KOREA FOCUS - May 2012

Table of Contents

Korea Focus - May 2012 - TOC - Politics 1. North Korea’s ‘Satellite Launch’: A Balance Sheet 2. When We Have an Ethnic Sri Lankan Represent Korea 3. Projection of the Seoul Nuclear Security Summit 4. Lessons from the Cheonan’s Demise 5. Civic Movement Put to Test - Economy 1. Preconditions for Korea-China FTA 2. Structural Change in Income Distribution 3. The Right Course of Chaebol Reform 4. Water Stress in Korea 5. The Economic Korean Wave in Japan - Society 1. Reasons to Record and Remember North Korea’s Tragic Human Rights Situation 2. How to Make the ‘Korean Legend’ Continue 3. Heroes Who Built the Ieodo Ocean Research Station 4. Truth about Gureombi Rock - Culture 1. Harmony of Peace from Paris 2. K-pop into the China Market 3. Historian Lee Ki-baek and Publisher Kim Seong-jae 4. Bread over Books, Shoes over Books?

5. Making Friends in Seoul - Essay 1. North Korea’s External Debts: Trend and Characteristics

2. North Korea’s Economic System in the Kim Jong-un Era: Prospects for Change and Implications 3. Polarizing Business Competitiveness 4. Korean Movies from True Stories: Reality and Desire for Myth - Feature 1. Activist Asserts the Lives of North Korean Defectors Should Come ahead of Ideology 2. Architectural Hallyu Attracts Young Architects from Abroad - BookReview 1. Rethinking the Theories on North Korea’s Demise 2. Koreans, It’s Time to Lead, Not Follow - Interview 1. Stephen Linton: “I have inherited the gene of 100-year-long love toward Korean people.”

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- North Korea’s ‘Satellite Launch’: A Balance Sheet - When We Have an Ethnic Sri Lankan Represent Korea - Projection of the Seoul Nuclear Security Summit - Lessons from the Cheonan’s Demise - Civic Movement Put to Test

North Korea’s ‘Satellite Launch’: A Balance Sheet

Han Sung-joo Professor Emeritus, Korea University Former Minister of Foreign Affairs

In spite of mounting criticism and dissuasion by its neighbors and the international community, North Korea obviously intends to proceed with its announced rocket launch in mid-April, supposedly to put a space satellite, Kwangmyongsong-3, into orbit. (Editor’s Note ―The North’s rocket exploded a few minutes into its flight on April 13.)

Pyongyang insists that it is acting in accordance with the wishes of the late leader Kim Jong-il. That is, the launch is for peaceful purposes and part of the centennial celebration of the birth of Kim Il-sung, who founded North Korea.

The North also claims that it informed the United States of the satellite launch when it was negotiating an agreement for food aid. Under a deal reached on February 29, Pyongyang vowed to freeze its uranium enrichment program (UEP) and the United States promised food shipments.

The general consensus is that the rocket launch was meticulously calculated and prepared while Kim Jong-il was alive and is not the byproduct of internal conflict and confusion since his death. Still, the North stands to suffer a backlash. The launch will deepen its international isolation and worsen already grim prospects of resolving its economic woes.

For North Korea, the primary purpose of developing and test-firing long-range rockets is to produce intercontinental ballistic missiles (ICBM) capable of reaching the continental United States. But there also are political and diplomatic objectives attached. First, Pyongyang intends to demonstrate to the outside world a stable power transition in progress from Kim Jong-il to his son, Jong-un. Second, by resisting international calls for a halt in the missile program, it is committed to intensify the solidarity and unity of the North Korean populace. Third, a hard-line faction presumably led by military forces may be intent on creating obstacles in the six-party negotiations over the North’s nuclear and missile programs to extract more concessions from the United States and other nations.

The North must also be counting on the launch to gain momentum for accelerating the development of missiles with nuclear warheads. Pyongyang conducted its first nuclear test three months after the test-firing of Taepodong2 ballistic missile in 2006 and a second nuclear test a month after the launching of a missile supposedly carrying the Kwangmyongsong-2 satellite in 2009.

While North Korea pursues these objectives, the five other countries in the sixparty talks are entangled in their own political transition. This is curbing their influence on a wayward Pyongyang or their ability to take tough measures.

Russia will be left hamstrung until early May when president-elect Vladimir

Putin will be sworn into office. China, due to change its top leadership this autumn, will have little options to reassess its policy toward North Korea until new leaders are seated. Japan, stricken by frequent cabinet changes over the past six years, is overwhelmed by domestic political, economic and natural disaster issues so it can hardly pay close attention to foreign affairs. Both South Korea and the United States are mired in election campaigns – Korea’s general election at hand and the presidential elections of both countries in the fall – so they find it difficult to divert much attention to North Korea.

Taking advantage of these transitional developments in other countries, Pyongyang is employing a “carrot and stick” tactics of its own. That is, on the one hand, it displays its willingness to resume the stalled six-party talks, proposing to freeze its UEP and promising to readmit International Atomic Energy Agency (IAEA) inspectors. On the other hand, the North is committed to its long-range missile launch, posing a provocative challenge to the international community. Its double-edged ploy hinders policy coordination among other parties of the six-way talks, especially Seoul and Washington.

Beijing is displeased with Pyongyang’s nuclear and missile development, but it does not want North Korea to implode or to see a military clash flare up on the Korean peninsula. Therefore, while it expresses concerns about the North’s “satellite launch,” China will deliberately accede to Pyongyang’s vindication and oppose additional sanctions against North Korea, trying to resume the sixparty negotiations. If the United States halts its food aid, the North will refuse to freeze its UEP and the reentry of IAEA inspectors, passing the buck to Washington. The scrapping of the February 29 agreement would end up with failing to prevent Pyongyang from conducting its missile launch and letting it continue uranium enrichment. In return, North Korea will not get food assistance, but it can claim its might and prestige have been upheld, gaining an excuse to keep up its nuclear and missile development programs.

Accordingly, the North Korean leadership may believe that the long-range missile launch would lead to more gains than losses for them. In actuality, however, the North will lose not only 240,000 tons of U.S. food aid but also opportunities for economic cooperation with other countries, further increasing its economic dependence on China. With the latest “satellite” issue, Pyongyang has placed a tremendous political and diplomatic burden on Beijing. What’s more, China has been reminded once again that the North’s nuclear weapons and missiles can threaten it. Although China is supporting and defending North Korea for now, it is quite possible that Beijing would eventually change its position at a certain stage.

The North’s latest move has also intensified international attention and concerns about North Korea’s weapons of mass destruction. The Nuclear Security Summit in Seoul, which North Korea criticized, originally had no plans to discuss the North’s nuclear weapons and missiles. But Pyongyang’s announcement put the issue at the top of the summit agenda. By dashing the expectations of the international community and choosing to isolate itself further, North Korea is only increasing the insecurity of Kim Jong-un’s fledgling regime.

[Chosun Ilbo, April 6, 2012]

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When We Have an Ethnic Sri Lankan Represent Korea

Kang In-sun International News Editor The Chosun Ilbo

U.S. President Barack Obama last week nominated Jim Yong Kim, president of Dartmouth College, to be the next president of the World Bank. The World Bank is an international organization that spends tens of billions of dollars annually to assist developing countries. Announcing Kim’s nomination, Obama said, “His experience makes him ideally suited to forge partnerships all around the world.” Kim was born in Korea and grew up in the United States, and has worked in various parts of the world, including Asia and Africa. “His personal story exemplifies the great diversity of our country,” Obama said.

Initial candidates for the World Bank presidency had included internationally renowned elites from the United States, such as Secretary of State Hillary Clinton, Columbia University Professor Jeffrey Sachs, Senator John Kerry, and former Harvard University President Lawrence Summers. Kim was

nominated due reportedly to the U.S. government's consideration for international politics. Obama acted cleverly by nominating a “Korean American” amid broad demand from developing nations for someone outside the United States. Traditionally, the World Bank presidency has been filled by an American while the International Monetary Fund is led by a European. As expected, China welcomed Kim’s nomination and other newly emerging economies did not raise objections.

In fact, when Kim’s nomination was first reported, many people wondered about his background. But they nodded their heads after hearing Obama’s remarks. Kim, a naturalized U.S. citizen, started as a medical doctor, but has had a diversified career based on his experience in various regions and sectors.

Diversity, which few Americans have, has now become his competitive edge with which he can persuade the international community.

The United States used to be called a “melting pot” because it brought diversity together. But the country is now called a “salad bowl,” which means it is a mixture of many different cultures maintaining the characteristics of individuals and minorities. The United States has a competent candidate like Kim because the “salad bowl” is functioning properly. The country has a long history of bitter discrimination against minorities, ethnic and social, but the experience has created a lot of room to admit differences and to give individuals chances to develop themselves.

Korea is also a multicultural society nowadays. It has about 100,000 naturalized citizens, with some 10,000 foreigners becoming Korean citizens every year. Marriage immigrants living in Korea amount to some 210,000, with about 150,000 children born to them. In addition, some 30,000 couples tie the knot in international marriages annually. The nation has nearly 1 million long-term foreign residents.

The scope of Korean nationality continues to be expanded. In spite of their appearance, some Koreans have significantly different ways of thinking because they have stayed overseas for a long time studying. Conversely, despite their appearance, many people born in multicultural families have truly Korean ways of thinking and living. We also have citizens who have defected from North Korea.

Korea is changing little by little, embracing multicultural trends. Even “mixedblood” people with “distinguishable” appearances can serve in the Army and become police officers. Military authorities decided to use the term “people” instead of “nation” in the oath of enlistment.

Nonetheless, we should take a step further: create the space where all Koreans of diverse descents can preserve their individual characteristics and cultural identity. They will transfuse diverse blood into Korea and take it to a higher level. More talented Koreans can be born and grow up in such a diverse environment. The day will soon come when the Korean president talks about “the great diversity of our country,” as Korea takes the lead in launching a new international organization and nominates a Danish Korean or a Sri Lankan Korean to be its chief.

[Chosun Ilbo, March 28, 2012]

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Projection of the Seoul Nuclear Security Summit

Ahn Yin-hay Professor Graduate School of International Studies Korea University

“Katchi kapshida!” (“We go together”) U.S. President Barack Obama declared in concluding his speech at the Hankuk University of Foreign Studies in Seoul on March 26. Delivered on the sidelines of his participation in the 2012 Nuclear Security Summit, Obama’s address, together with his trip to the Demilitarized Zone partitioning the Korean peninsula a day earlier, was to reaffirm the solid alliance between South Korea and the United States and his commitment to sustaining world peace. Attending the speech as a guest at the university’s jam-packed auditorium, I was deeply impressed by his emphasis on the vital need for global partnership, sharing insightful wisdom and stepped-up efforts, in seeking a world free of nuclear threats.

Like the first Nuclear Security Summit held in Washington two years ago, the

guiding theme of the Seoul conference was the prevention of nuclear terrorism. Another main issue was nuclear safety, prompted by Japan’s atomic reactor accident caused by a devastating earthquake and tsunami in March last year. The dual goals of quashing the threat of nuclear terrorism and strengthening safety in peaceful uses of nuclear energy are indeed essential in the establishment of international nuclear security. But then, they only constitute part of far-reaching efforts in pursuit of a “world free of nuclear weapons,” a grand vision of the 21st century, which is being challenged by such drawbacks as dubious nuclear developments by North Korea and Iran.

On February 28-29, the Korean Association of International Studies hosted an international conference in Seoul under the theme of “Establishment of a Global Nuclear Security Regime and Prospects for Nuclear Security Issues in East Asia.” Invited to the conference as keynote speakers were Park Geun-hye, the head of the governing Saenuri Party, and Han Myeong-sook, the leader of the opposition Democratic United Party. They presented conservative and progressive views of nuclear security, respectively, revealing a wide gap in their perceptions.

Ms. Park expounded that North Korea’s possession of nuclear arms poses an issue that should never be overlooked, and on that principle, concerned parties need to make concerted efforts toward building up mutual confidence. On the other hand, the opposition leader asserted that an aggravation of the North Korean nuclear issue has stemmed from the Lee Myung-bak administration’s hard-line policy toward the North. While inter-Korean relations have been strained, intermittent efforts have been made to resume the long-stalled sixparty talks on North Korea’s nuclear question. But Pyongyang is hardly expected to renounce its nuclear ambition. To be sure, the North has publicly stated that it would never give up its satellite launch, calling it a requisite for economic development.

With the participation of top leaders from 53 countries and four international organizations, the Seoul Nuclear Security Summit served itself as the largest summit assembly for multilateral cooperation next to the United Nations General Assembly. While hosting the two-day conference, South Korea conducted 23 bilateral summit talks, nine meetings of prime ministers and 12 sessions of foreign ministers, demonstrating its extensive diplomatic outreach.

In addition to its role in global economic issues exemplified in 2010 when it hosted a G20 summit in Seoul, South Korea has now taken initiatives in the sphere of diplomacy and international security as well.

Summing up their debate, participants in the second Nuclear Security Summit unanimously adopted the Seoul CommuniquĂŠ which, among other points, called on nations to accelerate their domestic approval of the Convention on the Physical Protection of Nuclear Material (CPPNM), as amended in 2005 to strengthen protective measures at nuclear facilities, so as to put it into force by 2014. The summit acknowledged the progress made in plutonium disposal plans, pledged in 2010 and thence implemented by the United States and Russia, and some other tangible results of the Washington summit.

Notwithstanding, the communiquĂŠ is non-binding and lacks specific steps for reducing plutonium and highly enriched uranium that can be used to produce nuclear weapons.

With regard to North Korea’s controversial plan to launch a long-range rocket, the United States and China were in unison in expressing their concerns.

However, they differed in their approach to attaining nuclear security. While President Obama called on other nations taking part in the conference to further reduce their stockpiles of nuclear material, President Hu Jintao stressed that, even though he fully agreed to the importance of nuclear security, the rights of developing countries to utilize nuclear energy for peaceful purposes

should not be restricted and that reduction of nuclear material has to be enforced through voluntary actions.

The Seoul summit was instrumental in universally underscoring the importance of nuclear security and safety and setting the direction of resolving nuclear questions through global governance of multilateral cooperation.

Because the biennial summit is a forum of top political leaders of world nations, sustained efforts have to be made to explore ways to keep on mobilizing political momentums in dealing with nuclear problems. The third summit due to be held in the Netherlands in 2014 is expected to take concrete next steps in realizing a “world free of nuclear threats.�

[Dong-a Ilbo, March 29, 2012]

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Lessons from the Cheonan’s Demise

Park Sung-choon Minister of Patriots and Veterans Affairs

Every day, a mother appears at the Daejeon National Cemetery to visit the graves of the sailors of the Cheonan, a Navy corvette sunk by a North Korean torpedo on March 26, 2010. She wipes the tombstones of all 46 fallen sailors.

One of them is her son, Chief Petty Officer Lim Jae-yeop.

For the 30 days, from the moment the naval ship went down until its shredded stern was salvaged, the families of the sailors spent nights in tears, hoping that their sons or husbands would come back alive. The entire nation was of one mind wishing for the safe return of all sailors. But none of the 46 missing men survived. There was another tragic death: Warrant Officer Han Joo-ho died after diving ceaselessly into the cold water to search for the missing crew. This brave Navy officer, who showed an example of the noble spirit of sacrifice, was also laid to rest in the same cemetery.

Two years on, the name “Cheonan” seems to be a dim memory among many people and their worries about another provocation from the North seem to be dissipating little by little. But the security conditions facing the Republic of Korea don’t seem any better than when the Cheonan was torpedoed. Far from apologizing for its sinking of the ship, the North shelled Yeonpyeong Island in November the same year even before the pain of the bereaved families of the fallen sailors and the people was healed.

Moreover, in a joint New Year’s editorial this year, the North Korean regime made clear once again that it will usher in a “strong and prosperous socialist state.” Many pundits are warning of the high possibility of the regime staging another military provocation against the South this year. The Republic of Korea is now at a more crucial juncture than ever as far as its security is concerned. Now is the time to break the vicious cycle of the North attacking the South and of the South falling victim.

In order to defend the future of our young generation and the Republic of Korea, the nation acutely needs a strong sense of security as well as a full military preparedness. We need, first of all, to become internally united and stronger to maintain peace. What the Republic of Korea requires at this moment is a correct understanding of its security reality and clear judgment of necessary steps to improve national security, rather than vaguely emphasizing the importance of security.

The key to the Republic of Korea’s security is its alliance with the United States. What is particularly important is that our young generation should have a correct understanding of the Korea-U.S. alliance, which has served as a foundation for the security and economic growth of the Republic of Korea, and of the North Korean regime’s strategy to seek disintegration of the

alliance. And the Republic of Korea should never be swayed by any threat from the North in the future. This is how we can make sure that the lessons left for us by all fallen patriots and heroes, including the sailors of the Cheonan, will not end up in futility.

The bereaved families of the fallen sailors are saying, “You may forget our sons, but never forget the lesson the Cheonan gave us.� A memorial service will be held in honor of the fallen sailors at the Daejeon National Cemetery at 10 a.m. today. We are trying to ensure that the memorial service and atmosphere will not be affected by the Nuclear Security Summit to open in Seoul today.

The nation certainly has many important economic and political affairs to look after. But what can be more sublime than remembering those who died while fulfilling their duties to defend the country? I sincerely hope that the nation will never forget the names of the 46 young men who perished along with the Cheonan as well as Warrant Officer Han Joo-ho.

[Dong-a Ilbo, March 26, 2012]

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Civic Movement Put to Test

Cho Hyo-je Professor of Social Science Sungkonghoe University

Each party has nearly finished nominating its candidates for the National Assembly in preparation for the April 11 general elections. One of the important points to take note in the run-up to the elections is civil society groups’ participation in politics. Individual dissidents and civic activists have participated in politics in the past. In fact, the current leader of the main opposition party used to be a civic activist herself. But civil society organizations turning themselves into political groups, some playing a crucial role in uniting progressive parties, are a totally new phenomenon.

The leader of a civic group won the Seoul mayoral election last year, butit remains to be seen how the civil society’s mass participation in politics will affect the parliamentary elections. To be sure, though not known widely, there is lively debate going on inside the civic groups themselves about the possible

extent of their influence. There are, of course, pros and cons, and realists and idealists, regarding the political participation of civil society.

Many people believe the state, the market, and the civic society are clearly divided. But this generalization is nothing but a schematic categorization. In fact, they overlap, conflict, or cooperate with each other. Many civil society groups have been deeply involved in issues of real politics, demonstrating significant influence. They have played a role in making up for democratic deficiencies that have been incurred because party politics and journalism failed to play their proper roles. And it cannot be ignored that some elite members of the judicial circles, academia, the press, and the civic society have traditionally been absorbed into the political arena. Metaphorically speaking, as there are non-banking financial institutions besides banks in financial circles, there are non-party organizations besides political parties in the political arena.

This is a characteristic of Korean politics and civil society, a phenomenon hard to imagine in neighboring Japan, not to mention in most Western countries.

Foreign researchers find it unfamiliar. The phenomenon is hard to explain with normative theories imported from overseas. Critics of civic engagement in politics include both progressives and conservatives. We need to look squarely at the fact that most critics base their views on the principle that civil society movements should be separated from politics. But the historical roots of Korean civic movements cannot be denied simply because they do not conform to widespread principles. Rather, it is desirable to admit the civil society’s participation in politics as an objective reality and seek ways to maintain the respective characteristics of political and civic societies.

To this end, we should make it a rule to evaluate politics and civic movements under different standards of legitimacy. As is well known, politics functions on

the principle of official and legal representation. Politicians who are elected through democratic procedures engage in activities and make decisions as representatives with authority delegated by the people. Once elected, they should coordinate matters of public interest and achieve social integration as representatives of the entire electorate as well as their supporters.

But civic movements are different. They lack official representation endowed through elections. Therefore, civic movements may be evaluated based on their intrinsic value, transparency of activities and responsibility to supporters.

From this point of view, civic participation in politics itself poses no problem.

Problems occur only when different standards of legitimacy between the political and civic societies are confused. It is natural that unlike politicians, civic activists should focus on their personal values. In this regard, they should speak and act with more solid ethical convictions than now.

But once they decide to enter politics, civic activists need to accept quite different principles and ethical responsibilities of the public sector. While keeping the values of civic movement, they must be prepared to seek compromises sometimes and play Machiavellian roles at other times.

Basically, they should be ready to accept political evaluation while they engage in politics. It is neither good nor bad for civic activists to engage in politics. They just should bear in mind that different standards of legitimacy are applied to different spheres of activity. Then, politics can be rejuvenated and civic movements can find their proper place.

[Hankook Ilbo, March 14, 2012]

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- Preconditions for Korea-China FTA - Structural Change in Income Distribution - The Right Course of Chaebol Reform - Water Stress in Korea - The Economic Korean Wave in Japan

Preconditions for Korea-China FTA

Kim Hyun-chong Former Trade Minister

Korea finally appears to be ready to start negotiations for a free trade agreement (FTA) with China. If signed, the trade pact would have considerable effects on the bilateral political, military, diplomatic, social and cultural relations between the neighboring nations under the broad concept of economic security surrounding the Korean peninsula. Therefore, Korea will need to carefully calculate the potential profits and losses in terms of geopolitical security as well as actual economic impact before it begins to negotiate.

Beijing tends to prioritize political factors in its FTA strategy. Thus, Chinese officials are more enthusiastic than ever about signing an FTA with Seoul due to the Korea-U.S. FTA. One of Beijing’s multidimensional strategies is to draw Korea into the greater Chinese economic bloc by means of free trade and

in the long run prepare for the day when it shares a border with a unified Korea. Consequently, more than reducing or eliminating tariffs on commodities and agricultural and marine products will be at stake.

There are eight key issues that must be addressed in the negotiations.

