THE TWO KOREAS 30 YEARS AFTER THE ARMISTICE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00553R000300010002-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 36
• Document Creation Date: December 21, 2016
• Sequence Number: 2
• Content Type: REPORT

Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Directorate of
Intelligence
After the Armistice
The Two Koreas 30 Years
NGA Review Complete
Secret
Secret
EA 83-10116
July 1983
Copy 3 31
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Directorate of Secret
Intelligence 25X1
After the Armistice
The Two Koreas 30 Years
An Intelligence Assessment
This paper was prepared by
25X1
25X1
25X1
25X1
It was coordinated with the
National Intelligence Council. Comments and queries
25X1
are welcome and may be directed to the Chief,
Korea Branch, OEA,
Secret
EA 83-10116
July 1983
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
The Two Koreas 30 Years
After the Armistice 25X1
Key Judgments The absence of war in Korea during the 30 years since the signing of the
Information available Armistice Agreement on 27 July 1953 must be seen as a major accomplish-
as of 16 June 1983 ment in itself. With the exception of the late 1960s, when skirmishes along
was used in this report.
the Demilitarized Zone resulted in hundreds of casualties each year, the
Korean people have been spared major bloodshed. Nonetheless, easing
tension and reducing the risk of war on the peninsula have proved elusive.
Indeed, North Korea is continuing the major buildup of its military forces
that began in the early 1970s. And since 1980 it has conducted a series of
large-scale military and paramilitary exercises, "war preparations" cam-
paigns, and alerts that appear designed to ready North Korea's military
forces and civilian population for combat. The North still seems to be
hoping to achieve reunification on its own terms.
But neither P'yongyang nor Seoul has been free to pursue its own course
without reference to the major powers. The United States, Japan, China,
and the USSR all have a stake in developments on the peninsula:
? The US security commitment to Seoul, with US forces along the DMZ
constituting a "tripwire" that would assure US involvement in any
fighting, has deterred aggression from the North and permitted South
Korea to focus its energies on economic development as well as self-
defense.
? China and the USSR have contributed to both economic and military
development in the North but have shown no enthusiasm for another war
that could draw them into a direct confrontation with the United States.
Although the major powers have had a mutual interest in avoiding
confrontation on the peninsula, there has been no agreement on even the
first concrete steps toward an inter-Korean political resolution. Indeed, the
two societies have developed along such different lines over the course of a
generation that they are further now from a settlement than ever. Political
elites and strong military establishments in both Koreas have acquired a
stake in the status quo and would resist any change in which they might
lose their privileged positions.
iii Secret
EA 83-10116
July 1983
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
The growing international acceptance of two Koreas also tends to reinforce
the status quo:
? South Korea has diplomatic relations with 116 countries, the North with
105, and 67 recognize both.
? Seoul has been named as the site of increasingly important international
events, including the 1988 Summer Olympic Games, which dramatically
underscores South Korea's coming of age and enhanced standing.
For the next several years tension probably will continue at the present
level or perhaps increase some. North Korea will cling tenaciously to the
hope that US forces will be withdrawn and that the political fabric in the
South will then start to unravel-giving P'yongyang an opportunity to
impose its will on the South. Seoul will continue to hope that US forces re-
main, permitting South Korea to concentrate on economic development
without diverting resources to an all-out effort to strengthen its military.
Reunification thus seems a receding dream. The best that realistic Korean
nationalists can hope for may be a "German model" in which each side
recognizes the other's right to exist, communicates directly with the other,
and engages in various cultural and economic exchanges. Even this is
probably out of reach for now, however, as it would require some measure
of trust between the two Koreas and a consensus by the major powers on
the ideological coloration of the arrangements-problems that seem as
intractable today as ever in the 30 uneasy years of "no war, no peace" on
the peninsula.
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
Secret
Contents
Key Judgments iii
Origin of the Two Koreas 1
P'yongyang's Long March 1
The Role of the Major Powers 3
Cross-Recognition 5
The 1980s: A Convergence of Uncertainties 8
Appendixes: Competition on All Fronts
B. Trends in the North-South Military Balance
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
Secret
After the Armistice
Origin of the Two Koreas
The basic problem in Korea-the division of the
peninsula-dates back to a hastily prepared plan
implemented by the allies at the close of World War
II. Writing in his memoirs, former President Harry
Truman noted that the United States had proposed
the division of Korea at the 38th parallel in 1945 "as a
practical solution when the sudden collapse of the
Japanese war machine created a vacuum in Korea."
The division was intended essentially as a temporary
military expedient to provide for the surrender of
Japanese forces to the Soviets in the northern part of
Korea and to the United States in the southern area.
There was no intent to partition the peninsula perma-
nently. The leaders of the allied powers had repeated-
ly endorsed the idea-at the Cairo, Tehran, and Yalta
Conferences among others-that Korea would even-
tually become a united and independent state after
the defeat of Japan.
enormous obstacles aside-leaders in both P'yong-
yang and Seoul sense that reunification is still strong-
ly desired by the Korean people and no government in
the North or South can publicly abandon this ulti-
mate goal.
P'yongyang's Long March
North Korea has doggedly pursued reunification on
its own terms since 1945. Although P'yongyang has
demonstrated considerable flexibility in shifting from
one tactical approach to another, it has constantly
kept its objective in view. It tried conventional mili-
tary means in 1950-53 and then undertook a brief
period of reconstruction in the late 1950s. But by the
early 1960s the North was again active on the
reunification front, trying to build an underground
Marxist-Leninist political organization in the South.
When this failed, it shifted in the late 1960s to
guerrilla and commando attacks, which peaked with
the raid on the presidential mansion in Seoul in 1968.
This phase produced hundreds of casualties annually
Such an intent was appropriate in view of the history
of the Koreans as a homogeneous people who had
lived on the same territory, used the same language,
and shared a common culture and political tradition
since as early as the seventh century. The division of
Korea hardened with the onset of the Cold War and
the emergence of Korean political groupings in the
North aligned with the Soviet Union and in the South
aligned with the United States.
At a recent academic conference in the United States,
an American scholar noted that it was difficult to
foresee any real prospects for movement toward Kore-
an reunification within anything less than 10 years. A
South Korean colleague countered that 50 years
would probably be a more realistic time frame-a
view shared by many experienced Korea watchers.
Despite these perceptions, reunification, has remained
a dominant theme in North Korea's official policy
statements, and it is a theme that has been given
increasing prominence since 1980 by the government
of Chun Doo Hwan in the South. It is clear that-the
on both sides.
The years 1969 and 1970 brought major changes in
North Korea's tactics. In 1969 P'yongyang stopped
the shooting along'the DMZ and, beginning in 1970,
adopted a series of new initiatives across a broad
front:
? Political overtures toward South Korea, resulting in
a brief period of dialogue in the early 1970s.
? A major diplomatic offensive among the nonaligned
countries in the mid-1970s, aimed at isolating South
Korea internationally and creating pressure for the
withdrawal of US forces from Korea.'
? An economic policy that for the first time included
efforts to obtain modern industrial technology from
Japan and the West.
? Probably of greatest importance, a major buildup of
its conventional military forces, which it continues
to pursue.
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
A variety of domestic and international considerations
appear to have prompted the North's new approach.
Also, the guerrilla campaign against the South failed.
South Korean villagers quickly reported guerrilla
bands from the North to local authorities, who called
in militia and army units to round them up.
P'yongyang's political initiatives toward the South
appear to have been encouraged by shifts under way
in the international arena in the early 1970s-primar-
ily the Sino-US rapprochement and the improvement
in US-Soviet relations. The North Koreans-and the
South Koreans to some extent-apparently were con-
cerned that improving relations among the major
powers might lead them to impose some form of
political arrangement on the two Koreas. Thus they
began a dialogue of their own to preempt such a move
and keep the political initiative in Korean hands. F_
P'yongyang and Seoul engaged in exploratory discus-
sions that culminated in a joint communique on broad
principles of reunification in July 1972, but soon
thereafter the dialogue snagged. The distrust on both
sides was too great to allow movement toward an
accommodation.
The North's gambits in the international arena
achieved limited gains, but fell short of P'yongyang's
maximum goals. Capitalizing on a mood of height-
ened militancy among the nonaligned countries, the
North succeeded in 1975 in getting a resolution
through the United Nations General Assembly calling
for the withdrawal of US forces from Korea. The
impact of the move was weakened when pro-US and
pro-South Korean forces secured the passage of a
counterresolution.
P'yongyang's economic initiative resulted in the ac-
quisition of some $600 million worth of Western
equipment and technology as well as nearly $1 billion
worth of industrial and raw materials on credit in the
mid-1970s. The move helped the North modernize
some industries and achieve a spurt of fairly rapid
growth. Plans did not pan out, however, as the
northerners proved inept in fully exploiting the new
equipment and unable to pay off their debts.
The Military Buildup
The one area where North Korea achieved significant
and sustained success was in the buildup of its
military forces.
