THE OUTLOOK FOR KOREA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A018200010001-0
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 23, 2016
• Document Release Date: April 8, 2014
• Sequence Number: 1
• Publication Date: September 7, 1961
• Content Type: NIE

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1 2 SEP igv
s _
NIE 14.2/42-61
7 September 1961
Mzd-ac,
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 14.2/42-61
SUPERSEDES: NIE 42.2-56
SNIE 42.1-60
NIE 42.1-2-60
SNIE 42-61
SNIE 42-2-61
SNIE 42-3-61
THE OUTLOOK FOR KOREA
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
UNITED STATES INTELLIGENCE BOARD
on 7 September 1961. Concurring were The Director of Intel-
ligence and Research, Department of State; the Assistant
Chief of Staff for Intelligence, Department of the Army; the
Assistant Chief of Naval Operations (Intelligence), Depart-
ment of the Navy; the Assistant Chief of Staff, Intelligence,
USAF; the Director for Intelligence, Joint Staff; the Assistant
to the Secretary of Defense, Special Operations; and the
Director of the National Security Agency. The Atomic Energy
Commission Representative to the USIB, and the Assistant
Director, Federal Bureau of Investigation, abstained, the sub-
ject being outside of their jurisdiction.
DOCUMENT NO
NO CHANGE IN CLASS. t
/jK DECLASSIFIED
CLASS. CHANGER TO: TS S C
AUT1-4: Hot 71/-2
NEXT REV/EW DATE: 01
DAM" FiEVIEWER.00 /2 .5?.
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370
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CENTRAL INTELLIGENCE AGENCY
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is for the information and use of the recipient and of persons under his jurisdiction on
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TABLE OF CONTENTS
Page
THE PROBLEM 1
CONCLUSIONS 1
DISCUSSION 2
I. INTRODUCTION 2
II. THE NORTH KOREAN IMPACT ON SOUTH KOREA 3
A. The Subversive Threat
B. Propaganda: The Unification Issue 4
C. The Economic Contrast 4
D. The Military Threat 5
E. Relative International Positions 6
III. PROBLEMS AND PROSPECTS FOR SOUTH KOREA 6
A. Political Stability 6
B. Economic Development 8
C. Military Readiness 9
D. Foreign Relations 10
IV. THE OUTLOOK FOR KOREA 11
*V5ANROW
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THE OUTLOOK FOR KOREA
THE PROBLEM
To estimate the major trends and prospects in South Korea, with particular at-
tention to the impact of North Korea on the south over the next two or three years.
CONCLUSIONS
1. In its push to unify Korea under Com-
munist control, the North Korean regime
will continue to depend primarily on sub-
versive tactics and propaganda appealing
to nationalistic sentiments and stressing
the economic benefits of unification.
Although these efforts have had little
effect, the Communists probably believe
their longer term prospects for a favorable
response to its unification appeals are
good and improving. In view of this and
the automatic involvement of US forces
in any resumption of hostilities in Korea,
we believe the Communists are not likely
to assume the grave risks of armed action
against South Korea over the next several
years. (Paras. 12-25, 50-53)
2. The greatest threat to South Korea, at
least in the near term, comes from within
South Korea. The country lacks a sense
of national purpose and faces both tre-
mendous economic problems and a brittle
political situation. The military junta
seeks to provide the drive and stability
which was lacking in the previous civilian
government but is subject to internal fac-
tionalism and lacks general public sup-
port in confronting these enormous prob-
lems. (Paras. 28-38, .54)
3. The prospect for South Korea over the
next few years is therefore very cloudy
and uncertain. US aid will probably suc-
ceed in preventing economic collapse.
However, even under the most favorable
circumstances, progress will be slow and
South Korea will continue to require
large-scale foreign aid for the indefinite
future if it is to remain an independent
nation allied with the West. (Paras.
39-42, 55)
4. The political situation is subject to
sudden and rapid change. Much de-
pends on future actions of the junta, in
particular, on its capacity to establish a
sense of forward momentum among the
Korean people. If the overall situation
in South Korea fails to improve signifi-
cantly and the people lose hope for na-
tional progress, the continued entice-
ments offered by the North Korean re-
gime could lead to some movement in
the south toward an accommodation with
the north. (Paras. 23-33, 56)
'stammer
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DISCUSSION
I. INTRODUCTION
5. The 1945 division of the Korean peninsula
was made for the administrative convenience
of US and Soviet occupation authorities and
was not meant, by the US at least, to last
beyond the period necessary to organize na-
tional elections. In the early years there was
a fair degree of movement of persons and
trade, but the administrative line at the 38th
Parallel soon took on the character of a politi-
cal division. This was largely owing to the ini-
tiative of the USSR in promptly consolidating
the Communist position in the north and in
refusing to join in holding national elections.
On either side, indigenous regimes were set up,
each claiming to represent all the Korean
people. By mid-1949, all trade between north
and south had ceased. The Korean War, and
the armistice which followed, reinforced the
partition. The demilitarized zone became the
de facto boundary between two competing po-
litical systems.
