North Korea’s Kim Jong Il Dies

[Muthukali]

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Dec. 19 (Bloomberg) -- Kim Jong Il, the second-generation North Korean dictator who defied global condemnation to build nuclear weapons while his people starved, has died, state media reported. A government statement called on North Koreans to "loyally follow" his son, Kim Jong Un. Rishaad Salamat reports on Bloomberg Television's "Asia Edge." (Source: Bloomberg)



Kim Jong Il, the second-generation North Korean dictator who defied global condemnation to build nuclear weapons while his people starved, has died, state media reported. A government statement called on North Koreans to “loyally follow” his son, Kim Jong Un.

Kim, 70, died on Dec. 17 of exhaustion brought on by a sudden illness while on a domestic train trip, the official Korean Central News Agency said. Kim probably had a stroke in August 2008 and may have also contracted pancreatic cancer, according to South Korean news reports.

The son of Kim Il Sung, North Korea’s founder, Kim was a chain-smoking recluse who ruled for 17 years after coming to power in July 1994 and resisted opening up to the outside world in order to protect his regime. The likely succession of his little-known third son, Jong Un, threatens to trigger a dangerous period for the Korean peninsula, where 1.7 million troops from the two Koreas and the U.S. square off every day.

“Kim Jong Il inherited a genius for playing the weak hand and by keeping the major powers nervous, continuing his father’s tradition of turning Korea’s history of subservience on its head,” said Michael Breen, the Seoul-based author of “Kim Jong Il: North Korea’s Dear Leader,” a biography. “We have entered an uncertain moment with North Korea.”

Jong Un, is at the “forefront of the revolution,” KCNA said in its official statement of the elder Kim’s death.

Won, Stocks Fall
South Korea’s won declined as much as 1.6 percent to a two- month low of 1,177.35 per dollar and government bonds dropped after the news. The Kospi index lost 4 percent to 1,766.82 as of 12:07 p.m. in Seoul.

Lampooned by foreign cartoonists and filmmakers for his weight, his zippered jumpsuits, his aviator sunglasses and his bouffant hairdo, Kim cut a more serious figure in his rare dealings with world leaders outside the Communist bloc.

“If there’s no confrontation, there’s no significance to weapons,” he told Madeleine Albright, then U.S. secretary of state, in a 2000 meeting in Pyongyang.

Those words took on greater significance in 2009 as Kim defied threats of United Nations sanctions to test a second nuclear device and a ballistic missile, technically capable of striking Alaska.

The following year North Korea lashed out militarily, prompting stern warnings from the U.S. and South Korea. An international investigation blamed Kim’s regime for the March 2010 sinking of the South Korean naval vessel Cheonan that killed 46 sailors. Eight months later North Korea shelled a South Korean island, killing two soldiers, two civilians and setting homes ablaze. The act followed reports by an American scientist that the country had made “stunning” advances to its uranium-enrichment program.

 

[Muthukali]

Dollar Rises After N. Korea TV Says Leader Dies

The dollar strengthened against the majority of its 16 counterparts after state television in North Korea said the nation’s leader Kim Jong Il has died, boosting demand for the U.S. currency as a haven.

The South Korean won tumbled against all of its major peers as an official at the defense ministry in Seoul said the nation hasn’t observed any changes in the military posture of North Korea today after Kim’s death.

“Because of increased uncertainty, it’s cause for risk aversion,” said Koji Fukaya, chief currency strategist in Tokyo at Credit Suisse Group AG. “The dollar will be the biggest beneficiary.”

The dollar strengthened 0.3 percent to $1.3008 per euro as of 12:29 p.m. in Tokyo from the close in New York on Dec. 16. The greenback added 0.4 percent to 78.06 yen. The European currency added 0.1 percent to 101.54 yen. The won sank 1.5 percent to 1,175.64 per dollar.

“Because of its geographical proximity, if this incident destabilizes North Korea, South Korea and Japan won’t remain unscathed,” said Fukaya. “People can’t buy the yen for risk aversion.”

 

[Muthukali]

N. Korea Signals Kim Succession as South Braces

North Korea said its people and military back Kim Jong Un, the little-known third son of Kim Jong Il, as leader as uncertainty around the political succession on a peninsula where 1.7 million troops are stationed unsettled stock markets from Seoul to Hong Kong.

Kim Jong Il passed away from “great mental and physical strain” two days ago, the official Korean Central News Agency said today, bringing an end to a 17-year tenure in which North Korea built nuclear weapons while some 2 million of its people died from famine. State media called for citizens to “loyally follow” Jong Un, who is at the “forefront of the revolution.”

“Kim’s death happened at a very bad time for the North Korean regime,” said Brian Myers, a professor of international studies at Dongseo University in Busan, South Korea. “It has really not proceeded very quickly with the glorification of the heir-apparent, Kim Jong Un. An average North Korean is still in the dark about his upbringing, his biography, why he is uniquely well qualified to take over the country.”

South Korea called in police officers for emergency duty, considered raising alert levels for the military and pledged steps by the central bank if needed to stabilize financial markets. The transition in the north adds to risks for Asia’s fourth-largest economy, which is already contending with slowing export growth as Europe’s debt crisis dents global demand.

Dollar, Stocks
The Kospi index of shares tumbled 3.4 percent as of 3:25 p.m. in Seoul (KOSPI), and the MSCI Asia Pacific Index lost 1.3 percent. South Korea’s won sank 1.4 percent to 1,174.80 per dollar. The U.S. currency gained 0.3 percent to $1.3010 per euro and 0.2 percent to 77.94 yen.

During a state television broadcast monitored in Tokyo, the announcer wept as she read the news of Kim Jong Il’s death. Footage was aired of thousands of people in the main square of the capital of Pyongyang chanting in unison and waving Kimjongilia, a flower named after the deceased leader. While official reports give Kim’s age as 69, Russian records indicate he was born in Siberia in February 1941.

The late leader last year set in line his succession plan. Kim Jong Un, thought to be 28 or 29, was first mentioned in official KCNA dispatches on Sept. 28, 2010, when his appointments as general and vice chairman of the Central Military Commission of the party were announced.

Right Side
Jong Un stood at his father’s right side at a military parade the next month, wearing a black suit with a mandarin collar similar to the style worn by his grandfather, who founded the nation after World War II. The younger Kim, educated in Switzerland, also emulates Kim Il Sung’s slicked-back hairstyle, rather than the bouffant favored by his father.

“It comes at a time when there was a slight indication North Korea was going through one of its good-boy phases,” said Carlyle Thayer, a politics professor at the Australian Defense Force Academy in Canberra, referring to signs of a North Korean pledge to suspend parts of its nuclear program. “I don’t expect an outbreak of war, but it takes the positive trends that were beginning to emerge and perhaps puts them on hold.”

North Korea for years has engaged in a strategy of brinkmanship with the U.S. and South Korea following the 1950-53 Korean war, which ended without a peace treaty. America became one of the nation’s biggest aid donors as its negotiators forged periodic agreements with the North to suspend its nuclear armaments program.

Food Aid
The U.S. agreed on providing food aid to North Korea in recent talks held between the countries in Beijing, based on steps including a suspension of the North’s uranium enrichment, South Korea’s Yonhap News reported two days ago, citing diplomatic officials in Seoul it didn’t identify.

The Obama administration resumed direct talks with Kim Jong Il’s regime in October after increased sanctions had no effect in persuading it to abandon the nuclear program. The U.S. envoy on North Korea Glyn Davies told reporters in Tokyo last week further bilateral talks hinge on the totalitarian state changing its “provocative” behavior.

The U.S. is “closely monitoring” reports that North Korean leader Kim Jong Il has died, the White House said in a statement in Washington. President Barack Obama has been notified and the administration is in “close touch” with allies South Korea and Japan, the statement said, citing the office of the press secretary. The U.S. remains “committed to stability on the Korean peninsula,” the statement said.

