Northeast Asia is currently the world's most dynamic region as the figure below illustrates. Five of the world's six largest militaries (China, U.S., Russia, North Korea, and South Korea) and four nuclear-capable powers converge on the Korean peninsula. Northeast Asia's military forces are primarily ground-focused and lack precision weapons. Conflict would result in tremendous devastation, property destruction and loss of life. In this geo-political landscape, the presence of U.S. forces supports peace and stability to the region. Northeast Asia is truly a critical region for the U.S. and the world.

Optimism over the pace of North-South reconciliation efforts following the June 2000 summit meeting between ROK President Kim Dae-jung and Chairman Kim Chong-il, the dictator of North Korea, has been tempered by a year of progress and then followed by year of slowdown in peninsular dialogue. Chairman Kim Chongil has yet to follow through on his promised visit to South Korea. North Korea unilaterally cut off most Inter-Korean contacts in March 2001 and has elected to not sign an agreement to de-mine a portion of the Demilitarized Zone (DMZ) that would pave the way for a North-South transportation corridor. Ministerial talks resumed in September, but planned family re-unions were abruptly cancelled in October by North Korea. The sixth Ministerial Talks ended with limited measurable results in November 2001. No further talks are planned at this time. Unfortunately, we have come to realize that North Korea is either unwilling or unable to significantly improve relations with the ROK or U.S. The security situation remains dynamic and the military threat has not been fundamentally reduced on the peninsula or in the region. The North Korean military continues to remain a formidable threat to the security of Northeast Asia. North Korea remains on the U.S. State Department's list of "Nations that Sponsor Terrorism." On January 29th, our president stated our "goal is to prevent regimes that sponsor terror from threatening America or our friends and allies with weapons of mass destruction. Some of these regimes have been pretty quiet since September the 11th. But, we know their true nature. North Korea is a regime arming with missiles and weapons of mass destruction, while starving its citizens." Despite attempts by the South Korean government, North Korea has shunned all attempts to discuss substantive military confidence building measures to reduce tensions. As reported in numerous press accounts, Pyongyang views these confidence-building measures as "premature" and continues to castigate the U.S. administration's policies as being too aggressive.

North Korea initially responded to the events of September 11 with "deep regret" and some condemnation of the acts. In addition, Pyongyang publicly rejected terrorism and the support of terrorist organizations, and signed two anti-terrorism trea

ties and announced plans to sign five more. However, started to condemn Pyongyang criticized the American military actions in Afghanistan and elsewhere. Although North Korea did welcome the new Afghan government, North Korea has responded negatively toward President Bush's recent state of the Union address in recent writings and public broadcasts. Although we welcome and hope for more direct North-South dialogue and reconciliation, we watch with caution as the military threat from North Korea continues to remain high, both in conventional capability and weapons of mass destruction. North Korea continues to divert a large percentage of its national resources toward military expansion and modernization, and maintains approximately 70 percent of its forces within 90 miles of the DMZ.

In 2002, we expect North Korea to continue diplomatic outreach strategies designed to garner much needed economic aid and assistance. However, in 2003, three critical events will influence the political-military affairs on the Peninsula. First, changes in regional politics will take place with elections in the ROK. Secondly, pressure will intensify on the DPRK to start cooperating with the International Atomic Energy Agency (IAEA), so as to avoid unacceptable delays in the delivery of essential nuclear components necessary to build two light water nuclear reactors in North Korea. Third, while North Korea has said it will continue a moratorium on missile launches until 2003, it has not made a commitment to extend beyond that time. These three events form a potential nexus for increased tension on the Peninsula. These key events are centered around the United Nation's International Atomic Energy Agency (IAEA) inspections of reprocessing facilities in the north, which must occur prior to delivery of key components for the light water reactors. We will watch these events carefully. Failure to allow a timely completion of IAEA inspections into the history of the North Korean nuclear program could jeopardize existing agreements.

III. NORTH KOREAN OVERVIEW AND STRATEGY

North Korea continues to pose a dangerous threat to the stability and security on the Korean Peninsula, the region, and, increasingly, the world. They remain a dangerous adversary with regional operational reach and global proliferation impact. The Kim Chong-il Regime continues to maintain a large, capable, and forward deployed military-making the area between Seoul and Pyongyang the most militarized place on earth. Korea remains a place where U.S. Forces could almost instantaneously become engaged in a high intensity war involving significant ground, air, and naval forces. Such a war would cause loss of life numbering in the hundreds of thousands and cause billions of dollars in property destruction. The military capabilities and policies of North Korea have remained fundamentally unchanged since my testimony last year.