6. The economic and political development of
the two regions proceeded in widely different
fashion. Under the guidance of its Soviet
mentors, the regime set out to create a dis-
ciplined Communist state, based on the com-
plete domination of the party over all aspects
of national life. It was helped enormously in
this effort by the advantage the north pos-
sessed in having obtained through the parti-
tion most of the country's heavy industry and
mineral resources. Despite setbacks suffered
during the Korean War, the regime has very
largely succeeded in imposing its will on the
Korean people in the north and in develop-
ing the economic potential of the area.
7. Through purges and reorganizations, Pre-
mier Kim Il-sung, with the aid of a number of
Soviet-trained supporters, has attained virtu-
ally complete control of the Korean Labor
(i.e., Communist) Party and the government.
The so-called "Yenan clique," made up of
Koreans who had been associated with Com-
munist China before 1945, has been largely
eliminated and the regime probably has no
serious factional problems at present. The
Korean Labor Party has expanded to the point
that it now claims nearly one and a half mil-
lion members (out of a population of 10 mil-
lion) . The strength of the party has enabled
the regime to enforce strict controls and
severe discipline on the North Korean people.
8. Both Kim and the government he heads are
essentially the creation of the USSR,' and the
USSR almost certainly continues to exert pre-
dominant influence on the North Korean re-
gime. At the same time, however, there has
been increasing competition from Communist
China for influence in both the economic and
ideological spheres, and North Korea is de-
pendent in considerable degree on Peiping for
military support and economic aid. Peiping
and Moscow are in agreement, however, on
the need to maintain and strengthen North
Korea's position vis-a-vis South Korea.
9. The partition left South Korea with two-
thirds of the agriculture, two-thirds of the peo-
ple, and severe problems in establishing a
viable economy. The loss of Japanese admin-
istrators, skills, and trade had a sharp impact
on the economy of the south which was also
forced to absorb large numbers of refugees.
Syngman Rhee became President of the Re-
public of Korea in 1948 but, until he consoli-
dated his control during the Korean War, his
regime was too weak to cope realistically with
'Kim was a junior officer in the Soviet occupation
army when he returned to Korea in mid-1945 after
20 years' absence. He still went by his real name of
Kim Song-chu and was virtually unknown at that
time. The Soviets assigned him to a minor post
while they set about laying the groundwork for his
emergence as a "national hero." This occurred in
late 1945, when he was introduced to the Korean
public at a liberation celebration in Pyongyang
under his present alias, which was in fact the
name of a renowned national hero of Korean re-
sistance against the Japanese. Backed by the So-
viets, Kim took over the Korean Communist Party
from the local leaders. Upon establishment of the
Democratic People's Republic in August 1948, he was
placed at the head of the newly formed cabinet as
Premier.
2
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the social and economic problems of the south.
Moreover, his 33 years of exile had little pre-
pared him for the task, and he was either un-
willing or unable to impose the economic dis-
cipline South Korea needed to make most
effective use of the aid coming from the US.
Following the Korean War, the popular base of
the Rhee government narrowed, corruption
flourished, and public dissatisfaction with
official fraud, repression, and lack of leader-
ship grew.
10. The collapse of the Rhee government in
April 1960 initiated the present period of politi-
cal instability in South Korea. The Chang
Myon government which followed Rhee had
democratic instincts, but its political base was
weak and its leadership timid and ineffectual.
It failed to end excessive factionalism and poli-
ticking in the Assembly. Its record on re-
forms, and especially on measures against
corruption, was extremely disappointing to
those Koreans eager for changes that Rhee's
downfall seemed to promise. Among these was
a small group of disgruntled and ambitious
military officers whose stated objectives were
to bring discipline into Korean society and
politics, honesty to government, and progress
to the country. On 16 May 1961, this group
executed a military coup d'etat with an effi-
ciency and boldness seldom encountered in
South Korea. Political leadership in South
Korea passed to the military for the first time
since the founding of the Republic. For the
new military leadership, all the old economic
and social problems remain. In addition, new
situations affecting political development,
public participation, and national freedoms
have been created. At the same time, South
Korea must continue to reckon with the threat
from the north.
II. THE NORTH KOREAN IMPACT ON SOUTH
KOREA
11. In the decade that has passed since the
start of the Korean War, the government of
North Korea has continued to maintain
formidable military forces, but has placed in-
creasing stress on propaganda and subversion
as the weapons with which to bring about the
3
collapse of authority in the south. The
shattered North Korean economy has been re-
built and the regime is seeking to make its in-
dustrial achievements known and envied by
the people in the south. The political turmoil
in South Korea over the past year and a half
probably has given the North Korean leaders
increased confidence in their approach.
A. The Subversive Threat
12. The North Korean regime has actively
engaged in a program of subversion against
the people and government in the South
since the partition. Prior to the collapse of
the Rhee government, this program consisted
mostly of infiltrating political action agents
and propaganda, primarily aimed at increas-
ing South Korean dissatisfaction with eco-
nomic malpractices and inaction, selfish po-
litical maneuvering, and the continued
presence of foreign troops on Korean soil.
