Under the Loving Care of the Fatherly Leader: North Korea and the Kim Dynasty (132 page)

In October 2003, Pyongyang said it had reprocessed some eight thousand
spent fuel rods that had been in storage during the period of the freeze. “If that is indeed the case, it could have produced enough fissile material for an additional five or six nuclear weapons,” Kelly said.
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When Pyongyang hinted broadly that it might simply declare itself a nuclear power, China, for one, did not like that idea and cut off North Korea’s oil supplies for several days to enforce a demand for negotiations. By early 2004 Pyongyang had offered to re-freeze its plutonium-based program (evidently realizing its admission had been a tactical error, it now denied it had acknowledged having a uranium enrichment program) while negotiating with the United States, South Korea, China, Japan and Russia to see what sort of deal it could get. What it wanted from Washington included a non-aggression pact and diplomatic relations.

While the first nuclear crisis had appeared pretty much to halt movement toward economic change, Pyongyang the second time around kept moving on a parallel track—to the extent that quite a few foreign skeptics started to become believers that something major could be happening this time.

One implication of Kelly’s confrontation with North Korean officials on the bombs-from-uranium issue was, of course, that there would be no progress for the time being on resolving economic issues between Washington and Pyongyang. The month after the Kelly visit, however, Kim Jong-il’s brother-in-law, Chang Song-taek, led a high-powered delegation to South Korea to learn from the Southern economy. Ignoring super-high-tech, capital-intensive operations that were way out of their league, the Northern visitors focused on what seemed within their reach: standard industrial commodities such as steel and fertilizer, which they had been producing and could hope to produce more efficiently, and smaller businesses including golf and tourism. “So while their South Korean guides expected they would like to see Samsung Electronics’ cutting-edge technology,” reported a Seoul newspaper, “they were more interested in how an LG subsidiary makes toothbrushes.” Pak Nam-ki, the North’s chief economic planner, looked intently at what he was shown and asked many detailed questions. South Koreans speculated that the travelers, upon their return to Pyongyang, would first disabuse Kim Jong-il of his misconceptions about the South Korean economy and then draft a new blueprint for restoring and reforming the North’s economy.
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What about that old assumption that reform would unravel the ideology that kept the populace in thrall to the leader? For mass consumption, continuity was the byword. By February 2003 the regime had cranked up its propaganda machine to insist that the new initiatives fit right in with received scripture.
Nodong Shinmun
published an article on Kim Jong-il’s “wise leadership for improving socialist economic management”—an article
that mentioned the term “profits” several times. Explaining the timing of the publicity, the paper said it marked the thirtieth anniversary of a work by his father, “On Several Issues for Improving Socialist Economic Management.” Kim Jong-il had accomplished a “great feat,” the paper said, by maintaining “the socialist economic management principle amid the imperialists’ encirclement and mounting difficulties.” Mean-while, he “leads us to thoroughly guarantee real profits in the socialist economic management.” Perhaps the one-time political economy major had thought better of his student-princely disdain for instruction in computation. “Economic management requires scientific calculations,” said that article on his management approach.
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Addressing the Supreme People’s Assembly—the parliament—on the state budget for 2003, Finance Minister Mun Il-bong went farther. “In all institutions and enterprises a system of calculation based on money will have to be correctly installed, production and financial accounting systems be strengthened, production and management activities be carried out thoroughly by calculating the actual profits,” Mun said. German scholar Ruedi-ger Frank found in another passage of Mun’s speech an effort to graft onto the old socialist ideology a new recognition of the role of entrepreneurs. “Our people, holding high the Great Leader’s ideology of nation-building after liberation, have built a new democratic Korea upon the rubble,” Mun said, “those with strength using strength, those with knowledge using knowledge and those with money using money.” Frank noted that strength stood for the workers and peasants and knowledge for the intellectuals—the three groups represented in the hammer-sickle-writing brush emblem on Pyongyang’s Juche Tower. “But ‘money’ is a new component,” he wrote. “It stands for those who excel in economic activities.” Frank found it “remarkable that the leveling of the ideological battlefield has begun so early. Kim Jong-il may be no Mikhail Gorbachev, nor a Deng Xiaoping, but the evidence makes it hard to believe he is a stubborn opponent of reform.”