Alert Level
All police officers in South Korea were called to work for emergency duty and commanders are discussing “a detailed course of action” in response to developments in the North, the National Police Agency said in a statement on its website today. The military is discussing whether to raise its “watchcon” monitoring to level two from level three, and its “defcon” combat alertness to three from four, an official at the defense ministry said on condition of anonymity.

South Korea’s central bank will “closely monitor” any developments and will take steps to stabilize markets and seek international cooperation if needed, Bank of Korea Governor Kim Choong Soo said at a meeting in Seoul today. The BOK said in a statement it will run a 24-hour market monitoring system.

Thomas Byrne, a senior vice president at Moody’s Investors Service in Singapore, said in an interview that “we recognize that the collapse of the North Korean state or an outbreak of war pose an event risk for South Korea, which will have severe implications.” He added “we consider that likelihood to be remote even under the current uncertain situation.”

Coup Unlikely
Yang Moo Jin, a professor at University of North Korean Studies in Seoul, echoed Byrne’s assessment.

“The possibility of a public uprising or military coup in North Korea seems low since the North has prepared for the succession for the past year,” said Yang. “Kim Jong Un’s complete takeover of the helm will not take place for awhile due to his young age and inexperienced leadership. The North will be under the control of a governing body, I expect, for about a year.”

Tensions on the peninsula have risen since attacks last year that killed 50 South Koreans. North Korea shelled a South Korean island last November, killing four people. It has denied an international report blaming Kim’s regime for the torpedoing of a South Korean warship in March 2010 that killed 46 sailors.

Reactor Program
North Korea last month said it was making progress in building a light-water atomic reactors and producing low- enriched uranium. The U.S., Japan and South Korea have all urged China, North Korea’s biggest ally, to persuade it to return to six-nation nuclear disarmament talks that were abandoned in April 2009.

“Kim’s death was one of the critical Black Swan risks on the Korean peninsula,” said Kwon Young Sun, a Hong Kong-based economist at Nomura Holdings Inc. “The initial shock will be negative for South Korean markets. What’s important is the policy makers’ responses. The South Korean government probably has contingency plan and international cooperation with the U.S. and China is also very important.”

Speco Co. led gains among defense-related companies in Seoul stock trading. A defense equipment manufacturer, it jumped by the daily limit 15 percent to 2,350 won. Victek Co., an electronic warfare equipment maker, and Huneed Technologies, a military communication equipment manufacturer, also rallied 15 percent.

The inexperience and youth of North Korea’s heir-apparent Kim Jong Un “increase the likelihood of miscalculation” with South Korea and the U.S. and raises the potential risk of “provocations,” General James Thurman, commander of the combined South Korea-U.S. forces, said in written answers to the Senate Armed Services Committee in June.

“Our primary concern is the potential for additional North Korean provocations, which is a tool of choice as part of its coercive diplomacy,” Thurman, the top commander of the U.S. troops in South Korea, wrote.

 

[Muthukali]

Turmoil From North Adds Risk as South Korea Exports Slow

Kim Jong Il’s death and the risk of instability in North Korea may weigh on business and consumer confidence in South Korea just as the central bank warns of threats to growth and exports falter.

Finance Minister Bahk Jae Wan yesterday pledged preemptive action if needed to support financial markets and the economy as the won and stocks fell. The central bank will “closely monitor” developments and stabilize markets if needed, Governor Kim Choong Soo said.

Moves toward Kim Jong Un’s succession after his father’s 17 years of rule are a distraction for South Korean officials steering their nation through an export slowdown triggered by Europe’s debt crisis. The government is forecasting that shipments will grow in 2012 at less than half of this year’s pace and the central bank said Dec. 8 that “downside” risks for the economy are dominant.

North Korea’s transition “may hurt confidence in the short term,” said Kwon Young Sun, an economist at Nomura Holdings Inc. who worked at the central bank for 14 years through 2006. He added that the government will “do whatever it takes” to boost sentiment if necessary.

South Korea’s stocks dropped the most in five weeks yesterday, with Samsung Electronics Co. sliding 3.6 percent, after Kim’s death sparked concern there could be a power struggle in the nation, still technically at war with the South. The Kospi index (KOSPI) of stocks slumped 3.4 percent, while the won sank to more than a two-month low.

North Korean Attack
Risks from North Korea are rising “sharply,” Bahk said in Seoul. South Korea has recovered quickly from past North Korea- related shocks, he added.

Four South Koreans died in November last year when the North shelled Yeonpyeong Island in retaliation for South Korea firing rounds into disputed waters during a training exercise. Relations soured earlier in 2010 over the sinking of a South Korean warship, killing 46 sailors.

“It is too early to say how the situation will evolve after Kim Jong Il’s death, but political developments demand close attention,” Fitch Ratings said in a statement yesterday. Fitch, Standard & Poor’s and Moody’s Investors Service saw no immediate implications for South Korea’s credit rating.

Exports, Consumption
“Business confidence may be affected, especially when external demand is quite weak already,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. At the same time, any impact may be “relatively short-lived” because the leadership transition was planned and hence less risky than otherwise, she said.

South Korea’s exports, equivalent to half of the economy, may increase 7.4 percent next year, down from a 19.2 percent gain this year, according to the finance ministry. At home, sales at major department stores fell last month for the first time since February 2009, government data show.

Lee Sung Kwon, an economist at Shinhan Investment Corp. in Seoul, said that consumer confidence may slide and any instability in North Korea could be an extra reason for the central bank to cut rates in January after leaving them on hold for six straight months. ‘

North Korea’s state media yesterday called for citizens to “loyally follow” Kim Jong Un, who is at the “forefront of the revolution.” Royal Bank of Scotland Group Plc said Kim’s death had increased the chance of the regime collapsing through a coup or a failed attempt to reform the political and economic system.

One Volatile Week
The harm to South Korean confidence may be limited because the nation is used to “living with uncertainty and occasional attacks,” Erik Lueth, a Hong Kong-based economist for Royal Bank of Scotland. He said that some institutions may reduce their investments in South Korea and markets may remain volatile “over the next week or two.”

Goldman Sachs Group Inc. said in a note that “historically, the impact of events in North Korea on the Kospi has not lasted more than a week, and we do not see any reason why the situation would be different now.”

South Korea’s economic growth will slow to 3.7 percent next year from 3.8 percent this year and 6.2 percent last year, the nation’s finance ministry says.

The leadership change comes “at a challenging time for the South, where the economy is already facing stiff external headwinds,” said Frederic Neumann, an analyst at HSBC Holdings Plc in Hong Kong.

 

[Muthukali]

N. Korean Succession Tested With Kim’s Son

The stability of nuclear-armed North Korea may hinge on whether its military and the family of deceased dictator Kim Jong Il agree that his little-known, twenty-something son can extend six decades of dynastic rule.

Kim Jong Un was named to high-level military and party posts in September 2010. Kim Jong Il, who died of a heart attack Dec. 17, groomed his son for succession by featuring him prominently at a party congress and having him meet with foreign dignitaries.

The younger Kim is slated to take the reins of an economy whose 24 million largely impoverished people -- five percent of whom serve in the military -- have almost no access to outside media and suffer from chronic malnutrition. North Korea shows no signs of abandoning its nuclear weapons program in the face of global sanctions and any sign of concessions from the new leader could undermine his position.

“It’s not going to be an easy succession,” said Hong Yung Lee, a professor of East Asian politics at the University of California at Berkeley, in a phone interview. “The most important institution is the military. How will it handle Kim Jong Un?”

Kim was designated the country’s leader yesterday in an official statement announcing his father’s death, and North Korea’s military pledged its support. The official Korean Central News Agency called him a “great successor” to carry on his father’s legacy. The memorial service is set for Dec. 29.

Brother, Sister
Before taking his posts and being named a four-star general last year, Kim Jong Un had never been mentioned in official reports. Kim Jong Il last year also elevated allies including his sister Kim Kyong Hui, brother-in-law Jang Song Thaek and Workers’ Party of Korea official Choe Ryong Hae to act as guardians for his untested son.

