Thursday, December 20, 2012

SKorean president-elect vows deeper NKorea engagement, but Pyongyang may be wary

Park Geun-hye promises to reach out to North Korea with more humanitarian aid and deeper engagement after she moves into South Korea's presidential Blue House on Feb. 25. Pyongyang, however, may be in no mood to talk anytime soon.

Park's declarations ahead of Wednesday's election that she will soften five years of hard-line policy rang true with voters, even as they rejected her opponent's calls for a more aggressive pursuit of reconciliation with the North.

A skeptical North Korea may quickly test the sincerity of Park's offer to engage — possibly even before she takes office. She is both a leading member of the conservative ruling party and the daughter of the late anti-communist dictator Park Chung-hee, and Pyongyang has repeatedly called her dialogue offers "tricks."
Outgoing President Lee Myung-bak's tough approach on North Korea — including his demand that engagement be accompanied by nuclear disarmament progress — has been deemed a failure by many South Koreans. During his five years in office, North Korea has conducted nuclear and rocket tests — including a rocket launch last week — and it was blamed for two incidents that left 50 South Koreans dead in 2010.

But reaching out to North Korea's authoritarian government also has failed to pay off. Before Lee, landmark summits under a decade of liberal governments resulted in lofty statements and photo ops in Pyongyang between then-leader Kim Jong Il and South Korean presidents, but the North continued to develop its nuclear weapons, which it sees as necessary defense and leverage against Washington and Seoul.

Analysts said Park's vague promises of aid and engagement are not likely to be enough to push Pyongyang to give up its nuclear weapons ambitions, which Washington and Seoul have demanded for true reconciliation to begin. To reverse the antipathy North Korea has so far shown her, Park may need to go further than either her deeply conservative supporters and political allies or a cautious Obama administration will want.

"North Korea is good at applying pressure during South Korean transitions" after presidential elections, said Yoo Ho-yeol, a professor at Korea University in South Korea. "North Korea will do something to try to test, and tame, Park."

Even the last liberal president, Roh Moo-hyun, a champion of no-strings-attached aid to Pyongyang, faced a North Korean short-range missile launch on the eve of his 2003 inauguration.

North Korea put its first satellite into space with last week's rocket launch, which the U.N. and others called a cover for a test of banned ballistic missile technology.

Despite the launch, Park says humanitarian aid, including food, medicine and daily goods meant for infants, the sick and other vulnerable people, will flow. She says none of the aid will be anything that North Korea's military could use. She's open to conditional talks with North Korean leader Kim Jong Un.

The aid won't be as much as North Korea will want, to be sure, and it won't be as much as her liberal challenger in Wednesday's election, Moon Jae-in, would have sent. Park's conditions on aid and talks also could doom talks before they begin.

Pursuing engagement with North Korea "really would have to be her top priority for her to be a game-changing kind of leader on the issue," said John Delury, an analyst at Seoul's Yonsei University. He added that Park is more likely to take a passive, moderate approach.

"In the inter-Korean context, there's not a big difference between a passive approach and a hostile approach," Delury said, "because if you don't take the initiative with North Korea, they'll take the initiative" in the form of provocations meant to raise their profile.

North Korea was not a particularly pressing issue for South Korean voters, who were more worried about their economic futures and a host of social issues. But it is of deep interest to Washington, Beijing and Tokyo, which had been holding off on pursuing their North Korea policies until South Korean voters chose their new leader.

The next Japanese prime minister, Shinzo Abe, is a hawk on North Korea matters who has supported tighter sanctions because of the rocket launch.

The U.S. had attempted to warm relations with North Korea with an aid-for-nuclear-freeze deal reached with Pyongyang in February, but that collapsed in April when the North conducted a failed rocket launch.
Washington could use a new thaw on the Korean Peninsula as a cover to pursue more nuclear disarmament talks, analysts say, but the Obama administration will also likely want a carefully coordinated approach with Seoul toward Pyongyang.

Park's North Korea policy aims to hold talks meant to build trust and resolve key issues, like the nuclear problem and other security challenges. Humanitarian assistance to the North won't be tied to ongoing political circumstances, though her camp hasn't settled details, including the amount.

Park also plans to restart joint economic initiatives that were put on hold during the Lee administration as progress occurs on the nuclear issue and after reviewing the projects with lawmakers.

Park's statement that she's willing to talk with Kim Jong Un "practically means she's willing to give more money to North Korea," which is Pyongyang's typical demand for dialogue, said Andrei Lankov, a scholar on the North at Seoul's Kookmin University.

But the heart of the matter — North Korea's nuclear program — might be off limits, no matter how deeply the next Blue House decides to engage.

"North Korea isn't going to surrender its nukes. They're going to keep them indefinitely," Lankov said. "No amount of bribing or blackmail or begging is going to change it. They are a de facto nuclear power, period, and they are going to stay that way."

Thursday, December 6, 2012

Gillard still welded to surplus promise

Prime Minister Julia Gillard remains determined to deliver a budget surplus in the 2013 election year, despite ongoing signs of a sluggish economy.

The federal government believes the economic fundamentals remain strong, but admits there's downward pressure on corporate tax receipts due to weaker commodity prices and a high Australian dollar.

"Our last economic update had us at trend growth and that's why the last economic update had us with a surplus," Ms Gillard told ABC radio on Friday.

"We are still determined to deliver the surplus."

But shadow treasurer Joe Hockey said figures this week showing the economy expanded by just 0.5 per cent in the September quarter - for a sub-trend annual growth 3.1 per cent - undermines the prime minister's surplus commitment.

"Ever since the mid-year budget update the prime minister and the treasurer have been crab-walking away from their 2012/13 surplus promise," he said in a statement.

"Time and again they have refused to repeat their guarantee to deliver a surplus this financial year."

Opposition Leader Tony Abbott believes the government is building up to dump the projected $1 billion surplus.

"Yet another broken promise from a government which is just incompetent and untrustworthy to its core," he told reporters in Toowoon Bay, NSW.

However, the Australian Greens would welcome the government dropping the surplus and leaving the budget in deficit.

"You would be hard pressed to find an economist that says a surplus is a good idea," Greens senator Larissa Waters told reporters in Canberra.

"A surplus delivered off the back of single parents, off the back of an underfunded NDIS that won't start for years, that's not a surplus that benefits Australians."

The latest international trade figures for October released on Friday reflect the challenges facing the economy.

Australia's trade position deteriorated as lower commodity prices, particularly for coal products, and a high Australian dollar constrained export earnings.

The goods and services balance widened to a $2.09 billion deficit in October, from a downwardly revised $1.42 billion shortfall in September, marking the biggest seasonally adjusted trade gap since March 2008 when the global financial crisis hit.

The value of imports rose three per cent, but exports were flat and fell 9.5 per cent over the year, creating ramifications for the nation's terms on trade.

RBC Capital Markets strategist Michael Turner said the national accounts report released on Wednesday showed income measures were uniformly weak in the September quarter as a result of the four per cent fall in the terms of trade - which was almost 14 per cent lower over the past year.

"The early data for (the December quarter) suggest more of the same ahead, as activity shifts to a sub-trend pace," he wrote in a client note.

Capital imports rose by 13 per cent in October as business took advantage of the continuing strength of the dollar, while the currency dampened export revenue.

The Reserve Bank of Australia cut the cash rate again this week in anticipation of these dynamics.
"We think the adjustment process throughout the economy will require a lower cash rate still," Mr Turner said.