Protection of investors is the foremost problem. A group of Korean investors were not properly compensated years ago, when they were forced to withdraw from hotel business near Mount Paektu under order from Chinese authorities.

Therefore, provisions on investor-state dispute settlement should be included in the Korea-China FTA. Second, Korea has to demand additional opening of China’s services market, especially the financial service sector. The FTAs that China has concluded so far only involve tariff elimination and reduction on industrial, agricultural and fisheries products. China has refused to open its domestic services sector beyond the concessions it offered upon joining the World Trade Organization.

Third, environmental and safety standards should be absolutely strengthened.

If nuclear reactors located along China’s western coastal regions are stricken by an earthquake or man-made disasters, the Korean peninsula will certainly suffer severe effects.

Fourth, we, as a nation pursuing reunification, should try to forge agreement with China to build an industrial complex in Dandong near the western North Korean border and allow tens of thousands of North Korean workers to commute to the plants. By doing so, the North Korean people will be exposed to capitalism and the North’s regime will be able to implement arms reduction.

Such developments would elevate the livelihood of North Koreans who face chronic food shortages and thereby provide the momentum for practical changes in the isolated communist state.

Fifth, we must demand that products manufactured by South Korean investors in North Korea’s special districts, such as Hwanggumpyong, an islet in the mouth of the Amnok (Yalu) River, the Rajin-Sonbong special economic zones, be classified as “Made in South Korea.” At present, products from the Kaesong (Gaeseong) Industrial Complex north of the DMZ are recognized as South Korean-made in some of Seoul’s FTAs. Such an agreement will entice investment in North Korea from foreign companies eyeing the vast Chinese market and help create jobs for North Koreans. In addition, stronger protection of intellectual property rights, cooperation in food safety control and standardization of food safety procedures should be included in the KoreaChina FTA. Negotiations with China won’t be easy. Leverage is important in all negotiations. Depending on the progress in free trade negotiations with China, the time may come for Korea to raise the issue of striking a similar pact with Taiwan. If necessary, Seoul may have to persuade Beijing to upgrade their two-way FTA to a multilateral regional trade agreement, or RTA, that would include Hong Kong, Macau, Taiwan, Mongolia and the 10 ASEAN countries.

Authorities in Beijing should be persuaded that an RTA representing continental powers is needed to counter the 10-member Trans-Pacific Partnership, or TPP, which is led by the United States, Japan and other maritime powers but excludes China.

We need to make a cool-headed assessment of what would benefit us the most – membership in the continental powers’ RTA, or success or failure of the maritime powers’ TPP. Simultaneously, we should push for an inter-Korean FTA based on comprehensive economic cooperation with North Korea, which depends on China for 83 percent of its international trade. But the two Koreas would first need to settle matters stemming from the North’s 2010 attacks on

Yeonpyeong Island and the warship Cheonan.

We must be careful to maintain a balance between a rising China and a waning United States. While striving to be impartial between the two powers, we must establish our domestic, unification and diplomatic policies on the basis of realism, rather than ideology. A superpower generally tends to demand more from a weaker party than it gives. Time on the Korean peninsula is ticking in favor of China, not the two Koreas. We must go to the FTA negotiating table with China while bearing in mind this stark reality.

[JoongAng Ilbo, March 7, 2012]

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Structural Change in Income Distribution

Kim Yong-ha Professor of Economics Soonchunhyang University

The nation’s income distribution in 2011 deteriorated sequentially but was better than 2009, according to Statistics Korea. Korea’s Gini coefficient, an index that gauges income equality, was 0.311 in 2011, a tick worse than the 0.310 in 2010 but better than 0.314 in 2009. (Zero on the index means perfect equality and 1 is maximum inequality.)

Quintiles, the ratio of the richest and poorest 20 percent of income earners, have been on the rise since 2007, indicating that the gap in income distribution has widened in the wake of the global financial crisis.

The problem lies in our economic and social structure. In our export-oriented economy, added value is mostly created by export companies with international competitive advantage. Across-the-board economic growth is

possible only if wealth from exports trickles down to enterprises that serve domestic demand. But the link between the exporters and domestic suppliers is very weak, exacerbating the industrial polarization.

Industrial polarization eventually leads to employment bipolarization, which will increase regional divide. Under the current economic structure, income distribution will certainly continue to worsen. Government taxation and social safety nets can help shore up income distribution, but in Korea, disposal income inequality is lower than market income inequality and the gap is widening.

Taxes and social insurance charges against gross domestic product (GDP) exceed 25 percent and the ratio of public social expenditures to GDP has spiked to around 10 percent.

Despite the government’s persistent efforts, it remains difficult to close the income gaps. One of the reasons is the nation’s aging population. As people get older, their income declines sharply. The income inequality is magnified if they did not save enough during their prime working years. Thus, the income gap between the elderly and younger workers and among the elderly themselves becomes more pronounced as the nation grows older.

The ongoing deterioration in our nation’s distribution structure is due mostly to population aging. A case in point is Japan’s Gini coefficient of market income, which is in excess of 0.50, far higher than Korea’s 0.34. The reason for the gap is not because industrial and employment bipolarization is more severe in Japan than in Korea, but because Japan has become the world’s most aged country with the percentage of its elderly population, aged 65 or older, exceeding 20 percent. In comparison, the percentage of elderly people in Korea has just topped 10 percent.

The problem is Korea is similar to Japan in that both nations have low birth rates and a rapidly aging society. It is no exaggeration to say that Korean society in 20 years will closely resemble today’s Japan. Accordingly, our most urgent priority in preventing a further worsening of distribution structure is to arrest population aging. Of course, even if our nation’s birth rate was to reverse now, the effects will not be tangible for 25 years. Nevertheless, the government has to devise a long-term strategy to fundamentally solve the low fertility problem. In this sense, state expenditures designed to tackle the low birth rate can be seen as an investment in the future.

At the same time, macroeconomic policy efforts should be made to ensure that export-produced added value trickles down to the domestic sector. A weak won helps the nation’s export growth but raises import costs and subsequently weighs on domestic consumption. Japan has striven to boost domestic spending even at the expense of export competitiveness by holding fast to a strong yen over the past several years. The sustained weakness in the value of the won will hinder efforts to tame consumer prices, particularly amid the recent surge in international oil prices. It is necessary to carefully readjust our macroeconomic policy stance.

[Financial News, March 6, 2012]

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The Right Course of Chaebol Reform

Lee Sang-bin Professor of Business Administration Hanyang University

Election season debate over the reform of chaebol, or family-run large conglomerates, has erupted again. Ahead of the April 11 general elections, both the ruling and opposition parties have issued a flurry of pledges to reform the chaebol. President Lee Myung-bak’s recent warning about bakery businesses run by daughters and granddaughters of chaebol families was in line with the campaign rhetoric. Revival of the equity investment ceiling system, regulation of exclusive intra-group transactions and a ban on circular equity investment also are under discussion.

However, these measures hardly inspire much hope. The cap on chaebol’s cross-affiliate investments has already proven inefficient. Even if the controversial equity ceiling system is complemented and revived, its effectiveness will remain questionable. The government has already created

new taxes to deter chaebol from funneling subcontracting work and business to their subsidiaries. Ending inter-chaebol transactions chaebol financial services companies can also be problematic. If chaebol are forced to sell off stocks due to a ban on circular equity investments, only private equity funds like Lone Star Funds of the United States will reap financial gains. In this context, reform ideas from rival political parties are expected to fizzle out after this year’s elections.

In spite of persistent criticism from the general public, the chaebol companies have made indisputable contributions to national economic development and the livelihoods of people through job creation. However, people are seldom cheered by record profits of export-orientated conglomerates. They complain that the chaebol wield disproportionate influence over the economy; they believe the record profits merely benefit the chaebol themselves rather than the overall national economy.

According to the trickle-down theory, the prosperity of chaebol is supposed to eventually benefit all people. The trickle-down effect can be expected when water overflowing from the so-called “self-emptying cup,” which figuratively refers to chaebol, gets the floor wet. Similarly, in the traditional ondol (warm stone) floor heating system, heat is supposed to spread from a warm area to a cool area. But the system will fail if the heat does not spread.

Chaebol enterprises can achieve trickle-down effects through salaries, payments to subcontractors, and investments. But these days they increasingly depend on contract workers, who are paid lower salaries, rather than hire on a full-time basis. The manufacturing sector’s employment inducement coefficient also remains low, meaning that chaebol’s additional job creation effects are insignificant. In addition, large conglomerates are absorbed in fattening their profit margins by gouging subcontractors and suppliers and

stealing their technologies and business achievements.

Chaebol also seek easy business opportunities in neighborhoods, instead of carrying out risk-taking investments. On top of that, the government has kept the value of the won artificially low under its exports-at-all-cost policy, creating inflationary pressure in the national economy. The government is now pushing to lower the corporate tax rate under its business-friendly slogan.

Against such a backdrop, chaebol’s huge dividends seem to trickle down to foreign investors who own approximately half of many chaebol companies’ shares.

The Japanese author of the book titled “Rich Samsung Poor Korea” asks which is more beneficial to people, a nation where a few enterprises enjoy record-breaking profits in an oligopolistic market, or one where all companies can compete fiercely even though their combined profits barely reach that of a single oligopolistic conglomerate in the neighboring country. The answer is the former nation, if record-breaking corporate profits trickle down to ordinary people. Otherwise, the answer is the latter. Consumers benefit from competition between enterprises, which is not the case of the former nation.

The chaebol reform should now focus on maximizing the trickle-down effects.

We should consider abolishing the conversion of non-regular workers to regular workers, though the controversial policy was introduced to help enhance labor market flexibility. The proposed hike in the top corporate tax rate and unfair subcontracting transactions should also be scrapped. All these measures should be denounced as anti-market. In an oligopolistic market, however, we cannot single-heartedly stick to market-friendly policies. It is not appropriate to insist that protection of shareholders is market-friendly and protection of stakeholders is anti-market.

Former General Motors President Charles Erwin Wilson, who served as the secretary of defense under President Dwight Eisenhower from 1953 to 1957, left a famous saying at the Senate confirmation hearing of his appointment: “What is good for the United States is good for General Motors and what is good for General Motors is good for the country.” But even the mighty General Motors couldn’t help treading the path to decline after falling out of favor with the American people.

The Dalai Lama once said, “Whether we like it or not, we’re all connected, and it is unthinkable to be happy all by oneself.” Chaebol, which appear to be intoxicated by their accomplishments regardless of public sentiment, are advised to keep this wise saying in mind.

[Maeil Business Newspaper, February 29, 2012]

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Water Stress in Korea

Park Seok-soon President National Institute of Environmental Research Today we celebrate the 20th annual World Water Day. This day was formally proposed at the United Nations Conference on Environment and Development in Rio de Janeiro, Brazil, in June 1992 to increase awareness about the importance of water in the environment, agriculture, health and trade. The next year, the U.N. General Assembly proclaimed March 22 as World Day for Water.

As the United Nations raised the issue of water scarcity, the U.S.-based Population Action International (PAI) named 18 water-scarce countries and nine water-stressed countries, with the rest of the countries defined as waterrich, in 1993. Korea was included among the water-stressed countries, a designation that disputed. The debate further intensified when the government

embarked on a project to refurbish and clean up the nation’s four major rivers – Han, Nakdong, Yeongsan and Geum.

Some environmental activists and groups supported by professors and other intellectuals argue that Korea’s designation as a water-stressed country is deception used by the government to push for the four river refurbishment and dam constructions. They contend that PAI is a private research institute with no relation to the United Nations, claiming that Koreans are not experiencing any water-related inconvenience. The government and water experts retaliate that the PAI list was compiled in consideration of each country’s water circumstances and relevant data and standards, and has been used by the United Nations as well. People seem too confused to trust either side.

Recently, an international organization has released more reliable data that can end the debate. In its report titled “Environmental Outlook to 2050,” released on March 7, the Organization for Economic Cooperation and Development (OECD) said that Korea was experiencing severe water stress. The OECD also introduced Korea’s four river restoration project as an exemplary case for water resource management and green growth. The OECD report contended that the four river project is expected to create US$32.8 billion (37 trillion won) in economic benefits and 340,000 new jobs. It also forecast that Korea will emerge as a global leader in water resource management based on its experience in the four river project and related technology development.

Nevertheless, opponents of the four river project appear determined to ignore the OECD report, reiterating that the Korean people are not experiencing water stress. Their argument may sound plausible but it ignores the issue of our nation’s food and virtual water imports. About 40 percent of Korea’s food demand is met through imports and the shipments contain a huge amount of virtual water. Virtual water refers to the water used to produce food and

industrial products. For instance, it takes 1,900 to 5,000 liters of water on average to produce one kilogram of rice, 1,100 to 2,000 liters of water to produce one kilogram of beans, and 15,000 to 70,000 liters of water to produce one kilogram of beef.

As of 2007, Korea’s food imports contained 45 billion cubic meters of virtual water, including 31.6 billion cubic meters in grains and 8.9 billion cubic meters in livestock products. That is more than three times the nation’s water storage capacity of 13 billion cubic meters, which is held in dams and agricultural reservoirs. Of course, our exports of consumer and industrial products also contain virtual water.

Considering all factors, the nation ranks as the world’s fifth largest virtual water importer, with its total imports exceeding 32 billion cubic meters. But virtual water imports are expected to become difficult in the near future. That’s because world food production declines every year due to climate change with the demand of grain for bio-energy production rising sharply. Every onedegree Celsius rise in average global temperature can reduce the world’s grain yields by 10 percent. By around 2025, world grain production will be 30 percent less than the current level, according to food experts. On the contrary, due to the rapid population growth, the global demand for food is expected to increase 50 percent by 2030 and double by 2050.

Historically, Korea has been affected by droughts and floods. By origin, the nation is a water-stressed country. But we now need huge amounts of water, due to irrigation farming, advanced industrialization and high population density, among other factors. Korea has so far managed to overcome its severe water shortages. Let’s terminate the debate on water scarcity now, as its conclusion is crystal clear. Let’s pool our wisdom and prepare for climate change and energy crisis.

[Korea Economic Daily, March 22, 2012]

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The Economic Korean Wave in Japan

Bae Geuk-in Tokyo Correspondent The Dong-a Ilbo

These days, Koreans living in Japan say they find it increasingly convenient to communicate with Japanese people, thanks to the spread of hallyu, or the Korean Wave.

A Korean housewife, who moved to Japan last year, is one of the beneficiaries, as she now feels completely relaxed among Japanese friends. At first, she was embarrassed about not being to speak Japanese. After several months, however, her tension was gone and her lack of Japanese language skills posed few problems. When she met with mothers of her daughter’s kindergarten classmates, one talked to her in English and another in Korean. As time passed, she became friends with all of the mothers and she is now busy responding to invitations to visit their houses.

She has no problem communicating in a mix of English and Korean, though her English is not fluent. Indeed, the Korean Wave has sparked a fad for the Korean language in Japan. Japanese housewives are particularly enthusiastic about learning Korean, carrying around notebooks and pens. Amid the Korean fever, Korean residents “complain happily” that their knowledge of Japanese is of little use these days. Many of them say they even feel flattered.

Ethnic Korean residents used Japanese-style names in the past but many of them now proudly display their Korean names. Unlike in the past, a growing number of Koreans are found proudly speaking Korean in subways and other public places. The surging national pride among Koreans cannot be explained simply by the cultural aspect of hallyu, which encompasses television dramas and pop songs. It is the so-called “hallyu economy” that has decisively changed the mainstream Japanese society’s perception of Korea. Hallyu economy and hallyu culture constitute the two pillars of the Korean Wave that help boost the Korean people’s self-esteem abroad.

In one vivid example, Japanese newspapers, magazines and televisions are competitively running special features on Korean economy. In a recent Saturday morning program, one Japanese TV network commented: “In the entertainment field, (Japan) has been overpowered by hallyu. In the television market, chief executive officers of Sony and Panasonic have been replaced after the Japanese electronics giants fell behind Samsung and LG in the global markets. In February, Elpida Memory, the last Japanese maker of computer memory chips, filed for the nation’s biggest bankruptcy in two years. This is only part of the whole story. Korea’s free trade deals with the European Union and the United States have taken effect and tariffs on most industrial products and cars will be eliminated in Korea’s trade with these vast markets within five years. At the current pace, (Japan) will be overtaken by (Korea) in all areas.”

One senior Japanese journalist recently said: “Since the Meiji Era, Korea has never been such a threatening competitor to Japan. A much fiercer competition is expected for this year.” Japan has always kept a watchful eye on Korea but has been reluctant to recognize its neighbor as a rival. But fundamental changes in the Japanese mainstream perception of Korea appear to be under way.

Not surprisingly, a number of the Korean economy-related books have been published. Their titles include “Why do Korean companies win in the global markets?” and “Let’s learn about the strong Korean economy.” Various academic forums on Korea’s economy also have been held in Japan. Keio University economist Heizo Takenaka, who served as minister of internal affairs and communication and minister of state for privatization of postal services in the cabinet of Prime Minister Junichiro Koizumi, has repeatedly said in recent years that “the time has come to study the hallyu system.” He apparently meant that Japan has to learn the secrets of Korea’s success.

The most sought-after lesson Japan obviously wants to learn from Korea is its entry strategy for global markets. From the beginning, Korea looked to foreign markets to overcome the small size of its domestic market. Japan, which has a land mass nearly four times larger than Korea and its population about 2.5 times, focused more on its domestic market. As soon as the Korea-U.S. free trade agreement went into force on March 15, Japan’s Yomiuri Shimbun lamented that “Japanese enterprises would now have to fight their Korean rivals with a handicap.” The Asahi Shimbun is reporting extensively on Japanese industrial plants that have lost to Korean rivals and shut down as well as lost jobs and bankrupt regional economies.

Japan’s manufacturing technology, once the country’s pride, is now dismissed as “domestically oriented.” Ironically, some of Korea’s success formulas that

Japan is now trying to learn are likely to be scrapped by Korean politicians, who are rushing to embrace populist welfare policies ahead of April’s general elections. Is this also a part of the hallyu system? The impudent attitudes of our politicians cannot be overlooked as insignificant, particularly in light of our turbulent history.

[March 26, 2012]

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- Reasons to Record and Remember North Korea’s Tragic Human Rights Situation - How to Make the ‘Korean Legend’ Continue - Heroes Who Built the Ieodo Ocean Research Station - Truth about Gureombi Rock

Reasons to Record and Remember North Korea’s Tragic Human Rights Situation

Kim Tae-hoon Lawyer & Chairman Special Committee on North Korean Human Rights National Human Rights Commission of Korea

The North Korean Human Rights Documentation Center and Archives operated by the National Human Rights Commission of Korea marked its first anniversary on March 15. Before the center’s opening, there had been scattered testimonies and record keeping on North Korean human rights violations. The center became the first state-run institution to compile individual cases amounting to criminal offenses and to document them for comprehensive and systematic management and preservation.

More than 23,000 North Koreans have defected to South Korea so far. These defections, braving China’s adamant policy of forcible repatriation, clearly indicate that there are human rights problems that are more serious than food

shortages in the North Korean system. Under these circumstances, the National Human Rights Commission set up the North Korean Human Rights Documentation Center and Archives to provide the legal foundation to seek punishment of violators of universal international human rights norms, thereby establishing the basic order of free democracy after reunification.

Furthermore, the archival data will be utilized as reference sources for recruiting North Korean personnel after unification, as well as evidential matter for reinstatement, retrial or damage compensation for victims and basic material for human rights education.

As early as November 1961, West Germany established the Central Registry of State Judicial Administrations in Salzgitter to verify human rights violations committed by the government of East Germany before reunification, which turned out to be quite successful. In Korea, the National Human Rights Commission, an independent and quasi-international organization, has assumed the comparable role to provide international agencies such as the United Nations with reliable data, taking significant and efficient steps toward improving the human rights situation in North Korea.

As of February 28, a total of 81 cases of human rights violations in North Korea, involving 834 individuals, have been reported to the center. All of these cases are serious enough to deeply shock human consciousness and would prompt a nationwide demand for new leadership if they happened in South Korea. Especially, human rights abuses in North Korean prisons, called kyohwaso, meaning “re-education center,� which have drawn less attention than concentration camps for political prisoners, have been found to be extremely serious.

According to the testimony of a North Korean defector, who was confined at

Re-education Center No. 12, also known as Chongori Re-education Center, from the second half of 2007 to early 2010, some 3,000 inmates at the center had been forcibly deported back from China and more than 70 people died from malnutrition every month. Another defector, who was detained at Reeducation Center No. 11, or Chungsan Kyohwaso, around June in 2005, said that he had carried the body of a dead prisoner on an oxcart and buried it on a bare mountain called “Flower Garden.” The corpse was numbered 3721, so the defector believed he was the 3,721st inmate to die at the prison that year.

The National Human Rights Commission finds out about brutal infringements of the basic human rights of North Korean residents and keep records on cases violating the four major international human rights treaties, to which North Korea is a signatory, particularly the “Rome Statute of the International Criminal Court,” which defines crimes against humanity according to international standards.

North Korea’s ruling class looks to be firmly united from the outside, but in fact they must feel very uneasy about the fate of the Kim Jong-un regime. As they fret about regime collapse, the message that the world is watching their evil deeds and documenting them would have tremendous repercussions. The impact would be even stronger than what East Germany felt about the activity of the West German registry on its human rights violations.

If the North Korean Human Rights Documentation Center and Archives produces “letters of indictment” against North Korea’s new leader, who ordered the execution of any defector during the mourning period for Kim Jong-il, and officers in charge of carrying out his orders to systematically abuse the fundamental rights of their population, the center will effectively compile historical records on brutal crimes committed by the communist regime. Thus its very existence will help reduce human rights violations in the North and send hope and comfort to victims.

