SEOUL: On the thoroughfares of Pyongyang, the North Korean capital, five remarkable roadside billboards are scheduled to go up later this month. In one, a young man will stare out with an expression of wonder once reserved for official posters of North Koreans gazing upon their leader, Kim Jong Il. This time, the object of awe will instead be a shiny new Fiat.
The billboards are part of what is being dubbed the first corporate media blitz to hit North Korea. Pyeonghwa Motors Corporation — a South Korean company with close ties to the Rev. Sun Myung Moon’s Unification Church — coaxed the North Korean government this year into a major break with its communist doctrine: the launch of a capitalist marketing campaign. Pyeonghwa began assembling cars in North Korea 18 months ago using imported Fiat parts.
Creating an ad campaign acceptable to North Korean officials wasn’t easy, said John Kim, the company’s director of general affairs. “We had to work closely with the government, and they kept on rejecting ads ... because they looked too much like we were trying to sell something.”
The company has already begun publishing ads in government- sponsored trade magazines showcasing the slick Whistle sedan, named after a popular North Korean song, as well as a new, roomier SUV model. Several months ago, the company began running a seven-minute info-commercial on government-controlled TV depicting studious North Koreans test-driving a Whistle and inspecting the company’s North Korean assembly plant, according to Pyeonghwa executives and independent observers who have seen the magazine ads and TV spots.
“The nuclear issue with North Korea is clouding the signs of recent progress in the North’s economic opening,” said Park Chan Bong, South Korea’s deputy assistant minister for unification policy. “They have been moving toward change, and, we believe, they are now moving quicker still.”
Even as North Korea has belligerently confronted the West with threats to become the world’s newest nuclear power, foreign business leaders, political analysts and South Korean officials say the government has been quietly taking bold steps to deepen a nascent foray into capitalism.
Although virtually no one — except Pyeonghwa Motors — is predicting huge sales in a nation where most adults can’t drive and where it would take an average citizen about 15 years’ salary to afford one of the $14,000 cars, the fact that the North Koreans have allowed the ad campaign is being seen by many observers as a breakthrough.
The North Koreans, aware of their withering economy, began taking steps toward economic reform in July 2002. The government started permitting some food markets to sell groceries and cooking materials without fixed government prices. In doing so, it abandoned a key tenet of communism and for the first time let the market determine prices. That sparked a serious bout of rising prices that, experts say, has been only partly offset by across-the-board wage increases.
But South Korean officials and recent business travellers to North Korea say the food markets have dramatically expanded in the past few months. Existing markets have added manufactured goods to their product lines while new markets are spreading beyond the capital into rural areas. Pyongyang’s official news agency recently described the expanded markets as being designed “to dramatically ... improve the country’s standard of living.” In a radical departure from protocol, the agency also proudly published a photo of a large new market under construction in Pyongyang.
This month, the North Koreans announced a cabinet reshuffle that raised Pak Pong Ju, former chemical industries minister, to the loftier position of premier. Described by one South Korean official as “a man very interested in free-market reforms,” Pak led a mission of North Korean observers on a tour of South Korea’s high-tech industries last year.
In addition, Kim Jong Il, who came to power after the 1994 death of his father, Kim Il Sung, has been ratcheting up a programme to transfer the authority to fire employees from party officials to factory managers, according to South Korean government officials.
Next month, North Korea plans to host a group of South Korean manufacturers interested in setting up shop in a new industrial complex in Gaesong, less than nine miles across the most heavily militarized border in the world. Long-term plans for this joint project between South Korea’s Hyundai Asan Corporation and the North Korean government include shopping malls and even an amusement park, according to Jang Whan Bin, Hyundai Asan’s senior vice president. Groundbreaking took place in July, but construction has not started.
Critics caution that rather than reflecting real change, the recent steps more likely signal a pragmatic attempt by the regime to keep itself in power after the failure of an economy once propped up by the Cold War largess of the Soviet Union and China. “The North Korean economy is in shambles, and the government will do whatever it can to survive,” said Hyun In Taek, a North Korea expert at Korea University in Seoul. “The investments are unlikely to change anything — and are also likely to prove very unprofitable.”
Indeed, companies such as Hyundai Asan have already lost millions of dollars on tourism investments in North Korea in recent years. And the Pyeonghwa Motors project also serves as a lesson in the remarkable difficulties of turning a buck there.
When Pyeonghwa opened its $20 million plant about 40 miles west of Pyongyang early last year, the company hoped to sell 1,000 cars in 12 months, but has unloaded fewer than half that number in 18 months, according to John Kim, the company’s director of general affairs. Most cars have been sold to North Korean government officials or foreign diplomats stationed in Pyongyang.
The company is operating against the odds: There are only two gas stations in the North’s capital, and since the company does not offer credit to North Koreans, its cars are way out of reach for all but a privileged few.
But most analysts insist that North Korea still needs substantial financial aid from Japan and support from Washington for multilateral loans before deeper reforms are possible. Unless a resolution is found to the nuclear standoff, however, that support is likely to remain elusive.
“It’s like a fascinating play — watching the North Koreans reform their economy even as they hold on to the nuclear threat,” said Lee Shin Wha, a North Korea analyst at Korea University. “These companies should be prepared for difficulties ahead, and should remember that the North Korean regime is, well, very particular in nature.”—Dawn/The LAT-WP News Service (c) The Washington Post.