Following the 1960 revolution in South Korea,
the North Korean regime increased its efforts
to infiltrate agents, particularly through
Japan, and since that time, North Korean
agents sent into South Korea have probably
numbered about 200 to 250. Some of these
were assigned the mission of subverting gov-
ernment officials, college students, and
teachers.
13. In general, North Korean efforts to sub-
vert the populace in the south appear to have
had limited success. The Korean War left
a deep anti-Communist conviction among
most people in the south and the Rhee gov-
ernment was highly effective in detecting and
arresting North Korean agents and their
local accomplices. Although agents have re-
cently been better trained and financed than
those in the past, they have faced the same
difficult task of blending in with the populace
in a country into which there is almost no
bona fide immigration or refugee flow. We
believe that most of these agents have been
seized. Since the May 1961 coup, there has
been a lull in agent activity, probably reflect-
ing some North Korean uncertainty regard-
ing the prospects for subversion under the
military junta now ruling in South Korea.
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B. Propaganda: The Unification Issue
14. The North Korean regime has had more
success with its propaganda campaign urging
unification of Korea. There is a strong de-
sire for national unification among the
Korean people on either side of the demili-
tarized zone. The North Korean regime ex-
ploits this nationalistic sentiment and plays
on the desires for the restoration of family
relationships and the renewal of traditional
cultural and commercial contacts. In addi-
tion the regime stresses the opportunities that
unification would provide for the integrated
development of the country's economy.
15. The North Korean propaganda for unifica-
tion is coupled with a constant demand for
the departure of US and UN forces from
Korea and the settlement of the unification
problem by the Koreans themselves. Accord-
ing to Pyongyang, there can be no unification
as long as there is "foreign interference" in
South Korea. The North Korean regime has
repeatedly denied the competence of the UN
to deal with the Korean question .and has re-
jected the concept of UN-supervised elections
in Korea as a step toward unification. North
Korea has proposed, at one time or another,
all-Korea elections, development of north-
south contacts, an international conference
on the Korean question, and, most recently, a
loose federation of North and South Korea.
Under the federation scheme advanced by
Kim Il-sung in late 1960, the two govern-
ments would retain their separate identities
but, as a preliminary step toward unification,
would appoint representatives to a Supreme
National Committee to supervise expansion of
cultural and economic cooperation.
16. The North Korean campaign for unifica-
tion trades on the relative position of the two
economies which are highly complementary.
In recognition of this and the greater strength
of the North Korean economy, the North
Koreans have offered extensive trade relation-
ships as a prelude to unification. Since No-
vember 1960, North Korea has elaborated a
series of comprehensive proposals to reopen
trade, grant economic aid to South Korea,
and establish close economic and cultural re-
lations. North Korea has proposed to pro-
4
vide vast quantities of electric power as well as
to construct hydroelectric stations in South
Korea; to build metallurgical, cement, machin-
ery, and chemical fertilizer plants; to under-
take broad irrigation projects, cancel all
farmers' debts to their moneylenders, and to
double the South Korean fish catch; to hire
all unemployed South Korean college gradu-
ates, to enroll 4,000 South Korean college stu-
dents in North Korean colleges, and to give
financial assistance to 3,000 other South
Korean students.
C. The Economic Contrast
17. The greater strength of the North Korean
economy derives in large degree from the di-
vision of resources in the partition of the
Korean peninsula in 1945. At that time, the
North Korean regime acquired about two-
thirds of existing heavy industry, including
electric power, mining, and metallurgical in-
dustries. Along with these, the Communist
authorities in the north fell heir to most of
Korea's hydroelectric potential and mineral
resources, including most of its iron ore and
coal. By contrast, South Korea received
about two-thirds of existing light industry
and agriculture but almost no mineral re-
sources except tungsten and a little coal.
18. Population factors have also favored
North Korean economic growth. The initial
imbalance of population, with the north hav-
ing roughly one-third and the south approxi-
mately two-thirds, has been further increased
by the pattern of subsequent population
growth. The flight of refugees from North
Korean oppressive policies held population
growth during the period since World War II
to less than 10 percent, relieving the diffi-
culties of agricultural growth. During the
same period, South Korea's population grew
by more than 50 percent, eliminating its agri-
cultural surplus and creating a deficit.
19. The economic policies of the two regimes
have differed sharply: North Korea has been
guided by an industry-first policy, as distin-
guished from the consumer-first orientation of
South Korea. As a consequence, the rate of
advance in North Korea has been much the
greater, with its gross national product ap-
&PiaveAMP
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proximately doubling since 1949, compared
with an estimated increase of only about one-
quarter _ in South Korea. Since 1954, the
amount allocated to investment in North
Korea has been roughly equivalent to one-
third of gross national product whereas in
South Korea this amount has been equivalent
to less than 15 percent of gross national
product.
20. From 1950 to 1960, the amount of eco-
nomic grants and credits which the Com-
munist Bloc declares it has provided North
Korea is equivalent to approximately US $1.3
billion. The USSR has supplied about 50
percent, Communist China, 30 percent; the re-
mainder has come from the European Satel-
lites. An expanding commercial trade be-
tween North Korea and other members of the
Bloc has steadily supplanted economic aid.
