Peter Sylvestre's picture

SEOUL — Since the meltdown of their already highly-tarnished international standing, Kim Jong-eun and his advisors have been undertaking measures to normalise the DPRK's international position and to give the appearance, if not the reality, that North Korea is modernising under the wise leadership of its young Marshal.

However, recent embarrassing incidents — such as the early- July interception in the Panama Canal of a North Korean vessel transporting two obsolete Cuban disassembled Mig-21s and an anti-aircraft missile system, ostensibly for repair in North Korea — continue to bedevil any chance of the DPRK becoming a normal member of the international community (if that is, indeed, a goal at all).

Current endeavors include repairing the self-inflicted economic harm resulting from the total rupture of North-South economic relations, buttressing the eroded relationship with China, and managing the economic disruption caused by a mass public mobilisation that lasted for weeks on end in the spring.

Negotiations to reopen the Gaeseong Industrial Complex, unilaterally closed by North Korea on April 9 as part of its bellicose rhetorical war, inched forward when North Korean negotiators expressed a degree of willingness to permit some international investment.

The closure had effectively shut down 123 South Korean light manufacturing firms that employed approximately 53,000 North Korean workers, providing US$87-100 million in hard currency for the DPRK annually. Negotiations, however, are dragging on one key issue: measures to prevent future shutdowns or even confiscation whenever the whimsical winds shift in Pyongyang.

Since July 6, when an understanding was reached to negotiate the reopening of the complex, Northern negotiators have insisted throughout the subsequent six sessions that operations commence immediately, while their Southern counterparts remained firm that guarantees be proved first.

What guarantees the South must have in mind is not clear, as North Korean commercial relations frequently result in non-payment, unilateral imposition of regulations and taxes, and downright suspension and outright confiscation.

Short of North Korea posting a performance bond, any guarantees are likely to be worth as much as the Korean People's Won (KPW), which fluctuated between 8,000 and 9,000 to the US$ on the black market as of April, according to the Centre for Financial Stability. North Korea attracted only US$79 million in FDI in 2012 (mostly from China), according to World Investment Report.

Repairing bridges with China is also on the list of priorities. Kim Jong-eun met Chinese Vice President Li Yuanchao, who ranks eighth in the Government hierarchy, on July 26 to celebrate the 60th anniversary of the armistice that suspended actual fighting on the Korean  Peninsula in 1953. However, relations are not what they were — ever since China supported a UN resolution condemning North Korea's nuclear ambitions.

Also, when it comes strictly to business, Chinese officials and private traders and investors have long been irritated by North Korean high-handedness. When North Korea seized a Chinese fishing boat on May 5 for not purchasing obligatory fuel from North Korea, China's Ministry of Agriculture (in an irritated tone) forbade its fishing fleet to fish in North Korean waters as of June 28.

Moreover, DPRK-Chinese trade fell 2.3 per cent to US$2.45 billion during the January-May 2013 period as overall DPRK imports from China fell 8.5 per cent to US$1.33 billion, according to Korea International Trade Association (KITA) statistics. Curiously, North Korean imports of crude oil from China also declined five per cent to US$265 million, despite rumours and indications that the North Korean economy posted positive growth over last year.

On the domestic economic front, Pyongyang is scrambling to undo the confusion resulting from its War of Words in the Spring — while projecting an image of economic revitalisation.

North Korea has apparently developed a 3G cellphone to go with its 3G network, established in 2008 by the Egyptian firm, Orascom Telecom, in co-operation with North Korea's Koryo Link. North Korean subscribers have soared from an initial 100,000 in 2008 to 1.5 million (about 5 per cent of the population) as of November 2012. However, service is restricted to domestic calls and the Government-controlled (and created) intranet.

Still, this development opens the possibility of rapid diffusion of information (and rumours) beyond official information channels. In keeping up with the times, Kim Jong-eun is allegedly reading up on information technology and "common sense" (translated as common knowledge, not basic intuition, logic or intelligence), and has exhorted the rest of the population to do the same. But, how they get access to international technology journals (given the above restrictions and highly limited international language skills) has yet to be announced.

In tandem with Chairman Kim's professed focus on the economy, the Korea Workers' Party established in June a Department of Economy with far-reaching authority in terms of appointments and approval of foreign investment and all FOREX operations, whether military or State-owned, even at the Ministerial level.

The measure is a response to widespread abuse, following promulgation of a reformed economic management system in June of last year. That system offered new incentives to farmers and various enterprises. Although problems have been reported in specific areas, under the new system, agricultural imports from China fell 14.2 per cent in the period January-May 2013, while fertiliser imports jumped 42.7 per cent, suggesting increased agricultural production.

The decline in food prices throughout 2013 also suggests that agricultural production is up (although authorities have also distributed reserves of food intended for wartime, allegedly in response to widespread discontent over mass mobilisation this past-spring).

Compared to the Spring, when North Korean theatrics made global headlines, the relative quiet in North Korea is welcome. However, there is no sign that the regime is planning to make any substantive changes that would give the international community any confidence in a true change in modus operandi on the part of North Korea.