The Brand New North Korean Economic Policy

The Eclipse of the Sunshine Policy Continues

Reversing a decade of the “sunshine” policy of closer engagement, inter-Korean ties are going from bad to worse. Since deciding after three months initial silence, which suggests uncertainty in Pyongyang that it dislikes South Korea’s conservative new president, Lee Myung-bak, North Korea has roundly and regularly denounced him, with its inimitable invective, as a traitor, sycophant and puppet. It will have amused Kim Jong-il that South Koreans seem to feel more threatened by US beef imports than by Northern weapons of mass destruction.

Mass demonstrations over the resumption of US beef imports to the South have left Lee Myung-bak seriously weakened. His attempt to link future North-South co-operation to nuclear compliance, although logical, was ill-timed, ruffling as it did the six-party talks at a delicate time. It was consequently unwelcome to the US and undermined Lee Myung-bak.s efforts to improve ties with that country, which had been tense under his predecessor, Roh Moo-hyun.

Now the US is due to give North Korea the one-half million tonnes of grain that the South normally does, but which the North was too proud to request from Lee Myung-bak. As China is buying up North Korean mines and other assets, South Korea risks being marginalised and losing all leverage in North Korea.

So far Kim Jong-il has comprehensively outplayed Lee Myung-bak, who in between apologies to his own people over the beef issue is now trying to find a way to repair inter-Korean ties without losing face. In a major shift, Lee Myungbak told the South’s new National Assembly (the legislature) on July 11th that full dialogue between the two Koreas must resume.

Lee Myung-Bak went ahead with that speech even though hours earlier the North’s army shot dead a middle-aged Southern housewife, who had apparently strayed from her hotel in the Mount Kumgang tourist resort into a closed military area. South Korea at once suspended these tours, which over the past decade have taken 1.9m Southern tourists to the North with the odd accident, but never anything like this. Hyundai Asan, an arm of South Korean’s Hyundai conglomerate whose main revenues derive from the Mount Kumgang tours, will run up losses if the suspension lasts long, as it might. As of late July the North was still refusing either to apologise or to allow entry to a Southern fact-finding team. Inter-Korean relations may yet worsen before they become better, even though it is hard to see this as serving the true long-term interests of either side.