Grand Marshal Kim Il Sung and Marshal Kim Jong Il are joined by defense minister Marshal O Jin U to make up the three-member presidium of the party political bureau. This means the fusion of power at the top, potentially blurring functional boundaries between the KPA and the party and possibly skewing policy decisions toward military options.9
Under Kim Jong Il, the KPA in the short run seems likely to have a preferential claim to state resources. Some analysts say this now amounts to one-third of annual budget outlays, or as much as a quarter of Pyongyang’s gross national product. In the yearly battles over resource allocation, the military has always prevailed, presumably because of its primary mission. But that does not tell the whole story. The KPA’s economic role is considerable. It is called on to provide the bulk of the labor force for major state construction projects. More importantly, arms sales controlled by the KPA have accounted for an estimated $500 million a year in recent years, or nearly a third of Pyongyang’s annual export earnings. Lately, Pyongyang’s oil crunch seems to be forcing the KPA’s attention to the Middle East, reportedly to seek oil in exchange for North Korean Scud missiles and other military supplies.
No less significant is the KPA’s role as an instrument of foreign policy toward the Third World. In the 1980s, Pyongyang is known to have dispatched military advisors to 33 “nonaligned” countries, had a military training program for 18 countries and exported or granted weapons and other kinds of military aid to 35 countries. 10 This military diplomacy is linked to Pyongyang’s overseas propaganda, which pursues sympathy and support from the Third World.
As resources available for foreign arms, crude oil, and food imports continue to dwindle, the KPA’s attitudes will become pivotal to the future of the DPRK. The KPA and Kim Jong Il will have to decide whether to channel more resources to the military at the expense of the economy; whether to press for major inter-Korean arms cuts and balanced force reductions; and whether to abandon the nuclear weapons program in exchange for concessions from Washington and Seoul.11
ECONOMIC PERFORMANCE
“Kim Jong Il will have to depend on performance rather than charisma to succeed in leading North Korea in the future,” says a 1991 report by a study group of prominent American scholars and specialists on Asian affairs. 12 The “performance” alludes to an economy whose lackluster record has had Pyongyang worried since the 1970s, long before the stagnant economy was severely shaken by the unexpected collapse of the Soviet bloc.
In 1984, Pyongyang began approaching the West, albeit unsuccessfully, for joint ventures, expanded trade, and advanced industrial technology. Cheap labor and some abundant underground mineral ores aside, the North has had little to offer except promises of riches for would-be investors. Nearly at the bottom in international credit ratings, it has a decidedly unappealing investment climate, given its leadership unpredictability and the secrecy of its economic data.
Unable to sell its capital import and trade policy on its merits, Pyongyang appears to believe it has no option but to turn grimly inward and practice rigorous austerity. A sense of urgency was evident in Pyongyang’s behind-the-scenes contacts with South Korean trading firms beginning in 1987–until then politically unthinkable in light of the North’s public disparaging of South Korea’s economic achievements. To make matters worse, the crumbling of the Soviet bloc proved devastating for the North’s economy, which had depended on the former Soviet Union for half of its trade turnover. Ensuing economic dislocations led to negative economic growth in the 1990-92 period, estimates ranging from -2% in 1990 to -10% in 1992.1a In December 1991, the North announced it would set up a special economic zone. The following year, it sent an unprecedented government economic delegation to Seoul for first-hand observation of South Korean factories. Since then, the government has announced more steps to make the country’s economic climate more attractive to foreign investors.
Future prospects for North Korea’s economic development are not encouraging, as Pyongyang seems opposed to internal reforms. For a command regime used to doing things its own way, economic reform could be very painful and possibly frightening, particularly given Pyongyang’s stormy past relations with the world’s major economic powers. Since North Korea’s centrally planned, autarkic command economy has been an integral part of Kim Il Sung’s vaunted infallible leadership, structural reform appears unlikely for now. Incrementally adjusting the system could unravel the DPRK, as happened to the socialist regimes of eastern Europe and the former Soviet Union. “For the Kim Il Sung regime,” as one analyst put it, “the lessons of history are unequivocal: to ‘reform’ is to die.” 14
Soon the two Kims and their economic planners are bound to confront sobering questions: whether a cautious, controlled economic opening would help answer their prayer, or whether the opening should be substantial, “analogous to the Chinese model, in order to bring in sufficient amounts of technology, capital, essential imports of machinery and oil and other needed goods, and to generate the exports to pay for much of those imports.” 15 These questions clearly have implications for Pyongyang’s political, military, and nuclear policies. Major shortcomings seen in Pyongyang’s economic future will likely remain unresolved unless the two Kims come to realize that their future lies in trade and at least some interdependence with neighbors and the rest of the world.