[Munhwa Ilbo, March 22, 2012]

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How to Make the ‘Korean Legend’ Continue

Lee Shin-hwa Professor of Political Science and International Relations Korea University

While studying in the United States many years ago, I had a chance to work at the World Bank for a while. I was a political science major, but the opportunity to work for the global financial institution mostly staffed by economics majors arose because a security-related project was under way. I also believe that I owed the opportunity to my predecessor, a female researcher of Korean descent, who had earned a good reputation for her job performance.

Now that Jim Yong Kim, the Korean-born president of Dartmouth College in the United States, has been nominated as the next president of the World Bank, two of the world’s “Big Three” international organizations (United Nations, World Bank and IMF) could be led by ethnic Koreans. Some people say that the nomination came from President Barrack Obama’s political consideration to placate the resistance of newly developing countries to another U.S.

nominee leading the World Bank. However, political consideration cannot be a major reason for nominating the head of an organization that exerts great influence on the global village’s politics and economy.

Some years ago, the late Dr. Lee Jong-wook, director-general of the World Health Organization, actively worked as the first Korean chief of a U.N.affiliated agency, earning praise as the world body’s “Little Giant.” U.N. Secretary-General Ban Ki-moon has also displayed enough leadership to be reelected to a second term. Apart from Kim’s outstanding personal qualifications and ability, one may say that the impressive activities by these Koreans in the international community influenced President Obama’s decision.

Along with these individuals’ capabilities, the Korean government has also exerted remarkable efforts since South Korea joined the United Nations in 1991. The number of Koreans serving at international organizations has continued to increase. As of June 2011, a total of 398 Koreans are working for international organizations, nearly triple the 139 in 1999. During the same period, the number of Koreans serving in high-ranking positions at international bodies has also risen from 10 to 37.

However, Koreans still claim an insignificant portion of staffers at international organizations. Currently, Korea accounts for 2.26 percent of the U.N.’s regular budget, ranking 11th in terms of the amount of contribution among the world body’s 193 member nations, but Koreans constitute a mere 0.26 percent of the entire staff of the U.N. Secretariat. Korea remains one of the under-represented countries in the United Nations, with its citizens constituting no more than 1 percent of the workforce at any U.N. agency. This is why our nation has to apply more systematic and aggressive diplomatic efforts toward the world body.

However, we must not think that raising the portion of Korean staffers at international organizations will directly serve Korea’s national interests.

Working as a staff member of an international organization means being a public servant of the entire international community. Therefore, our government has to devise its policy toward international organizations from long-term perspectives rather than focusing on the immediate practical issues such as increasing the number of Korean staffers and hosting international events or organizations.

In other words, the nation should try to expand the scope of its multilateral diplomacy by demonstrating its leadership as a middle power through the exploitation of niche issues of global importance or contributing to operational reforms at international organizations. These efforts will eventually lead to greater advances in Korea’s status and prestige.

Despite being a major economy with membership of the OECD and G20 and boasting of the world’s top-notch technology as an information and communication powerhouse, Korea is still groping for its position and role as a middle power in global politics. It is especially difficult to promote our national interest and prestige by building up hard power such as military strength amid the current international circumstances dominated by complexity and uncertainty with the United States and China locked in competition.

On the other hand, it is a more realistic alternative to improve our status and influence by strengthening soft power, which is represented by international reputation, cultural charm and national image. When there are more Koreans internationally recognized and respected and the Korean government’s diplomacy and policy efforts equipped with global vision and strategies create synergy effects, the “Korean legend” will go on.

[Chosun Ilbo, April 3, 2012]

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Heroes Who Built the Ieodo Ocean Research Station

Bang Hyeong-nam Editorial Writer The Dong-a Ilbo

Kim Si-jung, former minister of science and technology, feels like being on cloud nine these days in spite of having a sore throat. China’s recent territorial claim to Ieodo, a submerged rock south of Jeju Island, ironically reflects the importance of the ocean research station built on the rock, for which he laid the groundwork while in office. He even feels proud that he made a successful example in preserving national interests by foreseeing future problems amid a rapidly changing international political environment.

When Kim visited the Korea Ocean Research and Development Institute (KORDI) in February 1993, shortly after taking office under the newly installed administration of President Kim Young-sam, he was briefed on a project to build an ocean research facility on Ieodo. The project was the brainchild of Dr. Lee Dong-yeong, then a principal researcher at the institute.

He had been insisting on building the facility since 1991. After ordering a delay, Kim began studying the project.

First, Kim heard opinions from various government offices. All the eight relevant ministries including the Ministry of National Defense agreed to the project. Encouraged by the results, Kim explained the purpose of the proposed construction to Chung Jae-seok, deputy prime minister and concurrently minister of economic planning board, in early 1994 and succeeded in getting his commitment to allocate the necessary budget.

The KORDI’s initial plan had been simple. Its idea was to plant steel pipes on the underwater rock and build an unmanned observatory. But Kim had a different idea. To him it seemed unreasonable to build such a small and shabby structure, if it was to serve various purposes, including weather and ocean observation, securing marine resources and clarifying territorial boundaries.

What was needed, he thought, was an inhabitable facility equipped with a heliport for convenient travel.

History is made by intricate encounters. Kim’s meeting with Dr. Lee was crucial to the development of a scholarly idea into a national project that would protect the legendary island and the surrounding waters from territorial ambitions of neighboring countries. Another man played a vital role in the landmark construction: Dr. Sim Jae-cheol, a public works specialist who headed KORDI’s Climate Change and Coastal Disaster Research Department, who had participated in the project from the beginning.

The design of the proposed station was completed in 1994. Kim sounded out the responses of other countries and international organizations, including the United Nations, with the assistance of Dr. Park Choon-ho, an authority on international maritime law. Most of the respondents expressed favorable

opinions, saying there would be no problem in building an observation facility at a spot closer to Korea than any other country. The embassies of China and Japan in Seoul also were notified and neither objected.

Still, many residents of Jeju Island fiercely opposed the plan. They denounced it, asking how anybody dared to drive steel posts into the rock which had been regarded as a Utopian island enriching the mythical imagination of the islanders for such a long time. The KORDI succeeded in persuading the Jeju residents by assuring them the construction work would be kept unrevealed to outsiders as much as possible. While overseeing the construction from 1998, Sim made more than 10 visits to Jeju to talk to local folklorists and professors.

Despite delays due to difficulty in finding a contractor, the Ieodo base finally soared to 36 meters above sea level in May 2003. Korea became the owner of an ocean observation station thanks to the heroes who tenaciously carried out the project, looking ahead to the future of the nation. “If we tried to build the station today when China’s national power has rapidly expanded, the construction would have been impossible,� Kim said.

Ahead of the general election, political parties are churning out myriads of promises. One wonders how many can compare to the Ieodo station project in terms of importance to the nation. Likewise, is there any cabinet minister today who is working so eagerly to realize a future-oriented policy as Kim did? Did anyone among the opponents to the Korea-U.S. FTA calculate in earnest the future value of the free trade deal? Have those opponents to the Jeju naval base construction ever imagined the security interests to be gained

by Korea after the base is completed?

I want to suggest that politicians who are running to become lawmakers take the time to study at the least the history of the Ieodo station construction. Do

we have to watch the 19th National Assembly open with yet another bunch of short-sighted politicians who are either incapable of or uninterested in looking ahead even a few years while pursuing their immediate personal interests?

[March 18, 2012]

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Truth about Gureombi Rock

Hong Chan-sik Chief Editorial Writer The Dong-a Ilbo

Amid the prolonged disputes over the construction of a naval base on Jeju Island, we often hear the unfamiliar word “gureombi.” On her visit to the controversial construction site on March 7, Han Myeong-sook, chairwoman of the main opposition Democratic United Party, called for the government to “stop the blasting of Gureombi.” Some popular entertainers such as broadcaster Kim Mi-hwa and singer Lee Hyo-ri have joined the campaign, twitting that “Gureombi should be protected.”

“Gureombi” is a Jeju native dialect referring to the tree with the academic name Litsea japonica. There is an abundant amount of this evergreen on Jeju and the southern coastal districts of Korea. Then it should seem certain that so many people, including Chairwoman Han Myeong-sook, have not stood up to safeguard the commonplace tree. What they are trying to protect appears to be

a rock outcrop on the shore at the construction site. It is called “Gureombi Rock� because of its location near a colony of gureombi tree.

Those who oppose the Jeju naval base construction have tenaciously adhered to their assertion that cultural relics and animals and plants at the construction site should be protected. All construction projects on an area over 30,000 square meters are required by the law to undergo a surface investigation to determine whether the site has underground cultural artifacts. Construction can be canceled if the site is judged to have buried cultural relics or it is feared to damage natural monuments. Indeed, back in the 1990s, the Korea Racing Authority scrapped its plan to build a racecourse in the Bomun Lake Tourist Complex in Gyeongju, as historical sites and relics continued to be unearthed in the process of surface investigation.

If the site for the naval base on Jeju contains truly valuable artifacts, or rare animals and plants, supporters of the construction project may change their minds. Cultural and environmental issues are that sensitive. When the Jeju naval base construction plan was finalized in 2007, the opponents first raised the issue of preserving a colony of soft corals near Bam Island, some 1.7 kilometers away from a breakwater for the base. Designated Natural Monument No. 442, the soft corals are a species with tender skeletons.

The Cultural Heritage Administration asked the Seoul National University’s Research Institute of Oceanography to investigate the possibility of pollutants from the proposed construction site harming the soft corals. The investigation found that ocean currents flow from the soft coral colony toward the construction site. It meant that even if pollutants were released from the site, they would not reach the soft corals.

Next, the opponents made an issue of Asian shore crabs and narrow-mouthed

toads which inhabit in front of the construction site. Eventually, an agreement was made to capture all the Asian shore crabs and narrow-mouthed toads and relocate them to a nearby location that has a similar environment. That cost about 150 million won.

Folk religion was also on the list of problems raised by the opponents. They demanded that an old place for offering prayers on the construction site be preserved and named a state-designated cultural property. In response to their request, members of the Cultural Heritage Committee, an advisory body for the Cultural Heritage Administration, examined the place and reached the conclusion that it fell short of qualifying for designation as such in terms of historical and academic value.

Investigations were conducted over the entire construction site of 280,000 square meters to determine whether any section had cultural artifacts buried underground to be preserved. Some archaeological remains dating to the early Iron Age were discovered in parts of the site, but the total area considered worthy of cultural preservation only amounted to 2,400 square meters.

Gureombi Rock is the latest card of the opposing forces in their desperate effort to deliver a decisive, critical blow to halt the base construction. They are demanding that the rock be designated a natural monument, which would surely be a powerful tool to obstruct the construction. However, the Cultural Heritage Committee has already concluded that the rock has little topographical distinction compared to many locales along the island’s coastline.

Some netizens criticize the Cultural Heritage Committee as well as the Cultural Heritage Administration for its decision, but the committee is the highest decision-making authority. It consists of private experts who work

independently. The committee is dedicated to the maximum possible protection of cultural heritage, so denouncing the committee lacks persuasion.

The opponents have continuously attempted to halt the construction by raising one issue after another. It now looks evident that they are not trying to protect culture and the environment but are using them as political tools to condemn and obstruct the naval base construction.

When the blasting of Gureombi Rock began, Kim Jin-pyo, floor leader of the Democratic United Party, called for its suspension, insisting that the rock is located within a UNESCO biosphere reserve. But his assertion turned out to be ungrounded. Some netizens asserted that the rock belongs to a UNESCO World Natural Heritage site, which also proved untrue. Korean leftist forces have thus revealed their time-worn tactics of exaggeration, distortion and fabrication to achieve their goals.

Even those who are leading the anti-base campaign seem to be confusing the gureombi tree and the rock. Therefore, most ordinary citizens lack in-depth understanding of the environmental and cultural issues surrounding the naval base construction. Hence they are vulnerable to agitation. No matter how important our natural environment is, the value of Gureombi Rock cannot outshine the nation’s security benefits to be gained from the naval base. The majority of people should make cool-headed judgment based on objective facts.

[March 14, 2012]

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- Harmony of Peace from Paris - K-pop into the China Market - Historian Lee Ki-baek and Publisher Kim Seong-jae - Bread over Books, Shoes over Books?

- Making Friends in Seoul

Harmony of Peace from Paris

Gabrielle Y. Guyonne Pianist & Music Director of Paris Appassionata Association; Professor at Conservatoire François-Joseph Gossec de Gagny

In the evening of March 14, the lobby of the Salle Pleyel Concert Hall in Paris bustled with an audience awaiting an historic performance ― a joint concert

by North Korea’s Unhasu Orchestra and the Radio France Philharmonic led by renowned South Korean conductor Chung Myung-whun. A long line formed in front of the box office an hour before the concert started and the event’s organizers said that all the tickets for the 1,900-seat hall sold out quickly. The performance prompted enthusiastic applause from the full house.

The concert also drew full media attention. Radio France, arts broadcaster Arte and reporters from local broadcasting stations and magazines were present, while the press from South and North Korea eagerly captured images in and around the concert hall. Just before the concert started, French Culture Minister Frédéric Mitterrand appeared on the stage to remark, “I want to

celebrate that this hall represents unity through music.” He was obviously moved by the assembly of musicians from the divided Korean peninsula, which remains the Cold War’s last frontier.

The Unhasu Orchestra, made up mostly of players in their 20s, performed in the first part of the concert. With most of its 70 members educated abroad, the orchestra demonstrated impeccable ensemble and techniques in energetic rendition of clean notes and rhythms. The opening song, “Young Circus Girls,” based on traditional folk rhythm, aptly encouraged the festive mood with wind and percussion instruments creating gorgeous harmony.

The second piece, “Two Traditional Instruments and the Orchestra,” featured traditional Korean string instruments gayageum and haegeum played by musicians dressed in hanbok costumes. Lyrical melodies of a lively and innocent atmosphere, combined with excellent techniques of the musicians, elicited exclamations from the audience. The performance proved that Korean musical spirit can be delivered through Western classical music. There was no awkwardness often found in immature ensemble of Western and traditional Korean music. It was the kind of music that can be created by Koreans alone but adroitly balanced with Western classical music.

Closing the first part of the concert was North Korean violinist Mun Kyong-jin performing Saint-Saens’ “Introduction and Rondo Capriccioso in A Minor for Violin and Orchestra.” It was followed by a piece for violin solo based on the popular Korean folk song, “Arirang,” inviting nostalgic responses from many Koreans in the audience. During the intermission, local audience members were heard pouring out praises for North Korean music, which they felt was “very emotional and dramatic.”

The second part of the concert was vibrant with majestic grandeur. Maestro

Chung led the Radio France Philharmonic playing Brahms’ “Symphony No. 1” along with the Unhasu Orchestra. Amid its characteristic solemn mood, deep resonance and tense crescendo, the symphony unfolded serene yet gloomy and pathetic melodies. The slow and lyrical dance rhythm seemed to comfort the closed and wounded hearts of Koreans from both sides of the border.

While the two Koreas have yet to overcome tension and conflicts arising from their unhappy past, the concert delivered a significant humanitarian message of hope for the Korean nation along its long journey into the future. The audience held its breath as the two orchestras crafted sublime harmony of peace, greeting the end of each movement with passionate applause in an unusual rapport.

In response to the fourth curtain call following the Brahms symphony, Chung took the microphone and remarked, “Politically, South and North Korea are two countries, but we are one from the humanistic point of view.” Then, for encore performance, he led the two orchestras in an orchestral adaptation of “Arirang,” which he explained was “a song that every Korean knows,” and Bizet’s “Carmen Overture.” Music has the power to move people beyond all ideological barriers. We witnessed such a historical moment today.

[The Hankyoreh, March 17, 2012]

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K-pop into the China Market

Kim Seong-han Staff Reporter The Weekly Hankook

K-pop is waking up the dormant Chinese market. SM Entertainment is launching a new music group, EXO, in South Korea and China simultaneously; JYP Entertainment is promoting the popular Korean girl group Miss A on the Chinese mainland; and other Korean entertainment companies are also keen to make inroads into China. Given that China was seen as a hopeless market by Korean musicians for many years, the situation is changing dramatically. The following are key developments concerning K-pop’s foray into the Chinese music market.

# China Emerges as a New Frontier for K-pop It is now common for Korean entertainment agencies to incorporate Chinese members into a group from the start to appeal to China’s music market. This

strategy was tested when SM’s Super Junior-M subgroup included a Chinese member and entered the Chinese market. Similarly, JYP added two Chinese to Miss A in an apparent bid to appeal more to Chinese audiences.

EXO is taking the approach to the next level by dividing its 12 members into two teams, EXO-K and EXO-M for Korea and China, respectively. EXO-K is scheduled to debut in Korea on March 31 and its Chinese alter ego will debut the next night in China. EXO carries a special meaning for SM Entertainment, which has constantly explored the Chinese market since 1998 when it secured the Chinese government’s approval for the release of H.O.T.’s album “Happiness.” It was the first-ever Korean music album to formally reach the Chinese market.

# Chinese Market is Changing SM and JYP are not the only Korean entertainment companies that are intent on exploiting the Chinese market. Other Korean entertainment agencies are trying to emulate the two frontrunners. Why do Korean agencies look to China, a market notorious for copyright infringements? The main reason lies in the changing market atmosphere in China. In 2006, the Chinese government revised the concerned law to require foreign music content to obtain approval from the Culture Ministry. This demonstrated the desire to protect the copyright of foreign music in the domestic market.

In January last year, the Chinese government conducted an investigation into illegal music files transferred online and punished those who violated the copyright regulations. Google launched a commercial online music search and download service in 2008, and is pushing for the introduction of Green Dam, a content-control software to prevent piracy. China is yet to set up a transparent music file distribution and payment system, but what’s certain is that

transformative changes are under way in that country.

# Risk or Opportunity?

Despite various negative factors, China is too important to ignore in terms of its growth potential for Korean entertainment firms and artists. According to the statistical data, China’s 2011 online music market was estimated at 2.24 billion yuan (370.3 billion won). Illegal piracy is declining fast while the legitimate online market is expanding rapidly. As of 2011, China has 360 million Internet users and 634 million mobile users, up 27 percent and 47 percent, respectively, from 2010.

Korea’s entertainment industry is most optimized for the fast-expanding Chinese market. After all, Korean agencies and musicians have fought a series of tough battles at home against illegal piracy that is armed with eye-popping information technology.

China’s attractive potential, however, comes with a price: more risks. The Chinese government is trying to nurture its local market, favoring Chinese singers over foreign competitors. In January this year, for example, the Chinese authorities placed a weekly, two-hour limit on entertainment broadcasts. Thus, as competition among Chinese entertainers intensifies, the chance for foreign counterparts is diminishing sharply.

No wonder, then, that Super Junior-M, Miss A and EXO rely on Chinese members to appeal to the local audiences. “There will be more Korean music groups with Chinese members targeting the local market,” said an expert in the Chinese music market. “The experiment in China will be a new guide for fresh attempts at other markets,” he said.

[No. 2418, April 2, 2012]

www.koreafocus.or.kr

Historian Lee Ki-baik and Publisher Kim Seong-jae

Lee Seon-min Opinion Desk Editor The Chosun Ilbo

The first issue of “Korean History Lecture for Citizens” published by Ilchokak appeared in August 1987. The semiannual academic periodical never missed publication for 25 years until it recently stopped at the 50th issue, completing its mission in sharing academic research with ordinary citizens. Having made a name for itself as a popular history magazine, it once sold over 10,000 copies.

Although sales numbers tapered, it was widely recognized for its broad and balanced views, academic rigor and tone in appealing to a mass audience.

A large number of magazines come and go in the volatile publishing industry in Korea. The non-commercial “lecture” series survived thanks to the firm determination and passion of the late Sogang University professor Lee Ki-baik (1924-2004), who masterminded the hard-fought endeavor. Professor Lee belonged to the first generation of historians educated after the nation was

liberated from Japanese rule. He believed that sharing research results with the public was just as important as conducting research itself.

During the 1960s and 70s, Professor Lee wrote excellent essays to correct Koreans’ perception of history, which became distorted during the Japanese colonial rule. The history lecture series was launched as nation-centered and people-centered historical views clashed in the 1980s. Lee planned and edited each issue and paid writers and printers with his own money. In his later years when suffering from liver cancer, rather than rest, he expended his last bit of energy on his final editorial meeting.

Lee had seen to the publication of the 35th issue. After his death, the younger professors who had helped him as editorial writers, such as Yoo Yeong-ik of Yonsei University, Min Hyeon-gu of Korea University, Lee Gi-dong of Dongguk University and Lee Tae-jin of Seoul National University, continued publishing the series for the next seven and half years.

Kim Seong-jae (1927-2005), the founder of Iljisa, is another unforgettable figure who is remembered for familiarizing the public with Korean studies.

His company published a quarterly academic journal titled “Korean Studies Bulletin” for 30 years. Kim entered the publishing industry while he was still a student at the Seoul National University’s College of Education. In 1956, he founded Iljisa, a publishing house that only produced humanities books, and in the winter of 1975 he published the first issue of Korean Studies Bulletin with the aim of eradicating the “colonized” historical views of Koreans.

Professor Kim Won-yong of Seoul National University tried to dissuade him, saying that it was no good wasting his time on something that could not last more than two or three issues at most. However, Kim persisted, and it became his lifetime project. Competent scholars about 10 years junior such as Korean

literature scholar Kim Yun-shik, sociologist Shin Yong-ha and historian Han Yeong-woo joined him and worked as editorial board members. Kim paid attention to every detail from contacting writers to editing and proofreading.

Even after being diagnosed with final-stage pancreatic cancer, Kim was at his desk proofreading every manuscript until a week before his death. Korean Studies Bulletin was considered the “base� for Korean studies. Although the journal incurred chronic deficits, Kim’s last wish was respected so its 120th and last edition was put out four months after his death.