At the 2003 parliamentary budget session came an announcement of another initiative, issuance of People’s Life Bonds. “Why would a state like North Korea care about collecting large quantities of its own currency?” asked Frank. He speculated that “the one-time extra revenue created by issuing the bonds will be used to pay wages until the new price system functions.” Frank discerned in the issuance of the bonds “not only a sign of a desperate effort to prevent a failure of the reforms, but also another indicator of the strong determination of the North Korean leadership to stabilize … with the goal of creating a domestically functioning and internationally compatible national economy in the future.” He worried that circumstances—especially unavailability of loans and grants from outside—-would block the achievement of that goal. The scholar concluded that “something has started which can hardly be stopped anymore, unless it either becomes a brilliant success or a miserable failure.”
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I remained skeptical, for the time being, that the changes were truly momentous, and I was by no means alone. The head of one foundation dedicated to medical and food aid for North Koreans traveled through the country a couple of months after Finance Minister Mun’s speech. Compared with what he had seen on earlier trips, the aid organizer found that the lives of ordinary people remained “difficult almost beyond description.” Starting with the years of most acute famine, “North Koreans have had to turn to informal coping mechanisms,” he told a U.S. congressional committee. But an illustration he offered could just as well have been taken as an omen of change for the better. “Even individuals who work in government ministries rely on outside sources of income to acquire the goods and services they need for their families,” he said, reporting that “the North Korean economy has slowly improved over the past few years,” thanks mainly to “the informal economy.” He told how informal coping mechanisms, including produce from private plots and farmers’ markets, had “halted North Korea’s precipitous economic slide toward oblivion.”

But the foundation chief still found the country unable “to move beyond an ‘informal economy’ on the macro level.” Missing, he said, was “the structural reform needed to promote legitimate international trade. … While some would argue that attempts to set up special economic zones and adjustments in currency represent a genuine willingness to embrace economic reform, these policies aimed at promoting economic growth have yet to make a meaningful impact on everyday life.”
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Nevertheless, anecdotal evidence continued to pile up, suggesting a breakthrough that had ended the regime’s stubborn resistance to major change. At the very least, North Korea was displaying that sense of bustle that I had found so lacking by comparison with China in earlier decades. A Russian scholar visited North Korea in July 2003 and found brighter lights in Pyongyang, where the electrical system had been repaired and was being modernized with Swedish assistance. Cellular phones were in wide use in the capital, which had begun to experience the predictable safety problems caused by people chattering away while driving or cycling. Bicycles in large numbers were a relatively new feature of the urban landscape; I had seen few on my visits starting in 1979. Strikingly, “people were using the word ‘reform’ without any reluctance,” the Russian said. Because of the older generation’s suspicion of a buzzword connected closely to the collapse of Soviet and Eastern European communism, North Koreans until the previous year had stuck to the euphemism “national measures.” Touring outside Pyongyang, the Russian saw evidence that “the overall economic situation has been gradually improving and the economic reform is being continuously carried out despite the ‘nuclear crisis,’ while the internal situation has stabilized.”
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Whether the regime was serious about reform was quite a different question from whether reforms would succeed. Regarding the latter, the evidence
was mixed. An official of the Catholic aid organization Caritas who visited North Korea in August and September 2003 found smoke rising from factory chimneys and housing construction under way She encountered fewer electrical brownouts than before. “Small, family-size businesses or small cooperatives are providing services or producing goods (repairing bicycles, transporting wood, selling and bartering of agricultural products and consumer goods). A ‘bottom-up’ process seems to have started; there is more drive as people are left to fend for themselves. Under- or unemployed workers are engaged in the search for different coping strategies.”

