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Kim Jong-il Died Saturday, State TV Reports

Aired December 19, 2011 - 03:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KRISTIE LU STOUT, ANCHOR: Welcome back to CNN's breaking news coverage of the death of Kim Jong-il. I'm Kristie Lu Stout in Hong Kong.

After seventeen years in power, Kim Jong-il is dead at the age of 69. The former North Korean leader created a cult of personality worship at home but was regarded as one of the world's most suppressive leaders by the international community.

A North Korean's media is saying Kim's funeral will be held December the 28th in Pyongyang. He reportedly died of a heart attack on Saturday while riding a train. They would North Korea describes as a field guidance tour and emotional broadcast who broke the news to the country earlier on Monday.

She says Kim died of "overwork" after dedicating his life to the people and that he could not be saved despite the use "every possible first aide measure."

Whatever his reputation on the west, Kim Jong-il was revered by his own people. And we have rare video from inside Pyongyang of North Koreans reacting to his death. Just watch and listen.

(VIDEO CLIP PLAYING)

An incredible glimpse there from inside North Korea even Kim Jong-il's son prepare to the reigns of powers of North Korea, Kim's death leaves the world without one of its most eccentric leaders.

Let's here from Dan Rivers now about the man who lead the so- called "Hermit Kingdom" for 17 years.

(BEGIN VIDEOTAPE)

DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Kim Jong-il always cast a slightly bizarre figure. His diminutive stature and characteristic hair were empowerment for some in the west, but for the citizen of the democratic people Republic of Korea, Kim was the embodiment of this recursive state. Feared, loved, worshipped, obeyed, his cultured personality was deeply entrenched.

His father was Kim Il-Sung who founded North Korea with soviet backing off the World War II. Kim Jong-il was just a little boy when the Korean War breakout in 1950, but the soviet back north invading the American bats south. After fighting ended, Kim Jong-il became steeped in his father's philosophy of juche or self-reliance. And the North became ever more occlusive.

The north and south never formally signed a peace treaty and remained technically at work separated by a tense demilitarized zone. Gradually Kim Jong-il was groomed for the top, making public appearances in front of cheering crowds.

When Kim Il Sung died in 1994, he was declared eternal president. So, his son instead became general secretary of ruling workers party of Korea. And by 1998, as head of the army, he consolidated his position of absolute power.

ANDRE LARKOY, NORTH KOREAN ANALYST: He will be remembered as the person who was responsible for awful things, for the existence of one of the worst dictatorships in -- probably not only in Korean history but in war history the 21st century. Yes, he did not create his dictatorship, it was his father's but he took the responsibility and he made sure it continued for many more years.

RIVERS: He was known for his love of fine wines at odds in a country where food shortages and privation are common. All of the leaders is he became known and to have indulge in his appetite for the finer things, but his people were literally starving to death. The collapse of the Soviet Union hit Korea hard, suddenly ending guaranteed trade deals.

Then devastating floods compounded the famine. Estimates vary for the number that died, but even the regime itself admitted that almost a quarter of a million perished between 1995 and 1998. Some say it was more like ten times that figure.

But in the capital Pyongyang, the orifice of a successful state was maintained. An opulent subway truth the dear leader would say but the deeply placed progress on to his and his father's leadership.

Kim Jong-il was well known as a film buff, here visiting the set of a North Korean production. His personal video library was said to include 20,000 titles, with "Rambo" and "Friday the 13th" supposedly topping the dear leader's favorite place.

In 2000, there appeared to be a tow in north-south relations, the first ever summit meeting between Kim Jong-il and counterpart from the south, President Kim Dae-Jung, the south so-called "sunshine policy of engagement" themed to be (INAUDIBLE).

But Kim Jong-il pressed ahead with his nuclear weapons program. The U.S. labeled it part of the axis of evil in 2002. A year later, North Korea withdrew from the nuclear known proliferation treaty.

In 2006, the north conducted a nuclear test and test five missiles. It added extra urgency to the six party talks designed to deal with North Korea's nuclear program. A breakthrough came in 2007 when Kim Jong-il finally agreed to disable the nuclear reactor at Yongbyong in return for fuel and better relations with the U.S. But despite dramatically blowing up the cooling tower, North Korea seemed to backtrack afterwards. The deal appeared to be in jeopardy. The capture of two U.S. journalists, Laura Ling and Euna Lee, on the North Korean border sparked another crisis in 2009. It ended when former President Bill Clinton flew in and successfully negotiated their release, prompting hopes there would be further engagement.