Political Environment: Kim Chong-il is firmly in control and, with the support of the military and his leadership circle, he establishes all policies for North Korea. We were optimistic throughout last year that the June 2000 summit between Kim Dae-jung and Kim Chong-il would lead to improved North-South relations. In the months that followed the June Summit, the North and South held several Ministerial and sub-Ministerial discussions as well as three small-scale family reunions. In early 2001, the North for its own reasons broke off discussions with the South. President Kim's administration, with U.S. support, has continued to pursue dialogue with the North, and has taken a number of steps to encourage the North to return to the table. As President Bush has noted, we are disappointed that the North has yet to react favorably.

On June 6, 2001, President Bush stated our willingness to undertake serious discussions with North Korea on a broad agenda, including improved implementation of the Agreed Framework, verifiable constraints on North Korea's missile programs and a ban on its missile exports, and a less threatening conventional military posture. This position has been restated repeatedly by Secretaries Powell, Rumsfeld and others.

Over the years, North Korea has established diplomatic relations with 150 countries. This past year, North Korea focused its efforts on establishing diplomatic relations outside the Northeast Asia region, particularly in Europe where it established relations with 13 of the 15 members of the European Union. Kim Chong-il visited China and Russia in part to counter-balance the South's growing relationship and influence with the North's historical benefactors, but also to garner much needed economic assistance and political support. This increased diplomacy allows them to enlarge their donor base for aid while expanding their growing illicit trade activities.

The North Korean diplomatic outreach, in many ways, undermines the international legitimacy of the regime. Ambassador after ambassador who have visited

North Korea tell me about the dismal and almost surreal conditions that exist there. Authoritarian controls strictly censure all facets of information into the country. The more North Korea engages other countries, the more the world learns about North Korea and they see for themselves the reality of life for the people that live under the Kim family regime.

Economic Environment: North Korea remains incapable of feeding its population or providing for its basic energy needs. Their infrastructure continues to deteriorate and they are unable to reverse their current economic situation through improved industrial production. Consequently, they depend on others, predominately the U.S., the ROK, Japan, and China to meet their food and fuel needs. The North maintains a policy that ensures the military gets first priority on national resources. The policy allows the Korean People's Army (KPA) to operate a parallel military economy in which weapons, missiles, and drugs are produced for sale. Profits from those sales accrue directly to the military. Additionally, Kim Chong-il continues to provide luxury items such as cars, housing, and food to supportive senior leaders to ensure their loyalty. We see no potential change in this policy that is clearly designed to support the military and ruling elite at the expense of the North Korean people. Accurately assessing the size and condition of the North Korean economy is difficult at best. North Korea continues to treat most economic data as a state secret and much of its economy is supported by foreign aid and illicit activities. Consequently, economic assessments of the North Korean economy remain nothing more than educated guesses. Based on current and projected conditions in North Korea, we expect no significant economic change in 2002. North Korea will continue to require and receive outside aid for survival.

Role of Military: The Korean People's Army (KPA) is by far the dominant presence in the country. It is the one instrument of power that enables North Korea to extract aid from its neighbors in the region. The KPA ensures regime survival by controlling the internal situation and deterring external threats. The military also plays a major role in the economy. The armed forces are North Korea's largest employer, purchaser and consumer. It provides the regime with a substantial portion of its hard currency through weapons sales and illicit activities.

Conventional Forces: The KPA is the fifth largest active duty military force in the world, numbering over 1.17 million personnel. The ground force is the world's third largest, numbering almost one million soldiers. An estimated six million Reserves support the Active-Duty Force. The North Korean air force has over 1,700 aircraft. The navy has more than 800 ships, including the largest submarine fleet in the world. The North fields a total artillery force of over 12,000 systems, including 500 long-range systems, deployed over the past decade, with the ability to strike Seoul from their current location. About 70 percent of the North Korean Army is deployed south of Pyongyang and those forces are capable of conducting an attack with very limited tactical warning. However, an attack scenario appears unlikely at this time because North Korea clearly knows that its regime would ultimately be destroyed as a result of any attack.

Asymmetrical Forces: The North's leadership has developed substantial capabilities in ballistic missiles, special operations forces, and weapons of mass destruction. The North's asymmetric forces are dangerous, receive a large portion of the military budget, and are well trained. Methodical improvements continue in each area.

