Imagining the Catastrophic Consequences of a New War in Korea

27 09 2017

New War in Korea(Leonid Petrov for Daily Telegraph, 23 September 2017) The 1953 Armistice Agreement brought a sustainable halt to the Korean War, but has never ended it. Nor did it transform into a peace regime. During the last sixty four years the North and South Koreans live in the conditions of neither-war-nor-peace, which has certain advantages and downsides for both regimes separated by the Demilitarised Zone.

For the communist government in the North, the continuing war provides legitimacy and consolidates the masses around the Leader, who does not need to justify his power or explain the economic woes. For the export-oriented economy and steadily democratising society of South Korea, the continuing war against communism provides broad international sympathy, which is translated into the staunch security alliance and economic cooperation with the US. Any change (intentional or inadvertent) in the current balance of power or threat on the peninsula would lead to immediate re-adjustment or re-balancing of the equilibrium.

Military provocations of the North, does not matter how grave or audacious (i.e. 1968 guerrilla attack on the Blue House in Seoul, 1968 the USS Pueblo incident, 1976 Axe Murder Incident, 2002 naval clashes in the West Sea, the 2010 ROK corvette Cheonan sinking or Yeonpyeong Island shelling), have never led to the resumption of war. Similarly, peace and reconciliation-oriented initiatives (i.e. the 1972 Joint North-South Korean Communiqué, the 1991 Joint Declaration of South and North Korea on the Denuclearization of the Korean Peninsula, or the 2000 North–South Joint Declaration) inevitably end with a bitter disappointment. It seems that both Koreas are destined to live in the perpetual fear of war without really experiencing it.

Regional neighbours find this situation annoying but acceptable because the reunification of Korea can be potentially dangerous for some and advantageous for others. The Cold War mentality persists in Northeast Asia and dictates to its leaders to exercise caution in any decisions related to the Korean peninsula, which is known to be the regional balancer. After the WWII, Korea was divided by the great powers for a good reason – to separate the communist bloc from the capitalist democracies. Seventy years later, Korea still serves as a buffer zone which separates the economic interests of China and Russia-dominated Northeast Asia from the US-dominated Pacific Rim.

Should any of the actors start changing the equilibrium in Korea, the stabilising forces of reasoning and good judgement will inevitably return the situation to the original and steady balance of threat. Neither the UN intervention in Korea nor the Chinese counterattack in 1950 could help Koreans to reunify their country. Similarly, North Korea’s progress in building their nuclear and rocket deterrent (independently from what is promised by the alliance with China) will be counterbalanced by the return of US-owned nuclear weapons to South Korea or by the resumption of Seoul’s indigenous nuclear program, which was abandoned in the 1970s. When the balance of threat is restored, a temporary period of improved inter-Korean and DPRK-US relations will follow. Peaceful or hostile co-existence in Korea serves the interests of the ruling elites in both Koreas and benefits their foreign partners too.

Imagining the catastrophic consequences of a new war in Korea is pointless because everyone (in Pyongyang and Seoul, Washington and Moscow, Beijing and Tokyo) understands the risks associated with imminent nuclear retaliation. After the 2006 nuclear test North Korea is a fully-fledged nuclear power and what was previously possible (or at least hypothetically imaginable) with regards to a military action against Pyongyang is simply out of question these days. Whether Washington admits the reality or continues to produce the self-deceitful blandishments of a surgical strike against North Korea, a new hot war in Korea is not feasible simply because it serves no ones’ interest.

First, it would be suicidal for the aggressor and equally catastrophic for the victim of aggression. Second, when the nuclear dust settles the presumed victor would not know what to do with the trophy. The Kim dynasty would not survive another war for unification. Democratically elected government in Seoul would not know how to rule the third of its (newly acquired) population who is not familiar with the concept self-organisation. The cost of damaged physical infrastructure rebuilding will be dwarfed by the long-term expenditures required for maintaining social order in the conquered territories, re-education and lustration of the captured population. Survivors would prefer to seek refuge in a third country out of fear for revenge and reprisals. The exodus of Korean reunification is not something that regional neighbours are ready to welcome or absorb. It will take years and trillions of dollars before Korea can recover after the shock of violent unification.