Observers say Kim Jong-il will be remembered as a nearly impossible man to bargain with, stubborn, and fickle in equal measure, a man who kept 23 million people in a totalitarian nightmare in one of the most repressive reclusive regimes in the world.

Dan Rivers, CNN.

(END VIDEOTAPE)

STOUT: Of reactions to Kim's death has been flowing in from around the world. South Korea's defense ministry has raised its national alert to the second of three levels. And President Lee Myung-bak as the people of South Korea, "concentrate on economic activities and remain calm."

Now, meanwhile in Washington, the U.S. official says that North Korea now faces extraordinary change and uncertainty, and that an insecure North Korea could well be more dangerous. Earlier the White House press secretary issued a statement said this. "We are closely monitoring reports that Kim Jong-il is dead. The president has been notified and we are in close touch with our allies in South Korea and Japan. We remain committed to stability on the Korean peninsula and to the freedom and security of our allies."

And meanwhile, Japan called an emergency national security leading upon learning of Kim's death. A statement has since been issued offering condolences, and Japan's chief governor spokesman says, "We wish the sudden news would not affect North Korea negatively."

And finally, China offered its deep condolences on the death of Kim. China is, of course, a close ally of North Korea.

Now, in south Korea, much of the region is concerned what might come next in North Korea's leadership ranks once Kim's cult personality is stripped away. And we asked former south Korean ambassador to the U.S., Han Sung Joo, about that.

(BEGIN VIDEO CLIP)

HAN SUNG JOO, FORMER SOUTH KOREAN AMBASSADOR TO THE UNITED STATES: I was the foreign minister when his father, Kim Sung, his son, died in 1994. And we had then, and I'm sure right now, we had plans to make our military and security ready for any unforeseen and untoward provocations or events, and also we had to see what's going on. Another very important part of the preparation would be to have very close consultation with other countries, particularly allies of the United States, Japan, China, Russia, and so on.

JOHN VAUSE, CNN SENIOR INTERNATIONAL CORRESPONDENT: And so what do you think is happening inside Pyongyang right now? SUNG JOO: Well, Pyongyang took two days to announce the death of Kim Jong-il and also announced the makeup of the -- what they call the funeral committee which consists of 232 members headed by Kim Jong-un, the third son. And so, they are trying to put up the face that is both order, orderly and united. We're not sure whether the death was natural or there was any foul play, but regardless, they are trying to put up a best face under the circumstances.

(END VIDEO CLIP)

STOUT: CNN's coverage of the death of Kim Jong-il continues after the break, and we'll be looking at the next in line to lead North Korea, Kim's son, Kim Jong-un.

(COMMERCIAL BREAK)

STOUT: Welcome back, and let's recap this breaking news story for those of you joining our continuing coverage.

North Korean leader Kim Jong-il is dead. A state media reported his death at noon local time today saying he died at 8:30 in the morning on Saturday. And a tearful broadcaster reported that Kim died after overwork from dedicating his life to the people. North Korea's state-run KNCA news agency reported that Kim suffered "great mental and physical strain while on a train during a field guidance tour." She says Kim suffered a heart attack and couldn't be saved despite every possible life-saving measure.

Now, the country is looking to its next leader, Kim Jong-il youngest son, Kim Jong-un, has already been called the great successor by north Korean state media. Kim Jong-un is believed to be 27 or 28 years old. He is the son of ever Kim's late third wife, and despite lack of military experience, he was promoted to four star-general last year. There are few known photos of Un said to share the same type of personality as his father, described as ambitious and a take no prisoners' type.

A south Korean's military has raised its alert status following the passing of Kim Jong-il and its passing has caused a wave of uncertainty in the region and around the world. Choi Jong Kun is a political science professor, South Korea's Yonsei University and he joins us from Seoul.

And professor, thank you for joining here on CNN. Again, the military there in South Korea raised their security alert. Why?

CHOI JONG KUN, PROFESSOR, YONSEI UNIVERSITY: Right. Obviously, this is the moment of uncertainty, and South Korea wants to so-called minimize that level of uncertainty and its operating procedure. However, we have not seen any unusual movement within and from North Korea, so we will have to watch and see.

