Chapter 12: Lifting the North Korean Economy
Won Bae Kim 1. THE AILING NORTH KOREAN ECONOMY North Korea’s state-run economy is almost dead, except perhaps for the military sector. Despite Pyongyang’s slogan of self-reliance (juche), the North Korean economy had been dependent on Soviet subsidies before the 1990s and has recently been dependent partly on Chinese and South Korean trade and aid (see Figure 12.1). The public distribution system has broken down and as a result informal marketization has been in operation since 1995. The regime tried to ratify the marketization from below in July 2002. However, by 2005 signs began to emerge that economic reform was in reverse. In December 2009, Pyongyang took a drastic currency redenomination, which targeted members of the country’s growing merchant class and thereby almost killed marketization from below (Yoon and Oh, 2009). The major prescription for the ailing North Korean economy has been reform and opening. A Chinese-style reform has been recommended to Pyongyang by Beijing.1 Kim Jong Il took trips to China in May 2000, January 2001 and May 2010. Each time, he made positive remarks about China’s economic development. The visits were intended to jump-start North Korean economic reforms. After Kim Jong Il’s 2001 visit to Shanghai, Pyongyang introduced reform measures of more marketoriented pricing and wage structures on 1 July, 2002. The Sinuiju special administrative area was proposed in 2002, following the Shenzhen model of China. Pyongyang’s attempt to develop the Sinuiju special zone via Chinese capital and management has, however, failed because it was opened too soon...
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