Because the North's ballistic missile program provides such powerful diplomatic and political leverage, the North's ballistic missile program remains a top priority. Over the past 2 years, North Korea has upheld its self-imposed moratorium on flight-testing long-range missiles, but has not halted research and development. They continue to refine their missile capabilities by continued testing of rocket engines and other components. Kim Chong-il stated to President Putin that the current missile flight-testing moratorium will remain in place at least until 2003. However, they continue to export missiles and missile technology throughout the world. Their ballistic missile inventory includes over 500 SCUDs of various types that can threaten the entire peninsula. They continue to produce and deploy medium-range No Dong missiles capable of striking Japan and our U.S. bases there. Pyongyang is also developing multi-stage missiles capable of striking the continental United States. They have tested the 2,000-kilometer range Taepo Dong 1 missile and continue significant work on the 5,000 plus kilometer Taepo Dong 2 missile.

North Korea's special operations forces (SOF) are the largest in the world. They consist of over 100,000 personnel and constitute a significant force multiplier. We consider them a tough, dedicated, and profoundly loyal force. They undergo yearround training to develop and maintain their skills. During wartime, these forces would attack from the ground, air and sea against both our forward and rear areas. The North will concentrate SOF against our critical warfighting nodes and seek to prevent rapid force and sortie generation by U.S. and ROK forces.

North Korea also possesses weapons of mass destruction. A large number of North Korean chemical weapons threaten both our military forces and the civilian population centers of South Korea and Japan. We assess that North Korea has very large chemical stockpiles and is self-sufficient in the production of chemical components for first generation chemical agents. Additionally, North Korea has the capability to develop, produce and weaponize biological warfare agents. They can deploy missiles with chemical warheads and potentially have the ability to weaponize biological agents for missile delivery.

We continue to be concerned with North Korea's potential nuclear threat. Though in January 2002, North Korea allowed the IAEA to visit an isotope facility, North Korea still refuses to comply with nuclear non-proliferation protocols. If North Korea will not allow inspections of their nuclear facilities, the international community cannot verify that they have in fact stopped their nuclear weapons development program. Current assessments indicate that North Korea may have produced enough plutonium for at least one, and possibly two, nuclear weapons.

Proliferation: North Korea contributes to the instability in the Middle East and South Asia through its aggressive sales of arms, missiles, and technological expertise. Missile sales and the transfer of missile technology to Iran, Syria, Libya, İraq and Pakistan especially trouble us. The possibility that North Korea could transfer nuclear technology to extremist regimes is real and is one of our greatest concerns. Illicit Activities: North Korea engages in a variety of other state-sponsored illicit activities to include counterfeiting of U.S. currency, money laundering, the production and sale of illegal drugs, trading in endangered species, and smuggling. In many cases, these illicit deals are sponsored by the military, with the cash profits returning to military hands.

Force Improvements: North Korea cannot afford to significantly modernize its aging conventional force. They continue to produce limited numbers of replacement systems and depend on China and Russia to provide equipment and spare parts. North Korea continues to modernize systems that can marginalize specific U.S. military strengths. North Korea is adaptive. They study our actions, most recently in the Balkans and Afghanistan, in order to develop tactics and techniques aimed at offsetting our technological advantage. They concentrate their efforts against U.S. surveillance, precision munitions and force generation capability. They continue to improve their command, control, communications and intelligence (C4I) systems, harden and bury their facilities, improve lines of communication, disperse forces, and improve camouflage, concealment, and deception (CC&D) measures. The result of these efforts has been to increase the survivability of North Korean combat power, and to complicate our ability to generate the forces and sorties required to defeat a North Korean attack.

North Korean force improvements are indicative of their continued policy to maintain a large, capable and effective military. Unfortunately, many people view the North Korean military from a cold war or conventional perspective and mistakenly assess them to be incapable of challenging the ROK-U.S. alliance. Such people become blind to the continuing threat posed by North Korea. The North Korean military is evolving in ways that make them a threat into the 21st century. They constantly study how we fight and develop capabilities that leverage their strengths against our weaknesses. They are adaptive and are methodically improving their military capabilities. They can conduct operations that span the spectrum from smuggling, kidnapping and assassination, to conventional combat. They are clearly the type of current and future threat that is described in the Quadrennial Defense Review.

As a result of their specific actions, North Korea continues to pose a dangerous and complex threat to the peninsula and the WMD and missile programs constitute a growing threat to the region and the world. The Kim Regime seems unwilling or unable to change its stated intent, goals, and policies. Consequently, they will continue to use the threat of military action to gain concessions, mostly in the form of economic aid from neighboring countries in the region and the United States. It is our opinion that North Korea's infrastructure will continue to degrade and that the regime will require outside aid to meet basic food and fuel requirements. Despite the extreme hardships on its people, the Kim regime will continue to support the elite and the military at the expense of the general population. Kim Chong-il will remain in power and the North Korean government will likely not experience an economic driven collapse in 2002. Although an attack on the ROK would cause many casualties and great destruction, CFC would rapidly defeat North Korean forces.

