The Chaebol Returns To The Presidency 1967 [EN]: Chapter 106

106. Paju Industrial Complex, Not Gaeseong!

Kennedy, who had been observing the discussion, shared his thoughts with his staff.

When the decision-maker reveals their intentions upfront, it diminishes the purpose of open discussion.

“We can’t expect the U.S. military to handle everything indefinitely. It’s time to bolster South Korea’s economic strength and international standing, and for them to shoulder a security burden that reflects that.”

The Secretary of Defense added,

“I agree with the President. South Korea is a dependable ally. We need to work together with them to keep China, the Soviet Union, and North Korea in check in Northeast Asia. This is the ideal moment to elevate South Korea’s strategic importance.”

The Commander of the Asia-Pacific Command then voiced his concern.

“Does this mean Japan is being sidelined?”

“That’s the direction it’s heading. Can Japan match South Korea’s defense spending?”

“…….”

Weapon purchasing power reflected national strength.

This year, South Korea’s exports were projected to significantly surpass Japan’s.

The payment plan for U.S. weapons purchases was structured in installments tied to the average crude oil price.

With crude oil prices expected to rise for at least the next four years, this arrangement was highly advantageous for South Korea. It was crucial to acquire as many weapons, raw materials, and other physical goods as possible during this period.

This opened the door for South Korea to establish a light aircraft carrier fleet and acquire nuclear submarines.

*

Presidential Office.

I was in a meeting with President Jeong, who was managing the National Wealth Fund and had recently acquired a defense company.

“President Jeong, this is a prime opportunity for the Korean defense industry to truly take off.”

“You’re significantly expanding the naval and air forces. Expectations are high. However, I understand that we still lack the capability to build fighter jets, light aircraft carriers, and submarines.”

“That’s why we’ll be acquiring existing diesel submarines from Germany and existing light aircraft carriers and F-4 fighter jets from the United States. All new weapons purchases will include technology transfer agreements. Conventional submarines will be manufactured at Hyunse Shipyard, and fighter jets will be handled by Hyunse Aerospace.”

“Ah, so that’s why you advised me to concentrate solely on aerospace and shipbuilding, and to avoid automobiles, in the past?”

“Haha, exactly. While operating the existing weapons systems, we’ll send engineers to the United States and Germany, where these new weapons are being developed. We’ll also have Hyunse’s engineers join them there. Although we’re importing weapons now, our goal is to nationalize their production in the future.”

“I understand. We will dedicate our efforts to nationalizing them.”

The two moved to the rooftop gazebo to discuss upgrading defense capabilities.

The President inquired,

“How is the White Bear Project progressing?”

The White Bear Project was a medium- and long-range missile development program aimed at nationalizing the Nike surface-to-air missile.

During Chairman Wang’s administration (1979), when South Korea was suspected of developing nuclear weapons, the U.S. government noticed the White Bear Project and raised concerns that the missile could carry nuclear weapons. South Korea provided a written guarantee that it would ‘not develop or possess missiles with a range exceeding 180 km.’

Now, with no restrictions on missile range, they were developing missiles with a range of 1,000 km or more.

“We’re making good progress. The key is determining how much to extend the range, but I anticipate we’ll see the completion of a 1,200 km range missile within 1-2 years.”

“Ah, that’s reassuring. Even though the current defense budget is somewhat inadequate, we will allocate a substantial sum from the National Wealth Fund to Hyunse Shipbuilding, Aerospace, and K Enterprise under the guise of defense industry investment.”

“Since we don’t have to seek approval from the National Assembly for each expenditure, the National Wealth Fund is incredibly useful in situations like this, Your Excellency.”

“Hahaha, don’t worry about the funding. This time, we’ll provide advance payments. We need to compensate for all your hard work.”

“I’m relieved that we can attract top talent with our financial resources. We’ve only had after-payment bids until now, so it’s been a constant struggle.”

“Hahaha-”

“Thank you, Your Excellency!”

The reason the qualifications for the president of the Korea Investment Corporation didn’t include a ban on holding concurrent positions was also a consideration for President Jeong.

