Archive for Sunshine

I’d tell you what I think of North Korea’s sudden mini-summit …

but Robert Koehler has already told you roughly what I think, so I can save most of the keystrokes. North Korea has had more false rehabilitations than Linsday Lohan, Robert Downey Jr., and the entire membership of Grateful Dead, combined. It would take nothing less than the announcement of a coup d’etat for me to take this at all seriously.

I wonder if Pyongyang’s Southern Wind ploy means that its Hostage ploy with Japan is about to blow up, as predicted. For now, Park Geun Hye continues to resist domestic political pressure to lift sanctions until the North actually does something to deserve that.

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Update: OK, fun’s over. Back to your bunkers:

The defence ministry said the South’s patrol boat had initially fired a warning shot after the North Korean vessel penetrated half a nautical mile inside the South’s territorial waters.

Instead of retreating immediately, the North patrol boat opened fire, so “our side fired back,” a ministry spokesman said, adding that there neither vessel had directly targetted the other and “no damage” was sustained.

The South’s patrol boat fired “around 90″ rounds in total.

The incident took place at 9:50 am (0050 GMT) near the South Korean border island of Yeonpyeong, and the North patrol boat retreated to its side of the border 10 minutes later.

“We are now watching North Korean troop movements and tightening vigilance against any additional provocations,” the spokesman said. [AFP]

Prediction: the Kaesong worker safety inquiry will be a whitewash.

You may recall that several weeks ago, some North Korean workers at Kaesong fell ill with symptoms of benzene poisoning. The bad news is that we still haven’t heard a peep of protests on the workers’ behalf from the Korean Confederation of Trade Unions, for some reason. The good news is that the Korean government cares enough about appearances to have ordered a safety inquiry:

The South Korean government began a two-month probe Thursday into the working conditions at 33 factories in the Kaesong Industrial Complex following reports of a suspected benzene poisoning case there.

All of the selected factories use a relatively large amount of chemical materials, according to the unification ministry.

The ministry commissioned the (South) Korean Industrial Health Association to conduct the probe, which is scheduled to last through Nov. 30. The association’s experts are making an on-site inspection to assess the safety and security of the working conditions “through an objective survey” and take measures for systemic management, said the ministry.

In August, North Korea claimed a number of its workers at two car parts makers operating in the industrial park suffered some symptoms of exposure to benzene and other toxic chemicals. [Yonhap]

But the usual problem of transparency in North Korea is already interfering with the investigation’s integrity. Yonhap reports that although “[t]he South has suggested medical checkups to determine the exact cause,” the North Koreans have refused to allow them.

An “investigation” based on incomplete evidence might deceive a few gullible investors, but wouldn’t do much more for the welfare of the workers than the World Food Program’s monitoring has done to end hunger in North Korea. If South Korea really cared about the workers’ welfare, it would close down any enterprises that use toxic chemicals in their processes for which it’s unable to complete a thorough and objective safety review. Better yet, it would also investigate how much of their nominal wages the North Korean workers receive at all.

Australia-Korea FTA causes Kaesong backlash

I couldn’t have said it any better than this, and Jay Lefkowitz may be the last person who did:

“We can’t see how the Australian government in good conscience could bring such goods into the country,” he said. “It’s absolutely appalling, it basically would make the Australian government and Australian consumers complicit in the exploitation of North Korean workers by their government, and would ensure that Australian dollars are going directly into the pockets of the North Korean regime. Let’s be clear: it’s aiding and abetting exploitation.”

Mr Robertson said conditions in the GIC were “nowhere near basic international standards for labour rights or human rights”.

“They’re not free at all. What is happening in the Gaesung Industrial Complex is you essentially have workers who are controlled by North Korea being provided to the South as cheap labour.

“The payment doesn’t even go to the North Korean workers — it goes to an intermediary and the North Korean government takes a cut. Any sort of expression or effort to demand more rights from the workers would of course face retaliation. The only reason they stand for this kind of thing is because they’re from North Korea and they’re getting access to foreign currency.” [news.com.au]

Fortunately, that’s not going to happen without another negotiation and Australia’s agreement, and given the recent influence of Justice Kirby’s report on Australia’s public opinion and foreign policy, the obstacles to such an agreement seem considerable, to say the least.

The Australian deal on “outward processing zones” sounds a lot like the arrangement that was worked out in the U.S.-Korea FTA. Years later, Kaesong products still can’t be sold in U.S. markets … at least not legally. That isn’t likely to change anytime soon, because Kaesong remains intensely unpopular in Congress.

Seoul to Pyongyang: Let’s talk about human rights.

“Not only in high-level talks but also in any occasions of inter-Korean dialogue in the future, (Seoul) expects to have comprehensive discussion on all sorts of humanitarian issues including human rights,” unification ministry spokesman Lim Byeong-cheol said in a briefing.

“If high-level talks are held (between Seoul and Pyongyang), I think it is desirable that they discuss all the issues they want to discuss including this (human rights) issue,” Lim said. [Yonhap]

I’m not terribly impressed with Park Geun-Hye’s attention to human rights in North Korea overall, but this does represent progress when compared to the Roh Moo Hyun / Chung Dong-Young Die-in-Place Policy.

What if the capitalist North Korea is just as bad as the communist North Korea?

There are many reasons why the Sunshine Policy failed, most of them rooted in the character of the men who rule in Pyongyang, and in the character of the men in Seoul who conceived and executed it. And in that conception, the flaw that was obvious to some of us from the very beginning was that Sunshine — and its surviving derivatives — invested its monotheistic faith in economic reform, yet in practice (and to a large extent, in theory, too) it was agnostic about political reform and disarmament.

I have always held something closer to the opposite priorities. Personally, I believe that capitalism, with just enough regulation to maintain a peaceful society, is a superior economic system to any form of statism, but I’m not messianic or Hegelian about it, as long as the system doesn’t deny its people the right to live. Of course, North Korea does deny its people the right to live, but things like privatizing agriculture and local markets have never been the principal focus of Sunshine advocates, either. They have always invested their passion in top-down capitalism — specifically, projects like Kaesong, Kumgang, and any sign that the regime was interested in trade and money.

Which, of course, it has been all along. Pyongyang has consistently allowed just enough trade to feed, equip, and maintain the military, and buy swag for the elite. The Washington Post‘s Anna Fifield reports from Pyongyang that the elite are getting more swag, but this does not mean that North Korea is reforming.

Cars, for instance. A recent visitor, in the capital for the first time since 2008, found many more of them on the streets — and not just the locally produced “Pyonghwa” brand or Chinese BYDs, but Lexus sport-utility vehicles and late-model BMWs and Audis.

And shoes. Many women are dressing more fashionably, and brightly colored, shiny high heels, often with jewels, appear to be the trend du jour.

Changjon Street, in the heart of the city, near Kim Il Sung Square, is unrecognizable from a few years ago. Rows of round apartment towers line the street. Lit up at night, they are festooned with neon bands, giving them the appearance of giant fireworks. By day, the towers are reflected in the glittering river, making the city look “just like Dubai,” in the words of one government-appointed minder. [Washington Post, Anna Fifield]

I’m far more likely to accept these representations from Fifield than from, say, Jean Lee, because Fifield is no one’s cheerleader.

But the situation in the cities outside the capital, and even more so in the countryside, remains extremely dire. The state does not provide anything like the kinds of rations it once did, and hunger remains widespread.

Even in Pyongyang, there are still many more signs of extreme poverty than wealth. Bent-over elderly women carry huge sacks on their backs, men with weathered faces sit on their haunches by the roadside, and North Korean children appear noticeably smaller than their South Korean peers.

Foreign visitors to Pyongyang are driven along the same routes from their hotels, no matter where they are going, leading them to conclude that only certain streets are fit for foreign consumption.

We see reflections of the same thing in Pyongyang’s military belligerence, its continued weapons development, its spurning of the U.N. Commission of Inquiry, its retrograde crackdowns on information, agriculture and trade by non-elite North Koreans, and its new foray into hostage-taking. The rich are getting richer, but the people in charge are still psychopaths.

The most interesting question Fifield’s report raises is where all that money is coming from. An easier question to answer is where North Korea is getting all the luxury goods that it’s banned by U.N. resolutions from buying.

