North Korea reaches out

According to sources familiar with North Korean affairs, North Korea is holding public  lectures on the upcoming economic reforms, the principles of which were outlined under Kim Jong-un’s On the establishing of a new economic management system in our own style. A key challenge to liberalization will be acclimating people to autonomously managing industries and setting prices for their products without government direction.

At the same time, the broken Public Distribution System (PDS) seems to be on the verge of abolition; the same source suggests that except for special sectors such as defense, medicine, etc. the PDS will be practically halted. On one hand, the PDS has long distorted the state’s ability to assess the needs of the people, thus abolishing the top-down mechanism of distribution may give the market a freer hand to supply the people and more efficiently distribute the available resources. On the other hand, with domestic food prices on a constant rise since the beginning of summer, the potential consequences of withdrawing what remains of the minuscule state rations is worrisome. It could potentially have a catastrophic effect on the people’s consumption of food in the short term, in particular for people with very little access to additional income.

For the reasons above and others, the South Korean government is looking skeptically at recent developments

Were [the North Korean officials] to officially abolish the distribution system, the bedrock of a socialist planned economy, North Korea would be rejecting its own self. They will not be able to officially abandon it.


At the time of the 2002, July 1st economic management improvement measures, North Korea discontinued the distribution system alongside increasing prices, but at no time was it ever written down that they were officially abandoning it

Meanwhile, Pyongyang is making an effort to show that it is sincere about the upcoming reforms. DPRK Chairman of the Presidium of the Supreme People’s Council Kim Young-nam “expressed hope that Vietnam will share its experience in socioeconomic construction and development,” praising the result of Vietnam’s “Doi Moi” reform policy that was launched in 1986.

The praises were not limited to Vietnam. According to Choson Ilbo

…Kim Jong-un, meeting with senior Chinese apparatchik Wang Jiarui on Aug. 2, made a rare reference to China’s 12th five-year plan for national economic and social development and its longer-term vision of achieving a society where most people are middle class. The North Korean Workers Party’s goal, too, “is to achieve economic development and improve people’s livelihood.”

However, praise for Vietnam and China’s reforms could have been merely lip service to Hanoi and Beijing for providing North Korea with flood assistance. Vietnam has pledged 5000 tons of rice to help North Korea and, according to the UN, China has donated a $1 million to aid victims of the flood.

The sincerity of these reform efforts will only be evident after October when the adjustments supposedly go into effect. Until then Pyongyang will no doubt struggle to balance needs of the country and the political circumstances that justify the existence of the state.


About Yong Kwon

I develop trade advocacy strategies for a DC-based consulting firm. Studied economic history at the London School of Economics, and can be found on twitter at @ykwon88
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