B00BY4HXME EBOK

by Lankov, Andrei

  From this point of view, the Kǔmgang Mountain tourist zone, the first of the “Big Three” projects, can be seen as an ideal undertaking. It is, essentially, a fenced-off ghetto for South Korean tourists and hence politically safe.

  The project was conceived as early as 1989, when Chung Ju-yung, the founding chairman of Hyundai Group, the largest South Korean business conglomerate, first met with the Pyongyang leaders, including Kim Il Sung himself. Chung Ju-yung was born in what is now North Korea, and in the last years of his long and eventful life he demonstrated a sentimental attachment to his native land. This seems to be the reason why his Hyundai Group (or, to be more exact, its Asan subsidiary) took on all three major intra-Korean projects.

  Chung Ju-yung’s proposal envisioned an establishment of a South Korean resort in North Korea. The resort was to be located in the Kǔmgang (“Diamond”) Mountains, which for centuries have been seen in Korean culture as the embodiment of scenic beauty. The mountains conveniently lay near the DMZ.

  In November 1998 the Kǔmgang project commenced operations. As with the majority of North-South “cooperation” projects, the South did most of the work while the North received the lion’s share of the project’s benefits. For the South Korean side, the project could hardly be called a success story. In January 1999 Hyundai predicted that by the end of 2004, there would have been a cumulative 4.9 million visits to the North. The actual figure was merely 0.9 million. Hyundai Asan also said in 1999 that by 2004 some 1.2 million South Korean tourists would visit the project annually. Yet the actual number of visits in 2004 was 274,000—four times below the initial expectations. In 2007 the number of visitors peaked at 350,000—an impressive figure, but still well below the rosy expectations of the late 1990s.17 Between 2001 and 2002 the project nearly went bankrupt and only a massive infusion of the South Korean government funds saved it from capsizing.

  The South Koreans did not rush to the new resort. This lack of enthusiasm was easy to explain, since the trips were not cheap: a tour to Kǔmgang would cost almost as much as cheaper tours to China or Southeast Asia. At the same time, the allure of North Korea, once clearly a “forbidden fruit,” was diminishing in the South.

  Once in the resort, South Korean visitors were not allowed to venture outside the fenced area. The local population was removed from this area completely, and only a few hundred North Korean minders and plain-clothes “guides” were present there. Most of the semiskilled personnel at the project were ethnic Koreans recruited from China—they were willing to work for low wages, and they were politically safe for the North Korean authorities (like the tourists themselves, Chinese-Korean personnel were not allowed to leave the resort).

  Nonetheless, some “ideological damage” is possible even in such circumstances. One of my North Korean interlocutors was sent to work at the resort construction during a labor mobilization in the early 2000s. During his stay, he had no contact with South Korean tourists whatsoever, and did not see them even from afar, but later, after his defection to the South, he mentioned this trip as a turning point in his ideas about the South. He could see some South Korean equipment, and also some buildings erected by the Southerners, and it was enough. He said: “I knew that the South was ahead of the North, but only after my trip to Kǔmgang tourist zone I realized how much ahead they actually are.”

  Much in line with the Kǔmgang tourist zone was the decision to start tours to the ancient city of Kaesŏng, which is located near the DMZ and has great historic significance for all Koreans. Compared to the Kǔmgang tourist zone, Kaesŏng city tours meant a greater level of exposure. Every day, the inhabitants of Kaesŏng could see dozens of large, shiny South Korean buses, which crisscrossed a small historical downtown. Each bus, apart from a driver, had two or three minders, whose job was to make sure that visitors would not take shots of the everyday life of the city. Pictures could be taken only at designated stops. Upon departure, all digital cameras (only digital cameras were allowed on tours) had to be checked frame by frame, and those visitors who dared to take politically incorrect pictures—of, say, an ox-cart on a city street—would have to pay a fine.

  Nevertheless, the North Korean authorities obviously did not have enough money to ensure sufficient segregation of the South Korean tourists. The police did not allow North Koreans to get within a few dozen yards of tourists, but even from such a distance Northerners could see that Southerners were well dressed and unusually tall by Northerner standards.