It was intended to facilitate public interest projects such as defense, not to enable the pursuit of private gain.

Of course, the opposition party might later criticize this arrangement, but the President was determined to proceed.

Should we avoid making soy sauce simply because we fear maggots [a Korean proverb meaning one shouldn’t be deterred by minor potential problems]?

*

Busan Naval Base.

Three used 1,200-ton diesel submarines, sleek and black like dolphins, arrived from Germany.

South Korea finally possessed submarines worthy of the name.

Naval engineers and Hyunse Shipyard engineers worked alongside German engineers to receive technology transfer.

To learn how to operate the existing aircraft carriers and nuclear submarines, naval officers and engineers were sent to the United States to participate in trial operations.

After a few months of training, they would sail the vessels back to Korea and begin full-scale operations.

The naval base expansion project was also underway.

The relocation of the Naval Base Command to Jinhae, away from the congested Busan Port, had begun.

To protect the industrial complex that stores and processes oil, an oil tanker pier was constructed in Yeosu, and another large-scale naval base and military airport were built in Goheung.

These developments were a stepping stone toward the Pacific era and control of the West Sea (Yellow Sea).

*

The deployment of South Korean submarines was undoubtedly unwelcome news for North Korea.

To counter submarines infiltrating underwater, North Korea would have to invest significant tactical and strategic resources to completely overhaul its naval tactics and coastal defenses.

North Korea entered into negotiations to acquire conventional submarines from the Soviet Union, surpassing the existing Soviet-made small submarines in its possession.

However, this project required a massive amount of defense spending, which was beyond the reach of a country struggling with the oil shock.

If the two Koreas engaged in an arms race, North Korea would be unable to compete with South Korea’s overflowing oil money and would face economic collapse.

The North Korean Deputy Premier, the second-highest-ranking official, requested an emergency meeting with the South Korean President and made a surprise unofficial visit to Seoul.

There had been several high-level inter-Korean talks at Panmunjom [the Joint Security Area between North and South Korea], but they were unsatisfactory, so the Deputy Premier was dispatched as a special envoy of the Premier.

*

The President met with North Korea’s Deputy Premier and Jang Seong-taek, the head of the Liaison Department, at a safe house.

President Jeong, who had visited the North and was familiar with them, was also present.

The head of the Liaison Department had been in contact with South Korea through President Jeong.

Tea was served on the table.

After exchanging customary greetings, the Deputy Premier brought up the main issue with the President.

“Your Excellency, the Premier is deeply concerned that the North and South, instead of moving forward in peace and cooperation, are heading towards confrontation.”

“Ah, is this about the submarine deployment?”

“Exactly. The Premier’s intention is to reduce military spending.”

“I share that desire. But North Korea doesn’t have oil fields, does it?”

“Yes? What do you mean….”

“South Korea has the 7th mining zone to protect, correct?”

“…….”

“Yuldo and Haeodo have also been incorporated into our territory, but Chinese ships invaded Haeodo, planted Chinese flags, and fled. We must protect our expanded maritime territory. This force has nothing to do with North Korea.”

“Even if you’re defending Haeodo, isn’t it a threat if you simply turn the submarine’s bow north?”

“Then, will North Korea protect Haeodo and the 7th mining zone?”

“Yes? That’s….”

“That doesn’t make sense. North Korea also advocates self-reliant defense. South Korea is also strengthening its defense for self-defense purposes. It’s not aimed at the North, so to be so alarmed is like a thief with a guilty conscience, isn’t it?”

“…….”

President Jeong spoke to the Deputy Premier.

“Many countries are interested in the offshore oil fields. If South Korea doesn’t protect them, the U.S. 7th Fleet will be stationed there. Does North Korea want that?”

“No, that can’t happen. The U.S. military is our mortal enemy.”

“That’s why South Korea is inevitably increasing its military spending for maritime defense. Surely South Korea wouldn’t invade North Korea, its own people?”

During Chairman Wang’s era, North Korea used the excuse that it was developing nuclear weapons as a deterrent.