Even a peaceful unification is likely to pose threat to Korea’s neighbours. The windfall of natural resources and economical labour force, if combined with advanced technologies and nationalism-driven investments, will help Korea outperform the industrial powerhouse of Japan and enter into open competition with China. A narrow but strategically located Russo-Korean border corridor will link the European markets and Siberian oil with Korean industrial producers. An underwater tunnel, once completed between Korean and Japan, will undermine the Sino-American duopoly and link the peninsula with the islands.

If the North and South are unified, the presence of US troops will be questioned not only in Korea but in Japan as well. US security alliance structures across the Pacific will crumble, followed by economic and technological withdrawal from the region. Even the new Cold War against China and Russia won’t help Washington to prevent the major rollback of American influence in Asia and the Pacific. Russia and China, as well, upon losing the common adversary will need to resume competition and power struggle for regional hegemony. Thus, the unification of Korea will open a new era of regional tensions, which nobody is really prepared to endure.

Korea today, however divided and problematic, is a capstone of regional peace and stability which must not be touched by political adventurists. The balance of Northeast Asian regional security architecture has been hinging on the 1953 Armistice Agreement, which proved to be sold and robust enough to survive many international conflicts. Even the acquisition of nuclear armaments by North Korea is not going to change the inter-Korean relations or Koreans’ relations with neighbours. However, if North Korea is deliberately targeted or attacked and destroyed, as has been threatened from the UN podium, that would trigger the processes far beyond of our imagination and control and inevitably lead to tectonic shifts in politics, security and economy of the region, which collectively produces and consumes approximately 19% of the global Gross Domestic Product. Surely, nobody will play with fire when so much is at stake.

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How the Hell does North Korea Manage to Earn Foreign Exchange?

19 04 2017

Kaesong Industrial Park - workers(Charis Chang, 2017.04.18, www.news.com.au) From the outside North Korea looks like an impoverished state cut off from the rest of the world. But during its weekend procession, the isolated regime managed to put on an impressive display of its rockets and military strength, in defiance of growing American warnings about its military capability.

While many have the impression of North Korea being a poor country that can’t feed its own people, Leonid Petrov told news.com.au that it had large stockpiles of natural resources that it used to fund its weapons research.

“North Korea is a mountainous country that has huge natural resources including deposits of high quality coal, gold, silver, uranium, iron ore and rare earth metals,” said Dr Petrov, a visiting fellow at the Australian National University College of Asia and the Pacific.

He said North Korea had exported its minerals to allies such as China and the Soviet Union for decades until the collapse of the communist bloc. Since then it had been more proactive in international trade, although the tightening of sanctions has seen its export ability curtailed recently.

Dr Petrov said China in particular had maintained trade in North Korea and was keen to keep a monopoly on its rare earth metal trade.
“So China buys everything North Korea is prepared to offer (of its rare earth metals),” he said. These metals are important because they are used the production of many 21st century products like mobile phones, computers, LCD screens and cars.

Another way that North Korea earns its money is by exporting its workers to China, Russia, the Middle East, Eastern Europe and South East Asia. In fact there were no visa requirements between North Korea and Malaysia until early this year, when tens of thousands of North Korean workers were deported following the assassination of North Korean president Kim Jong-un’s older brother Kim Jong-nam.

“Tens of thousands of North Koreans are sent overseas to work in restaurants, construction sites, as vegetable growers and builders of monuments in places like Africa,” Dr Petrov said.

“Dictatorships like big projects and North Korea can offer them labour to build big monuments, highways and airports.” Dr Petrov said the “lion’s share” of the worker’s wages went to the North Korean government.

North Korea also welcomes foreign investment. The Egyptians have invested in the country’s telecommunications network, concrete factories and construction industries, while the Chinese are keen on fishery resources, the mining industry and have developed a network of supermarkets selling Chinese-made consumerables.

Previously North Korea also benefited from co-operation with South Korea, which invested hundreds of millions into the Mt Kumgang resort where South Koreans and foreign visitors could stay and go mountain climbing. The Kaesong Industrial Park, which produced goods using South Korean know-how and North Korean labour, also gave it a financial boost until it was shut down last year following North Korea’s fourth nuclear test.