But indirectly, Fifield raises a more fundamental policy question. What if we accept, for the sake of argument, that Kim Jong Un has abandoned socialism for state capitalism, without disarming or altering its essential contempt for humanity? Did economic reforms in China necessarily equate to political reforms? Was Nazi Germany less of a menace despite being state-capitalist? If North Korea’s de facto abandonment of socialism means that Sunshine has succeeded, it’s an awfully hollow victory.

Derivatives of Sunshine still live, of course, as do a surprising number of die-hard adherents. But whenever I ask them why they adhere, they confess that it isn’t really because they believe, but because they can conceive of no better ideas.

 

And this is big news — and something I should care about — why, exactly?

”Reversing its earlier decision, North Korea said Thursday that it will not send a cheerleading squad to accompany its athletes who will compete in the upcoming Asian Games in South Korea.”

That’s probably very good news for the cheerleading squad, considering what happened to the last one.

North Korean workers at Kaesong show symptoms of exposure to toxic chemicals …

including benzene. If you wonder why people such as myself rail against slave labor and the lack of labor rights at Kaesong, this is why. A real independent union would have stood up for the workers and raised this issue long ago. I can’t say I have much confidence in the desire of either of the governments involved — much less the employers — to tell the truth about the exposure of help the victims; after all, that wouldn’t serve the financial or political interests. People go into North Korea full of promises to change its system. North Korea’s system always changes them instead.

The natural default candidate to advocate for these workers would be South Korean unions. Sadly, South Korea’s largest labor group behaves like Pyongyang’s wholly owned subsidiary.

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Update: More here, via AFP. And according to this article, Kaesong is suffering from deteriorating facilities, nervousness by potential investors, and (surprisingly) labor shortages. Why? Despite the high premiums the regime extracts from South Korean investors, the regime is increasingly renting out its workers to Chinese factories instead. According to the article, however, the regime can’t raise those premiums even more because Kaesong labor already costs more than it does in Southeast Asia. Interesting.

RFA: N. Korea tells overseas trade reps not to use the internet

In our latest of edition of North Korea Perestroika Watch, Radio Free Asia, citing identified sources speaking on condition of anonymity, reports that Pyongyang has instructed its overseas money-men to stop using the internet. The regime is even threatening to seize their work and personal laptaps to enforce the order. The trade workers tell RFA that the order, which even includes the use of e-mail, is impeding their ability to do their jobs and earn foreign currency.

A source living in China along the border with North Korea said the order was issued verbally by senior officials in Pyongyang recently. It is causing great inconvenience to the trade officials, most of whom are based in China with others living in Europe, Russia, and Africa, the source said.

“The order discouraging trade workers abroad from using the Internet by the North Korean government is actually a warning to not [disseminate] outside information,” said the source, who is linked to trading of goods with North Korea. “Trade workers abroad are used to contacting the North Korean authorities at home by email,” the source said. [Radio Free Asia]

According to the report, most of the North Koreans overseas save enough to buy laptops, which they then use to access South Korean web sites. Presumably, many of these people understand enough English to all kinds of sites, including this one. Which could mean I’m going to stop getting all those hits from Cambodia, Singapore, Malaysia, Tanzania, and Ethiopia.

If the report is accurate — and it seems like something that could be confirmed through multiple sources — then it suggests that the regime must have enough fear of the internet’s subversive power to incur some economic harm from the imposition of this inefficiency.

The regime has gone so far as asking trade workers to communicate by fax, presuming anyone else still has a fax machine.

The U.N. Panel of Experts recently printed documents showing that North Korean trading companies used e-mail with .silibank domains to facilitate the weapons transactions with Cuba that were uncovered by the seizure of the Chong Chon Gang last year. Years ago, Sili Bank was the false-dawn perestroika sighting of the week when it set up a pay-for-message e-mail system for foreigners. Curiously, and unlike many other North Korean banks, Sili Bank does not have a SWIFT number, suggesting that if it really does operate as a bank, it doesn’t operate internationally.

Personally, it’s hard for me to imagine that this order will last much longer than North Korea’s ban of the U.S. dollar, or South Korean clothing. It will be a huge hassle for a few weeks, after which all those affected will have that much less respect for the state’s authority.

If Kaesong “wages” aren’t used to pay workers, what are they used for? (The Unification Ministry won’t comment.)

In yesterday’s post about Kaesong, I argued that by any reasonable definition, its North Korean workers are forced laborers, and that the best evidence we have suggests that the vast majority of their “wages” are probably stolen by the Pyongyang regime, through a combination of direct taxation and confiscatory exchange rates. My argument relied heavily on a recent study by the economist Marcus Noland, who has done an excellent job researching questions that most journalists have overlooked, addressing the ethical implications of the answers, and arguing for a voluntary code of ethics that could go a long way toward address those implications.

Noland has done a good enough job discussing the ethics of Kaesong’s labor arrangements that I see no need to add to it. I do, however, see some important legal implications that no one else has addressed in depth.

The first set of legal issues arises from long-standing suspicions that Kaesong manufacturers are sneaking components or finished goods from Kaesong into U.S. markets, a benefit that the South Korean government sought when it negotiated its Free Trade Agreement with the United States, and which it raised again as recently as last October. Because the two sides couldn’t agree on the inclusion of products from Kaesong, they agreed instead to Annex 22-B of the FTA, on “Outward Processing Zones.” Annex 22-B, however, is nothing more than an agreement to keep talking. It’s fair to say that Congress would not have ratified the FTA without the understanding that Kaesong products were excluded from it.

That means that despite the FTA’s ratification by the Senate, by its own terms, it lacks supremacy over a statute that specifically excludes goods that are “mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor.”

You’re entitled to question the administration’s determination to enforce this law, but as it turns out, an obscure Customs regulation at 19 C.F.R. 12.42 allows private petitioners to oppose the landing of goods made with forced labor in U.S. ports. The U.S. cotton industry has been especially effective at using this provision to tie up Uzbek cotton in customs warehouses, and to raise political pressure against the import of cotton from Uzbekistan. If human rights organizations became aware of specific Kaesong-made goods being imported into the United States, Noland’s study now gives them a strong evidentiary basis to tie those products up in customs warehouses, too. This, by itself, might be enough to make the export of those products to the United States unprofitable.

Finally, depending on the amount of Kaesong labor embodied in a product, its import to the United States could violate complex country-of-origin labeling rules, or could be receiving a lower-tariff status under the U.S.-Korea Free Trade Agreement, from which Kaesong products were ostensibly excluded (after much contentious negotiation).

Nor does the administration seem inclined to defend Kaesong imports. In 2011, President Obama signed Executive Order 13,570, which banned North Korean imports from the U.S. market. Any violation of that executive order carries the severe penalties of Section 206 the International Emergency Economic Powers Act — 20 years in prison, a fine of $1,000,000, and a civil penalty of $250,000. Despite a recent spike in suspicious travel by U.S., South Korean, North Korean, and Chinese diplomats, the North Koreans are a no-show, tensions with North Korea are back on the rise, and the Obama Administration is hinting about strengthening sanctions, not weakening them.

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These still aren’t the questions that cause the greatest discomfort at the South Korean Unification Ministry. That question is this: If the money paid into Kaesong isn’t going to the workers, just where is that money going? As Treasury Undersecretary David Cohen recently said, “Precisely what North Koreans do with earnings from Kaesong, I think, is something that we are concerned about.”

Cohen is concerned because his department enforces the regulations and executive orders that implement U.N. Security Council sanctions against the North’s WMD programs. Those resolutions limit unrestricted cash flows to North Korea, in order to deny its WMD programs of funding. The latest of those resolutions, U.N. Security Council Resolution 2094, was passed in 2013 and says this:

“11.  Decides that Member States shall, in addition to implementing their obligations pursuant to paragraphs 8 (d) and (e) of resolution 1718 (2006), prevent the provision of … any financial or other assets or resources, including bulk cash, that could contribute to the DPRK’s nuclear or ballistic missile programmes, or other activities prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution, or to the evasion of measures imposed by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution ….;

[....]