“The succession has been a race against time, and time has run out,” said Rod Lyon, a program director at the Australian Strategic Policy Institute, in a phone interview. “If the family is not united, we’re in a very dangerous space.”

South Korea, which never signed a peace treaty with the North at the end of the 1950-1953 Korean War, yesterday called in police officers for emergency duty, considered raising alert levels for the military and pledged steps by the central bank if needed to stabilize financial markets. South Korea’s Kospi index (KOSPI) today rose as much as 1 percent after tumbling 3.4 percent yesterday and the won rebounded from a 10-week low.

Defense Surge
Shares of South Korean military suppliers rose. Speco Co. (013810), a defense equipment manufacturer, Victek Co. (065450), which makes electronic warfare equipment, and Huneed Technologies (005870), a military communications equipment manufacturer, all gained by or close to the daily limit of 15 percent for the second day.

The Japanese government, which built up its defense network after a North Korean missile flew over Japan in 1998, today announced the purchase of 42 Lockheed Martin Corp. (LMT) F-35 Joint Strike Fighters.

During North Korea’s state television broadcast, the announcer wept as she read the news of Kim Jong Il’s death. Footage was aired of thousands of people in the main square of the capital of Pyongyang chanting in unison and waving Kimjongilia, a flower named after the deceased leader. The country is in official mourning until Dec. 29, when a national memorial service will be held.

‘Military First’
Under the North’s “military first” ideology, the nation has built an armed force of 1.2 million soldiers, with about 7.7 million in reserves, according to South Korea’s Unification Ministry. Some North Korean troops withdrew from annual training and returned to their bases after Kim’s death, South Korea’s defense ministry said today in a statement.

“We don’t know if there is a group of angry generals that may decide enough is enough after two generations of Kims,” said Bradley K. Martin, author of “Under the Loving Care of the Fatherly Leader: North Korea and the Kim Dynasty” and a former reporter for Bloomberg News. “Jong Un is not even 30 years old, so it’s going to be very difficult.”

Kim Jong Il reportedly had a stroke in 2008, spurring speculation over his succession. Kim Jong Un and his older brother, Kim Jong Chol, have a different mother than the eldest son, Kim Jong Nam, who fell from favor after he was caught trying to enter Japan in 2001 on a fake passport. Educated in Switzerland according to U.S. and South Korean media, the youngest son resembles his grandfather, Kim Il Sung, who founded the nation after World War II.

No Supreme Commander
Kim Jong Un’s 15 months as presumptive heir pale in comparison to the 20 years his father had to prepare as the designated successor to Kim Il Sung, who died in 1994. Kim Jong Il only took the highest post in the ruling Workers’ Party three years later.

Yesterday’s statement didn’t name Kim Jong Un, thought to be 28 or 29, to replace his father as supreme commander of the army, head of the National Defense Commission or general secretary of the Workers’ Party of Korea. Securing his place as unquestioned head of state will require him to assume those positions, said Park Joon Young, professor of international relations at Ewha Woman’s University in Seoul.

“He is not prepared and needs a lot of people’s help to maintain his position as heir,” Park said. “It will be very difficult for Jong Un to stand on his own.”

Uncle’s Response
Park and other analysts said the response of Kim Jong Un’s uncle, Jang Song Thaek, will be key to the regime’s future. As vice chairman of the National Defense Commission, Jang is the No. 2 government official. Granting or withdrawing his support may make the difference for Kim Jong Un.

“Stability will depend on Jang Song Thaek, who is Kim Jong Un’s de facto regent, and how he has positioned himself,” said David S. Maxwell, associate director of the Center for Peace and Security Studies at Georgetown University in Washington, in an e-mail. “Things are likely to unravel slowly.”

Tensions on the Korean peninsula have risen since attacks last year on a warship and a disputed island that killed 50 South Koreans. The administration of President Barack Obama, along with the United Nations, increased sanctions after the incidents. The U.S. resumed direct talks with North Korea in October on dismantling its nuclear program, including work on a light-water atomic reactor that the Korean Central News Agency said on Nov. 30 was “progressing apace.”

Food Aid
Glyn Davies, the U.S. envoy on North Korea, told reporters in Beijing that the U.S. was in talks to provide food aid to the country. The Associated Press yesterday reported a deal had been struck for North Korea to suspend its uranium enrichment program in exchange for food, before Kim Jong Il’s death was announced.

North Korea’s economy shrank in 2010 for the second year in a row, according to South Korea’s central bank. The North’s nominal gross domestic product totaled 30 trillion won ($25.5 billion) last year, compared with South Korea’s 1,173 trillion won, the central bank said in November.

“Even when North Korea has been under great internal and economic strain, its levers of state control are very, very strong,” Euan Somerled Graham, senior fellow at the S. Rajaratnam School of International Studies in Singapore, said by phone. “The chance of an internal rift within North Korean elite is the risk, rather than a spontaneous uprising from the people.”

 

[Muthukali]

North Korea Poses Challenge to U.S. Spy Efforts

If Stalin’s Russia was “a riddle, wrapped in a mystery, inside an enigma,” as Winston Churchill described it in 1939, Kim Jong Un’s North Korea 72 years later is an even more inscrutable intelligence target.

The technological revolution that has brought the Internet, smart phones, Twitter, Facebook, YouTube and the outside world to other repressive regimes has just begun lapping at North Korea’s shores, mostly along the Yalu River on the Chinese border.

“It’s a very hard target,” said U.S. Representative Mike Rogers, the Michigan Republican who heads the House intelligence committee, in a telephone interview yesterday. “There is no freedom of movement, in, out or once you’re in; and North Koreans are not very well connected to each other, let alone to the outside world.”

Although it wasn’t disclosed by North Korea for some 48 hours, “Dear Leader” Kim Jong Il’s sudden death came as no surprise, said a U.S. official in an e-mail message. U.S. intelligence agencies had known that Kim was at an increased risk of a coronary event or other medical emergency since his 2008 stroke, and had anticipated he would die with little warning, the official said, speaking on the condition of anonymity to discuss classified matters.

Hard to Tap
A simple fact is at the heart of the intelligence challenge posed by North Korea, David S. Maxwell, the associate director of the Security Studies program at Georgetown University in Washington, said in an interview. “What makes it hard for us to penetrate is the same control of information that keeps the regime in power,” he said.

North Korea relies on an 11-year-old network of underground fiber-optic cables that’s harder for outsiders to tap -- and easier for the authorities to monitor -- than are cell phones, satellite communications or the Internet.

Recruiting spies and extracting human intelligence from North Korea is even more difficult, in part because there is no U.S. embassy in Pyongyang to provide cover for U.S. intelligence officers.

Busted for Cigarettes
Few foreigners are allowed to visit, and those who do are followed everywhere, regardless of their status or their country’s relationship with Pyongyang. In late 1980, Justin Nyoka, a Zimbabwe cabinet minister who was visiting the North Korean capital with Prime Minister Robert Mugabe, an admirer of “Great Leader” Kim Il Sung -- Jong Un’s grandfather -- made the mistake of visiting his hotel lobby in search of cigarettes without a government minder. He was immediately seized and returned, politely but firmly, to his room, he later said in an interview.

North Koreans rarely are permitted to travel abroad, and those who are have been thoroughly vetted, have escorts everywhere and know their spouses, children, parents and siblings are under the watchful eyes of the police back home.

Trying to recruit traveling Northerners, said Maxwell, is virtually impossible, and not only because they are never alone. Three generations of their families would pay for any betrayal or even any gossip, he said. After the late Hwang Jang Yop, an adviser to Kim Jong Il, defected to South Korea in 1997, his wife and a daughter committed suicide and three other children were imprisoned in labor camps, according to the South Korean newspaper Chosun Ilbo.