Dr Petrov said until last year China was also providing North Korea with other resources it needed such as crude oil and petroleum at “friendly prices” or possibly even for free.
It’s this type of trade that the Trump administration and the Australian government wants to block.

“They’re keen to see China stifling North Korea to death and causing the economic collapse of North Korea’s economy, which is unrealistic,” Dr Petrov said.

He said China sacrificed more than 250,000 soldiers during the Korean War to support the North Korean government. “It’s wishful thinking that China would just turn the tap off and allow the North Korean regime to implode.

“China understands that this would cause chaos in North Korea, the absorption of North Korea into South Korea and the subsequent advance of American troops to the Chinese border.

“So China is not going to allow the economic collapse of North Korea.” Dr Petrov said China was more likely to demonstrate its anger through ceasing economic co-operation temporarily, such as when it suspended the importation of coal after the assassination of Kim Jong-nam. “It bites but is not deadly,” he said.

But Dr Petrov said these types of actions were probably not going to be effective in curbing North Korea’s ambitions as it could always turn to Russia to help. “If China ceases economic co-operation, then Russia steps in and will continue doing the same,” he said.

“North Korea knows that well and plays off Russia against China, allowing Moscow and Beijing to compete for concessions on North Korea’s mining industry, fisheries and port facilities.” Russia is interested in North Korea because it sees it as a good market for Russian gas, oil and electricity. Russia believes North Korea could also potentially open the corridor for the export of energy to South Korea.

It sees North Korea as part of a potential transport corridor stretching from South Korea to Europe, via Russia’s Trans-Siberian Railway. “Russia is not interested in the collapse of North Korea but the stability and co-operation with North Korea,” Dr Petrov said.

Even other countries have had a hard time enforcing sanctions against North Korea.
A United Nations expert team released a report last month that found North Korea had managed to avoid sanctions by using Chinese front companies and other foreign entities to disguise where its goods were coming from. Last year it managed to continue its export of banned minerals and also has access to international banking.

Part of the problem is how different countries interpret what is banned by the sanctions.
One example was highlighted after Austrian ski equipment was found at the luxury Masik ski resort in North Korea. Austria later said it didn’t think ski lifts were included in the European Union’s definition of luxury goods prohibited from being sold to North Korea.

An Australian brand of ski clothing was even manufactured at the Taedonggang Clothing Factory in Pyongsong from 2014, but the company said it was not aware of the problem until after production had been completed and shipped to retail customers. It took two years for the company to sever its production line.

When asked how the conflict with North Korea could be resolved, Dr Petrov said: “Stop the war, end the conflict, reconcile and co-operate”. Dr Petrov believes that North Korea had a chance for survival if it could resume co-operation with South Korea, and this could happen if South Korea changed leadership at its May 9 presidential election.

He said co-operation did happen during the 10 years of the Sunshine policy that encouraged interaction and economic assistance between the two countries from 1998 to 2008, but the US actions were very important.
He said North Korea initially froze its nuclear program according to an agreement made when Bill Clinton was president but his successor George Bush scrapped this, which forced North Korea to resume its program.

See the full article here… 





Brisbane-based geologist Louis Schurmann linked to huge North Korea rare earths mining project

7 11 2014

Louis Schurmann(By Mark Willacy, ABC, 6 Aug 2014) A leading Asian human rights activist has urged the Federal Government to investigate a Queensland-based resources company and a prominent Australian geologist over mining deals with North Korea that he believes may breach United Nations sanctions.

One of the deals involves the mining of a potential deposit of 216 million tonnes of rare earths, which are minerals used in everyday items including smartphones, flatscreen televisions and computers, but also essential for sophisticated weapons such as guided missiles.

The deposit, discovered at Jongju, about 150 kilometres north-west of the North Korean capital Pyongyang, is reportedly one of the world’s largest.

It could also provide a significant boost to the rogue state’s economy.

Late last year, a British Virgin Islands-based private equity firm, SRE Minerals, signed a joint venture with the regime-run Korea Natural Resources Trading Corporation to develop the site for the next 25 years.

The project’s lead scientist and director of operators is Dr Louis Schurmann, an experienced Brisbane-based geologist and fellow of the Australasian Institute of Mining and Metallurgy.