She found that flourishing kitchen gardens of farming families were providing a “support network for relatives without access to land.” The gardens meant extra income for farmers, whose regular farming work paid them mainly in food. Corn and rice were still the main crops, but “since the start of the economic reform process cooperative farm managers tend to have more freedom to plant. By now cash crops, such as tobacco, sesame, mulberry, fruits and vegetables, have been widely introduced.” Those crops “provide farms not only with a higher income but also with access to diesel fuel and other farm inputs for which foreign currency is needed. Farmers’ markets have evolved into general markets selling a variety of consumer goods and marketplaces are to be developed all over the country.” Prices, while kept within set limits, were fluctuating according to supply and demand.

That aid worker saw both positives and negatives in what she had observed in her travels. “The cradle-to-grave security has disappeared,” she said. “Individuals are given, for the first time, more responsibility and thus feel more in charge of their own destiny. This has set capacity free, but at the same time there is a growing need to support people who have difficulties in coping with these changes. Haves and have-nots are developing; families tend to spend from 50 percent to 80 percent of the family income on food.” She warned that the economy was “balanced on a knife edge” and that international help was required if the reforms were to succeed: “The attention of the international community is focused on the nuclear crisis, ignoring—after years of calling for reforms and change—the fact that the DPRK leadership is now working hard to develop policies for economic reforms and opening-up.” Her organization did not expect quick results, “because real change has to come from within,” she said. But she emphasized that “Opening up the economy can only work if the international community is willing to help.”
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In September 2003, Pak Pong-ju, who as chemical industry minister had been part of the high-level study delegation visiting Seoul the previous year, took over as North Korea’s prime minister, the top post running the domestic economy. Mean-while fine-tuning of the new economic measures proceeded. The original 2002 devaluation of the
won
had not sufficed to attract people to the official moneychangers. In the summer of 2003 the rate reportedly was adjusted to match the black market rate.
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At the end of September 2003, Pyongyang issued what were seen as realistic tax and labor regulations for a new industrial park planned for Kaesong, the old royal capital near the South Korean border. The minimum wage there was set at fifty dollars a month plus a social insurance package computed at 15 percent of the wage. Businesses created in the park by outside investors would pay 14 percent of their profits in corporate income tax.
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(Still, some of the surviving members of the founding family of Hyundai, which had invested in both the Mount Kumgang development and the Kaesong industrial park, were becoming discouraged by the lack of return on the investments.
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) Other rules announced later in the year included a ban on entry into the territory by “international terrorists, drug addicts, lunatics.”
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As the Kaesong regulations were being issued the South’s unification minister called the North’s reform efforts “meaningful.” He added that Pyongyang officials had explained to their Southern counterparts that they were obeying a previously ignored instruction by Kim Il-sung that they study the capitalist economic system.
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The regime put out the word that it would license one foreign accounting firm and one foreign law firm to set up shop in Pyongyang,
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and moved to merge some insolvent banks.
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Some European investors said they would establish a capital company in Pyongyang, advise in restructuring the financial system—perhaps starting a credit card settlement system and opening a bond market—and encourage foreign investment.
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In January 2004 the European Union Chamber of Commerce in Seoul opened a two-person satellite office in Pyongyang.
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Pyongyang envisioned a major thrust in the information technology industry to power its economic takeoff. In 2003 the country shifted its focus from soft-ware development to telephony, the Internet and hard-ware. It was able to announce that in the course of the year the number of mobile phone subscribers increased nearly seven-fold to 20,000. Its hard-ware production capacity had risen to 135,000 computers and 100,000 monitors a year. Plans included providing fixed telephone lines to every North Korean home within five years. But the country faced a severe cash shortage that threatened all its ambitious projects. A North Korean official noted at the end of 2003 that expanded international cooperation—read “technology transfer”—-would help things along. South Korean officials cautioned, though, that the level of progress would depend on whether the nuclear weapons issue could be resolved.
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