P'yongyang had been carrying out a major expansion
of its conventional forces dating back to the start.of
the decade. The North expanded its ground forces
from fewer than 400,000 in 1970 to nearly 800,000
late in the decade and increased the number of its
major infantry units by about 40 percent. Aid from
China and from the Soviet Union was substantial in
the early stages of the buildup; both provided sizable
quantities of aircraft, tanks, and armored personnel
carriers. The Soviets also supplied a large number of
surface-to-air missile systems. But overall, the North
built most of its weapons in its own defense industries.
The buildup was carried out in secret, and it gave
P'yongyang a decisive military advantage over the
forces of the South.2
North Korea's motivation for undertaking this large-
scale effort may have been influenced by several
developments:
? The Nixon Doctrine, announced at Guam in June
1969, calling for a retrenchment of US military
operations overseas.
? The US announcement in 1970 that it would with-
draw one of two infantry divisions in Korea and
official hints that additional withdrawals would
follow.
? By the early 1970s strong domestic US sentiment,
fueled by the war in Vietnam, against any further
military involvement in Asia.
From these signals, P'yongyang may well have calcu-
lated that the United States would pull out of Korea
at some point in the late 1970s and that a strong
conventional force would give the North the option of
taking the offensive when the time was opportune.
25X1
25X1
25X1
25X1
25X1
25X1
ZoA]
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
P'yongyang probably had some defensive concerns as
well. In 1969 the Sino-Soviet dispute intensified
sharply, with armed clashes taking place along the
Ussuri River. P'yongyang probably worried that Bei-
jing and Moscow would be less than reliable allies if
they were preoccupied with fighting one another.
More important, P'yongyang may well have feared
that the South could present a formidable challenge
later in the 1970s because:
? When the United States announced it was begin-
ning to withdraw units from South Korea, it also
publicly promised to furnish major assistance to
modernize Seoul's armed forces.
? By the early 1970s the South Korean economic
takeoff was well under way.
The force structure P'yongyang built in the 1970s,
however, considerably exceeds defensive require-
ments-a fact that supports the view that offensive
. thinking dominated P'yongyang's calculations.
When President Carter won the election in 1976 and
soon thereafter announced that he would begin a
phased withdrawal of US ground forces from Korea,
some elements within the P'yongyang leadership
probably concluded that their long-sought goal might
finally materialize.
Kim's reservations proved well founded. During 1977
P'yongyang became increasingly impatient with the
clarifications and adjustments to the withdrawal poli-
cy. In the spring of 1978 it reacted angrily to the
large-scale US-South Korean joint military exercise
"Team Spirit 1978," which was carried out as a
confidence-building measure for Seoul, and to the US
announcement that the rate of US withdrawal was
being slowed down. Following President Carter's visit
to Seoul in the summer of 1979, the North Korean
Foreign Ministry charged that:
... Carter's recent South Korean trip was
not a "peace" trip as he claimed, but a
powder-reeking trip of a hypocrite agitat-
ing for aggression and war.
Following President Reagan's election in 1980, North
Korean ambitions for reunification received further
telling blows. The troop withdrawal plan that had
been pending was categorically rejected, and Presi-
dent Chun Doo Hwan was warmly welcomed as one
of the first foreign heads of state the new administra-
tion invited to Washington.
P'yongyang now faces a formidable array of obstacles.
These include a reinforced set of military deterrents:
? US forces, which constitute a "tripwire" along the
DMZ itself.
? The US security commitment to Seoul, which ulti-
mately entails possible US use of nuclear weapons
to repel an attack.
? The growing strength and sophistication of South
Korea's own armed forces.
The Role of the Major Powers
In a broader setting, North Korea's uncertainty about
the reliability of its major allies-China and the
Soviet Union-should it take an adventurist action is
another inhibiting influence. Throughout Korea's his-
tory the policies of its larger neighbors have often had
a decisive influence on the peninsula. The Koreans
have repeatedly been invaded, occupied, and subject-
ed to foreign intervention. In modern times, the major
powers contributed decisively to the partition of the
peninsula in 1945, China and the Soviet Union sup-
ported the North during the 1950-53 war, the United
States intervened to prevent forceful reunification,
and Sino-US rapprochement in the early 1970s
prompted a parallel-albeit short-lived-inter-
Korean thaw.
Since the Japanese occupation of Korea ended at the
close of World War II, developments in the triangular
relationship between China, the Soviet Union, and the
United States have been especially important.
Throughout most of the 1960s the North Koreans
were able to draw some benefits from the steadily
growing friction between Beijing and Moscow.
P'yongyang played one major ally off against the
other, thereby obtaining substantial political, econom-
ic, and military assistance from both as they competed
25X1
25X1
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Secret
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
with one another for influence in P'yongyang. The tilt toward China, but P'yongyang remains worried
North Koreans were also able to wrest a considerable that Soviet contacts with South Korea will assume
degree of independence for themselves as a result of permanence
By the late 1960s, however, the dispute between
China and the Soviet Union intensified. Both Beijing
and Moscow began to try to improve relations with
the United States, and this resulted in a strategic
disadvantage for North Korea. The Soviets made
clear their lack of support for adventurism in Korea
when they refused to endorse P'yongyang's aggressive
actions in 1968-69. Moscow clearly wanted to avoid a
new war with the United States over Korea. And as
the Chinese moved toward rapprochement with the
United States, they apparently sought to moderate
North Korean policy. They, too, did not want to
become involved in a confrontation with the United
States on the Korean Peninsula. Instead, they sought
to use the US presence in the region as a strategic
counterweight to their principal adversary, the USSR.
Both Moscow and Beijing seem to recognize that the
Korean Peninsula remains the most critical danger
point in East Asia. It is the one area where the direct
interests of all the major powers in the region con-
verge and is the single place where US forces would
become directly involved in the early stages of a
conflict. Because of Korea's strategic setting and the
strength of the opposing Korean forces, China and the
USSR could also be quickly drawn into a shooting
war on the peninsula. Indeed, both Beijing and Mos-
cow seem to view the US security commitment to
Seoul as an important ingredient in the mix of factors
that keeps peace on the peninsula.
In large part as a result of Moscow's stance, there are
abundant signs that the current relationship between
the Soviet Union and North Korea is marked by
coolness and distrust. On the political side, the Soviets
have made no effort to smooth the way for a visit by
Kim II-song. Kim, who has not been to Moscow since
1961, undoubtedly would like to have a summit with
the Soviet leadership to balance his highly publicized
trips to China in 1975 and 1982. Moscow's modest
contacts with South Korea are another irritant. In the
past these flirtations appear to have been timed in
part to signal Soviet displeasure with North Korea's
China, which has a common border with North Korea
that is longer than the USSR's, has a strategic stake
in the region that is greater than the USSR's. As the
Korean war demonstrated, China is determined to
keep a friendly-or at least nonhostile-power on its
eastern flank. Soviet gains in recent years along
China's periphery, particularly in Vietnam and Af-
ghanistan, have no doubt bolstered China's desire to
shore up its equities and prevent Soviet inroads on the
Korean Peninsula
There are many indications that China's relations
with North Korea are healthier than Moscow's. There
has been a regular exchange of high-level visitors.
China's present leaders, Hu Yaobang and Deng Xiao-
ping visited P'yongyang in April 1982-a trip which
was not publicized until Kim 11-song's visit to China
in September 1982. On the international front, North
Korean sympathies usually lie more with China than
the USSR. For example, North Korea has supported
Kampuchean forces fighting Moscow's Vietnamese
ally and has failed to endorse Soviet actions in
Afghanistan
Nevertheless, there are frictions in Sino-North Kore-
an relations. Like Moscow, Beijing has opened modest
contacts with South Korea. P'yongyang made vigor-
ous private protests over the sharp increase in indirect
trade between China and South Korea in 1979-80. In
1981-82 this trade was cut back substantially, but in
recent months it has been increasing again--largely
through intermediaries in Hong Kong.
P'yongyang is especially uncomfortable with China's
tendency to view the US and Japanese military
presence in Northeast Asia as a useful counter to
Soviet expansionism. Although North Korea has not
engaged in public polemics with China, it frequently
reminds Beijing that Sino-US rapprochement has
jeopardized China's claim to Taiwan
25X1
25X1
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
Kim I1-song probably believes that China and the
Soviet Union would provide military support if North
Korea were invaded by South Korean and US forces,
but he is likely also to judge that he cannot count on
such support in an unprovoked attack against the
South. P'yongyang's military buildup and its indige-
nous defense industry attest to the strength of its
commitment to preserve the option for independent
action. Thus, we believe that, although Moscow and
Beijing probably would try to discourage any North
Korean drive to reunify the peninsula by force, they
Since 1953, the United States and South Korea have
developed a full range of political, economic, and
cultural ties. The scope and vitality of these ties
reflect the emergence of South Korea as an important
and dynamic newly industrialized state. Over the
years, nevertheless, a number of issues-including US
troop withdrawals and Seoul's human rights record-
have strained bilateral relations. From time to time
such strains have prompted Seoul to seriously consider
25X1
25X1
25X1
25X1
probably would not be able to veto it.