Tokyo-based Human Rights in Asia director Ken Kato has told the ABC that he wants the joint venture project investigated.

“Rare earths are an indispensable material for guided missiles,” he said.

“North Korea’s mining resources are a major source of revenue for its nuclear and missile programs.”

Activist who questioned deal labelled ‘doomsday prophet’ in email

UN Security Council resolution 2094, passed in response to the regime’s 2013 nuclear weapons test, bans the transfer of any financial or other assets, or resources “that could contribute to the DPRK’s [North Korea’s] nuclear or ballistic missile programs”.

The question remains whether this could in any way apply to rare earths mined in North Korea.

The ABC has obtained correspondence between Mr Kato and Dr Schurmann, in which the activist warns the geologist that the project could be in violation of resolution 2094.

The exploration geologist dismissed the concerns in a reply email.

“Have you ever thought that doomsday prophets like your [sic] cause most of the problems?? What we are doing is making a difference … a POSITIVE one … try it,” Dr Schurmann wrote.

Mr Kato has referred Dr Schurmann to the Sanctions Section of Australia’s Department of Foreign Affairs and Trade, urging an investigation.

The Sanctions Section replied: “Australia takes its sanctions obligations … very seriously and we will provide due consideration to the matters you have raised.”

When Lateline asked the department whether Australians or Australian companies involved in the Jongju mining project were in breach of sanctions, it refused to comment, or to confirm if an investigation was underway.

Rare earths could ‘change the whole game’ for North Korea

North Korea expert Leonid Petrov, from the Australian National University, warned that if the rare earths deposit was as big as being touted, it would provide a huge boost to the country’s economy.

Dr Petrov said such an injection of hard currency into the impoverished and brutal regime would strengthen its chances of survival.

“If they really do have substantial amounts of rare earths in North Korea it can actually change the whole game of survival for North Korea,” he said.

“The regime does not need to reform [with such an injection].”

Mr Schurmann is not the only Australian link to the Jongju rare earths project.

Brisbane-based Salva Resources assessed the deposit for the proponents, and found it to be a considerable and economically viable prospect.

At the time of the company’s involvement, Salva Resources was owned by Brisbane mining executives Lachlan Broadfoot and Grant Moyle.

Last year, in a deal that media reports said had netted them millions of dollars, they sold the company to US engineering group HDR.

Lateline contacted the new company, HDR Salva, seeking comment about the Jongju assessment and an interview with Mr Broadfoot, who works at the merged company.

In a statement, HDR Salva said: “Salva Resources was contracted to do a geological review of historical data. The nature of this work was thus not relevant to your other comments.”

Those “other comments” relate to the ABC’s queries about UN sanctions against North Korea.

Under Security Council Resolution 1718, to which Australia is bound, it is “an offence to engage in conduct which assists, or results in, the sale, supply or transfer of specified goods on the luxury goods list to [North Korea]”.

Number 22 on the prohibited list is “precious metals”, an appellation sometimes given to rare earths.

It is unclear whether resolution 1718 applies to materials mined inside North Korea.

Gold and silver also appear on the list.

Lateline has discovered that Dr Schurmann’s mining interests in North Korea are not just confined to rare earth minerals.

Dr Schurmann is a director of Australian Stock Exchange-listed EHG Corporation, which last year announced it had acquired a sub-licence “to mine, process, extract and sell all minerals from the North Hwanghae province” in the closed communist state.

Those minerals would include gold, silver, lead and copper.

Dealing with North Korea ‘controversial business’

ANU’s Dr Petrov said dealing with North Korea was fraught with dangers.

“The money that goes to North Korea can be used by the regime to suppress its own people or to beef up its nuclear or missile capabilities. So doing business with North Korea is controversial business.

“It’s highly advised if you don’t want to end up on the list of sanctioned people and banned from doing business with other countries, you’d better check the list and check what is prohibited and what it allowed.”

Lateline emailed Dr Schurmann, sent him a Facebook message, called his home phone number, and visited his Brisbane home seeking comment. The program finally made contact. But the geologist told the ABC he has been advised by his lawyers not to comment at this stage.

As well as potential sanctions breaches, questions remain about who Dr Schurmann and his colleagues are dealing with in Pyongyang.

