[Cankor] Report #222

[cankor at cankor.ca]

Dear subscriber,

Welcome to issue #222 of the CanKor Report.

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The CanKor team

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CANADA-KOREA ELECTRONIC INFORMATION SERVICE

CanKor # 222

Friday, 8 October 2005
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Christopher Hill, US Envoy to the Six-Party Talks, testifies to the House 
Committee on International Relations. The 19 September joint statement, he 
says, gives a vision of the end-point of the process, the verifiable 
denuclearization of the DPRK. Although the statement also takes note of the 
DPRK's assertion that is has the right to peaceful uses of nuclear energy, 
Hill made "crystal clear" that discussion of the provision of a light water 
nuclear reactor would take place only after credible verification that the 
DPRK has eliminated all its nuclear weapons and all nuclear programs. Hill 
urges the termination of KEDO, and the creation of "new, more secure, 
arrangements to carry out denuclearization."

Two Korean films make their debut in New York. Empress Chung, an animated 
film, which opened in several cinemas in the South and six in the North, was 
produced employing animators from the DPRK. The President's Last Bang is an 
irreverent portrayal of the presidency of ROK General Park Chung Hee.

This week's CanKor FOCUS reviews the progress of DPRK tourism, the industry 
that blazed a trail in inter-Korean commercial engagement across the DMZ, 
albeit fraught with scandal and controversy. Hyundai Asan, operator of the 
first tourism venture in the DPRK, is once again embroiled in controversy. 
The Hyundai Group weathered allegations of bribing the Kim Jong Il regime 
into the 2000 inter-Korean summit. It suffered the loss of chairman Chung 
Mong-hun to suicide as he faced charges for his involvement. Now 
Vice-chairman Kim Yoon-kyu is accused of misappropriating South-North 
cooperation funds. Current chairwoman Hyun Jeong-eun dismisses Kim Yoon-kyu 
and welcomes an investigation, eager for more transparency in the Hyundai 
Group's business with the DPRK. In protest, Pyongyang slashes the tourist 
quota to the Kumgang Resort and suspends additional projects in Kaesong and 
Mt. Paektu that were at the trial stage. This provides opportunities for the 
competition. ROK's powerful Lotte Tourism is poised to sign a deal to 
operate tours to Kaesong.

Other inter-Korean projects that will benefit the tourism industry on the 
Peninsula include the richly symbolic restoration of the Holy Valley Temple, 
a Buddhist historic site bombed during the Korean War.

American passport holders interested in a rare tourism opportunity are 
welcomed to Pyongyang this month to experience the breathtaking mass Arirang 
gymnastics festival.

In this week's CanKor OPINION, economist Ruediger Frank discusses the 
implications for DPRK economic reforms if, as reported, the DPRK prohibits 
the sale of grain in the markets in favour of rations via its public 
distribution system.
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Contents:
1.   US NEGOTIATOR HILL: TIME FOR 'REAL ACTION' ON DPRK
     http://usinfo.state.gov/eap/Archive/2005/Oct/06-417673.html
2.   TWO FILMS OPEN IN USA, REFLECT SHIFT IN KOREAN ATTITUDES
     http://english.ohmynews.com/articleview/article_view.asp?at_code=285307

FOCUS: Turbulence in DPRK tourism
3.   CORRUPTION PLAGUES HYUNDAI ASAN TOURISM PROJECTS
     http://english.donga.com/srv/service.php3?bicode=050000&biid=2005100398538
4.   HYUNDAI CHAIRWOMAN CLEANS HOUSE, UPSETS DPRK
     http://english.chosun.com/w21data/html/news/200509/200509120028.html
5.   LOTTE TOURISM POISED TO ACCEPT DPRK OFFER
     http://english.chosun.com/w21data/html/news/200510/200510070009.html
6.   REBUILDING A TEMPLE, NARROWING A GAP
     http://www.nytimes.com/2005/10/02/international/asia/02temple.html?ei=5070&en=a8e862488c03bdea&ex=1129003200&emc=eta1&pagewanted=print
7.   DPRK ALLOWING US VISITORS FOR ARIRANG
     http://www.nytimes.com/2005/10/02/travel/02advkorea.html?ex=1129003200&en=ac50b55bfe81f7f3&ei=5070&emc=eta1

OPINION:
8.   WHITHER ECONOMIC REFORMS IN DPRK?
     http://www.koreaherald.co.kr/archives/result_contents.asp?id=200510080004&query=North%20Korea
*************************************************

1.   US NEGOTIATOR HILL: TIME FOR 'REAL ACTION' ON DPRK
     US State Department Press Release, 6 October 2005

It is time for "real action" from North Korea on its commitment to dismantle 
its nuclear weapons programs, says Christopher Hill, the top US negotiator 
for the Six-Party Talks.