Hard Targets
While the U.S. relies on allies -- and sometimes adversaries -- for intelligence on other so-called “hard target” countries such as Iran, Cuba, Russia and China, reliable sources on North Korea are few and far between.

The Chinese have limited access and they remain reluctant to share very much because they suspect that the U.S. seeks to overthrow the Pyongyang regime and keep troops stationed in South Korea as part of an effort to contain China, said a U.S. official with access to classified intelligence. Chinese reports on the health of Kim Jong Il “were consistently rosy,” said the official.

Germany, where for years North Korea’s leaders sought medical treatment, has been a “declining resource” since communist East Germany collapsed in the 1980s, said the official. It may decline further, the official said, as Chinese medicine improves and the young Kim, who U.S. officials think is 27, requires less frequent treatment than his ailing father did.

Disguising a Reactor
These challenges are compounded by the fact that, despite the country’s backwardness, North Korea’s intelligence trade craft is “something to be reckoned with,” said Rogers.

Pyongyang concealed its support for Syria’s secret nuclear program for some time, even as both countries were closely watched by adversaries. It did so in part by using foreign companies to ship material and also, a senior U.S. official told reporters in 2008, by putting curtain walls and a false roof on a Syrian reactor to conceal its resemblance to a North Korean one at Yongbyon. The disguise ultimately failed, and an Israeli air attack destroyed the reactor on Sept. 6, 2007.

The difficulties of collecting intelligence on North Korea are offset, at least in part, by the fact that U.S. interest in the so-called hermit kingdom is concentrated on Pyongyang’s nuclear and missile programs, its weapons exports, its support for terrorist groups and the military threat it poses to its neighbors. Troop movements, missile tests and other military actions are largely visible to reconnaissance satellites.

Limited Interests
Economic intelligence, which is of keen interest in China and elsewhere, is less important because the country’s trade is so limited. Reports about internal stability -- considered critical in countries such as Iran, Egypt, Syria and now perhaps Russia -- are less important in the case of Pyongyang because analysts don’t expect the kind of rapid change that’s occurred elsewhere, said a second U.S. official with access to intelligence material.

Not immediately knowing about Kim's death was of little practical importance because there turned out to be no need for quick action, the first official said.

The intelligence picture from North Korea has been growing sharper in recent years, albeit slowly. Earlier this year, in a rare victory against Pyongyang’s weapons proliferation, the U.S. Navy intercepted a ship it suspected was carrying North Korean missile parts to Myanmar and forced it to return to North Korea.

Intelligence on the North also has improved because South Korean intelligence officers, who have linguistic and cultural advantages, are spending less time tailing their own politicians and more time pursuing targets in the north, said the second official.

Times a’Changing?

“Over the past three or four years, we have gotten better,” said Rogers. “It requires incredible persistence, but we’ve been able to build on small successes.”

Technology may finally turn the tide, as it’s doing elsewhere, by forcing even North Korea to change, even if not to abandon its reclusive and repressive ways.

Barbro Elm, the Swedish ambassador to North Korea, recently reported that she had taken a trip from Pyongyang to three other cities and had strong domestic cell phone service the entire way. She had international service only when she was near the Chinese border and could connect to Chinese towers.

The Egyptian firm Orascom Telecom Holding SAE (OCIC) is building a 3G cell network in the North, according to a Nov. 1 report by Alexandre Mansourov of the Nautilus Institute for Security and Sustainability, a policy research group in San Francisco. The report said that only about 3 percent of the country now has service, although it would become harder to monitor as it grows.

‘Crossed the Rubicon’
While the country’s GDP is just $1,800 and a cell phone costs more than $300, wrote Mansourov, the North Korea mobile communications industry has “crossed the Rubicon,” and the government “can no longer roll it back without paying a severe political price.”

Communication in North Korea, he continued, “has transitioned from a panopticon of total control to a voluntary compliance system, where the government makes an example of a select group to try and force the rest of the country to stay in line.”

While that may in time prove to be bad news for the young Kim as he ponders the fate of dictators elsewhere, it may be the best news out of North Korea for spies since the country was founded in 1948.

 

[Muthukali]

‘Medieval’ Economy Is Kim Jong Il’s Legacy

Kim Jong Un, North Korea’s anointed leader, inherits an economy that was outstripped by South Korea in the 1970s, shrank after the collapse of communism in Europe and now struggles under its stated policy of self-reliance.

Gross domestic product of 30 trillion won ($26.5 billion) in 2010 was one-fortieth of the size of South Korea’s, according to estimates by the South’s central bank. The North’s economy probably shrank in four of the past five years, the Bank of Korea says. North Korea doesn’t release GDP data.

The choice for Kim and his supporters is whether to stick with the central planning that’s failed in the past or embark on the type of opening that led neighbor China to surpass Japan as the world’s second-largest economy. Founded with more mineral resources and a bigger industrial base than the South, North Korea can barely feed itself after more than six decades of totalitarian rule, with the U.S. Central Intelligence Agency calculating its global GDP rank at 195th out of 228.

“It’s the best example of the failure of a closed economy -- they’re still living in a medieval era when the rest of the world is moving forward every day,” said Cho Bong Hyun, a researcher at IBK Economic Research Institute in Seoul, who has visited the North more than 30 times since 2000 and advises South Korean companies operating in an industrial zone there. “The young leader may try some economic reforms such as a partial market system and foreign investment zones once he gains unchallenged control of the country.”

Famine, Hunger
North Korea has depended on economic handouts since the mid-1990s when an estimated 2 million people died of starvation under then-ruler Kim Jong Il, Jong Un’s father.

Food aid is currently needed for about 5 million of the nation’s 24 million people, with one in three children physically stunted from a lack of nutrition, according to a Nov. 25 report from the Food & Agriculture Organization of the United Nations and the World Food Programme.

From May to September, the daily cereal ration that most households rely on was 200 grams or less per person, or one- third of minimum needs, the organizations said. People eat wild foods such as edible grasses, acorns, pine nuts, berries, mushrooms and flower roots, they said.

“Kim Jong Un won’t do anything about the economy in his first year -- he will put everything into politics and maintaining order,” says Lee Young Hwa, an economics professor at Osaka’s Kansai University who is active in the Japan-based human-rights group Rescue the North Korean People. “This will further worsen the economy. Once the political situation has stabilized, he will focus on the economy.”

China Ties
Close ties with neighboring China, a source of oil and food and a purchaser of coal, have yet to convince North Korea to mirror that nation’s opening up. North Korea’s trade of $4.17 billion in 2010 compared with South Korea’s $891.6 billion, the Bank of Korea estimates.

Informal citizens’ markets exist and some foreign companies have made limited inroads.

Macau billionaire Stanley Ho backed a casino in a state-run hotel in Pyongyang through his Sociedade de Turismo e Diversoes de Macau SARL. Hong Kong’s Emperor Group has a gambling venue in Rason, a city near China’s border intended to operate as a special economic zone.

Capitalist Enclave
At the Gaeseong industrial park, 10 miles (16 kilometers) from the border with South Korea, companies from the South such as underwear maker Good People Co. (033340) operate with mainly local labor. Cairo-based Orascom Telecom Holding SAE (ORTE) had about 666,520 mobile phone subscribers in the nation as of June 30, up from 184,530 a year earlier, according to data compiled by Bloomberg. News Corp. (NWSA) has published mobile-phone games developed by North Korean programmers.

“North Korea’s economy used to be in a better shape than the South until the early 1970s, thanks to the industrial infrastructure that the Japanese set up to invade China during World War II,” said Cho, of IBK. “The situation reversed as South Korea boosted its growth through industrialization and exports while the North kept its door closed to protect its dictatorship.”

The collapse of the Soviet Union in 1989 removed one of the North’s main sources of funding. The regime, founded by Kim Jong Un’s grandfather, Kim Il Sung, has pushed a doctrine of self- reliance known as Juche that has led to shortages of raw materials and foreign currency.