Human rights activist Mr Kato said most of Pyongyang’s biggest money making ventures were run by a secret unit of the regime called “Office 39”.

Mr Kato has told the ABC that while Office 39’s agents were sometimes involved in legitimate ventures, they were also responsible for counterfeiting, drug smuggling and weapons trafficking, he said.

“Office 39 controls most of the mining in North Korea. It’s like a big exclusive conglomerate for the Kim family,” said Mr Kato.

“The US Treasury Department says Office 39 provides capital to North Korea’s leaders and it is subject to sanctions in Australia, the US, and Europe.”

Do you know more? Email: investigations@abc.net.au





US Thanks Panama for Arms Shipment Seizure

23 11 2013

Cheongcheongang_Panama(ABC Radio, PM, Brendan Trembath reported this story on Wednesday, November 20, 2013)

MARK COLVIN: The US vice-president, Joe Biden, has thanked Panama for detecting a shipment of Cuban arms bound for the secretive nation of North Korea. Panamanian authorities seized a North Korean ship in July after they found tonnes of military hardware, including two MiG fighter jets, hidden in a cargo of sugar.

There’s a UN arms embargo against North Korea. The discovery sheds more light on the barter trade between North Korea and Cuba and the state of their defences. Brendan Trembath reports.

BRENDAN TREMBATH: On a visit to Panama, the US vice-president, Joe Biden, has thanked the thousands of workers expanding the Panama Canal.

JOE BIDEN: And I look forward to this relationship continuing to grow and prosper. And as a consequence of what you’ve done at the canal, we have the possibility of expanding our economy by hundreds of billions of dollars over the near term.

BRENDAN TREMBATH: If they finish on time, large freighters will be able to navigate the waterway from 2015. The US vice-president has also acknowledged a less desirable type of trade through the Panama Canal. He’s thanked Panamanian authorities for the seizure in July of a North Korean-flagged ship packed with Cuban military hardware.

Both the Cuban and North Korean governments have said the arms were obsolete and being shipped to North Korea for refurbishment. But the Communist allies did not explain why two MiG fighters were buried under more than 200,000 sacks of sugar.

Dr Leonid Petrov is a Korean studies researcher at the Australian National University.

LEONID PETROV: And I believe that it’s happened because North Korea simply feels they are cornered, they are being watched. They are paranoid, and they’re trying to disguise any possible activity with the outer world.

BRENDAN TREMBATH: Can you read into the types of aircraft seized? Does it suggest anything about the state of the North Korean military?

LEONID PETROV: The state of North Korean military is not particularly great. The lack of fuel, particularly, for aircraft keeps its air force in the under-trained state of condition. I believe that North Koreans need more training to be more efficient in operations in any branch of their military, depending whether it’s air force, naval or army.

They have a very huge fleet of submarines, probably largest in the world. But in terms of air force and particularly these MiG-15, MiG-17 and MiG-21 aircraft, they were used during the Korean War, 60 years ago. Of course, they have been already outmoded, outdated. They don’t pose any strategic threat but can pose a danger of a suicidal mission or it may be used as a delivery kind of vehicle for a small, compact nuclear device if needed.

BRENDAN TREMBATH: There are no signs North Korea is about to engage in talks on its nuclear program.

LEONID PETROV: The Six-Party Talks are dead and buried. I personally never believed in the Six-Party Talks, simply because there are too many parties in the Six-Party Talks process. And the main obstacle for the resumption of Six-Party Talks, well, regardless of how efficient they might be, I think that, and it’s pretty clear, that Washington, Seoul and Tokyo simply refuse to go back to the negotiating table.

MARK COLVIN: ANU academic and frequent visitor to North Korea, Dr Leonid Petrov, with Brendan Trembath.

Listen to the audio file here…





S. Korea postpones international investment roadshow at Kaesong

15 10 2013

kaesong-complex-dprk(BY OLIVER HOTHAM, NK News, OCTOBER 15, 2013) SEOUL – An investment roadshow aimed at promoting foreign investment for the joint-run Kaesong industrial complex has been postponed, the South Korean government announced on Monday.