The Beijing-Moscow talks were renewed this past
winter but do not appear at this time to be having a
major impact on either North or South Korea. As
long as the Chinese and Soviets continue to desire
stability on the Korean Peninsula, major shifts in
policy-such as providing greater support for North
Korea's reunification policy-would not serve their
interests.
Nonetheless, P'yongyang almost certainly hopes for a
Sino-Soviet rapprochement accompanied by a signifi-
cant intensification of anti-US policies in Beijing
and/or Moscow. Such a development could-ideally
from the North's perspective-entail stronger Sino-
Soviet support for P'yongyang's reunification schemes
and pressure for a US withdrawal from South Korea.
The North Koreans have yet to make any official
comment on the talks, however-a sign that they are
uncertain how they may be affected
In South Korea, officials are even more uneasy than
the North Koreans are about the Sino-Soviet talks.
Seoul sees a greater likelihood of harm than good
resulting from them. During the 1970s Seoul ulti-
mately became convinced that the improved Sino-US
relationship was a positive development, mainly be-
cause it believed that Washington could-through
Beijing-restrain and perhaps moderate North Kore-
an behavior. Now the South sees some danger that the
Washington-Beijing connection has been loosened,
that Sino-US strategic cooperation may now be diffi-
cult to achieve, and that in the longer term there will
be a retrogression toward the hard alignments of the
Korean war.
following a go-it-alone policy
major power it can turn to for comparable support
limits the South's options. 25X1
Cross-Recognition
Since the mid-1970s, the United States has publicly
espoused "cross-recognition" as a way to reduce
tensions on the peninsula and foster an environment in
which the two Koreas might begin working toward a 25X1
settlement.' As a formal process, cross-recognition has
made little headway. Both Koreas have found fault
with the concept. North Korea has been more vocifer-
ous, arguing it is just another scheme by outside
powers to legitimize the "two-Koreas" status quo. In
public China and the Soviet Union have generally
supported North Korea, but in private they have
occasionally indicated some flexibility-provided that
the United States takes the lead in contacts with
North Korea. South Korea is less adamant than
North Korea-indeed, in the past year, it has en- 25X1
dorsed exploratory cross-recognition probes by both
Washington and Tokyo-but is keenly intent on
ensuring that any steps taken by the major powers
are, in fact, reciprocal so that P'yongyang does,not
make disproportionate gains.
As an informal process, cross-recognition has been
under way for some years. Japan has had a longstand-
ing, if not particularly satisfying, trade relationship
' Cross-recognition in this context is a process that involves Chinese
and Soviet recognition of South Korea in exchange for US and
Japanese recognition of North Korea. The concept envisions a step-
by-step process leading to the establishment of full diplomatic
relations. It could involve simultaneous initiatives by all four major
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
with North Korea. The Soviets upped their modest
contacts with South Korea a bit last fall when Soviet
officials visited Seoul for the first time since the
Korean war. Seoul used the occasion of the hijacking
of a Chinese civilian aircraft to South Korea in May
to seek more enduring mechanisms for joint. handling
of such incidents in the future. The Chinese did
cooperate in establishing a cordial negotiating atmos-
phere, but Beijing has since played down the political
implications of these dealings in order to limit the
damage to their relations with P'yongyang.
The North Koreans oppose even these limited Soviet
and Chinese gestures. From P'yongyang's perspective
the simple, straightforward key to reducing tension on
the Korean Peninsula remains in Washington.
P'yongyang continues to argue that the US presence
in the South is the critical problem. Once the United
States withdraws, in P'yongyang's view, the critical
prop will be removed from the South and a "settle-
ment" will naturally follow.
P'yongyang's periodic overtures for talks with the
United States since the mid-1970s have received some
support in recent years from intellectuals in South
Korea, Japan, and the United States. They contend
that the North is isolated and fearful of a US attack
and that US communications with P'yongyang-and
possibly some economic enticements-could be the
catalyst needed to break the 30-year deadlock.
Such contacts would unnerve South Korean leaders.
A negative reaction from Seoul might be tempered
somewhat if there were extensive US-South Korean
consultations in advance and if Beijing and Moscow
agreed to make corresponding moves toward Seoul.
From Seoul's perspective the key to a settlement is in
P'yongyang: the North must simply abandon its goal
of taking over the South. But above all, the South
Koreans believe it is essential for the two Koreas to
engage in a dialogue and to move step by step toward
building mutual trust. Officials in Seoul contend that
US-North Korean contacts could in fact reinforce
P'yongyang's determination to ignore South Korean
authorities. And South Korean authorities insist-
probably correctly-that, even if they acquiesced in
talks between the United States and North Korea,
P'yongyang's essential aim would probably remain
the same-a US pullout.
The Current Impasse
The core of the current impasse remains the conflict-
ing national goals of P'yongyang and Seoul-and
their respective allies. Despite the North's proposals
for a loose confederation, it clearly still hopes to
extend its system throughout the peninsula, absorbing
South Korea. Seoul, meanwhile, despite its detailed
proposals for reunification based on compromise, cer-
tainly intends to ensure that any settlement scheme
would ultimately give the South-with its stronger
economy and with twice the population of the
North-the upper hand.
The growing international acceptance of "two Ko-
reas" also works to reinforce the division of the
peninsula:
? South Korea has diplomatic relations with 116
countries, the North with 105, and 67 recognize
both Seoul and P'yongyang (see figure 1).
? Seoul has been named as the site of significant
international events, including the 1988 Summer
Olympic Games, a development that dramatically
underscores South Korea's coming of age and its
enhanced international standing.
There are other important factors that would compli-
cate any scheme fora peaceful inter-Korean political
settlement:
? The two societies have developed along divergent
lines over the course of a generation. In the South
there has been halting movement toward pluralism
and a more open society, while in the North a
totalitarian system centered on the Kim 11-song
personality cult has been firmly established.
? Political elites and strong military establishments in
both Koreas have acquired a stake in the status quo
and would resist any change in which they might
lose their privileged positions
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
Competing Reunification Proposals
Formation of a Democratic Confederal Republic of
Koryo (DCRK) (Announced by Kim II-song at the
Sixth Congress of the North Korean Workers Party,
October 1980)
Initial Steps
Democratization of South Korean politics
Repeal of South Korea's anti-Communist laws
The conclusion of a US-North Korean peace treaty
and withdrawal of US troops from South
A North-South conference of representatives ofpoliti-
cal parties and social organizations to discuss forma-
tion of the DCRK
Organization of the DCRK
The creation of a Supreme National Federal Assem-
bly with equal representation for North and South
The creation of a Standing Committee under the
SNFA to serve as a united government of the confed-
eral state
Recognition and acceptance of the ideologies and
systems of North and South
Separate regional governments in North and South
with local autonomy within the limits of the interests
and demands of the entire nation
Administrative Guidelines for the DCRK
Adherence to independent national policies
Pursuit of democracy and great national unity
Economic cooperation ... development of independ-
ent national economy
Cultural and educational cooperation
Traffic and communications between North and
South
Pursuit of economic well-being for the entire people
Creation of a combined national army
Protection of the national rights and interests of
overseas Koreans
Coordination of foreign activities
Peaceful, nonaligned foreign policy; friendly relations
with all countries
Peaceful Unification Through National Reconcilia-
tion and a Democratic Process (Issued by President
Chun Doo Hwan in his 1982 New Year's policy
statement)
Initial Steps
A South-North summit meeting to discuss reunifica-
tion issues without preconditions
Provisional Agreement on Basic Relations
South-North relations to be based on equality and
reciprocity, pending unification
South and North shall renounce violence and resolve
problems through dialogue and negotiation
South and North shall not interfere in the other's
political order and social institutions
South and North shall maintain existing armistice
arrangements pending measures to end military
confrontation
South and North shall progressively open their soci-
eties to each other-including free travel and techni-
cal, cultural, and economic cooperation
South and North shall respect the other's treaties
until unification is achieved
South and North shall appoint plenipotentiary envoys
to deal with liaison issues
Unification Formula
Formation of a Consultative Conference for National
Reunification (CCNR) to draft a unified constitution
A democratic referendum throughout North and
South to ratify the constitution
Democratic general elections under the constitution
to form a unifled government
Establishment of a unified democratic republic pur-
suing the ideals of nationalism, democracy, liberty,
and well-being
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
A case can be made that the impasse P'yongyang has
faced in recent years-including the reaffirmation of
the US commitment to South Korea, the restoration
of relative political stability and fairly rapid economic
growth in the South, and tentative gestures by both
Beijing and Moscow toward Seoul-could have
prompted another major policy reappraisal in North
Korea at the outset of the 1980s such as happened in
the early 1970s. The major policy statements at the
North Korean Sixth Party Congress in October 1980
strongly emphasized the need to revitalize the North's
economy and to improve living standards, in contrast
to the need to build up the armed forces that was
stressed at the Fifth Party Congress in 1970. It could
be argued that logic must impel the North to set aside
indefinitely the goal of imposing its will on the South.
There is no evidence this has happened.
