Will North Korea Embrace Reforms?

In less than a year after his father’s death Kim Jong-un has become well entrenched in power, gaining popularity through PR campaigns (displaying “local leadership”, appearing in public accompanied by his young wife, attending concerts and other events). The “vertical of the power” has been propped up with the July 2012 purges of the top army ranks. The army and security services have been reminded of the role they should play in government: ensuring foreign and internal security, but not interfering in the political or economic agendas. The party was called upon to control the state governance and the cabinet of ministers to deal with the economy. All that gave rise to hopes there might be reforms in North Korea, particularly given the start of a discussion of “economic measures”. However by autumn the process appears to have stalled and any possibility of change in North Korea today remains mute.

In less than a year after his father’s death Kim Jong-un has become well entrenched in power, gaining popularity through PR campaigns (displaying “local leadership”, appearing in public accompanied by his young wife, attending concerts and other events). The “vertical of the power” has been propped up with the July 2012 purges of the top army ranks. The army and security services have been reminded of the role they should play in government: ensuring foreign and internal security, but not interfering in the political or economic agendas. The party was called upon to control the state governance and the cabinet of ministers to deal with the economy. All that gave rise to hopes there might be reforms in North Korea, particularly given the start of a discussion of “economic measures”.

However by autumn the process appears to have stalled and any possibility of change in North Korea today remains mute.

Dilemmas Kim Jong-un faces

Will Kim Jr. be able to preserve everything as it is and as the older leadership wants? The initial steps, with the closing of borders to defectors and smugglers, repressing the “disloyal”, inspectors sent around to “instil fear”, and stepping up the fight against “enemy ideology”, speak rather of an attempt to tighten the screw than liberalise. The geopolitical position of the country bordering on South Korea, which strategically is poised to take over the North, does not allow for any experiments that might challenge the security of the regime. It was officially announced that any rumours about ground-breaking reforms were “silly dreams” and “absurdity”. The North Korean leadership is hoping to patch up the totalitarian monarchic political system and preserve it without any serious change for decades to come.

Photo: www.nknews.org
Streets of Pyongyang have recently shed their
last portraits of Karl Marx and Vladimir Lenin

But would it be possible to rely on injunctions and “tightening the screw” to lead the country back into the past, to the times of the current leader’s grandfather? It is rather unlikely, what with the information from the outside seeping through and the emergence of market relations. The local population has long lost its faith in socialist ideals; they have learned how to circumvent injunctions with bribes and perceive propaganda as nothing more than “white noise”.

Without innovations the regime is doomed. The new leadership will have to bring the rules of the game in line with the reality. Essentially, in order to retain North Korea as an independent state its elite must come up with a new “national idea” which will modernize the ideas of isolationism, asceticism and egalitarianism that set everybody’s teeth on edge.

It is comparatively easier to get rid of the imported ideas of communism. The name vanished from the North Korean constitution back in 2009, and the streets of Pyongyang have recently shed their last portraits of Karl Marx and Vladimir Lenin. The term “socialism of a new kind” is quite elastic and capable of accommodating quite a variety of social systems. And since “Kim Il-sung – Kim Jong-Il-ism” looks more and more like a religious teaching (it is worth remembering that Confucius, too, was a historical figure), there could be different ways to interpret the “legacy”.

In the summer of 2012 the top leadership unveiled the slogan of “Kim Jong-il patriotism”. New ideologemes could emerge on the basis of Korean nationalism, reproduced from the deeply entrenched Confucian ideas of the supremacy of the state and hierarchies. There was yet another slogan invoking “a powerful country and infinite prosperity”, which was an ingenious development on an earlier idea of a “strong and prosperous power” but with an emphasis on higher living standards. The North Korean leadership appears to be pondering over the experience of such countries as Singapore and Brunei, possibly in an attempt to transform the regime into the “dictatorship for the development”.

Will Kim Jong-un have the heart for the economic reform?

Photo: Reuters / Damir Sagolj
North Korean farmer

Economically, North Korea is far from a Stalinist system. Its semi-paralyzed government sector co-exists together with a quasi-market shadow economy and commodity sectors populated with businesses owned by administrative, regional or party authorities, secret services or the army. The ‘non-socialist’ sector includes joint enterprises or free economic zones that have been given a new lease on life this year. A semi-state oligarchical economy is emerging incipiently, to set up, potentially, a future basis for the regime.

It is time to revisit the system of administration in order to be able to control the society not just with sticks but with carrots too. What is needed is a new set of clear rules of the game, and a decisive campaign against corruption which has effectively made compliance with the obsolete, Draconian laws more or less optional.

