Analysis of Economic Reform in North Korea: Comparison with Chinese Case

Abstract

In the 1990s, with the disintegration of the former Soviet Union and the death of Kim Il-sung, North Korean economy entered one of its worst phases. North Korea faced various difficulties resulted from the planned economy. So it has been trying to make its endeavors to escape from economic crisis by reforming its economic system, albeit limitedly, since 2002, including 7.1 economic reform measure, Special Economic Zones (SEZs), and Our Style Economic Management Methods. Then, is North Korea really adopting comprehensive economic reform since 7.1 Measures in 2002? If so, how far has the reform progressed? Will these changes in the North Korean economy eventually result in opening up like China did in the late 1970s? This paper aims to answer the questions above. It analyzes and assesses the change of North Korean economic policies and to see how far these economic changes have been progressed since July 1st 2002 by comparing with Chinese reform in the late 1970s. Therefore, it argues that North Korea is not launching a comprehensive economic reform as China did due to the several reasons. The North Korea economic policies are very similar to those of Chinese in the late 1970s. However, no one really knows what impact these policies have made in the North Korean society and it is likely that the result of those economic policies will not result in the same level of economic achievements in China. Compared to the Chinese economic reform in agriculture sector, industrial sector and in special economic zones, the prospects of the North Korean reform do not appear encouraging. The private property ownership is still not allowed, the market is still controlled by the government, it is less likely to attract foreign capital to special economic zones with the international isolation and it is impossible to confirm whether the central-government have decentralized authority. The countrys reforms have been limited both in scope and depth. The North Korea regime prefers political stability that it will not pursue any larger scale reforms because economic reform would likely undermine the stability of the regime. In other words, North Koreas primary purpose is not economic development or economic recovery, but is a stabilization of the regime. It is true that the number of markets have been increasing, but North Korea still lacks of essential elements to launch a comprehensive economic reform as there are too many obstacles to be solved. Despite the recent economic policies introduced in North Korea over past 10 years, the prospects for the North Korean economy remain clouded due to the internal limits and absence of external cooperation. These obstacles make difficult for North Korea to reach beyond partial measures.