February 22nd 2003


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Articles from this issue:

COVER STORY: Getting a grip on Japan

EDITORIAL: Kiwibank: lessons from NZ

CANBERRA OBSERVED: NSW Liberals in the spotlight as election looms

WATER: Farmers' water rights at risk in the Murray-Darling Basin

Sugar Summit held in Brisbane

STRAWS IN THE WIND: Destruction of wealth / Negative gearing

INTERNATIONAL TRADE: Free trade: where do we stand?

WESTERN AUSTRALIA: Protests in Fremantle

Deregulation and growth (letter)

Iraq and Zimbabwe (letter)

Time to get serious about Australia (letter)

QUEENSLAND: Dangers in Qld Nats' move to become 'relevant'

NORTH KOREA: Is time finally up for dinosaur regime?

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NORTH KOREA:
Is time finally up for dinosaur regime?


by Sharif Shuja

News Weekly, February 22, 2003
After the collapse of the Soviet world and the death of Kim Il Sung, North Korea under Kim Jong-il has continued alone on the rigid communist way, in spite of economic consequences that have led the state beyond ruin. Sharif Shuja wonders why the leaders in Pyongyang have pursued a policy abandoned not only by Russia but also by China and Vietnam.

In the West, North Korea has acquired a certain notoriety but it remains a comparatively unknown country. One difficulty in judging North Korean conditions is that literature on the country is, in comparison with virtually all other countries, in very short supply.

Reliable statistics are even more difficult to come by. Specialists on East Asia have published a number of basic and often detailed studies, but the very character of the Hermit Kingdom has meant that most authors have seldom had the opportunity to even visit the country, let alone live there. It has probably only ever been visited by a few thousand Westerners, mainly businessmen, technicians and debt negotiators.

Increasing trouble

North Korea's increasingly serious problem of feeding its population, famines, nuclear and missile program, have all led to a renewed interest in the country and developments generally on the Korean peninsula.

Can a totalitarian system such as that of the DPRK continue to operate without any major change in the twenty-first century?

The conventional view outsiders have of North Korea is that of a rogue regime, irrational, dangerous, provocative, even aggressive. Pyongyang's invasion of South Korea in 1950, its maintenance of strong military forces near the inter-Korean border ever since, its bizarre political and diplomatic practices, its refusal to liberalise its economy like its more dynamic neighbours, its nuclear weapons program and the 31 August 1998 so-called 'missile' test are all seen to affirm this conventional view.

Kim Jong-il, like his father, Kim Il-sung, has run a ruthless regime that has in many respects done its people terrible disservice.

The defection in Beijing on 12 February 1997 of Hwang Jang-yop, Secretary of the Central Committee of the Workers' Party of Korea (WPK) and a close associate of Kim Jong-il raised questions regarding the longevity of the regime in Pyongyang. North Korea is an "alienated state facing possible extinction". Abundant reports, over nearly a decade now, indicate that North Korea's economy is under enormous stress and that it lacks the capacity, unaided, to feed its people, fuel its factories and transport systems, or generate sufficient foreign exchange to cover its needs.

On the other hand, South Korea, being prosperous and sharing the values of democracy and a free economy, has not only now established good relations with China and Russia, but also has transformed its cooperative ties with traditional allies, such as the USA, Japan and the nations of Western Europe, into equal partnerships.

South Korea regards close co-operation with its traditional allies, especially the USA, in the key areas of security, the economy and trade to be important for the continued progress of the country. The challenge now for the South is to ensure that the North does not collapse, since this would entail costs of an order which would seriously destabilise the economy of the South, as well as unsettling the strategic balance in the region.

The viciousness in the North Korean economy is rooted in the structural inadequacy of it industry.

First, centralised economic planning in North Korea has been carried out resolutely regardless of worker productivity and technology levels. Bureaucrats, ignoring the real economic situation, allocate resources. This results in inefficient distribution that causes state-owned enterprises to be moribund.

Moreover, since there is no direct connection between production and consumption, producers are unable to adapt to demand changes.

Second, North Korea has concentrated on heavy industry, specifically the weapons industry, as its core sector for economic development. Light industry and agriculture as well as the service sectors were neglected and consequently weakened.

Third, North Korean industrial equipment is in a serious state of disrepair because there is no money to rejuvenate industrial facilities.

And finally, the North Koreans have carried out the national industrial policy. The result is economic isolation.