“14.  Expresses concern that transfers to the DPRK of bulk cash may be used to evade the measures imposed in resolutions 1718 (2006), 1874 (2009), 2087 (2013), and this resolution, and clarifies that all States shall apply the measures set forth in paragraph 11 of this resolution to the transfers of cash, including through cash couriers, transiting to and from the DPRK so as to ensure such transfers of bulk cash do not contribute to the DPRK’s nuclear or ballistic missile programmes, or other activities prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution, or to the evasion of measures imposed by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution;

“15.  Decides that all Member States shall not provide public financial support for trade with the DPRK (including the granting of export credits, guarantees or insurance to their nationals or entities involved in such trade) where such financial support could contribute to the DPRK’s nuclear or ballistic missile programmes, or other activities prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution, or to the evasion of measures imposed by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution;

The use of the words “could contribute” is burden-shifting language, like the language in Paragraph 8(d) of Resolution 1718 (2006) that required member states to “ensure that any funds, financial assets or economic resources are prevented from being made available” to persons and entities involved in North Korea’s WMD programs. You can’t “prevent” unless you know where the money is going in the first place, and if you aren’t asking, you aren’t preventing. The Security Council’s clear intent was to force member states and companies under the jurisdiction of their laws to move beyond feigning ignorance and make reasonable inquiries. The Unification Ministry’s Sergeant Schultz act doesn’t work anymore.

Past precedent gives us reason to share Undersecretary Cohen’s concern. As early as October 2000, Noland wrote here that North Korea’s revenues from the Kumgang Tourist project, which he estimated at $450 million per year, were being deposited into a Macau bank account controlled by the notorious Bureau 39, for “regime maintenance,” despite the lack of “real systemic implications for the organization of the North Korean economy or society.” For all we know, North Korea could be using its Kaesong revenues for even more sinister purposes.

There is also the broader problem that a steady stream of cash dulls the economic pressure that is the outside world’s principal lever for disarming North Korea.

“The fact is, South Korea and China are providing North Korea with a considerable amount of unconditioned economic support,” said Marcus Noland, a Korea expert at the Institute for International Economics in Washington. “As long as that support is forthcoming, North Korea will not feel as much of a need to address the nuclear issue, and attempts to isolate the North economically will have less and less credibility and effect.” [WaPo 2005]

The Congressional Research Service also discusses the tension — some would say, schizophrenia — attendant in alternating between economic subsidy and economic pressure. No wonder South Korea has clung so dearly to the pretense that Kaesong wages really are paid to the workers. Unfortunately for the Unification Ministry, the evidence contradicts this cherished falsehood — it’s impossible to deny that Kaesong is a subsidy to Pyongyang. The U.N. Security Council, however, has chosen economic pressure, most recently with the active support of South Korea’s Ambassador to the United Nations (at the time UNSCR 2094 passed by a vote of 15-0, South Korea was a non-permanent member of the Security Council).

But what does South Korea know about what Pyongyang is doing with its money? I posed the question to the Unification Ministry in an e-mail and on their Facebook page. Here, in relevant part, is what I asked them:

Recently, I read a report by the economist Marcus Noland indicating that most South Korean investors at Kaesong don’t actually know how much of their nominal wages the North Korean workers there actually receive, and that the North Korean government likely keeps most of the money. First, can the Ministry comment on that? If you deny this assertion, can you explain the basis for your denial?

Second, this assertion also raises the question of where the money is going. A series of U.N. Security Council resolutions requires Member States to ensure that their money isn’t being used to finance North Korea’s WMD programs. A senior U.S. Treasury official and a report by the Congressional Research Service recently raised concerns about how North Korea uses its revenue from Kaesong.

Can you describe what if any financial checks, precautions, and transparency are in place to ensure that North Korea isn’t using Kaesong earnings for illicit purposes, to facilitate human rights abuses, or to buy weapons to threaten people, including U.S. troops, in South Korea?

Also, I’m wondering if you’ve sought an advisory opinion about Kaesong from the U.N. 1718 Committee’s Panel of Experts.

So far, the Unification Ministry hasn’t responded. I’ll update this post if they do, but I’d be astonished if they had extracted enough financial transparency measures from the North to answer the question in good faith.

Incidentally, one of the interesting points I gleaned from the last U.N. Panel of Experts report is that the POE gives advisory opinions on transactions with North Korea. If the Unification Ministry isn’t asking for one, it may be because it doesn’t want to know the answer.

Largely because of South Korean domestic politics and government subsidies, Kaesong has outlasted a few of my predictions of its demise. It will face more challenges this year and next, as we appear to be entering a new cycle of North Korean provocations, and as South Korea’s present leader appears unusually disinclined to tolerate them. The fact that Kaesong’s workers are functionally slaves deserves to be one of those challenges. So does the likelihood that the entire enterprise consequently violates a series of Security Council resolutions designed to protect South Korea’s own security.

Dear President Park: He’s not that into you (updated with N. Korea’s rejection)

In every successful relationship, there are certain things one must not ask the other party to the relationship. No matter how much you may desire it, the answer will never be “yes.” The request itself will not be received well. Depending on the request, the special equipment it would require, and the identity of the other participants, it may even lead to the destruction of property or violence.

In the relationship between North and South Korea, it is apparently no longer OK to ask the other party — that party being North Korea — for nuclear disarmament. One strong indication of this is the fact that as of this morning, both Koreas are shelling each other’s territorial waters, and residents of Yeonpyeong Island are hiding in shelters. (Update: David Chance of Reuters says “[t]here was no fleeing to shelters.”)

What are we to take from this? Perhaps the most obvious is what North and Korea have is not a relationship at all, which makes the idea of cohabitation seem blithely unrealistic. But that is what President Park proposed during a visit to Dresden, where she announced her long-awaited plan to reunify Korea. You can read the full text of her speech here.

Much of Park’s proposal consisted of things most of us would call unobjectionable — the idea that reunification of Korea is ultimately desirable, and that the eventual marriage of South Korea’s technology and capital with North Korea’s labor, natural resources, and favorable geography would catalyze the rapid economic development of the North and greater prosperity throughout Korea.

In theory, the North might even join Park in deploring the cultural, economic, and ideological divisions between North and South, and in aspiring to reduce the mutual isolation and distrust across the DMZ. What that would amount to in practice sounds like Sunshine 2.0:

[T]hose from the south and the north must be afforded the chance to interact routinely. We will encourage exchanges in historical research and preservation, culture and the arts, and sports — all of which could promote genuine people-to-people contact – rather than seek politically-motivated projects or promotional events. [....]

This would consist mostly of exchange and education programs that various NGOs have pursued on a small scale for decades. The fact that North Korea allows these limited programs suggests that they’ve helped North Korea accumulate wealth for its various priorities, but they’ve failed to make any apparent favorable change in Pyongyang’s world view. Oh, and Park is still promoting that “international peace park” along the DMZ.

Park also called for more humanitarian and development aid to North Korea:

The Korean Government will work with the United Nations to implement a program to provide health care support for pregnant mothers and infants in North Korea through their first 1,000 days. Furthermore, we will provide assistance for North Korean children so they could grow up to become healthy partners in our journey toward a unified future. [....]

[W]e must pursue together an agenda for co-prosperity through the building of infrastructure that support the livelihood of people. South and North Korea should collaborate to set up multi-farming complexes that support agriculture, livestock and forestry in areas in the north suffering from backward production and deforestation. [....]

[South] Korea could invest in infrastructure-building projects where possible, such as in transportation and telecommunication. Should North Korea allow South Korea to develop its natural resources, the benefits would accrue to both halves of the peninsula. [....]

In tandem with trilateral projects among the two Koreas and Russia, including the Rajin-Khasan joint project currently in the works, we will push forward collaborative projects involving both Koreas and China centered on the North Korean city of Shinuiju, among others. hese will help promote shared development on the Korean Peninsula and in Northeast Asia. [....]

If South and North Korea could shift the adversarial paradigm that exists today, build a railway that runs through the DMZ and connect Asia and Europe, we will see the makings of a genuine 21st century silk road across Eurasia and be able to prosper together.

None of this is particularly new, either. Expect the North’s reaction to be, at best, to accept as much of this as it can easily control and still profit from.

There were also things that Park’s failure to mention would have caused worldwide consternation — so she did mention them, ensuring swift rejection from Pyongyang:

Ladies and gentlemen, It pained me to see a recent footage of North Korean boys and girls in the foreign media. Children who lost their parents in the midst of economic distress were left neglected out in the cold, struggling from hunger. Even as we speak, there are North Koreans who are risking their lives to cross the border in search of freedom and happiness.