Weeks of talks among the six parties involved - North and South Korea, 
China, Japan, Russia and the United States - ended September 19 with a joint 
statement of principles. "But the time has come to move from declarations to 
real action," Hill said.

A fifth round of Six-Party Talks is set to begin in November in Beijing, 
where the next step will be to discuss a process and a timetable for North 
Korea to abandon its nuclear weapons ambitions. Hill, who is assistant 
secretary of state for East Asian and Pacific affairs, made the comments in 
October 6 testimony to the House Committee on International Relations.

"The key outcome of the last round of Six-Party Talks is clear, unambiguous, 
and endorsed by all Six Parties to the talks: It is the DPRK [Democratic 
People's Republic of Korea] commitment to abandon all nuclear weapons and 
existing nuclear programs and to return, at an early date, to the NPT 
[Nuclear Non-Proliferation Treaty] and to IAEA [International Atomic Energy 
Agency] safeguards," he said.

The September 19 joint statement, Hill said, "is a statement of principles 
designed to guide the parties on the way forward. It gives a vision of the 
end-point of the process - from the DPRK, prompt and verifiable 
denuclearization; from the other parties, economic cooperation, energy 
assistance, and steps toward normalization of relations, provided that 
matters of bilateral concern such as human rights are addressed."
(See related article at: 
http://usinfo.state.gov/eap/Archive/2005/Sep/19-210095.html)

NEGOTIATING THE DETAILS
The next phase involves working out the details of the DPRK's dismantlement 
of its nuclear programs as well as corresponding measures to be taken by the 
other parties. This phase, Hill warned, "will involve tough negotiations."
(See related article at: 
http://usinfo.state.gov/eap/Archive/2005/Oct/06-46969.html)

Hill noted that there has been much comment on the DPRK's future right to a 
civilian nuclear program. "The DPRK, in the Joint Statement, asserted that 
it has the right to peaceful uses of nuclear energy. The other parties took 
note of this assertion and agreed to discuss, at an appropriate time, the 
subject of the provision of a light water reactor to the DPRK," he said.

But Hill emphasized that it has been made "crystal clear" as to when the 
"appropriate time" would be. Such discussions would take place only after 
North Korea has eliminated all its nuclear weapons and all nuclear programs, 
and after the end of these programs has been verified to the satisfaction of 
all parties by credible international means, including the IAEA, he said. In 
addition, North Korea must come into full compliance with the NPT and IAEA 
safeguards, demonstrate a sustained commitment to cooperation and 
transparency and cease proliferating nuclear technology.

Hill said that all the parties of the Six-Party Talks, with the exception of 
North Korea, agree on these terms. "None of them expressed a willingness to 
provide the DPRK with an LWR [light-water reactor], understanding that the 
DPRK's legitimate energy needs are best met through other means."

NEW IMPLEMENTATION GROUP NEEDED
Hill added that the United States is urging termination of the Korean 
Peninsula Energy Development Organization (KEDO).

KEDO was established in 1995 to implement key provisions of the 1994 Agreed 
Framework that would have given North Korea two light-water reactors in 
exchange for an end to Pyongyang's nuclear weapons programs. Members of KEDO 
include South Korea, Japan, the United States and the European Union.

"We believe that KEDO as an organization has served its purpose and that now 
we need new, more secure, arrangements to carry out denuclearization," Hill 
said.

Hill pointed out that in the September 19 joint statement the United States 
affirmed it has no nuclear weapons in South Korea and no intention to attack 
North Korea with nuclear or conventional weapons. But he added that the 
United States remains committed to its alliance with South Korea and has no 
plan to withdraw additional troops from the Korean Peninsula.

