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North Korea chooses guns over butter
By Aidan Foster-Carter

(Published with permission of NewNations.com)
March's big event in the Democratic People's Republic of Korea (DPRK) was the budget. As usual, the Supreme People's Assembly (SPA), the rubber-stamp parliament, met for just a single day last Thursday, March 25. It heard - and unanimously approved - reports by the finance minister, Mun Il-bong, on the budget, and by the prime minister, Pak Pong-ju, on the wider economy. Each of these looked both forward and back, summing up last year and setting tasks for 2004. (The calendar year is also the financial year in North Korea, which otherwise uses its own unique calendar, starting from the birth in 1912 of the late great leader Kim Il-sung, who died in 1994; thus 2004 is Juche 93, 2003 is Juche 92, and so forth.)
Nor is this the only idiosyncrasy. Despite the rare treat (eagerly anticipated by DPRK-watchers) of an official number or two, as so often in Pyongyang, the Star Trek mantra applies. This was a budget speech - but not as we know it. As reported by the official Korean Central News Agency (KCNA), Mun Il-bong did not actually reveal a single solid number. With due prudence, he reported underspending: expenditure was only 98.2 percent of the planned figure (who lost out is not revealed), while revenue exceeded the plan at 100.9 percent.
Until last year, such percentages could be plotted against known past figures to derive the real numbers. On that basis, North Korea's recent budget history is startling. After years, indeed decades, of reported steady annual increases on both sides of the ledger, by 1994 income and spending alike had reached 41.5 billion won (just under US$20 billion at the rate of exchange then). Then Kim Il-sung died, and for four years the SPA did not meet: supposedly as a sign of mourning, but this was also the worst period of famine.
When in 1999 the SPA finally reconvened, the then-finance minister, Yun Ki-jong (a rare woman among Pyongyang's top elite), revealed, but did not try to explain, figures of barely 20 billion won for 1998 - meaning both income and spending had plunged by half in just four years. After this shock, the pattern of slow annual rises resumed, reaching 22.2 billion won in 2002. But that year's economic reforms, involving manifold increases in most prices and wages, created a new problem from 2003: namely what exchange rate to use, as between what can in effect be called old and new won. No doubt Pyongyang bureaucrats have their own multiplier for this, but they are not letting on what it is.
So we are stuck with percentages and bitty ones at that. Besides aggregate income and spending, Mun Il-bong gave a partial breakdown. Last year 15.7 percent of the budget went for defense, 23.3 percent on the national economy, and 40.5 percent to "various popular policies for the promotion of the people's welfare" (social services in normal parlance). Where the remaining 20.5 percent went was not revealed, nor any further breakdown. Of last year's main innovation - North Korea's first government bonds in half a century, intended to flush out foreign currency and other savings kept under the proverbial mattress - Mun just said that "a large revenue" was added and "not a small amount of funds" donated.
Taxing free markets
He was hardly more forthcoming on targets for this year. Total revenue is set to rise by 5.7 percent, with a planned 16.5 percent increase in state enterprise profits - while "those of cooperative organizations and others are envisaged to markedly swell". The "others" refers to North Korea's new and burgeoning private sector, whose relationship to the old planned economy - which the budget report presupposes as the norm - is far from clear. Defeated in trying to crush free markets, the state is doubtless keen to tax them.
Otherwise it was targetry as usual. Total spending is slated to rise by 8.6 percent, suggesting either a deficit or more bond issues. Defense gets 15.5 percent; in so militarized a society the true figure must be much higher. Interestingly, defense tasks include "stepping up ... informationalization" (sic): a rare admission that North Korea's obsession with information technology (IT) has a military dimension. (South Korean defense planners, skeptical of sunshine, have added cyberwar to the long list of threats they might confront from across the Demilitarized Zone.) Overall spending on science and technology is set to rise by a massive 60 percent, whereas education - surely not unconnected - and health get just 9.5 percent and 5.9 percent respectively.
Apart from an opaque mention of an extra 8.1 percent for unspecified "additional measures" these were the only numbers given by the finance minister. Otherwise, his old-style priorities could have been declaimed at any time in the past half-century: "In order to re-energize the nation's economy as a whole this year the government will allocate huge funds for the fields of the national economy so as to keep the production in the mining, machine-building, chemical and building materials industries and forestry going at a steady rate and effect a new productive upswing in the light industry and the rural economy while channeling main efforts into the power, coal and metal industries and the railway transport." But if everything is a priority, then nothing is.