It is difficult, if not impossible, to find academic journals and magazines comparable to these two periodicals in our society these days. Although the academia and the publishing industry have grown remarkably in size and their conditions have improved beyond comparison over these years, few are as devoted and self-sacrificing as the late Lee Ki-baik and Kim Seong-jae.

Scholars who are oblivious to their communal duties produce numerous papers like machines and greedy publishers are preoccupied with making profit.

These people are not capable of producing magazines that will influence society and go down in history. I want to advise those scholars and publishers who have not yet lost their sight for valuable endeavors to reconsider their role in light of what these two men did to show us the way through their publications.

[March 24, 2012]

www.koreafocus.or.kr

Bread over Books, Shoes over Books?

Noh Jae-hyun Editorial Writer The JoongAng Ilbo

On the street, you sometimes come across a sign in front of tire stores that says, “Wow! Tires are cheaper than shoes!” This is not at all incorrect considering the wide range of shoe prices. Comparing a person’s shoes to a car tire even brings a smile.

However, the latest Statistics Korea data on average household spending on books erases smiles and prompts serious thinking about what is on our feet. A Korean household consisting of two or more members spent more on shoes (22,784 won) than on books (20,570 won) a month. This was the first time the order was reversed since the items began to be tracked in 2003. It was also the first time that people spent less on books than on bread (20,979 won). Shoes last about a year or so at the least, but people still spent more on them than books. Even more alarming is the fact that books here include textbooks and

reference books for students.

Professor Han In-seop teaching law at Seoul National University wrote on Twitter yesterday, “When your children go to the bookstore to buy a school workbook, hand them extra cash so that they bring home a book they can read.

If you let them pick a book, they will surely read it because they chose it. To make the final selection, they will probably go through about 20 books. They bring home one book, but in their head they have a list of 20 potential reads.

And their minds will have become all the richer.”

Such thoughtful parents seem to be going extinct in Korea. Statistics do not just fall out of the skies; there is a reason for everything. Last year, a number of good publishing houses went bankrupt. Itreebook, Ire, Taedongbooks and Munidang published well-known books such as “Song of the Sword,” “Song of the String,” “Chicken Soup for the Soul,” “White Night” and “Father.”

Distributors such as KG Book Plus, Saemteo and Pyeonghwadang went bust, and this year Korea’s largest exclusive agency Susongsa also collapsed.

Smaller publishers are scrambling to survive in the aftermath. People may be spending less on books because of higher smartphone bills and vigorous penetration of e-books, but basically it boils down to the tendency to not read.

In a few days, the Ministry of Culture, Sports and Tourism will declare 2012 the “Year of Book Reading.” They will be airing the message, “The time is now 00 o’clock, your time for reading,” on the radio and TV to launch a read20-minutes-a-day campaign, and will encourage bedtime reading for children.

Heavy reader contests and university students’ book debates are planned, but there is skepticism about how effective these events will be.

There are voices calling for more practical measures to promote publishing.

President Ha Eung-baek of Human & Books Publishing said, “We need to

benchmark the U.K. in levying zero percent VAT on the publishing industry so that their tax burden on paper and printing is reduced. With a little input, we can reap great benefits.� The general election is not far away. I would much prefer such small but concrete vows rather than empty promises that the world will somehow change for the better.

[March 6, 2012]

www.koreafocus.or.kr

Making Friends in Seoul

Michelle Farnsworth Foreign Client Relationship Manager Shinhan Bank

I have been living and working in Korea for nine years now, and in that time I have seen many friends come and many friends go. There has been a constant cycle of farewell parties and new introductions. The routine of making new friends and letting go of old ones is just as much a part of the long-term expat experience as homesickness and culture shock. It’s a sad and inescapable reality.

In my early years in Korea, when I was a happy-go-lucky English teacher living in the suburbs of Suwon, I found that it was very easy to meet new friends organically. I would run into another fellow English teacher at the local Family Mart and the next thing I knew we were best friends, bonding over similar shared experiences in a foreign land. It felt as though I had so much in common with nearly everyone I met: we had the same jobs, we spoke a

common language, and we even patronized the same Family Mart! These factors combined while may not be reason enough to pursue a friendship back home, but they were enough to not only spark but maintain many meaningful relationships for me here in Korea.

I haven’t been in the teaching racket for more than five years now and I’ve noticed that meeting new friends has become more difficult. When I run into another foreigner at Family Mart we rarely even make eye contact, let alone strike up a conversation. And even if we do chance to say hello, I don’t usually feel that instant connection that I used to feel ― just because we are both foreigners shopping at a Family Mart in Korea does not mean we actually have anything meaningful in common.

I’m not sure exactly when or why this shift started to happen, but I have a theory that it is a combination of mainly two factors. First, I think it’s partially because I’m now moving in a slightly more professional social circle and befriending transient English teachers who have no stake in Korea does not interest me so much anymore. Time is precious: if I’m going to invest time into a relationship, I need to believe there is more to it than just being caught in the same place at the same time.

Second, I think this shift is also partially because the big city mentality and Seoul lifestyle hinders me from befriending random foreigners. While there is still a small and tight-knit foreign community in Seoul, it doesn’t have the same cohesiveness that it did in a more remote area like Suwon. Living in Seoul, we are not as desperate for English-speaking friends since they are potentially all around us.

So, it was about a year ago, perhaps due to this slowly evolving fussiness or perhaps due to my time-consuming work schedule, that I noticed that my

circle of friends was becoming a little sparse. I was attending all the farewell parties, but I wasn’t replacing those who left. When I commented on this situation to a friend one day, she suggested that I join the Seoul International Women’s Association (SIWA).

My friend was, and still is, actively involved in SIWA. She couldn’t stop raving about the organization and all the cherished friends she had made thanks to SIWA. But she is an expat wife with a lot of time on her hands and many of the SIWA meetings, tours and events are during business hours. How could I get involved with my busy work schedule?

She noted that the Working Women’s Network chairwoman position had been unfilled for more than a year and suggested that I should take it on. I wasn’t sure what being the chairwoman of this committee would entail, but I’m very happy to report that I accepted the position.

I had a lot of freedom to decide the structure and format of the committee and I decided to organize meetings that would target and serve other disenfranchised women like me in search of ideas, inspiration and friends. I wanted the focus to be on creating a warm, welcoming environment for likeminded women that allowed time for introductions, conversations, and budding friendships with other women in similar situations and professions.

Starting with this great pool of ambitious women, it’s almost impossible not to make meaningful connections.

We now hold mingling and networking events once a month for professional ladies (both Korean and foreign) in Seoul. These are the friends that I had been looking for! And there are usually about 30 of them, all gathered in one room at the same time. It is inspirational and exciting to be a part of such an interesting, diverse, and most importantly, similar group of women.

I’m so happy that I finally got involved in this group and I regret not getting involved sooner. I hope more women will take the initiative to approach it and learn more about the friends that are waiting to meet you in Seoul!

[JoongAng Sunday, March 11, 2012]

www.koreafocus.or.kr

- North Korea’s External Debts: Trend and Characteristics - North Korea’s Economic System in the Kim Jong-un Era: Prospects for Change and Implications - Polarizing Business Competitiveness - Korean Movies from True Stories: Reality and Desire for Myth

North Korea’s External Debts: Trend and Characteristic Yang Moon-soo Professor of North Korean Economy University of North Korean Studies

I. Introduction North Korea should begin repaying South Korea’s food loans this year. The South provided food to the North on six occasions between 2000 and 2007, delivering a total of 2.4 million tons of rice and 200,000 tons of corn worth US$720 million. By June 7, Pyongyang is obligated to pay $5,830,000 for $88 million worth of food received in 2000. However, considering the North’s economic difficulties and strained relations between the two Koreas, payment is unlikely.

As the payment date approaches, concerns are growing among North Korea watchers about the overall state of the North’s debts to South Korea, the former Soviet Union, China, Japan, France, Germany, Britain and other countries. The scale of the North’s foreign debts is unclear as Pyongyang rarely provides economic data, particularly in the sensitive area of its external liabilities. Outsiders’ efforts to access correct figures have not been successful.

This study aims to draw the outline of North Korea’s external debts, but the author should admit that his observation cannot but be partial and provisional because of the unavoidable scarcity of data and information.

Part II of this paper briefly reviews North Korea’s external economic relations during the 1970s, when the socialist state’s foreign debt problems initially surfaced about the middle of the decade. Part III reviews the debt increase in the following years. It tries to gauge the overall scale and delves into the

background and causes of repayment problems. Part IV examines special conditions existing between the North and the respective lender nations.

II. North Korea’s External Economic Relations in the 1970s 1. Change in Economic Policies and Expansion of Trade with the West North Korea’s external economic policies changed dramatically in the 1970s.

The first sign was massive imports of machinery and plant facilities from advanced economies, including Japan, France, West Germany and Britain, beginning in 1972. What was surprising was that trade with these capitalist nations were made with loans.

As <Table 1> indicates, North Korea in the 1960s incurred foreign loans mostly from socialist states, but during the next decade, loans from capitalist states exceeded those from socialist countries. Between 1971 and 1980, North Korea borrowed $1,292 million from capitalist nations, an amount that exceeded all of foreign loans that it incurred in the 1960s.

The lending enabled trade between North Korea and the West to expand during the 1970s. Loans from OECD members were concentrated in the four-year period of 1972 through 1975 and they naturally led to rapid increases in trade with these countries. (Refer to <Table 2>.) Imports from the OECD members outpaced exports from them.

Trade with the OECD members increased drastically in 1972 and peaked in 1974, when the Northâ&#x20AC;&#x2122;s imports from capitalist states, including developing countries, accounted for 53.7 percent of its total inbound goods, overtaking those from socialist states for the first time. Imports from the OECD declined rapidly after 1975.

Pyongyangâ&#x20AC;&#x2122;s expanded trade with the West produced huge trade deficits.

(Refer to <Table 2> and <Table 3>.) During 1971-75, North Koreaâ&#x20AC;&#x2122;s trade

deficits with OECD nations totaled $1.05 billion and the trade gaps with socialist states amounted to $970 million. Thus, the deficit figures which were $242 million in 1961-65 and $400 million in 1966-70 ballooned to $1,932 million in 1971-75. The rapid increase of trade deficits led to the problem of heavy foreign debts.

Beginning in 1973, when the first global oil shock sharply increased petroleum prices, North Korea had to spend more for its imports than it earned from exports. While it was paying more for the imports of machinery and plant facilities, the prices of non-ferrous metals, including lead and zinc, which were the Northâ&#x20AC;&#x2122;s main exports, nosedived. In addition, trade demand from Western industrialized nations fell. (Refer to <Table 3>.)

2. Background to Changes in External Economic Policy North Korea’s expanded economic relations with the West in the early 1970s came amid détente between Cold War adversaries. Relations between the Eastern socialist bloc and the Western capitalist world rapidly improved with the so-called “ping pong diplomacy” between the United States and China, U.S. President Richard Nixon’s trip to Beijing in 1971 and his visit to Moscow the following year. East European countries, which had stagnant economies, took advantage of the détente by tapping capital from the West.

In the meantime, China opened its doors to former capitalist foes and North Korea followed suit, establishing diplomatic relations or exchanging trade offices with a number of European nations. Moreover, an overheated international financial market and lenders offered loans to the North in 1972 to early 1973.

North Korea was anxious to achieve its economic development goals under a six-year plan (1971-76), which it vainly tried to reach two years in advance.

North Korean leaders realized that cooperation with socialist states alone did not guarantee success and were attracted to the advanced technologies of Western capitalist states.

In the meantime, dialogue with South Korea started in 1971 for the first time since the Korean War and the two Koreas issued a joint communiqué on July 4, 1972, pledging bilateral efforts toward peaceful reunification.

In 1972-1973, before the global oil crisis, the prices of gold, silver, lead, zinc and other export items of North Korea were rising and Pyongyang must have been confident of its payment capabilities. North Korean leaders had taken

note of South Korea’s economic development through introduction of Western technologies. All these developments led North Korea into deciding to spur development with large-scale buildup of manufacturing plants with Western equipment and financing.

III. North Korea’s Foreign Debt Problems 1. Historical Review North Korea’s foreign debt problem was exposed for the first time in 1974. In July that year, the North failed to make an initial down payment for steel products from Japan and the shipment was suspended. As the news was reported, North Korea’s other trading partners in Japan and Western Europe pressed Pyongyang for payment for their exports and some banks dispatched their representatives to Pyongyang to demand early settlement of its liabilities.

To raise capital, the North issued bonds and obtained new loans but failed to elicit any significant support from the international financial community. Thus, in June 1975, North Korea began negotiating payment deferments with major creditor nations.

In July 1975, Euler Hermes, a leading credit insurer of West Germany, suspended its credit insurance for exports to North Korea, alerting the related businesses. About the same time, the Japanese Export-Import Bank refused to extend loans to North Korea and the Ministry of Trade and Industry virtually halted insurance for trade with the North. In May 1976, a British private consulting agency for North Korean trade was closed and European banks soon held official and unofficial meetings for joint pressure on the North for debt payments.

By 1977, North Korea had reached debt rescheduling agreements with Japan, Sweden, West Germany, France, Switzerland and Austria. In negotiations with West European lenders, North Korea demanded eased payment terms and replacement with new loans, and finally in July 1987, a group of about 140 European banks declared North Korea a default state. With Japan, North Korea obtained deferment of import payments for the third time in April 1983, but Pyongyang suspended payments in January 1984 under the excuse of political reasons.

North Korea’s loan default has continued and occasional negotiations between North Korean authorities and Western lenders’ group ended without clear results. After the dismantling of the Soviet Union in 1989-1991, Russia and North Korea discussed debt payments but the talks went nowhere. Summing up, North Korea has been unable to make interest payments, let alone paying off the principal, since the middle of 1984. Hence the accumulated interest has surpassed the total principal.

2. Overall Scale and Characteristics of North Korea’s External Debts Because no official data is available on North Korea’s foreign debts as well as its major economic indices, including the gross national product, this study has to rely on estimates by international agencies. The South Korean government and the OECD released their estimates during the 1980s to the 1990s, but have not provided any officially recognized data since 2000.

During the 1970s, a number of overseas institutions sporadically produced provisional North Korean debt figures. The U.S. Congress, for example, reported that North Korea’s foreign debts amounted to $55 million in 1970, which soared to $725 million in 1974. The U.S. Central Intelligence Agency estimated that the North’s external debts stood at $2.4 billion as of the end of

1976, of which $1.4 billion was owed to capitalist states and the rest to socialist nations. The New York Times and the South Korean government estimated the North’s total debts at $2.3 billion, while the West German newspaper, Handelsblatt, reported the total amount reached $2 billion. Based on these figures, it may well be said that North Korea’s foreign debts in 1976 – two years after its debt repayment problems surfaced – amounted to somewhere between $2 billion and $2.4 billion.

Estimates became more complicated in the 1980s and 1990s. (Refer to <Table 4> and <Table 5>.) There were significant gaps between figures provided by the South Korean government and the OECD, for example. Seoul speculated that the North’s external debts grew from $2.23 billion in 1980 to $7.86 billion in 1990 and to $12.46 billion in 2000. The OECD figures were considerably lower with $4.88 billion for 1990 and $7.43 billion for 1998. According to the South Korean authorities, the North’s debts to capitalist countries ($2.80 billion) exceeded those to socialist states ($2.41 billion) in 1987 but the table turned two years later to show $2.74 billion owed to the West and $4.04 billion to the East.

Regarding North Koreaâ&#x20AC;&#x2122;s external debts after 2000, only scattered and

piecemeal data and estimates have been available. In 2008, Kwon Young-se, a lawmaker of the Grand National Party, claimed that North Korea owed a total of $18 billion in debts to about 30 foreign states including China, Russia and East European nations, attributing the figure to an unnamed intelligence agency. He said that the amount almost equaled North Korea’s GDP. On January 1, 2008, Bloomberg reported that the North’s total external debts amounted to $15 billion. Britain’s Financial Times on August 19, 2010 reported an estimate of $12 billion, of which two-thirds were concentrated in former socialist states.

It should be noted that any estimate of North Korea’s debts cannot but be provisional figures, considering that Pyongyang is still negotiating with lenders for write-offs and rescheduled payments. In addition, currency exchange and interest rates add to the flexibility of any estimates. One thing that is certain is that the scale of the North’s foreign debts continues to swell because of the huge amount of overdue interest.

North Korea’s repayment capabilities can be assessed by comparing its debt scale to its export volume or GNP, and then comparing these ratios with those of other nations. (Refer to <Table 6>.) In 1995 North Korea’s ratio of foreign debts against GNP was slightly above the average of low-income and lowermiddle-income economies. But more noteworthy was the ratio between external debts and exports. The North, with a small export volume, shows an extremely high ratio, compared to other low-income countries and even to Mexico and Hungary, which have even higher debt-to-GNP ratios. The North’s debt-to-export ratio in 1995 was 10 times higher than the average of lowincome and lower-middle-income economies. These figures clearly reveal the extremely worrisome status of North Korea’s debt repayment capabilities.

3. Background and Causes of North Koreaâ&#x20AC;&#x2122;s External Debt Problem North Korea has been under chronic trade deficits since the founding of the state. To determine why the countryâ&#x20AC;&#x2122;s external debt problems emerged in the middle of the 1970s, it is necessary to take note of not only its trade volumes but current account and capital account figures as well as the overall international balance of payments.

<Table 7> provides clues to why North Korea had no external debt problems until the early 1970s. It is highly likely that North recorded current account surpluses during the 1950s, thanks to foreign grants that were abundant enough to cover its modest trade deficits. Grant-type aid was discontinued in the 1960s, but the return of Korean residents from Japan during those years must have meant a substantial amount of foreign capital brought into the North. This probably helped the North maintain surpluses in international payments. In the 1970s, however, the capital inflow from Japan declined, causing a depletion of foreign exchange reserves in North Korea.

There were several important reasons for North Koreaâ&#x20AC;&#x2122;s swelling foreign debt problems in the middle of the 1970s. First, the unexpected oil shock increased import payments while export earnings dwindled. Second, North Koreaâ&#x20AC;&#x2122;s

foreign exchange reserves amounted to only $300 million to $400 million, with its gold reserve worth $56,740,000 and silver $63,140,000, according to available data. By 1973, the North already was asking Japan to accept iron ore instead of cash for import payments.

Third, trade deficits continued to expand as the North had few other products to export when demand for its non-ferrous metals declined. A typical underdeveloped

economy,

North

Korea

had

extremely low

export

competitiveness as a result of its ill-advised macroeconomic and trade policies.

With limited energy resources, insufficient capital and low technological capabilities, the North was forced to increase imports of capital goods and intermediary materials in an effort to pursue industrialization. Without considering the countryâ&#x20AC;&#x2122;s overseas sales capabilities, North Korean authorities often decided to import expensive machinery and equipment for political reasons.

Efforts to increase exports met unsatisfactory results. The North was only able to sell some raw materials and half-processed products based on its relatively abundant natural resources. Export of manufactured goods was limited because of generally low product quality. In North Korea, where goods are chronically in low supply, producers did not have to care about quality; their focus was on meeting supply targets.

Fourth, foreign debts rapidly accumulated because North Korea neglected repayment of loans introduced in the early stages of economic development.

North Korea received large-scale grant aid from abroad in the 1950s, but foreign credits increased rapidly as grant aid was discontinued and beginning in the 1970s most capital inflows were made through loans. The maturity of earlier loans approached while trade deficits swelled. New loans were incurred to pay overdue interest and principal and the overall scale of external debts

snowballed.

IV. Particularities with Major Creditor States 1. North Korea’s Debts to Russia 1) Russia’s Loans to Developing Countries Russia’s loans to developing countries involve the complex issues of exchange rate and debt rescheduling. Russia took over the rights to the external loans provided by the former Soviet Union and those loans were mostly denominated in rubles. When the Soviet Union extended loans to developing countries, the ruble was strong against the dollar with the exchange rate of 0.6 ruble per dollar, but the ruble value plummeted with the collapse of the Soviet Union and the ensuing economic crisis. The problem of applying adequate exchange rate for the ruble-denominated loans became a serious issue between the lender and borrower states.

Most borrowers from Russia are poor countries seeking debt rearrangements through the intervention of the World Bank, IMF, OECD and the Paris Club.

As it joined the Paris Club in 1997, Russia follows the multilateral debt relief framework established by the organization of lending nations. For the rubledenominated loans signed before January 1, 1992, the exchange rate of 0.6 ruble to the dollar will be applied, but Russia will make upfront discounts of 70 to 80 percent for these loans with the remaining liabilities to be paid in accordance with the “Naples conditions” providing further reduction by 50 to 67 percent on the basis of the present value of the debt instead of its nominal value.

Assuming North Korea joins international financial organizations and agrees

to the IMF programs for economic reform, its debts to Russia will be subject to the debt relief formula of the Paris Club. Otherwise, North Korea could seek bilateral debt relief negotiations with Russia. If the debt rearrangement Russia made with Laos is benchmarked, the exchange rate will be 0.6 ruble to the dollar and a 70 percent discount will be given with a further cut of 20 percent on the basis of the present value. The result will be a reduction to 24 percent of the original amount. If the latest “Cologne terms” are applied, liabilities may be discounted down to 10 percent.

2) North Korea’s Debts to Russia Relations between Russia and North Korea were strained abruptly following the dissolution of the Soviet Union. Moves to improve their ties began in the mid-1990s and the two countries signed a new treaty of amity and cooperation in 2000 to replace the 1961 friendship pact. Summit talks held in Moscow in 2001 between President Vladimir Putin and North Korea’s Kim Jong-il produced a joint communiqué, which mentioned the North’s past debts to Russia as an important matter to be considered in promoting bilateral economic cooperation.