The long road to normalizing relations with North Korea, Hill said, also 
will include discussions on human rights, biological and chemical weapons, 
ballistic missile programs, conventional weapons proliferation, terrorism 
and other illicit activities.

"The way forward is to build on the agreement that we reached last month in 
Beijing," Hill said. "I believe that each of the parties recognizes that the 
realization of the vision laid out in the September 19 Joint Statement is in 
its fundamental interest."

For more information, see US Policy Toward North Korea at: 
http://usinfo.state.gov/eap/east_asia_pacific/north_korea.html
*************************************************

2.   TWO FILMS OPEN IN USA, REFLECT SHIFT IN KOREAN ATTITUDES
     by Ronda Hauben, OhMyNews, 10 October 2005

Several Korean films are making their US debut in New York City this fall. 
"Empress Chung" was shown by the Korea Society on Sept. 21, 2005. This 
animation is directed by Nelson Shin. Much of the work on creating the 
animation was done as part of a joint project employing animators in North 
Korea to do the animation work and South Koreans to do the story line and 
complete the film.

"Empress Chung"
At its most fundamental level, the film is about reunification. The film 
portrays a classic story of honest folk being fleeced by crooks. Chung's 
father is presented as a loyal Minister who refuses to join those plotting 
against the King. He loses his lovely wife in a fire started by those who 
are part of the plot against the King. The Minister is blinded, but manages 
to save his baby daughter Chung, from the fire.

Chung grows to become a lovely young woman who is willing to sacrifice even 
her life to help her father get his eyesight back. She becomes a victim of a 
plot to take advantage of her concern for her father. She is to be killed 
and offered as a sacrifice to appease the sea dragon. She is saved but is 
separated from her father. The scene is set for Chung and her father to seek 
a way to be reunited.

Taken as a tale of separation, and then the struggle for reunification, the 
film "Empress Chung" can be seen as an analogy with the desire of Koreans 
for reunification. The film opened in several cinemas in South Korea in 
August 2005 and six theatres in North Korea shortly afterwards.

In the creation of the film as well as in the content, the film helps to 
highlight that there are ways being found to lay the ground for a peaceful 
reunification of North and South Korea.

Another film being shown in New York this fall is "The President's Last 
Bang," written and directed by Im Sang Soo. It was chosen to be part of the 
43rd New York Film Festival.

"The President's Last Bang"
At one of the showings in New York City, the film's director introduced the 
film, describing how he intended to portray the presidency of General Park 
Chung Hee and the plot to assassinate him by KCIA agents, as Mafia-like 
activity. The film presents an irreverent portrayal of both the South Korean 
President and the KCIA officials plotting his murder.

An example is how the film depicts Park as listening to Japanese songs just 
before he is murdered. This associates Park with the injuries suffered by 
the Korean people during the years of the Japanese occupation of Korea.

At the film showing I attended, the director was supposed to answer 
questions after the film. For some unexplained reason this was cancelled 
without the audience being notified in advance. Many in the audience 
expressed their disappointment.

Both films present a review of Korea's past, whether by the animation of a 
well known Korean folk tale as in "Empress Chung," or by the portrayal of a 
historical event, the assassination of General Park, in "The President's 
Last Bang," in a farcical and irreverent manner. These films are proving 
interesting to an international audience who appreciate the opportunity to 
learn about Korea's historical and cultural heritage.
*************************************************

FOCUS: Turbulence in DPRK tourism

*************************************************

3.   CORRUPTION PLAGUES HYUNDAI ASAN TOURISM PROJECTS
     by Joong-Hyun Park and Myoung-Gun Lee, Donga Ilbo, 3 October 2005

Hyundai Group Chairwoman Hyun Jeong-eun expressed her willingness to accept 
an investigation, either from the Board of Audit and Inspection, or from the 
prosecution, regarding Hyundai Asan vice-chairman Kim Yoon-kyu's alleged 
misappropriation of South-North cooperation funds. She believes this will 
make Hyundai Group's business with North Korea more transparent.

While the opposition Grand National Party (GNP) called for thorough 
investigation into Kim's alleged misappropriation of the funds, civic groups 
decided to accuse Kim of the charges in this scandal. The Ministry of 
Unification has also begun its investigation.