And this:

North Korea must choose the path to denuclearization so we could embark without delay on the work that needs to be done for a unified Korean Peninsula. I hope North Korea abandons its nuclear aspirations and returns to the Six Party Talks with a sincere willingness to resolve the nuclear issue so it could look after its own people.

Should North Korea make the strategic decision to forgo its nuclear program, South Korea would correspondingly be the first to offer its active support, including for its much needed membership in international financial institutions and attracting international investments. If deemed necessary, we can seek to create a Northeast Asia Development Bank with regional neighbors to spur economic development in North Korea and in surrounding areas.

Park did not clarify how many of these benefits are conditional on North Korea’s disarmament, which is an essential point. If they aren’t conditional on disarmament, this is little more than a recycled list of Sunshine projects. If it is conditional, judging by Pyongyang’s reaction, it’s dead on arrival.

As an aside, I wonder how many Germans shifted in their seats uncomfortably when Park said, “Wir sind ein Volk!”

Since Park’s speech at last week’s nuclear security summit — which North Korea denounced at length — North Korea has published calls for Park’s resignation, called her “a faithful servant and stooge of the U.S.” for calling for North Korea to give up its nuclear weapons, and insisted that its missile tests, prohibited by multiple U.N. Security Council resolutions, are “justifiable.” It continues to repeat that it will never give up its nuclear weapons and threatened to “bolster” its “war deterrent,” usually understood as a reference to its nuclear weapons. It even threatened to carry out a new kind of nuclear test, presumably one using enriched uranium.

There is more. Referring to the South’s seizure of a North Korean fishing boat that entered South Korean waters, the North is vowing revenge against “military gangsters.” The North continues to deny its responsibility for sinking the ROKS Cheonan.

Can someone as smart as Park Geun-Hye really be naive enough to believe that these proposals are plausible in the near term? Although they are very much in line with the Sunshine Lite policies that Park has advocated for at least a decade, I doubt it. It seems more likely to me that Park is issuing these proposals now, while keeping the conditions for their realization vague, with an eye on South Korea’s approaching mid-term elections. The North’s escalation of its rhetoric suggests that Park’s vision has about as much chance of being realized as Lee Myung Bak’s strikingly similar vision.

As Park herself has said, “It takes two hands to clap.” The sound that can be heard from the Yellow Sea today isn’t applause.

Update: As I expected, the other hand isn’t clapping:

The North’s main Rodong Sinmun newspaper called [Park] an eccentric old maid, an idiot and a hen over her comments on North Korea’s economic difficulties and its homeless children. Park’s comments “are an unpardonable insult” to the North, the newspaper said.

I knew they wouldn’t like this part:

The Rodong Sinmun, an official mouthpiece of the North, said Park’s comments on pregnant women and infants in North Korea are “disgusting,” noting that Park hasn’t even been able to get married.

The newspaper also claimed Park’s policy on unification with North Korea is designed to hurt the North’s ideology and its socialist system.

Stop me if I’m out of line here, but if Pyongyang doesn’t want to keep hearing this sort of thing, maybe it should consider feeding its people.

KCNA has also published a lengthy defense of its nuclear weapons, and it’s still harping on the “pirates” and “gangsters” who seized that North Korean fishing boat, and denouncing President Park by name. It may be preparing to carry out large-scale military exercises near Pyongyang, and it has also declared a no-fly/no-sail zone in the Sea of Japan, suggesting that more fireworks will follow.

It seems we’ve entered a new cycle of provocations.

Royce goes to Seoul, calls for cutting off Kim Jong Un’s cash

So Ed Royce, Chairman of the House Foreign Affairs Committee, was in Seoul last week, and sat down for an interview with Yonhap to talk North Korea:

“It seems that the strategy that slows down North Korea the most is not allowing them access to the hard currency which they use in order to create their offensive nuclear weapons capabilities,” said Royce in an interview with Yonhap News Agency in Seoul. 

Royce is now in Seoul along with a delegation from his foreign affairs committee. He met with President Park Geun-hye and Foreign Minister Yun Byung-se earlier in the day. 

“We have tried various strategies and at this point, one of the problems is that if we give any additional support to the regime of North Korea, for example, we were to give them inducement in the form of currency, they would use that hard currency to further expand their nuclear weapons capabilities,” the lawmaker said. [....]

Royce also said the new United Nations report on the North Korean regime’s brutal human rights violations may help add pressure on Pyongyang to give up its nuclear program and may possibly make North Korean leader Kim Jong-un stand trial on crimes against humanity in the International Criminal Court (ICC). [....]

“Perhaps there will be new opportunities (following the publication of the U.N. report) to have fresh pressure brought from governments such as Beijing on North Korea in order to try to slow its development of nuclear capabilities,” the U.S. politician said.

“I think it will galvanize international public opinion with respect to the conditions inside North Korea and hopefully can push to put North Korea on a different track.”

When the final report is submitted to the U.N. Human Rights Council on March 17, the international community could take actions to refer the North Korean leadership to the ICC, he said, adding, “I know there’s much discussion of that at the U.N.”

If you’re one of those who wonders why people worry so much about North Korea’s nukes when other countries also have nukes, read the COI report. It isn’t the proliferation of nuclear weapons that scares me. It’s the proliferation of nuclear weapons to people who don’t value human life and who have no compunction about killing large numbers of people that scares me.

And lest we think that South Korea has completely recovered from the Sunshine fad, its interviewer hasn’t quite shaken it off.

“An issue for the Obama Administration and Congress is to what extent they will support – or, not oppose – Park’s possible inter-Korean initiatives,” the Congressional Research Service (CRS) said in a report posted on its Web site Thursday.

For instance, it pointed out, the Park government has indicated a desire to someday internationalize and expand the Kaesong Industrial Complex, a historic joint venture between the two Koreas located just north of their land border.

“These moves could clash with legislative efforts in Congress to expand U.S. sanctions against North Korea, such as H.R. 1771, the North Korea Sanctions Enforcement Act,” it added. [Yonhap]

As much as it cramps my fingers to write this, I actually believe there are ways that South Korea could make Kaesong into something most Americans would accept. As it is, Kaesong “wages” are not only paid directly to the regime itself, but they’re paid at a ludicrous, confiscatory exchange rate. Then, there are also various “taxes” the regime charges the tenant companies, which requires the South Korean government to subsidize those companies to keep them afloat. In effect, it’s a scam to launder money from the South Korean government to the North Korean government, with slave labor as the medium of exchange.

The other problem with these arrangements is that they’re increasingly at odds with U.N. Security Council resolutions that require transparency in financial dealings with North Korea. That’s particularly true of UNSCR 2094, which passed with a “yes” vote from South Korea, as a non-permanent UNSC member. Need I remind everyone that those resolutions were passed, in large part, to protect South Korea’s own security? If you doubt me here, read Paragraph 11 and tell me how you square a big, fat, no-questions-asked cash pipe with that. Korea isn’t in a very good position to complain that China is violating UNSC sanctions when it’s arguably guilty itself. 

As it was advertised, Kaesong was going to be an engine of reform. But if we don’t know there all that money goes — and we don’t — then it could be used, for all we know, for nukes, yachts, and ski resorts. But Kaesong could become palatable to Americans if Park Geun Hye extracts enough financial transparency from the North Koreans, and ensures that those workers really are getting the $70-or-so a month, and to ensure that the money isn’t being used to build centrifuges. If that happens, Kaesong might diminish as a potential irritant in U.S.-ROK relations. It might even become an engine of change — this time, of North Korea.

Post-Sunshine South Korea is sober, pragmatic, and grouchy.

In this post last week, I cited polling data showing how South Koreans’ views of North Korea have hardened in recent years, representing a dramatic swing since the fervent anti-Americanism and pro-appeasement sentiment of the Kim Dae Jung and Roh Moo Hyun years. I reckoned that the 2010 Cheonan and Yeonpyeong attacks were the tipping point in this shift, but a wealth of polling data from the Pew Global Attitudes Project changes my mind about this. I wish the data directly measured South Koreans’ views of North Korea, but they do measure other indicators that turn out to have a logical relationship to them.