Indeed, North Korea appears to be continuing on the
basic course it set in 1969-70. The military buildup
has continued. The expansion of the North's military
manpower appears to have become more gradi}al
beginning in the late 1970s, but it has continued
nonetheless, and additional upgraded weapons-par-
ticularly tanks, armored personnel carriers, and self-
propelled artillery-appear to be reaching units in the
field at a steady pace. Since 1975, for example, the
North's artillery has increased by nearly 80 percent
and P'yongyang has added more than 1,000 tanks and
75 jet combat aircraft to its inventory.
Additionally, since at least 1980 P'yongyang has
conducted a series of military and paramilitary exer-
cises, "war preparations" campaigns, and other alerts
on an increasingly large scale. Such activities proba-
bly reflect a measure of concern in the North about
the annual joint US-South Korean "Team Spirit"
maneuvers, which have grown each year in scale and
sophistication. Nonetheless, the top leadership in the
North is, in our judgment, generally well informed on
US and other international affairs and has no illusions
that the United States wants another war in Asia and
is planning an actual attack
We believe that, instead, the North's training and
alarms are intended mainly to strengthen its overall
military readiness, reinforce strict political discipline
among the civilian population, and buttress P'yong-
yang's charge that the United States is the prime
source of tension on the peninsula. The North appears
to be clinging to the hope that the Americans will
eventually go away, that the political fabric in the
South will then start to unravel, and that P'yongyang
will yet have an opportunity to achieve reunification
on its own terms.
The 1980s: A Convergence of Uncertainties
If armed confrontation can be avoided for the next
few years, there will be time for a variety of factors
that could reduce tension on the Korean Peninsula to
have greater effect. Speculating about potential
tension-reducing factors is risky, however, because
most factors generally cited are, in reality, two-edged
swords.
One such factor is the succession issue in North
Korea, where Kim 11-song, 71, has been grooming his
son, Kim Chong-il, as a replacement. The second
generation of leadership could be somewhat more
pragmatic than the founding father of the revolution
and could place a higher priority on modernization
and economic development than on completing the
Korean Workers Party revolution by extending its
control over the South. Many longtime North Korea
watchers, however, strongly suspect that the younger
Kim-or any other likely successor-will, at least
initially, adopt an assertive policy toward the South to
establish himself as Kim's rightful heir. Lacking the
charisma and stature of his father, Kim Chong-il may
well be inclined to defer to the powerful North
Korean military establishment.
A succession is in the offing in South Korea as well.
President Chun Doo Hwan has succeeded in filling
the political vacuum created when Park Chung Hee
was assassinated late in 1979. Chun has consolidated
power, put his opponents off balance through a series
of liberalization gestures, presided over an economic
recovery, and made a series of impressive achieve-
ments in foreign policy. At the same time, there
remain significant political vulnerabilities in South
Korea. The emerging middle class is likely to press for
a greater political role as the decade progresses, but it
is not clear that the current military-backed govern-
ment is sufficiently flexible to.adapt by sharing power.
Of key importance, Chun has promised to hold an
25X1
25X1
25X1
25X1
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
Figure 1
North Korea and South Korea: Status of Diplomatic Relations
Kiribati
505901 (545038) 7-83
Arctic Ocean
~s C c C' ?l ; ( r
South
Pacific
Ocean
Miller Cylindrical Projection
Scale 1:85,000,000
Zy e
Costa Rica
Beaxe -ima
m
El Salvador ? ague
Panama -
,1 "l,IS2US4*'n.Gayana
\ Suriname
Colombia French Guiana
t' jv (Fr.)
Ecuador
- Antigzia and B.
5tn
st.vm t a"'~
JMOMrdlarS Ba
!North
Atlantic
Ocean
Lua:
France
Andwa'7
Spain r o"
orocco
Algeria
t.H
tape ?- ? Melf c6.
S j+ r ~...
V
The Gamble - ~ l
Gmnoe 9asot B 1
Sierra Leo Ivory ; e
Liberia
Togo
Sm Tome
end DnncipeS,?
Equatorial .Cot
Guinea ,
Zambia
Egypt
imbabw
nzania
Comoros
India
Sri
iLanka
China
noporb
Brunei
Malay819(
Australia
Arctic Ocean
South
Atlantic
Ocean
The United Stales Government has not recognized
the incorporation of Estonia, Latvia, and Lithuania
into the Soviet Union. Other boundary representation .
is not necessarily authoritative.
.
C.A.R. Central African Republic
F.R.G. Federal Republic of Germany
G.D.R. German Democratic Republic
P.D.R.Y. People's Democratic Republic 61-Yemen
U.A.E. United Arab Emirates
Y.A.R. Yemen Arab Republic
ntries having diplomatic relations with:
South 'Korea only
North Korea only
Both North Korea and South Korea
Neither North Korea nor South Korea
Country names are underlined
where tone would be too small
Secret
Secret
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
Secret
President Kim II-song gives on-
the-spot guidance as his son
and heir apparent, Kim Chong"
election and step down by the end of his seven-year
term in 1988. There has not, however, been a peaceful
transfer of power in the South in the 30 years since
the armistice. The likelihood of major political insta-
bility does not appear to be high, but the potential
exists and should it happen P'yongyang might be
tempted to intervene.
Economic issues also could cut either way. One of the
most significant trends in East Asia in recent years
has been South Korea's rapid and generally sustained
economic growth. As the North Koreans fall further
and further behind their southern kin, they could
recognize a need to shift emphasis from military to
civil production. Conceivably they could then seek to
defuse tensions on the peninsula-at least as a tactical
measure for a few years-to permit them to focus on
economic development and keep the gap in living
standards between North and South from becoming
wider. The potential for mutually advantageous eco-
nomic exchanges between North and South has in-
creased somewhat over the past 10 years, despite the
widely divergent development paths in the two coun-
tries, strengthening the case for inter-Korean trade.'
Alternatively, we can envision the North's leadership
shifting to a more openly interventionist policy in an 25X1
effort to derail the South's rapid economic develop-
ment
And the outlook for the North-South military balance
over the longer term is clouded with uncertainty.
South Korea has increased its defense spending since
' See appendix C for a more detailed discussion of economic
performance in the two Koreas and the increased potential for
economic exchanges.
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
the mid-1970s and is making efforts to modernize its
armed forces-there have been major advances in the
South's fighter aircraft fleet. Under the most favor-
able circumstances Seoul might begin to narrow the
gap in other respects by the late 1980s. In view of the
faster growth of its economy, the South, if it continues
defense expenditures at the current rate, would be
outspending the North by a considerable amount at
the end of the decade. Such spending does not
automatically translate into a military advantage. The
South pays much more for both military manpower
and equipment. Moreover, if the North continues to
expand its troop formations and weapons inventories
at the present rate, its military lead will increase, not
diminish, over the next several years
Finally, shifts in the policies of the major powers
could have an important impact, as has so often been
the case throughout Korea's history. It is possible, for
example, that recent gestures by Moscow and Beijing
toward South Korea-the Soviet visitors to Seoul and
the Sino-South Korean hijacking negotiations in par-
ticular-could be the harbinger of a stabilizing trend.
The USSR's and China's concerns for their respective
equities in North Korea limit how far and how fast
they will go in developing contacts with Seoul, but
each seems to have concluded that South Korea is an
increasingly important middle power in the region.
This recognition might contribute to a reduction of
tension on the peninsula should P'yongyang become
convinced that Sino-Soviet support for strong action
against the South had waned even further.
At the same time, other-less comforting-scenarios
are plausible. Should the current Sino-Soviet talks be
accompanied by a serious deterioration in the USSR's
or China's relations with the United States at some
point in the 1980s, one or the other or both might feel
freer to aid North Korean causes. Both the Soviets
and the Chinese would have to weigh carefully the
risk of provoking a clash with the United States in
Korea and of prompting a major rearmament policy
in Japan. China in particular would be wary of setting
in motion actions that could result in expanded Soviet
influence in North Korea. The Soviet Union, on the
other hand, could conclude that heightened tension in
Korea would force Beijing to support P'yongyang and
thereby damage its relations with Japan and the
United States. In any event, intensified strains in US
relations with the Soviet Union and China could
embolden P'yongyang to adopt more aggressive initia-
tives, perhaps without explicit Chinese and Soviet
approval.
Scenarios for the Future
Thirty years after the Korean Armistice Agreement, a
wide range of possible futures can be envisioned for
the Korean Peninsula, some more improbable than
others but all with their roots in the past:
? Renewed war. Should the Chun government stum-
ble badly or the United States be diverted elsewhere
militarily, a new invasion is possible; such a scenario
is unlikely, however, as long as US forces remain on
the line and the US commitment remains credible.
? Renewed guerrilla warfare. A frustrated P'yong-
yang might see this option, perhaps reinforced with
terrorism, as its only means of derailing the South's
success-particularly in the economic and interna-
tional arenas. Although such tactics failed to unset-
tle the South in the late 1960s, foreign investment is
more important in South Korea now than it was and
Seoul is hosting many more international events.