According to an announcement made by the Hyundai Group yesterday, after the 
Hyundai Group's internal reports on Kim's corruption were released recently 
by Dong-A Ilbo, Chairwoman Hyun ordered the group's executives to release 
any details, including information about South-North cooperation funds, if 
they are asked.

Chairwoman Hyun also said, "The operation of cooperative businesses between 
South and North Korea, which is likely to facilitate public enterprises such 
as reconciliation and cooperation between the two Koreas, must be based on a 
high degree of transparency and morality."

Meanwhile, the GNP insisted through a statement issued under the name of 
Rep. Hwang Jin-ha, the second policy mediation commission chair, "This 
incident may be just one of many corruption cases related to cooperative 
business with North Korea," adding, "Through thorough investigation, the 
government must redeem misappropriated taxes and reprimand those who are 
responsible for this."

The GNP also said, "It is absurd for the Ministry of Unification to deny its 
responsibility," adding, "The ministry, which has indirectly supported 
business in order to preclude any suspicion of its special treatment toward 
Hyundai, is denying the charges just by saying, 'The ministry has never 
directly raised the South-North cooperation funds for Hyundai Asan.' This is 
neglect of its duty."

The Ministry of Unification, however, said on the same day, "We have already 
received the explanation on the group's investigation over Kim's corruption 
from the Hyundai Group's inspection team, and we already asked Hyundai 
yesterday to submit materials of its inspection and other related 
materials."

Kim Kyu-Cheol, president of the South-North Korea Forum, a civic group 
working for cooperative business between South and North Korea, said, "We 
should take action because South-North cooperation funds that were raised by 
taxing the nation was misappropriated as an individual's slush fund," 
adding, "Relevant civic groups will have a meeting during this week in which 
we decide detailed procedures for the accusation of Vice Chairman Kim."
*************************************************

4.   HYUNDAI CHAIRWOMAN CLEANS HOUSE, UPSETS DPRK
     Chosun Ilbo, 12 September 2005

Hyundai Group chairwoman Hyun Jeong-eun has taken the unusual step of 
posting her feelings on Hyundai Asan's embattled North Korean tourism 
projects on the company website. The move came after Pyongyang slashed the 
tourist quota for Hyundai Asan tours to the North's Kumgang Mountains in 
protest at the ouster of the company's vice chairman Kim Yoon-kyu, for many 
years its point man in negotiations with the Stalinist country. Additional 
projects in Kaesong and Mt. Paektu that were at the trial stage have 
stalled.

Hyun said the two sides had come to a watershed where they must decide 
whether to continue with the tourism projects. The chairwoman, who was the 
prime mover behind Kim's ouster, said that she could not decide the matter 
on her own as the projects were not only the lifetime projects of the group's 
late founder Chung Ju-yung and her late husband Hyundai Asan chief Chung 
Mong-hun, but also "projects of the unification earnestly desired by the 
whole people."

"Last time I visited the Kumgang Mountains, I was even forced to open my 
handbag, but despite the contempt, I thought of only one thing," she wrote 
in the statement posted Monday. "There are people who have given their lives 
for the project" -- a reference to her husband's suicide -- "so that insult 
was nothing, and I will not give up."

Hyun said she had no choice but to sack the vice chairman, regretful though 
it was to dismiss a man who advised both Chungs. She denied the decision was 
motivated by pettiness or arrogance that arose after Hyun met with North 
Korean leader Kim Jong-il but was taken for the future of the company's 
North Korea projects.

The vice chairman's corruption "went beyond personal improprieties and was 
becoming a fatal flaw in the integrity of the entire corporation, and it was 
a grave decision taken so that there would be no doubt cast on the ethics of 
the projects we pursue in the future," Hyun wrote.
*************************************************

5.   LOTTE TOURISM POISED TO ACCEPT DPRK OFFER
     Chosun Ilbo, 7 October 2005

Lotte Tourism has reportedly decided to accept an offer from North Korea to 
operate tours to the border town of Kaesong after the Stalinist country fell 
out with its original South Korean partner, Hyundai Asan.

