On Tuesday, Beijing signaled full backing for Pyongyang’s recently rumored economic reforms by announcing an agreement with its ally regarding the development of two areas in North Korea, the Rason Economic Trade Zone and the Hwanggumphyong and Wihwado Economic Zone. At the same time, Vice Commerce Minster Chen Jian, writing in the official People’s Daily, stated that priority will be given to the two zones. “We will support big Chinese companies that are willing to invest in North Korea to broaden the economic and trade cooperation with North Korea, to push the two sides to upgrade two-way trade and investment structures and study the feasibility of cooperation on big projects,” he stated.
Chen’s words came just hours after Pyongyang’s most influential power broker arrived in the Chinese capital for almost a week’s stay. Jang Song Thaek, married to Kim Jong Il’s sister, led a delegation of 50 officials to seek Beijing’s assistance for Pyongyang’s development plans.
The trip appears significant, coming after a flurry of signs that Kim Jong Un, North Korea’s new leader, has opted for fundamental economic reform. This month, for instance, Pyongyang reportedly issued instructions to loosen controls over factories, which can now set prices and, according to their own policies, distribute profits. Peasants can now keep 30 percent of their harvest.
More significantly, Kim, through Jang, has declared “money war” against the military. An estimated 70 percent of North Korea’s foreign currency business was conducted by the flag officers under former leader Kim Jong Il. His son, Kim Jong Un, has set about gaining control of that business. The new leader, for instance, recently shuttered Taepung International Investment Group, which has been described as the military’s conduit for investment abroad.
Kim Jong Un also knocked the military down another notch by closing the notorious Room 39, the “slush fund” that has been at the center of North Korea’s disreputable activities. This is not to say the Kim regime is finally exiting crime, such as the counterfeiting of US currency and Viagra and the distribution of illegal drugs. Rather, Kim is trying to shift this business to those who do not wear uniforms. His goal, according to Yang Un-chul at South Korea’s Sejong Institute, is a roughly even split of power between the military and the Korean Workers’ Party.
The campaign against the military was likely the reason for last month’s sacking of Vice Marshal Ri Yong Ho, chief of the General Staff, who is said to have been hiding hundreds of thousands of dollars in his home. The surprise move has been generally interpreted as a prelude to real reform, as the army boss was rumored to be the primary obstacle to change. As Sejong’s Yang notes, “The biggest hurdle to any relaxation of the private sector has always been the military, which wants to keep its economic rent.”
Is the Kim family about to turn over a new leaf? There have been many false dawns before, especially Kim Jong Il’s July 2002 “reforms” that were in reality the antithesis of positive change. And the development of the Rason and Hwanggumphyong and Wihwado zones, both far from the center of the country, is not nearly as bold a vision as Kim Jong Il’s Sinuiju Special Administrative Region, which would have resembled Hong Kong.
Yet we should not discount the significance of the changes occurring almost daily in the Democratic People’s Republic of Korea, as North Korea likes to call itself. Jang Song Thaek, by getting rid of Vice Marshal Ri and scores of other regime figures, is dismantling the delicately balanced power structure put in place by Kim Jong Il to protect his son. And Kim Jong Un and Jang have taken on the nation’s most powerful establishment, the Korean People’s Army. To make matters worse, fights over control of foreign currency, which is what the Taepung and Room 39 changes were all about, are always “among the most ferocious,” as Korea watchers Marcus Noland and Stephan Haggard have noted.
In spite of these steps, it seems unlikely that the North Korean regime can successfully reform itself. It has survived more than six decades by not changing. It is much too brittle to withstand genuine transformation.
As the inexperienced Kim Jong Un embarks on the simultaneous restructuring of both the nature of his regime and the structure of the country’s economy, we are bound to see even more turmoil on the Korean peninsula. A nuclear-armed military is unlikely to allow its position at the center of society to continually erode. The generals and admirals, in all probability, will strike back hard.