Fortunately the prime minister's speech, at the same SPA session, was a little more forthcoming. This was Pak Pong-ju's first annual report since his appointment last September. A year before that, as chemicals minister, he took part in an economic study tour of South Korea; where his practical grasp and eagerness to learn - touring the plants of Samsung et al, he yearned for several extra pairs of eyes to take it all in - impressed his hosts. Hence high hopes are riding on him, as the latest incarnation of a longstanding adventism - waiting for Godot, so far - which pines for the day when Pyongyang's technocrats will finally take over, and economic rationality will reign.
No technocrats yet at the helm
Not yet, alas. Wishful thinking abounds, especially in Seoul these days. The Financial Times, in an upbeat account of Pak's speech to the SPA, quoted Park Suhk-sam (chief North Korea researcher at the Bank of Korea, the South's central bank), as concluding that reform-minded technocrats appear to have firm control over economic policy in Pyongyang: "Market concepts such as profitability are becoming entrenched."
Yet a close reading of Pak's full speech (summary at www.kcna.co.jp) - hardly supports such optimism. The premier patently has drive, and a grasp of detail. But it is quite clear that he is constrained by political, meaning military, priorities. He added a few figures to those given by Mun Il-bong. Last year gross industrial output value rose 10 percent, electricity 21 percent, lead and zinc 76 percent, iron ore 46 percent, and cement 27 percent.
That sounds impressive, if true. But repeated references to the need to "normalize" production suggest North Korea is still struggling merely to recover ground lost in the 1990s, when a series of shocks - the abrupt end of Soviet aid, floods, and famine - all but wiped out the already-creaking old industrial base. The northeast, where much of this was located, remains a rust belt, with few plants emitting smoke or other signs of life. Many have been cannibalized for scrap metal, sold across the border in China. A leading Seoul daily, the Chosun Ilbo, claimed on March 10 that workers at the crucial Musan mine, praised by the prime minister for its efforts last year, are selling iron ore to China to buy food instead of sending it as per plan to the Kim Chaek steel mill.
While of course Pak Pong-ju mentioned none of this, one can and must read between the lines. Thus he demanded "an efficient use of electricity by minimizing the loss of electricity in transmission, establishing a strict centralized discipline over the power supply and widely introducing meters". There is no point producing 21 percent more power, only for it to be dissipated either in dilapidated transmission lines or wasteful usage.
Similarly, Pak's calls to "put production on a normal track", in areas ranging from chemicals to foodstuffs, imply an economy still in recovery mode. As such, the few specific targets he mentioned appear unrealistically high - unless the prior baseline is alarmingly low. He wants fabric output to rise by 73 percent, and footwear by 53 percent. Even more striking, he called for production of 2.3 times more iron ore, 2.5 times more pig iron, and five times more rolled steel than last year. Unless this means restarting or repairing plants that had closed, such rates of increase sound absurd and unattainable.
The army gets the lion's share
And what is all this steel for? "To supply ... national defense industry on a preferential basis." Similarly, more coal - "tunneling should be kept ahead of coal mining", which sounds obvious but suggests problems opening up fresh seams - is essential to "meet the need for coal in munitions industry and key domains of the national economy".
This gives the game away. Kim Jong-il's Songun (military-first) policy, to which Pak duly genuflected, is both a direct and indirect barrier to economic recovery, let alone reform. Steel going to tanks and missiles is lost to more productive uses: for civilian factories or tractors, say. True, arms sales can earn foreign exchange; but this is risky business now, thanks to the United States-backed Proliferation Security Initiative (PSI), which has already intercepted several military cargoes heading to and from North Korea.
Not only is Songun unproductive, its priorities are reactionary, putting as they do back at center stage the old Stalinist heavy industry behemoths: coal, iron, steel. This is not where a 21st-century North Korea should be focussing. Its comparative advantage lies in manufacturing for export: as in the planned Kaesong special zone for South Korean firms, Pyongyang's best business hope, which the premier did not see fit to mention. At home, the heavy-industry fetish reduces light industry and agriculture, lip service aside, to being forever the bridesmaids, never the bride. (Then again, as US expert Marcus Noland of the Institute for International Economics has noted, in a rational world mountainous North Korea - the South too - would not grow food but import it.)