Adapting Technology
North Korea’s state-run KCNA news agency frequently touts the marvels of Vinalon, a fiber made from limestone that was invented in the country, and domestic techniques for making steel without coking coal, an expensive ingredient that it would need to import.

The nation’s deposits of minerals including coal and metals may be worth about 6,984 trillion won, or 24 times more than those in the South, according to South Korea’s state-run Korea Resources Corp.

Industry “is operating at only a small fraction of capacity” due to lack of fuel, spare parts and materials, the U.S. State Department said in an Oct. 31 report. At the same time, the nation is “thought to earn hundreds of millions of dollars from the unreported sale of missiles, narcotics and counterfeit cigarettes and currency, and other illicit activities,” it said.

Intelligence Gathering
Last year, major industries “were hampered by bad weather, poor energy and raw material supply, and the international economic sanctions on the country,” according to the Bank of Korea, which produces its analysis of the North from information gathered in part by the South’s National Intelligence Service. Teams of about 25 economists help compile the data.

Accurate intelligence is difficult to obtain because of the North’s secrecy, analysts said. David S. Maxwell, the associate director of the Security Studies program at Georgetown University in Washington, said in an interview this week that “what makes it hard for us to penetrate is the same control of information that keeps the regime in power.”

Risks of economic policy changes in the North were highlighted early last year by the execution of an official held responsible for bungling a currency revaluation. Pak Nam Gi, the ruling Worker’s Party of Korea head of finance and planning, was shot for intentionally damaging the economy, South Korean news agency Yonhap reported in March.

The revaluation was an attempt to reassert the regime’s control by confiscating the savings of people active in private trading, according to analysts including Andrei Lankov, an associate professor at Kookmin University in Seoul. Instead, it fueled inflation and exacerbated shortages of food and basic goods already endemic due to mismanagement of the economy.

KCNA has a different view. It reported this month that North Korea’s economy is prospering after “unprecedented miracles and innovations in socialist economic construction,” while “the U.S. is troubled by a large number of poor people” and South Korea by an increasing number of suicides “due to unemployment and poverty.”

 

[lianbeng]

Re: N. Korea Signals Kim Succession as South Braces

"my father died!"

 

[Muthukali]

Nuclear Weapons Not the Top Risk From North Korea

North Korea’s mini-submarines and Soviet-era artillery may pose a greater threat to Asia than its nuclear program as Kim Jong Un seeks to cement support among generals three times his age in the world’s fourth-largest army.

While questions remain over whether Kim will inherit his deceased father Kim Jong Il’s control of the totalitarian state, he heads a country whose so-called military-first policy has kept it on combat alert since the Korean War ended in 1953. It terms a trade embargo over its nuclear weapons program “vicious sanctions of the enemy,” and has repeatedly assaulted the South.

“We’re still some ways away from North Korea being able to point a nuclear weapon at someone in any meaningful way,” Alexander von Rosenbach, U.K.-based senior analyst of armed forces at IHS Jane’s, said by phone. “There is a risk of a surprise attack to bolster the regime’s credentials.”

Strikes last year that killed 50 South Koreans demonstrate the risks posed by more than 250 long-range artillery installations along the world’s most fortified border in reach of the Seoul area and its 23 million citizens. The U.S., China, South Korea, Russia and Japan have failed to convince the regime to drop its nuclear-weapons program in eight years of talks.

Global Consequences
“North Korea’s military forces retain the capability to inflict lethal, considerable disruption to the ROK with significant corresponding regional and global economic and security consequences,” U.S. Forces Korea said in a report last year, referring to South Korea. “North Korean forces are postured to conduct limited attacks or kinetic provocations against the Alliance, with little or no warning.”

Last year, North Korea shelled an island in the Yellow Sea, killing four South Koreans, and was blamed by an international panel for sinking the Cheonan warship, in which 46 sailors died. North Korea has one of the world’s largest fleets and more than 30 guided-missile patrol boats, according to a 2007 paper from the U.S. Army War College’s Strategic Studies Institute.

While North Korea has twice detonated a nuclear device, the country doesn’t have the technology to deploy one, said analysts including retired U.S. Admiral Bill Owens, a former vice chairman of the Joint Chiefs of Staff who has lived in Beijing and Hong Kong for the past five years.

“I don’t think they have the ability to deliver a nuclear weapon,” Owens said in a telephone interview.

Birth From War
North Korea is a legacy of World War II, which ended Japan’s occupation of the Korean peninsula, and the Cold War. The Japanese surrendered to U.S. forces in the south and to Soviet troops in the north. The Soviet Union then installed an anti-Japanese guerrilla leader, Kim Il Sung, as head of North Korea. Kim invaded the South in June 1950, starting a war that ended three years later without a peace treaty.

Before his death in 1994, Kim authorized operations that included a 1983 assassination attempt on South Korean President Chun Doo-hwan in Myanmar that killed more than 20 people, the bombing of a Korean Air flight that killed all 115 on board, and the kidnapping of at least 13 Japanese to serve as language teachers for North Korean spies.

Kim Jong Il succeeded his father and stepped up the country’s missile and nuclear-weapons development, while continuing provocations against South Korea.

‘Lot of Harm’
The history of attacks “shows a lot of potential for causing damage, particularly if they aren’t concerned about the international consequences of their actions,” said Richard Bitzinger, senior fellow at the S. Rajaratnam School of International Studies in Singapore. “They haven’t really got a high-tech army overall, but that doesn’t mean it can’t cause a lot of harm.”

North Korea is estimated to have 1.2 million troops and another 7.7 million in reserve, according South Korea’s 2010 Defense White Paper. It also has 70 submarines, including an undetermined number of Yeono-class midget subs, compared with South Korea’s 10.

The Kim regime allocates a third of its budget to maintain 1,700 aircraft, 800 naval vessels and more than 13,000 artillery systems, according to the American military, which has 28,500 troops in South Korea. The U.S. estimates that the Pyongyang government has enough plutonium for a half-dozen nuclear devices and sells ballistic missiles for cash.

Land Mines
The 4 kilometer (2.5 mile) wide, 248 kilometer-long demilitarized zone is sown with a million land mines. The waters off the coast near the border are claimed by both sides and any military provocations from North Korea would probably revolve around such disputes, said Gary Li, head of marine and aviation forecasting at Exclusive Analysis Ltd., a London-based business advisory firm.

“The submarine force would be a likely candidate for any action,” Li said. “It would remain covert and you can deny responsibilities. They have the advantage of telling their own people one thing and telling the world another because they can keep the two separate.”

Kim Jong Un, thought to be in his late 20s, was made a four-star general last year and promoted to a senior position in the Workers’ Party of Korea. He hasn’t taken his father’s place as head of the National Defense Commission, a position designated as the “supreme leader” of the country, according to its constitution. Kim Jong Il, who state media said died of a heart attack on Dec. 17, took three years after his father passed away before assuming the country’s highest posts.

Low Morale
North Korea’s capabilities are limited by obsolete weapons, low morale among soldiers, reduced training and issues with command control, Dennis C. Blair, then director of National Intelligence, said in a 2010 annual threat assessment.

“Pyongyang relies on its nuclear program to deter external attacks on the state and to its regime,” Blair said. “Although there are other reasons for the North to pursue its nuclear program, redressing conventional weaknesses is a major factor and one that Kim and his likely successors will not easily dismiss.”

North Korea, which conducted nuclear test explosions in 2006 and 2009, said Nov. 30 that construction on a light-water atomic reactor and production of low-enriched uranium is “progressing apace.” While work is nearly complete on the outside walls of the building, the plant may not be operational for two or three years, according to an analysis of satellite photos on former U.S. nuclear negotiator Joel Wit’s website, 38North.org.

U.S. Targets
No public information can verify that North Korea possess operational nuclear weapons, according to the Stockholm International Peace Research Institute. North Korea wants to develop ballistic missiles capable of hitting targets in the continental U.S., according to the Pentagon.