In 1954, North Korean exports financed only
about 13 percent of imports (including eco-
nomic aid) , but by 1960 exports financed 45
percent of imports. As a percent of gross
national product the grants and credits re-
ceived by North Korea dropped from a high of
33 percent in 1954 to about 3 percent in 1960.
On the other hand, North Korea is completely
dependent on imports of coking coal, petro-
leum, and rubber, and is deficient in raw cot-
ton, machinery, and equipment.
21. In contrast to South Korea where over-
population and underemployment represent
major problems, North Korea has a shortage
of labor, particularly skilled labor. To cope
with this problem, the regime has made in-
creasing use of female workers, using women
in mining and metallurgical industries as well
as in agriculture and light industry. In addi-
tion, the regime has occasionally employed
soldiers to supplement the civilian labor force.
22. Given the great dissimilarities in economic
resources and policies, price systems, and con-
sumption patterns, it is difficult to compare
the living standards in North and South
Korea. Economic conditions are favorable to
North Korea in some respects and to South
Korea in others. In North Korea grain and
housing are strictly rationed, but made avail-
able at cheap prices, while clothing and other
consumer goods are sold at extremely high
prices; in South Korea, where the prices are
determined by the market, grain and housing
are more expensive and other goods much
cheaper. In South Korea the variety and
quality of consumer goods is greater than that
in the north, and the extremes between
wealth and poverty are also greater. In
neither South nor North Korea is the living
standard for the bulk of the people signifi-
cantly above the subsistence level.
D. The Military Threat
23. The North Korean military establishment
is an effective, modern organization but given
the present balance of forces in Korea it does
not in itself pose a severe threat to South
Korea. Without outside assistance, the North
Korean armed forces are capable only of
maintaining internal security and of conduct-
ing limited defensive and offensive operations.
However, the introduction of Chinese Com-
munist or Soviet forces would greatly in-
crease North Korea's offensive and defensive
capabilities.2
24. The North Korean Army, with an overall
strength of 329,000, is slightly more than half
the size of the combined South Korean Army
and Marine Corps strength of 545,000. It is
organized into 18 infantry divisions and one
tank division. There are no known plans for
an increase in the size of the North Korean
Army and, as long as the regime continues to
push its economic program, any increase is
21n areas near the Korean border, there are ap-
proximately 500,000 Chinese Communist troops (34
divisions) and about 100,000 Soviet troops (13 di-
visions) . We estimate that as many as 17 Chinese
divisions could be brought into place along the
present demilitarized zone within 10 to 12 days.
The Chinese Communist air and naval forces have
approximately 1,950 aircraft based in the Northern,
Northeastern and Eastern Air Defense Districts, in-
cluding about 1,270 jet fighters and 420 jet light
bombers. The Soviet air forces have just over 1,700
aircraft in its Far East and Transbaikal Military
Districts consisting mainly of 850 jet fighters, 265
jet medium bombers (100 assigned to naval avia-
tion) , and 55 heavy bombers. In close proximity to
Korean waters, the Soviet Far Eastern fleet has 88
submarines, 6 cruisers, and 52 destroyer types. The
Chinese Communists have 25 submarines as well as
coastal patrol forces.
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unlikely. The capabilities of the army have
been increased, however, by reorganization
and re-equipment with modern weapons. Its
logistic capability has been largely restored
since the armistice took effect in 1953. The
North Korean Army's superiority in artillery
and other combat support weapons partly off-
sets the South Korean Army's numerical
superiority.
25. The North Korean Air Force as compared
with the South Korean Air Force has fewer
total personnel (16,000 as against 22,000) , but
three times as many pilots (900) ; it has two
times as many aircraft of all types, including
nearly three times the number of South
Korean jet aircraft. Tactical components
total 485 jet aircraft and include three fighter
divisions, one attack/fighter division, and a
light bomber division. Possessing an exten-
sive air facilities system and a modern and
effective radar network, the North Korean
Air Force has a fair to good capability for
ground attack, air defense, and interdiction.
In view of the short distances involved, the
North Korean Air Force has a substantial
capability for launching a surprise attack on
South Korean and UN military and logistic
installations. The North Korean Navy, con-
siderably smaller than the South Korean
Navy, is little more than an inshore defense
force with the mission of coastal patrol. Its
most important function since the armistice
has been to smuggle agents into South Korea.
E. Relative International Positions
26. Until recently, the North Korean regime
was unrecognized outside the Sino-Soviet Bloc.
In the past year, however, the regime has been
actively seeking diplomatic contacts with non-
Bloc countries. So far, three (Cuba, Guinea,
and Mali) have recognized the North Korean
regime and received North Korean ambassa-
dors. Only Guinea has established a mission
in Pyongyang. North Korea has placed trade
missions in India and the United Arab Re-
public and signed trade agreements with Iraq,
Yemen, and Austria. During the spring of
this year, North Korea signed agreements with
Burma and Indonesia for the establishment of
consulates.