Where to start? Last summer North Korea was discussing reforms in the economy, called “28 June measures”. Those measures effectively foresee, among other things, an introduction of family contracts in agriculture (the rural teams are to be reduced to 4–6 people, with the right to take possession of up to 30 per cent. of the crops); elimination of the rationing system effectively in collapse since the 1990s; a significant increase in wages; migration to direct cash or non-cash settlement among enterprises; de-centralisation of economic management and allowing the enterprises more independence. However, the discussion of these plans alone was enough to send inflation expectations soaring, and resulted in a higher demand for hard currency and food products.

Nevertheless, everything suddenly ceased in autumn 2012, and the ongoing efforts to raise awareness were curtailed. In this argument between the conservative forces, which urge to fight capitalist methods and the limited market mechanisms, and radicals, who, although swearing allegiance to “socialist ideals”, believe that reforms should “have a capitalism smell”, the former seem to have so far taken the upper hand. But will that be for long?

It appears that sooner or later Kim Jong-un will have to opt for the legalisation of the already existing market economy and setting up of a relevant legal framework. Private merchants and enterprises should be brought out into the light, state corporations and state owned companies regulated systematically; a proper system of payments should be introduced, the financial system rehabilitated, and a tax system established. Admittedly, any change like that could succeed only with financial support, which can only come from abroad.

The outside reforming factor and the role of Russia

Photo: Reuters
Lee Myung-bak, President of the Republic of Korea

The largest donor and investor in North Korea to date has been China, whose expansion has even been called “economic colonisation” of North Korea. However, with North Korea’s international situation and its relations with South Korea improving, it is the latter that may move to the front. Some help could also come from the multilateral organisations.

North Korea obviously should leave its isolation and lessen, at least in part, its confrontation with the rest of the world. Is there any sign of this at all? North Koreans lately have been rather emotional, if only verbally, in their response to “hostile actions” (military exercises in South Korea, South Koreans efforts at developing their missile capacity, etc.), showing all around their interest in holding a direct dialogue with the US.

A step forward towards the West in the nuclear agenda could have calmed the tensions. Toning down their bellicose rhetoric, looking for trade-offs in the nuclear programme and their relations with the neighbouring states could set the scene for the reforms and modernisation of the country, which in turn will help improve relations with the West. However, the dialogue will inevitably be a protracted one. Something extraordinary must happen in the world for the US political elite to agree to co-exist with such an odious regime as the one in Pyongyang.

In contrast to other rogue states (such as Myanmar), North Korea, no matter what it might theoretically do to demilitarize and democratize itself and improve its human rights record, will not be accepted by the opponents as an equal partner for a very simple reason: the ultimate goal is to see the Koreas unite, instead of retaining North Korea as an independent state.

Thus the only chance for North Korea to survive is to have national reconciliation with the South. It should also strive to find a counter balance to its dependence on China. The change in the South Korean government ousting the arch-conservative administration of Lee Myung-bak sets the ground for that. Both countries should be interested in restoring their dialogue at the governmental level, boosting cooperation in trade and investment, resuming tourist projects, starting to implement multilateral initiatives, and lessening tensions in the territorial disputes in the Yellow Sea (possibly based on the principal outcomes of the October 2007 inter-Korean summit). Kim Jong-un could even visit Seoul: there is no personal grudge against him as there was against his father, although at least half of the population of the Republic of Korea perceives negatively the North or any compromises with it.

Russia should realise that the goal of making North Korea non-nuclear is as yet unattainable, and that the diplomatic process is only an instrument to arrest further nuclear proliferation.

Russia now has a window of opportunity to enjoy a relationship of trust with the new Kim Jong-un leadership in North Korea and enhance its role in the Korean issue. The possibility of reform in the neighbouring state is a chance for Russia to strengthen her positions in Northeast Asia, and help the Russian business enter multilateral projects.

Geo-economically and geopolitically, Russia’s interests have to do, first and foremost, with the prospects for building a gas pipeline into South Korea across North Korea and connecting the Trans-Korean railroad to the Trans-Siberian railway. The reforms would help complete these projects and stabilize the economic situation in North Korea. The 2012 North Korean debt negotiations, which resulted in a 90 per cent write-off, with the balance of 10 per cent (USD 1.1 bln.) pledged to an investment fund, may help raise the funds, among other things, through co-investment.

Russia has a vested interest in stimulating the potential reform processes in North Korea, which would help to ensure security near her borders. It means we need to assist in the implementation of an evolutionary scenario of change in North Korea, which rules out any shocks.