Rigid N. Korea Stirs as Seoul Hosts Olympics

While the world marvels at the stunning economic success of South Korea, a proud bastion of capitalism about to host the 1988 Summer Olympics, it can only puzzle over the country’s enigmatic alter ego, a Communist nation bristling with military might across the border just 30 miles north of Seoul.

To its many detractors, the Democratic People’s Republic of Korea, as the northern half of the peninsula was named when it formed a Soviet-sponsored government 40 years ago last Friday, is backward, stagnant, unpredictable, irrational and dangerous--a totalitarian state so rigidly attached to a primitive form of communism that its most remarkable achievement in four decades is resisting change.

But economic pressures on North Korea are building to the point where its system is ripe for reform, according to analysts in Japan, the only nation in the Western alliance that has maintained substantive, though unofficial, links with the North Korean regime over the years.

Although friction over the Olympic Games has further polarized the geopolitical rift on the Korean Peninsula, the post-Olympic era could witness a gradual emergence of North Korea from its self-imposed isolation, these analysts say. Pyongyang has displayed deep irritation over not being allowed to co-host the Games, and is boycotting them. But North Korea’s economy is at a crossroads in development, and it desperately needs an infusion of capital and technology to resist being eclipsed by its prosperous rival to the south.

“In contrast to the dynamic growth in the south, it seems from the outside that there’s no change at all in the north,” said Teruo Komaki, a senior research officer for Tokyo’s Institute of Developing Economies who has visited Pyongyang, the North Korean capital. “But there is an undercurrent of change.”

North Korea has given little indication that it is willing to abandon its “juche ideology,” the personal philosophy of President Kim Il Sung, a dictatorial cult leader who has ruled the north since the former Japanese colony was liberated and divided along the 38th Parallel in 1945. Juche literally means “nucleus,” and the ideology embraces the values of self-reliance and self-determination that have helped keep North Korea frozen in a xenophobic, revolutionary warp.

But on Sept. 8, Kim gave the clearest signal to date that he wants to cast aside total isolation to improve economic and technical ties with the West.

“We should develop good-neighborly, friendly relations with those capitalist countries which respect the sovereignty of our country,” Kim said in a speech carried by the north’s official Korean Central News Agency.

Signs of Opening Up

There have been some indications that North Korea’s technocrats may be toying with the notion of reinvigorating the economy by opening up, including these developments:

-- North Korea revised its investment laws in 1984 to allow joint ventures with companies from the West. Although there have been no significant results, analysts believe a hotel project in Pyongyang involving a French company has been revived after a rough beginning. Several small-scale projects, including manufacturing facilities, are in progress with participation by companies controlled by Korean residents of Japan, Pyongyang’s primary source of Western goods and technology.

-- The country opened up to ordinary foreign tourists for the first time last year in an apparent attempt to earn hard currency. Several group tours from Japan actually made the pilgrimage to Kim Il Sung’s socialist utopia. The visits were curtailed earlier this year by Japanese government sanctions in the wake of the November, 1987, bombing of a South Korean airliner, with the loss of 115 lives, which Seoul, Washington and Tokyo blamed on North Korean terrorism. This week, Japan announced the lifting of the sanctions.

-- President Kim in public speeches has praised the Soviet Union’s perestroika and glasnost initiatives and applauded Chinese economic reforms. He has not said whether North Korea has anything to learn by these examples, but many observers, especially those in South Korea, are optimistic that reforms by its major socialist allies will influence thinking in Pyongyang. Both China and the Soviet Union are attending the Seoul Olympics and establishing trade ties with Seoul.

-- Word has leaked out through Chinese sources that Pyongyang’s normally rigid bureaucrats are studying the feasibility of a free-trade zone at the Yellow Sea port of Nampo. It appears that the plan remains at the talking stage, but there have been reports that the port is being dredged and enlarged to accommodate larger ships, possibly in preparation for increased international trade.

Credit Is a Problem

A chronic problem with credit, however, is likely to undermine any positive steps that North Korea may attempt in opening up its economy. It has been cut off from the international capital market since the 1970s, when the lack of hard currency forced it to go into default or miss interest payments on hundreds of millions of dollars in loans. Now strapped with a foreign debt estimated at between $3 billion and $5 billion, the government has conspicuously failed to undertake a policy of rebuilding its credit-worthiness.