In a fax earlier this week, Pyongyang told Lotte it would ditch the Hyundai 
Group, which had already started a trial run when it incensed Pyongyang by 
firing the Asan top executive who had for many years been its point man in 
negotiations with the North. The North told Lotte it could make the offer 
public if it wants.

Lotte has not officially announced its decision out of consideration for 
Hyundai Asan, but Korea's biggest travel operator reportedly made an 
internal decision to accept.

Lotte Tourism president Kim Ki-byung is reportedly to visit Pyongyang for 
direct negotiations with the North between Oct. 22 and 25.
*************************************************

6.   REBUILDING A TEMPLE, NARROWING A GAP
     by James Brooke, New York Times, 29 September 2005

Far below the mists of Buddha Peak, in a clearing in the pine forests of 
Holy Valley, a gray-robed monk followed a ritual practiced here for almost 
15 centuries, chanting sutras and burning slender sticks of incense before a 
smiling golden Buddha. But as a fall wind whispered through the trees, the 
early morning calm was broken Thursday by chain saws chewing through pine 
logs and hammers banging on roof beams.

Last year, a South Korean Buddhist order came to this site to rebuild the 
Holy Valley Temple, a historic wooden treasure that was burned, according to 
a plaque here, after American planes bombed a temple complex here in the 
Korean War. Now, with South Korea's government providing most of the money 
for a $10 million project, the order is reconstructing 14 buildings in the 
temple complex.

"As time goes by, we can minimize the gap between our ways of thinking," the 
Venerable Jejeong, a 44-year-old South Korean who is the head monk here, 
said as another monk prayed through the din of construction on a new prayer 
hall. As the morning sun gave his smooth-shaven head a luminous glow, he 
added, "We can find common ground."

That goal fuels a growing number of South Korean projects in North Korea. 
But few are as rich symbolically as the temple reconstruction, where with 
the blessing of a secular and isolationist government, materials from South 
Korea and labor from North Korea are joining to restore the legacy of a 
common religious heritage.

Still, the temple project, near the Mount Kumgang tourist zone in North 
Korea, is firmly rooted in temporal concerns as well. From South Korea's 
point of view, the rebuilding of one national historic monument today means 
one fewer reconstruction bill to pay when the Koreas finally join again - 
and is a logical extension of the South's "sunshine policy" of engagement 
and eventual reunification with the North. It is no coincidence that the 
South Korean Unification Ministry is paying for more than half of the 
reconstruction project here.

Whether the projects in North Korea are industrial parks, nuclear power 
plants or, as in this tourism zone, hotels, restaurants, golf courses and 
temples, many South Koreans do not see them as foreign aid or foreign 
investment. They see them as investments in a united Korea.

"North Koreans are not interested in religion," said Jejeong, who like many 
Buddhist monks uses only one name. "But after unification, they will become 
more interested in religion. North Koreans will come and visit the temple. 
Think of how China has evolved."

Early in the Communist era, North Korea effectively banned religious 
practices, closing all Christian churches except for a few showcase houses 
of worship in Pyongyang, the capital. But it has preserved some Buddhist 
temples as national cultural monuments. For years, South Korean Buddhist 
groups have quietly sent temple preservation aid to the North, often 
truckloads of roofing tiles.

Now, North Korea has authorized two major reconstructions - one here and one 
in Kaesong. Both are in border enclaves where North Koreans strictly control 
access to South Korean projects. At Kaesong, the Hyundai Asan Corporation is 
building an industrial park, a huge complex designed to play host to 
hundreds of South Korean companies.

Here, Hyundai operates a tourism complex that will have the capacity next 
summer to welcome 2,500 tourists, overwhelmingly South Koreans, with 
opportunities to hike, play golfing or soak in hot springs. All this takes 
place "inside the fence," a 6-foot-high green wire fence that limits access 
by North Koreans to resort employees and military guards. Holy Valley is 
inside the fence, and Hyundai provides logistical support for the temple 
work.

Asked whether residents of nearby North Korean villages are allowed to visit 
the newly rebuilt temple, Jejeong replied, "Never."

But at the Pyongyang Naengmyeon, or cold noodle, restaurant near here, Kim 
Young Hyun, the Hyundai executive who runs the resort, said: "We do have a 
plan of opening up the temple eventually to North Korean people. At this 
point, this is tourist area. But it will open up to the local community as 
North Korea opens up."