? More of the same. The most likely scenario over the
next several years is continued drift toward a de
facto "two-Koreas" solution, with occasional violent
incidents and tension continuing at the present level
or perhaps slightly higher. P'yongyang has been
patient for a long time and can probably wait some
more for a better opportunity for decisive action.
This course has the advantage of generally avoiding
bloodshed, although it holds a considerable potential
for a renewed flareup of fighting as well.
? Reunification. This outcome-despite the continu-
ing series of proposals from both P'yongyang and
Seoul-is becoming an increasingly remote and
ephemeral goal. But movement, however slight,
toward a more amicable inter-Korean modus viven-
di may be possible. This alternative would perhaps
result in progress toward a "German model," in
which the two sides would recognize each other's
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
right to exist, communicate directly with one anoth-
er, and engage in various cultural and economic
exchanges; it would be difficult to achieve-because
it would require at least tacitly coordinated moves
by both Koreas and all the major powers.
In the past 30 years, new forms of Korean nationalism
have been fashioned in support of two separate re-
gimes. There are signs, nonetheless, that the historical
nationalism of the ethnic Koreans remains a strong
undercurrent on the peninsula. It is possible that this
force could be harnessed in the future to buttress
moves toward an inter-Korean political settlement. A
solution would require a consensus by the major
powers on the ideological coloration of such an ar-
rangement-something that seems as elusive today as
ever in the 30 uneasy years of "no war, no peace" on
the peninsula.
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
Appendix A
Diplomatic Rivalry
When the Armistice Agreement was signed in 1953,
both North and South Korea had diplomatic relation-
ships with a few friendly regimes. Seoul had ties with
five countries-the United States and its principal
allies, P'yongyang with 12 countries-China, the
Soviet Union, and other Communist states. Following
the coup in South Korea in 1961, Seoul steadily
expanded its official relationships as President Park
Chung Hee sought to elevate South Korea's interna-
tional standing and prestige. By 1970 South Korea
was recognized by 70 countries, as compared to the
North which had expanded its official relationships to
only 27.
foster relations with foreign countries. At last count
South Korea had established diplomatic relations with
116 countries, the North with 105.
The effort that the two governments expend in these
diplomatic sweepstakes is out of proportion to the
resources available to two middle-sized developing
countries. From time to time, Seoul has considered
refocusing its efforts to emphasize the quality of its
overseas ties rather than their number. Seoul, how-
ever, has never relinquished its lead, and no South
Korean leader is likely to willingly permit North
Korea to go ahead.
North Korea then launched a major effort to broaden
its diplomatic relations with the non-Communist
world. Between 1970 and 1975, the number of coun-
tries recognizing P'yongyang climbed to 89. The gains
occurred against a backdrop of emerging detente in
East-West relations that lent legitimacy to establish-
ing"relations with Communist countries. At the same
time, P'yongyang began to present a more reasonable
image to the world by entering into a dialogue with
South Korea and by reducing its support for subver-
sive movements abroad.
Dual Recognition
In broadening its diplomatic ties, P'yongyang compro-
mised its "one-Korea" principle and established rela-
tions with 67 countries-mainly in the Third World-
that had already recognized South Korea. In accept-
ing the concept of dual recognition, North Korea
weakened its claim to being the only legitimate
government in Korea. P'yongyang, however, vigorous-
ly continues to oppose any effort by its major allies,
China and the USSR, to develop political ties with
Seoul.
Today the competition between the two Koreas for
power, influence, and legitimacy continues to extend
well beyond the peninsula. Diplomats from North and
South Korea are involved in a worldwide rivalry to
International Organizations
Both Koreas have actively sought membership in
international organizations and their rivalry has fre-
quently marred the proceedings. In the UN General
Assembly, where both Koreas have observer status,
the Korean question was heatedly debated in the early
and mid-1970s. North Korea, with the help of its
backers, succeeded in 1975 in passing a resolution
calling for the dissolution of the UN Command and
the withdrawal of US troops from Korea. The impact
of the resolutions was greatly diminished, however,
when the General Assembly on the same day passed a
rival resolution supporting South Korea's call for
inter-Korean talks aimed at developing alternative
arrangements for maintaining the armistice.
In the fall of 1976 North Korea quietly ended its
efforts to raise the Korean issue at the UN General
Assembly. The slaying of two US officers by North
Korean guards at Panmunjom in August 1976 had
tarnished P'yongyang's image, and the North proba-
bly calculated that it could not improve on the voting
results at the 30th General Assembly in 1975. The
resolutions passed in 1975 are not binding on the
Security Council.
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
North Korea has had somewhat greater success in
mobilizing support in the Nonaligned Movement
(NAM). P'yongyang gained membership in the NAM
in 1975 and at the same time successfully undermined
Seoul's bid for membership. Since joining the move-
ment, P'yongyang has been able to have language
favorable to its position on the Korean issue regularly
inscribed in the formal documents issued at periodic
NAM summit meetings.
As long as US military forces remain in South Korea,
P'yongyang probably will be successful in denying
Seoul membership in the NAM by exploiting South
Korea's alleged dependence on "foreign troops." Even
so, South Korea, because of its substantial political
and economic ties with individual NAM member
states, has been able to influence NAM proceedings.
For example, at recent NAM summit meetings South
Korea, through its allies in the movement, has man-
aged to water down the language on the Korean issue
or, failing that, to have many NAM members enter
written reservations.
Hosting International Events
The rivalry between North and South Korea on the
diplomatic front recently moved into a new phase.
Both countries are now seeking opportunities to host
prestigious international events. North Korea has
helped its cause by transforming its formerly dreary
capital of P'yongyang into a genuinely attractive city
with many parks, impressive buildings and monu-
ments, wide avenues, and an opulent subway system.
Nevertheless, South Korea, with its deeper political
and economic ties with a larger number of countries, a
well-developed tourist industry, and a more open
society, is far ahead in this competition.
In October 1983 South Korea will host the annual
conference of the Inter-Parliamentary Union (IPU).
In 1986 the 10th Asian Games will be held in Seoul,
and in 1988 the 24th Summer Olympic Games. North
Korea in 1979 hosted a World Table Tennis Champi-
onship, and it has also organized several specialized
conferences of the NAM. P'yongyang is making a
determined bid to host the next NAM summit.
The intensity of the rivalry between the two Koreas
already is having an adverse impact on these interna-
tional gatherings. North Korea, having failed to deny
South Korea the opportunity to host the IPU confer-
ence in the autumn of 1983, is now trying to organize
a boycott. South Korea, by publicizing its concerns
about a possible North Korean terrorist operation to
scuttle the IPU conference, is not helping its own
image as conference host. The two Koreas, because of
their constant wrangling, are negating to an impor-
tant degree the legitimacy and good will they seek in
hosting these events.
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
Appendix B
Trends in the North-South
Military Balance
One of the most striking changes on the peninsula
over the past 30 years has been the growth of North
Korea's military machine. P'yongyang has essentially
reversed the military balance during this period and
now has a significant advantage in nearly every
measure of combat power. As figure B-1 shows, its
forces outnumber those of the South by nearly
200,000 men (nearly 800,000 in the North to some
600,000 in the South); it has both quantitative and
qualitative advantages in most types of weapons and
equipment
At the end of the Korean war, North Korea's armed
forces numbered some 300,000. These forces consist-
ed largely of conscripted replacements for the well-
equipped, Soviet-trained troops who had suffered
heavy casualties during the advances of US and South
Korean forces in the early months of the war. In the
immediate postwar period P'yongyang reconstituted
and reequipped its forces to assume the defense
responsibilities of the 200,000 Chinese troops who
remained in North Korea after the war. The Soviet
Union continued to supply economic and military aid
and to provide a security screen so that P'yongyang
could concentrate on reconstruction and economic
development.
South Korea's armed forces numbered 630,000 in
1953. Seoul's forces have actually contracted slightly
since then in terms of manpower; improvements made
since the war have been in equipment acquisitions and
training. Through the 1950s and 1960s, upgrading
took place gradually with US aid, while the United
States maintained a military presence that deterred
any military ambitions of the then weaker North
Korean forces. By 1970 it was generally acknowl-
edged that an inter-Korean force parity existed on the
peninsula. Although the North had a substantial edge
in number of combat aircraft, the South was at least
equal in the capability of its ground forces and had a
larger potential for mobilization of reserves.
