abroad, a notoriously bad credit rating and a large foreign debt, almost as great as its gross domestic product (GDP).
By 1999 things were beginning to look somewhat better, with the first increase in GDP in a decade. Even so, at $16 billion, GDP was essentially the same in 1999 as it was in 1985, only about one-twentieth of South Korea's GDP with one-half the population of South Korea.. There was no industrial production to speak of. Factories were operating at 25% capacity, some at l0- 15%. After years of neglect, the country's infrastructure was barely equal to South Korea's in 1975. In ever-growing contrast to South Korea, one of the great success stories of the post-war era, North Korea's economy was in the midst of the worst economic decline of a country not at war. It was estimated that approximately $6 billion would be needed to bring it up to South Korea's level in 1990. Trade volume of $1.48 billion in 1999 was less than a third of total volume of $5.24 billion in 1988. With a constant negative balance of trade over the years, North Korea was $12 billion in debt and in default on most of its loans. The society was also under severe stress. The country had experienced more destabilizing change over the past five years than it had over the previous 40 years combined. Its workforce was exhausted and demoralized, exhibiting all the trouble signs of a socialist system relying on exhortation rather than individual capitalistic motivations.
Despite this grimmest of pictures, there was a glimmer of hope with the slight turn- around in production in 1999. But then the year 2000 arrived with more crushing blows in the form of another prolonged drought in the fall and spring of 2001 that again dampened hope of a speedy recovery.
North Korea at Death's Door
A year or so ago, at meetings such as this, it was fashionable to predict that North Korea would not survive. The collapse of the regime was seriously contemplated by Korean scholars around the world, including in the U.S. It was argued that the utter collapse of the economy coupled with major contraints in the system including the national philosophy of juche (self- reliance) that was seen by many as a bar to economic development through trade, the regime's self-defeating military-first policies allocating 25% of GDP to defense at the sacrifice of economic investment, the exhausted workforce that could no longer be rallied to herculean efforts by exhortations of a charismatic leader, and the loss of that strong leader who had seemed indispensable in running North Korean's highly centralized economy and cult society and who was now succeeded by a much less impressive, virtually unknown and unproven heir apparent all this and more argued against survival. The betting was that it was only a matter of time before North Korea would implode, much as the Soviet Union had done.
There were then and are now more convincing reasons for thinking that North Korea will not implode, whatever the enormity of its current problems, because of a number of countervailing strengths in the system. The only wild card in this more hopeful assessment is the untimely death of Kim Chong-il within the next few years, which would throw everything up in the air and result in unpredictable developments. His continued good health and security from untoward events are important assumptions underlying any guess/estimate of future developments in North Korea. They are an important factor to be considered in any and all analyses of North Korean future prospects. Kim Chong-il's obsessive concern with his own security, especially on foreign trips, suggests that he too realizes the crucial importance of his own survival in power. His health should continue to be a prime intelligence target for U.S. analysts of North Korea.
There are many factors arguing in favor of the continued stability of the regime, so long as Kim Chong-il remains in power. The government's ability to put current economic problems in context with past hardships the North Koreans have suffered under the Japanese and during the Korean War and long ago under the Chosen Dynasty tends to mitigate the importance of arguably short-term set-backs. Regime propaganda that food supplies are being diverted to feed the military at times of increased danger from the U.S. and South Korea or stock-piled for the happy day of reunification when the North will need to feed the starving South Koreans is not challenged by a free press, and the people appear to believe the propaganda. Official reports of starvation around the world, due to natural disasters and other causes, are also believable given North Koreans' total ignorance of world events. Such reports assuage the people's discontent with current problems. The tight control of the regime over all aspects of life in North Korea make opposition to Kim Chong-il extremely unlikely, if not virtually unthinkable. The small size, homogeneity of the country and intense loyalty of the people to Kim Il-song (which may properly be described as a national cult worship of Kim Il-song as a semi-god) give Kim Chong- il, as Kim Il-song's son, an advantage that other world leaders might well envy.
Only mass starvation and death (as we were beginning to see in 1996-98) might pose a serious threat to the regime, and they are not likely to reach a critical point for several reasons. No one, not South Korea, not China or Russia, not the U.S. or Japan, wants to see North Korea collapse with all the attendant problems and costs that that would involve, especially for South Korea. China would never let that happen. If need be, to prevent mass starvation and the collapse of North Korea, it could increase its grain exports to North Korea by another 500,000- 1,000,000 tons at relatively small cost, around $1 billion. It has not had to do that, however, because of the international humanitarian aid that has poured into North Korean from the U.S., South Korea and other countries during recent years of widespread famine.
