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Source: Agence France-Presse (AFP)
Date: 17 Feb 2003
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North Korean economy plunging towards sub-Saharan status
by Peter Harmsen
PYONGYANG, Feb 17 (AFP) - North Korea, once one of Asia's
wealthiest countries, is in free fall toward the living
standards of sub-Saharan Africa with its rigid economy
failing to provide even basic necessities.
Price rises introduced last year to better reflect market
conditions are making matters worse, because only the
privileged classes have been given significant salary hikes
to match.
"It has crystallized the existing gap between haves and have-
nots, and the pain of the low classes is severer than
before," said Katy Oh, co-author of the book "North Korea
Through the Looking Glass".
"Its a failure." One Pyongyang official said his monthly
salary was increased overnight to 2,000 won (13 dollars) from
100 won last July.
This 20-fold raise has, however, been dwarfed by steep price
hikes for several daily items.
A kilogram (2.2 pounds) of rice, which previously went for
0.1 won, now costs 40 won, while one kilo of pork is priced
at 170 won, up from eight won before the reforms, locals
said.
That is, of course, if potential buyers can lay their hands
on these products in the first place.
"You have to understand that our country is not so rich in
commodities as some foreign countries," said an official
experienced in explaining away the economic trouble to
foreign visitors. "But we are able to provide the
necessities."
That might be an exaggeration, since numerous reports
describe empty shop shelves, even in the capital, which is by
far the richest part of the country.
In the provinces, the situation remains near-catastrophic, as
under-nourishment stunts the physical growth and mental
development of a whole generation. People are reportedly
dying.
North Korea was not destined to end up in its current mess.
In 1945, when the peninsula was liberated from Japanese rule,
the Soviet-occupied North was a far more industrialized
society than the largely agricultural South, controlled by
the United States.
Initial high growth started slowing in the early 1970s, and
the economy is now 32 percent smaller than its peak year in
1990.
Resistance to radical change has left the country with an
antiquated industrial base and an official mindset that is
even more out of date, reminding Chinese visitors of their
own bad old days.
"Its tough going doing business in North Korea, like China in
the late 1970s," said a Chinese businessman who frequently
travels to the isolated country.
"You cant use cellphones, and youre being taken around in a
government-assigned car by a government-assigned driver," he
said.
The North Koreans prefer to blame their predicament on forces
beyond their control, including natural calamities and the
collapse of its traditional Soviet and East European markets.
The Americans have been accused all along of trying to stifle
the economy, a charge that has been redoubled after the
United States last year halted fuel aid over the current
nuclear crisis.
"The blackouts in Pyongyang are caused by the fuel shortage,"
said Ryu Sung Rim, a foreign affairs official. "Nearly all
factories are affected, but its particularly bad in the
countryside."
The knee-jerk reaction by the government is to resort to
traditional pleas for hard work, austerity and "struggle",
perpetuating the kind of inefficient incentives that brought
down the economy in the first place.
Against this backdrop, last year's price reforms are
potentially "revolutionary", according to Paek Hak-soon, a
researcher at South Korea's Sejong Institute.
"Previous reforms were in economic relations with the outside
world," he said, referring to earlier measures aimed at
attracting foreign investment. "What happened last year was
touching upon the domestic area for the first time in
history."
But lifting curbs on prices and giving people more money in
the pocket is only a partial reform at best.
A necessary next step will be to make it easier for industry
and agriculture to produce goods that the newly-won cash can
be spent on, according to observers.
For instance, farmers could be allowed to sell a larger share
of their output in free markets, or be organized into family
units rather than collectives.
The core problem is dictator Kim Jong Il and the spoiled
ruling elite around him, who worry a more open economy could
erode their power, according to foreign observers.
"The technocrats would like to have reform, would like to
cooperate with South Korea, would like to get loans from the
World Bank," said Oh. "But Kim Jong Il and the military are
so afraid of losing control."
Kim may in fact have slightly more liberal views about the
economy than his late Stalinist father, Kim Il Sung.
Tapes that allegedly contain remarks by Kim junior and have
been smuggled out of the country suggest that he recognizes,
however dimly, the importance of material incentives such as
bonuses.
But Kim is trapped by his paternal legacy, according to
observers. He got where he is because of his father, and
would lose his legitimacy if he strayed too far from his
course.
While it is anyones guess what North Korean officials think
in private, their remarks on the economy leave little hope
that they understand what needs to be done.
"We are indeed in a difficult situation, but were full of
confidence that we can build a prosperous country that can
provide its people with everything," said Ryu, the foreign
affairs official. "We dont feel pessimistic about the
situation at the present stage."
But elsewhere among the countrys 22 million there is a
growing recognition that something must be done soon if North
Korea is to survive as a nation state.
"Ive got a few Korean friends, and theyve changed over the
years," said a Chinese resident of Pyongyang. "They now
understand that they need to follow the Chinese example."
ph/mp/nj AFP
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