The military aspect aside, tensions between old and new thinking in Pak Pong-ju's speech are palpable. Thus officials - still in control - are now charged with not only "economic guidance" but also "business management", which they must carry out "on the socialist principle and the principle of ensuring profitability". As if being capitalist and socialist at once is not hard enough, they must be militarist too: "actively learning from the fighting trait and working method created by the People's Army".
Squaring so many circles inevitably undermines Pak's call for "a leaping advance on the front of economy and science", itself intended to "bring about a decisive turn in improving the standard of the people's living". Notable too, and sadly typical, was the silence on production relations as opposed to productive forces (as Karl Marx would put it). Ironically, to outside observers North Korea today is a classic Marxian case. The main obstacles to development are not technical but social: to wit the dead weight of a regime and system that still willfully misdirect resources on a monstrous scale.
No mention of market reforms
Ominously, not once did Pak Pong-ju explicitly mention the cautious yet far-reaching market reforms that North Korea has implemented since July 2002. A reform that dares not speak its name must by definition be limited. Yet the day before, the visiting Chinese foreign minister was proudly shown Pyongyang's new Tongil private market, and KCNA reported this. With similar ambivalence, The Economist's correspondent was taken to Tongil - but forbidden to photograph it. Similarly, that stony statistical silence speaks volumes about the limits of reform so far. Foreign investors, not least, will not come unless given numbers to crunch - nor while the nuclear crisis remains unsettled, yet another way in which Songun impedes North Korea's economic growth.
On a brighter note, Pak Pong-ju evidently wants to open the economy. Yet his call to build modern export production bases for the extractive industries has an oddly old-fashioned ring. True, North Korea has a range of minerals that it can, indeed does, process and sell. Moreover commodity prices are high, unlike in the 1970s when an earlier outward foray landed Pyongyang with debts that it could not, or would not, repay to this day. Yet after half a century of socialism, is this classic Third World raw-materials syndrome really the best that a self-styled "people's paradise" can do? And how can it do even this without vast investment, which can only come from outside? North Korea has been trying to flog its mines for years, but has had almost no takers.
At one point, for once almost speaking the same language as the rest of the world, Pak says that "the quality of major commodities in great demand which mainly depend on locally available rich raw materials should be raised to the world's level for their high competitive edge on the international market". Yet to make exports world-class will, again, require finance and technology that North Korea simply does not possess.
In the most striking section of his report, Pak in effect calls on North Korea to become one big export zone: "All domains and units of the national economy should wage a mass movement to build their own strong export bases, expand and develop foreign trade in a multifaceted manner and encourage equity and contractual joint ventures on an extensive scale in the direction of introducing advanced science and technology. They should conduct substantial cooperation for economic development with various international organizations in keeping with the changed environment and conditions."
Amen to that. Yet again, this is not wholly new - and it all depends who does what, why, and how. In fact for many years enterprises have been told to maximize foreign-exchange earnings - but to show loyalty to the Dear Leader (who often pockets the proceeds, as cash or "gifts"), rather than to boost the economy as such. The premium here is on one-off deals that turn a quick buck, rather than building stable long-term relationships. Nor is Pyongyang picky about partners or products: witness the Pong Su, a ship caught last year dropping heroin in Australia for Malaysian gangsters (see Hand in the cookie jar, April 29, 2003). This year the State Department accused North Korea of drug trafficking at state level. The obverse of expanding legitimate trade has to be a complete halt to criminal enterprise.
Or again trade may be an act of desperation. The Chosun Ilbo story quoted above also claims that even public security officials - hitherto privileged, for obvious reasons - were recently told to start trading, simply to obtain food; and that corruption among hungry officials is spreading. The shopworn slogan of juche (self-reliance), when not simply a lie - North Korea has never been in any sense a self-contained economy, but has always depended on outside subventions - is now given a new twist. Ever since the famine of the mid-1990s, entire regions, sectors, or households have in effect been told to expect nothing from the state: you are on your own now, so fend for yourself.
Yet this same regime, despite defaulting on its side of the social contract in failing to guarantee even the most rudimentary of human needs - food to eat, for sheer physical survival - still has the gall to claim monopoly rights over its long-suffering citizens' bodies and minds. The contradiction is acute; one wonders how long it can last before people start demanding, as the song has it: "What have you done for me, lately?"
At the macroeconomic level, Kim Jong-il cannot put off forever a choice between, literally, guns or butter: a military-first policy, or a viable economy. He cannot have both; and Pak Pong-ju cannot deliver economic progress while shackled by Songun.