More than 70 percent of North Korean forces are within 100 kilometers of the demilitarized zone established at the end of the Korean War. Even so, its constitution calls for “peaceful reunification” of the peninsula.

North Korea conducted more than 1,400 major provocations and violations of the demilitarized zone from 1953 to 2003, according to U.S. military estimates. State media regularly threatens to turn Seoul into a “sea of fire.”

The U.S. is pledged to defend both South Korea and Japan, where almost 40,000 troops are stationed. Japan, which has strengthened its defense capability after North Korea sent a missile over the island nation in 1998, this week announced the purchase of 42 Lockheed Martin Corp. F-35 Joint Strike Fighters.

“The risks we face over the next several years stem from Kim Jong Un’s weakness, not his strength,” said Marcus Noland, deputy director of the Peterson Institute for International Economics in Washington and the author of “Avoiding the Apocalypse: The Future of the Two Koreas.” “You can imagine other military provocations like the ones we’ve observed over the last 18 months toward South Korea.”

 

[Muthukali]

Kim Jong Un Plays Statesman to Visitors

Kim Jong Un got his first chance to play the role of North Korean statesman as a former first lady from the South and the chairwoman of Hyundai Group visited to pay their condolences over the death of Kim Jong Il.

Lee Hee Ho, the 89-year-old widow of former President Kim Dae Jung, and Hyundai’s Hyun Jeong Eun led a private group of 18 South Koreans to Pyongyang yesterday as the North’s media extended its adulation of Kim Jong Un, thought to be younger than 30 years old. The group made a 10-minute stop at the Kumsusan Memorial Palace, where Kim Jong Il’s body is lying in state, and met the new leader, said Park Soo Jin, a spokeswoman for the Unification Ministry in Seoul.

The ruling party named Kim as head of its central committee, just a week after his father’s death on Dec. 17, adding to the official Korean Central News Agency’s recent references to him as “supreme leader of the revolutionary armed forces” and “great successor” to his late father and grandfather, Kim Il Sung.

“The visit will work as lubricant, but it won’t be a catalyst for an immediate change,” said Kim Yong Hyun, a professor of North Korean studies at Dongguk University in Seoul. “There’s a long way to go for North and South Korea.”

Meeting with the former first lady may help create an image, both at home and abroad, of Kim Jong Un as a leader who already has a South Korea policy, said Baek Seung Joo, a North Korea specialist at the state-run Korea Institute for Defense Analysis in Seoul.

`Catastrophic Consequences'
No government officials from Seoul will pay condolences, according to the Unification Ministry, which oversees policy toward North Korea. Known for making repeated threats against its southern neighbor, North Korea warned on Dec. 25 of “unpredictable catastrophic consequences” after the government in Seoul restricted condolences.

South Korea, which prohibits its citizens from traveling to the North except to the jointly run Gaeseong industrial complex, gave special permission for Lee and Hyun.

Private individuals and groups, also banned by South Korean law from praising the North Korean regime, may send condolences via mail or fax.

Lee and Hyun stayed at the Baekhwawon State Guest House in Pyongyang, accommodation used previously by Kim Dae Jung and his successor, the late Roh Moo Hyun, the Unification Ministry said.

The state-run Korean Central News Agency in Pyongyang said Lee and Hyun expressed “deep condolences and sympathy” to Kim Jong Un, and that he gave them his thanks. Lee wrote in a condolence book of her desire for the early reunification of the divided peninsula while Hyun said the late leader had sought “reconciliation and cooperation” and would always be remembered, according to a statement from KCNA.

`Internal Unity’
Neither the North Korean news agency nor the Unification Ministry indicated what else may have been said.

“Kim Jong Un’s top priority is internal unity and other issues that are heavily domestic,” said Kim Heung Kwang, who heads NK Intellectual Solidarity, a Seoul-based organization founded by defectors from the North. “The group aren’t current politicians in South Korea and there’s no reason for Kim to start tackling foreign policy.”

A flurry of official statements hailing the young leader over the past week also indicates that he may be given the highest formal roles in the country more quickly than was his father, who waited three years for the titles following the death of Kim Il Sung, said Paik Hak Soon, director of North Korean studies at the Seongnam, South Korea-based Sejong Institute.

The group will return home today, a day before Kim Jong Il’s funeral tomorrow. They traveled by land and crossed the border about 8:30 a.m. yesterday near the village of Panmunjom, where a cease-fire that ended fighting in the Korean War was signed in 1953.

 

[Muthukali]

S. Korea Consumer Index Falls After Kim Death

South Korean consumer confidence fell to a three-month low in December, as concern the political outlook in the North will worsen in the wake of Kim Jong Il’s death compounds the risk from Europe’s debt crisis.

The sentiment index fell to 99, from 103 in November, the Bank of Korea said in an e-mailed statement today. A reading below 100 indicates pessimists outnumber optimists. The survey was conducted between Dec. 14 and Dec. 21. North Korea announced the death of its leader on Dec. 19, with his son Kim Jong Un, thought to be under 30, to succeed as ruler.

Policy makers in the South pledged to take steps as needed to stabilize markets in the aftermath of the North’s announcement, and an initial slump in equities was recouped within days. While the government said Dec. 21 that South Korea had so far seen little impact to its economy, Asia’s fourth largest, any sign of prolonged impact to consumer spending may spur monetary and fiscal stimulus, economist Kong Dong Rak said.

“We don’t know what will happen in North Korea and this makes people so wary,” said Kong, a fixed-income analyst at Taurus Investment & Securities Co. in Seoul. “Both the central bank and government may have to come up with stimulus if consumers and companies reduce spending in fear of worse things in North Korea or Europe.”

The consumer confidence index is based on survey responses from 2,042 households in 56 cities.

Asian Stocks
South Korea’s benchmark Kospi Index (KOSPI) of stocks, which dropped 3.4 percent on Dec. 19, the day reports emerged of Kim’s death, was little changed at 9:49 a.m. in Seoul today. The won gained 0.2 percent to 1,153.10 a dollar, after falling 1.4 percent on Dec. 19.

Asian stocks were little changed amid slow holiday trading after the South Korean confidence report and the Bank of Japan said downside risks to the economy had increased in November. The MSCI Asia Pacific Index added less than 0.1 percent. The measure is headed for a 17 percent decline this year, its biggest annual loss since 2008.

A “few” Bank of Japan board members said financial-market turmoil from the European debt crisis and the yen’s appreciation were increasing risks for growth, according to a record of last month’s board meeting.

Those members “pointed to the possibility that downside risks to the economy had increased somewhat since the previous meeting” held in October, according to minutes of the Nov. 15- 16 gathering published today in Tokyo. The BOJ refrained from altering policy at the time, and also kept its asset purchases and benchmark interest rate unchanged this month.

China Profits
Today’s report didn’t specify how many people shared that view and members in the record aren’t identified by name. The central bank last week lowered its economic assessment for a second month at its December board meeting.

Elsewhere in Asia, China is due to release a report on November industrial profits today. Last month’s report showed corporate profit growth slowing on waning export demand from Europe. Industrial companies’ net income rose 12.5 percent in October from a year earlier, less than half the 27 percent pace from January to September.

In the day ahead, Finland is scheduled to release consumer and business confidence reports for December, while the Netherlands will release producer confidence data. In the U.S., the Conference Board’s consumer confidence index may increase to 58.6 in December, according to the median of 61 estimates ahead of a release today.

 

[Muthukali]

N. Korea May Fete ‘Touching Drama’ for Funeral

North Korea today lays to rest Kim Jong Il, who developed nuclear weapons while more than 1 million of his people starved to death, in a ceremony observers may scrutinize for signs of the regime’s new power hierarchy under son Kim Jong Un.

North Korean state media have refrained from providing details on the procession, to which foreign delegations weren’t invited. Analysts and South Korea media said it will mimic that of that nation’s founder, Kim Il Sung, in 1994. The elder’s ceremony began at the Kumsusan Memorial Palace at 10 a.m., went for one hour, and involved the new leader making a tour of the coffin aside the country’s top officials, Yonhap News said.