  Interaction with minders was also allowed and even frequently initiated by the minders themselves. Obviously, these young police and intelligence officers were supposed to do their job—that is, gain intelligence. Nonetheless, there is no doubt that in the process they also discovered many interesting things about actual life in the South. One might argue that the secret police personnel would know the truth anyway, but this is hardly the case: normally such people would be far too low in the pecking order of the North Korean bureaucracy to be allowed that much access to subversive knowledge about the “other Korea.”

  Of all the “three projects,” the Kaesŏng industrial zone (KIZ) is by far the most significant both economically and politically. The idea of the KIZ is based on the increasingly common assumption that the interests of both Koreas can be served by a combination of Southern capital and technologies with Northern cheap labor. So, it was decided to develop an industrial park in the vicinity of the DMZ. In this industrial park South Korean companies would employ North Korean workers who, laboring under the supervision of South Korean managers, would produce cheap items for sale in South Korea and overseas.

  The KIZ construction began in 2003, and by late 2004 the first production lines began to operate in the complex. Big business did not show much interest in the idea, so only small- and medium-sized South Korean companies chose to move into the KIZ. For them, the South Korean government provided generous inducements, which included, among other things, cheap loans and guarantees. The guarantees were especially important, since even in the early days of the Roh administration, when the North-South relations went through a short honeymoon, South Korean businessmen were afraid that overinvesting in the KIZ would one day make them hostages to the policies of both Seoul and Pyongyang.

  Contrary to earlier worries, the KIZ was remarkably successful. Admittedly, as was the case with the Kǔmgang tours, the initial estimates were proven to be overoptimistic: in 2003 it was promised that as early as 2007 some 100,000 North Korean workers would be employed by some 250–300 South Korean companies in the area. The actual results were less impressive: by late 2010, some 120 South Korean companies operated at the KIZ, with 47,000 North Korean workers employed. Over half of the companies (71, to be exact) dealt with clothing and textiles. In 2010 the KIZ-based companies produced goods worth $323.3 million (again, slightly over half consisted of textiles and clothing). For the mammoth South Korean economy, this is small change, but for the North this income is significant enough.18

  The KIZ is located some 10 kilometers away from the DMZ, so the South Korean personnel commute daily, but some of them stay there overnight (thus creating an ever-present possibility of a hostage situation in case of a crisis). As of 2010 there were about 800–900 South Korean technicians and managers who supervise the North Korean workers.

  Theoretically, the South Korean companies pay their North Korean workers the agreed basic monthly wages of $61 (as of 2010), but this figure does not include overtime premiums and special incentives, so the actual monthly payment seems to be close to $90–100 per worker. However, this salary is paid to a North Korean government agency that makes a number of deductions, so only a fraction of the total—less than 35 percent—reaches the workers’ pockets. Indeed, the KIZ is a major cash cow for the North Korean state, providing an estimated annual revenue of $25–40 million. This allowed the numerous critics of the project to describe it as a “slave labor camp.” The description is grossly unfair: even after the deductions, the KIZ jobs are by far the best-paid regular j
obs in North Korea, so the locals strive hard to be accepted to a KIZ-based factory.

  Any interaction between North Korean workers and South Korean managers is discouraged. In one incident, a South Korean manager was kept under arrest for a few months, allegedly for criticizing North Korea and encouraging a female North Korean worker to defect.

  Nonetheless, one should not underestimate the impact that the KIZ has on the city of Kaesŏng and the surrounding area. By now a significant part of the local population are employed in the KIZ. It looks like the average South Korean industrial district and, as such, would probably be described as monotonous and faceless by visiting aesthetes from other parts of the world. But for the North Koreans themselves, the area looks stunningly unusual and beautiful. The streets are lined with trees, roads are paved, and bright electric lights are on every night. Standard prefabricated buildings are clean and brightly colored. This is not what the average North Korean has seen in the typical industrial district in his country. As a matter of fact, first-time visiting North Korean officials cannot hide their surprise—even though such improper emotions might be politically dangerous.