Because North Korea faced an aggravated economic plight, policy-makers have realised the limitations and weaknesses of their self-reliant, isolationist, economic policies that have been stifling initiative at home and estranging potential overseas partners.

Concluding that they needed a change in their economic development strategy, North Korean officials enacted a series of laws and regulations on joint ventures, foreign investment and free economic and trade zones to attempt to reshape their economic development strategy.

Since 1991, the North Korean government has tried to cooperate with Western countries and has begun to adopt relatively bold economic opening measures. On 28 December 1991, the DPRK Administration Council created a Free Economic and Trade Zone (FETZ) around the cities of Rajin and Sonbong. The Rajin, Sonbong and Chongjin ports were designated free ports in 1991. This action can be interpreted as a sign of new thinking in Pyongyang on economic issues. There is, however, no sign of any move toward market-oriented reform because of the North's rigid ideology.

It is important to bear in mind the economic role played by the military. No facts are, of course available, but the armed forces obviously have control of a considerable production capacity. It must be stressed that this sector has always been given priority and that it operates outside the ordinary planned economy - or, probably more accurately, constitutes a parallel planned economy of its own.

North Korean arms sales account for the lion's share of hard currency income, which, as a consequence, is mainly used for importing arms rather than food.

The nation has no oil reserves of its own, and domestic energy production is based upon hydroelectric power and coal. When Russia refused to deliver oil except against hard currency, imports were reduced by 75%. North Korea then turned to China which, in 1993, followed the example of Russia. The repercussions were felt in all sectors of the economy.

Transport capacity was immediately reduced, which particularly reduced the distribution of coal and also led to cutbacks in use of tractors and agricultural machinery. The production of fertilisers fell. Consequently, both the production and distribution of foodstuffs were adversely affected.

The regime was forced to announce Chinese and Vietnamese style limited reforms in agricultural policy in order to meet the food shortages. These developments towards limited private ownership and freedom of travel etc., were recognised in the new constitution of 1998.

North Korea's food crisis developed over a long time without any radical measures being taken to try to improve things. This food crisis caused famines and deaths of thousands of North Koreans. There were also floods which damaged crops.

After the catastrophic famine of recent years, Pyongyang risks a legitimacy crisis with its own population. But the regime's dilemma is that it is not prepared to accept the necessary economic reforms, because this would be a threat to its survival.

Despite all these difficulties, it appears that Kim Jong-il is firmly in control in the DPRK. The DPRK regime is over fifty years old, which means that almost the entire population has known nothing but the political and ideological norms set by the KWP.

With a lower level of economic development and an ineffective civil society come lower levels of popular expectation. Significant regime strengths are also present in the form of a formidable state repressive apparatus. It is therefore clear that the initiative for any major change in North Korea remains with Kim Jong-il.

However, he shows no signs of addressing the country's systemic crisis. And there is little sign of alternative leadership emerging from the people around Kim. Some suggest that younger generation cadres in the leadership circle would be pragmatic in orientation and seek significant change to state policies if they come to power.

No change to this situation seems possible under current circumstances, and thus one commentator concludes that "any meaningful moves toward democratisation must await the demise of the Kimist system".

Three tasks

I believe Kim Jong-il faces three tasks. The first is to solve the country's immediate economic problems. The second is to open up North Korea gradually to the outside world and earn the trust of others, including the USA and Japan. The third is to ensure the long-term survival of his regime.

North Korea is fighting for its survival. However, the world at large is not prepared to help preserve a totalitarian regime, but appears willing to pay a price for peace. Nor is any state prepared to take upon itself the costs and burden of administering the North Korean territory in the event of the collapse of the present administration. But this administration is at present not capable of performing its duties - the people cannot survive without outside support. This means that the world at large has to share the responsibility for keeping the present administration functioning.

The obvious goal is to preserve peace in the peninsula. And for most countries, the natural solution is probably seen as being market economy reforms ending in reunification under Seoul's leadership.

It seems that the North cannot move towards reform unless the huge military-industrial establishment can be attracted to market economies and that, in any such process, the South Korean chaebols (giant conglomerates such as Samsung and Hyundai) will play a leading role.

The challenge for the South will be for them to find ways to work with the regime in Pyongyang, which could be a key for the North's survival in the next decade.

  • Dr Shuja teaches at the University of Melbourne




























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