STOUT: OK. No unusual movement from North Korea since the announcement of the death of Kim Jong-il, but what is the thinking in south Korea about the transfer of power to Kim Jong-un, who is just 28 years old, the youngest son of Kim Jong-il, now a great successor leading the country with nuclear weapons. How will the transfer of power proceed?

JONG KUN: I think, you know, it's a great moment of challenge for South Korea because they want the future might look like for the whole region as a whole. Kim Jong-un is untested leader, you know. But if you look back at 1994, Kim Jong-il was also untested leader. For he went into the leadership for 17 years, and I think Kim Jong-un will be able to handle the situation. Because nuclear is not only a very ultra dictatorship country, the state has gone through a lot of crisis for the last 20 years.

So, I think that it's got a lot of knowledge, a lot of strong bureaucracy, and not to mention there is a strong military. So I think that North Korea state as a whole will support Kim Jong-un's leadership for a while.

STOUT: You said the state, the military, will support Kim Jong- un, but is Kim Jong-un really -- will he be one calling the shots, or will it be the supporters, the political advisers around him?

JONG KUN: Right. I think that, you know, even if we had Kim Jong-il as a leader for the last 17 years, I think that the state of North Korea has been run by military committee, and Kim Jong-il was running the country as head of the military committee. So, I think that as long as there is a military committee headed by Kim Jong-un, I think there is going to be a more collective decision being made for the well-being of the country. And I think Kim Jong-un may be playing a rather figurative role, but you know we'll have to wait and see though.

STOUT: You sound very optimistic about the transfer of power in North Korea. What impact will that have on six party talks which remain suspended? Do you see them starting out in the next year or two?

JONG KUN: Well you know, we're approaching the end of 2011, and we used to anticipate that year 2012 will be the great year of changes. You know, we have a lot of presidential elections in capitol of South Korea and the United States, and there is going to be a leadership change in Beijing. And also, North Korea has been promoting the idea of achieving great in (INAUDIBLE) in year 2012.

With the sudden demise of Kim Jong-il, things are a little be very uncertain. However, I think that you know we might have to wait a little bit longer to see the re-opening of six-party talks, because whoever gets power in Pyongyang, I think he or she has to re-shuffle the power foundation. That means a lot more attention being paid to domestic parties in Pyongyang rather than six-party talks. That means we'll have to wait about six to one year more to see re-opening of the six-party talks, one that point on little bit more pessimistic.

STOUT: You know there is this political shuffling happening behind the scenes at Pyongyang. So, just how vulnerable is Kim Jong- un, who is very much a political novice?

JONG KUN: He might be a political novice, but he is supported by his long-time ally to his family. You know, some of the members in the funeral committee being working with his father, Kim Il Sung. So that means that you know, North Korea and military is North Korea. North Korea's workers party is North Korea. They share the same faith symbolized by a successful succession from Kim Jong-un from Kim Jong- il. So, I think that he will get better support and which will be continuous and which will remain pretty strong. So I think it's rather premature to assume that, you know, Kim Jung's power base is rather not so late.

STOUT: Choi Jong Kun with us some interesting insight there into the inner workings of North Korea politics. Thank you so much for joining us here on CNN.

Now, what if Kim Jong-il's lasting legacies should be the nuclear development. In 1994, as the year came to power, North Korea agreed to freeze and dismantle its nuclear weapons program. And then four years later, the U.S. and North Korea held the first round of high- level talks about expected construction of an underground facility. Negotiations with North Korea became a back and forth of broken promises with Pyongyang pledging to stop its weapons program in exchange for aide on to later we make.

In January of 2003, North Korea withdrew from nuclear nonproliferation treaty. That April, Pyongyang declares it had nuclear weapons. And three years later, North Korea claimed it's successfully tested a nuclear weapon.

But in 2006, Pyongyang agreed to disable its nuclear weapons facilities. The next year, North Korea destroyed a water cooling tower Yongbyong; it's a facility where its extracted plutonium for weapons, but progress broke down after that.

And then in May 2009, North Korea conducted its second nuclear test.

Our CNN coverage of the death of Kim Jong-il continues after the break, and we'll be looking at the impact his death has had on the markets -- that, of after a break.