When the prayer hall opens in the spring, Holy Valley is expected to attract 
the hundreds of South Korean tourists who roll by daily in tour buses on 
their way to Mount Kumgang. South Koreans, moved by the mountain scenery and 
by chats with North Korean waitresses and forest guards often say they want 
to offer prayers for Korean peace and reconciliation.

In North Korea, reconstruction of a religious site might be contentious, but 
this project has perfect political cover. On Sept. 28, 1947, the original 
Holy Valley Temple was visited by Kim Il Sung, the founder of North Korea. 
According to the historical plaque, he praised the roof lines of the 1787 
temple, the latest on the site since 519 A.D.

Even better, Mr. Kim was accompanied by his wife and their son, Kim Jong Il, 
who rules North Korea today. Sites of visits by the nation's dynastic 
trinity are revered. On Thursday, bouquets of flowers remained at the base 
of the historic plaque, reminders that Wednesday was the 58th anniversary of 
the Kim family visit.

"Culture is the way to find common ground for both Koreas," Jejeong said, 
after walking barefoot over the polished pine floorboards of the new temple. 
"As for culture and sentiment, we have a lot in common. But when it comes to 
politics, economy and defense, it is a long process."
*************************************************

7.   DPRK ALLOWING US VISITORS FOR ARIRANG
     by Su Hyun Lee, New York Times, 2 October 2005

American tourists will have a rare opportunity this month to visit North 
Korea's capital and see a mass sports festival. North Korea will allow 
United States passport holders to enter on visas from either Oct. 8 to 12 or 
Oct. 15 to 18 to go to the Arirang 2005 festival. Travelers will have to fly 
from Beijing to Pyongyang, the North Korean capital, on the country's 
airline, Air Koryo, and then will be able to attend the games and see other 
parts of the country.

Koryo Tours, www.koryogroup.com, a travel agency in Beijing run by two 
British citizens, Nicholas Bonner and Simon Cockerell, was approved to lead 
tours to the games because of its experience in taking tourists to North 
Korea, according to a member of the North Korean delegation to the United 
Nations. Mr. Cockerell said the North Korean Tourism authorities informed 
him on Sept. 20 that American tourists would be allowed in for a limited 
period of time.

This is only the third time United States citizens have been allowed into 
North Korea: the company also welcomed 100 American tourists for versions of 
the Arirang Mass Games in 1995 and 2002.

The games, which started this year on Aug. 16 and will end Oct. 17, are made 
up of synchronized gymnastics performances, above, in May Day Stadium, which 
is in Pyongyang and can accommodate 150,000 people. About 80,000 floor 
gymnasts and soldiers are expected to perform when Americans are allowed.

On the second day of their tour, the Americans will go to Kaesong on the 
southwestern tip of the country to visit the demilitarized zone dividing the 
Korean peninsula. On the third day, the tourists will be shown around 
Pyongyang, including the Grand Monument on Mansu Hill, Workers Party 
Foundation Monument and the Pueblo, the American Navy intelligence ship that 
was captured by North Korea in 1968.

The games have long been used to disseminate messages of unity and 
nationalism, but the tourism is also a source of income. Recently, North 
Korea has begun to allow tourists, including Americans, into the Kumgang 
Mountain resort, and South Korean tourists have been able to go to Kaesong 
on a limited basis. The United States does not officially ban travel to 
North Korea; to apply for a visa, Americans must submit a résumé, passport 
information and a letter from an employer confirming they are going as 
tourists to Koryo Tours, whose telephone and fax number is (86-10) 
6416-7544. The information must get to Koryo at least a week ahead. A 
double-entry visa to China is also required.

The tour costs roughly $1,860, at $1.25 to the euro, from Beijing, plus 
$62.50 for a games ticket.
*************************************************

OPINION

*************************************************

8.   WHITHER ECONOMIC REFORMS IN DPRK?
     by Ruediger Frank, Korea Herald, 8 October 2005

As has been reported in the media, North Korea is about to reintroduce fully 
its public distribution system and simultaneously prohibit the sale of grain 
on the markets. If this turns out to be true, if really 100 percent of 
people's food requirements are covered and if this is a measure that is not 
temporary, there would be a number of implications.