It was a logic tailored to the level of North Korea, whose ultimate goal was the withdrawal of U.S. troops.

“Military buildup in place of U.S. troops… that makes sense.”

It was a dubious excuse, but North Korea consistently emphasized the nation, the shared people, and self-reliance, so it couldn’t easily contradict this logic.

“Now, as an oil-producing country, South Korea has no choice but to maintain a commensurate defense. The situation has changed, what if your thinking stops at the old times?”

“Hmm, hmm. Your Excellency, I understand. I will inform the Premier.”

The Deputy Premier changed the subject while drinking tea.

“Your Excellency, and Minister Jeong, didn’t you say that if oil came from the 7th mining zone, you would share it with the same people? Currently, North Korea is conducting blackout drills every night. When will the oil be supplied?”

In the North, President Jeong was still referred to as Minister.

In previous years, North Korea had been importing about 30% of South Korea’s crude oil consumption, but this oil shock had reduced that to less than 10%.

President Jeong replied.

“The condition for supplying oil was that the North’s Premier would visit Seoul and open the way for exchanges between the people of North and South Korea, wasn’t it?”

“…….”

“But inter-Korean civilian exchanges are still a distant prospect. Isn’t that why we’re at an impasse now?”

The Deputy Premier was busy wiping sweat from his forehead with a handkerchief.

“Er, I mean, let’s not have that kind of personal exchange, but let’s have an industrial barter of resources. Yes, trade. North Korea has abundant coal and iron ore, so let’s exchange them.”

“With oil prices soaring these days, coal and iron ore won’t even cover 10% of North Korea’s consumption.”

The Deputy Premier’s pent-up frustration surged.

“Your Excellency, even if it’s a business transaction, isn’t this excessive? If we’re the same people, shouldn’t we receive oil for free?”

The President said calmly.

“Free? Even the crude oil supplied to our own citizens is supplied at 70% of the market price. Why should it be free only for North Korea?”

“…….”

The Deputy Premier was speechless.

The President continued.

“There is no free trade. Discounts can be offered, but giving and taking is the foundation of trade.”

“Your Excellency, then what do you want besides iron ore and coal?”

The President revealed the card he had been holding.

“North Korea’s labor force.”

“Labor force? What do you mean….”

The President stood up and pointed to the Korean Peninsula map on the wall.

“Let’s create a joint South-North Korean industrial complex with 60,000 workers in Paju in the west and Cheorwon in the east!”

It was modeled after the Gaeseong Industrial Complex during Chairman Wang’s era.

At the time, the Gaeseong Industrial Complex played a significant role in inter-Korean exchanges, but the political situation became unstable due to attempts to develop nuclear weapons using the wages earned at the Gaeseong Industrial Complex, and it eventually closed down.

Later, the risk of Korean managers dispatched to Gaeseong being taken hostage increased, and when they withdrew, all the factories were confiscated.

Based on that experience, he was proposing an industrial complex within South Korea.

The President’s proposal made the Deputy Premier’s eyes light up.

“A joint North-South Korean industrial complex!”

The President elaborated.

“We will provide the land and factories on our side, and the North will provide the labor to produce light industrial products such as clothing and shoes. We will pay wages to 60,000 North Korean workers, and half of those wages will be used to pay for oil. This will supply 10% of North Korea’s annual oil consumption.”

“Ah, I understand. It’s a form of overseas worker dispatch to earn foreign currency.”

“Exactly, earning foreign currency. And North Korea should also develop a tourism industry targeting South Koreans to earn foreign currency.”

“Tourism industry?”

The President pointed to the map and said.

“Create a tourist route that includes Gaeseong, Geumgangsan [Diamond Mountain], Baekdusan [Mount Paektu], and Pyongyang, allowing South Koreans to tour these sites. If you allocate half of the Korean currency earned here, we will supply another 10% of North Korea’s annual consumption in kind.”

“You’re certainly driving a hard bargain.”

“Again, there’s no such thing as a free lunch.”

The President’s intention was to somehow encourage civilian exchanges between North and South Korea, using oil as an incentive.