(COMMERCIAL BREAK)

STOUT: You're watching North Koreans reacting to the news that they're dear leader; Kim Jong-il is dead. State media say Kim died on Saturday of a heart attack but his death was not announced until just a few hours ago. As one might imagine, this is the only story on North Korea's state-run TV station. Let's take a look at it at KCNA right now. And so far today, they've been replaying the tearful announced we showed you earlier.

They've also gone for minutes of time just showing Kim's portrait. And we'll keep monitoring KCNA throughout the day.

Now, we also want to take a look at the economic reaction to the news right now. To do just that, we're joining world business today's Pauline Chiou -- Pauline.

PAULINE CHIOU, CNN INTERNATIONAL CORRESPONDENT: Kristen, the European markets open about 25 minutes ago and they are following in the footsteps of the ASEAN Pacific markets. Take a look; they are all in negative territory. Fitse down by about half of percent, the Xetra Dax down by a third and Zurich SMI down by about the same amount. That CAC in Paris is in negative territory by about three-quarters of a percent at the moment.

And here's what happened in the sessions here in Asia as a result of the news of Kim Jong-il passing away today. There we go. Now, the Kospi ended the day down three and four tens of a percent, but at one point it was down by about five percent, the others industries in the region also in negative territory.

Let's look at the timeline of what happened to the Kospi today. The news of Kim Jong-il's death came at around lunchtime, local time, and you can see the market there in Seoul plunged dramatically, then picked up a little, then went down and then regained some footing later on in the session.

I do want to take you to the currency charts here to give you a taste of what happened with the Korean won, if we can pull that up. The Korean won lost some ground after the news came out, and there was a big selloff here, as you can see. The selloff happened as this graph is going up, which means that's the one weekend and it hit a high of about 1179 close to 1:00 local time.

The U.S. dollar gained strength as a result of this and it also gained against the euro and the yen throughout the session. Interestingly enough, even though many stocks declined today because of the news of Kim Jong-il. The defense stocks in South Korea actually gained as a result of this. This reflects that sense of uncertainty of what could happen.

Take a look at some of these stocks. Speco which is the defense equipment manufacturing company is up 14.91 percent. Victek also up by about the same amount. That company makes electronic warfare equipment. And Huneed Technologies up also 15 percent. There was a limit to how much these stocks could go up and that limit was capped at 15 percent.

Now, because of this question of uncertainty of what happens with the passing of Kim Jong-il, will there be a smooth transition, there is a sense of uncertainty, and will the region be destabilized, and then that begs the question of what happens with south Korea and south Korea's credit rating?

Well, we asked several credit rating agencies about their view of South Korea's credit rating, and both Fitch and S&P came out saying that South Korea's credit rating won't be affected purely because of this news. But S&P did say that the death of Kim Jong-il foes raise security risks on the peninsula and of those who risks increase of course, that could change their view on the rating for South Korea. For example, if the regime change is not smooth in North Korea.

So, some interesting affects today after this news came out. And Kristie, about 20 minutes, I'll have more of in-depth look of the economy inside North Korea, what daily life is like and how much people make in North Korea.

STOUT: We're looking forward to that. Pauline Choui, thank you.

Now CNN's coverage of the death of Kim Jong-il's continues after the break. And when we come back, and we'll be live in Seoul to examine what his death can mean for the region.

(COMMERCIAL BREAK)

STOUT: Let's recap our top story for you. If you're just joining our continuing coverage, North Korea Kim Jong-il is dead. State media reported his death at noon local time today. They said that Kim couldn't be saved despite the use of every possible first aid measure.

Let's get closer look at the circumstances around Kim's death. State media, they say that he died 8:30 a.m. on Saturday but they did not report his death to the world for another 48 hours. KCNA says Kim suffered a heart attack due to the "great mental and physical strain caused by his interrupted filed guidance tour for the building of thriving nation. It is also worth noting that state media reported that Kim died on a train. Kim Jong-il famously refused to fly and have been traveled by train,

And whatever you might think of Kim Jong-il, there is no denying that he wasn't your typical head of state. Let's get a look at the man and his life now from John Vause.

(BEGIN VIDEOTAPE)

JOHN VAUSE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): With the platform shoes, oversized sunglasses and trademark jump suit, Kim Jong-il looked every bit the mighty tyrant.

UNIDENTIFIED MALE: The appearance made it a little more difficult to treat him seriously, at least at first.

VAUSE: He was the diminutive dictator with the reputation for indulging in fine wine cognac and foreign prostitutes who held total power over bailing state, developed nuclear weapons and forced the U.S. to negotiate.

