Korea: reunification by stealth?
by Paul French
[ politics - march 05 ]
There’s a kind of reunification occurring between the long divided North and South Korea; it’s based on cheap labour, economic opportunism and is happening in a place called Kaesong. It will probably be beneficial to only two people - those who dominate the still mighty chaebols of the ROK (those conglomerates such as Hyundai, Samsung etc) and Kim Jong-il, the unchallenged, un-elected and seemingly un-seatable ruler of the Democratic Peoples Republic of Korea (North Korea). The chaebols are getting a cheap source of labour, closer to home than even China, at a time when they need to reduce their costs to maximise their profits and also need a new stick to beat their notoriously vocal trade unions. Kim needs some hard currency to keep his regime afloat and some jobs for his underemployed and near-starving population. It could just be a win-win situation for both powerful groups - an alliance of raw capitalism and raw dictatorship, two phenomena which have often found themselves comfortable bedfellows.
However, Kaesong is not without risk. When, in June 2002, Kim announced his plans for an investment zone in Sinuiju in the country’s northwest, adjacent to the Yalu River and the border with China, it is thought he caused a breach between himself, his clique of advisers and the Korean People’s Army (KPA), which remains a major force in the DPRK. The KPA has a million men (and not a few women) under arms. The KPA has never much liked Kim Jong-il, believing him a pale shadow of his guerrilla-fighting, nation-building father Kim Il-sung, who died in 1994. It is generally believed that Kim did a deal to keep funding the KPA and elevate more military leaders to senior political positions in return for their support. He got his deal, but relations have remained tense.
The KPA has been intricately involved in building the DPRK from fighting the Korean War (1950-1953) to defending the nation’s sovereign territory to using its men and resources to prop up the ailing economy through building dams and power stations (invariably not very well) and becoming a reserve agricultural workforce out in the fields at planting and harvesting time en masse. The old deal may be collapsing - reports from China indicate that the army is increasingly suffering the same levels of hunger and impoverishment as the mass of the people of the country, while projects such as Sinuiju and Kaesong have alienated them from the civilian leadership. Why?
Though never formally accepted, it can be argued that Sinuiju and Kaesong are both effectively projects that cede DPRK territory to foreign (and foreign in this sense means South Korean too) interests. Sinuiju collapsed as the Chinese took exception to a low-wage zone adjacent to their flourishing investment zone of Dandong just across the border. The Chinese businessman Kim had appointed in charge of the project was banged up in prison in China, sentenced to 18 years for tax evasion, and the zone collapsed. Kaesong, a project near the DMZ and the ROK, was started as part of former ROK President Kim Dae-jung’s “Sunshine Policy”. To many, it sounds like progress, but Kaesong is no equivalent of the boomtowns of China’s investment zones started under Deng Xiaoping in the 1980s such as Shenzhen or Hainan. In Kaesong, no North Korean firms are involved in joint ventures with investors the way China insisted upon. This means no technology transfer, little training for DPRK workers and no cross-fertilisation of the sort that allowed domestic Chinese firms to become the demon exporters we now know.
All the North is providing in Kaesong (just 44 miles north of Seoul) is cheap labour at a minimum monthly wage of US$50. (In Pyongyang the average wage is US$22). A reported 900 ROK companies have expressed interest in the zone, with Hyundai alone claiming it will invest US$184 million by 2007. The DPRK cannot supply sufficient energy to Kaesong, and by March 2005 the ROK state power company will be running energy into the zone, while afterwards it is expected that the South Korean state telecoms provider will move in to handle communications as the North cannot handle demand. If you control the factories, the power and the communications, do you not, in fact, control the territory? (Consider also that due to the economic collapse and poor track maintenance, the train journey time for the 120-mile trip between Pyongyang and Kaesong can take up to six hours!)
If you buy this argument, then you can start to see a scenario of reunification by stealth with a clear advantage going to the South. Not surprisingly, given that capital goes where it can get the best return, South Korean firms are queuing up to invest in Kaesong and produce closer to home for less than they can in even China, let alone South Korea itself. If room runs out at Kaesong (the zone is currently 92,400 square meters), then the DPRK can just enlarge it to allow more companies in to employ more unemployed DPRK workers. With just an estimated one-third of all non-military factories currently operational, underemployed workers are plentiful. However, as the zone increases, so it will need more power (from the ROK) and more communication infrastructure (from the ROK) and more of everything (mostly from the ROK). The reunification by stealth will continue.
All this probably suits everyone except the KPA Generals. Despite having bounced back from the 1997-1998 Asian financial crisis, the ROK economy remains weak and susceptible to economic shock and a return to recession. One of the ROK’s major trading partners, Japan, remains in stubborn recession. China is providing a new outlet for ROK goods, from cars to microwaves, but still most South Koreans think their economy is too fragile to absorb the cost of a sudden unification.