IV. ROK-U.S. ALLIANCE

The alliance between the Republic of Korea and United States of America remains the best in the world. It is an alliance built on honor, respect, a common set of values and a commitment to the defense of the freedom of South Korea. Our power, might and daily readiness are unmatched. Unquestionably, our South Korean partners are professional warfighters. They can mobilize over 4.5 million service members and can bring 54 divisions to the fight. Our combined warfighting assets after full mobilization include over 1,500 strike aircraft that can launch over 2,000 daily sorties, over 1,000 rotary aircraft, more than 5,000 tracked vehicles, 3,000 tanks and over 250 combat ships to include four or more carrier battle groups. If necessary, this unequalled combined combat power and might will decisively defeat a North Korean attack and destroy its military and the Kim regime. It is this real and overmatching power that strengthens our deterrence mission and ultimately provides regional security.

Our continuing cooperation and understanding is a success story in many ways. This success has been institutionalized in our Mutual Defense Treaty of 1953, the Status of Forces Agreement of 1966, the annually conducted Security Consultative Meetings that have been held since 1968 and Military Committee Meetings that have been held since 1978. The Republic of Korea has actively supported American non-proliferation efforts and joined the Missile Technology Control Regime (MTCR) in 2001. The ROK expects to resume chemical weapons destruction by the spring of 2002 and hopes to achieve a 4 to 5 percent destruction this year and 45 percent destruction within two to 3 years. Three alliance areas deserve particular note: Impact of September 11, Wartime Fighting Readiness, and an update on the Special Measures Agreement and Defense Burdensharing.

Impact of September 11: The public condemnation of the terrorist acts against the U.S. was led by President Kim Dae-jung, who pledged support in the spirit of the Mutual Defense Treaty. He was quick to pledge support even greater than the ROK provided during Operation Desert Storm. The outpouring of sympathy from the Korean people and military was phenomenal, as was their commitment to the security and safety of U.S. troops. The ROK immediately moved to match words with deeds, sharing intelligence, increasing force protection measures and planning support packages for multi-theater use for Operation Enduring Freedom (OEF).

We believe the events of 11 September will prove to be a seminal event in the history of the ROK-U.S. alliance. As we speak to you today, ROK forces are leading a U.N. mission, providing force protection for U.S. interests on the peninsula, and supporting OEF on a global scale. The ROK sent liaison officers to both PACOM and CENTCOM and quickly learned how the war on terrorism would be prosecuted. They have worked hard to learn lessons about how to support freedom's effort on both a regional and global scale. ROK forces are standing shoulder to shoulder with U.S. forces from Tampa to Kyrgyzstan and from CENTCOM to PACOM. They have accomplished this while increasing their U.N. support and taking command of the U.N. mission in Cyprus. This is an incredibly strong alliance!

In addition to their efforts on the Korean peninsula, our allies have sent forces in support of OEF. The ROK Navy has been supporting OEF since 18 December 2001, with one Landing Ship Transport (LST). Utilizing over 170 personnel, they have delivered construction materials for runway repairs to coalition facilities at Diego Garcia and are assisting with search efforts regarding the downed B-1 bomber. The ROK Air Force continues to support U.S. global efforts with four C-130s conducting transportation operations between Guam and Wake Island with support as far west of Diego Garcia. Furthermore, the ROK has provided a Mobile Field Hospital since February. This team of 130 personnel has provided medical care in the vicinity of Afghanistan in support of coalition efforts in OEF. Overall, the ROK has committed over 470 personnel, high value equipment, and significant force structure to support OEF objectives. The ROK support for the U.S. led coalition against terrorism has been comprehensive from humanitarian aid to global deployments of medical personnel, navy ships and air force units. We believe this type of support is key to a greater global and regional perspective for the Republic of Korea and will assist their evolving role as a regional leader.

The Republic of Korea, along with Japan, will co-host the 2002 World Cup Soccer Games between 31 May and 30 June. Teams from thirty-two nations will participate. An estimated five million visitors are expected to attend these events. This is the largest sporting event in the world and is of enormous importance to the Republic of Korea, Japan and all of Northeast Asia. This is the first time the World Cup has been held in Asia and the first time it has been co-hosted by two nations. In the wake of the September 11th attacks against the World Trade Center and the Pentagon, the world is looking to the Republic of Korea and Japan for assurance