  North Korean workers in the KIZ need not talk to South Koreans to get an idea of what life in South Korea looks like. The South Koreans are tall, well dressed, and their skin testifies to the fact that they don’t spend much time on labor mobilization, neither planting rice with bare hands nor pushing cement blocks around. Even small talk might not be that innocent, since hints about daily life in the South—both intentional and incidental—are bound to be dropped and North Koreans will certainly take notice. No amount of police surveillance will prevent this from happening.

  Even smuggling from the KIZ has a remarkable impact on minds in surrounding areas. For snacks, many North Koreans are given Choco Pies, a seriously unhealthy, sugar-rich but delicious snack, popular in the South. It is known that most of them get the Choco Pies from the KIZ to share with their families. These Choco Pies become carriers of highly subversive messages about South Korea’s sophistication and prosperity—like pretty much everything that is taken from the KIZ, legally or otherwise (and theft is a big problem).

  The KIZ does fill the regime coffers, no doubt, but it also serves as a conduit for new and uncensored knowledge about the outside world. We can be sure that thanks to the KIZ, an overwhelming majority of some quarter-million people who live in its vicinity have come to understand that most of what they read about South Korea in the official media is completely false. Even minders and political police agents are not immune from the effects of these discoveries.

  IN SEARCH OF A GULLIBLE INVESTOR

  In 1991 the North Korean government established a special economic zone (SEZ) in the remote northwestern corner of the country. The Rason SEZ, as it became known later, was to be located where the borders of China, Russia, and North Korea meet, and become a business hub of the region.

  News of the establishment of North Korea’s first SEZ produced much enthusiasm in the international media. As usual, there was no shortage of pundits who saw the decision as a sure sign that Chinese-style reforms soon would be launched in North Korea. After all, in China of the early 1980s, similar SEZs—islands of the market economy in an ocean of state socialism and central planning—played a major role in the early stages of the reform. Surely, the optimists claimed, the introduction of the SEZ was a sign that North Korea would soon emulate China.

  As subsequent developments demonstrated quite well, the Rason SEZ was not a sign of reform. Neither was it a success. By the year 2000, the total volume of foreign investment in the area was a paltry US$35 million even though initially, in 1991–1992, there were talks of about US$2 billion of investment.

  The major problem was the location. The Rason area is underdeveloped even by North Korean standards. The only paved road in the area connects Rajin and Sonbong, and even this is only a single lane. The bridge that connects the area with China has remained unchanged since colonial days. Obviously, Pyongyang expected that rich foreign investors would pay for the upgrading of the infrastructure. They did, but only on a very limited scale.

  So for two decades the Rason SEZ has largely remained dormant, serving essentially as a large marketplace where North Korean merchants have been able to buy Chinese goods for further resale in the inner regions of North Korea. (The merchants needed a special pass to get in since the area is fenced off and off-limits to ordinary North Koreans, but nowadays a small bribe can solve this problem with ease.) For a brief time it also served as a gambling enclave for rich Chinese, but after some ugly embezzlement incidents, the Chinese demanded the closure of the local casino. The zone slipped into obscurity, even though its small port was sometimes used by the Russian and Chinese companies for cargo transit.

  In 2002 the North Korean government made another attempt to launch an SEZ—this time in the border city of Sinuiju.

  In 2002 the proposed policies looked fairly radical. It was stated that the entire population of Sinuiju, some 350,000 people, would be relocated to other areas, to be replaced by 200,000 model workers, handpicked by the authorities for their skill and perceived political reliability.

  The most unusual act was the decision to appoint a foreigner as the SEZ governor. The choice was Yang Bin, a Chinese entrepreneur with Dutch citizenship, then reputedly the second richest man in China. He was 39 years old at the time.

