NORTH KOREA NEWSLETTER NO. 158

(May 19, 2011) *** TOPIC OF THE WEEK S. Korea's May 24 Measures on Cheonan Warship Sinking Remain Effective SEOUL (Yonhap) -- This coming May 24 will mark exactly one year since the South Korean government announced a set of punitive measures against North Korea for the sinking of the Cheonan warship in March last year. While the May 24 measures still remain effective, exchanges and cooperation between the divided Koreas remained frozen for the entire past year, except for the Kaesong industrial complex, which is jointly operated by the South's capital and technology and the North's cheap labor. Still, the rival sides have not found a breakthrough in their deadlocked relations for the past year. Seoul has persistently demanded Pyongyang take responsibility and a sincere attitude for the warship's sinking. But the North has reacted harshly to Seoul's demand, claiming that the Cheonan incident is a "fabrication of South Korea and the United States." The South Korean government's hard-line stance has taken a toll on overall trade between the two Koreas and drastically cut humanitarian aid to the North. In response to a North Korean torpedo attack on the battleship Cheonan, South Korean President Lee Myung-bak said on May 24 last year that the country will immediately resort to self-defense measures against any additional provocations by the North, asserting that the socialist regime will pay for the sinking, which killed 46 sailors. President Lee said countermeasures against Pyongyang would include taking it to the U.N. Security Council, suspending inter-Korean exchanges and banning North Korean ships from passing through its waters. President Lee said Seoul will also put trade and exchanges between the two Koreas on hold, although it plans to continue its humanitarian aid to Pyongyang. Under the measures, South Korea's first military countermeasures against Pyongyang included launching its own anti-proliferation exercise and resuming psychological warfare against North Korea. Other measures included the prohibition of general trade between the two Koreas, as well as all inbound and outbound shipments of goods and materials for processing on commission. The Seoul government refused to allow its citizens to visit North Korea "with the exception of necessary visits" to Kaesong and a troubled joint mountain resort on the east coast. Accordingly, inter-Korean trade and economic cooperation came to a halt. South Korean nationals were prohibited from visiting the North. Also, any South Korean contact with North Koreans in third countries was also restricted. In addition, new investment in the North was disallowed, and the number of South Koreans staying in the Kaesong industrial complex was significantly curtailed. But very limited humanitarian aid was later permitted on a civilian level to those who suffered flood damage and to babies and children. In reality, inter-Korean relations retracted before the July 7 Declaration in 1988 when the two Koreas opened the doors for inter-Korean trade while terming it as "internal trade between Korean people." To make matters worse, the North made another provocation in November last year. The North pounded artillery shells on the peaceful island of Yeonpyeong near the Northern Limit Line (NLL), the virtual maritime border between the two Koreas. It was the first direct attack on South Korean territory by the North since the 1950-53 Korean War. Once again, the Korean Peninsula found itself embroiled in a new crisis with the two sides engaging in a tug-of-war ever since. As a condition to improving inter-Korean relations, the South Korean government has demanded that the North live up to its commitment to denuclearization and apologize for the Cheonan sinking and artillery shelling of Yeonpyeong Island. Pyongyang did express regret over civilian deaths in the Yeongpyeong incident, but called it the results of the South's provocations. Still, the North has kept mum in the face of calls for a sincere attitude on its dismantlement of its nuclear weapons programs. The May 24 measures and the heightening tension on the Korean Peninsula are likely to continue unless Pyongyang takes a proactive attitude and Seoul shows more flexibility to the recalcitrant North. Under the situation, President Lee made a new proposal in Berlin on May 9. Lee offered to invite North Korean leader Kim Jong-il to Seoul for an international nuclear summit next year if Pyongyang makes a firm commitment to give up its atomic programs and apologizes for last year's attacks. The regional powers surrounding the Korean Peninsula are working to resume the six-party talks on the North Korean nuclear issue following an inter-Korean nuclear meeting and then Pyongyang-Washington talks. The so-called three-stage process is being raised to