Under the Loving Care of the Fatherly Leader: North Korea and the Kim Dynasty (96 page)

The regime knew that it still had work to do before very many outsiders would be ready to plunk down their money. “We want to revise laws, and make special new laws for the zones alone, to satisfy your demands,” Kim Dal-hyon said. “Our intention is to make a better zone than China’s Shenzhen.” (Indeed, it turned out that new regulations were enacted on October 5,
1992. They offered foreign investors tax breaks, guaranteed them property rights and allowed remittance of some profits back home. Not only joint ventures, as before, but also wholly foreign-owned ventures were now permitted. South Koreans, barred by the 1984 law, could invest in the North under the law’s new version.
¹³
Tax rates, published February 6, 1993, were more favorable to foreign investors than China’s rates.
¹⁴
)

While hardly anyone in North Korea had much experience with market economics, Yoo Jang-hee, president of the Korea Institute for International Economic Policy (KIEP), a Seoul think tank, and leader of the South Korean delegation, was encouraged that such new-generation officials at least understood
“their
kind of economics.” Intriguing as the new approaches were, however, they did not represent a decision in favor of fundamental change. North Korean authorities remained impaled on the horns of an old dilemma: Although failure to open to investment by capitalists could doom the Pyongyang regime, so could the attitudes, knowledge and ideas that would enter the country along with such change. After all, how could a separate North Korean regime be justified once its subjects could see it had become merely an inferior imitation of the wildly successful capitalist Korea to the South?
¹⁵

The solution that Kim Dal-hyon and his technocrats proposed sounded like the ultimate test of totalitarianism: establish free economic zones, but segregate them so tightly they would have no effect on people and institutions elsewhere in the country. Kim insisted that there should be little problem of other North Koreans envying the wages and living conditions of workers inside the zones, since “we believe in our people.” But Kim Duk-choong and other visitors speculated that the regime had picked Rajin and Sonbong as the first free-trade zone precisely because the area was remote from main population centers. (Years later it was reported that the state was clearing out the zone’s population, replacing it with new residents whose ideological commitment was considered beyond reproach.)

The experience of other countries such as China suggested that the economic apartheid envisioned would not work for long, and that real economic takeoff would both require and contribute to real market reform and opening. Pyongyang officials, however, had their marching orders. While capitalistic methods would be allowed in the trade zones, Kim Song-sik said, “we think we can keep those methods from affecting enterprises elsewhere in the country, where the government’s economic policy is unchanged.”

In addition to more rather than less control over the people, the strategy to accomplish such a containment of capitalist ideas envisioned even more intense propaganda efforts to whip up mass enthusiasm for the status quo. In April 1992, the regime unveiled a new stage extravaganza,
Song of Best
Wishes,
featuring a cast of thousands who wished Kim Il-sung a happy eightieth birthday and praised the system he had installed. “Winds of temptation may blow,” the gigantic chorus sang, but “we’ll go our way forever. Hey hey let’s defend socialism!”

“There are quite a number of people on earth who are anxious to see our style of socialism corrupted by the filthy germ of revisionism,” Kim Il-sung explained in a volume of his memoirs published around that time. “We do not want our Party to be reduced to a club or a market-place by the tendency of ultra-democracy The suffering inflicted upon us by the evils of ultra-democracy in military affairs during the anti-Japanese war and the lessons of Eastern Europe cry out to us that we must not allow this.”
¹⁶

To prospective foreign investors, officials audaciously pointed out the discreet charms of totalitarianism—social stability not least among them. At his press conference, Kim Dal-hyon was asked whether workers for foreign firms would be subjected to the time-consuming ideological cheerleading sessions that workers in other enterprises were required to attend. Perhaps not, he indicated, but “I think our ideology will help the creation of the free economic zones. There won’t be any thieves, punks or pimps in our zones. We are constantly educating our younger generation and our older population to work as hard as possible. In fact, the mission of the Three Revolutions teams—not that they-will be in the zones—is to stimulate overproduction.”