UNIDENTIFIED MALE: That was not necessarily the work of a womanizing, booze-swilling individual drunk during the day.

VAUSE: Inside North Korea, it was all about Kim, betrayed by his propaganda machine as political, military, technological, artistic and cinematic genius. A renaissance man, who has flown fighter jets, written operas and shot 11 holes in one. And his first try at gold.

His public heritages were breathlessly reported on state. He was hailed as the central brain and the morning star. He was a crazed ruler who loved to make people dance, a million of them all at once and all in step. He presided over a nation more cult than country.

You chase away fear storms and give us faith, they say. His official biography says, he was born in a log cabin on a sacred Korea mountain under rain bows and stars. Western scholars say it was probably in Siberia at a soviet camp where his father was training to fight.

He loved movies. James Bond was apparently among his favorite, and he reportedly was unhappy with North Korea's portrayal in "Die Another Day." No word on what he thought about this on America.

In the late 1970's, it's belief, he personally order the kidnapping of a South Korean actress and her director husband, and on the eighth years until they escape, forced them to make propaganda films.

Kim did apologize for North Korea's kidnapping of 13 Japanese and allegedly approved the bombing of a Korean airlines flight which killed more than a hundred people. The apparent motive was to disrupt the 1988 Olympic Games in Seoul. While U.S. officials dubbed North Korea, the soprano state for its role in organized crime, including the distribution of heroin and methamphetamines.

UNIDENTIFIED MALE: His legacy will be that he actually made some pretty bad choices for his country.

VAUSE: He was the man who, every day, it seemed, had a bad hair day. He starve his people. Threatened South Korea with the boat largest military in the world and built missiles that could reach Japan and perhaps beyond. The serenity of his brutality is gone. In its place, the terrifying uncertainty of what comes next.

John Voss, CNN, Beijing.

(END VIDEOTAPE)

STOUT: China is North Korea's closest ally, and the news of Kim Jong-il's death is being reported there. To get a closer look at reaction in China, let's go to Stan Grant in Beijing now.

Stan, China has expressed its condolences. Give us a reaction from Beijing.

STAN GRANT, CNN SENIOR INTERNATIONAL CORRESPONDENT: Absolutely. One statement put out from China, and that's all they're saying at the moment. Other questions were asked. This was at a ministry of foreign affairs briefing. They've put those questions on notice for later.

What they're officially saying right now is they're extending condolences to North Korea, saying that Kim Jong-il had done great things for the cause of socialism, saying also that they want to work for stability in the area, and that is going to be the key here right now and really put China in the fray. China is the closest ally to North Korea, the one that seems to be able to exert the most influence, although it has been questioned at times in the past, and try to bring stability.

What could Kim Jong-il's passing, it leaves avoid a lot of questions being asked about Kim Jong-un, the successor. Just how much authority will he be able to impose? Just how streamlined will this succession process be? And how much instability will we see in North Korea during this vacuum, if you like. China, of course, is going to be crucial to that.

What's really going to come to the fore here is the relationship between China and the United States. If you take all the other parties out, that emerges really as the critical relationship here. Do the two sides just adopt mutual quarters? Take Cold War stats, the United States backing South Korea or China backing North Korea. Or are they will be able to work through the un-difference to be able to find the path of stability during this time of so much uncertainty -- Kristie.

STOUT: And so, Kim Jong-un is a known figure in China. He is reportedly visited there with his father. He was introduced to Chinese leadership. As he been talking along, he is a political novice but with powerful backers and Stan, what would North Korea look like under Kim Jong-un?

GRANT: Well, this is really not answerable right now, you know. If you put your mind back to when Kim Il Sung passed away and Kim Jong-il had taken over, they were speculating then exactly how we're speculating now. Will he be able to assume authority? Will he just be a puppet leader? Will the hard line general take control?

All of those questions are being asked now by Kim Jong-un. Last year he was being made a four-star general. Some observer says that his fingerprints have been on the attack on South Korea naval boat and also in the attack on Pyongyang Island. And interpretation of that is that he was trying to establish his own hard line credentials.