In the decade between 2003 (the height of the anti-American wave) and 2013, the polls tell us that South Koreans’ views shifted steadily toward what we usually associate with “conservative” views — their opinion of the U.S. became 32% more favorable, unfavorable views of the U.S. fell 30% to just 20% in 2013, and 15% more South Koreans believed that the U.S. considers their country’s interests “a great deal” or “a fair amount” in making international policy decisions.

Between 2008 and 2013, the percentage of South Koreans viewing the U.S. as a “partner” as opposed to an “enemy” rose 18%, from just 51% to 69%. Between 2002 and 2013, favorable views of China fell 20%, to 46% (up from the 2010 nadir of just 38%). Very few South Koreans see China’s growing military power as “a good thing.” About a quarter of South Koreans view China as an enemy, but that figure has hardly shifted since 2008, when it was first measured.

The results I had really hoped to show you come from a poll by the Asan Institute, which I’d picked up as a paper booklet at a conference last summer. The poll gave a detailed generational breakdown on South Korean attitudes toward the North, and showed that Koreans in their 20’s were the most conservative age group in two generations. That’s immensely relevant; unfortunately, I’ve managed to lose the pamphlet in one of my stacks of paper, and I can’t find the results online, so you’ll have to settle for the next best thing — this report from Asan’s Kim Jiyoon, which shows us the same image in lower resolution:

When examined by age group, there is an interesting but consistent tendency. The young generation of South Korea exhibits conservative attitudes toward national security issues. They are quite a different species from the young generation ten years ago. Conventionally, a conservative South Korean tends to be hostile and assertive toward North Korea and friendly toward the United States. Much like those who are in their sixties, a disproportionate number of the youngest generation of Korea chose to support the United States (64.8%) in the hypothetical match against North Korea. This is the second highest proportion following the oldest generation’s support 72.8 percent. The most ethnically bound generation was in their forties—the so-called 386 generation. 

Surprisingly, most of this shift occurred between 2007 and 2009. The trend was underway before the election of Barack Obama, the Cheonan Incident, the Yeonpyeong Incident, the killing of Park Wang-Ja and the closure of Kumgang, or any of the events Americans might be tempted to think catalyzed this trend. It’s more likely that a steady stream of evidence gradually undermined the grandiose and wishful unifictions of the Korean left. The incidents of 2010 were not the cause of the shift, but probably solidified it just as people were growing tired of Lee Myung Bak, and prepared to listen to criticism of his policies.

There is also evidence that the Yeonpyeong attack shook off many South Koreans’ disbelief that North Korea sank the CheonanThis report by the International Crisis group cites a poll showing that Yeonpyeong attack convinced 17.7% of South Koreans that North Korea sank the Cheonan.* It’s human nature to view evidence as self-affirming, and I suppose plenty more South Koreans who were at least willing to entertain Cheonan conspiracy theories before Yeonpyeong decided, after the event, that they knew all along that North Korea did it. And overwhelmingly, they wanted to hit North Korea back.

The data suggest a zero-sum ideological contest between North Korea and the United States. The good news is that the contest has shifted away from North Korea lately (I care much less whether it shifted toward us). The bad news is that the shift is more a withdrawal of interest, of investment, of hope, and of fear. It does not look forward to reunification and has no desire to hasten it. It is the grouchy hangover that follows intoxication. I have no quarrel with pragmatism; it’s the selective apathy I can’t stand. And young Koreans are as blindly nationalistic as their elders, despite their immersion in the global culture.

The rejection of appeasement in its most masochistic forms, in a favor of a more rational, interest-based calculus, should not be confused with a complete rejection of inter-Korean exchanges or dialogue. It especially should not be confused with affection for the United States, or for the young, libidinous, and occasionally drunken American soldiers gallivanting around Seoul, Pyongtaek, and Uibongbu.** What it means is that South Koreans think they need us, and that the Sunshine fad is over.

Later this week, I’ll examine how South Korea’s changed media environment may have contributed to these changes, and why, even if the Democratic Party wins the next elections, it will be on a far more moderate platform than that of its predecessor, the Uri Party. It all sort of fits together. Trust me.

~  ~  ~

This particular study also makes the mathematically impossible finding that 83.6% already believed that North Korea did it. The study concluded that South Koreas were moving to the left, but based this conclusion on a snapshot of public opinion during the second and third years of the Lee Administration, a point in the political cycle when voters usually grow disenchanted with the party in power. No wonder the study wrongly predicted a DP victory in the 2012 election.

** Except me, of course. I’m sure I was a lot nicer than the other drunken, libidinous young soldiers.

Update, Feb. 10:

Many thanks to Steven Denney for providing two links to studies relevant to this post. The headline is that ethno-nationalism is on the decline in Korea, but when I read the actual texts, I’m more inclined to think that the character of Korea’s ethno-nationalism has changed from generation to generation. Nationalism is no longer seen in explicitly political terms that militate union with the North. Instead, the younger generation invests its national pride in the South Korean nation, rather than in the Korean race. Says CSIS:

Koreans have begun to view themselves and their republic in a way that reflects political, social, and economic realities. Korea’s new nationalism is based less on 

ethnicity than previous strands of nationalism, views the state with an increasing level of confidence, and presumes that South Korea is on the rise in East Asia and the world. …

The 2013 data makes it clear that the South Korean public judges North Korea on its actions, with public opinion turning sharply against the North following tensions in early 2013. Of course, if North Korea can become a responsible neighbor, attitudes would improve. The question is if the North can achieve this before the youngest South Koreans decide that they, and their country, are better off seeing the Republic of Korea as a completely separate political and national entity. In 2012, while 11 percent of those in their 60s expressed no interest in reunification, 23 percent of those in their 20s stated the same. Notably, it was those in their 20s (60 percent) who were most in favor of reunification on South Koreans terms, indicating a less accepting and less tolerant attitude toward the North. …

The most important point to make is how sharply South Koreans in their 20s have broken in their views of North Korea with those in their 30s and 40s. In 2011 and 2012, those in their 20s were the least likely to identify the North Korea as “one of us.” Indeed, in 2012 this cohort was more likely to define the North as an enemy (24 percent). Following heightened inter-Korean tensions in the first quarter of 2013, the response “one of us” decreased by 9 percentage points.

I suppose if push came to shove, it would still be a case of “my brother and me against my cousin, my cousin and me against the stranger.” And I would hesitate to conclude that we’re seeing the emergence of a post-racial Korea. Still, we’ve at least seen the decline of an explicitly political racism in South Korea, something that disgusted me enough to inspire the very creation of this site. That is good news, because political racism never ends well.

Young South Koreans were also more confident in their country than their elders, and more resolute in the face of North Korea provocations. I can’t help thinking that insecurity is often the root of nationalism in its most extreme forms.

Kaesong running at half-capacity as investors trickle away

When Kaesong reopened after a five-month shutdown, I speculated that the shutdown would have lingering adverse effects on some of the operations there — that some of the manufacturers would have lost suppliers and customers, experienced workers would not return, credit would be overextended, and machinery and materials would have degraded.

Sure enough, Kaesong still hasn’t recovered from the shutdown. Contrary to South Korean government claims that it’s running at 80% capacity, the true figure is just 50%. That may be as good as it gets. South Korean companies are starting to trickle out of Kaesong, and new ones can’t go in to replace them:

Two South Korean companies with factories at the inter-Korean factory park in Kaesong have decided to discontinue operations in the face of unfavorable business conditions, sources said Tuesday.

The unification ministry and corporate insiders said a textile manufacturer and an electronic parts producer opted to sell their factories and land at the Kaesong Industrial Complex and signed related contracts.

Another small company that makes stuffed goods at a factory apartment run by the Korea Industrial Complex Corp. is close to abandoning its Kaesong operations in the face of mounting financial difficulties, they said.

Of the 123 companies with factories in Kaesong, three have not restarted their factories, with many others conceding they are operating below full capacity. Entrepreneurs claimed companies are currently operating at just 50 percent capacity even though normal operations resumed on Sept. 16.

“Concerns caused by a cooling off of cross-border relations after the Kaesong complex reopened are making it hard to secure orders, and there are growing fears that things will not improve in the near future,” said a corporate source, who declined to be identified.