27. The recent signing of formal defense
treaties with the USSR and Communist China
probably was intended to give North Korea
formal security guarantees and greater status
both within and outside the Bloc. In addi-
tion, these treaties probably reflect a desire
by Bloc leaders to present North Korea as a
fully developed and independent state, having
an international status comparable to South
Korea. Although North Korea's efforts to
extend its international ties have not yet had
widespread impact, the regime has succeeded
in blurring South Korea's claim to be the only
legitimate representative of the Korean peo-
ple. Many countries, particularly the newer
ones, hesitate to recognize either Korean re-
gime, whether from indifference or from de-
sire to avoid cold war entanglements. This
in turn has adversely affected South Korea's
standing with the UN.
III. PROBLEMS AND PROSPECTS FOR SOUTH
KOREA
A. Political Stability
28. The Situation in the Junta. The military
junta that seized control in May 1961, oust-
ing Chang Myon and bringing the Second Re-
public to a sudden end, was composed of gen-
erals and field grade officers, some of North
Korean origin and some from the south. Mo-
tivated largely by a sense of disgust and frus-
tration with the corruption and graft in gov-
ernment and the upper ranks of the armed
services, the more junior officers were active
in the planning and execution of the coup
under the leadership of Lt. General Pak
Chong-hui. A number of the general officers
joined the coup group after much of the initial
planning had been completed and were moti-
vated to do so by personal ambition as well
as a desire to reform. However, common to
the members of the junta was an intensely
nationalistic concern over the uncertain di-
rection of the Chang Myon government and
its alleged softness toward communism. They
regarded the experiment with parliamentary
government as a failure and were determined
to give South Korea the executive control and
impetus missing under Chang Myon. How-
ever, there was little consensus on the methods
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and extent of reform necessary to achieve
these goals.
29. The internal power structure of the junta
has altered since May, but a basic problem of
control and authority remains. Lt. General
Pak Chong-hui is the dominant figure. Colo-
nel Kim Chong-pil, head of the central in-
telligence bureau, is the second strongest man
in the group and has so far worked in con-
cert with Pak. Several members of the ori-
ginal group?most notably its original front
man, Lt. General Chang To-yong?have been
ousted. The most serious potential source of
division in the junta lies in the more radical
and extreme outlook of the junta's younger
members.
30. Since the coup, this group has pressed the
hardest for punitive action against civilians
and military officers accused of corruption and
has been the least willing to move toward re-
turn of the government to civilian control.
Its hardnosed attitude has been reflected in
its suspicion and distrust of US motives in
South Korea and in the initial difficulties in
restoring fully the US-Korean military rela-
tionships existing before the coup. As Pak
has been drawn by South Korea's dependence
upon the US toward closer relations with US
authorities in Korea, it is possible that some
members of the colonels group have become
suspicious of his dedication to the objectives
of the coup and of his own ultimate ambitions.
31. There will probably continue to be fac-
tional shifts and maneuvering within the
junta as various groups vie for influence and
as Pak strives to consolidate and extend his
power. As long as political and economic
pressures on the junta do not become too
great, Pak and the other junta members will
probably be able to prevent their internal fric-
tions from breaking out into open conflict.
However, if the leadership began to encounter
serious public resistance to its policies and
public law and order started to disintegrate,
the divisive forces within the group would
probably cause it to fall apart. At that point,
the various faction leaders might appeal to
their supporters in the South Korean armed
forces for help and armed clashes between
different camps could result.
7
32. The junta has stated that it does not plan
to return the government to civilian control
until after corrupt and selfish elements have
been removed. The time of the transfer is
now scheduled for the summer of 1963, fol-
lowing the adoption of a new constitution and
general elections earlier in that year. To pre-
pare for the elections, political parties will be
allowed to resume activities in early 1963, al-
though "corrupt and evil" politicians will be
prohibited from participating. The junta
plans to return to the presidential system and
unicameral legislature that characterized the
Rhee government.
33. The Korean public has reacted to this
schedule with disappointment and skepticism.
From the junta's point of view, the date is
sufficiently far in the future to be easily
changed if political or economic developments
over the next two years so warrant. We be-
lieve it is highly unlikely that the junta would
of its own accord advance the date of transfer
and the odds are only even that the 1963
schedule will be met. If the junta appeared
unlikely to meet this schedule, highly adverse
public reaction would probably result. The
junta may attempt to avert this difficulty and
guarantee its control through such means as
forming its own political party and running
military or ex-military officers for political
office. In any event, 1963 promises to be a
critical year, with the possibility of serious
turmoil over the formulation of a new con-
stitution and the holding of elections.
34. The Junta and the People. The coup
initially received some welcome from many
Koreans who had grown impatient with the
apparent inability of the politicians in Parlia-
ment to forego the game of politics and settle
down to Korea's urgent economic and political
problems. However, public disenchantment
with the new regime has appeared in the cities
and is spreading in the rural areas, although
a favorable attitude can still be found among
many farmers. The authoritarianism and re-
sort to police rule have adversely affected the
junta's standing among intellectuals and stu-
dents, many of whom regard the military
junta as little better than the Rhee regime
they overthrew.
