North Korea in the emerging international system: prescriptions for South Korea.

The general view of North Korea is that of a "rogue" regime, irrational, dangerous, provocative or even aggressive. Pyongyang's invasion of South Korea in 1950, its maintenance of strong military forces near the inter-Korean border since then, its bizarre political and diplomatic practices, its refusal to liberalise its economy like its more dynamic neighbours, its nuclear weapons programme and the so-called "missile" test on 31 August 1998 (1) are all seen to affirm this view. The Kim Jong-il regime, like that of Kim Il-sung, has been a ruthless government that has in many respects done its people great disservice. The defection in Beijing on 12 February 1997 of Hwang Jang-yop, a Secretary of the Central Committee of the Workers' Party of Korea (W. EK.) and a close associate of Kim Jong-il (2), raised questions regarding the longevity of the regime in Pyongyang. (3) In fact, North Korea is an alienated state facing possible extinction. (4) 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 liberal democracy and free-market economies, has not only now established good relations with China and Russia, but also has transformed its cooperative ties with traditional allies, such as the United States of America, Japan and the nations of Western Europe, into equal partnerships. Despite the end of the Cold War, the on-again-off-again dialogue between the South and the North and the efforts of South Korea's President, Kim Dae-jung, to adopt a more conciliatory approach to the North than his predecessor, (5) the reality is that the Korean Peninsula remains divided.

Confronted with a world that is now on the march toward openness and reform, North Korea seems unwilling to undertake major changes, though the historic summit between Kim Jong-il and Kim Dae-jung in June 2000 has raised the profile of Klm Jong-il. He has tried to show the international community on this occasion that North Korea is ready to engage with the outside world.

This paper demonstrates that North Korea, in recent years, has only changed its external economic relations and business laws; the "fundamentals" have not been changed since it is still a command economy. South Korea and the West have an interest in promoting democracy and market economies in North Korea. Yet it would be wrong to assume that it is in their power alone to bring this about. In the end, it will be North Koreans who bring the country's period of misery to a close.

REFORMS AND CHANGES IN NORTH KOREA

A large problem, for North Korea, is lack of transparency. This lack is in policy-making, in how influence flows, who makes what inputs, where decisions are really made, who is in and who is out. It means that foreign governments have less opportunity to influence the policy-making process in the way they do elsewhere. It also means that on many issues we do not know whether the North Koreans are sincere or not. This gives rise to the more speculative interpretations of the North's domestic, foreign and military policies, so that when the regime does speak candidly it has to cross a wall of scepticism. (6)

However, a change is visible in North Korea's economic policy outlooks, and the evidence suggests that the country has, in the last few years, undertaken limited reform in the economic and trade areas. Pyongyang has enacted a series of laws and regulations on joint ventures, foreign investment and free economic and trade zones around the cities of Rajin and Sonbong to attempt to reshape their economic development strategy. The Rajin, Sonbong and Chongjin ports have been designated free ports.

Nevertheless the innate viciousness in the North Korean economy is rooted in the structural inadequacy of its industry: the regime's commitment to autarkic juche, its centralised bureaucratic planning, its concentration on heavy industry, and the extreme disrepair of even that (since there is no money to update equipment). Moreover, since 1995 the country has been gripped by a serious humanitarian crisis worsened by severe droughts and floods. Kim Jong-il faces three tasks: to repair the horrendous economic problems (if he can); to open up his country to the outside world; and to ensure that his regime survives such drastic changes.

The new North Korean constitution adopted in September 1998 included for the first time articles on costs, prices, profits and the laying of a legal basis to build more economic zones and moves toward rights of ownership. Pyongyang is not as impervious to Chinese-style reform as its rhetoric indicates. As one Korea observer comments, "Chinese-style agricultural experiments are taking place in rural cooperatives. While not called reforms, they have regime endorsement." (7)

The continued economic crisis has raised fears of an exodus of refugees to the South. For one body of opinion, an immediate danger is the collapse of the North as a functioning state, leaving the South to pick up the pieces and pay the immense cost of reunification. Current estimates suggest that the burden of bringing the North up to even 80 per cent of the standard of living of the South would be as high as U.S.$1 trillion, or perhaps even more. In relative terms, this would be much greater than the load placed on the German economy in the first few years of its reunification. Others in the South suggest that, regardless of these economic and strategic considerations, the main imperative at the moment is the alleviation of suffering in the North.