Also, courting capitalists clearly violates the principles of juche thought, which is still rigidly enshrined along with the cult of Kim Il Sung.

“It may seem like a situation where change is about to take place,” said Masakazu Morita, editor in chief of Radio Press, a nonprofit news service in Tokyo that monitors Pyongyang’s official radio broadcasts and wire reports. “But nothing really has changed.”

Under such conditions, North Korea remains an unattractive partner for investment or trade, despite an appeal made in July by South Korean President Roh Tae Woo for Seoul’s Western allies to establish economic ties with Pyongyang that might draw it into the international community.

Locked in Vicious Cycle

As such, it is locked in a vicious cycle: unable to break out of an impasse in development because it cannot pay for technology but unable to earn hard currency because its stagnant industrial machine has little to export.

“The most serious hurdle to clear is high technology,” said Choe Kwan Ik, an official of the General Assn. of Korean Residents in Japan, a group of stateless Koreans with loyalties to Pyongyang that serves as North Korea’s pipeline to the West. “But they are blocked by the capitalist economies.”

Previously, Pyongyang’s economic planners had been able to boost productivity through campaigns such as the “200-day worker battles” that the official Korean Central News Agency still celebrates with characteristic hyperbole. But analysts say North Korean industry is on the verge of outgrowing the labor-intensive economy that once accounted for solid development, and the proletariat alone can no longer stoke the engines.

A dearth of reliable information requires a great deal of guesswork in analyzing trends. Pyongyang stopped releasing figures on industrial production in 1983, but data on fiscal spending and the downward revision of production targets in the government’s most recent seven-year plan suggest that the double-digit growth of the 1970s is a thing of the past.

Several Years’ Slump Seen

The result is a widening gap in prosperity between North and South Korea that is likely to force Pyongyang to take action to ensure the regime’s survival, even if doing so would contradict juche orthodoxy. Independent estimates place North Korea’s per capita income at about $1,200, already less than half that of booming South Korea, which has twice the north’s population of 20 million people.

North Korea’s two-way trade hovers at about $3.5 billion a year--50% of it with the Soviet Union, about 15% with China and 10% through Korean residents of Japan. In contrast, South Korea did $32 billion in trade last year, racked up a global trade surplus of $7.7 billion and saw its economy grow by 12%. In addition, Pyongyang carries a far heavier burden of defense spending--20% of its gross national product as opposed to 6% for the south--to maintain an edge in military strength over its southern foe.

If the gap expands much further, it will threaten the absolute political power held by Kim Il Sung and his son and designated heir, Kim Jong Il, said Komaki of the Institute of Developing Economies.

Kim Called Main Impediment

The irony is that the largest impediment to reform is Kim Il Sung, the “great leader” who at 76 is believed to be such an exalted being that he is isolated from the harsh realities of his country.

The Soviets, who have been a major source of development aid, reportedly were displeased when Pyongyang started allocating precious resources to build monuments to Kim during the 1980s. Kim has strengthened the chokehold of centralized planning and set agriculture on a backward course by converting collective farms into state farms, in which peasants become civil servants instead of the motivated tillers increasingly allowed in China.

Observers dispute whether Kim Jong Il, known in official Pyongyang parlance as “dear leader,” is any better informed and more moderate, or whether he is in a position to wield genuine power before or after his father’s death. The unexplained sacking in February of army Chief of Staff Oh Guk Ryol, thought to be a close ally of the junior Kim, raised speculation that a power struggle might be afoot--or that Oh was taking responsibility for the alleged terrorist bombing of the South Korean airliner last year.

North Korea has denied culpability in the bombing, much as it denied previous allegations of terrorism as well as the historical fact that it invaded the south to start the 1950-53 Korean War.

Son Seen as a Visionary

Choe, the official of the Korean Residents Assn. who frequently visits Pyongyang, described Kim Jong Il, 46, as an enlightened, college-educated visionary who is already firmly in control of the day-to-day running of the country.

But Choe laments that central bureaucrats are obstructing progress. “They’re rigid and less creative and they’re accustomed to routine work. That’s the most serious problem,” he said.

“It’s a totalitarian country, so it would be easy to change things,” said Shigeyuki Hiroki, assistant director of the Northeast Asia division at the Japanese Foreign Ministry. “All that needs to happen is for Kim Il Sung to wake up one morning and say things are going to be different, and it will change.”