Throughout the 2000s, the two governments continued negotiations to reassess North Korea’s debts to the Soviet Union, but no clear-cut result was seen despite Moscow’s offer of drastic loan cuts. In December 2006, it was reported that Russian Deputy Finance Minister Sergei Storchak and his North Korean counterpart Kim Yong-gil agreed that the North’s debt to the former Soviet Union, amounting to 3.6 billion rubles, would be reappraised at $8 billion and an 80 percent discount on the amount would be given. Details were to be resolved before the third meeting of the Russia-North Korea Cooperation Committee for Trade, Economy, Science and Technology, scheduled to be held in March 2007.

However, the bilateral cooperation committee only reaffirmed the “principle of resolution through an adequate agreement,” indicating backpedalling on negotiations. At the latest fourth committee meeting, held in Pyongyang in September 2011, Russian Regional Development Minister Victor Basargin and the North’s External Trade Minister Li Yong-nam signed a 26-point agreement, but again no concrete accord was made on the North’s debts.

In addition to its 80 percent discount offer in 2006, Russia is reported to have proposed a 90 percent cut in the 2011 meeting. Deputy Finance Minister Storchak said in September last year that Russia would give a 90 percent relief for North Korea’s debts amounting to $11 billion and that the remaining 10 percent might be converted into investments in energy, medicine and other areas. When Russia signed an MOU with North Korea last August on the laying of a gas pipeline through the North Korean territory, it reportedly expressed intent to make a 90 percent debt relief for North Korea.

No final accord has been made, however. Basically, the problem is that North Korea is not willing to recognize Russia as the legitimate successor to the Soviet Union. Besides, there has been no agreement on the details of debt reassessment. Most importantly, North Korea seeks a political settlement of the debt issue while Russia does not intend to do so. In the third intergovernmental cooperation committee meeting in March 2007, the North Korean chief delegate said that his country was not capable of repaying the Russian credits and that the issue could be resolved through political decision.

As the two governments were unable to reach a final agreement on the amount of debts to pay, there are only Russian quotations, which ranged from a low of $8 billion to a high of $11 billion. The higher figure was mentioned by the deputy finance minister in August 2011, when Kim Jong-il was meeting Russian President Dmitri Medvedev in Ulan-Ude in eastern Siberia. Russian

media explained that the amount of North Korean debts increased by $3 billion over the past five years because of overdue interest and penalties for failure to make payments.

Russia has the final say about the debt issue but many experts agree that Moscow’s “major decision” is not impossible, considering its ambitions to gain leadership position in Northeast Asia through grand energy and railway projects as well as the six-party negotiations for North Korea’s denuclearization.

2. North Korea’s Debts to China The most outstanding fact about North Korea’s debts to China is that their overall scale and the moves between the two countries for their settlement have remained in almost complete secrecy. The South Korean authorities speculated in the late 1980s that the total amount could range from $580 million (in 1987) to $100 million (in 1989), but no such approximate estimate has ever been made since the 1990s.

Following the disintegration of the Soviet Union in 1991, China replaced the Soviets as the guardian of North Korea, and trade between the two countries spiked upward. While North Korea recorded large trade deficits, China is believed to have provided the North with significant amounts of aid in grants as well as credits. But no estimate is available about the overall scale of liabilities.

As the above table indicates, trade between North Korea and China increased dramatically in the 2000s, with the North recording large deficits each year without an exception. The Northâ&#x20AC;&#x2122;s trade deficits during the decade aggregated at $6,106 million, which represented a 68.8 percent increase over the accumulated deficits in the preceding 10 years ($3,618 million). The figure even exceeded the total trade deficits recorded during the 50 years from 1951 to 2000 ($5,499 million). These large deficit figures raise the question of how the gap has been coped with. The natural answer is that the North must have incurred enormous amounts of debts to its neighboring guardian state.

Since the rupture of the socialist bloc, China is known to be providing its impoverished neighbor with various commodities on credit. About 500,000 tons of crude oil has been delivered annually to North Korea via a pipeline from Heilongjiang Province. International prices are applied to the oil shipments but North Korea has presumably been offered concessional credits for payment. In addition, North Korea receives considerable amounts of food from China annually, a large portion through commercial transactions and an unknown amount through grants and concessional credits.

It may well be assumed that the Northâ&#x20AC;&#x2122;s accumulated debts have reached a

high level, especially since the 2000s, but there is no way for outside observers to know how the two states are seeking ways to settle the liabilities. Since the North suffered economic difficulties and its reliance on China continued to deepen amid amicable relations throughout the 2000s, the unpaid debts may not be too serious a problem yet and political settlements are highly likely.

3. North Korea’s Debts to OECD Members After North Korea’s external debt problem emerged in the mid-1970s, the alerted banks of the West formed creditor groups to make joint negotiations. In March 1977, 31 banks reached a rescheduling agreement with the North’s Choson (Korea) Trade Bank. North Korean authorities, however, fulfilled only a part of the agreement and repayment terms were virtually ignored. In 1987, a total of 140 banks again formed a creditor group represented by Britain’s Morgan Grenfell and the ANZ (Australia and New Zealand Banking Group), but negotiations fell apart because of North Korea’s lukewarm attitude.

After these failures, the OECD creditors took remedial steps to save themselves. They recognized their credits to North Korea as nonperforming loans and received compensations from export insurers and credit guarantors.

The collected insurance money must be substantial in each member country but the whole amount has not been confirmed.

Externally, the OECD creditors filed suits against North Korea in August 1990 and in April 1992 with the International Court of Arbitration under the umbrella of the International Chamber of Commerce. The arbitration court ruled that the North should pay the requested interest and principal immediately but the ruling had no binding force.

Noteworthy was that the creditor banks, including ANZ, Morgan Grenfell and

BNP (Banque Nationale de Paris), converted their credits to North Korea into bonds and began circulating them at low prices to recover their losses, though in only a small amount. Potential buyers of these bonds may calculate two possibilities: the bond price could rise when North Korea’s political and economic situations improve; and South Korea may repay the bonds when the two Koreas are reunited with the South taking over all outstanding liabilities of the North. Thus the South should find it hard to pay no heed to the North Korea bonds issued by the OECD banks.

4. North Korea’s Debts to Japan North Korea’s failure to make import payments surfaced in Japan in 1974 and long-term delays over six months were reported in 1975. North Korea and Japan made debt rescheduling agreements in 1976, 1979 and 1983, but the North was unable to fulfill them. Especially in 1983 when Japan took economic sanctions against the North following the terror attack on South Korean presidential delegation in Yanggon (Rangoon), which was attributed to North Korean agents, Pyongyang retaliated with a halt to all payments to Japan.

Meanwhile, the two countries made official contacts occasionally to discuss debt problems. The Japan-North Korea Settlement Council was set up in 1977 to seek normalization of bilateral economic exchanges, including the North’s debt repayment. The Korea Trade Bank took charge of payments to Japanese general trading companies and other private businesses. Then in 1979, Japan established the East Asia Trading Institute for joint research on the expansion of economic exchange and study of industries and resources. Japanese members of the Japan-North Korea Settlement Council visited Pyongyang in 1987 and 1992 to discuss the debt issues with the Korea Trade Bank but they failed to find concrete solutions. Representatives of the East Asia Trading

Institute also visited the North and heard Pyongyang wanted Tokyo to change its North Korea policies as a precondition for debt settlement.

In 1986, the Japanese government released export insurance funds to the general trading firms and other private exporters to cover a part of their losses.

A total of 32 billion yen was released to about 30 companies in accordance with the Export Insurance Law. It was a move to relieve the difficulties of private exporters and help normalize trade with North Korea. The Japanese government thus took over a portion of the North’s liabilities and will try to settle them when the two countries normalize their relations.

South Korea and Japan set a precedent for comprehensive settlement of mutual claims and liabilities when they agreed on diplomatic normalization in 1965.

Japan provided South Korea with $300 million in grants, $200 million in financial loans and another $300 million in commercial credits in addition to an unspecified sum of commercial loans. With the $300 million grant, South Korea’s debts to Japan, totaling $45,730,000 by that time, were cancelled.

When calculating the total amount of North Korea’s debts to Japan, it should be recalled that trade settlement between the two countries was made in West German marks until the mid-1970s. Under the yen-mark exchange rate in late 1976, when the two countries had their first debt rescheduling agreement, the principal of Japanese credits should have amounted to about 80 billion yen.

North Korea repaid about 10 billion yen before it suspended payments to Japan in January 1984, with some 70 billion yen remaining in arrears. When interest is added to the principal, the total debts could exceed 100 billion yen, or could possibly amount to 200 billion yen depending on interest rates. By the present yen-dollar exchange rate (80 yen to the dollar), the North Korean debts could range between $1.2 billion and $2.4 billion. Given North Korea’s claims to Japan amount to around $10 billion, some 8 to 16 percent of it may go to offsetting the North’s debts to Japan.

V. Conclusion The North Korean problem of external debts began surfacing in the mid-1970s and continued to worsen to reach a virtual default in the 1980s, with interests growing to exceed principals. If the oil shock in the early 1970s was a major external cause of the North’s debt problem, the communist state’s chronic trade deficits continued to undermine its repayment capabilities and aggravate the debt problem. The snowballing external debts obstructed international financial assistance and foreign investment, which are vital for economic recovery.

The overall scale of North Korea’s foreign debts is roughly estimated at $12 billion to $18 billion, which could be readjusted depending on debt relief negotiations with lenders. But overdue interests are to offset any cut in the amount of debts.

With Russia, there are the problems involving the application of ruble-dollar exchange rates and the scale of debt relief by the international standards. With OECD states, the North Korea bonds circulated by the creditor banks are among notable problems. Japan may seek to settle the North’s outstanding debts through diplomatic normalization with the regime in the future.

North Korea’s huge external debts pose a serious problem that cannot be overlooked as the two Koreas will eventually have to achieve reunification.

But study on this important issue remains at the rudimentary stage with a critical lack of necessary data and information. The problem seems far more complicated than expected; it requires continued attention with in-depth research.

[KDI Review of the North Korea Economy, March 2012, published by the Korea Development Institute]

www.koreafocus.or.kr

North Korea’s Economic System in the Kim Jong-un Era: Prospects for Change and Implications Kim Suk-jin Research Fellow Korea Institute for Industrial Economics and Trade

Since the death of North Korea’s National Defense Commission Chairman Kim Jong-il, the world has been paying extraordinary attention to the country’s future. Most of the interest is on whether the late leader’s son, Kim Jong-un, and his supporters will be able to stay in power, but a more fundamental question is whether or not the country’s policy and system would change. That is the most important issue for North Korean people’s livelihood and interKorean relations regardless of who controls the impoverished communist state.

This study forecasts North Korea’s future through four possible economic scenarios: 1) restoration of a planned economy; 2) reform and opening-up modeled after China and Vietnam; 3) the status quo; and 4) system collapse.

First, the restoration of planned economy will likely be difficult, considering the fundamental inherent problems attached and North Korea’s weak ability to acquire economic resources. The possibility of reform and open-door policy also is low because the new leadership is concerned about political risks resulting from eased ideological control or the inflow of information about the outside world. Therefore, the most likely scenario in the short run is maintaining the status quo by winning resources through economic cooperation with China or South Korea or through denuclearization talks.

However, considering the North’s exchanges with the outside world are increasing, the possibilities of reform and opening-up or regime collapse will increase gradually.

The goal of the South’s North Korea policy should be a market economy and reunification of the two Koreas in the end. In this regard, Seoul needs to take extra care in deciding the concrete content and form of economic aid and cooperation projects. Among the primary requisites are inducing changes in North Korea’s policy and system, and creating conditions for as many people from the two Koreas as possible to meet each other and work together.

For a country with a unique system like North Korea, the death of a leader and subsequent power succession often provide a key opening for system change.

Hence, unusual attention has been on North Korea’s future since the death of Kim Jong-il last December. In reality, one can’t help doubting whether the Kim Jong-un regime will be able to control North Korean society effectively and remain in power. The skepticism is conspicuous because Kim Jong-un, the young and inexperienced third-generation leader did not have the time to be sufficiently prepared for ascension to power like his father.

A more fundamental question for the livelihood of ordinary North Koreans and inter-Korean relations is the policy direction of the North Korean government whether under Kim Jong-un or another supreme leader. For example, the Kim Jong-un regime could adopt policies quite different from those of Kim Jong-il, or it may lose power to someone who implements policies similar to those under the deceased leader.

North Korea’s Half-baked Socialism Before looking ahead to possible changes in the North Korean system, it is necessary to explain its characteristic features. As is well known, North Korea’s “classical socialism” rested on two pillars ― state ownership of

productive assets (businesses, mines, land, etc.) and a centrally planned economy ― but the latter collapsed and the socialist structure crumbled in the early to mid-1990s.

The North’s planned economy, of course, never did work well, falling short of ambitious forecasts, as in the former Soviet Union. Therefore, it would be appropriate to say socialism was actually a command economy that was ordered and controlled by bureaucratic organs, and market transactions were limited in scale.

After the mid-1990s, North Korea suffered so much economic despair that a considerable amount of economic activity spun out of bureaucratic control. A number of residents now eke out their living through free market activities at “changmadang” (private marketplace) and private production is evident in agriculture, fishing, mining and manufacturing. Private trading activities with China also seem to be quite vigorous.

Some regard this phenomenon as the spread of “market” or “market activity,” but it should be emphasized that North Korea’s markets remain “unofficial” markets. They fall far short of forming a true market economy, considering the regime still does not protect property rights and contract implementation, nor allow the freedom to conduct private business activities. In addition, the country maintains the public ownership system of productive assets as well as an official economy dominated by state-run companies and government agencies, so it would be safe to say North Korea basically retains its socialist system. Summing up, North Korea has established a dual economic system composed of official and unofficial activities, which may be dubbed “halfbaked” socialism.

Political Situation and Scenarios for Change in Economic System The question on what changes might occur in the North Korean economic system is closely connected to possible changes in the countryâ&#x20AC;&#x2122;s political situation. One of the reasons that North Korea has neither collapsed nor reformed and opened itself like other socialist countries lies in its pre-modern hereditary system of governance.

North Koreaâ&#x20AC;&#x2122;s future political situation can be conjectured under three possible scenarios. First, Kim Jong-un, vice chairman of the National Defense Commission, remains the supreme leader and maintains his hereditary regime.

Second, Kim loses power for whatever reason and a new leader or group of leaders emerges and retains the characteristics of socialist regime. Third, the Northâ&#x20AC;&#x2122;s socialist regime disintegrates irrespective of who is in control.

As for the future economic system of North Korea, four major possibilities can be considered. First, the North resurrects its classical socialism, that is, the regime restores a planned (command) economy. Second, it gradually shifts toward a market economy by actively introducing reform and openness like China and Vietnam. Third, it carries on partial socialism not much different from the present one. Fourth, the socialist regime collapses, leading to radical system change and reunification.

The three scenarios of change in North Korea’s political situation and the four possibilities of change in its economic system can be combined as shown in <Table 1>. The combination can produce 12 cases in purely hypothetical terms, but those marked X may be excluded as they are considered all but implausible. In other words, if North Korea’s socialist regime completely breaks down, the situation may directly lead to radical system change and reunification.

Possibility of Restoring Planned Economy If Kim Jong-un succeeds in maintaining the regime, North Korea will likely return to a planned economy. The hereditary successor can’t help but seek the legitimacy of his rule in the ideology of his father and grandfather. Actually, Kim Jong-il also made several attempts that reflected his intention to restore planned economy.

Given the nature of North Korean political system, the alternative power elite

who may replace Kim Jong-un will likely come from among influential figures in the existing power group. They basically share their socialistic ideology and may want to shore up their power through a planned economy. But a reversal to the past would face obstacles.

The biggest barrier would be in garnering widespread consensus that a renewed planned economy is desirable and even feasible. A considerable number of North Koreans would have to support the policy shift, if it is to succeed. In addition, North Korean bureaucrats and party cadres would have to exercise extraordinary administrative capacity and demonstrate strong loyalty.

Another obstacle would be finance. The leadership, for its part, would have to secure investments and other economic resources sufficient to restore the official industrial economy.

Under the present North Korean circumstances, these conditions are obviously difficult to meet. Amid the protracted economic difficulties, even the party cadres, let alone ordinary people, have come to think they canâ&#x20AC;&#x2122;t rely on the state for their survival and therefore, each individual should take responsibility for their own livelihood. A similar phenomenon, dubbed â&#x20AC;&#x153;demoralization,â&#x20AC;? occurred in other socialist countries in their final days, when people gave up hopes and expectations for socialism.

This is the reason for the growing tendency even among major state agencies and cadres to put the interests of their organizations, families and individuals ahead of those of the entire nation. Some state-run enterprises and government agencies have secured financial resources to partially restore their production capacity since the 2000s, but these moves were not aimed at restoring the overall planned economy but were attempts by a few power groups with privileged access to resources to solidify their own economic bases.

Even if North Korea manages to overcome these barriers to rebuild its industries and recreate the framework of a planned economy, it would face huge difficulties in achieving long-term stable management and operation of the restored economic system. A planned economy easily becomes inoperative due to insufficient incentives and difficulties in communication. Also, with their unsuccessful experience in managing a planned economy in the 1970s and 80s, the North Korean authorities must be well aware that rash attempts to revert to the old ways could trigger a bigger crisis. This was the reason why the Kim Jong-il regime had to remain in half-baked socialism for a long time.

These circumstances would not change under the new regime.

Possibility of Chinese-style Reform and Openness If North Korea cannot go back to the classical planned economy, what would be the alternative it can choose? The most positive way would be to opt for reform and openness as China and Vietnam have done. Both these countries have not only attained economic development but their communist parties have successfully solidified their grip on power through reform and openness.

So they could serve as benchmarks.

But it is important to understand that the reform and opening-up of China and Vietnam has been sharply different from reforms that appeared in the former Soviet Union and some East European countries in their latter days of socialism. The main theme of “reformist socialism” in the former Soviet bloc was to improve the management of state industries through “decentralized reforms.” This involved giving managerial autonomy to state enterprises. It was an attempt to change only the detailed methods of economic governance while maintaining the basic socialist frame of property ownership and bureaucratic control.

What appeared in the reform and opening-up of China and Vietnam, on the other hand, was a nascent form of private economy. It included the dismantlement of collective farms and establishment of family farming as well as growth of private businesses, clearly deviating from the socialist system.

The previous socialist ideology antagonized private business activity, but the communist parties in China and Vietnam gradually permitted private business activities before completely liberalizing them later. Thus, the reform and opening-up in China and Vietnam can be viewed as a phased process of fundamentally shedding socialist ideology and parameters.

There is one more caveat: To introduce reform and openness like China and Vietnam does not mean simply mimicking what they did. As different countries have different circumstances, it is neither possible nor desirable to exactly follow other countriesâ&#x20AC;&#x2122; footsteps. China and Vietnam also showed considerable differences in their reform. Also, adopting similar policies would not automatically put North Korea in the same league as China and Vietnam.

For example, even if North Korea sets up and operates special economic zones, it would be hard to say the regime is seeking reform and openness unless it introduces market-oriented reforms throughout its economy.

North Korea has not actively pushed for reform and openness so far probably because of its concerns about political risks. Reform and openness requires the support of a new ideology. Relaxation of conventional political and ideological suppression and control to a certain extent is inevitable. As seen in the case of perestroika that the erstwhile Soviet Union pursued in the 1980s, however, excessive relaxation of control is highly likely to lead to political crisis, and as a consequence, the regimeâ&#x20AC;&#x2122;s collapse. When they introduced reform and openness, the communist parties of China and Vietnam had greater influence on their populace and better governance abilities than their Soviet and East

European counterparts. But North Korea’s ruling elite of today seems to lack such self-confidence.

As North Korea’s economic difficulties worsen and the gap with China and South Korea grows wider, however, the power elite in Pyongyang may eventually want to revive their anemic economy through gradual reform and openness. North Korea has drastically increased economic exchange with China and South Korea over the past decade, which should be regarded as a step forward from its previous policy. Also, North Korean leaders might try to win the support of the general public by easing oppression and control on their unofficial economic activities.

As stressed earlier, however, there is a big difference between moving somewhat closer toward reform and opening-up and implementing “real” reform and openness. If North can say it is adopting genuine reform and opendoor policies, it should bring about far more fundamental policy changes, such as the dismantlement of collective farms, legalization of urban private economy and private business activity, and liberalization of foreign trade, as well as ideological emancipation that can justify these policy reversals. In addition, there should be a number of people armed with a reform-oriented mindset to spearhead reform and opening-up, not only from among the highlevel power elite but from mid- to low-level cadres. Experiences of other countries show such a reform-minded elite class was largely formed during power transfer and consequent generational transition.

In this regard, the death of Kim Jong-il could be seen as one of the important factors in enhancing the chances of reform and opening-up in North Korea. In the course of the new leader Kim Jong-un solidifying his power base, a gradual generational change can take place in the North’s power elite, and the new-generation leaders are likely to be more reform-oriented than the old

ones. On the other hand, Kim Jong-un has disadvantages in pushing for ideological emancipation, a prerequisite for reform and opening-up, as he is a hereditary successor to his father.

Even in case Kim Jong-un proves to be incompetent and is replaced, the chances of reform and opening-up can swing either up or down. The new leadership that ousts Kim Jong-un could be either conservatives who stick to the old system, or reformists who try to experiment reform and openness. As there is no way to know the real dynamics within the North Korean power elite, it is very hard for now to guess which group would have the advantage in a power shift. However, considering North Koreaâ&#x20AC;&#x2122;s younger generations have undergone totally different life experiences from those of older ones and are living in ways far removed from socialist ideology, chances are high that an increasing number of people, not only ordinary citizens but elite groups as well, will aspire for reforms as time passes and generations change. In this regard, one may expect the possibility of reform and openness to grow gradually in North Korea as years go by.