The preferred outcome for most is that reunification should come eventually, but not yet. Most people in the South acknowledge that in the presence of the continued North's economic crisis, the United States and Japan can utilise political engagement, create favourable conditions for the North-South peace treaty and offer the North inducements to a gradual evolution of reform rather than instability. However, to build confidence and experience in the norms of behaviour in international society, efforts to engage North Korea should begin now, not only in economic development, but in long-overdue environmental protection as well.

In the economic sector, the United States could support the Northeast Asia Economic Forum and the Tumen River Area Development Project, in which North Korea shows great interest. Isolating North Korea might increase, rather than diminish, the risk of instability in North-East Asia and worsen the already atrocious living conditions of ordinary North Koreans.

The South Korean President Kim Dae-jung has shown strategic vision and a determined willingness to promote inter-Korean reconciliation under the so-called "Sunshine Policy". The 1997-98 financial crisis has also broadened support among the South Korean populace for a policy of peaceful coexistence, although Koreans were already growing wary of the economic cost of unification even prior to the crisis. The "Sunshine Policy" implies a recognition of the North Korean regime, an admission that a near-term collapse of the regime is unlikely and undesirable, and therefore a willingness to postpone unification.

RESPONSE FROM SOUTH KOREA

Whether North Korea undertakes reform and, if so, what kind of reform it will choose, to a large extent depend on political factors, the most important of which is the stability of Kim Jongil's regime itself.

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. (8)

The rise of the South Korean economy has been largely due to government protectionism and conglomerate expansion. In particular, chaebol-government duality is held as the key to the economic development and growth of the country. (9) Chaebols have become the most powerful group of domestic capitalists in South Korea. Recently they have taken the lead in exploring business opportunities in North Korea. Hyundai and Daewoo were the first into the North. A number of the other chaebols, including Samsung, L.G. (Lucky-Goldstar), Sunkyong, Kolon and Hanhwa, made modest investment plans. In the past few months, Hyundai, acting as a tour operator, has taken tens of thousands of South Korean tourists to Mount Keumkang, a beauty spot in the North. Hyundai Group founder Chung Ju-yung, also on a business trip to North Korea, had met Kim Jong-il. Over the life of Hyundai's six-year agreement with North Korea, this tourism will raise almost $1 billion in foreign currency earnings for Kim Jong-il's regime. That regime has formally recognised the farmers' markets, and now accepts the concepts of "profit" and "cost".

Hyundai is to build a vast export zone in, and run tour buses to, Kaesong, an ancient capital just over the border that will become to Seoul what Shenzhen is to Hong Kong. (10)

The Samsung, L.G., Daewoo and Tongil groups are also taking steps to initiate joint ventures with the North. L.G., which already assembles colour television sets in the North, is planning to set up a colour T.V. plant and scallop farm there. Daewoo is negotiating with its northern partner to set up hotels in the Rajin-Sonbong zone. (11) These trends are indeed encouraging, as was the successful summit meeting between Kim Dae-jung and Klm Jong-il in June 2000.

EXPLAINING THE SUMMIT

The summit has major implications for the Korean Peninsula and for the balance of power in that part of Asia. By all accounts, it produced a remarkable breakthrough in the relationship between the two Koreas with the signing of an agreement. They agreed in principle to find ways to promote economic co-operation, to achieve reconciliation and eventually to reunify their two countries without "interference" from others. Other topics in the summit discussed include the reunion of divided families, further cultural and sports exchanges and steps to relink severed railways across the Demilitarised Zone.

The meeting of the two leaders certainly provided valuable momentum to a recognition by South Koreans that the North shares and upholds the same cultural values -- those of Confucianism -- and that Northerners are not from some different world. However, it remains to be seen whether the North Korean regime is willing to make the efforts to implement the deals made at the summit.

Should North-South relations continue to improve, the subsequent reduction in tensions will make the future of U.S. forces in South Korea increasingly uncertain. At present, the United States has 37,000 troops stationed in South Korea. The North Korean threat is a key justification for U.S. military spending and a new theatre missile defence system.