The South has made significant gains in the past 13
years in the firepower of its ground forces and has
offset the North's numerical lead in combat aircraft
Figure B-1
North Korea-South Korea:
Armed Forces Personnel Strength, 1953-83
300 1953 55 60 65 70 75 80 83
North Korea
-South Korea
by acquiring better quality aircraft and weapons
systems. But P'yongyang's massive force expansion
and modernization have far surpassed Seoul's efforts,
resulting in a shift in the military balance in favor of
the North (see figure B-2)
The North's expansion program was supported by
direct transfers of Soviet and Chinese equipment
during the late 1960s and early 1970s. North Korea
received large numbers of armored vehicles, aircraft,
and surface-to-air missiles, as well as technical aid for
the expansion of its own arms production base. Do-
mestic production increased at a rapid rate in the
early 1970s, and the North now meets most of its own
military production requirements for ground forces
and naval equipment, with continuing technical aid
from its allies)
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Figure B-2
North Korea-South Korea:
Weapons Inventories, 1970-83
Artillery and Multiple
Rocket Launchers
I I I I I I I I I I I I I
1970 75 80 83 1970 75 80 83
North Korea
South Korea
11111111111111
The Ground Forces
North Korea has taken the lead in numbers of
personnel and maneuver units, as well as in firepower
and mobility. New maneuver units have been formed
and both new and existing units have grown larger,
conscription has increased, and personnel have been
kept in the services longer. At the same time, unit
firepower has been improved with more and better
weapons. In 1970 a typical South Korean infantry
division held an advantage in firepower, but by 1980
the North Korean division held the edge, in spite of
steady improvements made by the South
There has been a similar shift in unit mobility and
armor protection. In 1970 the North was not known to
have armored personnel carriers (APCs) in infantry
divisions. By 1980 it had three divisions mechanized
with 300 APCs and 100 tanks each. The North is
continuing to equip divisions with domestically pro-
duced tanks and APCs and now appears to be reorga-
nizing its mechanized units to form mixed APC and
truck-mobile divisions, perhaps better suited to the
Korean terrain. Although the final organization of
these units cannot yet be determined, at least seven
infantry divisions show evidence of this new mobile,
firepower-heavy configuration. South Korea has only
one mechanized infantry division and is forming a
second using wheeled APCs.
The North also holds a marked advantage in tanks. It
maintains a 2.4 to 1 advantage in the total number of
medium tanks, and model for model its tanks are
rated more effective and more heavily armed than
most of the South's. North Korea's tanks are orga-
nized into large units. The North has two armor
divisions, and eight or nine armor brigades and
regiments. The South has three armor brigades.
The North's lead in artillery has also increased.
Although both sides have added to their artillery
inventories, the North's has grown at a much faster
pace, more than doubling since 1970. North Korea
now has the fourth-largest artillery force in the world,
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
with 2.3 times as many weapons as the South. Al-
though the South's US-designed weapons are slightly
more accurate, they are at a critical disadvantage in
range. The North has over 1,600 weapons that can
fire at ranges in excess of 18,000 meters, the South
only 42.
The Air Forces
The North Korean Air Force has grown throughout
the decade; the number of jet combat aircraft has
increased from 570 in 1970 to some 760 today. Gains
in recent years, however, have been in models older
and less capable than the aircraft the United States
has provided South Korea. The South's quality fight-
ers make its Air Force more than a match for the
North Koreans in air combat, but the force still
appears too small to provide air defense against the
North's numerically superior force and at the same
time supply close air support for the ground forces
called for in current defense planning. Moreover, the
North continues to get new F-7 (MIG-21) fighters
from China and MI-2 helicopters from Poland.
The Naval Forces
North Korea's Navy has tripled in size since 1970,
outnumbering the South by about 4 to 1 in total
combatants. It has progressed from a force devoted
almost exclusively to coastal defense to one that can
carry out antishipping, amphibious raiding, and min-
ing operations in South Korean waters, albeit on a
limited scale. North Korea is expanding the produc-
tion of naval combatants at the expense of civilian
shipbuilding. The South Korean Navy, by contrast,
has grown little. Its antiship missiles are better than
those of the North, but it has fewer missile attack
boats, no operational submarines, and a limited num-
ber of minesweepers. Many of its major combatants
were built in World War II and are increasingly
difficult to maintain; many of the North's were built
in the last 12 years.
Both sides have expanded their reserves and militia
forces over the past decade. The North is believed to
have reorganized and augmented its reserves and
militia beginning in the late 1970s to achieve a
current strength of over 4 million. The South has
twice the population and thus a greater potential for
mobilization, but it has only 3.8 million trained
reserves and militia.
Defense Industries
The North's force buildup has been accompanied and
promoted by the rapid growth of its defense industry
since 1970. In the early part of the 1970s, both China
and the Soviet Union aided the buildup by providing
military equipment and technical assistance. Notable 25X1
among the several projects involving technical aid
are
the tank plant built with Soviet assistance 25X1
=and the submarine production yard constructed 25X1
with Chinese help. In recent years, our estimate of the
North's military production technology has been
raised. It now seems likely that for several years the
North has been making wire-guided antitank missiles,
heat-seeking antiaircraft missiles, and fire control
radars for antiaircraft guns. Thus, the North can
produce almost all of its ground forces and naval 25X1
weapons, ammunition, and equipment, and remains
dependent on outside sources only for aircraft, sophis-
ticated electronics, and perhaps some missiles.
South Korea began forming its defense industries
from almost nothing in the 1970s and expanded them
rapidly. It now produces a wide variety of small arms,
infantry heavy weapons, and artillery. An indigenous
tank is in development, and F-SE fighters and Hughes
500MD helicopters are being coproduced with US
assistance. Although the defense industries are devel-
oping further to produce more sophisticated equip-
ment, including some indigenous designs, they are not
developing at a rate necessary to overtake the North's
defense industry. South Korean plants are operating
well below capacity-the South's forces are not grow-
ing beyond the current 600,000-man ceiling, and
requirements for many basic weapons have been met.
The Buildup in Perspective
During the early years of the buildup, P'yongyang
completed a program begun in the mid-1960s to
fortify the North's rear areas and industrial base
against air attack. The program consisted of the
construction of hardened and underground facilities
for key military units and industrial establishments
and the deployment of large numbers of SA-2 sur-
face-to-air missile systems imported from the Soviet
Union. In 1972 Kim II-song announced that the
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
"Fortress Korea" program was complete. Since then,
improvements in the North's air defense have pro-
ceeded at a slower pace and the bulk of militar
production has gone into offensive systems.
There appears to be little question now that the North
has developed its forces to maintain the military
option for reunifying the peninsula. Although P'yong-
yang invested in both defensive and offensive systems
throughout the 1960s, there is very little about the
more recent force buildup that suggests it has been for
defense against an attack from the South.
The forces expansion generally dates back to the
1969-70 period, not a time when P'yongyang had
reason to expect an increasing threat from the South,
but a time when antiwar sentiment in the United
States was peaking and the US administration was
implementing a Vietnamization program that would
eventually disengage US troops from ground combat
in Asia. In 1971 one of the two US infantry divisions
in South Korea was withdrawn. P'yongyang could
also see how Chinese and Soviet support for North
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
Vietnam helped limit US military options in South-
east Asia and probably would judge that the United
States would be at least as constrained in any confron-
have been formed and equipped with amphibious
vehicles and ribbon-bridging equipment that enhances
the speed of offensive operations but is of marginal
tation with North Korea.
The size of the force Pyongyang has built is in excess
of defensive needs, and its composition and equipment
are generally offensive in orientation. In the ground
forces, the emphasis has been on rapid mobility and
firepower. Tanks, APCs, and trucks have been sup-
plied to maneuver units in increasing numbers. Artil-
lery and antiaircraft systems are being. mounted on
tracked vehicles. Large engineer river-crossing units
value in defense.
Over 100,000 of the North's ground troops are in elite
ranger/commando units-troops organized and
trained for offensive operations in the rear areas of
South Korea. Some of these units specialize in air-
borne and amphibious raids and exercise regularly
using the Air Force's 265 AN-2 transports and the
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
Navy's fleet of 100 fast landing craft. The rest train in
overland infiltration into the South. Their primary
wartime missions are the destruction of the South's
air defense systems, air forces, and command and
control centers and the harassment and interdiction of
US and South Korean supply lines.
Compared with the elaborate system of antivehicle
barriers and fortifications South Korea has built
between the DMZ and Seoul, North Korea has
invested little in defense against an attack on the
ground. There are antitank barriers along the DMZ
but no series of fortified belts for an in-depth defense
similar to those of the South. North Korea's extensive
fortification and hardening efforts have concentrated
on protecting its military forces and industrial base
from air attack-the kind of attack it could expect the
United States to carry out on its rear areas in a
conflict initiated by either side. The artillery of most
of South Korea's online units is deployed to the rear of
the infantry it will support in the defense, but the
North's artillery is set up in hardened sites close to the
DMZ, providing maximum range for supporting an
attack force into the South, but rendering the artillery
less useful in defense because it could be bypassed and
enveloped in a relatively shallow penetration by forces
from the South.
Trends in the 1980s
If current trends in military improvement in the
North and South continue, the North will not only
keep its current advantage but further widen its lead
over the South in the next several years. P'yongyang is
making steady gains in personnel strength, although
this growth is more gradual than that seen during the
first half of the 1970s. The South, on the other hand,
plans no significant increases in military personnel. *In
most ground forces weapons (particularly in artillery,
tanks, and APCs) and in naval combatants, the
South's planned acquisitions will not keep pace with
those in the North.
