Asia Times: PYONGYANG WATCH: Reform: Halfway house, or the full monty?


	February 1, 2001	atimes.com

The Koreas

PYONGYANG WATCH
Reform: Halfway house, or the full monty?
By Aidan Foster-Carter

So now the dear leader is back in Pyongyang, pondering the lessons of his trip to Shanghai to examine capitalism - oops, socialism with Chinese characteristics - in action. Question: What does he do next? That's a tough one. Contra the blather from Seoul, he can't just wave a magic wand and turn North Korea into China or Vietnam. It simply isn't that easy. Conditions are different, and the mess is far worse.

Farming? Sure, he should decollectivize. But will he dare? And how can family farms turn around an ecological disaster zone: soil killed by too much chemical fertilizer, and widespread deforestation? Industry? There's a lot (or was) - but it's mostly old, worn-out, shut down, or cannibalized for scrap. Who'll buy these rustbelt antiques? And who'll hire their laid-off workers? No simple salvation there.

Markets? That's easier, in principle. Since the state food ration system collapsed, North Korea has de facto become a market society as people struggled to survive (many didn't). The government tolerates this, but that's all. If Kim Jong-il learned anything in China, he should swiftly do a Deng Xiaoping and say loudly and clearly that markets and private enterprise are A Good Thing, to be actively encouraged.

Or will he settle for less? Fearful of opening Pandora's box, and with KPA diehards resisting change, he may go for a more limited exercise. It must be tempting to confine capitalism to a few enclaves, and hope it can work its economic magic without subverting the political status quo. This is already being tried. The scenic Diamond Mountains (Kumgangsan) in the southeast have been leased out to South Korea's largest conglomerate, Hyundai - at a price: almost US$1 billion over six years. Hyundai runs tour cruises, has built facilities like ports and roads, and even talks of creating a hi-tech Silicon Valley.

Much more momentous, if it happens, is Hyundai's planned industrial zone near Kaesong: just across the Demilitarized Zone (DMZ) and a short drive from Seoul. When complete, a raft of small Southern firms would turn out goods worth $20 billion annually - increasing Pyongyang's exports more than 20-fold. Is this for real? Possibly not. Hyundai's finances are in dire straits. Its Kumgang tours have ferried 350,000 Southerners north - but have lost more than $300 million. Hyundai wants to halve its $12 million monthly fee, but Pyongyang - itself no stranger to payment problems - sternly refuses. If the tours grind to a halt, so will the Kaesong project - which has got no further than preliminary site surveys so far.

But anyhow: If you were Kim Jong-il, would you really want to turn your front line into a free zone? Even if you're that radical, are the KPA happy? Hyundai couldn't believe their luck when they were offered Kaesong. It had wanted Haeju, further west and not so near the DMZ. But the dear leader had pressed them to go for Sinuiju, way up on the Chinese border (which would double logistics costs).

Sinuiju may not suit Hyundai, but it could be just the ticket for Kim Jong-il. As his train trundled back from China across the Yalu (Amnok) river, rather than head for Pyongyang he stopped for three days in this grey northwestern frontier city - a stark contrast to China's bustling Dandong just across the water. Sinuiju is a light industry center, and Kim visited plants making toiletries, condiments and enamelware. He said nothing startling. But given the timing, you can bet he was mulling how the people might have soap, soy sauce and saucepans - all very scarce - more abundantly. There have been rumors before of making Sinuiju a special zone. And isn't a border with an ally a safer place to start than on the DMZ?

But if Sinuiju does become such a zone, let's hope North Korea has learned a lesson from its first foray of this kind. It's nearly 10 years since Rajin-Sonbong, on the northeast border with China and Russia, was made a "free economic and trade zone" (the "free" was later dropped, ominously); with much hype about building a Rotterdam of the east where these three countries meet, and a trickle of UNDP aid.

And now? A decade on, Rajin-Sonbong's sole big prize is not the expected factories, but a Hong Kong-owned casino. Three things went wrong. First, it's just too remote: the best way in is by helicopter. Relatedly, North Korea took the concept of a greenfield site way too literally. It still hasn't even paved the road to the Chinese border - while China has built a motorway, and also in exasperation a new rail link to a Russian port, Zarubino, which bypasses Rajin-Sonbong altogether. Time and tide don't wait.

Above all, Pyongyang sent mixed signals. It let the won float freely - to 1 percent of the official rate, which speaks volumes - but banned family businesses just as they were starting to thrive. When Kim Jong-il visited, he ordered all the ads removed, to be replaced by slogans - and pictures of himself. Let's hope Shanghai has wised him up. It's far too late for toes in the water, or even halfway houses. What North Korea needs is the full monty: markets, reforms, private business, entrepreneurs. Everywhere. Now.

(Special to Asia Times Online)

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