Bloomberg News

Lee Says ‘New Era’ Possible After N. Korea Calls Him Traitor

January 03, 2012

(Updates with minister’s comment in last paragraph.)

Jan. 2 (Bloomberg) -- South Korean President Lee Myung Bak said a new era in inter-Korean relations is possible if the North is sincere about shedding its nuclear program, after Pyongyang accused him of “madcap saber-rattling.”

“If North Korea comes forward with a sincere attitude, it will be possible for us to work together to open a new era of the Korean peninsula,” Lee said today in his New Year speech, two weeks after the death of Kim Jong Il was announced. “But as long as there continues to be a possibility of North Korean provocation, we will maintain a watertight defense posture. If any aggression occurs, we will strongly respond.”

The rhetoric from the North Korean regime under new leader Kim Jong Un has echoed that of his father, Kim Jong Il, with threats of revenge against Lee and his “group of traitors.” Lee and his Grand National Party, who face parliamentary and presidential elections this year, have dropped in opinion polls amid persistently high inflation and opposition criticism over their decision to roll back the “Sunshine Policy” of engagement with the North.

“Kim Jong Un is expected to worsen inter-Korean relations as a distraction that will help his internal power building,” said Yoon Deok Min, a professor of North Korean studies at South Korea’s state-run Institute of Foreign Affairs and National Security. “Lee is trying to prevent another provocation by reassuring the North with a repeat of his conditional willingness to talk.”

Nuclear Tests

South Korea is open to resuming six-party talks on North Korean denuclearization, involving the U.S., China, Japan and Russia, as soon as the North halts its nuclear activities, Lee said. He said his government wouldn’t tolerate provocations by North Korea, which has twice detonated a nuclear device and in November 2010 fired artillery at an island in the Yellow Sea, killing four people in the first shelling of South Korean soil since the 1950-53 Korean war.

“I have expectations that this year will set a milestone for resolving the North Korean nuclear issue,” Lee said. “We are ready to provide the necessary support to ease North Korea’s security concerns and resuscitate its economy based on what will be agreed upon at the six-party talks.”

The last talks were in December 2008 and United Nations inspectors were expelled from North Korea in 2009. The U.S. said last month it was in discussions with North Korea to send it food aid.

Sunshine Policy Reversed

Lee reversed the Sunshine Policy implemented by his predecessor, Kim Dae Jung, when he entered office in 2008, saying that Kim Jong Il’s provocative policies shouldn’t be rewarded. During his single five-year term, which ends in February 2013, North Korea detonated a second nuclear device and in 2010 unveiled an advanced uranium enrichment program.

The opposition has blamed Lee for escalated tensions, saying his tough stance provoked hostilities like the island shelling and an attack in March 2010 in which 46 South Korean sailors were killed when the Cheonan warship sank. An international panel blamed the North for the sinking of the ship. North Korea denied the allegations.

Lee’s approval rating has plummeted from 76 percent when his term began in February 2008 to 26.9 percent, according to a poll of 3,750 South Koreans conducted Dec. 19-23 by Seoul-based Real Meter. The margin of error was plus or minus 1.6 percentage points.

Lee said he will focus in the coming year on reducing inflation and bringing down unemployment by investing over 10 trillion won ($8.7 billion) in creating jobs. The government’s goal is to get inflation down to the low 3-percent range, he said.

Inflation Focus

“While growth is important, we will put emphasis on lowering inflation,” Lee said.

Consumer prices rose 4.2 percent last month from a year earlier, matching November gains and exceeding the central bank’s target of 2 percent to 4 percent through 2012, Statistics Korea said Dec. 30. Rising inflation limits the scope for an interest-rate cut this month even as threats to growth mount.

Europe’s debt crisis is cutting export demand and North Korea’s leadership handover threatens confidence by adding to the risk of instability on the Korean peninsula. The Bank of Korea forecasts that the country’s economic growth will slow to 3.7 percent in 2012 from 3.8 percent in 2011.

The benchmark Kospi stock index declined 0.4 percent to 1818.37 at 1:29 p.m., erasing an earlier gain of 0.7 percent. The won weakened 0.3 percent to 1155.85 per dollar. The Kospi slid 3.4 percent on Dec. 19 when Kim Jong Il’s death was announced, then rallied 4 percent the next two trading days.

Food And Power

In its annual New Year editorial, North Korea yesterday called on its people to defend Kim Jong Un and said the country’s leaders won’t change the course set by Kim Jong Il and his father Kim Il Sung. The 5,800-word editorial, carried by the state-run Korea Central News Agency, also said solving the country’s food and power shortages were urgent goals in 2012.

“The food problem is a burning issue in building a thriving country,” the statement said. Power shortages should be solved “at all costs,” it said.

The United Nations says more than a third of North Korean children suffer from malnutrition and the number is growing after the North’s main food aid donors terminated their programs in the past two years to pressure the North to relinquish its nuclear weapons program.

“Food shortages were mentioned with the intent to attract aid from the outside world,” said Kim Yong Hyun, a professor of North Korean studies at Dongguk University in Seoul. “For now, the new regime will take cues from how Kim Jong Il ruled.”

No Change

Unlike last year’s message, the editorial didn’t mention inter-Korean dialogue or cooperation, South Korea’s Unification Ministry said in an analysis posted on its website yesterday. For the first time in four years, the editorial called for the ouster of U.S. forces in South Korea, the ministry’s intelligence analysis bureau said.

The North warned last week that there will be no change in inter-Korean relations as long as Lee is president of South Korea, one of its main food donors.

The North Korean New Year statement said new coal fields should be developed and more hydropower stations built to overcome the country’s power shortages. It called for officials to “radically increase” grain yields.

North Korea’s economy is one-fortieth the size of South Korea’s and has shrunk in four of the five years through 2010, according to estimates by South Korea’s central bank. Its 2010 gross domestic product was 30 trillion won ($26.5 billion), according to the bank’s estimates. Pyongyang doesn’t release GDP data.

Handouts

The country of 24 million people has relied on outside handouts since the mid-1990s, when famine killed an estimated 2 million people. Almost 3 million North Koreans will need food assistance in 2012, UN agencies said in November.

South Korean Unification Minister Yu Woo Ik said he was “disappointed” by the new leadership’s stance toward the South.

“Our government will not set aside its hopes for progress in inter-Korean relations so easily,” he said in an address to ministry employees that was e-mailed to reporters. “We will continue operating a flexible policy and take time in observing North Korea’s behavior.”

--Editors: Peter Hirschberg, Brett Miller

To contact the reporter on this story: Sangwon Yoon in Seoul at syoon32@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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