Future of the Strategy to Maintain Status Quo Reform and openness is an attractive alternative, but not an easy one in that it requires extraordinary political capacity. And this seemed to be the reason the Kim Jong-il regime had no other choice but to maintain the status quo without fundamental policy changes despite prolonged economic difficulties. The strategy to preserve the status quo does not of course mean doing nothing.

Over the past decade, the Kim Jong-il regime tried to pull off inter-Korean economic cooperation and economic aid through two summits, continued to hold negotiations with the United States, and showed signs of enhancing economic cooperation with China. Acquiring economic resources through

external relations was North Korea’s main strategy to preserve the status quo.

At this juncture, there is a question to ponder. It is how to evaluate the prospect of North Korea introducing massive foreign aid to implement the socalled

“developmental

dictatorship,”

thereby

overcoming

economic

difficulties, if the secretive communist state normalizes diplomatic relations with other countries.

Developmental dictatorship is a common term, but it is not easy to define.

Simply put, it means a dictatorial regime implementing a powerful economic development policy. What matters, however, is the content of such a policy.

Classical socialism provided the typical approach of dictatorial regimes pursuing forceful economic development through a centralized command structure. As mentioned earlier, however, North Korea today lacks the general conditions for such a powerful policy for economic development.

South Korea in the Park Chung-hee era (1961-1979) is often cited as an outstanding example of successful developmental dictatorship, but it should be understood that South Korea’s economic development was thoroughly based on private property ownership, market economy and private business activities. China after reform and opening-up offers another notable example of developmental dictatorship. The Chinese case, however, exemplifies a transitional model evolving toward a market economy, which is different from both the classical socialism of the former Soviet bloc and South Korea’s economic development model. In other words, assuming that North Korea implements developmental dictatorship, the pivotal factor would be what kind of economic system it is based on. That leads to a conclusion that developmental dictatorship itself cannot be an independent scenario.

North Korea could push for economic development through external

exchanges by either strengthening economic cooperation with China or receiving massive assistance through diplomatic normalization with South Korea, the United States and Japan. But without fundamental change to its current economic system, all those efforts would amount to little more than the preservation of the status quo.

From a broader perspective, one can see dictatorial regimes in not a few lowincome developing countries maintain their power bases by using aid money from abroad instead of implementing substantial economic reforms. In some developing countries, the power elite mainly relies on their natural resources, but the results are largely the same whether they attain funds from exporting commodities or foreign lenders and donors. These countries also have an official economy controlled by power elite and unofficial economy in which ordinary people eke out their living. North Korea of today seems to be under similar circumstances.

If one doesnâ&#x20AC;&#x2122;t stop at North Korea and looks at low-income developing countries as a whole, relatively few of them have adopted scenarios for planned economy or reform and openness. Most of them make ends meet with external aid. Whether they opt for planned economy or market economy, it is very difficult to fundamentally change an economic system, while winning economic resources from the outside world is much easier. Viewed from this perspective, North Korea will most likely adopt a policy that maintains the status quo, regardless of whether Kim Jong-un continues to rule or is replaced.

Will North Korea be able to overcome economic difficulties solely by securing sufficient economic aid from abroad and not transforming its system? If global experiences are any guide, one canâ&#x20AC;&#x2122;t help but become skeptical. A number of low-income developing countries have failed to attain economic development despite long-term, massive foreign aid, because they stopped short of

implementing fundamental systemic reforms. In North Korea, too, development projects are highly likely to end up as failures even if Pyongyang receives massive foreign aid, as its lack of systemic reforms would lead to lack of economic efficiency. Chance are high the Northâ&#x20AC;&#x2122;s economic situation would get better than now, but long-term, sustainable growth is hard to expect.

North Korea could follow the path of many dictatorial regimes, who subsisted long on foreign aid. As long as it retains effective political controls, the North Korean status quo could survive for a considerable time. But system survival would not be indefinite. Dependence on exchanges with foreigners would inevitably lead to continuous spread of information about the outside world and formation of interest groups benefitting from external exchanges within the elite class, which in turn will most probably spawn aspirations for change.

If the existing power group accepts such aspirations while sticking to power and maintaining political stability, it would lead to reform and openness. On the contrary, if it fails to stay in power or the regime falls apart in the process, it would result in radical system change and start of reunification. Considering all these variables, North Korea will very likely seek to preserve the status quo in the short run, but, in the long run, it is increasingly likely to opt for reform and opening-up or move in the direction of eventual collapse.

Implications for North Korea Policy The future of the Kim Jong-un regime can exert a great influence on interKorean relations and the entire Korean nation. Far more important in this regard is in which direction the North Korean system will change than whether or not Kim can stay in power.

From a long-term, fundamental point of view, it seems more desirable for North Korea to move toward a market economy through reform and openingup rather than returning to planned economy or preserving the status quo.

Some even believe that the socialist regime should collapse, leading to radical system change and opening the reunification process as soon as possible. It is hard to say which is more desirable ― reform and openness or system collapse. It involves quite subjective judgment. It must be pointed out, however, that political and economic preparations are necessary for a possible regime collapse and the start of reunification process, as it will accompany enormous confusion and cost. In any way, South Korea’s goal in its North Korea policy should be to induce the North Korean system to shift to a market economy and ultimately attain territorial reunification, through either reform and openness or system collapse.

Then, what would be the ways to facilitate North Korea’s system change? It is necessary to encourage North Korea to increase exchanges with the outside world, including South Korea, in ways that help an increasing number of North Koreans to benefit from the process, have more access to information about the world society, and aspire for reform. The South Korean government has made various attempts to offer aid to North Korea and promote interKorean economic cooperation over the past decade or so.

It is difficult to rule out the possibility, however, that the South’s aid and economic cooperation would only help the North preserve its current system.

Economic resources from the outside world can serve as important means of enabling North Korea to endure economic hardship without reform. InterKorean economic assistance and cooperation projects can either expedite or deter North Korea’s systemic transformation, depending on ways they are implemented. If the North Korean authorities can acquire economic resources without extensive contacts between people from the two sides, it is highly

likely to hinder system change in the North. On the other hand, if aid and cooperation projects are carried out in ways to encourage North Korea to introduce policy and system changes and allow as many South and North Koreans to meet each other and work together, it will likely speed up reform and openness, and eventual system collapse.

It is one thing to understand the conceptual implications of North Korea policy, and it is another to devise action plans and execute them in effective ways. The North Korean regime cannot help but worry about its political security, so it has the tendency to be wary about and guard against all South Korean policies toward the North, rejecting even reasonable and mutually beneficial ones. In order to push through its policy to facilitate the Northâ&#x20AC;&#x2122;s reform and openness, South Korea should draw up wise policies and make persistent efforts to conduct dialogue with North Korea.

[Economics of Korean Unification, Vol. 1, 2012, published by the Hyundai Research Institute]

www.koreafocus.or.kr

Polarizing Business Competitiveness Woo Cheon-sik Senior Fellow Korea Development Institute

I. Overview Polarization of industry and business and widening gaps in competitiveness and performance have been spreading across the sectors and intensifying amid the recent economic recession and slow growth. Tangible polarization, as seen in the performance differences among various economic areas (industries, sectors, business category and size, employment/income groups, etc.), is deepening into “omni-directional and individual polarization,” the gaps ever widening among individual players within the same group.

If employment and income polarization is included, the internal and external factors of polarization form a vicious circle of “achievement gaps among industries and businesses ―> gaps in income and employment ―> gaps in innovation base (human resources, investment in research and development) ―> back to the gaps among industries and businesses.”

Economic recovery is expected to partially relieve the problem, but structural factors at home and overseas will very likely continue, sustaining or intensifying polarization. The growth rate cannot be expected to rebound in the short to mid term. Besides, this is not an issue that can be resolved through economic recovery alone.

In order to tackle the widening gaps amid slow growth, a two-track strategy is required to maximize the growth potential of competitive sectors while improving the capability of struggling sectors. In other words, shared growth should be sought through market opening and policy reforms for service industries and small and medium companies.

Due to the accelerating polarization among individual players, the average performance of a specific group is not significant anymore. More specialized

and differentiated approaches are required to address problems faced by individual players, for which overall restructuring of policy infrastructure is necessary.

II. Development Trend of Polarization In a polarized economy, the widening performance gap (productivity, profit, etc.)

between

competitive

and

weak

sectors

(industry/business

categories/companies) increases the proportion of employment in the laggards, eroding the distribution structure of the entire economy. This kind of polarization gradually emerged in the 1990s and accelerated after the 1997 currency crisis. In the early 2000s, polarization continued to intensify due to cyclical factors such as weak domestic demand.

1) Main factor in the first phase (1990 to the present): Employment in the manufacturing sector fell by 11 percentage points from 28 percent in 1989 to 17 percent in 2010, while productivity soared. Meanwhile, employment rose in the service sector in spite of stagnating productivity. Deindustrialization has proceeded much faster in Korea than in most industrialized countries, but the productivity (wages) of the nationâ&#x20AC;&#x2122;s service sector remains far lower than that of manufacturing. As of 2009, the service sector accounted for 60 percent of GDP and 67 percent of employment, but its productivity hovered around 40 percent of manufacturing sectorâ&#x20AC;&#x2122;s, compared to 80 to 100 percent in industrial countries.

2) Main factor in the second phase (since the currency crisis to the present): Large conglomerates with high productivity and high growth (key manufacturing, finance and insurance, construction, etc.) reduced their workforce substantially, leading to steep increases in employment at small and

medium-sized firms and subsistence-type service businesses with low productivity.

3) Main factor in the third phase (since economic recession): Amid the remarkable corporatization trend of local service providers, traditional manufacturing, service, transportation and construction businesses faced tumbling domestic demand. Recession in these already overcrowded sectors dealt a severe blow to employment and income in the middle to lower income classes, leaving numerous small-time business owners and temporary day labors jobless.

Around the mid-2000s, the overall economy began to show new structural changes amid increasing polarization among businesses as the industrial and corporate restructuring triggered by the currency crisis neared completion. The changes included decline of innovative small and medium companies, emergence of knowledge-intensive service companies, and phenomenal growth of the top 10 conglomerates into global multinational enterprises.

III. Causes and Prospects of Polarization Polarization was caused by a combination of three structural factors (see <Figure 1>): rapid changes in the domestic and global economic environment; vulnerability of the industrial and employment structures at home; and delays and accumulated problems in policy response. Polarization is expected to continue in the mid to long term and may even intensify.

In regard to the vulnerable industrial and employment structures, the major problems are the weak core parts and material suppliers, who are considered the â&#x20AC;&#x153;backbone of industry,â&#x20AC;? and a hefty proportion of self-employed small

business owners.

Due to the weakness of their suppliers, a growing number of core intermediate goods have been outsourced since the mid-1990s. Therefore, the outstanding achievements of highly productive and export-based sectors mainly led by a few large conglomerates, such as IT and automobiles, have not fully led to additional domestic demand. Added value from exports has fallen from 0.71 in 1993 to 0.63 in 2000 and again to 0.56 in 2009. Meanwhile, import dependency for intermediate goods has risen from 18.8 percent in 1990 to 24.7 percent in 2009.

The proportion of self-employed small business owners has been trending downward but still stands at the 30 percent level, the highest among the OECD member countries in both manufacturing and service industries.

It is expected that not only the majority of businesses in light industry (about 6 percent of total employment) but also small companies in heavy and chemical industries (about 5 percent of total employment) and small-scale farms (about 50 percent of farm households) will remain marginalized.

It is also forecast that the majority of subsistence-type small service firms and builders, which served as primary employment providers after the currency crisis, have recently undergone extensive restructuring driven mainly by major enterprises. These vulnerable businesses will face increasing marginalization in the years ahead.

IV. Basic Direction in Policy Response and Core Tasks The current polarization across all industries is an inevitable process of

restructuring for the advancement of Korean economy. The recession also has positive effects of resolving the factors of economic restructuring that accumulated before the currency crisis.

Compared with industrial countries, Korea has significant structural problems in its economy, including a huge proportion of the self-employed and immaturity of corporate-type service providers with high productivity in the business and social welfare services sectors. This means there is a great need for improvement as well as possibilities through restructuring.

In the services sector that remains seriously backward, policy efforts in recent years have brought about significant systematic improvement in productivity and competitiveness. For example, the current administration carried out the “fifth comprehensive measures” and the “13th measures.” Hence the service industry is making noticeable moves toward structural and qualitative development.

It is necessary to improve the environment of market competition toward facilitating a smooth transition of “business and people” into high productivity sectors, increase support for economic players with innovative potential to encourage investment in technological manpower, and strengthen social protection for the perpetually vulnerable working class.

Government policy should basically be geared for support to “people” instead of “businesses/institutions.” For businesses, the government should create a competitive market environment complying with global standards. Social protection should be strengthened for companies with marginal abilities to cope with the changing business environment and vulnerable working classes, including elderly small-scale farmers and subsistence-type small business owners, thereby inducing youths and experienced workers into public and

welfare service sectors.

1. Major Policy Tasks for Business An effective support system needs to be built to introduce a regional cluster policy for parts and materials, textiles and garments, food and beverage, and other light industries, which have not been provided with policy support commensurate with their business value and economic contributions.

As for the service sector, anti-competitive institutions and practices must be abolished by reforming business organizations and strengthening the role of regional governments. At the same time, a systemic reform is also needed to provide as much policy support to the service sector as manufacturing.

In order to fill the vacuum of mid-tier companies and help them join a competitive market environment, there should be continuous efforts to absorb external resources. Considering the latest trend of multi-polarity in the global economy, Korea should strengthen its strategic inroads into newly emerging markets such as Southeast Asia, the Middle East and Latin America. Also, an innovative strategy is necessary to encourage foreign investment which is stagnant. Korea needs to attract European and American investment into its strategic business services and especially the European middle-tier and small and medium-sized companies in the parts and materials sector.

2. Major Policy Tasks for People The government should encourage investment in human resources development driven by the private sector, not to mention education, for active job transfers, business shifts and start-ups. Through a balanced combination of public and private financial resources, active support has to be provided for

investment in people.

Among necessary measures are loans and scholarships (work study scholarships and full grant scholarships) for students from low-income families and drastic improvement in re-education programs for experienced workers including those in the service industry. To this end, it is necessary to create funds to increase financial support and devise ways to vitalize private financial markets.

In particular, specialized job transfer program should be strengthened for midcareer skilled workers dismissed in the restructuring process. They may be utilized as managerial resources to reform small and medium-sized companies, thus expanding the market for specialized business services. The government should also consider ways to widen the social safety net for those who are excluded from social protection under the current system, including farmers and non-salaried workers in service industries.

Government programs and policy implementation systems related with education, labor and welfare for regional-based adult education and training should be reformed at front-line enforcement agencies. Regional governments and business organizations need to be encouraged to actively participate in policy implementation for education and training, information provision and improvement of workplace environments through systematic reorganization of business organizations for efficient learning.

3. Improving the Conditions for Policy Implementation For the services sector, the existing laws and regulations and policy execution system should be improved on the basis of comprehensive reviews and evaluation of concerned statutes and agencies. A basic law for governing

service industries should be legislated to help resolve conflicting interests and create momentum for a policy shift.

For small and medium-sized companies, the policy implementation system and governance structure should be reshaped in ways that improve the capability of policy authorities and increase the participation of regional governments and innovation leaders. It is also necessary to rationalize and settle policies and projects related with building a regional innovation system.

[Excerpted from presentation at the fifth KDI Open Forum for Reviewing Korean Economy, March 20, 2012, organized by the Korea Development Institute]

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Korean Movies from True Stories: Reality and Desire for Myth Kim Young-jin Film Critic & Professor Department of Film and Musical Myongji University

Following the release of “The Crucible” (“Dogani” in Korean), movies based on reality or promoted as such have been all the rage. “Unbowed,” released in January, was a huge hit as it rode on society’s mistrust of the judicial system.

The main actors and staff worked on this movie without pay so production costs did not top 500 million won. By early February the movie had drawn three million people, and excluding relative differences in scale, this makes it as successful as the 2009 independent movie hit “Old Partner,” which cost 100 million won to produce.

“Nameless Gangster: Rules of Time,” is a fictional portrayal of the government’s declared war against crime under President Roh Tae-woo (19871992). Nevertheless, by infusing the screen with the tone and texture of true events, the film has been just as successful as “Unbowed.”

This trend in the box office gives us many interesting points to ponder. First, it is evident that blockbuster-style movies no longer should be considered the only way to overcome the limits of the domestic market. The fact that movies based on true stories or inspired by them have attracted moviegoers shows that viewer tastes have changed. In “Unbowed,” the most interesting moments are not those dealing with the life of the protagonist, Professor Kim Myeong-ho, but the scenes inside the court. The events, unbelievable if they were not true, make for a legal drama quite different from Hollywood fare, and the appearance of the eccentric protagonist has strong dramatic appeal.

Similarly, “Nameless Gangster” does not have the traits of a Hollywood gangster or noire film. Instead the drama is driven by strong regional color in the social atmosphere and characters portrayed. Throughout the movie there are moments when the movie departs so wildly from genre conventions that it seems to be parodying the great Hollywood gangster flicks. For example, the lives of the leading characters are totally devoid of tragic dignity. A stronger feeling in the movie is the sense of compassion for the somewhat pitiful characters and ridicule and satire of Korean society for the way it operates through personal connections.

Star Persona and the Trap of Genre Conventions The movie business tends to rely on star persona and genre conventions as a safe way to generate sustainable profits. But such devices don’t work that well in Korea, as there is no well-established formula for matching stars with certain genres. For example, over the past few years, Jang Dong-gun has consciously styled himself as a blockbuster hero. But from “Typhoon” to “Warrior’s Way” and now to “My Way,” the results have not been so good.

Even the craftsmanship of Kang Je-gyu, the Korean director considered to be the best in blockbuster movies, has not been able to save Jang. In fact, it even seems that Jang has dug his own grave.

“My Way” is based on a real person. The idea was taken from the book “D Day” by Stephen E. Ambrose. It mentions a Korean soldier in German prisoner of war uniform captured by the Allied forces after their landing in Normandy, France, during World War II. The Korean soldier had been captured by the Japanese army and then taken by the Soviet Union. He then was captured by the Germans, and dressed in a German uniform was assigned to hard labor in Normandy, where Allied troops come upon him. Thus, his life is marked with the misery of Korea’s situation in the early 20th century, when the country stood on the fringes of world war. But on the other hand, he could be called one very lucky man. With a strong will to survive, he endures his horrific fate.

There would have been several ways of turning this story into fiction. But “My Way” took the easiest and consequently the most tedious route. The historical background to the story has been used as so much toilet paper to turn Jang into a screen hero. He is a superhuman being who looks good no matter what the situation. The scene with Jang Dong-gun and Japanese star Joe Odagiri playing soccer in Normandy dressed in German military uniforms, a scene

ridiculed by many, has no effect other than to blatantly mythicize the stars from Korea and Japan against an historical backdrop. As this silly strategy is used without blending into the storyline, audiences found it hard to hold back their laughter.

The character that was properly fleshed out as a human being was “Anton” played by Kim In-gwon, but he can’t be the lead. At times he moves the audience as the story focuses on him but he falls far short of being a central axis to the plot.

If “My Way” is an example of the star persona engulfing the genre conventions, “Perfect Game” is the opposite case, with the genre conventions consuming the star persona. The acting by Yang Dong-geun and Jo Seungwoo, who play real baseball pitchers Choi Dong-won and Sun Dong-yeol, respectively, is first-rate. The legendary, 15-inning pitching battle between Choi and Sun is a perfect movie subject. This kind of story was possible only because it was based on real life. Perhaps the makers were afraid of pushing ahead with the story in a straightforward manner, for the movie presents people and incidents that keep the audience on the edge of their seats.

The character Park Min-su, a second rank player for the Haitai Tigers, is a father and generally the most incompetent player on the team, but at the crucial moment he makes a big hit. With this move, however, the honesty of the real life match becomes quickly mired in melodramatic exaggeration. The same goes for the female reporter for a sports newspaper who rails against the Chun Doo-hwan government’s policy to keep the people ignorant of politics by making them addicted to sports. Wary of pro baseball at first, gradually she falls in love with the men’s game, and instead of being an observer she chooses to lose herself in the narrative. It’s a move clearly aimed at evoking melodramatic empathy.

I believe the dramatic unpredictability of “Perfect Game” would have been much stronger if it had more actively explored the characters inside and out rather than using the typical narrative style of its genre. It must be remembered that Choi and Sun were not only sports symbols of their time, but stars who are hard to find in any other era. Choi, in particular, is such a star. While Sun was a strictly self-disciplined pitcher, Choi from his high school days would step up to the mound at any time if his teammates asked him, regardless of his physical condition. He was like that before and after he became a professional player.

In 1987 when the legendary game of the movie took place, Choi was a falling star while Sun was a rising one. Choi was older and had pushed his body hard.

In his college days, Choi once pitched for 27 innings straight. When he was on the Lotte team, he once came to the mound for six days straight. In the 1984 championship series, he pitched four winning games out of five for Lotte. But did the movie deal with the inner world of such a man? Not really. It brings to mind another movie, “Mr. Gam’s Victory,” also based on a real person, which

made the same wrong moves. When a movie is based on non-fiction, the key to success is finding balance in the use of genre conventions. In this respect, “Perfect Game” played it too safe and never outwitted the audience’s predictions.

Differences in Interpretation of Reality In the same light, “Unbowed” does not get high marks either. The story unfolds in irregular fashion, the acting is uneven, and there is nothing new about the way the main incident evolves or how the secondary characters are linked to it. For example, the lawyer representing the lead, Professor Kim Gyeong-ho, and the journalist reporting on his case are university alumni; but using this kind of connection as leverage for the plot is old hat. And while the actors are partially to blame, it is true that they haven’t been given good conditions to work with. The lawyer must be able to speak indirectly for the protagonist inside and outside the courtroom, but throughout the movie he never quite fits in. He is only a convenient character used to convey the idea that standing by Kim’s side is like upholding social justice.