resolve the North's nuclear issue through the six-way conference, hosted by the North's staunchest ally, China. Despite chilled inter-Korean relations, particularly in inter-Korean cooperation and exchange, overall trade last year showed moderate growth due to the growth of the Kaesong industrial zone. According to data released by the South Korean Ministry of Unification, ordinary trade between South and North Korea declined by 53.9 percent in 2010 compared to 2009, down from $256 million to $118 million. Processing-on-commission trade also saw a decrease of 22.4 percent during the same period from $410 million in 2009 to $318 million last year. On the other hand, as the Kaesong industrial complex in the North was left as the last remnant of inter-Korean business ties, trade passing through the complex saw a heavy increase last year. The total amount of trade through the Kaesong complex amounted to $1.4 billion in 2010, a 53.3 percent jump compared to $941 million in 2009. Along with trade, South Korea had cut off nearly all humanitarian aid to the North, resulting in numbers from last year dwindling to a third of what had been given to North Korea in 2008. In 2008, a total of 67 billion won ($60 million) worth of humanitarian aid was sent to North Korea while it plummeted to 30 billion won last year. Seoul currently allows humanitarian aid from private groups mostly for North Korean children and infants. Transportation between the two Koreas also showed a clear decline, with no flights made last year, compared to 11 in 2009 and 64 the year before. A total of 1,432 ships made the trip between South and North Korea last year while 2,577 did so in 2009. But the number of South Koreans traveling to the Kaesong industrial complex increased slightly, a 7.9 percent increase to 130,119 persons last year from 120,616 people the previous year. This is because of the increase in the number of South Korean commuters due to the North's stricter limit of South Koreans staying inside the North's complex. This year, a daily average of more than 600 South Korean workers are currently staying at the Kaesong complex, up from the 500 level in the past several months. The increase reflects a reduction in military tensions between the two Koreas, officials at the Unification Ministry said. Seoul slashed the number of South Korean workers staying at the Kaesong complex to as low as 200 a day following the artillery barrage last November. The number jumped to around 500 in early April. More than 46,000 North Koreans work for about 120 South Korean firms operating in the industrial zone to produce clothes, utensils, watches and other goods. Experts said the May 24 effect coming from Seoul's hard pressure on Pyongyang can be estimated at around $3 billion a year. That means the North suffered that amount in losses in cash flow due to the suspension of economic cooperation and processing-on-commission trade with South Korea. A senior government official said that the Seoul government has fined North Korea some $3 billion annually, saying the North cannot sustain itself any longer if it commits acts worthy of fines continuously. The official said that the North's launching of a peace offensive from the beginning of the year indicates that the South Korean government's policy toward North Korea is bearing fruit. A unification ministry official added that the May 24 measures have proved to be effective in that the North should pay a price for its deplorable behavior, saying there is no change in the Seoul government regarding the May 24 measures. "It's difficult to say clearly where the last stop for this will be," said another official from the Unification Ministry, indicating that the South Korean government has not yet set a date for the end of the punitive measures. On the other hand, the North is reinforcing its economic cooperation with China with trade between the two allies last year recording its highest level ever. A recent report says North Korea's exports of mineral resources jumped 17-fold in a decade with its outbound shipment of coal and iron ore leading growth. According to Radio Free Asia (RFA), the communist state's exports of mineral resources reached $860 million last year, compared with some $50 million in 2002. Citing data compiled by the Korea Trade-Investment Promotion Agency, the RFA said exports of such minerals as coal and iron ore accounted for 63 percent of its total exports to its strongest ally China. In the first quarter of the year, the North earned around $154 million by exporting coal to the neighboring country, compared with $9.68 million seen a year earlier. North Korea's mineral reserves are believed to be among the largest in the world, worth some 7,000 trillion won, based on 2008 prices, according to an earlier report by the Unification Ministry.