He claimed that there are other companies who may decide to leave Kaesong if things don’t improve soon. [Yonhap]

Korea Real Time has more on the specific troubles some of the firms are having, and also notes that “another seven South Korean companies, which had leased land to build factories” at Kaesong, have informed the Korea ExIm Bank “of their decision to give up and scrap their business plan.”

On top of everything else, some companies that received $166 million in insurance payments from the South Korean government before restarting operations will now have to repay their bailout money to the government. The North has also made exorbitant demands that the investors pay the workers it has not yet reemployed “a so-called supplemental security income equal to 40 percent of their monthly pay.”

Sources speculated that up to 1,800 workers may be let go by companies, which means business will have to pay security income totaling $40,000 this month to 1,000 workers they want to retain.  [Yonhap]

Although the September deal that reopened Kaesong was designed to protect investors from political risks, the policies of both governments continue to constrict business operations. The North’s restrictions on “travel, communications, customs, and basic rights of South Koreans working at” Kaesong are inhibiting its competitiveness. So are South Korean trade sanctions imposed after the North’s 2010 attacks against the South. Seoul recently considered, then rejected, demands by the not-pro-North-Korean-at-all Democratic Party to lift trade sanctions against North Korea without the precondition that the North apologize for sinking the Cheonan (and for shelling Yeongpyeong Island?) and “take responsible measures,” whatever those are.

A surprising point that arose from this debate is that, according to ROK Unification Minister Ryoo Kihl-jae, “as long as the ban [on North-South economic exchanges] is in place, South Korean companies will be barred from investing in Kaesong, although this rule does not apply to foreign firms.” Presumably, Ryoo is only speaking of new South Korean investments, but still — really? So a venue whose sole appeal to a potential investor is a nationalist delusion exclusive to South Korea … is only open to investors who aren’t South Korean? If that’s a business model that tempts you, I hope I can interest you in my plans for a chain of bondaegi stands, coming soon to a county fair near you.

[True story: I accidentally ordered these in a restaurant once.]
 

Is it any wonder that “[i]n the past foreign companies had shown interest in investing in the special business zone, but this did not bear fruit”?

The extreme political risks of an investment in Kaesong hover over the whole experiment. At the moment, tensions appear to be rising. Some predict that more provocations are likely, and those provocations that would almost certainly impact Kaesong. On the other hand, signals from the South Korean and U.S. administrations suggest that each is interested in cutting some kind of deal with Pyongyang, but also fearful that the other ally will do so to its own disadvantage. Park Geun-Hye has even floated the prospect of a summit, before denying (not quite believably) that the condition are “ripe” for that. (Judging by the recent experience of the Mongolian President, they’ll be ripe when she makes the NBA draft.)

Policy-wise, we’ve reached a fork in the road, and it isn’t clear which fork we’ll take. The problem, as always, is that Pyongyang doesn’t want the same deal we do. It has no use for Park Geun-Hye’s conditional type of engagement, or Washington’s demands for nuclear disarmament. Unless someone caves, one of these two forks is blocked. The other leads to more political risk for Kaesong, and for things that matter much more.

Ambassador Gifford’s Trojan Rabbit

Just in time for North Korea’s latest nuke test scare, Mike Gifford, the British Ambassador to North Korea, takes to the pages of the L.A. Times to urge readers to support “engagement” with North Korea, although not very convincingly. Gifford begins with a litany of reasons why we either shouldn’t, or can’t — human rights (reason enough to isolate South Africa and Sudan, but not North Korea, apparently); WMD proliferation, attacks, and threats (followed by U.N. sanctions that impose financial transparency requirements North Korea can’t meet); the closure of Kaesong (further depressing the already-low level of investor confidence).

FrenchTaunt

Allow me to help Gifford refute his own thesis by citing another example — Kumgang Mountain. There is no better paragon for engagement with North Korea than Kumgang, which sucked up massive subsidies by South Korea that still didn’t cover the massive losses of its investors, but which did provide Kim Jong Il “tens of millions a year in hard cash” to sustain his misrule. Hardly anyone ever talked about how Kim Jong Il spent all this money, but Swedish investigative journalist Bertil Lintner cited an October 2000 conference paper by our friend Marcus Noland, alleging that money paid by South Korea’s Hyundai Asan company to the North Koreans had gone “into the Macau bank account of ‘Bureau 39′,” for what Noland calls “regime maintenance.”

As for the countervailing benefits of Kumgang, well, there weren’t any. Tourists were kept within hermetically sealed boundaries that prevented any meaningful contact with the North Korean people, and were guided and watched at all times. Those who broke the rules were arrested or forced to write confessions. One who slipped the bounds was shot. This was the last straw for the South Korean government, which stopped the flow of South Korean tourists (and cash). North Korea then confiscated the whole expensive shebang.

Screen Shot 2013-10-24 at 8.00.38 PM

[A screen shot from the actual Kumgang web site. Yes, it's still live.]

Five years later, South Korea is talking about another round of bail-outs for the companies that lost money on Kumgang. So it always goes with engaging North Korea.

Gifford also acknowledges (with apparent approval) that the U.N. has responded to some of North Korea’s assorted outrages by tightening sanctions. These require targeted financial isolation of North Korea to the extent that the money could be used for WMDs, weapons, and luxury goods. And yet, Gifford still calls for more “engagement.” So, exactly what kind of engagement can he still plausibly advocate? The answer turns out to be “nothing much”:

We are negotiating an extension of a highly successful English-language teacher training program we sponsor, which operates in six Pyongyang universities and one middle school.

So they’re teaching English to the scions of pre-selected regime loyalists, most or all of whom are presumably in Pyongyang? Huzzah for them. Do you suppose they’re using John Locke or John Stuart Mill as course texts? Neither did I. In which case, it’s far from clear how this will transform North Korea. It’s not as if the students will have a wide range of English reading materials to choose from.

Through the British government’s Chevening Scholarships, we recently sent two postgraduate students from North Korea to study at Cambridge University. We are also funding smaller-scale projects supporting the elderly, the disabled and nursing mothers.

So, that’s … two down and 22,999,998 to go.

U.N. agencies such as the World Food Program, UNICEF, the World Health Organization and half a dozen international civil society organizations with operations in North Korea work bravely with limited funds to improve the lives of ordinary people through better healthcare, sanitation, education, disability rights and agriculture — crucial in the face of malnutrition and deprivation outside the capital.

Who’s against that? Oh, right. Kim Jong Un is against that. For over a decade, he and his father manipulated foreign NGOs into feeding their loyalists while they used food as a weapon against the lower castes, and then spent the savings on European luxuries (Gifford’s ulterior motives now begin to emerge). Otherwise, Gifford argues against a straw man. I’ve long wished we could deliver food to every hungry North Korean, provided we could be reasonably certain of helping them (we can’t be).

They deserve our support, as do the outside organizations working to end North Korea’s human rights abuses, in which freedom of expression, movement, religion and thought are severely curtailed.

And how many organizations are currently working inside North Korea to promote freedom of expression, movement, relation, and thought?

Anyone who criticizes the government or party is punished severely, and knowledge of the outside world — where it exists — is extremely minimal or distorted.

So, that’s … zero.

On the other hand, North Korea does have an inexhaustible appetite for a ski resorts, water parks, fitness centers, dolphinaria (which I guess is a word), mausolea (ditto), MiGs, missiles, nukes, and a whole lot of things that aren’t much use to starving people. You could say these things are changing North Korea. You just can’t say they’re changing it for the better.

U.S. law isn’t what’s isolating North Korea. North Korean exports haven’t been welcome here since 2011, but so what? North Korea wasn’t exporting anything to us before that; it doesn’t make anything we want to buy, and in any event, it can still export to China and South Korea. U.S. companies can export to North Korea if they obtain the necessary licenses, and provided they aren’t trading in things banned by U.N. resolution (luxury items, WMD components, or weapons), but generally don’t because North Korea tends to dishonor contracts (sound familiar?) and can’t get letters of credit. Americans aren’t prohibited from traveling to North Korea; it’s North Korea that doesn’t allow its people to come here. You can read North Korean news sites here; now try to read the L.A. Times in Pyongyang.