The event, intended to be held at the end of the month on October 31, had been planned to encourage foreign companies to set up factories in the jointly run Kaesong industrial complex, which currently only hosts South Korean companies that use North Korean labor. North Korea was informed of the postponement on Friday, and a new date for the show is yet to be set.

A Unification Ministry spokesperson who declined to be name told Agence France Presse that the delay was “inevitable” due to recent deteriorations in cross-border relations and “the lack of progress at talks with North Korea to enhance communication, and travel to and from Kaesong”.

“As is known,” the spokesperson said, “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 spokesperson said the government had decided that because of this failure to agree on matters crucial to foreign investors, they saw no point in going ahead with the roadshow.

“South Korea’s decision to postpone an investor-related event in the Kaesong Industrial Park is another indication of President Park’s “Trustpolitik” failure,” Professor of Korean History at Australia National University Leonid Petrov told NK News, explaining that “trust in inter-Korean relations is not going to be restored without concrete and mutually beneficial projects, such as Kaesong and Kumgangsan”.

“Only by ending the Korean War and formally recognizing one another can South Korea and North Korea improve the investment climate,” Petrov argued. “Without such changes, business people (both Koreans and foreigners) will remain hostages of Seoul and Pyongyang’s political games”…

See the full text of the article here…

 





Wihwado benefits China second time but leaves Korea divided

19 06 2012

 (Leonid Petrov, The University of Sydney) Last week, North Korea announced to the world that it would make its two islands, Hwanggumphyong and Wihwado, a visa-free zone for foreigners. A special law has been adopted in the DPRK to attract foreign investors and give them preferential treatment in the payment of tariffs, taxes and land use. Will this recent change in policy rescue the North from poverty and change things for the better?

Those who are familiar with Korean history will remember the Wihwado Retreat (위화도 회군) of the 14th century. In 1388, General Yi Seonggye of the Koryo kingdom was ordered to march north with his army and invade the Liaodong peninsula, which was under the control of Ming China. However, when his troops reached Wihwado Island in the estuary of the Amnok (Yalu) River, General Yi suddenly changed his mind. With the support of high-ranking government officials and the army, Yi Seonggye decided to return to the capital, Kaesŏng, and trigger a coup d’état. He toppled the Koryo King and ascended the throne himself as King Taejo, the founder of Joseon Dynasty.

King Taejo’s change of heart comes to mind in the context of the situation. In an effort to turn the tide of its economic development, North Korea selected the islands of Wihwado and Hwanggumphyong as the future site of the country’s Special Economic Zone with China. Although the move goes against the grain of North Korea’s traditional tendency to isolate itself, the islands lie at the mouth of the Amnok River, which has served as a natural border between the two countries since the time of Yi Seong-gye. Its location, just opposite the cities of Sinuiju on the DPRK side and Dandong on the PRC side, adds strategic importance to this historic place. In June 2011, a start-up ceremony took place on the island in recognition of the DPRK-China joint development and operation project.

The executive decision to develop the abandoned islands into a thriving industrial park had been made by the North Korean leader Kim Jong-Il who frequently visited China to solicit economic aid and investment. Soon after his demise in December 2011, his son and successor, Kim Jong-Un, called upon the citizens of the DPRK “to actively do business with China” and “bring in as much cash profit as possible”. As such, the commercial importance of Wihwado and Hwanggumphyong Economic Zone has only increased, raising speculations that it would be turned into the playground of capitalism for North Korea’s centrally-planned and autarkic economy.

The earlier experience of joint development and cooperation in the Rason (Rajin-Seonbong) Economic and Trade Zone showed that neighbouring China was keen on aggressively investing in infrastructure and manufacturing sectors provided they could be guaranteed an upper hand in competition against Russian, Japanese or South Korean investors. China’s access to the East Sea (Sea of Japan) is cut short by the 17 kilometre-long DPRK-Russian border, rendering the industrial base of Jilin and Heilongjing landlocked. On the contrary, the Wihwado and Hwanggumphyong Economic Zone, located at the mouth of the Yalu (Amnok) River, which flows into the Yellow (East) Sea, seems to be a more attractive option for China.