Indeed, a South Korean lawyer who was one of my companions on the trip marveled at the “naive, pure, unsophisticated” personalities of North Koreans he met. “These people know how to cooperate,” he said. He noted the attentive hospitality and prompt service in hotels and restaurants, contrasting with the lackadaisical and even sullen behavior he had experienced in a communist neighbor, China. Irreverent Westerners might be tempted to credit lobotomies, or at least lifelong brain-washing, for the discipline displayed by North Koreans. But I reflected that true-believer cults everywhere do tend to produce devotees who exhibit sweet personalities—just think of the starry-eyed young cultists who, around that time, were accosting passersby for contributions in Western cities. The Kim Il-sung cult was no exception.

Still, most outsiders reacted warily They were put off not only by the unlikely strategy of development without real change but also by Pyongyang’s general profile—from its record of debt default to its reputation for aggression to doubts about political stability once Kim Il-sung should pass from the scene. Particularly unexcited were Japanese, who had the resources, the proximity and the history of interest in the Korean peninsula to become a major factor if they should-wish to do so. North Korea still had not paid its debts despite repeated reschedulings. Japan had heard offers to repay its portion in fish and in gold, but nothing ever had come of those, either. The Japanese government in the 1980s made export insurance payments to
companies left in the lurch. In the process, Tokyo refused to offer any more export insurance. Some Japanese suggested it would be hard to take Pyongyang seriously until it began paying off the old debts with some of the money that had been going for monuments and birthday bashes. (Japanese general contractors were an obvious exception to the usual caution. Contractors eyed the Rajin-Sonbong and Chongjin port-expansion projects hungrily. They figured that normalization of Tokyo-Pyongyang diplomatic ties would come before too much longer, and with it Japanese aid. Such funding would pay for expensive construction contracts, of which Japanese contractors could hope to win the larger share.)

To those focused on the debt, Kim Dal-hyon asked for patience. “There is no reason we should pay these debts right at this moment,” he said. “Creditor countries should understand the economic situation faced by socialist countries.” Blood ties could go a long way toward producing the sort of understanding for which Kim Dal-hyon was pleading. In some periods there had been considerable talk of economic cooperation between North and South Korea. There were even reports of South Korean proposals to buy up some of the North Koreans’ overseas debt, as a fraternal gesture.

South Koreans and their counterparts in the North had talked of cooperation in the past without much coming of it. In a July 7, 1988, special declaration, South Korean President Roh Tae-woo said it was time to improve North-South relations. As part of the process, he proposed introducing tariff-free North-South trade as if the two were a single country. Analysts at the time doubted that immediate results would amount to much. Actually, Roh’s economic olive branch to the North had been motivated in part by a wish to give China and the Soviet Union an excuse to betray their Pyongyang ally by stepping up economic and political ties with Seoul.

Predictably, North Korea—still smarting over the 1988 Olympics and loath to get involved in an exchange that would expose its economic inferiority to its own people—had immediately dismissed Roh’s offer as “nothing new.” But Pyongyang’s long-term need remained. North Korea-with the collapse of communism elsewhere was thrown back on a form
of juche
that was too truly self-reliant for comfort. Now forced to do without the vital resources it had been accustomed to receiving from its communist brethren, the North badly needed reunification from an economic standpoint. To Seoul business leaders, mean-while, the economies of North and South offered a complementary fit that was equally tempting, in a pure pocketbook sense. Transportation was one factor. Gaining rights to use North Korean rail-ways and to overfly the North could save substantial sums for the South as it expanded its continental markets, particularly in China and Russia.