Thus, Pyongyang can reasonably expect to be rescued from disaster, judging from the precedent of the past ten years when, if anything, it had fewer friends than it has today. Kim Chong-il has not been too proud to hold out his hand for help from anyone and everyone. North Korea has survived as a beggar nation since 1945, without ever having got itself on a sefl- sustaining basis. Its success can only have breed confidence that it can continue to survive as it has for the past 55 years on hand-outs.
Kim Chong-il has three basic choices. He could adopt fundamental economic reforms (the introduction of a market economy, private ownership of property, and banking and legal reforms) that would almost certainly lead to real recovery but would likely threaten the essential totalitarian nature of the regime. He is not likely to risk that course. He could stand pat, hoping to ride out the current crisis with continued foreign assistance in the form of food, fertilizers and petroleum and continued exhortations for his people to work harder and eat less. Or, he could opt for a middle road, making certain adjustments, far short of basic economic reforms, that would increase productivity to some degree without serious threat to his totalitarian control.
Kim Chong-il's Plans for the Future
What has he done to date and what does that suggest for the future? He has continued to rely on exhortations and mass mobilization to complete specific economic development projects, and he has continued to rely on outside assistance to feed his people and support his industries. He has artfully used the threat of nuclear proliferation and missile development to extract food, fertilizer and oil from the U.S., South Korea, the European Union and other countries. This is essentially a stand-pat response in the sense of continued reliance on foreign assistance, but it is a significant change in North Korea's turn-away from its former Communist allies to new non- communist benefactors .
That the U.S. now gives more humanitarian aid to North Korea than North Korea receives from any other country and that we now give North Korea more humanitarian aid than we give to any other country in the Far East would have seemed unthinkable five years ago. It is nothing short of a complete reversal in DPRK policy toward the U.S. even though it admittedly does not constitute basic economic reform. North Korea has gone so far as to offer to suspend its missile development program in exchange for more aid from the U.S. In hopes of receiving much-needed humanitarian aid from other countries, it went on an unprecedented "charm offensive" last year, establishing diplomatic relations with a score of nations, including Australia, New Zealand, Canada, Philippines, Germany and Kuwait.
In a stunning reversal of long-standing North Korean policy, Kim Chong-il capped his "charm offensive" in welcoming Kim Dae Jung's Sunshine Policy with the unexpected and dramatic summit meeting of the two leaders in Pyongyang. By 1994 Kim Il- song had apparently come to understand that his country could not survive without Soviet and Chinese aid. He was planning a summit meeting with South Korea's then president on the day he died. Those plans were shelved during the mourning period after Kim's death while Kim Chong-il remained in seclusion, trying to deal with the series of natural calamities besetting North Korea. By the spring of 2000, after a hopeful reversal (soon-to-be-proved temporary) of North Korea's ten-year economic decline, he seemed ready to address a longer-term solution to his economic problems in enlisting South Korea aid, first and foremost, along with aid from other countries..
Kim had every good reason for expecting a favorable response from the South, given Kim Dae-jung's personal investment in the Sunshine Policy and North Korea's long-time success in extracting concessions from the Soviet Union, China and other countries in support of its economic development. For this reason, he may have been surprised and certainly disappointed to hear from Kim Dae-jung that South Korea could not provide enough aid to save North Korea, that it would need U.S. aid. Whether he had come to that same conclusion himself and Kim Dae-jung only confirmed his thinking or whether Kim Dae-jung surprised him with this disheartening news, it would appear that he has been acting ever since on the belief that U.S. aid is crucial to North Korea's development, as it was to South Korea's own story-book emergence as an economic powerhouse during the past 30 years. All of Kim Chong-il's actions since June 2000 are compatible with a quest to secure better relations with the U.S. as the sine qua non of economic survival and, hopefully, economic development after that.. The continued vituperation against the U.S. in North Korean propaganda to its own people should not be seen as contradicting the realpolitik policy that North Korea is pursuing toward the U.S. and other Western countries. As we learned time and time again during the Cold War, Communist leaders have made sudden, dramatic reversals in policy with no hint of it in their propaganda to their own people right up to the moment of the announcment of a changed policy. Kim Chong-il can be expected to hammer away at the presence of U.S. troops in Korea and other evils of the U.S.right up to the time he announces a 180-degree change in policy.