Of course, Seoul has studied the German example closely and clearly there are parallels between the old GDR and the DPRK: divided countries with the state socialist portion losing out economically to the capitalist side; heavily militarized borders; the involvement of the US and USSR on opposing sides of the border; the socialist portion less populous than its capitalist opposite. However, the GDR was a much more economically advanced society than the DPRK today and GDR citizens also more exposed to the world than those isolated in North Korea.
Although direct contact was limited, West Germans could at least see GDR athletes performing at the Olympics; mail was exchanged between separated families; and there was passage of refugees from East to West. Between the two Koreas, the separation over the last 55 years has been virtually total. That families had no knowledge of their Northern or Southern relations was evident in the emotion displayed during the family reunions in the early days of the Sunshine Policy. For most South Koreans their Northern relatives simply disappeared in 1953 and were never heard of again. Additionally, North Korea has no previous experience of any form of social and political system except highly centralized Confucian authority and colonialism. East Germany had known forms of federalism and democracy. Although the GDR’s economy stagnated under the command economy, there can be no comparison with the scale of the current North Korean collapse. Shortages were common, but in essence the GDR provided a sustainable standing of living to its residents and developed strong industries in mineral extraction, steel and manufacturing. While the country suffered from the inherent flaws of state planning, it managed to be an active exporter of products such as rolled steel and cars. The gap between North and South Korea is significantly wider than that which pertained between East and West Germany at the time of reunification.
Most Koreans who favour some sort of reunification along German lines - the ‘soft landing’ approach as opposed to military conflict - concede that the process must be more gradual than that which occurred between the GDR and FDR. Certainly, the estimated costs - perhaps as high as US$1 trillion by some estimates - alarm many South Koreans. Additionally, as has been pointed out by other analysts, geography will play a part. The costs of upgrading infrastructure including road networks, ports and telecommunications will be very considerable. Social welfare benefits are another factor, being far higher in the DPRK than those that were seen in the former GDR. Then there is the question of the DPRK’s outstanding debts to Western nations (over US$12 billion), the former USSR and Japan, which would require either cancellation or their discounted purchase on the international market by South Korea to offset the DPRK’s lack of creditworthiness - which would be a costly exercise.
Given this, perhaps a gradual reunification by stealth spreading out from Kaesong and slowly absorbing the North’s unemployed labour force is preferable to Seoul.
The issue of reunification has been turned on its head by the economic collapse of North Korea. Up until the mid-1970s, when the Northern economy was growing faster than in the South, reunification seemed feasible to Pyongyang. It seemed possible to win over a Southern population witnessing slower growth, lower per capita standards and a military government answering to American command. However, by the 1980s and then after the USSR’s collapse the North became unattractive to citizens of an economically powerful ROK. This was itself a shock to the North Koreans, who by and large had believed in state planning and their political philosophy of Juche (self-reliance) and increasingly lacked the answers as to why their country was lagging behind and collapsing. This situation was all the more confusing considering that Juche teaching includes a substantial component of Confucianism, which decreed that power should reside with those who govern well and act in a morally superior fashion. Had they not done this? Had Kim Il-sung not shown the way? As the USSR and the Eastern bloc fell away, as the non-aligned movement fell into inaction, and as China largely ignored North Korea, it must have been perplexing to Juche/Confucian thinking.
Perhaps any genuine starting point for reunification must depend on the will of the people involved, although it seems unavoidable that a unified peninsula will look a lot more like South Korea than North. Many in Seoul remain concerned that reunification could have negative implications for the real wages of Southern workers and that the North could drag down the South economically. Others see the infusion of North Korea’s younger population as a way to avoid the coming demographic problem in the South - an ageing population, 2% unemployment and over 250,000 foreign workers required already. The North may be able to provide much-needed labour, not just for the reconstruction there but also for low-wage jobs in the South. It could be a new base for locating the manufacture of products such as domestic appliances, work that is now being transferred to China and South East Asia.
The American journalist T R Reid, commenting on Korea, asked ‘How long can an entire country stay angry?’ There is still no rush in the ROK towards reunification. The thinking remains that it is better to wait, and for the North to recover economically. There remains little enthusiasm for reunification in Beijing; Washington remains essentially disengaged from the debate. At the end of the day the simple truth is that no reunification scenario envisages the continuance in power of the KWP or Kim Jong-il. As long as Kim and the KWP remain in power, North Korea must remain independent and the peninsula divided.
For those watching the DPRK, the question is will the Generals allow this process to continue or will they themselves decide that Kim’s time is over? For the time being it seems certain that the peninsula will remain both paranoid and divided.