However, the real incident on which the movie is based is much more complex. The real person behind Kim Gyeong-ho’s character is Kim Myeongho, a math professor at Sungkyunkwan University. While making a stand regarding public notice of a mistake in the college entrance exam, Kim Myeong-ho clashes with his colleagues and alienates school authorities, who deny him tenure. When the court rules in favor of the university, Kim later points a bow and arrow at one of the judges who rendered the decision.

That is about all the public knows about the case, but it is much more complicated. Professor Kim Myeong-ho was known to be an eccentric, stubborn person who never listened to others. Although he could have been saved by the law, his own mercurial behavior botches the case, and he ends up in court for threatening the judge with a bow and arrow. That would be a more balanced interpretation of the case, reflecting both sides, but the case was celebrated as resistance against those who cover up the truth.

Director Jeong Ji-yeong created the movie’s most impressive moment in a courtroom scene. First, he cast for the lead Ahn Sung-ki, an actor generally liked and respected, and makes him play an anti-hero with anti-establishment DNA. Different to what he has hitherto shown on the screen, Ahn aggressively brings to life an honest “madman.” When the judge cuts in on what he’s saying, he roars and tells the judge not to interrupt, and in court he proclaims that he will sue both the judge and the prosecutor. Thanks to the power of the character, the audience grows to like him even without bringing in some grand cause.

In the movie, Kim Gyeong-ho is not insisting that he is right: he admits to his threatening act in part but argues that he never shot the arrow. At the same time, he berates the court and prosecution for omitting his own evidence,

which punctures the prosecution’s argument that Kim shot an arrow at the judge. Microscopic scrutiny of the character creates great waves.

Actors Moon Sung-geun and Lee Kyeong-yeong have a wonderful presence as judges. Moon’s tough and shameless behavior is a vibrant depiction of the sense of superiority felt by the powerful, who believe they cannot be hurt by any attack. Meanwhile, Lee delivers an unforgettable portrayal of a judge who is constantly undecided and hesitant but has no thoughts of changing his stance. These judges were ready to try the case as a routine matter, and the vagueness of their expressions vividly shows people in power who cannot be persuaded in any direction. Such character description, keeping some distance from the categorization of people into good and bad, seems to show the proper approach to communicating reality.

So while this movie is said to be based on a true story, it is a dramatized adaptation with strong appeal that rides on the general atmosphere of Korean society today where mistrust of the judiciary has surged, thereby reflecting a factional attitude. As such, the argument as to whether the movie is fiction or based on reality is a waste of time. There is no such thing as an absolutely objective fact. Depending on the context, a fact can be differently interpreted.

In “Unbowed,” the facts and court transcripts have been put into a dramatized context under the proposition of “achieving legal justice.” The only difference is whether one agrees or disagrees with this proposition. Debate on whether a storyline is true or not and whether we can believe it or not, has long been banished from modern art, which has already accommodated the multiplicity of reality. Putting aside the issue of whether or not “Unbowed” is a true political movie, it cannot be said the movie has violated the ethical boundaries of a commercial movie.

Ironic Overturning of Genre Conventions Director Yoon Jong-bin’s “Nameless Gangster: Rules of Time” presents more complicated issues for discussion. This movie, set in the 1980s, is about a corruption case involving a customs officer and a distant relative, who is the boss of an organized criminal gang. Though said to be fiction, the movie creates a sense of déjà vu and tricks the audience into thinking that the plot is true. The story of the rise of a former customs officer, Choi Ik-hwan (played

by Choi Mink-sik), who takes on the role of right-hand man to his relative is quite convincing. The rise and fall of the protagonist is little different to that seen in most gangster movies: the hero’s grand ambition makes him a success but also leads to his ruin.

What is not typical of a gangster movie is the way the leading character is portrayed. Choi Ik-hwan never commits violence himself. He is not a man who equates ambition with violence and overpowers those around him, hence bringing on his own ruin. He achieves success by using those around him who live by violence and discards them when they are no longer useful. He stands

on the fringes of power, which is symbolic of violence, and quickly realizes that real violence lays in political power. The gang boss, Choi Hyeong-bae, who is young enough to be his nephew, occasionally asks him about his real motives. He knows his relative is not a gangster and tells him to stop acting like one. But while Choi Ik-hwan may not be a gangster, he is also not one of the powerful either. He is simply an opportunist and success seeker who lives off the powerful as he does his own networking.

There is no way such a character can have any dignity. This means he cannot be a tragic hero, and the same goes for the boss and the members of his gang.

They are too young, unlike the elderly gangsters of Hollywood. They are not only young but are also short-lived. In this sense they are different to gangsters in Western culture, whose organization is inherited by the next generation turning to a legitimate line of business. But nothing lasts forever, and there are severe fluctuations in the rise and fall of business, which makes for increased drama and a rampage of betrayal and fraud. In such circumstances, the boss calling Choi Ik-hwan “the Godfather” is not just a friendly way of addressing an older distant relative but a device that makes the audience laugh.

There is a world of difference between “Nameless Gangster” and the romanticized and mythical mafia family depicted in Francis Ford Coppola’s “The Godfather.” The reality of this movie, the world of high officials and mobsters who outwardly swagger and strut and think nothing of betrayal and fraud, cruelly tears down mythical faith in the movie based on genre conventions.

Movies have an aesthetic and ethical duty to truthfully observe the conflicts in reality. At the same time, they should serve as a buffer to mediate and solve those conflicts. For this reason many movies have become modern myths.

Putting such myths together is not as easy as one may think. A world only

filled with myths is not healthy. On the other hand, neither is a world filled only with dry observation of reality. It is a healthy sign that Korean movies are acting as a filter to reality. Over the past few years, mainstream Korean movies have barely reflected the contemporary world. Only now do they seem to be finding their place. Hopefully, in the future we will be able to see more balanced movies that act as a filter to reality and a medium between reality and myth.

[Quarterly Zeitgeist (Sidae Jeongsin), Spring 2012, published by Sidae Jeongsin Co.]

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- Activist Asserts the Lives of North Korean Defectors Should Come ahead of Ideology - Architectural Hallyu Attracts Young Architects from Abroad

Activist Asserts the Lives of North Korean Defectors Should Come ahead of Ideology

Heo Mun-myeong Staff Reporter The Dong-a Ilbo

On February 21, several celebrities, including actor Cha In-pyo, and a group of teenagers held a press conference in front of the Chinese Embassy in Seoul to call on China to stop repatriating North Korean defectors. Most of the teenagers wore white masks to protect their identity as they held signs saying â&#x20AC;&#x153;Save My Friend,â&#x20AC;? and tearfully pleaded for the protection of North Korean defectors in China.

The young activists were students and graduates of Yeomyeong School, an alternative school for former North Korean students. Thus, they once again illuminated the issue of North Korean defectors, who are among us but whom we hardly stop to think about.

On February 25, I visited Yeomyeong School at the foot of Mt. Nam (99 Soparo, Jung-gu, Seoul) to meet its vice principal, Cho Myung-sook. A small building with two stories above ground and two basements, the school consists of six classrooms and one teacher’s room. It looked rather like a make-shift night school from the 1980s. The vice principal was having a late lunch with a bowl of instant noodles and a rice ball. My first question for her was what led her students to participate in the rally.

“News reaches my students a few times a year that some of their acquaintances who had escaped the North were forcibly deported back, sending the youngsters into a panic,” Cho said. “This time, it was even harder for them because their peers were among those who were repatriated. Back in North Korea, some of the children here witnessed people being shot to death in a marketplace after failing to escape the country. These children know all too well how cruelly everyone, young or old, gets beaten if caught attempting to flee to the South. What is worse is that those defectors currently detained in China were caught during the mourning period for Kim Jong-il while his son Kim Jong-un had threatened that anyone caught defecting during that period would be killed. My students know very well what will happen if they are sent back to the North. That is why they couldn’t just sit and watch.”

Cho added, “When I was working in China helping to rescue North Korean refugees, I saw, at close range, a man being taken away by a Chinese public security officer. The terrified look on his face and his eyes filled with fear are still vivid in my mind.” She went on to say, “After I decided to organize a public demonstration, I was at a loss for what to do because I didn’t want my students to be exposed. So, I discussed this matter with Mr. Cha In-pyo, who is a sponsor for our school. Saying he was more than willing to help us, he suggested that the students participate with their identity concealed. So they could stand behind him, their faces covered with masks. I’m so grateful to

him.”

Yeomyeong School was established in 2004 by 23 church organizations and individual patrons who were helping North Korean defectors. Among the eight alternative schools for young North Korean defectors nationwide, this is the only school that issues accredited middle- and high-school diplomas. The school has produced over 70 graduates thus far and currently has 70 students, aged 16 to 25.

“About 70-80 percent of our students have not completed formal education fitting for their age,” Cho said. “Back in the North, most of these children had given up their studies because they had to go around finding food and coal.

Those few who stayed at school scarcely had time to study either, because they were too often mobilized for various construction projects, building dams and paving roads, and activities for lending hands to farming villages. They often had only one meal every other day, relieving hunger by eating from garbage cans in the street or gathering roots in the mountains. Consequently, they are suffering from anemia, muscular pains of unknown causes, various skin diseases and many other health problems. Since they have never been vaccinated, their immune systems are so weak. Their bodies adjusted to extreme starvation for a long time, about 60 percent of these children develop juvenile diabetes as they start all of a sudden to have three meals a day in the South.”

What breaks Cho’s heart above all else is the trauma that has been entrenched in the young minds. She explains, “Since they are having a hard time adjusting to a radically different environment in the South after wandering from place to place for a long time, it is already an enormous challenge for most of our students to come to school on time every day. They suffer from anxiety and nervousness, and tend to react with excessive sensitivity to the slightest

stimulus. Their parents can’t afford to pay much attention to their children’s sufferings either, because they are heavily burdened with financial and other problems themselves. Some students can’t come to school because they must take care of their sick parents. Therefore, we find it much more urgent to heal their bodies and minds, which have been mercilessly scarred from the very moment of birth, by embracing them with love and patience rather than merely passing them knowledge and sending them to college.”

One of the founders of the school, Cho is not only playing the role of a mother for her students but is also responsible for school administration. I was curious about what brought this woman who was born, raised and educated all the way through college in Seoul to her current position.

Cho was born in 1970 in Sangye-dong, one of the poorest neighborhoods in Seoul at the time. Her family was so poor that she could eat only one or two meals a day. It was only after entering elementary school that she learned other people eat three meals a day. With little interest in learning, Cho spent much of her youthful days struggling to find a purpose in live. However, her mother implored her to attend college to have a better life than her parents. After failing the university entrance exam twice, Cho passed and majored in education at Dankook University. Her goal was to become a teacher because she wanted to look after children having a difficult adolescence as she did.

While a junior in college, however, an errant telephone call from an illegal migrant worker changed her life. Finding that she spoke some English, the stranger started to beg for help. The next day, Cho visited Guro Hospital, where the person’s friend was hospitalized after suffering a worksite injury.

Cho said, “I am a type of person who can’t turn my back on people in need.

Moreover, as I was studying the Bible in earnest at that time, I thought it was

not right to ignore anyone asking for help.” “Up to that moment,” she continued, “I had thought I was the most miserable person in the world. But I found I was wrong when I came to learn about the situation of foreign migrant workers. When I learned that some of them had no money for food, I visited them daily for two weeks to buy them something to eat.” She was naturally involved in helping migrant workers in negotiations on worksite accidents with their employers, and eventually gave up her dream of becoming a teacher to devote herself to social work. In 1997, she married a fellow social activist, Lee Ho-taeg, who currently works to support foreign refugees in Korea.

During their honeymoon in China, the couple witnessed the appalling situations of North Korean defectors. Cho notes, “It was a time when North Koreans started to flee their country to escape from severe famine. Back then my husband was working for ethnic Koreans from China who were injured in worksite accidents or swindled by fraudulent job brokers. From some of the Korean-Chinese workers, he heard about the wretched condition of North Korean defectors hiding in China. So we started to meet them in person.”

Therefore, “just like independence fighters during the colonial period,” they had secret meetings with North Korean defectors.

Cho recalled: “They were mostly people who had lived in the North Korean provinces of Pyongan and Hamgyong, near the border with China, before crossing the border to escape the severe famine in their country. With their pale, terrified faces, they looked like ghosts, rather than living persons. Some had come to look for food, but there were a lot of women who had been sold for money.”

The honeymooning couple couldn’t return to Seoul, leaving these people behind in such dire adversity, so they started to work for them, then and there.

Moving from one border district to another, where North Koreans sneaked into

Chinese territory, they provided food to some and helped detainees get their release by raising necessary money from their relatives in the South. They even built a hut near Mt. Paektu (Baekdu) on the border and lived there with North Korean defectors for a few months.

Then, some defectors expressed their wishes to go to a third country, knowing that they would die regardless of whether they were sent back home or stayed in China. In October 1997, the couple decided to accompany 13 North Korean defectors on their perilous journey to Vietnam. Cho said, “Our plan was that my husband would help them cross the border from the Chinese side and I would receive them on the Vietnamese side. But as soon as the 13 North Koreans managed to cross the border, all of us including myself were arrested

by Vietnamese soldiers.”

Cho and the 13 North Koreans were taken to a Vietnamese military camp near the border. She was so frightened that she thought about killing herself to avoid being executed. Until they were released the next morning by paying a few U.S. dollars – an unexpectedly petty sum of money – she spent the longest night in her entire life of 28 years. After many hardships, the couple eventually succeeded to take them to the Korean Embassy in Hanoi, but neither the Korean Embassy nor the Vietnamese government was willing to protect the defectors. After all, the 13 North Koreans were dispersed near the border area.

Cho and her husband went back to China and found them after searching for them over six months; this time they safely brought them to South Korea.

“Completing the mission, I was completely exhausted and ill with tuberculosis and hepatitis for the next two years,” Cho said. “Besides, my Christian faith was also put to test. I challenged God, asking him why I had to perform such difficult tasks. Watching the corpses of North Koreans shot to death while crossing the border and floating around in the river, I cried, asking God where

he was.”

During those two years of convalescence, it occurred to her that what was truly needed was a long-term, fundamental support system, rather than temporary, individual assistance. At last, Cho decided to open a school. She noted, “South Korean teachers are often helpless when our students go astray because the teachers can’t figure out all the horrible experiences the children went through at early ages. The children open their hearts to me relatively easily because I almost died helping North Korean refugees and experienced terrible poverty myself when I was young. By giving me trials, God has prepared me to take care of these children.”

Asked about the present support system for North Korean defectors in South Korea, Cho said, “It is important to offer basic cultural education about South Korean society’s institutions, customs and values, rather than trying to teach them occupational skills necessary for earning livelihoods immediately. It is also necessary to provide curriculum according to age group. The current programs for people of all age groups are less effective. It is no less important to combine and integrate the various support programs provided by different agencies.”

Regarding her view of national unification as an activist who is well versed in the situations of both Koreas, Cho said: “As a college student, I could not sympathize with my friends engaged in political activism. I thought it was much more important to help one underprivileged person around me than to preach grand political ideologies. When I helped foreign migrant workers, people labeled me a ‘left-wing progressive.’ Then, since shifting to helping North Korean defectors, I’ve been called a ‘right-wing conservative.’ What on earth is ideology? Human lives should be placed ahead of ideology. Some South Koreans today turn their faces away from the basic rights of North

Koreans who are leading indescribably miserable lives, decrying what they call ‘pro-North Korean’ activism. We must not pass down such heartless fetters of ideology to our posterity of coming generations.”

[February 27, 2012]

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Architectural Hallyu Attracts Young Architects from Abroad

Kim Mi-ri Staff Reporter The Chosun Ilbo

“Fascinated by Korea’s innovative and elegant design, I have studied architecture for the past few years with an aim of working in Korea. I hope to have an opportunity to learn more in your company··· Sincerely yours.”

Architect Roh Eun-joo, 43, head of Studio Gaon, recently received this e-mail message from the United Kingdom. At first, the message written in Korean made her think it was from a Korean, but the sender turned out to be a Briton.

Emilia Ross, 21, a student of architecture at the University of Edinburgh, asked if she could get an internship at Studio Gaon, attaching her courteous cover letter with an application form and her portfolio, all written in Korean.

She did not forget to add that her Korean proficiency is at introductory level.

The Seoul-based studio interviewed Ross by exchanging a few rounds of e-

mails in Korean, and decided to employ her as an intern. “We’ve had employment inquiries from architects in Spain, Uruguay, Poland and other countries, so the inquiry [from Ross] itself was not so extraordinary, but her eagerness and effort to communicate in Korean aroused my curiosity about her,” Roh said.

Lately, there has been a rising number of architects and students of architecture who contact Korean architectural design firms in the hope of working in Korea. In some renowned firms, receiving employment inquiries from abroad is not rare anymore. At Iroje Architects & Planners, run by the architect Seung Hyo-sang, 60, the staff has always included one or two foreign architects at any given period for the last several years. Currently, there are two of them – one from the United States, the other from China.

This tendency is also found in Archium, headed by Kim In-cheol, 65, professor of Chung-Ang University. Recently, two foreign staffers – one from the U.K. and the other from Thailand – completed their one-year stints and returned home. Shortly afterward, an Irish architect came for an interview.

Gansam Architects & Partners, one of the large architectural design firms in Korea, has hired up to 10 foreign applicants at a time.

Korean architects, recalling how difficult it was for Koreans to find a job at prestigious architectural firms in other countries, say they are amazed at how things have changed. They agree that hallyu, or the Korean Wave, has reached architecture. Seung Hyo-sang of Iroje comments, “Architecture is a saturated market in America and Europe. In Korea, on the other hand, various kinds of dynamic, short-term projects that can’t be experienced in those regions are frequently carried out.” He asserts that young architects still in their twenties from abroad should find Korea to be the “best country for training.”

“Since the Lehman Brothers crisis in 2008, large-scale architectural projects have virtually disappeared in the U.S.,” says Clayton Strange-Lee, 30, an American architect working at Iroje. He adds, “I appreciate that I can work in Korea, where a relatively higher number of new architectural projects are going on.”

Professor Kim In-cheol ascribes the “architectural hallyu” to the development of Internet media. He states that young foreign architects who learn about outstanding Korean

architects

and

their

works

through prestigious

international architectural websites feel at ease about contacting their Korean offices. Lee Kwang-man, president of the Korean Institute of Architects, notes, “As K-pop’s popularity has led to the heightened interest in Korean culture in general, an increasing number of foreigners want to come to Korea to study architecture as well as experience a new culture.”

[March 15, 2012]

www.koreafocus.or.kr

- Rethinking the Theories on North Korea’s Demise - Koreans, It’s Time to Lead, Not Follow

Rethinking the Theories on North Korea’s Demise

Oh Gyeong-seob Research Fellow Sejong Institute

“Post Kim Jong-il”

By Kim Young-hwan, Zeitgeist, 236 pages, 10,000 won The odds of North Korea remaining intact under the watch of Kim Jong-un have come under intense international scrutiny following the death of former leader Kim Jong-il.

A number of books on the untested new leader have been published in South Korea, but people in the South seem uninformed. Furthermore, the books are limited mostly to Kim Jong-un’s persona — his personality and childhood — and the transition of power from his late father Kim Jong-il. They consequently fail to weigh the chances of the new regime succeeding or shed sufficient light on the future prospects of the North Korean regime.

Against this backdrop “Post Kim Jong-il” hit the shelves. By rekindling the debate on the possibility of regime collapse in North Korea and triggering debate on whether Kim Jong-un can prove his worth, the book strikes chords that are decidedly different from the conventional contemporary literature on North Korea.

Author Kim Young-hwan’s personal reputation is partly responsible for the buzz that this book is generating. Kim was once dubbed the “godfather” of South Korea’s pro-juche (North Korea’s governing ideology of “self-reliance”) movement in the 1980s. He was the first person to preach the juche ideology to South Korean left-wing activists and the founder of the “National Democratic Revolutionary Party,” an underground pro-North organization.

That’s not all. Thanks to direct contact lines with the reclusive regime, Kim was personally chaperoned by North Korean agents in submarines to twice meet with North Korean founder Kim Il-sung, and he also participated in debates on the juche ideology with North Korean scholars. Ironically, Kim said his epiphany on the reality of North Korea hit during these visits; he realized the regime was little more than an illegitimate totalitarian government.

Kim eventually disbanded his party and sought the help of his colleagues to launch efforts to democratize North Korea. In many ways his book offers the answers as to what made a former pro-Pyongyang activist like himself embark on the path of democratizing North Korea.

This book is not a thesis of any kind to scientifically prove theories. Rather, it’s a collection of essays that simply and effectively convey the author’s thoughts and views on issues connected to North Korea’s collapse. The author does not assume any specific theoretical perspective or approach. Instead, he is

focused on unleashing his thoughts without being constricted to a theoretical mold. This makes the book an easy read and accessible to anyone who is interested in North Korean affairs. It would be equally beneficial for experts who would have access to the author’s refreshing views, opinions and hypotheses on the collapse scenario and other related issues.

The main mission of the book is to verify the proposition that North Korea’s collapse is near. To this end, the author presents largely provocative and disputable views on a host of related questions. They include: “Is North Korea a socialist regime?” “Will the Kim Jong-un regime be a success?” “Will North Koreans fall into destitution if the regime collapses?” “Would North Korea’s collapse spell devastation for Northeast Asia?” “Is an early reunification necessary?” and “What are the chances of China annexing North Korea or North Korea becoming China’s newest province?” Of these issues, this critique will focus mostly on reviewing the author’s theories on North Korea’s fall, along with the chances of a smooth succession by Kim Jong-un and the characteristic traits of the North Korean regime.

