Rome (AsiaNews) The first billboard in North Korean history first appeared on the streets of Pyongyang in December 2003. It was an advertisement for a car named “Huiparam” (Whistle), made with Fiat parts exported to South Korea which had made there way north of the border in an attempt to replace used Chinese and Japanese vehicle in addition to the country’s increasing number of bicycles.
The cars sold for 8000 euro. Yet even if unaffordable to most, the phenomenon signaled the few small steps North Korea, one of the last communist strongholds, enshrouded in mystery and cut-off from the rest of the world, is making toward establishing a market economy.
Some analysts predict that economic reforms and booms now happening in China and Vietnam will soon take place in North Korea, where it was once unthinkable that a communism could coexist with a capitalist market economy, despite the obvious huge contradictions and differences.
Regarding economic openness, the May 7 meeting between Choe Thae Bok (chairman of the Supreme People’s Assembly) and Johnny Hon (CEO of the British-based Global Group Companies) comes into the picture. The meeting, as reported by the state KCNA news agency, was organized due to pressures to overcome the country’s widespread hunger problems and imminent threat of a popular revolt
According to Asia Times Online, Mr. Hon agreed to take over the communist country’s only joint-venture bank. Further progress is found in the example of Loxley Pacific, a Thai telecommunications company which is setting up a partnership with the North Korean government in the cell phone industry.
Change Underway
A study found in the Far Eastern-Economic Review revealed that new businesses are starting to spring up in North Korea while vendors are found selling cigarettes, drinks and sweets at roadside stands. The government now allows small independent businesses to be set up, including restaurants and hotels.
“There is a growing consumer market which appears well-supplied with a wide range of goods,” said Richard Ragan, directing officer of the World Food Program in North Korea.
In a recently published directory, the North Korean government lists around 200 new commercial entities, similar to South Korean import/export independent businesses. The 200 or so companies run their businesses freely with foreign partners, while still being state owned. All this is happening while the Central Bank of Pyongyang does not extend government subsides to state or semi-private companies, while remaining a purely lending institution.
The new economic horizons, with obvious advantages found in a cheap labor force and shared linguistic-cultural heritage, are leading many South Korean businessmen to consider investing north of the border.
In general, North Korean enterprise is far behind the times like the rest of its industry. As Marcus Noland, an American economist at the International Institute of Economics compares the North Korean industry to that of “the Soviet Union or Eastern Block countries” before the fall of communism. Yet Noland says he doubts North Korean “can return to classic planned economy”. The economist says he sees the North Korean economy, as more of an economy that is at a standstill than one that is changing.
Economic Reform
When Pyongyang decided to introduce changes into its centrally planned economy in July of 2002, the main decision was to approve an increase in salaries, which previously had been the same for all workers. Another major decision surrounded the prices of goods, which in the past were purchased with “coupons” distributed the state-run Public Distribution System but now paid with cash.
The North Korean currency (the won) was then devalued and prices on goods subsequently skyrocketed, confirming the fears of those he thought reforms would hit the weakest sectors of the population the hardest. This proved true as the event was coupled with the ending of the Food Rationing Program along with state subsidies for homes. Some experts say, however, that some of these government programs are still enjoyed by certain state employees and military personnel.
In December of 2002 Pyongyang opted for the euro, not the dollar, as the basis for foreign transactions. For the first time since 1953, the year the government imposed a collective agricultural industry, a trial system of farming was introduced according to individual family management. North Korea also allowed farmers to purchase machinery and supposes as needed, to make profits and quality-oriented products. Moreover, the state allowed local authorities to enjoy a certain amount of autonomy regarding regional financial and economic issues.
Special Economic Regions
The North Korean government has created a special state bureau and region in Sinuiju, a small city along the Chinese border, to carry out its reform experiments with a new hybrid North Korean-foreign industrial and financial center. What’s more, a specially designated tourist zone has been opened on Mount Kumgang. Lastly, in preparation of a new economic region, a new industrial park has been set up in Kaesong, a demilitarized zone, to provide a low-cost labor to South Korean companies.