Since the Summit meeting, Kim Chong-il has heard only more disheartening news. After the losses to Hyundai of its tourism project to Mt. Kumgang Mountain and the gloomy prospects for business in North Korea that South Korean businessmen discovered last year, Kim Dae-jung and other South Korean officials have informed him again of the limits of their financial underwriting of an improvement in relations. Without hoped-for levels of aid from South Korea, the North may simply not be able to proceed with plans and promises that Kim Chong-il made at the summit meeting, including plans for a multi-billion dollar industrial park near Kaesong. He may not have the resources to re-build the railroad from Panmanjon to the Russian border, as promised. This may even explain, at least in part, the postponement of his planned reciprocal visit to Seoul, initially promised for this year. In his mind, conditions are not "appropriate" for a return visit since the ROK has declined to foot the bill for initiatives that he may truly want but that he counted on the South to finance and for which he cannot pay. North Korea's limited capabilities may well be the major restraint on its much grander hopes for expanded ties with the South. It would be a mistake to equate the two, confusing his intentions with much more limited capabilities .
Much has been written about the South's exaggerated hopes after the summit meeting. Perceiving the North to be on the verge of collapse, many South Koreans were deluded by a false hope that reunification was around the corner. Bitter disappointment on that score, coupled with a more realistic appreciation of the costs of the Sunshine Policy, quickly turned to anger against Kim Chong-il and recriminations of his reneging on his promises. It is quite possible that he was equally dismayed by his failure at the summit meeting and afterward to get much more generous assistance from the South. With exaggerated expectations of his own, his disappointment may also have turned to resentment, explaining his unwillingness to visit Seoul without promises of more aid.
It should be remembered that at their meeting the two leaders agreed on two things: they agreed to pursue peaceful reunification and they agreed on some kind of low-stage federation or confederation (with no time limit specified) as the eventual goal. They both seem to have envisaged a period of peaceful coexistence, longer, I think, than most observers had in mind. Kim Chong-il has spoken of a period of peaceful coexistence in terms of 20-30 years, and it seems that President Kim was not thinking of unification as an immediate goal either. His Sunshine Policy is essentially a policy of peaceful coexistence. Kim Chong-il has compared the North to being in kindergarden and South Korea in college and has said that it would take 20-30 years to narrow the gap, precisely the time period that he has cited for peaceful coexistence between the two Koreas. Implicit in this is the realization that the Koreas will need to be at a more similar stage, economically, before reunification can be accomplished. Also implicit in Kim Chong-il's acceptance of a relatively long period of peaceful coexistence is his recognition of the legitimacy of the South Korean government, a major change in North Korean policy.
Besides hoping for more aid from South Korea, Kim Chong-il also seems to have hoped that the North/South summit would lead to better relations with the U.S. In this he was no doubt buoyed by the visit of Secretary of State Albright to Pyongyang in October 2000 and Marshal Cho's reciprocal visit to Washington in January 2001 visits that represent a significant change in North Korean policy by any reckoning. During these talks and other private talks with Western leaders, North Korean officials have repeatedly expressed interest in learning more about Western accounting and business practices and civil law and expressed a desire to join the World Bank, IMF and other international financial institutions that could teach their college students about Western market systems and business management. They have asked for textbooks on how capitalism works and the legal framework that they need.
An intriguing article in the January 2001 issue of Rodong Shinmun expresing a willingness to do away with "outworn patterns and practices" in a "new way of thinking" about economic development using "new scientific and IT technology" was an even clearer sign of a major change in North Korean thinking about its economic development. Some observers have called this "new thinking" a unique development strategy that might be described as a "skip over" strategy, skipping the modernization stage in agriculture and industry and leaping foward to advanced technologies, specifically the IT industry. In moving directly to the adoption of advanced technology, North Korea would presumably skip over the high-cost process of industrialization and reap the benefits of technologically advanced industries much sooner.