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SECRET 8
35. The junta has made full use of its powers
under martial law to close newspapers, jail
politicians, educators, and businessmen, and
impose curfews and censorship. The atmos-
phere of fear and intimidation thus created
has so far prevented demonstrations of public
opposition to the junta. The junta's actions
against potential opposition leaders has
greatly reduced the chances for organized re-
sistance. Student groups probably represent
the most significant potential opposition to
the junta, although there has not yet been
any serious effort among the students to or-
ganize. A student-led uprising is not likely
as long as the junta appears to be unified and
determined to suppress antiregime activity.
36. All official proclamations by the junta
have stressed the anti-Communist nature of
its objectives. As part of its aims, the junta
has passed a stringent anti-Communist law
under which the government can take rapid
and forceful action against those it considers
to be Communist or Communist influenced.
Moreover, the junta has centralized and
strengthened the counterintelligence machin-
ery of the government, under the direction of
Colonel Kim Chong-pil, and has demonstrated
its readiness to arrest persons, high and low,
for "antistate" activities.
37. It is likely that one reason for the junta's
exaggerated expressions of concern regarding
Communist penetration?which has resulted,
for example, in charging ex-Premier Chang
Myon, South Korea's leading Catholic layman,
with being pro-Communist?is to convince the
Korean people that the coup d'etat was justi-
fied. Generally speaking, the people of South
Korea are strongly disposed against commu-
nism. Over two million refugees fled from
North Korea before and during the Korean
War and most adults in South Korea remem-
ber their exposure to Communist invasion and
occupation. However, if increasingly wide-
spread unemployment were accompanied by
mounting inflation, food shortages, and gen-
eral economic disintegration, the South Ko-
reans would become more vulnerable to uni-
fication propaganda which promised material
and economic improvement.
38. Over the past year or so, there has been
a slight increase in South Korean sentiment
favoring a new look at the unification prob-
lem. Some of this grew out of the resurgence
of Korean nationalism resulting from the na-
tion's experience in overthrowing the Rhee
government and the new freedom of political
discussion. Elements of younger, educated
Korean groups who have matured in the last
few years have especially been attracted to the
idea that unification, with all its potential
benefits, can somehow be achieved in an anti-
septic, nonpolitical way. Even the military
junta felt called upon to include preparing
the south for unification as one of its six an-
nounced goals. However, barring complete
collapse of organized government and accom-
panying economic chaos, we do not believe
that the South Korean people will give active
consideration to unification on Pyongyang's
terms or become significantly more susceptible
to Communist subversion in the next two or
three years.
B. Economic Development
39. South Korea's economic situation at the
time of the coup was shaky and it has not
improved. Unemployment has increased, the
banking system is in turmoil, traditional credit
mechanisms in the rural areas have been dis-
rupted, and the business community is fear-
ful of the junta's aims and reluctant to invest
in an uncertain future. Many businessmen
have been arrested on charges of illegal ac-
cumulation of wealth through tax evasion,
misuse of bank loans, and political kickbacks.
Most of these have been released, but are still
subject to confiscatory back payments and
penalties. These moves against businessmen
and a decree limiting interest rates on loans
to 20 percent per year have resulted in indus-
trial, commercial, and financial stagnation.
The lowered business activity following the
May 1961 coup is much worse than that which
came after the April 1960 revolution and may
be the most severe since the founding of the
Republic. Although the coup and subsequent
actions of the military junta are by no means
the sole cause of the present economic crisis
in South Korea, it is the junta that now must
provide the national leadership to deal with it.
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SItii#447 9
40. General Pak and the other leaders of the
junta came to power with meager comprehen-
sion of the complexity and magnitude of
South Korea's economic problems. They have
quickly become aware of the political im-
portance of economic progress, however, and
are now showing signs of coming to grips with
the necessary planning and decisions. Mili-
tary personnel initially placed in government
posts dealing with economic matters are being
replaced by more knowledgeable civilians.
Civilian ministers have been appointed to head
the two key economic ministries. A super-
ministry, known as the Office of Economic
Planning, has been created under a civilian
director holding rank in the government as
Vice Premier.
41. The economic problems that the junta
faces are the ones that have long plagued
South Korea, seriously compounded by two
successive years of national turbulence. There
is little the military government can do to
make up for South Korea's basic shortage of
all resources except manpower. Although the
economic situation in South Korea is grim, it
is not hopeless. The junta is able to pursue
its announced program of using outside aid
effectively without acceding to the pressures
of the legislative and special groups that
harassed the previous government. Much de-
pends on the weather and continued good
harvests of rice and summer grains. These,
plus uninterrupted US economic assistance
and some increase in business activity, will
probably prevent economic collapse.
42. Even under the most favorable circum-
stances, progress will be slow. Almost in-
superable obstacles will prevent South Korea
from achieving a self-supporting economy in
the foreseeable future. Unification of the
peninsula, permitting a more equitable dis-
tribution of the people and utilization of re-
sources, would greatly improve the economic
position of the country as a whole, but this
also is highly unlikely at any time in the fore-
seeable future. Korea's economic prospects
would undoubtedly improve with a reduction
in military forces and a consequent redirec-
tion of available resources, but there is little
likelihood that the junta will undertake sub-
stantial reductions in the near future. Other
domestic alternatives available are an auster-
ity program to increase forced savings or a
general increase in productivity, or both.