But these are the questions being asked about this man that we don't really know his exact age. It could be 27, 28 or 29. In any event, that is young. He now comes under the shadow of not just of his father, Kim Jong-il, but the eternal president Kim Il Sung. Some speculating that the couch of personality may be passing and now facing a new reality of a man that is run last who is being faceless to the west, does not bring that same sense of all authority that his father and grandfather have had, and, of course, it's yet to be seen just how he's able to express himself and impose himself in the days to come -- Kristie.

STOUT: All right, Stan Grant on this story live from Beijing, thank you.

Now, former CNN chief international correspondent Christiane Amanpour traveled to Korea in 2008, and she shared her memories with us a short time ago.

(BEGIN VIDEOTAPE)

CHRISTIANE AMANPOUR, FORMER CNN CHIEF INTERNATIONAL CORRESPONDENT: We were there with a team in 2008, first with the New York philharmonic, and it was around the time when there were negotiations going on between North Korea and the United States. And they came to fruition in June of 2008 when, you're right, we saw the nuclear tower, the water cooling tower at the Pyongyang plant blown up. But it was a moment of hope then which rapidly came to an end in the summer of 2008 because (INAUDIBLE) about that time most people suspect that Kim Jong-il suffered a stroke. As his health deteriorated, negotiations fell apart.

And then basically be none since then, except for there are reports that over the last several months, the North Korea and the United States have been talking. There were reports that potentially a food deal could be announced, a nutrition deal between the United States -- North Korea, gets weak potentially. And there were report as yet not completely confirmed, but there might be some deal, some movement on a nuclear deal with North Korea, again agreeing to suspend the enrich his other activities.

But again, this has not yet been announced but that was something that certainly United States negotiated. We met with several times with North Korea negotiated over the past several months both in Geneva and the Beijing, had hoped to be able to bring to fruition.

VAUSE: And Christiane, everyone is now looking to the heir apparent, Kim Jong-un, a man who we know very little about. We think he is in his late 20s. That he likes basketball. We heard Mike Chinoy giving us a few more details, that he is a quiet, polite man.

But is this the young man with very little experience the man who can essentially create the cult of personality as his father and his grandfather did?

AMANPOUR: Well, it's probably unlikely that he will be able to do that. Even Kim Jong-il was not able to maintain the cult of personality that his own father did, Kim Il-Sung. And certainly when Kim Jong-il nominated his young son to take over, people are concerned. He's very young. He hasn't got that much experience that we know of. And he's going to be taking over we presume a nuclear nation.

We will have to wait and see. The issue here is whether it will promote more hard-line policies from some of the old guard, whether they will sort of, you know, circle the wagons around this young man. And whether it will put a stop to some of these negotiations that were going on with the United States or whether they would be able to go through nonetheless.

(END VIDEOTAPE)

STOUT: CNN's coverage of the death of Kim Jong-il will continues after a break. And we'll take a closer look at North Korea's economy and how that could be affected by Kim's death.

(COMMERCIAL BREAK)

STOUT: It's busy news from this day. We want to recap this freaking news story for those of you joining our breaking coverage. It is the end of an era in North Korea where Kim Jong-il is dead. A tearful broadcaster reported that Kim died due to overwork after dedicating his life to the people. North Korea's KCNA news agency reports that Kim suffered, quote "great mental and physical strain while on a train during a field guidance tour."

There were more tears in the streets of Pyongyang earlier today. Kim, who is believed to have been 69, was in power since 1994 when his father died of a heart attack. His funeral is expected to be held on December 28.

Now, our Pauline Chiou has been looking into the state of the North Korean economy, she joins us now with that -- Pauline.

CHIOU: Kristie, as you know, North Korea's economy is quite fragile as the Hermit Kingdom is very isolated and lag behind other countries. In 2009, its GDP was estimated to be $29 billion. Now, in comparison, South Korea's GDP is over 30 times that size. North Korea relies heavily on food aid mainly from China since it cannot afford to feed most of its population.

North Korea also depends on China, its closest ally from most of extreme. Now, according to the Korea trade investment promotion agency, which is based in Seoul, China accounted for 83 percent of North Korea's $4.2 billion of international commerce back in 2010.

While North Korea does isolate itself, the regime has partnered with South Korea in an industrial complex called Kasong, which is on North Korean territory, just north of the DMZ. Now, this complex combines South Korean investment and technology with cheap North Korean labor. 123 South Korean companies worked out of the complex and they mainly manufacture things like clothes, electronics and utensils.