Tokyo may also have to rethink its position vis-a-vis the Koreans. Japan has always based its Korea policy on the assumption of a divided peninsula. But, as the North and South adjust their relationship, it is time Tokyo re-examined that policy and redefined the roles of Japan and Korea in the international context. As for China, officials in Beijing do not want Pyongyang to continue as a rogue nation, giving America and Japan the excuse to augment their military forces in the region. (13)

Still, for all the summit's merits, there is no guarantee that the Pyongyang-Seoul reconciliation will proceed smoothly, even after its successful start. China's intermediary role between the two Koreas may come under stress if reconciliation unravels. Japan-Korea ties will hinge on what Tokyo expects and can ultimately extract from Pyongyang, especially in security assurances versus war reparations. The recent round of Tokyo-Pyongyang talks did not produce significant results.

CONCLUSION

Dealing with the reality of the North as it exists and waiting for gradual change may now be the best way to advance. A lifting of sanctions on the North by the United States would enable it to earn more foreign exchange and buy more oil, rice and medicines. And its children would not suffer from malnutrition.

The new millennium brings fresh challenges and opportunities for policy-makers with two principles that should guide Seoul's and the West's policy towards North Korea:

* Recognition of North Korea as a State. Recognising North Korea as a State may generate no more costs to the international community than are borne at present. The United States and Japan should reconsider the official recognition of Pyongyang.

* Policy should be framed in order to encourage internal change. The focus should be the social and economic dynamics of the country. Efforts should be directed in such a way as to foster local civil freedom and individual enterprise.

(1.) The United States and South Korea initially told Japan that on 31 August 1998 North Korea test fired a Taepo-Dong-1 missile across Northern Honshu and into the Pacific Ocean. The United States later admitted that the "missile" was a satellite and the U.S. State Department spokesman James Rubin said the test still showed "Pyongyang's capacity to increase the range of its missiles and the capacity to threaten its neighbours. It demonstrated a dangerous and destabilising capability. We don't want to see that repeated." For details, see Alan Stokes, "North Korean missile was a satellite," The Australian, 16 September 1998, page 9.

(2.) Hwang Jong-yop is the most senior defector from North Korea to appear since the 1950s. His official ranking in the hierarchy (twenty-fourth) does not indicate his full importance. First, he was one of the three or four individuals who have been responsible for the formulation of the ideology of juche (self- reliance). Second, he has been one of a small group of power holders in Pyongyang entrusted with handling international affairs. Third, and perhaps of greatest importance, is the fact that he belongs to North Korea's ruling family. All leading power holders in Pyongyang are members of Kim Ilsung's extended family: Hwang himself is related by marriage to the late President.

(3.) James Cotton, "Defection of North Korea's ideologist a sign of regime crisis," The Pacific Review, Vol II, No. 1, 1998, pages 107-118.

(4.) Andrew Mack, "Will North Korea Survive?," New Asia Pacific Review, Vol. 3, No. 2, 1997, page 27. Professor Mack concludes: "The question today is no longer will the Kim regime collapse, but when." For North Korean perspectives, see Kim Byong Hong, "Regional Co-operation, Future Security and Prosperity of the Korean Peninsula," New Zealand Journal of East Asian Studies, Vol. 2, December 1997, pages 3-8. (Mr. Kim Byong Hong is the Director of the Institute for Disarmament and Peace in North Korea.)

(5.) For an analysis, see Liz Sly, "North Korea Unyielding in Direct Talks," Chicago Tribune, 15 April 1998.

(6.) Based on the author's research and observations. Also the author benefited from readings of a number of East Asia specialists, including Stephen FitzGerald, Paul Monk, Denny Roy, Colin Mackerras, James Cotton and R. A. Scalapino.

(7.) This view is typically expressed by Heather Smith, in "Dealing with North Korea: Problems and Opportunities," A.U.S.-C.S.C.A.P. Newsletter, Canberra, April 1999, page 5.

(8.) These impressions are from the author's readings of an analytical study by Paul Monk, as well as this writer's own personal observations. For the study, see Paul Monk, "Kim Jong-il's Paranoia and Kim Dae-Jung's Opportunity", Quadrant, March 1998, pages 38-43.

(9.) Sharif M. Shuja, "Inter-Korean Economic Integration", Lecture on Korean International Relations, Bond University, 15 October 1999.

(10.) Asiaweek, 1 September 2000, page 69.

(11.) Newsreview, 11 July 1998, page 12.

(13.) The Economist, 17 June 2000, page 27.

DR. SHARIF M. SHUJA teaches at the University of South Queensland and has adjunct professorial functions in International Relations at Bond University. His articles have been published in such journals as the Harvard Asia Pacific Review, the Journal of World Affairs and The Review of Policy Issues.