However, a marked increase in productivity
can be realized only after continued effort and
investment combined with a disciplined aus-
terity program over a long period. In sum,
the most likely prospect is that South Korea
will continue to require large-scale foreign aid
into the indefinite future if it is to exist as
an independent ?nation allied with the West.
C. Military Readiness
43. Supported by US military aid, South Korea
continues to maintain the world's fifth largest
military establishment. The previous govern-
ment had initiated steps to reduce the army's
size somewhat and was planning to invest the
funds saved thereby in economic development.
The junta has yet to spell out its military poli-
cies, but its early actions suggest that it will
not proceed with the reductions proposed by
the previous administration. The junta has,
however, forced the retirement of about 50 flag
and general officers, mostly on the basis of
ineffectiveness, and has separated more than
a thousand junior officers for incompetence
or corruption. The combat efficiency of the
armed forces may suffer temporarily by the
turnover in personnel but morale among those
remaining on duty will probably rise as the
The Director of Intelligence and Research, De-
partment of State, believes that this paragraph fore-
closes too firmly (fourth sentence) the possibility
that the junta may consider substantial reductions
in military forces in the near future. There is no
evidence to date that the junta is committed to re-
taining its military forces at their present levels,
while there is considerable evidence of its commit-
ment to adopt measures that would improve South
Korea's economic prospects. Although the question
of a reduction of force levels would probably pre-
sent a difficult conflict of interest for the junta,
the Director believes that the junta might under-
take reductions if it were convinced that to do so
would promise substantial economic benefit without
undue jeopardy to South Korea's security. More-
over, the junta has indicated its desire to raise
military pay levels; and if additional US aid for
this purpose is not forthcoming, reduction in force
levels may appear as a possible alternative means
to this end.
wagitibagg T
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junta takes advantage of the promotion op-
portunities it has created.
44. The South Korean armed forces total
about 583,000. The army has about 520,000
officers and men organized into 2 field armies,
5 corps, and 18 infantry divisions. Despite
logistic shortcomings and inadequate antiair-
craft defenses, the army is well equipped, well
trained, and combat ready. The air force,
with 22,000 personnel, has 282 aircraft, over
half of them F-86 jet fighter-bombers, and
about 370 trained pilots. The air force has
a good capability for close-support and inter-
diction but has only a fair capability for air
defense under visual flight conditions. The
navy has 55 escort, patrol, mine warfare, and
amphibious ships. While it maintains a
limited mine warfare and amphibious capabil-
ity, the navy's present primary mission is
coastal surveillance and patrol. The marine
corps, with about 25,000 men, is trained in the
techniques of amphibious assault with a regi-
mental landing team. In addition, UN
ground forces in South Korea total 49,000.
45. South Korean armed forces, which have
the support of two US Army divisions now in
position, could contain a North Korean at-
tack on the northern boundary. In view of
North Korea's limited offensive capability,
however, we believe that the Communists
would supplement North Korean forces with
Chinese or Soviet forces in such an attack.
In this event South Korea would require
prompt and extensive US reinforcement for
adequate defense.
46. The early actions of the military junta up-
set relations with the UN Command in Korea
and resulted in a considerable compromise of
CINCUNC operational authority. The junta
has since accepted the principle of the sub-
ordination of the South Korean armed forces
to the UN Command. However, their willing-
ness to implement fully agreements on the
command structure cannot yet be taken for
granted. The junta probably intends to main-
tain a larger degree of independence in its
command of South Korean forces, at least in
peace time. Moreover, the military type of
organization and subordination within the
junta and its relationships within the armed
10
services in effect establishes a chain of com-
mand separate from the UN Command. This
increases the danger that complete obedience
to CINCUNC authority will not occur under
all military exigencies.
D. Foreign Relations
47. After an initial period of preoccupation
with domestic affairs to the exclusion of inter-
national considerations, the military junta has
begun to show concern for its image abroad.
It has dispatched goodwill teams to some
fifty states. It has nominated a new envoy to
Japan and indicated its willingness to reopen
the negotiations underway before the coup.
It has announced its support for the present
UN formula on unification. And the junta
leadership has begun efforts consciously de-
signed to better its relations with the US.
48. The Chang Myon government was inter-
ested in improving relations with Japan but
was hampered by the often violent criticism
of its steps by anti-Japanese elements in the
press and in Parliament. The junta, on the
other hand, is less influenced by criticism and
has shown a growing understanding of the
desirability of coming to terms with Japan.
For its part, the Ikeda government is disposed
to go slow until the military junta has stabi-
lized its position and established sound rela-
tions with the US. Nevertheless, some im-
provement in Korean-Japanese relations may
be forthcoming, particularly if the deteriorat-
ing economic situation in South Korea causes
the junta to soften previous Korean stands
on wartime compensation claims and fishing
rights in return for Japanese economic assist-
ance.