For the South, labor was another key factor, more important than natural resources. After all, South Korea had done without Northern natural resources, going abroad to buy replacements. Resource-poor South Korea now had enormous experience and know-how in producing world-class manufactured goods. But its very success had become a problem. By the 1990s, the South had encountered the typical rich-country problems of overpaid and complacent labor. Southern industrialists paid their workers ten times North Korean wages, while the picky Southern workers increasingly turned up their noses at jobs that combined the “three D’s”: dirty, dangerous and difficult. “Here we’re trying to trade in our Hyundai Stellars,” a Seoul resident said to me in 1991. Mean-while in North Korea, he noted, the latest catchy public campaign slogan was, “Let’s watch the stars while we work.” The South’s need for a cheap, hard-working labor force to continue its “economic miracle” sparked a revival of economic interest in unification.

Industrialists from the South could see considerable attraction in a polite, well-behaved population and a labor force that was low-paid for the moment and, apparently, highly disciplined. When we visited Pyongyang’s Eguk Moran Garment Factory, the general manager, Jon Song-won, said of his employees: “They don’t even know the word ‘strike.’” His factory made suits for ethnic Korean buyers in Japan in exchange for materials and management costs plus a flat labor charge of $10 a suit. Someone asked Jon if he would be surprised to learn that the Japanese merchants buying the suits marked them up ten-fold or more before sale. Jon, almost as naive as his workers, replied: “I don’t think they-would do such a tricky thing.”

For South Koreans, argued Kim Duk-choong, investing in the North was “less risky than investing in Southeast Asia. You’re investing in your own country, in the long run.” He was pleased that Kim Dal-hyon at his press conference remarked that he hoped South Koreans would be the first to invest in Rajin-Sonbong development, “because they are our own compatriots.” Kim Duk-choong marveled: “It’s the first time they expressed that: ‘We welcome our brothers.’ ”

The fact that North Korea was playing up to prospective Japanese investors had helped—despite the unenthusiastic Japanese response—to trigger a competitive urge in the South to beat the former colonial master to the punch. The largest Southern corporate groups—Hyundai, Samsung, Daewoo, Lucky-Goldstar—had been excited enough by the long-term prospects to race each other in establishing task forces that would try to increase indirect trade with the North via third countries, and prepare for the day when direct trade would become a reality. Finally, on October 17, 1988, the government in Seoul had authorized private companies to trade with the North and permitted businessmen’s exchanges.

Hyundai founder Chung Ju-yung had been the first to take advantage of the new dispensation, traveling to the North in January 1989 and returning
with a tentative agreement on a $700 million joint project: development of a resort on both sides of the border around North Korea’s scenic Mount Kum-gang near the east coast. It was time to test Kim Jong-il’s promise to China’s Hu Yaobang that he would promote tourism. The Kumgang idea didn’t sound totally preposterous. As Seoul architect-planner Kwaak Young-hoon told me, first-time visitors from the South tended to react to aspects of North Korea the way surveys showed first-time visitors reacting to Disneyland: Both were seen as “clean and friendly.”

Political considerations had intervened, however. The collapse of East Germany in 1990 had triggered a major reassessment on both sides of the Korean Demilitarized Zone. The euphoria in Seoul had been palpable as some people predicted Korean reunification within five years. Southerners had licked their lips at what seemed the near-certainty that communism would self-destruct in North Korea without the South’s having to lift a finger. As in Germany reunification would come through absorption of the former communist state by the victorious capitalist state. Only then would the South invest in the North.

As a bonus, mean-while, news of the demise of European communism had nipped in the bud the leftist radical movement in the South, in which Pyongyang had placed some hopes for the eventual peninsula-wide victory of Kim Il-sung’s revolution. The idea of doing anything that could feed money into North Korea and help prolong its separate existence had become anathema in Seoul, especially to government officials. For two years after Chung Ju-yung’s 1989 visit to Pyongyang, no other top-ranked South Korean businessman had followed in his footsteps.

Members of the North Korean elite had gone into shock upon hearing the fate of their East German counterparts. In the new, unified Germany, Easterners initially seemed to have no claim to leadership and its perquisites—or even, in some cases, to decent jobs. That precedent had been as horrifying to Pyongyang as German unification had been inspirational to Seoul. Indeed, avoiding “absorption” had become an obsession in Pyongyang.
¹⁷