“Watching how people are aligned around Kim Jong Un tomorrow, we can have a clue on the power dynamic in the North Korean leadership,” said Paik Hak Soon, a director of inter- Korean relations at the Seongnam, South Korea-based Sejong Institute research group.

The ceremony will likely mobilize hundreds of thousands of weeping participants in a display of national mourning that’s designed to portray broad public support for the regime, according to analysts. State media have portrayed the image of a Kim Jong Un solidifying his hold on the succession, referring to him as “supreme leader of the revolutionary armed forces” and “great successor” to his late father and grandfather.

“North Korea will try to get as much as possible out of the funeral,” said Lee Jung Hoon, a political science professor at Yonsei University in Seoul. “They know everyone in the world is watching them and they will make it a really touching drama.”

Private Trip
No government officials from Seoul will pay condolences, according to the Unification Ministry, which oversees policy toward North Korea. Lee Hee Ho, the 89-year-old widow of former South Korean President Kim Dae Jung, and Hyundai Group Chairwoman Hyun Jeong Eun led a private group of 18 South Koreans on a two-day visit, where state media showed them being greeted by Kim Jong Un on Dec. 26.

Concern the political outlook in the North could worsen contributed to a slump in consumer confidence in South Korea, which fell to a three-month low this month, a survey released yesterday showed. The Kospi (KOSPI) slid 3.4 percent on Dec. 19 when the death of North Korean leader Kim Jong Il was announced, then rallied 4 percent the next two trading days.

Today’s funeral may begin with Kim Jong Un and the chairman of National Funeral Committee viewing Kim Jong Il’s coffin along with other senior officials, Yonhap News reported in a Dec. 25 preview of the event. If the 1994 protocol is followed, Kim Jong Un, his sister Kim Kyong Hui and the head of the Supreme People’s Assembly, Kim Yong Nam, will stand in the front row.

Front Row
Premier Choe Yong Rim, other high-ranking figures and Jang Song Thaek, Kim Jong Un’s uncle and the brother-in-law of late Kim Jong Il, will also likely be present, Yonhap said.

Then, the hearse will proceed to Kim Il Sung Plaza along a route that passes through Pyongyang’s main avenues, where throngs of wailing citizens will pay respects, Yonhap said. Kim Jong Il’s body will then return to the Kumsusan Palace, where it will remain, according to the news agency.

The funeral will be followed by a national memorial service on Dec. 29, the official Korean Central News Agency has said. That will involve a nationwide three minutes of silence, and gun volleys will be fired in Pyongyang and in provincial seats.

In the end, the funeral propaganda is unlikely to reveal how strong of a hold Kim Jong Un has on North Korea, said Brian Myers, a professor of international studies at Dongseo University in Busan, South Korea.

“Whether or not he’s really in control of the military or whether the military is really pulling the strings is not something we are going to be finding out,” he said. “To convey to the North Korean public that the country is being de facto run by a group of old generals would not be in their interest.”

 

[Muthukali]

North Korea Lays Kim Jong Il to Rest

North Korea today lays to rest Kim Jong Il, who developed nuclear weapons while more than 1 million of his people starved to death, in a ceremony observers may scrutinize for signs of the regime’s new power hierarchy under son Kim Jong Un.

State television showed soldiers massed in formation in Pyongyang as a limousine carrying a giant portrait of Kim Jong Il drove slowly along wide, snow covered avenues. The younger Kim cried as he walked beside the hearse carrying his father.

People en route to the ceremony carried white Chrysanthemum flowers through falling snow, said Gunter Unterbeck, a German national who’s lived in the North Korean capital since 1996. Children without real flowers made them from paper.

Analysts and South Korea media said the funeral will mimic that of that nation’s founder, Kim Il Sung, in 1994. That ceremony went for one hour and involved the new leader walking around the coffin in the presence of the country’s top officials, Yonhap News said.

Watching how people are aligned around Kim Jong Un “we can have a clue on the power dynamic in the North Korean leadership,” said Paik Hak Soon, a director of inter-Korean relations at the Seongnam, South Korea-based Sejong Institute research group.

‘Great Successor’
The ceremony is aimed at portraying broad public support for the regime, according to analysts. State media have portrayed the image of a Kim Jong Un solidifying his hold on the succession, referring to him as “supreme leader of the revolutionary armed forces” and “great successor” to his late father and grandfather.

“North Korea will try to get as much as possible out of the funeral,” said Lee Jung Hoon, a political science professor at Yonsei University in Seoul. “They know everyone in the world is watching them and they will make it a really touching drama.”

A notice in today’s paper said all social life would stop for three minutes from noon, including trains and cars, said Unterbeck. People were busy cleaning the streets and buildings this morning, he said.

‘Bid Farewell’ “
All streets in Pyongyang and all towns and villages throughout the country are now inundated with people sweeping away snow before bidding their last farewell to the leader,” the official Korean Central News Agency said in an English- language report.

No government officials from Seoul will pay condolences, according to the Unification Ministry, which oversees policy toward North Korea. Lee Hee Ho, the 89-year-old widow of former South Korean President Kim Dae Jung, and Hyundai Group Chairwoman Hyun Jeong Eun led a private group of 18 South Koreans on a two-day visit, where state media showed them being greeted by Kim Jong Un on Dec. 26.

Concern the political outlook in the North could worsen contributed to a slump in consumer confidence in South Korea, which fell to a three-month low in December, a survey released yesterday showed. The Kospi (KOSPI) slid 3.4 percent on Dec. 19 when the death of North Korean leader Kim Jong Il was announced, then rallied 4 percent the next two trading days.

Balloon Launch
South Korean civic groups and defectors from the North today said they launched balloons that will float across the border to deliver leaflets criticizing Kim Jong Il and his successor. North Korea has previously said such acts could ignite a war.

Today’s funeral may feature Kim Jong Un and the chairman of the National Funeral Committee viewing Kim Jong Il’s coffin along with other senior officials, Yonhap News reported in a Dec. 25 preview of the event. If the 1994 protocol is followed, Kim Jong Un, his sister Kim Kyong Hui and the head of the Supreme People’s Assembly, Kim Yong Nam, will stand in the front row.

Premier Choe Yong Rim, other high-ranking figures and Jang Song Thaek, Kim Jong Un’s uncle and the brother-in-law of the late Kim Jong Il, will also likely be present, Yonhap said.

The funeral will be followed by a national memorial service tomorrow, the official Korean Central News Agency has said. That will involve a nationwide three minutes of silence, and gun volleys will be fired in Pyongyang and in provincial seats.

In the end, the funeral propaganda is unlikely to reveal how strong of a hold Kim Jong Un has on North Korea, said Brian Myers, a professor of international studies at Dongseo University in Busan, South Korea.

“Whether or not he’s really in control of the military or whether the military is really pulling the strings is not something we are going to be finding out,” he said. “To convey to the North Korean public that the country is being de facto run by a group of old generals would not be in their interest.”

 

[Muthukali]

Kim Jong Un May Open North Korea: Defector

Kim Jong Un may relax state controls over North Korea’s economy and ease the isolation entrenched by his late father’s nuclear weapons program, according to a banker who fled the communist state after years working for the regime.

Kim’s Swiss education and his reported fondness for basketball -- a sign he’s a team player -- may make him more open to change than his late father, Choi Se Woong, former deputy governor of the North’s Korea Reunification Development Bank, said in an interview in Seoul this week.

“It’s better for North Korea to have Kim Jong Un as their leader than anyone else,” said Choi, 50, who defected to the South in 1995 and is the son of a former North Korean finance minister. “Kim Jong Un will seek to start a market economy but it will be uniquely North Korean-style, different from China, South Korea or any other capitalist country.”