Now, as for everyday life in North Korea, people wonder about this because it's such a mysterious place. We spoke with the director of daily NK which is a newspaper Seoul that covers North Korea. He said the monthly wage of a family in North Korea is between $3 to $20 per month. And there's something called the informal market where mostly women who sell things like appliances, clothes, electronics that are from China and South Korea and Japan.

Now, these women who sell these products and these informal markets bring in most of the money to a household because 80 percent of workers in government run factories or facilities actually don't get paid, so it's interesting to note that it's these women who are bringing in that very small salary. So, it's an interesting snapshot at daily life there.

STOUT: They're making the economy a very isolated one, and yet there are reports of western businessmen working and conducting deals in North Korea. You spoke in to one of them, a German businessman. What was his story?

CHIOU: Yes. This was very interesting. I spoke with this, a German entrepreneur last year, and he decided to go to North Korea because basically labor is cheap there. And he started an I.T. outsourcing firm. And he hired North Koreans who had good high-tech skills to make video games for western companies. And this German businessman would not tell me which western companies he was producing these games for, because obviously those western companies don't want that type of publicity that their products are made in North Korea.

But it was really interesting. He set up shop there about three years ago. He said labor in North Korea is cheaper than labor in China, so he also makes a lot more money. And he also said he believes there are about 100 westerners who are doing business there in Pyongyang, and there is a British company making DVDs there, DVD players, and also a French company manufacturing cement. So, some pretty interesting insight into what's going on in the Hermit Kingdom.

STOUT: Pauline Chiou, thank you very much for that.

Now, the flights of North Korea's people, it means that many flee across the border. And journalist and documentary filmmaker Shannon Van Sant has spent several weeks filming North Korean refugees as they escape through China.

And earlier, I spoke with her about the possibility that instability in North Korea could lead to major influx of refugees into China.

(BEGIN VIDEOTAPE)

SHANNON VAN SANT, JOURNALIST AND DOCUMENTARY FILMMAKER: Part of the reason these refugees have such a lot of troubles escaping through China is there a bounty price placed on their heads by the Chinese government.

So Chinese citizens and Chinese policemen are in some cases awarded several hundred dollars for turning in North Korean refugees. And China has stepped up security along the North Korean border. It has, to some extent, succeeded in stemming this flow of refugees and I think the top concern for China over the next few months is trying to stabilize that situation and trying to prevent any massive influx of North Koreans across the border.

STOUT: Have you been able to contact those you interviewed for your documentary film, the North Korean defectors, to gauge their thoughts and reaction to the death of Kim Jong-il?

VAN SANT: I have spoken with the missionary this morning who helped them escape, and they said that the refugees in China, they have not spoken to these specific refugees that I followed and I filmed. One of those refugees is still in hiding in Bangkok while he's applying for asylum to the United States.

But the two that made it to Seoul, they have -- since they were in prostitution, they were sold into sexual slavery in China, they've returned to prostitution in Seoul and I've lost touched with them. But the missionaries that I've spoken with and that I was -- that I was following and filming, they said that many of these refugees are reluctant and will be reluctant to speak out or have an opinion on this. Because they still, even after they've escaped to South Korea or the United States, they still are very scared. They're scared for the safety of their family members back in North Korea. They'll be reluctant to say anything that's negative about the regime. But judging from my interviews and my experiences with them, I think that they hope desperately that North Korea will change to the extent that people have enough food to eat, that their families are not dying of starvation, that people do not face public executions for watching banned television shows. That they are not in such hard labor. These are all experiences the refugees described to me.

STOUT: Yes. And I want to hear more about that. Just the reasons why they risk their lives to leave the country. You know, what kind of conditions they were facing to force them to make this harrowing journey from North Korea through China and to their ultimate destination?

VAN SANT: Sure. Two of the refugees I interviewed were teenagers. One was a 19-year-old girl, she was sold into sexual slavery in China. And she went across the border with human smugglers for a chance of a better life in China but primarily so she could feed her family. Her mom was unable to get out of bed because she didn't have enough food to eat. Her parents were incredibly sick and all she wanted to do was feed her family. And that was her only goal in coming into China.

And that was still her goal when I spoke with her before she made it to Seoul. They desperately want their family members, their parents, to be OK. To have enough food to eat. The two women I interviewed, they had been sold into sexual slavery in China and then deported back to North Korea. They were caught by the police. So then they had spent several months in hard labor camps in North Korea.