In the chapters titled “North Korea’s Collapse is Near” and “Issues Related to North Korea’s Collapse,” the author predicts an end to the North Korean regime. North Korea experts feverishly debated this topic in the early to mid1990s. Proponents of the meltdown theory predicted that North Korea would be affected by the fall of Eastern European socialist nations. They also underestimated Kim Jong-il’s ability to cope with the challenges his regime faced, such as the death of his father Kim Il-sung, severe famines and a broken economy. They were thus unable to foresee the North Korean regime’s power to stay afloat for two more decades after the first Kim’s death.

These scholars consequently adopted a more intrinsic approach. After watching Pyongyang withstand a great famine and economic troubles, the

majority now sees durability in the regime. The author chides these scholars for initially being unaware that by the time Kim Il-sung died in 1994, the North Korean regime was already gravitating towards Kim Jong-il. This was a sure indication that an immediate collapse was unlikely.

The 1995 food crisis pushed North Korea closer toward the edge, the author writes. Since then, with most of its state control systems crippled, North Korea has undergone ground-breaking changes from the bottom up. They include: 1) the emergence of a military dictatorship, 2) the military attaining more power and authority than the Workers’ Party, 3) a regime-wide ideological makeover, 4) the public’s waning loyalty to the party and ruling elite, 5) widespread corruption, 6) slackening government control over the public’s economic activities, and 7) more inflow of information from the outside world and its countrywide proliferation. These new trends have rendered the regime powerless to plug the holes in its system, according to the author.

He also argues that the chances are extremely low for North Korea to make a soft landing by implementing Chinese-style economic reforms and market openings, mainly because the Workers’ Party of Korea is unequipped to play a pivotal role in such restructuring. Another reason he cites is the moral deficiencies of Kim Jong-il and Kim Jong-un, which are manifested in the form of economic decline, human rights violation, widespread corruption, disorganized personal lives, embezzlement, and an extravagant lifestyle, all of which makes it impossible for the North Korean leadership to open up the country without triggering violent political protest from the populace.

The external environment also is unfavorable, the author writes. North Korea cannot expect any assistance from communist ideologies or the global communist movement, which has long since lost momentum, nor enlist support from the international community that disapproves of its isolationist

policy. Having the wealthy capitalist South on its doorstep would also exacerbate the political uncertainties entailing economic reforms. Even if the North decides to pursue reform and openness, it would have a low chance of succeeding as its political uncertainties would deepen to the point where the regime would suffer a meltdown regardless of whether it continues reforms or not.

The effort to champion North Korea’s collapse when the majority of North Korea watchers are skeptical about the possibility should certainly be accounted for as it can rekindle debate and stoke interest among scholars.

However, as the author himself admits, the symptoms do not guarantee an implosion. A detailed identification of the fuse is therefore necessary to persuade die-hard critics. That the North has been precariously hanging by a thread for a long while — since as early as 1995 — or that its demise is inevitable in the long term is not a strong enough argument.

Pinpointing the fuse, of course, is far from easy. For similar reasons, experts have yet to offer a satisfactory explanation for the fall of socialistic economies.

Numerous hypotheses have emerged, but none are convincing. The theory on failed coordination says that when the markets replaced the Soviet Union’s centralized planning system, the state’s arbitration mechanism broke down and eventually sparked a collapse. Another theory blames increasing unofficial economic activities, such as household spending, embezzlement, corruption and organized crime. The theory of the dictator being coerced into surrender says the Soviet Union crashed when its authoritarian regime was forced to slacken its surveillance capabilities due to increasing expenses and the market producers realized the regime had been rendered incapable of imposing severe punishments.

The bottom line is that the mechanism behind North Korea’s anticipated

collapse has not been sufficiently delineated in the book. The author claims a collapse cannot be avoided under Kim Jong-un because, at most, the country merely appears relatively stable in its power transition. In the chapter on “Chances for Success of Kim Jong-un’s Power Inheritance,” the author writes that while the new North Korean government may be able to avoid immediate chaos, it will eventually be subject to a larger crisis due to Kim’s shaky leadership and his regime’s overall vulnerability.

One of the biggest problems of the new government is that the transition was rushed and thus has disturbed the existing order and hierarchy among the ruling elite. This could lead to their defiance. Exacerbating the problem is Kim Jong-un’s lack of political savvy, which means he has few confidantes to turn to for sound advice and support. Kim is also expected to face challenges in controlling the ruling elite, mostly because he has spent much of his life outside the country and thus lacks understanding of his own people. Further, other high-ranking party members or younger North Koreans may question the propriety of sustaining an anachronistic hereditary dynasty in a nation calling itself the Democratic People’s Republic, while conflict is in store between Kim and his more ambitious subordinates.

The list of North Korea’s structural weaknesses goes on. The North Korean flavor of communism has all but lost its legitimacy and the country’s national competence is almost completely disintegrated, particularly in comparison with South Korea. The North’s insistence on nuclear weapons development and constant human rights violations have turned the regime into an international outcast, while its starving population is losing respect for a government relying on powers of coercion.

On the economic front, a series of policy miscues, including the botched 2009 currency reform, is inciting further complaints. The cadres as well as rank and

file members of the Workers’ Party show little passion or sense of duty for the communist revolution, and are instead becoming extremely self-centered and opportunistic. On the whole, the North Korean economy has lost its powers of self-restoration and has become increasingly dependent on the masses and markets. Corruption is widespread among bureaucrats and the administrative system has been disabled.

The state surveillance and fear are the two remaining pillars of the North Korean leadership. But the author points out that it won’t be easy to imitate the Kim Jong-il government and even if it does succeed, oppressive policies tend to groom more defiance than fear. The author presents these and other arguments to explain North Korea’s troublesome fate. But while the Kim Jongun regime is obviously engulfed in various internal and external crisis factors, the author does not explain precisely what will doom it. Such an explanation is necessary to prove the end is near.

Gordon Tullock’s theories are something worthy of mentioning at this point.

According to Tullock, dictatorships are overthrown by high-ranking government officials, military action by another country, or a public uprising.

Among them, public uprising rarely leads to the fall of autocracy. Most revolutions start with elite bureaucrats.

Given the characteristics of the North Korean regime, a crisis would most likely be triggered by a rift between Kim Jong-un and the ruling elite. Clashing interests and undue allocation of authority within the coalition established between Kim Jong-un and the ruling elite may be another cause for friction.

Chaos and struggle would inevitably surface if Kim fails to mediate between interest groups and properly mete out authority. All these factors could work against Kim Jong-un as he claws for power. The author should, however, have supported his claims by explaining exactly how the Kim Jong-un regime will

come face-to-face with a crisis.

In the chapter, “North Korea is No Socialist Regime,” the author writes that the North can no longer be categorized as a socialist state. In his eyes, North Korea has degenerated into a dictatorship of the Kim clan. The ruling juche ideology is nothing more than a means for idolizing the regime’s paramount leader and justifying his monolithic rule.

Over the past 60-plus years, North Korea has transformed from a socialist regime (from 1945 to the late 1960s) into a totalitarian socialist regime (from the late 1960s to the early 1990s) and finally a mafia-style military dictatorship (from the 1990s to the present). A communist single-party government, state ownership and command economy — the three major factors constituting a socialist state — started to crumble in the late 1960s to be completely destroyed by the mid-1990s, according to the author.

Since the 1990s, the Workers’ Party has been reduced to a propaganda tool for Kim Jong-il’s one-man dictatorship, while the Korean People’s Army has become almost completely independent of the party to serve as Kim Jong-il’s private army. North Korea may be keeping up appearances of state ownership of goods but the state coffers were turned into the private pockets for Kim Ilsung and Kim Jong-il as early as the 1970s. North Koreans were reduced to workers at the plants and farms owned by Kim Jong-il in the 1990s. The command economy was not functioning properly as vital government systems were shut down due to food shortages and an economy pandering to the military and monolithic dictatorship of Kim Jong-il.

Pundits, however, will not be easily convinced that North Korea is no longer a socialist regime. Park Hyeong-jung, for instance, claims that one-man dictatorship and personal cult are not uniquely North Korean but were

witnessed in other former socialist countries. He calls the phenomenon “underdeveloped socialism.” He also claims that what is referred to as “a uniquely North Korean phenomenon” occurs whenever efforts for socialist construction attempt to adjust to the external and internal conditions of an under-developed country such as North Korea. He calls the phenomenon “an inherent hereditary generality that has rationally materialized in the North Korean environment.”

Another expert, Cho Han-beom, says the basic premise of studies on North Korea is that the reclusive country, despite its distinct characteristics, is indeed a socialist regime retaining all the basic traits of socialism, such as the elimination of private ownership, a command economy, and monolithic rule by the single party and government. He said that in order to fully understand the demise of socialism, the process must be divided into the disintegration phase, when socialism starts to crumble, and the transition phase marking an official shift to a market economy, to be separately analyzed.

If he seeks to overturn the existing hypotheses, the author should have highlighted how the basic elements of socialism such as the communist party rule, state ownership and a command economy, are either non-existent or insignificant in the North. He could have also offered a detailed analysis on the workings of the North Korean economy and related data, rather than simply say state ownership and command economy went to Kim Jong-il’s private coffers. The author put forward sufficiently provocative claims but failed to provide the theoretical evidence needed to back them up.

Nevertheless, “Post Kim Jong-il” is a significant piece of work in that it has aroused the need for further studies on the theories of North Korea’s demise.

The hypotheses presented by the author pose sufficient academic challenges to other North Korea experts. The arguments are carried out in an easy yet convincing manner, while dealing with a heavy subject. For these reasons, this book is recommended to all who are interested in North Korean affairs.

[Quarterly Zeitgeist (Sidae Jeongsin), Spring 2012, published by the Sidae Jeongsin Co.]

www.koreafocus.or.kr

Koreans, It’s Time to Lead, Not Follow

Kim Beom-su Staff Reporter The Hankook Ilbo

“First Mover”

By Peter Underwood, Golden Lion, 280 pages, 14,000 won “A decade ago, who would have imagined Samsung outrivaling Sony? But Sony is no longer a match for Samsung and it’s now strictly between Samsung and Apple.”

Accurate as it may be, the observation is hardly new. However, it holds the key for unlocking Korea’s potential because it comes from none other than Peter Underwood, a 57-year-old corporate consultant who’s been in the business for over two decades in Korea.

In this part of the world, Peter Underwood is better known as Won Han-sok,

the great-grandson of Horace G. Underwood who founded what is now Yonsei University. He is the fourth-generation descendent of the Underwood family who became permanent residents in Korea after arriving in the 19th century.

Despite their undeniably significant contribution to Korean society, the Underwood clan has experienced their share of bad press, such as when the author’s older brother Han-kwang (Horace H. Underwood), then a professor at Yonsei University, departed from Korea some years ago. The local media was abuzz with speculation of the Underwoods abandoning a century-old friendship when in reality, Peter stayed behind. Many times, he was asked to verify that he was a true Underwood. “First Mover” is, in some ways, an answer to these and other questions he has received over the years.

The book’s title is a clear reference to the strategy conceived by Samsung Electronics Chairman Lee Kun-hee. It also takes a page from the advice imparted to Korean youths by local IT guru and entrepreneur Ahn Cheol-soo.

Underwood’s own message to Koreans is to find their own blue oceans so they can stop being followers and become leaders in both life and the global markets.

The author is probably one of the best suited to pen such a book. His definition of himself is “a Westerner whose roots are in Korea,” an apt description as he spent his adolescence in Korea, having arrived as a newborn. Except to attend university and graduate school in the United States and work in Japan for about four years, Underwood has never left Korea. Thus, his mind may be that of a Western man but he is knowledgeable enough about Korea to earn a seat on the Presidential Council on Nation Branding.

Considering that his line of work has involved mainly advising foreign investors on the Korean business environment, Underwood must have itched

to talk about what he witnessed over the years. But he has suppressed the urge — until now. This volume will be the author’s first attempt to bare his feelings about Korea and Koreans, both the good and bad.

As the title speaks for itself, the author’s main mission is to send out the message that there is real reason for alarm should Korea remain content to be branded a “fast follower.” Being an avid follower sufficed to achieve the “Miracle of the Han River,” but the guarantee for the future is not there anymore.

The author says Korea will eventually face competition from advanced countries such as the United States, Japan and Europe in the race to develop the next, ground-breaking “it” item. Does this fill you with pride? It should actually be cause for alarm because it’s a large order to fill for a nation who has succeeded by being a diligent follower alone. Korea now has to break out of the box and create a masterpiece to wow the masses. A failure means no future at all. Underwood, who refers to Korea “our nation” and Koreans as “us” throughout the book, firmly believes the country is capable of changing its persona.

There are certain problems to be addressed, however, to ensure success; the culture and mindset of the “fast follower” must be replaced. One of the best ways is to reform the Korean education system, Underwood says. He admires Korea’s passion for education, but he writes that the system is riddled with holes and shortfalls.

Forcing students to toil away for the same answers and be judged with points and scores alone must be discouraged at all costs, he says. Instead, they should be encouraged to freely explore creative solutions to be groomed to one day generate powerful and creative new ideas.

The predominant authoritarian culture based on blind obedience is also high on the author’s “out” list. Recklessly charging towards unverified goals — traits inherited from past military dictatorships — will get us nowhere, he says.

The search for a new future, one that is yet void of any right or wrong answers, requires a collective social intellect that can be attained through honest debate and trials and errors.

On the business front, Underwood notes the struggle to breed strong managers in a community where enterprises are ruled by a few chaebol (conglomerates) tycoons. He calls on corporate Korea to return to shareholder democracy.

Koreans also must distance themselves from their “one-family” social culture that has yielded damaging side effects such as xenophobia and repulsion toward interracial families. The author opines on these and other critical societal and economic matters in vivid detail through his own personal anecdotes.

Regarding the widespread view from futurists that China, Japan and India will eventually be recognized as future regional partners for the United States, Underwood strongly disagrees. “Japan has long since ceased to open itself up to the world and has consequently lost elasticity. The Japanese are therefore not qualified to become a first mover. When factoring out their obvious edge in size, China and India both lack essential qualities, such as democratization and social unity.”

Korea, in contrast, is brimming with potential, Underwood writes. This is not to be mistaken that Korea will one day match the United States in military prowess or economic power. What we can do is become “a hub for creativity, innovation and fairness,” a place where people from all corners of the world can come to work and socialize to give Korea the recognition as a global epicenter housing these virtues. To achieve this glory, the author says, Koreans all over must unite to accept the challenge of change or expect a quick demise.

[March 17, 2012]

www.koreafocus.or.kr

- Stephen Linton: â&#x20AC;&#x153;I have inherited the gene of 100-year-long love toward Korean people.â&#x20AC;?

Stephen Linton: “I have inherited the gene of 100-year-long love toward Korean people.”

Jeong Gu-hyeon Staff Reporter, Korea Daily (JoongAng Ilbo Los Angeles)

Dr. Stephen Linton can’t remember the lyrics of a single American pop song but he can recite the names of more than 500 tuberculosis patients of his, all living in North Korea. He is concerned that the 11-year-old girl named Sujeong in South Pyongan Province should not forget to take her medicine on time.

Also known as In Se-ban, Linton probably has inherited the loving gene for Korean people from his great-grandfather, Reverend Eugene Bell, who arrived in Korea in 1895 as a Southern Presbyterian missionary. Since then the four generations of Linton’s families have lived in Korea, providing medical help and conducting missionary work and educational service to the poor and the needy mainly in their southern home province.

To provide medical assistance to North Koreans, the Eugene Bell Foundation was established in 1995, commemorating the 100th anniversary of Reverend Bell’s arrival in Korea. Since its inception, the foundation has treated some 250,000 North Korean tuberculosis patients at a total cost of US$35 million so far.

The 62-year-old chairman of the Eugene Bell foundation is one of the very few Americans welcomed by North Korean authorities. Some newspapers in Seoul have referred to Linton as “the American most trusted by the North.” Linton paid a visit to the JoongAng Ilbo office in Los Angeles in an effort to ask Korean Americans to give support to North Korean patients suffering tuberculosis. This interview was conducted in Korean as Linton speaks it fluently.

Q. You visited North Korea a few months ago. Could you tell us about your patients there?

A. I visited North Korea last October. During the last four years, the Eugene Bell Foundation has been focusing on providing treatment for multidrugresistant tuberculosis. So far, over 100 people have recovered from the disease, and currently more than 500 patients are receiving quarantine treatments at six different clinics in North Korea. Fortunately, the medication system is stabilizing after years of operation.

Q. I understand that the type of tuberculosis that you are treating is difficult to be cured.

A. Multidrug-resistant tuberculosis is resistant to at least two of the best antituberculosis drugs. Therefore, specially tailored treatments are needed for

individual patients, which cost 150 times more than a typical tuberculosis treatment. Since it is very resource-demanding, even the United Nations had to let go of this illness from its priority list. Without external humanitarian help, the provision of proper medications is impossible in the North. More than 4,000 people are thought to be suffering from the multidrug-resistant tuberculosis but only 5 percent of them receive any medical help.

Q. What is the necessary medical procedure required for treatment?

A. A patient should be put into quarantine for at least 18 months, having regular medical intakes. This is absolutely critical for successful treatment.

However, the whole procedure is very painful for patients. They should take more than a handful of drugs at a time, consisting of 16 tablets, twice a day.

More often than not, side-effects tend to appear such as dizziness, nausea and moodiness. Quite a few of patients give up the treatment halfway through because of the painful procedure and long quarantine.

Q. You have often said that medical assistance for tuberculosis patients is one of the most effective ways to help the North Korean people.

A. Medical aid can be offered in a very transparent way, especially for multidrug-resistant tuberculosis. Rice provision may be regarded as controversial because, as some people worry, the food supply can end up with the military. Tuberculosis medication, in comparison, is tailored for each individual patient. It ensures that the medicine reaches the intended patient receiving that particular treatment. The medicines are delivered every six months, with the patientâ&#x20AC;&#x2122;s and the donorâ&#x20AC;&#x2122;s names marked on the box. It is a one-to-one donation system, where a donor knows who gets his or her assistance.

Q. Could you elaborate on the financial side of the treatment? How much does it cost to support medication for a patient?

A. Medical provision per patient requires US$2,000 per year in donation. That means financial assistance of roughly US$200 a month could give a new life to one patient suffering from the curable disease. If a church would take the responsibility for the treatment of one patient, it would be the most effective way to provide medicine in a predictable manner. I am very grateful that the Council of Korean Churches in Southern California has expressed willingness to find possible ways to provide medical support. I really hope to discover more ways to increase help to the patients in the North.

Q. What do you feel about the medical situation there?

A. Whenever I visit North Korea, it breaks my heart. After returning from each trip, my heart aches even more as I wonder how many of the patients that I met will stay alive until my next visit. Sometimes when I find myself unable to deliver the medicines they need, I feel frustrated with myself.

Q. When are the most rewarding moments for your hard efforts?

A. When the patients are fully recovered to leave the clinic in good health, we call the event a â&#x20AC;&#x153;graduation.â&#x20AC;? Since the treatment involves a years-long quarantine in separation from their families, leaving the hospital with restored health often makes the celebration very emotionally charged. Last spring, we celebrated the graduation of a woman patient, who was leaving after threeyear-long hospitalization. She cried, saying that she could finally hold her son in her arms again. We all cried with her.

Q. Your schedule book should be packed with various commitments.

Aren’t you physically exhausted?

Contacting tuberculosis patients also should involve some health risks.

A. There is no preventive medicine to tuberculosis. Face-to-face meetings with patients involve some risks of infection. But I am more motivated to approach them and give treatment to them than feeling worried about my health.

Q. What do you think are the reasons for your close connection with the two Koreas?

A. South Korea is my destiny as I was born to a missionary family and was raised there. With regard to my work for North Korea, it has been inevitable according to God’s providence.

Q. What is your favourite song?

A. I am quite old-fashioned and boring. The only song that I know by heart is “My old hometown where I lived···” [This is the first line from the popular Korean children’s song “Spring in My Hometown.”] I do not know all the lyrics of any American pop song. Probably I am still living in the 19th century.

When I was only three years old, my parents moved to Suncheon in South Jeolla Province and I grew up there. Back then, Suncheon was a small country town and nobody had TVs or radios. Before I started to live in Seoul as a freshman at Yonsei University, I was no more than a southern village boy.

Q. What is the vision of your work?

A. I hope to help consolidate an inter-Korean channel of exchange which is sustainable enough to stand ideological tensions and political disputes.

Without solid foundation work, efforts for mutual understanding and

humanitarianism remain vulnerable to political and ideological influence. I hope the Eugene Bell Foundation will play the role of a cross-border “delivery service” to bring love to North Korean people. I pray that some day the delivery role would be no longer necessary for the Korean peninsula.

Q. When do you think the two Koreas will be reunified?

A. Some South Korean people tend to think that the reunification will happen all at once in a manner similar to a ribbon-cutting ceremony. I don’t think that it will be a one-off event like that. Reunification isn’t something that can be simply “switched on” at one single shot. Reunification should arrive in the form of accumulated efforts that gradually increase inter-Korean exchanges on various scales.

His Korean family name “In” is written in the Chinese character 印 meaning a seal or stamp. A Korean dictionary provides 17 definitions. Notably, the seventh definition is “an ineffaceable, deeply engraved trace.” Probably it was not merely a coincidence that this particular definition is a typical usage in North Korean regions.

[March 1, 2012]

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COPYRIGHT Korea Focus is a monthly webzine (www.koreafocus.or.kr), featuring commentaries and essays on Korean politics, economy, society and culture, as well as relevant international issues. The articles are selected from leading Korean newspapers, magazines, journals and academic papers from prestigious forums.

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