Trojan Rabbit

The now-belabored point being — the main obstacle to constructive engagement with North Korea is … North Korea. North Korea, or rather the tiny minority that rules it, is determined to prevent the very change that Gifford is asking us to sow. If only. Our friend Nicholas Eberstadt has done us a great service by finding and printing this quote from a North Korean policy pronouncement on the subject of “engagement:”

It is the imperialist’s old trick to carry out ideological and cultural infiltration prior to their launching of an aggression openly. Their bourgeois ideology and culture are reactionary toxins to paralyze people’s ideological consciousness. Through such infiltration, they try to paralyze the independent consciousness of other nations and make them spineless. At the same time, they work to create illusions about capitalism and promote lifestyles among them based on the law of the jungle, in an attempt to induce the collapse of socialist and progressive nations. The ideological and cultural infiltration is their silent, crafty and villainous method of aggression, intervention and domination. . . .

Through “economic exchange” and personnel interchange programs too, the imperialists are pushing their infiltration. . . . Exchange and cooperation activities in the economic and cultural fields have been on the rise since the beginning of the new century. The imperialists are making use of these activities as an important lever to push the infiltration of bourgeois ideology and culture. . . .

The imperialists’ ideological and cultural infiltration, if tolerated, will lead to the collapse and degeneration of society, to disorder and chaos, and even to the loss of the gains of the revolution. The collapse of socialism in the 20th Century — and the revival of capitalism in its place — in some countries gave us the serious lesson that social deterioration begins with ideological degeneration and confusion on the ideological front throws every other front of society into chaos and, consequently, all the gains of the revolution go down the drain eventually.

If Gifford thinks the scale and type of activity he cites going to transform North Korea, he’s not only ignorant of recent history, he’s ignorant of North Korea’s ideology. If Gifford wants to argue against the people who are preventing engagement with the North Korean people, he has better things to do right there in Pyongyang.

But then again ….

Screen Shot 2013-10-24 at 8.38.37 PM

Kaesong was not shut down properly. Would you like to restart Kaesong in safe mode?*

Like most people, I don’t know what the genius behind this shutdown strategy realistically expected to accomplish with it. Its sudden, and apparently pressured, abandonment suggests that its mastermind didn’t think through its potential economic or political consequences, and that the decision was largely motivated by emotion and impulse, most likely egged on by a few yes-men in an echo chamber. He will (and should) pay significant economic and political costs for it. Potential investors, foreign governments, domestic government officials, and ordinary citizens will now question his capacity — and the capacity of those around him — for competent governance, or to create a safe place to do business. Indeed, it is those who are associated with him politically who must be the most bitter toward him.

Obviously, I’m talking about Kim Jong Un’s shutdown of the Kaesong Industrial Park.

Incidentally, and on a completely unrelated note, you may have heard that I had some unscheduled time off recently. I’m glad to report that I used the time productively. I did plenty of reading, writing, long walks with my wife, repair projects, and finally finished these:

P1020882

 

The frames are oak, with mortise-and-tenon joinery. They were inspired by a window lattice I saw at Toksugung Palace during my Army days in Korea, years ago.

 

P1020890

I was unhappy with the news that Kaesong would reopen, because Kaesong is based on the thoroughly discredited idea of bribing North Korea into reform and disarmament. Three nuclear tests later, the Security Council (including, at the time, South Korea) agreed to adopt UNSCR 2094, whose significance is its shift toward cutting off North Korea’s potential sources of funding for its WMD programs. If Kaesong is one of those funding sources, then it undermines that strategy. There’s something irreconcilably inconsistent about giving someone mouth-to-mouth while you’re strangling them, unless you happen to be a German dominatrix.

A key element of 2094 is that it shifts the burden of investors. It’s no longer sufficient to say that you don’t really know how Kim Jong Un will spend the money you pay him; UNSCR 2094 requires member states to “prevent the provision of … any financial or other assets or resources … that could contribute to the DPRK’s nuclear or ballistic missile programmes,” or other sanctioned activities, such as luxury goods imports. Do you really suppose the South Korean government or any of Kaesong’s investors know how Kim Jong Un is spending the money, or can exclude the possibility that he will use it for sanctioned purposes? Our Treasury Department can’t. If not, their financial arrangements violate UNSCR 2094.

Fortunately, attempts to restart Kaesong in safe mode are working about as well as … well, restarting a PC in safe mode. A high-profile planned conference of international investors that had been scheduled for this week had to be put off due to the North’s failure to lay the groundwork for rebuilding Kaesong’s infrastructure.

South Korea said Monday that it has postponed an investor relations event planned for the end of the month at a joint inter-Korean factory park in Kaesong.

The event that was originally set for Oct. 31 was arranged to attract foreign investors to set up factories at the Kaesong Industrial Complex, which is currently home to only South Korean companies. [....]

“Seoul sent the message to the North last Friday adding that under present circumstances, the reason for holding the event cannot be met,” a unification ministry official who declined to be identified said. He said the decision reflects the lack of progress made in talks to enhance cross-border communication and travel between Kaesong and the South.

Negotiations in these areas were part of the agreement reached to normalize operations at the industrial complex.

“As is known, negotiations on Internet connectivity, mobile phone use, utilization of radio frequency identification tag to ease travel and customs inspections have made no headway since the North called off working-level talks for the Sept. 26 meeting,” the official said. He said since no headway was made in matters that are critical for foreign investment, it has been decided that there is no point in holding the investors event. [Yonhap]

This Daily NK report, by contrast, suggests that the North actually delayed the conference, but this Joongang Ilbo report says that the North agreed to the delay at the South’s suggestion, which is still an unusually compliant response for North Korea. The Chosun Ilbo says that the North is giving the South the cold shoulder because it really wants Kumgang to restart, too.

Although most of the factories at Kaesong are back in production, both the southern managers and the northern workers continue to suffer from the lingering effects of the four-month shutdown.

Of the initial 123 South Korean companies, 118 South Korean companies returned to the Kaesong complex since the reopening and currently employ some 44,000 North Koreans, roughly 80 percent of the workforce before the shutdown in April.

Prior to the shutdown, the factory zone was home to 123 South Korean companies with some 53,000 North Korean laborers. Five firms have not restarted production for various reasons.

A month has elapsed since the resumption of operations on Sept. 16, but South Korean firms still face challenges as demand for their products plunged amid the prolonged tensions on the peninsula. The fall in demand has led to a cash shortage and created a vicious cycle in their business operation. [Yonhap]

The true picture is probably gloomier than this on closer examination:

South Korean firms at Kaesong, however, said they are facing liquidity crisis as their earnings remain weak as buyers are seeking deals at companies located at safer places less affected by volatile political situations.

“We already spent the compensation from the government to pay back bank loans,” another official from a Kaesong-based firm said. “Although we want to make a profit, there are no opportunities.”

A group of electronic firms in Kaesong echoed the view, adding that the companies will not be fully normalized until the uncertainties are abated.

“Out of 45 electronics and machinery firms in Kaesong, only 47 percent have operating factories, at least partially,” the group said in a statement urging two Koreas to resume talks in fully normalizing the complex.

“While the government says around 70-80 percent of the area’s factories are in operation, market watchers here believe the ratio hovers around only 50 percent,” another official from an apparel maker said. “Although all workers are showing up to work, nearly half of machinery are turned off.”

As Kaesong’s existing investors continue to struggle under the weight of last spring’s losses, the South Korean government is considering various bail-out options. (In a related development, the South is also meeting with Kumgang investors, to discuss possible bail-out options for them.)

At the same time, some of the North Korean workers who conceded too much in their “criticism” sessions after the April closure are also having problems getting their old jobs back, or any jobs, for that matter:

As the Kaesong Industrial Complex slowly moves toward a return to normal production, a number of its former employees have been dismissed by the North Korean side as a result of so-called “ideological problems,” Daily NK has learned.

A source from Shinuiju in North Pyongan Province reported on the 4th, “During the KIC shutdown in April, ideological sessions were held where some workers confessed they had been influenced by the impure ‘capitalist wind.’ They were then dismissed and sent back to their family hometowns. Upon hearing that the complex was to reopen, some had hoped to be reinstated but the authorities ignored this. On the contrary, they actually worked to isolated them from everyone else.”

“The Upper [the authorities] just instructed them to go and find work elsewhere; that was it. But no matter how good they are after working for ages in Kaesong, no enterprise or factory wants to use them because they are tainted goods now.” [Daily NK]

Kaesong turns out to be a risky proposition, whatever your nationality.

 

* With apologies.