  On September 12, 2002, the Supreme People’s Assembly, the North Korean rubber-stamp parliament, adopted the Basic Law of the Sinuiju Special Administrative Region. The Law consisted of six chapters (government, economy, culture, fundamental rights and duties of residents, structure, and the emblem and flag of the region), with an impressive 101 articles.

  The Basic Law proclaimed that the legal system would remain unchanged for 50 years, and that foreigners would enjoy the same rights as North Koreans in the area. Foreign judges were to be invited to solve disputes and oversee the enforcement of the laws.

  It looked too good to be true, and for a while there was a great deal of media hype about a “breakthrough.” The North Korean vice minister for foreign trade called the SEZ “a new historical miracle.”

  However, “new historical miracle” Sinuiju hardly lasted 50 weeks, let alone the promised 50 years.

  It was probably the Chinese who sank the project. Beijing was not amused by the turn of events. Yang Bin wanted to transform the city into a gambling center, a “Macao of the North.” This was not welcome. It is also likely that China did not want competition between Sinuiju and its northeastern cities. It did not help that the North Koreans, following their modus operandi, did not bother to liaise with the Chinese beforehand.

  Yang Bin was already under investigation at that time. Soon he was arrested for fraud and sentenced to 18 years in prison. No one heard about the Sinuiju SEZ for another decade.

  In 2011 an announcement about a new SEZ in the vicinity of Sinuiju was made—largely on the assumption that it would attract Chinese businesses. It might indeed become a success, but taking into consideration the track record of the North Korean SEZ, one should remain careful.

  THE SUN SETS

  By late 2007, North Korea’s strategists had good reason to feel happy about results of their diplomacy and brinkmanship. The US administration had given in, resumed aid, and even the revival of KEDO seemed likely after the February 13 declaration. Aid from the South helped to make up for the innate inefficiencies in the North Korean economy. In the long run, the Sunshine Policy might not have been as good for the North Korean regime as Kim Jong Il and his lieutenants seemingly assumed, but its destabilizing potential was unlikely to be noticed until much later. In addition, China had become increasingly involved in the North Korean situation, so North Korean diplomats could and obviously did hope to resume their old game of skillfully manipulating rival sponsors. But then things suddenly took an ugly turn.

  To a large extent the new North Korean crisis was a result of Pyongyang’s own miscalculations, but polit
ical changes within South Korea also played a major role in creating a new challenge for the North Korean regime.

  By 2005–2006, the South Korean public was increasingly dissatisfied with the Roh Moo Hyun administration. Rightly or wrongly, Roh’s government was seen as responsible for an economic slowdown. It also became clear that the noble past of pro-democracy fighters did not shield them from the scent of corruption. The political Right at the same time acquired charismatic leadership in the shape of the former Seoul Major Lee Myung Bak (nicknamed “the bulldozer,” due to his passion for demolition and construction). By late 2007 few doubted that the Right was well positioned to win the next elections by a landslide. In a last-ditch attempt to save his legacy and the Sunshine Policy, President Roh rushed for a second summit with the North, which took place in Pyongyang in October 2007. Among other things, he promised to open another industrial zone similar to that of Kaesŏng. But it was too late: elections were won by the Right and in February 2008, Lee Myung Bak became the new president of the Republic of Korea. Tellingly, the domestic North Korean media did not report the results of the elections for some two months.

  The issue of North Korea remained marginal during the campaign. The foreign media usually only bother to mention Korea in relation to some North Korea—induced crisis, so people outside the Korean peninsula tend to assume that South Koreans see the North Korean issue as a defining or at least very important part of their country’s political agenda. This has long ceased to be the case. A poll taken before the 2007 presidential elections encapsulates this spirit quite well. In the poll, would-be South Korean voters were asked to name “the most important task of the next president.” Of the participants, 36.1 percent said that this should be “economic development and creation of jobs”; 27.4 percent said “closing the income gap and improving welfare”; 22.4 percent wanted “political and social unity”; 11.2 percent wanted “political reform and leadership”; and only a meager 2.4 percent said that the would-be president should, first of all, concentrate on “improving inter-Korean relations.”19