N. Korea Names Kim Jong Un Marshal in Consolidation of Power

Kim Jong Un consolidated his hold on North Korea, taking the top military rank of marshal days after the army chief was removed.

The leadership of the government and the military made the decision yesterday, the state-run Korean Central News Agency said today in a statement.

Kim’s new post cements his place at the top of North Korea’s 1.2 million-strong military seven months after succeeding his late father Kim Jong Il as dictator. Having ousted army chief Ri Yong Ho on July 15, Kim is now free to pursue his own policies, such as using military resources to improve the country’s isolated and impoverished economy.

“Kim could have created a lot of instability and opposition by suddenly firing Ri Yong Ho, one of the most influential figures in the military,” said Cheong Seong Chang, a senior research fellow at the Sejong Institute in Seoul. “By raising Kim’s authority over the army, the regime is able to wield more control over the military leadership.”

South Korea has no comment on Kim’s promotion as it is a domestic matter, Unification Ministry spokesman Kim Hyung Suk said by telephone. South Korean President Lee Myung Bak held a national security meeting this morning to discuss developments in North Korea, according to a statement on the presidential website. The two countries technically remain at war after their 1950-53 conflict ended without a peace treaty.

The South Korea won extended gains while stocks fell after North Korea’s announcement. The benchmark Kospi index dropped 1.5 percent, halting a three-day gain.

Smooth Transition

“This is actually a positive for Seoul,” said Wai Ho Leong, a senior regional economist at Barclays Capital in Singapore. “Pundit speculation of a power struggle or coup by hardliners have not materialized. The transition has been smoother and faster than expected and I think this points us to more stability in North Korea and capital markets.”

North Korea yesterday named General Hyon Yong Chol vice marshal of the army two days after KCNA said Ri was relieved of his posts on July 15 due to illness. Ri, 69, was an advocate of Kim Jong Il’s military-first policy and may have lost a power struggle as Kim Jong Un deployed troops to work on construction projects, analysts including Park Young Ho said.

Ri’s departure “is a definite message from Kim that anyone who tries to challenge the regime will, without a doubt, be taken out,” said Park, senior research fellow at the state-run Korea Institute of National Unification in Seoul.

‘Fundamental Change’

The U.S., which has led the international push to force North Korea to abandon its nuclear weapons program, called for reform beyond organizational changes. The Obama administration in April canceled a food aid plan after Kim’s regime fired a long-range rocket in defiance of United Nations sanctions.

“Changes in personnel, absent a fundamental change in direction, mean little,” State Department spokesman Patrick Ventrell told reporters on July 17.

Thought to be under 30, Kim has worked to bolster his public image while rebuffing western appeals to abandon the country’s nuclear weapons development. He has taken a more dynamic leadership style than either his father or grandfather, state founder Kim Il Sung.

The younger Kim has already made two live-broadcast speeches unlike his father who has never delivered a public address. Kim Jong Un attended a performance this month featuring Mickey and Minnie Mouse, Winnie the Pooh and other Walt Disney Co. (DIS) characters that was unauthorized by the U.S. media company. He made a publicized visit to an amusement park in May where he scolded the management for chipped paint and broken pavement.

Isolated Economy

North Korea’s economy, isolated from most of the world’s markets over its nuclear weapons program, contracted in four of the past six years, according to South Korea’s central bank. Gross domestic product in the communist nation increased 0.8 percent in 2011 after a 0.5 percent decline in 2010, according to an estimate published by the Bank of Korea in Seoul.

North Korea’s per capita income was 1.33 million won ($1,160) while South Korea’s was 25 million won, according to its estimates. North Korea relies on China, its biggest trade partner, for energy and food assistance.

South Korean President Lee Myung Bak urged the North last month to follow the example of the political opening of Myanmar. The Southeast Asian nation’s efforts to reengage with the global economy were rewarded last week by President Barack Obama authorizing U.S. companies to invest in Myanmar for the first time in about 15 years.

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

To contact the editor responsible for this story: John Brinsley at jbrinsley@bloomberg.net

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