Marshal Cho's visit to Lucent and other telecommunications and IT companies in California within days of the Rodong Shinmun article underscored North Korea's newly publicized interest in the high tech communications field. Kim Chong-il's surprise visit to the Shanghai stock exchange later that same month left little doubt that he personally was leading an all-out effort to bring North Korea up to date with modern business practices and technology. It is not surprising that he would be in the forefront of North Korean thinking about a technological revolution given his well-known interest and knowledge of the t.v., movie, computer and communications industries. North Korean propaganda portrays him as being familiar with all fields of science from electronic engineering to chemistry, biology, civil engineering, and space technology, with special interest in information technology. This latter interest is reflected in the recent announcement of the opening of IT University of Pyongyang and the appointment of a Korean-American priest as university president with authority to recruit a superior faculty.
What then does Kim appear to be thinking of as the future of North Korea? He seems to envisage a very different path from that taken by South Korea and China, where surplus agricultural labor was available for newly-developing light industries, specifically textiles, which could be exported at competitive advantage in exchange for imports of heavy industrial and technologically advanced products the prototype of modern economic development. North Korea does not have a surplus agricultural workforce that can be transferred to light industry. Its competitive advantage, to whatever extent it has a competitive advantage, lies in the relatively more advanced communications field developed by its military. It is known, for instance, to have a fairly sophisticated software development, particularly in the fields of voice, fingerprint and eye identification. It could probably produce movie and camera equipment, computers, videos, CDs and other small electronic equipment at competitive advantage. No doubt Kim Chong-il is aware of Japan's success with the Pokemon phenomenon, involving computer games and movies, and Taiwan's recent success with movies featuring the martial arts and the latest in special effects. Having been in charge of North Korea's own movie industry at an earlier stage in his career and being a devotee of foreign movies and computers and dramatic effects, he probably dreams of the day when North Korea surprises the world with a similarly innovative and commercially successful new product or technology.
His commitment to the development of nuclear power as a major source of energy, following South Korea's lead in this regard, might be cited as another example of his interest in moving toward higher tech industries. There is economic justification for such a decision in light of the North's lack of oil and gas and the cut-off of Russian petroleum imports, not to mention the recent difficulties with domestic production of hydroelectric power and coal. Kim's willingness to suspend production at the Soviet-built nuclear reactor at Yongbyon (from which irradiated fuel rods were being removed that could be used to produce plutonium) in return for a U.S. promise to build two smaller but technologically superior, proliferation-resistant light-water reactors suggests a true interest in the peaceful use of nuclear power, whatever other interests one might suspect North Korea of having.
Higher-tech industries, like the above, could best be developed by the one and only technologically elite workforce in the country namely, the military which has the advantage of also being the most politically reliable group in the country. Furthermore, industries like the above could be built in discreet areas of the country, relatively isolated from civilian sectors, where the regime could control production by the military and export to foreign countries without significant interaction with the civilian sector of the economy. Limited economic zones like this would be less likely to "infect" the general population with dangerous notions of a market economy, much as the plans for the proposed industrial development zone around Kaesong envisage keeping foreign workers apart from North Korean workers and the Mt. Kumgang tourist scheme is designed to keep South Korean tourists away from any and all interaction with local residents and the KEDO nuclear energy plants are being built by foreign workers segregated from North Korean laborers.
Kim Chong-il seems to have an unmistakable fondness and fascination with modern technology, much as his father did, not only for economic but for psychological reasons, as well.. For a country at the very bottom of the economic ladder, high-tech projects offer a psychological boost to a down-trodden people. Kim Il-song was keenly aware of this in his willingness to divert scarce resources to the building of a "dream city" (Pyongyang) complete with high-rise apartments, grandiose public buildings with elaborate crystal chandeliers and expensive oriental rugs, soaring monuments, wide avenues, and an advanced subway system with marble floors and mosaic ceilings rivaling the best subway systems in the world while the rest of the country lived in poverty. He often said that he built Pyongyang to raise the people's morale and pride in their country. One is reminded of this when one hears of his apparently serious intention of sending a North Korean satellite orbiting the world (not necessarily sent aloft by a North Korean missile, if he is serious about foreswearing his missile development program in exchange for humanitarian aid and the use of other countries' missiles to launch his satellite) to beam Kim Il-song revolutionary tunes around the world!! Perhaps he remembers the impact on him, as a young boy of 12, and on the Communist world in general of the Soviets' launching of Sputnik in 1957. To his way of thinking, a North Korean satellite circling the globe would help to take the people's minds off their everyday existence and give them something to be proud of, just as they are proud of their beautiful city of Pyongyang and the colossal demonstrations involving thousands and thousands of people performing in unison at special performances staged to impress foreign visitors. As ludicrous as the idea of a North Korean satellite may seem to us, foreigners who have visited Pyongyang have been equally dumb-struck at the sur-real quality of Kim Il-song's "dream city" in the midst of the poverty of the real North Korea and the unthinkable waste of scarce resources in such monumental, nonproductive, showy excesses. There is something about Kim Il-song and Kim Chong-il that reminds one of Charles DeGaulle's memorable observation that "when you have nothing left but pride, pride is everything."
