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November 20, 2018

North Korean economic reform had started

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North KoreaThe promise of the North Korean leader Kim Jong-un to work for “socialist economic development” could bring reforms inspired by the Chinese model,, but Pyongyang will never say it. The regime announced on Saturday the end of the nuclear tests and trials of intercontinental missiles, and closed the nuclear experiment field. This gesture was welcomed by US President Donald Trump, who is planning to talk to Kim Jong-un at an unprecedented summit.

In his speech, the North Korean leader also said that the “new strategic line” of the Korean Workers’ Party would be “socialist economic building”.
The official North Korean agency KCTA repeated this phrase 56 times in its information on Kim Jong-un’s statement.

Once, after the end of the Korean War (1950-1953), the North was richer than the South, taking full advantage of the Japanese colonizer’s strategy of concentrating industrial development in the northern peninsula.

This trend, however, was completely reversed due to the impressive upsurge of the South and the collapse of the state-controlled North Korean economy, suppressed by decades of terrible governance, and then by the collapse of the Soviet Union.

In 2016, the average salary in South Korea was 20 times higher, according to Seoul statistics. North Korea does not publish any data on its Gross Domestic Product.

Things seem to be improving with governance of Kim Jong-un at the end of 2011 when the North started to become increasingly tolerant of private initiatives and the activation of small entrepreneurs trading in food products or commodities coming from China. In 2016, the North Korean economy is experiencing its strongest growth, according to estimates by the South Korean Central Bank. This trend, however, could be hurt by the strengthening of international sanctions.

The North Korean leader should only look at China and Vietnam if he wants examples of Communist parties that have embraced capitalism without putting the one-party system on the map. And they even strengthened it because greater prosperity strengthens the positions of power.

Managers of North Korean factories have recently told that once they meet their state-run production quotas, they are free to buy and sell at negotiated prices with suppliers and customers. The state-owned enterprises may also invest in other business sectors through affiliates. Thus, the national company Air Koryo started a business in the non-alcoholic beverages and taxis sector.

This allowed entrepreneurs to start a business “protected” by state-owned companies. The same is true for agriculture because the peasants working for state cooperatives can process their land and sell the products they produce in a market that is illegal in theory but exists in all North Korean cities.

However, the North does not produce enough. Even in years without large droughts, over 40% of the population suffers from malnutrition, according to the UN. The North will increase its investment in infrastructure, allow greater autonomy for state-owned enterprises and will still allow entrepreneurs to leave the profits they have.

During his visit to China in March, Kim Jong-un saw an inaugural presentation at the Chinese Academy of Sciences in Chungguancun, the Chinese Silicon Valley. He also told the Korean Workers’ Party, quoted by the KCTA, that the North should invest in science and education to build a “scientific and technological power”.

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