SOUTH KOREA AND THE MAJOR POWERS
Reconciliation with Seoul remains a central question for Pyongyang, but will be difficult, given the North’s long history of ideological disdain for its archrival. Kim Il Sung’s own dogma leaves no room for a separatist South Korea, and demands that in any case the South must be liberated first from U.S. occupation before it can join the North in a unified confederation. Not surprisingly, North Korea has tried to bend South Korea’s agenda for inter-Korean reconciliation to suit its own. 16 Substantively, it can not bring itself to accommodate the much larger South Korea, condemning its agenda for peaceful coexistence as one tantamount to “criminal treason,” anti-unification, and unforgivable subservience to foreign interests.
In recent years, however, the North Korean regime has come a long way in recognizing that there is an established, robust regime in Seoul it has to reckon with. This is not surprising, given the regime’s awareness of South Korea’s relative power and its heightened concern about being “absorbed” by South Korea. Some believe that the more Pyongyang feels threatened, the greater the likelihood that it will appeal to Seoul for a negotiated unity. Pyongyang may even begin to court its former enemy South Korea for its own self-preservation. 17 If so, Pyongyang will obviously have to rethink its policy aimed at “independence” and “democratization” of South Korea. 18
It is possible that Pyongyang may try to have it both ways: substantive linkage with South Korea while maintaining its assertion that South Korea must change its ways first if the two Koreas are to reconcile their differences. In any case, even as it publicly derides South Korea’s “bankrupt” economy, North Korea now seems to have no qualm about asking for its investments and economic assistance. This was evident in its behind-the-scenes contacts in 1992-93 with South Korean business firms represented in Beijing, soliciting their “participation” in Pyongyang’s new 7-Year plan slated to begin in 1994. North Korea might get some needed help for three reasons:
South Korean firms are eager to bring an end to their own sluggish business by cashing in on the North’s “cheap labor”;
A perception in Seoul that South Korea should invest in the North to counter a possible Japanese economic dominance developing in the North; 19
And growing perceptions in Seoul and elsewhere that aiding the North now can be a less costly alternative to its collapse that, analysts fear, would impact severely on South Korea’s own economic and political stability.
Where the two Koreas are concerned, the United States, Japan, China, and Russia all have one interest in common: a stable and nuclear-free Korean peninsula. Pyongyang’s relations with each of these countries will be crucial to its overall future direction.
The future of Pyongyang’s relationship with Washington depends on the outcome of several unresolved issues. The most pressing now concerns Pyongyang’s nuclear weapons program, the existence of which it denies while refusing to establish the veracity of its own claim by allowing IAEA inspections. Pyongyang argues that the nuclear issue can be resolved only through direct meetings between the DPRK and the United States. The U.S. position is that Pyongyang must comply with the IAEA special inspection because of the obligations it assumed under the nuclear nonproliferation treaty (NPT).
A second issue involves the U.S. military presence in the South. The communist North wants U.S. troops out of the South, its argument being that the cold war is over and that the U.S. military presence is the primary source of threat to the North. However, given the triangular nature of ties among Washington, Seoul, and Pyongyang, the North’s policy toward Washington is bound to affect its policy toward Seoul. This means that unless Pyongyang’s resolve to coexist with Seoul becomes credible, its demand for U.S. withdrawal could be misconstrued in Seoul as a continuing attempt to undermine South Korea. In the short run, it can be argued that the U.S. presence can be in Pyongyang’s own interest as the presence could become a potentially stabilizing force as the two Koreas strive for mutual reconciliation.
Russia incurred the wrath of Pyongyang in September 1990 by normalizing its relationship with South Korea. Relations have remained tense since then, despite North Korean-Russian bilateral talks in January 1993 aimed at improving the relationship and despite their interim accord that the 1961 mutual defense treaty would remain in place, until 1995, at least.20 According to Moscow, two major problems are yet to be resolved: Pyongyang’s failure to pay off a part of its debt to Moscow (totalling 3.3 billion of hard currency ruble, at the 1990 exchange rate): and North Korea’s insistence that Russia should stay out of Pyongyang’s dispute with the IAEA over the safeguards inspection issue. 21
Pyongyang has remained silent about China’s establishment of diplomatic relations with South Korea in 1992. With its increasingly weakened economic and security ties to Russia, North Korea can ill afford to antagonize China, Pyongyang’s last and perhaps only source of outside support. Despite recent unconfirmed reports of border clashes, an intense effort has been under way to cultivate China’s good will and economic and military support. So far, China has sought to accommodate Kim Il Sung as far as possible within the framework of its broader domestic and foreign policy agenda. In late 1991, China reportedly promised an increase in military aid. 22 In addition, to help the North weather its crisis of oil and foreign exchange shortages, Beijing reconsidered its decision to require that goods be paid for in hard currency. The decision was to go into effect in 1993. China also retains considerable leverage over Pyongyang’s foreign affairs and has played a key role in bringing Washington and Pyongyang together for direct talks over the nuclear inspection and NPT issues.