On the positive side, it would remove humanitarian concerns about the access 
to food by vulnerable groups, i.e., by people who were the losers under the 
market system of distribution. With a high rate of inflation after the price 
reforms of July 2002, those who were not able to generate at least some 
income connected to the increasing price level saw their purchasing power 
dwindle, making them dependent on humanitarian aid. Provided that the PDS 
functions properly, food will be provided at state-regulated prices, which 
will ensure more equal access - as long as there is enough to distribute, of 
course. Some groups will still eat first.

We also can stop worrying too much about diversion. Since diverted food 
cannot be sold anymore, at least not legally or on a large scale, the 
incentives for the diversion of food aid are significantly reduced. Provided 
that the PDS indeed provides all citizens with at least 500 grams of rice 
per day, there will be almost no demand for diverted food.

Finally, the reintroduction of the PDS, along with the simultaneous decision 
to end international food aid as provided by the World Food Program and 
other international organizations, signals a remarkable level of confidence 
by the North Korean authorities that they have enough food now, and that 
they will have it in the foreseeable future, too. The reintroduction of the 
PDS could be based on huge deliveries from China and South Korea. However, 
for analysts who think that juche really counts in North Korean policy 
decisions, this rather means that domestic food production must have reached 
healthy levels.

There are some possible negative conclusions, too. First of all, there is 
concern with regard to the markets. Is this just the first step to close 
them altogether? Or is it just a minor measure, i.e., the state prohibits 
trade with grain but continues to allow trade in all other goods? This 
remains to be seen.

If no further trade in grains is allowed, what happens to the incentives 
coming from these transactions? One possible answer would be that by paying 
peasants a competitive price, the state can ensure a continued high level of 
production. Another option would be that North Korean economists have 
finally discovered David Ricardo's principle of comparative advantage: try 
to generate income by exporting industrial goods and hope to use this income 
to supplement domestic agricultural production by food imports. In this 
respect, reports about restarting normalization talks with Japan, as well as 
the movement on the nuclear front, would signal efforts at improving 
political conditions for more international exchange.

But exports require a functioning industry. To resuscitate the manufacturing 
and service sector might be the next priority of economic policymakers in 
Pyongyang. There are some ways to do so.

First, some peasants who got used to having an increased income might 
conclude that they now should focus on other economic activities, like 
producing cash crops. Provided the state lets it happen, we might even see 
the birth of village enterprises in North Korea - these have been the engine 
of the first decade of China's economic reforms.

Furthermore, the request for development assistance sounds particularly 
interesting if we again consider normalization with Japan. In 1965, a big 
part of the funds transferred to South Korea in the context of normalization 
was used to build huge industrial enterprises, such as steel giant POSCO. 
North Korea's leader might have something similar in mind.

What will the reactions be inside North Korea? Certainly, a number of people 
will lose their source of income. These include rice traders and also people 
who were able to illegally divert food. It has to be seen whether this group 
is already big and powerful enough to create destabilizing discontent in 
North Korea, or whether it will be possible to direct the entrepreneurial 
energy and capital of these people into other areas. The latter would 
actually mean another boost of economic activities, and even lay the 
foundation for small and medium-sized enterprises. However, a similar logic 
was applied in South Korea's land reform under Syngman Rhee. Landowners were 
forced to sell to the state in the hope that they would reinvest that money 
and become capitalists - but this strategy largely failed. Again, we have to 
wait and see. A lot now depends on the North Korean leadership.

After all, the North Koreans keep being active in economic policy. They 
undoubtedly have learned from the past three years and drew conclusions. I 
would like to believe that the various training measures provided by the 
European Union, some of which I witnessed, have contributed their little 
share to a better understanding of economics. But as always in the case of 
North Korea, we are left with little solid information and much room for 
speculation whether we are just witness to an end to the economic reform 
period, or the next step forward.

[Dr. Ruediger Frank, an economist and Korean studies specialist, is 
professor of East Asian political economy at the University of Vienna in 
Austria and currently Korea Foundation distinguished visiting professor at 
Korea University. He studied at Kim Il Sung University in 1991. - Ed.]
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End CanKor # 222

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