The conditions they described in those labor camps were absolutely horrifying. They were -- they had scars on the legs because they were beaten by leaches. They had to live in a place with bugs and leaches and a room -- a very small room with maybe 80 people to a room. They had to do back-breaking work and hard labor. And these were young women, one was 19. So the conditions they described were unimaginable.

And the third refugee I interviewed is a 16-year-old boy. His family was not dying of starvation, but he has said that they basically only had potatoes to eat. And a family would be considered quite wealthy in his village if they could afford a bowl of rice.

(END VIDEOTAPE)

STOUT: Filmmaker Shannon Van Sant speaking to me earlier.

Now, CNN's coverage of the death of Kim Jong-il continues after the break, and we'll hear more about Kim's rein from a man who has visited North Korea many times.

(COMMERCIAL BREAK) STOUT: You are looking at the last known image of Kim Jong-il released by North Korean state media. We don't know when it was taken or where, but Kim is said to be inspecting an army drill here. I remember saying media said Kim died due to the quote "great physical and mental strain of a field guidance tour."

Let's get some insight on what Kim's death means for Pyongyang for someone who has been there multiple times, senior field producer Tim Schwarz. He joins me now.

Tim, good to see you, and we have been working on these glimpses from inside North Korea today, looking at the reaction of North Koreans there of the death of Kim Jong-il. They're crying, they're wailing. Is what we're seeing on camera indigestive of a mood of the nation?

TIM SCHWARZ, CNN PRODUCER: They're shocked for the nation of course. The North Korea used to having a strong authoritarian figure because they been ruling for the past decade, first the grandfather and then Kim Jong-il, the father.

A change like this is going to cause huge shocks throughout the whole system, and naturally we're expecting people pouring into the streets, expressing grief. A lot of it will be genuine in terms of the huge loads that are taken to their life. A lot of it also will be because it is what expected of them. They don't know what's expected of them in any political situation to express a difficult view. They know they're expected to show grief because this is what one does in North Korea in lieu of this event. So, there will be huge out pouring of grief.

Now, will it match enormous out pour of grief than we saw in 1944, when Kim Jong-il's father, Kim Il-Sung died? We don't know. Kim Il-Sung probably would have been held on high prestige by the North Korean people which he founded the nation, and they looked back at those times when they were started when they were actually doing quite well, the society of functioning. They were better off from South Korea.

Under Kim Jong-il, he's had a more difficult time in this country. They suffered famine, they suffered deprivation, and they also had glimpse of how the outside world is from DVDs, (INAUDIBLE) from people of North Korea fleeing the country and then coming back. So they now know that North Korea is not the paradise that they were told in earlier years, but it is a country undergoing hardship and their life is real hard. So there isn't necessary the same amount of line basis to authorities they used to be.

STOUT: And we'll see just how much grief the North Koreans express when the funeral for Kim Jong-il takes place on December the 28th. Now, you have reported multiple times from inside North Korea, and you were in North Korea when Kim Jong-un was named the successor. What was that like?

SCHWARZ: Well, I was in North Korea when he was named successor. He was named successor at a special party conference -- he wasn't named successor, he was thrust into the party limelight in a special conference in September of last year. And now, everyone in North Korea knew what this meant. There was a rumor the previous year that someone would take over, and when he was named a very prestige is political body and he knew this is in effect anointing him the successor but it not what he said that time.

I was there in November at a light army parade where Kim Jong-il came onto the pavilion with his father and took the applause of the public and the soldiers there. And that was one of his major first public appearances.

STOUT: And quickly, your gut reaction, did you feel this was a man who could lead North Korea next?

SCHWARZ: The infrastructure is all there and the precedent is set. There is no indication at the moment that he cannot lead North Korea. He's going to have a lot of support from the power structure that exists in North Korea who have a vested interest in maintaining their monopoly on power in the country.

And so, he's going to need powerful support and powerful allies, but for the leadership in North Korea, it's their only option. Their only option is to carry on the path they're going and keep a strong man of their own persuasion in power, or else in their eyes, the country will disintegrate.

STOUT: Because the infrastructure is there. Tim Schwarz, thank you very much for sharing your thoughts with us.

Now, CNN's coverage of the death of Kim Jong-il continues in the next hour. We'll look at the international reaction to the North Korean leader's death with reaction from Beijing and Seoul next.

(COMMERCIAL BREAK)