North Korea stands to receive several billion dollars from Japan as part of Tokyo’s pre-World War II compensations (For injuries to Korea during Japan’s occupation from 1910 to 1945). That would have been the case if its talks for diplomatic normalization, begun in 1991, had been completed. The talks were stymied by discords, notably the nuclear safeguards inspection issue. In time, there seems to be no question about Japan becoming perhaps the most important contributor to the development or resurrection of Pyongyang’s economy. That prospect remains a concern of South Korean economic planners and policymakers. 23
POSSIBLE OUTCOMES
Four outcome scenarios seem likely in the 1990s: status quo, reform, hardline, and collapse. Although these scenarios are analytically discrete, they could overlap to a degree.
THE STATUS QUO
Suppose that North Korea believes effective internal control is crucial both to ensuring self-preservation and to facilitating reform. If so, the Kim Jong Il regime seems certain to continue rigorous political control to enforce discipline and obedience–and try to keep the North Korean society insulated from foreign ideas and cultures. Economically, however, the regime would continue to search for low-risk ways to increase productivity and improve the standard of living. That will require a reshuffling of priorities, with more resources being allocated to economic development and away from military expenditures.
Yet, as long as Kim Jong Il feels insecure in the near term, his dependence on the military will continue undiminished. The KPA is bound to retain dominant influence over the North’s domestic, inter-Korean, and foreign policy issue areas. And Pyongyang is likely to continue to view the military as its only leverage with Washington and Seoul. The dilemma for Kim Jong Il will be how to balance these two conflicting priorities.
The status quo would have other consequences. Under the cloud of international suspicions about its nuclear intentions, Pyongyang will likely remain isolated and feel its security threatened, and may have trouble appearing credible in making any overtures to Seoul, Washington, and Tokyo. 24 Nor will the status quo solve Pyongyang’s endemic shortages of daily necessities.
REFORM
This scenario assumes a moderation in Pyongyang’s current pattern of economic, inter-Korean, and foreign policy approaches, since Pyongyang’s trustworthiness as a partner for foreign investment and trade will be pivotal to reform. Probably the most plausible scenario of this type is a gradual, modest reform. In the near term, a major structural reform would appear ruled out in order to protect the myth of Kim Il Sung’s “brilliant leadership.” There are two qualifications. A substantive reform (along with wrenching pains of uncertain transition) will come as a last resort if the political elite led by Kim Il Sung and Kim Jong Il become convinced that their collective survival depends on major changes. Another scenario for a comprehensive change postulates a possible coup by a counter elite made up of reformist generals and technocrats.
Near-term reform can be essentially an extension of the current effort to increase output of consumer goods, promote tourism, provide some monetary incentives to workers and farmers, and attract South Korean and Western investment and technology. Although these steps fall short of what outsiders might call “real reforms,” their success is crucial if more comprehensive reform is to occur. In any case, the future of the regime’s reforms, real or otherwise, could be gauged by the following, selective indicators:
A tangible shift in resource allocation in favor of nonmilitary and light industrial sectors;
Economic transparency through release of comprehensive, verifiable data;
Significantly increased investment in science and technology, coupled with willingness to dispatch North Korean students, scientists, and technicians to advanced countries most actively interested in North Korea’s economic productivity;
Relaxation of restrictions on in-country business-related travels by foreign businesspersons and technicians including South Koreans;
A substantial boost in manufacturing of labor-intensive, higher-grade consumer goods for exports to South Korea and Southeast Asian countries to earn hard currency; and
Rescheduling of foreign debt payments.
Reform can be measured also by Pyongyang’s good faith involvement in inter-Korean confidence building in both the political and military sectors. Heading the list will be new efforts to resolve the impasse over inspections of North Korea’s nuclear facilities. Other steps include initiation of a regular, controlled inter-Korean family reunions; inter-Korean mail exchanges; a joint development of tourist facilities at Mount Kumgang just north of the DMZ on the east coast, or at Mount Paektu on the North Korean-Chinese border; and a reconnection of severed railroad lines. Moderation could be also largely symbolic such as the possible disbanding of the Pyongyang-sponsored anti-South Korean political underground–the “Korean National and Democratic Front.”