Choi joins the growing number of people saying Kim will push for a more open North Korea as he takes over from his father Kim Jong Il, who passed away this month after a 17-year reign. Templeton Emerging Markets Group Executive Chairman Mark Mobius said last week he expects the North to adopt China-style deregulation, and a poll of South Koreans this month showed almost half expect the North to become more open under new leadership.

‘Exquisite Toys’
North Korea’s gross domestic product, about one-fortieth that of the South, shrank in four of the past five years after attempts to liberalize the economy failed under its stated policy of self-reliance. Still, it sits on deposits of minerals estimated at almost 7,000 trillion won ($6 trillion), according to South Korea’s state-run Korea Resources Corp.

“It’s a country with undiscovered minerals and the technique to make missiles,” Choi said. Have you seen the exquisite toys they make, like helicopters? Just think what it would be like if these skills were applied to manufacturing.’’

Kim may pursue more projects such as in Gaeseong, home to a joint industrial complex where South Korean-built factories employ workers from the North, said Choi, now a managing director at Eugene Investment & Futures Co. in Seoul.

Any economic opening in North Korea would follow Myanmar, also known as Burma, another undemocratic Asian nation subject to sanctions. Secretary of State Hillary Clinton this month became the highest level U.S. official to visit Myanmar in more than five decades as the nation moved to release political prisoners. Clinton pledged to upgrade relations if Myanmar takes further steps to ease repression.

`Last Stalinist Regime'
North Korea and Myanmar are among the few countries remaining largely disconnected from international commerce in a region that’s leading global economic growth.

“The sustainability of the world’s last Stalinist regime will ultimately be under greater pressure following a transfer of power and within the broader global context of political change, with nascent political reforms in Burma evidence that change is not limited to the Middle East,” Citigroup Inc. analyst Tina Fordham in London wrote in a note this month.

Kim, who’s thought to be 28 or 29, isn’t too young to lead the nation because his father also had decision-making responsibilities in his 20s, Choi said. Though Kim Jong Il formally began to assume the nation’s highest posts three years after North Korean founder Kim Il Sung died, he had been groomed for decades.

Michael Jordan Fan
The younger Kim may have attended the Liebefeld Steinhoelzli school in Berne, Switzerland during the 1990s under the alias Pak Un. Joao Micaelo, who attended the school at the time, told the Daily Telegraph last year he and Pak Un bonded over the difficulties of learning German, and their passion for NBA basketball and Michael Jordan.

North Korea has depended on economic handouts since the mid-1990s. Food aid is currently needed for about 5 million people, with one in three children physically stunted from a lack of nutrition, according to a report from the United Nations and World Food Programme.

Previous attempts to liberalize the North’s economy have backfired. In 2002, North Korea started its “most drastic” effort by letting prices and wages fluctuate, resulting in the spread of the black market, said Bahng Tae Seop, a senior fellow at the Samsung Economic Research Institute. That led to a widening gap between the poor and elite, Bahng said.

Choi was one of the elite. The second son of Choi Hee Byeok, who was finance minister during the 1980s, he attended the nation’s top college in Kim Il Sung University. Then he was a currency and gold dealer at Daesong Bank in charge of foreign- currency management for the North’s Workers’ Party before rising to the deputy governorship at the KRDB.

Though he fled 16 years ago, Choi said he’s still in touch with North Korean mentality and expects a smooth transition.

“North Koreans think it’s a ‘must’ that political power be inherited to the heir,” he said. “Kim will probably open up gradually and selectively, while tightening internal grip to keep his power.”

 

[Muthukali]

North Korea Ends Mourning of Kim Jong Il

Kim Jong Un, North Korea’s new leader, stood on a balcony overlooking Kim Il Sung Square in Pyongyang where tens of thousands of people gathered today to hear eulogies that bring to an end a period of national mourning for his father.

State television broadcast Kim Ki Nam, secretary of the Central Committee of the ruling Workers’ Party, delivering a eulogy today for Kim Jong Il, and images of a smiling portrait of the dictator erected in the square. Red banners adorned the square with the words: “Let’s serve the idea and leadership of respected Kim Jong Un with steadfast loyalty!”

The memorial services, which featured silent prayers and artillery salutes, are designed to bolster the standing of Kim Jong Un. The stability of North Korea, which has the world’s fourth-largest army and 70 submarines, may depend on the younger Kim’s ability to establish a firm grip on the regime.

State media have sketched the image of the younger Kim, thought to be 28 or 29, solidifying his hold on succession, referring to him as “supreme leader of the revolutionary armed forces” and “great successor” to his late father and grandfather.

Kim Jong Un yesterday walked beside the hearse carrying his father’s body though snow-covered streets. He was surrounded by members of the North Korean ruling elite during yesterday’s funeral and at today’s ceremony.

“Authorities are trying to indirectly communicate to the people that the transition is stable, that the new leader is stable,” Kim Yong Hyun, a professor of North Korea studies at Dongguk University in Seoul, said after yesterday’s funeral.

Observers around the world are scrutinizing images from the memorial and yesterday’s funeral for signs of changes in the regime’s power hierarchy under its new leader.

It is difficult to tell whether a regency-type system will develop, led by Kim Jong Un’s uncle Jang Song Thaek, who walked behind his nephew in the motorcade yesterday, Kim said. “For now, it’s evident that the system is being centered around Kim Jong Un,” he said.

 

[Muthukali]

North Korea Holds Military Rally for New Leader

North Korea held a military rally to demonstrate allegiance to new leader Kim Jong Un and announced a prisoner pardon to commemorate the birthdays of his father and grandfather, the country’s first two dictators.

Navy, army and air force service members yesterday gathered at a memorial plaza in the capital of Pyongyang, the official Korean Central News Agency reported today, saying the military “will build a ten thousands-fold bulwark for protecting the supreme commander and become rifles and bombs to serve as Kim Jong Un first line lifeguards.”

Kim Jong Il’s death last month after 17 years of rule left North Korea in the hands of his son, a little-known figure who is thought to be under 30 and needs the support of party and military leaders more than twice his age. Kim Jong Un yesterday was named supreme commander of the 1.2 million-strong army in a country where malnutrition has stunted the growth of one-third of its children, according to the United Nations.

North Korea will grant amnesty to convicts on Feb. 1 to mark the birthdays of state founder Kim Il Sung and his son Kim Jong Il, KCNA said in a separate report today. The Presidium of the Supreme People’s Assembly issued a decree authorizing the move on Jan. 5, the report said, without specifying how many convicts will be freed.

The government last granted pardons in August 2005 to mark the 60th founding anniversary of the ruling Workers’ Party, said Park Soo Jin, the deputy spokeswoman of South Korea’s Unification Ministry. Special pardons are also usually issued every 10 years of a milestone anniversary, Park said.

‘Military Genius’
“The new regime has pretty much stabilized, as Kim Jong Un plays commander winning the military’s loyalty and leader winning public harmony and solidarity through the amnesty decree,” said Yang Moo Jin, a professor at University of North Korean Studies in Seoul. “Kim Jong Un is getting that stability from how Kim Jong Il used to rule, and by saying he will follow his father’s dying wishes.”

North Korea’s state-run television aired a 50-minute documentary on Jan. 8 about Kim Jong Un’s “military genius” featuring footage of him driving a tank, assembling a rifle, plotting coordinates on a military map and sitting in the cockpit of a warplane. The program was broadcast on a day believed to be his birthday, according to a book by Kenji Fujimoto, the Kim family’s former Japanese chef.

Kim, believed to be 28 or 29 years old, oversaw the April 2009 test launch of the country’s long-range rocket, according to the film. “I was determined to enter a war if the enemies dared to intercept” the rocket, he was quoted as saying.

The program was a montage of his activities as the army’s “supreme commander” and included footage of his father and grandfather touring military facilities.

North Korea, which has twice detonated a nuclear device, has more than 250 long-range artillery installations along the world’s most fortified border in reach of the Seoul area and its 23 million citizens. North Korea and South Korea remain technically at war after their 1950-1953 conflict ended in a cease-fire.