49. With the assumption of power by the
junta, US relations with South Korea entered
a new phase. At least initially, suspicion and
distrust marked the attitude of many junta
members toward the US. General Pak, how-
ever, no longer holds himself apart from US
authorities in Seoul and has recently requested
and received a personal US advisor on eco-
nomic matters. The junta leadership is fully
aware of Korean dependence upon the US and
is seeking a relationship with the US which
will not endanger South Korea's major source
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of economic, military, and diplomatic support.
At the same time, however, the junta leaders
probably intend to develop a relationship
which reflects their desire for full control of
Korean affairs. Although the junta will prob-
ably be generally cooperative in matters af-
fecting the economy, it will be less responsive
to US advice on political and military matters,
particularly if it interprets such advice as
incompatible with its immediate interests.
IV. THE OUTLOOK FOR KOREA
50. The North Korean regime of Kim Il-sung
is stable, well entrenched, and energetic. It
faces no serious internal opposition and is
probably accepted, if not enthusiastically sup-
ported, by most of the North Korean people.
It will probably continue to concentrate, with
some success, in building up its economy and
may be able to effect a substantial increase in
North Korean living standards in the next
few years. It will continue to seek ways to
undermine governmental authority in South
Korea, employing every trick of subversion,
propaganda, and political maneuver at its
command. Although it probably does not ex-
pect to realize its goal of unification in the
near future, the regime probably is preparing
to exploit a collapse of authority, law, and
order in South Korea, if it should occur.
51. North Korea is not likely to resort to
armed action against South Korea in the fore-
seeable future. North Korea almost certainly
would not undertake such action without the
support of both the USSR and Communist
China. We believe that the USSR, recogniz-
ing that the reopening of hostilities in Korea
would automatically involve US military
forces, would be concerned over the difficulty
of controlling the risks of such a conflict. At
the same time, the Communists probably re-
gard as promising the long-term prospects for
fomenting disaffection and spreading sub-
version among the South Korean people. We
therefore believe it unlikely that the Commu-
nists will risk reopening hostilities in Korea
over the next several years.
52. Over the short term, North Korea's sub-
versive threat as such is probably not great.
After more than a decade of operating against
11
South Korea, Pyongyang still does not possess
an effective organization in South Korea. The
vigorous anti-Communist measures of South
Korean governments have played an impor-
tant part in this. But more importantly, the
people of South Korea have so far proved re-
markably impervious to the solicitations and
urgings from the north. Although much will
hinge on the future development of relations
between the junta and the people, we do not
anticipate an early change in the attitude of
South Koreans toward the Communists.
53. However, the economic accomplishments
of the North Korean regime and its propa-
ganda proposals may in time exert consider-
able influence in the south. With help from
the USSR and other members of the Bloc, the
North Korean regime probably could in fact
make good on most of its offers of economic
assistance to South Korea. North Korea has
the electricity and is capable of constructing
the plants, provided the heavy generating
equipment and other machinery were supplied
by the Bloc. In particular, the offer to give
financial assistance to students and to employ
idle college graduates strikes a very sensitive
part of South Korean society. If the South
Korean Government, together with US aid,
can keep the economy going, the impact of the
North Korean claims and accomplishments
will be blunted. However, the margin of
safety probably is small.
54. In sum, the greatest threat to South
Korea, at least in the near term, does not
come from North Korea. It comes, instead,
from within South Korea itself: from the coun-
try's shaky economy and its almost perpetual
state of crisis; from the unresolved political
questions that arise out of the leadership's
demand for authority versus the people's de-
sire for self-expression and freedom; from the
lack of social cohesion and effective institu-
tions for economic development; and finally,
from the people's capacity for revolt once
their patience has been pushed to its limit.
The South Koreans have so far developed no
clear sense of national direction and purpose.
It is this lack of national purpose which makes
dangerous the variety of Communist appeals
for unification on Communist terms and their
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offers of economic and cultural cooperation.
A strong, cohesive ideology is being matched
against a virtual ideological vacuum.
55. The prospect for South Korea over the
next few years is therefore very cloudy and
uncertain. As serious as the economic situa-
tion is, it will probably not be the most signif-
icant cause of future difficulties. US aid will
probably be able to keep the economy going.
It is in the political arena that the greatest
danger lies. The present government has not
yet gained any great measure of public sup-
port. The students have been quiet so far,
intimidated by the junta's readiness to show
the mailed fist; this quiescence probably will
not continue long. The army is not united
in its attitude toward the junta and will re-
main an important potential source of anti-
12
junta strength. The political situation is brit-
tle and it would probably not take much provo-
cation to precipitate another major crisis in
Korea.
56. Such a major crisis, if it occurred, could
take any one of a variety of forms, ranging
from a drastic change in the membership of
the military junta to a new popular uprising.
One thing seems fairly clear; both the South
Korean people and the leadership face many
disappointments, frustrations, and failures in
the years ahead. In such a situation, the de-
sire for economic progress and for an end to
hopeless temporizing, rising interest in uni-
fication, and continued enticements offered by
the North Korean regime could lead to some
movement in the south toward an accommo-
dation with the north.
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