Aidan Foster-Carter is honorary senior research fellow in sociology and modern Korea, Leeds University, UK. This article was first written for and published by www.newnations.com, and is reproduced by kind permission.
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Pakistan to play a pivotal role
By Syed Saleem Shahzad
KARACHI - As the Pakistan military establishment's pro-United States policies continue to receive harsh criticism domestically, Washington is now pressuring Pakistani President General Pervez Musharraf to undertake yet another operation against foreign militants and their proteges in Pakistan's tribal regions of South and North Waziristan near the Afghanistan border.
The most recent operation in South Waziristan kicked off two weeks ago and failed miserably, with the official figure listing about 50 of the Pakistan Army's officers and soldiers killed and no "prize targets" captured. Asia Times Online sources maintain the casualty figure is actually much higher. Now, Musharraf has been pushed back under the microscope. Through many reshuffles in the Pakistan army, Musharraf has managed to maintain his writ as chief of army staff, while holding onto his position as president of Pakistan - however this issue is reemerging as a source of contention in Pakistan. There is also intense debate in the armed forces hierarchy following the failed operation in Wana, the headquarters of South Waziristan agency, that the two offices should be separated to keep the army out of politics.
Such calls for the division of military and state come in the wake of several "high value target" myths established over the duration of the operation. At the start of the fighting, it was implied that al-Qaeda number two, Dr Ayman al-Zawahiri, was hiding out in the region, an allegation later dismissed by the army. More recently, it was suggested that two high-level al-Qaeda members, Tahir Yuldevish and "Abdullah", were seriously wounded and killed - in that order. Yuldevish is the leading commander of the Islamic Movement of Uzbekistan, meanwhile Abdullah's story would have ridiculed the army had the world known his background, given that Pakistan's Inter Services Public Relations (ISPR) department initially branded him to be a key al-Qaeda member.
Yuldashev and "Abdullah" are two of the most famous characters among the Pakistani jihadis - each featured in movies that are in circulation all over the country. Yuldashev can be seen addressing the Islamic cause in which he justifies their fight against the US by providing various glimpses of brutalities in Israel and in Chechnya. "Abdullah" is a Chechan guerilla who is known among the jihadis for his classic guerilla fights. He is shown in the movies killing Russian soldiers.
US bombings in Afghanistan forced Yuldevish to leave northern Afghanistan some time ago, his whereabouts are currently unknown, however, he was last believed to have been hiding out in Khost. Pakistani authorities took the lead from there and established their own guess that Yuldevish was hiding out in the Shawal mountains - a no-man's land on the Pakistan-Afghan border - and even claimed that he was wounded. Given the popularity of Abdullah in Pakistan, it was presumed that he should also be in Afghanistan, and his status was elevated by the ISPR to that of chief spy master of al-Qaeda. Soon after, however, it was recognized that there was no evidence of his presence in Afghanistan. He was eventually presumed dead, but it was later stated by the ISPR that he is not the chief spy master, but rather an ordinary spy: "an Egyptian" whose body had not yet been recovered.
These attempts to "glorify" the Wana operation were unable to cover up its failure and repercussions. The Pakistan army is split on an ethnic basis. Before the operation started in South Waziristan, Musharraf prematurely retired Corps Commander Peshawar Ali Jan Orakzai, a Pashtun, and installed Lieutenant-General Safdar Hussain - a Punjabi. The development was seen as anti-Pashtun among the Pashtun officers who are the second largest majority after Punjabi officers. These feelings of tension were clearly reflected during the operation, from both sides. Several soldiers and a few officers of Pashtun origin refused to participate in actions taken against the Pashtun tribals.
The way in which Pashtun tribals dealt with hostages is also a reflection of this split. The tribals that held Pashtun paramilitary force members hostage are said to have treated them with respect, later releasing them after a deal with Pakistani authorities. However, the soldiers that were of Punjab descent were killed and their bodies mutilated.
High-level sources tell Asia Times Online that in the face of these failures, Musharraf now faces two immediate challenges.
Firstly, the US military high command has been regularly been visiting Pakistan and is stressing the need for a complete crackdown on foreign fighters along the Pakistan-Afghanistan border area, starting from Khyber Agency to South Waziristan. They emphasized that the mission can only be successful if both US and Pakistani forces conduct joint operations in the area. The aim of this operation is once again to destroy the base of jihadi fighters believed to be in the Shawal mountains. Thus another operation in South and North Waziristan is inevitable, despite the public outcry sure to ensue.