Beijing has once thwarted North Korea’s plans to set up a Special Economic Zone in Sinuiju, where Pyongyang intended to create a new Hong Kong or Macao. The Chinese billionaire, Yang Bin, was appointed by Kim Jong-il as the governor of Sinuiju Special Administrative Region in 2002. That same year the DPRK government enacted a new economic policy on wage and pricing systems based on self-accounting management, known as the “July 1 Measures”. To the North’s dismay, China was not impressed by the prospects of having another Hong Kong on its northeastern frontier and quickly arrested Yang Bin for tax evasion. The message was clear: any development close to China’s borders must be endorsed by Bejing.

This time, Hwanggumphyong and Wihwado Economic Zone is the product of a Sino-North Korean administrative and trade agreement. Even the recent announcement that foreigners would be granted visa-free access and enjoy tax breaks still manages to provide China with full control over the movement of people and capital within its territory. Pyongyang’s official news agency, KCNA reported that, “upon presentation of passports or other equivalent documentation, foreigners and vehicles may enter or leave the zone through the designated route without a visa.” It also promised that “customs duties will not be levied on materials brought into the zone for processing, or on finished goods.” China’s control of the surrounding geography means that Chinese investors and manufacturers will have an upper hand in trade.

North Korea is in no position to bargain. Pyongyang’s dependence on Beijing is growing as international sanctions over its nuclear and missile programmes make it increasingly difficult for the North to access international markets and credit. The impoverished country is striving to revitalise its economy through foreign investment in its economic zones. Since China has already invested about US$3 billion in developing port facilities and roads in the Rason Economic and Trade Zone, Beijing might decide to funnel significant capital to the Hwanggumphyong and Wihwado Economic Zone too. But will this contemporary “Wihwado Retreat” rescue the North Korean economy?

Beijing would love to see Pyongyang follow its example by introducing market-oriented reforms, but North Korea simply cannot come to terms with granting its population the many freedoms necessary to make such a reform successful. Even the Chinese-style reform of the late 1970s required some basic liberties (freedom of movement, information, association, etc.). This is simply impossible in the conditions of an ongoing Korean War, in which North Korean society is continuously fed lies by the regime and inherently fears interaction with the rest of the world, particularly, South Korea. If Pyongyang decides to initiate reform, Chinese-style or otherwise, it would inevitably and quickly lead to the collapse of DPRK’s political regime. Therefore, the very word “reform” is a taboo in North Korea.

The DPRK leadership genuinely wants to modernise the country’s economy but does not want to change its social and political life. Pyongyang is constantly searching for shortcuts that could boost its dysfunctional economy without having to conduct a systemic reform. The new North Korean leader, despite of his young age, is surrounded by conservative older family members and elites who have no visionary plan for developing the country. Setting up tiny special economic zones, which would generate foreign exchange without bringing about any change to the rest of the country, is a preferable way forward. As a result of this half-hearted policy, the ordinary North Koreans will eat and dress better; they might even own PCs and mobile phones, but they will continue to live in the same paranoid state of fear and dependency on the Great Leader’s decisions.

The visa-free regime and tax holidays, which are promised for the Wihwado and Hwanggumphyong Economic Zone, are simply measures to lure a handful of random foreign investors and should not be seen as a sign of change in the economic thinking of Kim Jong-Un. Neither reform nor economic liberalisation is on the cards because either of these would immediately jeopardise domestic stability. The zones of economic cooperation are reluctantly permitted by the North Koreans with apprehension that possible ideological contamination might cost more to the regime than economic benefit.

Given the circumstances of the ongoing inter-Korean conflict, the sustainable development of the North Korean economy is impossible. The regime is locked in a security dilemma and is reluctant to experiment. Only peaceful co-existence and economic collaboration between Seoul and Pyongyang would remove fears and re-build trust. Increased inter-Korean cooperation, where the plentiful resources of the North are complemented by the cutting-edge technologies from the South, is capable of bringing North Korea back from its prolonged socio-economic crisis. Such collaboration would also enhance the powerhouse of South Korea, opening new markets beyond the Military Demarcation Line and linking the trans-Korean railway to the Eurasian continent.

This article can be read in Korean here… 위화도. 황금평 경제개발이 주는 의미는?

This article was also published as “Pyongyang’s newest SEZ just another shortcut” (AsiaTimes On-line, 22 June 2012)