The outlook is a bit brighter for the air balance. If
current trends in aircraft procurement continue, the
South will increase its lead in quality fighters and
could reduce the North's numerical advantage. Seoul
has agreed to purchase a squadron of F-16s after 1986
and is now coproducing F-5E fighters. The Chinese
will probably continue fighter deliveries to the North,
possibly enough for P'yongyang to maintain its nu-
merical advantage. Only the Soviet Union can provide
supplied the North with fighters since 1973.
the more advanced aircraft that could reduce the
South's qualitative edge, but the Soviets have not
South Korea could begin to reduce the North's lead in
some other respects by the late 1980s, but this longer
term outlook is probably contingent on continuing
serious economic problems in the North and contin-
ued high growth rates in the South. For example,
Seoul is expected to continue to devote approximately
6 percent of its GNP to defense in the 1980s, but the
absolute level of defense spending will depend on its
economic performance. This growth in South Korean
defense spending has varied widely in recent years:
Percentage change
in constant prices
1979
-0.3
1980
17.9
1981
-0.3
1982
9.7
1983
1.7 (projected)
(S NF)
Despite the North Korean buildup, the reaffirmation
of the US commitment to the South's defense in recent
years appears to have reduced the urgency of planned
improvements in the South Korean military. The
somewhat slower economic growth rates projected for
the 1980s have also increased pressures on the Chun
government to concentrate more spending on economic
development, while relying on the US tie to deter an at-
tack by the North. Future defense budgets may still
account for 6 percent of GNP but could begin to
contain items only partly defense related, such as
construction of roads and bridges in areas near the
DMZ
North Korea has probably spent at least 20 percent of
its GNP on the military since the mid- 1970s. Improve-
ments have been concentrated more in firepower,
25X1
25X1.
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
mobility, and the quality of equipment than in the
formation of additional maneuver units. This growth
has been based on a steady expansion of the North's ar-
maments industries since the mid-1960s, and we
expect that, at a minimum, the current rate of force
modernization will continue. But there are indications
that the armaments industries are being expanded
further, suggesting the military could be supplied with
new equipment at a faster rate in the mid-to-late
1980s.'
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Appendix C
The Economic Race
The partition of Korea at the 38th parallel in 1945
left the, North in control of more than half of the
peninsula's territory, two-thirds of the heavy industri-
al base, and most of Korea's mineral resources and
hydroelectric power potential. The South was left with
nearly two-thirds of the population, but less than half
of the agricultural resources (see table). The Korean
war wiped out the North's early lead in economic
development; important factories and power plants
were reduced to rubble, industrial sectors lost from 60
to 90 percent of capacity, and the agricultural sector
was seriously damaged. The rich resource base and
large amounts of aid from the USSR, China, and East
European countries, however, contributed to a rapid
recovery. Prewar levels of output were surpassed by
the late 1950s, and in the early 1960s P'yongyang was
setting its sights on the full industrialization of its
economy.
In the South, the war destroyed about half of the
industrial facilities. No economic sector escaped; the
value of net commodity output in 1953 was more than
25 percent lower than in 1940. The value of output in
the agricultural sector was nearly 20 percent below
the 1940 level. Population, however, was nearly
30 percent higher than in 1940 and nearly 20 percent
higher than at partition, largely because of repatria-
tion and refugees.
The South also received large amounts of aid-more
than 90 percent from the United States-to rebuild
its economy. Major portions of the infrastructure and
important industrial plants were reconstructed within
five years. Between the end of the war in 1953 and
1961, GNP in the South increased about 4 percent
annually. Per capita economic growth was sluggish-
averaging less than 2 percent a year-and by 1960
South Korea still had one of the world's lowest levels
of per capita income-less than $100. Recurrent
rapid inflation and severe trade deficits were constant
drags on the economy during the 1950s. The govern-
ment's economic decision making authority was weak
and outbreaks of political instability increased the
difficulty of tackling economic problems.
North and South Korea:
The Distribution of Population,
Land, and Industrial Assets in 1945
Population
34
66
Land
52
48
Arable land
52
48
Paddy
30
70
Dry field
67
33
Industrial assets
Coal mining
59
41
Metal mining
78
22
Iron mining
96
4
Machine tool fabrication
16
84
Light metal and pottery
89
11
Construction
19
81
Chemicals
90
10
Electricity and transportation
78
22
34
66
19
81
25X1
25X1
The Takeoff in the South 25X1
Park Chung Hee's overthrow of the Chang Myon
regime in May 1961 marks the beginning of the
"race" between the North and the South for rapid
industrial development. By 1963 Park had construct-
ed a new policy framework modeled on Japanese lines
that stressed export-led development. This economic
policy remained virtually unchanged until the early
1970s and vaulted South Korea to one of the Third
World's fastest growing economies. Between the early
1960s and the early 1970s, GNP increased nearly 10
percent annually, and per capita GNP increased
nearly 8 percent per year.
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
Although P'yongyang entered the race with a sub-
stantial lead, growth in the North slowed in the early
1960s. The slowdown was caused in part by the
curtailment of Soviet economic assistance that result-
ed from P'yongyang's support for China in the initial
phase of the Sino-Soviet split. The 1961-67 economic
plan was first adjusted and later extended to 1970,
when it was declared "substantially" fulfilled. The
decision to divert additional resources and manpower
to the military, perhaps partly occasioned by the
visible success achieved by the South, also slowed the
pace of industrialization in the last half of the 1960s.
Nonetheless, North Korea's real GNP increased by
about 7 percent annually during the 1960s and per
capita GNP rose more than 4 percent annually. A
comparison of economic performance in North and
South Korea is presented in figure C-1
Both governments entered the 1970s with ambitious
programs. Seoul continued to press for industrializa-
tion and export growth and also began programs to
redress an urban-rural imbalance by improving farm
productivity, rural services, and village living stand-
ards. P'yongyang focused on modernizing its fac-
tories, replacing antiquated Soviet and Japanese ma-
chinery with Western equipment and advanced
technology.
The need to obtain more advanced technology and
other goods led the North to open up its economy to
the developed West, moving the competition with the
South into the international arena. By 1975, the share
of the North's trade accounted for by non-Communist
countries had risen to nearly 45 percent, as compared
with about 18 percent in 1970 and only 13 percent in
1965
Default in the North
Large imports of plants and machinery obtained on
credit and increased amounts of economic assistance
from the USSR and China initially propelled the
North to the rapid growth rates the leadership sought.
P'yongyang, however, failed to obtain corresponding
increases in hard currency exports, and the Foreign
Trade Bank bungled its handling of payments prob-
lems in 1974-76. When North Korea defaulted on
debt payments to Western creditors and again on a
rescheduling agreement, trading partners slashed
their exports. A quick contraction in the level of trade
was a primary cause of a sharp recession in the mid-
1970s.
The South, in contrast, successfully juggled its trade
problems in the early 1970s. Seoul has been quick to
adjust to changes in world economic conditions by
shifting the direction and composition of exports.
Management of the 1973 oil shock was particularly
adept:
Gambling that the industrial West would adjust
quickly to higher oil prices, the South Koreans
borrowed heavily to expand industrial capacity that
would allow them to capture greater market shares
when demand in the West picked up.
Seoul also moved rapidly to expand exports of goods
and construction services to the dollar-rich oil coun-
tries in the Middle East.
By sustaining rapid growth though the first half of the
1970s, South Korea by 1976 finally matched the
North in terms of per capita GNP. The gap in per
capita GNP and in other measures of development
and performance has increased in Seoul's favor ever
since.
The North has been singularly unsuccessful in its
efforts to resume faster growth. An ambitious 1978-
84 plan is largely unfulfilled, and we estimate that
GNP has increased by less than 3 percent annually
since 1978. In the early 1980s, the North superim-
posed on other plans a priority program for greatly
expanding its agricultural, transportation, and electric
power sectors. Project completion dates range from
the mid-1980s to the late 1980s. This strategy appears
to us to have a greater chance of success than a nuts
and bolts expansion of industrial capacity because it is
much less dependent on acquiring expensive capital
imports that the North can ill afford
The South, too, had increasing difficulties in the late
1970s. Economic growth slowed and inflation rates
rose along with unemployment when oil price in-
creases and higher wage costs eroded export competi-
tiveness. Overcapacity in some industrial sectors, such
Approved For Release 2008/08/05: CIA-RDP84S00553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
Figure C-1
North Korea-South Korea:
Comparative Economic Indicators a
GNPb
Billion 1975 US $
Per Capita GNPb
1975 US $
Grain Productionc
Million metric tons
Industrial Productiond Electric Power
Index: 1975=100 Billion Kilowatt hours
Cement
Million metric tons
1955 60 65 70 75 80
^ North Korea
^ South Korea
Exports, f.o.b.
Million US $
~~1 r_1 II 1 1
1955 60 65 70 75 80
a South Korean data are for 1956 throughout
because no comparable data were available for 1955.
bNorth Korean estimates are rough and have a
larger range of error than South Korean estimates.
1955 60 65 70 75 80
cNorth Korean claims inflated by the inclusion
of rice before husking and potatoes at full weight.
d North Korean index is the gross value of
industrial output.