It is fashionable today to think that North Korea has not really changed, despite its devastating problems of the last ten years, because it has not instituted basic economic reforms along the lines of recent Chinese reforms that have brought the beginnings of a free market system and new methods of accounting and business management and notions of civil law. Nor has Pyongyang instituted any changes that have entailed risk of the "cultural and ideological infiltration" that Kim Chong-il so fears and seems determined to resist, believing, as he has repeatedly stated, that such "cultural and ideological infiltration" caused the downfall of the Soviet Union.
This is quite true, although the regime has tolerated the growth of farmer markets in rural areas which have been left pretty much to their own devices during recent years of widespread famine as the government struggled to supply urban areas with food imported from other countries. Its limited control over urban areas has been somewhat reminiscent of the limited reach of the Chosen Dynasty in bygone days. This is not an irreversible development, however. If and when the situation improves, it would be easy for the regime to re-establish control over rural areas and put an end to farmers markets.
There has been no change in the regime's continued reliance on foreign aid, either, belying the notion that North Korea's much vaulted "juche" philosophy means "going it alone" in an economic sense, without reliance on foreign assistance. To the contrary, North Korea not only continues to rely on foreign aid but is begging for more. "Juche" must be seen as meaning "self- reliance" in terms of the country's thinking and planning, doing it North Korea's way, not as others would have North Korea do it. Kim Il-song was famous for listening to the Soviets and the Chinese and promising to do what they said and then going home and doing exactly what he wanted!
There has, however, been a significant change in Kim Chong-il's thinking about foreign aid and how he plans to develop his country with foreign assistance. With neither Russia nor China nor South Korea offering sufficient aid, he is desperate for U.S. assistance, both in the form of humanitarian aid and in help getting into international financial organizations by our removal of North Korea from our list of terrorist nations. He no longer talks about his country as a "paradise" but admits to an emergency situation in which U.S. aid is essential.
He had hoped that the North/South summit meeting would lead to a similar meeting with the U.S., given his preference for negotiating at the top rather than through subordinates. The Bush administration's harder line has obviously been a major disappointment to him. His eagerness in informing Washington that he had nothing to do with the September 11 attacks and his public condemnation of terrorism in recent weeks are important signs of the priority he gives to improving relations with the U.S.
Although there is much to be suspicious of and good reason to move cautiously, the U.S. should be heartened by his apparent realization that North Korea's future lies with the West, especially the U.S. He has outlined a bold new economic development plan that involves scraping the old Soviet infrastructure and replacing it (rather than repairing it) with Western technology. He has also put forward an intriguing new theory of economic development based on developing high tech industries, rather than conventional light industries a la the Chinese model, that is more in keeping with South Korea's Hyundai success in moving directly to the use of advanced technology in the production of cars and ships sold around the world. It is a plan that makes sense in terms of North Korea's natural resources and that obviously appeals to Kim's sense of the dramatic and superlative.
Kim Chong-il's hopes for the future are not necessarily at odds with U.S. and South Korean long-term interests to the extent that they promote a North Korean future more closely associated with the West. To the extent that we and Seoul gain greater influence in Pyongyang relative to Russia and China and greater control over North Korea's developing economy, including its nuclear industry, our interests are well served. In the long run, as the North develops an economic system more compatible with the U.S. and South Korean systems, economic reforms are inevitable, if not during Kim Chong-il's lifetime than somewhat later. Thus, although there have been no real economic reforms to date, no suggestion that Kim Chong-il is willing to risk a free market system (which many insist on as the sine qua non of economic reform), his professed hopes for North Korea offer promise of real reform down the line and better relations with the U.S. and South Korea in the meantime, improving the prospects of eventual reunification sometime in the future, when the two Koreas presumably will have more compatible economic systems. The question remains who will pay for such progress. The costs are only likely to grow as the Koreas grow more and more disparate, as they have over the past thirty years but especially over the past ten years.