 

N. Korea says Park GH’s father “smelled of elderberries,” S. Korea responds with “large wooden badger” plan

I don’t know about you, but I sure got tired of Park Geun Hye’s hippie Earth mother act last summer, after North Korea started making nice, right after banks all over China and Europe started blocking North Korean accounts. Thank God that’s over with. We’re back to steaming reactors, spinning centrifuges, war drums, nasty taunts, and all the things we’ve grown to love and miss about North Korea. The North was uncharacteristically quietly during August’s Ulchi Freedom Guardian exercises, but for reasons known only in Pyongyang, it’s having an apoplectic fit over another one being held now:

On Monday Rodong Sinmun, the official newspaper of the Pyongyang regime, called the exercise a “bellicose attempt to escalate the situation on the Korean Peninsula […] by openly threatening it with nukes,” referring to the presence of the aircraft carrier USS George Washington. (The U.S. has a policy of neither confirming nor denying whether its ships are equipped with nuclear armaments.)

A North Korean military spokesman said that the U.S. would be “wholly accountable for the unexpected horrible disaster” that faced its “imperialist aggression forces.”  [Time]

Anyone want to start a pool on when KCNA puts up banners calling for Park’s disembowelment?

Referencing Park by name, rather than using the more neutral “chief executive” moniker, the spokesman warned the president that she was steering the Korean peninsula back into a period of dangerous “confrontation”. The commentary, carried by the North’s official KCNA news agency, was largely a response to a speech by Park on Tuesday urging Pyongyang to give up its nuclear ambitions. The president had also talked up the development of a military deterrent capability that would render the North’s nuclear weapons “useless”. [....]

“If Park and her group conspire with outsiders under the pretext of leading (North Korea) to ‘change’ … and force it to dismantle nuclear weapons, it will be little short of digging their own graves,” the NDC spokesman said. “There will be no bigger fool and poorer imbecile than the one who schemes to side with a nuclear-wielding robber and urge one’s own kinsmen to lower a knife first,” he added.  [AFP]

See also Yonhap and Sky News. But at least they aren’t threatening to strike first.

“If our enemies try to threaten us in the slightest, the country will launch ruthless pre-emptive strikes of annihilation,” the CPRK said. [Yonhap]

How to explain the very different reaction? Well, one cause we can eliminate is the exercise itself, given the muted reaction to Ulchi Freedom Guardian. If there’s one thing we should know about North Korea by now, its mood is driven by its own hormonal cycle. No one really knows what’s driving that cycle, but I’ll offer some possibilities.

If you forced me to guess, I’d cite the need to keep the military on high alert and forward deployed as Kim Jong Un sacks the head of his armed forces for the third time since December 2011 (or so say a lot of journalists who don’t really know if that’s true or not). [Update: See also Aidan Foster-Carter's take--"this is not normal," although previous reports of Kim Kyok-Sik's demise have been (possibly) wrong.]

Money is always a reasonable guess, although the signs of financial distress aren’t that clear. Yonhap is reporting that North Korea’s exports to China rose 8 percent (compared to last year) in the first eight months of this year, “thanks to higher exports of coal, ores and woven garments,” while its imports fell by 6 percent. As always, we have to begin by observing that we have no idea if these figures are even accurate before we speculate about what they mean. It could mean that the blocking of some of North Korea’s offshore accounts has caused them to shift toward paying for imports with raw materials instead of cash. North Korea also sounds pretty desperate for hard currency from foreign investment, but what else is new?

This part, however, is much easier to explain: they’ve restarted the 5-megawatt reactor at Yongbyon, and said for the umpteenth time that they will never give up their nukes. I speculate that this is because they want them some nukes.

The National Intelligence Service informed lawmakers of the restart, ruling New Frontier Party lawmaker Cho Won Jin said by phone yesterday. Lawmakers were also told that North Korean leader Kim Jong Un told his cabinet he plans to seek reunification with the South by force in three years, Cho said.  [Yonhap]

Did you read that last sentence carefully? If you’re reading it from Seoul, no, I don’t have a spare room, unless you’re related to me.

Running the reactor at Yongbyon would mean the North is making good on promises made in April to restart the facility as part of efforts to produce energy and improve its nuclear armed force. The United Nations Security Council has imposed strict sanctions on the North in a bid for it to return to negotiations and abandon its nuclear ambitions. [Bloomberg]

Chris Hill was not available for comment. So what is the South Korean government doing to send a stern message it won’t give cash or concessions in response to North Korean threats? It’s asking us to give the North cash and concessions for (or at least, in the immediate aftermath of) North Korean threats. According to Yonhap, South Korea “will begin talks with the United States next month on whether to entitle its goods made in North Korea to advantageous tariffs under their bilateral free trade agreement.” But Kaesong’s Trojan Rabbit strategy is a conclusive failure. Why double down with a Trojan Badger?

The idea of giving Kim Jong Un free trade benefits would certainly draw furious opposition in Congress, and frankly, I doubt that the administration (State Department notwithstanding) would even support it. It does, however, prove the premise of my own opposition to the FTA, as agreed. Skeptics–you know who you are–said this could never happen. The idea of extending free trade benefits to North Korea–benefits that not even Japan has–when North Korea continues to nuke up, sell chemical weapons technology to Syria, and threaten us is crazy talk, of course, but anything South Korea asks our government to do is self-evidently possible.

Kaesong investors beware: Treasury issues new warning about N. Korea money laundering risk

Precisely what North Koreans do with earnings from Kaesong, I think, is something that we are concerned about.”

– David Cohen, Undersecretary of the Treasury for Terrorism and Financial Intelligence

Just as Kaesong begins the process of reopening, and as the South Korean government seeks to “internationalize” investment there, the Treasury Department has issued a new warning about money laundering risks emanating from North Korea. The warning echoes longstanding concerns by the global Financial Action Task Force.

Every potential investor in North Korea needs to understand just how severe the potential consequences of turning a blind eye to money laundering can be, especially with respect to a place like North Korea, where Treasury has put the world on notice of the risks. Careless investors face multiple risks, including the blocking of their assets and accounts, civil penalties, and criminal prosecution. Assets that are co-mingled with criminally derived property, or that are co-mingled with assets involved in the commission of a money laundering offense, are subject to criminal or civil forfeiture.

Investors who may think that U.S. Treasury regulations don’t apply to them because they aren’t doing business in the United States may be shocked to learn that nearly all dollar-denominated transactions pass through U.S. Treasury-regulated banks, through correspondent accounts. Chinese and European banks that need their own access to U.S. financial institutions may also shun transactions with North Korea.

To further raise the political risk, new North Korean provocations are likely to cause President Obama, or a future U.S. President, to direct Treasury to further tighten financial restrictions on transactions involving North Korea.

Even today, investments in North Korea will attract greater scrutiny than investments in other countries. U.N. Security Council resolutions impose a duty to refrain from transactions that could help North Korea proliferate, and different jurisdictions have different blacklists of North Korean banks that are known to be involved in proliferation and money laundering.

It’s the investor’s duty to understand those complex and potentially tricky regulations governing transactions with North Korean nationals, something that no investor can do safely without specialized legal advice. Regulators will expect investors to ensure more financial transparency than they would if those investments were in places that did not pose the same money laundering risks. When it comes to the assessment of that risk, North Korea and Iran are in a class by themselves.

Kaesong Updates

The North Korean workers who were previously dispersed from Kaesong are being told to prepare to go back to work … provided that the necessary gratuities are paid, of course. Aidan Foster-Carter asks a very sensible question in a commentary at Korea Real Time: “What foreign firm in their (sic) right mind would consider investing in Kaesong?” This Joongang Ilbo report bolsters his skepticism:

The ministry in charge of inter-Korean relations said that in order to attract investments from outside Korea to the park, a subcommittee for its global competitiveness will host an investment briefing session next month for foreign companies stationed in the South.

“Some [foreign] companies expressed interest in the Kaesong complex but were also hesitant to make investments because of risk concerns and the fact that the Internet was not available there,” said Kim Ki-woong during a press briefing yesterday at the Unification Ministry.

Kaesong has nothing that an investor couldn’t find in the Philippines, Malaysia, or China, but it does have a lot of political risk and limitations of infrastructure that those places don’t have. In any event, as long as the two sides are still talking, there’s always hope that talks can fail.