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
as the automotive and petrochemical industries, was
exposed by the downturn in business conditions. Man-
agement of the economy also received less attention
during the period between the assassination of Presi-
dent Park in October 1979 and Chun Doo Hwan's
consolidation of power in late 1980.
Chun now appears to have the economy back on a fast
track. Economic growth, however, is unlikely to equal
past records. Planners are seeking expansion to about
7 to 8 percent per year, a sustainable rate that takes
account of the economy's greater size and complexity.
The Burden of Defense Spending
The most significant economic benefit of any progress
toward reduced tension on the peninsula lies in the
prospect of gradually easing the expensive burden of
maintaining well-equipped, large standing armies at a
high state of readiness. Although precise calculations
cannot be made for the North, we judge that the
absolute level of P'yongyang's military spending in
1982 was only slightly less than the $4.4 billion spent
by Seoul. A reduction of the current level of military
spending by 25 percent, thus, would release over
$1 billion worth of resources annually in each country
for other uses.
In purely economic terms, the North probably has a
greater need for relief from the current arms race. In
recent years, we believe P'yongyang has allocated at
least 20 percent of its GNP to the military in an effort
to sustain its quantitative and certain qualitative
advantages over the South. With consumption already
pared to a minimum, maintaining this high level of
military spending has pinched back investment in the
civilian sector, even in cherished heavy industry, and
has contributed to slow, halting economic growth._
Seoul has responded to the North's military buildup
by raising its spending on defense from 4 to 5 percent
of GNP in the late 1960s to 6 to 7 percent since the
mid-1970s. Still, the South remains well behind the
North in most aspects of force comparison. The South
has an advantage in its larger, faster growing econo-
my, but its military-industrial production and technol-
ogy have lagged behind the North's. Seoul's efforts to
establish a domestic arms industry over the past few
years have encountered severe problems and a number
The outlook for most of this decade, moreover, is
probably for the North-South imbalance to become
worse rather than to improve. Over the longer term
this could change. In strictly financial terms, for
example, if Seoul should decide to maintain the
military's share of GNP at around 6 percent for the
remainder of the 1980s, P'yongyang would have to
increase its spending significantly-perhaps to as
much as 30 percent of GNP-in order to match the
South's expenditures
Seoul's economic planners would welcome any genu-
ine opportunity to curb spending on defense. Although
the South's military burden is much smaller propor-
tionally than the North's, it is not without weight for
policymakers. Military expenditure accounted for 34
percent of the national budget in 1982. Rather than
subsidize expansion in defense industries where capi-
tal requirements per worker are high, the South may
well prefer to concentrate as much additional spend-
ing as possible in employment-generating sectors. The
labor supply will grow rapidly over the next few years,
at nearly 3 percent annually, and providing new jobs
will be an important ingredient in maintaining politi-
cal stability. Seoul also must raise the level of public
spending on social services for expanding urban areas
and on development projects, such as highways, to
prevent bottlenecks from choking off economic
growth.
With its large foreign debt the South Korean Govern-
ment is anticipating that a greater share of private
investment must come from domestic savings because
foreign sources of financing may become less gener-
ous than in the past. The need of additional funding
for government-sponsored projects can be met only
partly by assistance from the World Bank and other
international lending agents. Raising taxes to cover
continuing large outlays on the military and necessary
social programs risks cutbacks in saving/investment
rates. Still, running too large a budget deficit risks
rekindling rapid inflation and losing export competi-
tiveness. A misstep in either direction would slow
economic growth and require harsh austerity meas-
ures.
North-South reductions in military spending are like-
ly to be'especially difficult to achieve in view of the
longstanding distrust between the two sides. Such
of firms have recorded significant losses.
25X1
25X1
25X1
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
Figure C-2
Compatible and Noncompatible Trade Patterns
Compatible
Country A's exports
Percentage value of country A's exports
compared with country B's imports of
the same commodity.
Perfect compatibility.
Percentage value of country B's imports
compared with country A's exports of
the same commodity.
40
Country B's imports
reductions would probably come well after initial
steps were taken toward an accommodation. In the
interim, phased economic cooperation between North
and South Korea offers some attractive prospects-in
purely economic terms-should the two governments
acquire the political will and room to maneuver
The Potential for Economic Exchange
An investigation of the potential for inter-Korean
economic exchange in the early 1970s studied in
detail nearly 200 items that accounted for more than
90 percent of North Korea's and South Korea's
tradepResearch findings included:
? Only 15 items were obvious candidates for mutual
exchange and the potential value of such trade was
small-unlikely to exceed $25 million- each way.
? Moreover, economic development patterns and
plans of the North and South pointed toward a
reduced potential for such exchange in the future.
The explosion in diversity of exports and imports over 25X1
the past decade, especially in the South, suggest this
picture may be changing. To determine the potential
for exchange in the 1980s and early 1990s, we
recently examined the structure of trade in both
countries to detect evidence of emerging compatibility
or divergence. In figure C-2, point X indicates the
commodities accounting for 60 percent of the value of 25X1
country A's exports comprise 40 percent of the value
of country B's imports. Point Y indicates that com-
modities accounting for 70 percent of country B's 25X1
imports comprise only 10 percent of the value of
country A's exports.
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Figure C-3
Korean Trade Patterns: South, Korean Exports
Compared With North Korean Imports
Figure C-4
Korean Trade Patterns: North Korean Exports
Compared With South Korean Imports
25 50 75
North Korean imports, percent
Results for the Koreas
Trading patterns for North and South Korea compar-
ing 1970 and 1980 are presented in figures C-3 and
C-4. These graphs plot the principal commodity
groups representing 90 percent or more of value of
exports and imports by each country.' These graphs
vividly illustrate the noncompatibility of trading pat-
terns in 1970, consistent with the previous research
finding. The projection of continued and even widen-
ing divergence made by the early 1970s study, how-
ever, is not confirmed. Figure C-3, in fact, indicates a
trend toward North-South compatibility resulting
from (1) South Korea's growing capability to produce
' Values were constructed from official South Korean data and
from North Korean trade partner reporting to the UN. Only trade
with non-Communist countries was considered. Seoul's trade with
Communist countries has been small, while P'yongyang's was large
but declining as a share over the decade of the 1970s. The main
purpose of excluding Communist trade was to prevent the exchange
on bilateral terms of consumables otherwise difficult to market
from clouding the pattern of trade. Moreover, goods that are
equally marketable in the West would be difficult to redirect in
quantity because of long-term agreements with Communist trade
25 50 75
South Korean imports, percent
and export a widened range of machinery and trans-
portation equipment, and (2) increasing North Korean
demand for machinery and transportation equipment
to modernize its industry.
The structure of North K4ea's exports, on the other
hand, has shifted away from compatibility with the
South-as indicated in figure C-4. This appears to be
the result of Seoul's policy of import substitution,
which has provided it with a heavy industry base,
particularly impressive in the case of steel. The
increased requirements of the South's rapidly growing
processing sector for such commodities as nonferrous
metals and yarn and fabric for textile manufacturing
are responsible for the slight indication of greater
compatibility seen on the 1980 import side of figure
C-4J
We believe that the potential for trade will continue to
be mixed. The North's demand for technology, ma-
chinery, and transportation equipment will continue
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
to rank high on its priority import list, and the South
will become increasingly capable of producing the
range and type of equipment most sought by P'yong-
yang. As the North's industry develops in coming
years, its exports will also diversify to some extent and
become less concentrated in crude material and semi-
processed manufacturing sectors. The latter products,
however, will continue to have the most potential for
complementing the South's industrial development.
If the North's export structure is to move toward
compatibility-a necessity for balanced bilateral
trade to flourish-the most promising sector for de-
velopment is agriculture. Rising incomes in the South
have substantially increased the import of quality
food products. The North's current program to in-
crease its arable land, in particular the area devoted
to paddy, could result in a sizable increase in its grain
crop and a commensurate increase in exports of grain
and livestock products. The dependence of trade
compatibility on agricultural exports by the North to
the South is perhaps the most ironic outcome of 30
years of separate economic development since the
armistice.
Joint Projects
Beyond trade, prospects for cooperation include joint
exploitation of shared resources. Development of the
rich fisheries off the east coast could provide a test
case for examining the possibility of setting up joint-
stock companies. Offshore oil exploration and devel-
opment also would be mutually beneficial because
both Koreas depend on crude oil imports. These types
of projects, besides offering potential economic bene-
fits, might be attractive for two other reasons. First,
neither government would have to implicitly admit to
some systemic failure by inviting the participation of
the other. Second, the projects may appeal to Korean
nationalism by obviating the need for foreign assist-
ance. Joint ventures in mining and manufacturing are
possible third-stage projects.
The appeal of North-South economic cooperation is
not likely to be strong enough by itself to prompt
movement toward an inter-Korean accommodation,
but it could significantly reinforce such a trend should
it develop for other reasons.
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
 Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4
Secret
Secret
Approved For Release 2008/08/05: CIA-RDP84SO0553R000300010002-4