The second challenge Musharraf is up against comes from the International Atomic Energy Agency (IAEA). IAEA inspectors are now in Iran and aim to come Pakistan to verify the Iranian centrifuge facility with Pakistan - which means they will be paying a visit to Pakistan's nuclear installations, another issue sensitive to the Pakistani public.
Non-compliance with these two challenges is difficult for Pakistan, as the country is under heavy US pressure. But, on the other hand, compliance means giving Islamic radicals the chance to wreak further havoc. They are already seeking out this opportunity - under broader designs chalked out by the International Islamic Front - in which the success of the Afghan resistance can only be ensured once it takes control of Pakistan's backyard. This is only possible if the country falls into the hands of Islamic radicals or deep into anarchy and chaos.
(Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)


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Afghanistan: Return of the jihadis
By Syed Saleem Shahzad
KARACHI - With the onset of summer and the ice now melting in the mountains of Afghanistan, the most organized global struggle yet of the International Islamic Front partners has begun to defeat the United States and coalition forces at their hub in Afghanistan.
The early manifestations of this can already be seen in Uzbekistan, where a series of terror attacks over the past few days have left more than 40 people dead, and in the foiled terror attacks in Britain and the Philippines. But the real battlefield is Afghanistan, where Pakistan, already the world's backyard of radical Islam, will play an important role.
The Uzbek struggle
Events in Uzbekistan, including suicide attacks and culminating in a shootout on Tuesday, are the bloodiest wave of violence to hit the former Soviet republic since it enlisted as a key US ally in the "war on terrorism" soon after the 2001 September 11 attacks. A US air base there proved an important strategic asset in the US aerial attacks on Afghanistan.
Some reports have blamed the Hizb ut-Tahrir, but this is unlikely to be the case, as this group, although committed to the overthrow of existing political regimes and their replacement with a caliphate, has traditionally been non-violent.
Rather, the violence in Uzbekistan is much more likely to be linked to Afghanistan and the struggle that is to be played out there in the coming months.
Pakistan's Central Asia connection
In the development of Islamic radicalism in Uzbekistan, the "Naqshband" circle of Sufis emerged as an underground network during Soviet rule in opposition to the Soviet system. These Sufis believed in militancy against "tyrant" rulers. The network's first contact with Pakistan's Inter-Services Intelligence (ISI) came when the Sufis began resistance operations against the Soviets after the invasion of Afghanistan in 1979.
In collaboration with the US Central Intelligence Agency (CIA), the ISI actively assisted the militants, and also devised a strategy to take the struggle back to USSR soil, apart from Afghanistan.
The go-between for this was the Hizb-i-Islami Afghanistan (HIA), led by Gulbuddin Hekmatyar, who is now once again spearheading operations in Afghanistan. The HIA helped spread the revolutionary literature of the Muslim Brotherhood in the Central Asian republics. The aim was not to convert ordinary Muslims, but to recruit revolutionaries who would attack the Soviet system from within their own regions, including Uzbekistan. These operations were launched in the mid and late 1980s, and over the years a whole new generation has evolved committed to underground operations. They are not an isolated community, like the Pakistani tribals, who are easily identified with their links to militants. This new generation of militants is part and parcel of Central Asian urban culture, and like any secret agents, they are not easily identifiable.
Meanwhile, the Pakistan army established a special intelligence cell within the HIA for which Pakistanis and Afghans were trained. All of the Pakistanis were ISI operators. However, after 1989, at the end of the Soviet invasion of Afghanistan, the HIA began to work independently and it absorbed many Arabs into the intelligence cell, as well as Central Asian youths. These were sent to training camps in Afghanistan, where they were drilled by Arab instructors. The Central Asian recruits, therefore, forged good ties with many Arabs.
In the early 1980s Afghanistan also served as a testing ground for Pakistani dictator Zia ul-Haq's vision, along with his chief spy master, then Lieutenant-General Akhtar Abdul Rehman (later a full general), for an international Islamic brigade. This matured into Osama bin Laden's International Islamic Front, a loose umbrella front for organizations that include al-Qaeda and independent cells in Central Asia comprising militants nurtured by the CIA-ISI nexus and trained in the HIA's Afghanistan camps.
In this context, the terror in Uzbekistan, which borders Afghanistan, cannot be seen in isolation, rather as the beginning of a new jihad in Afghanistan that will tap into resources, especially those in Central Asia, developed over many years.
(Copyright 2004 Asia Times Online Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)