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North Korea’s External
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Ⅷ 1. Introduction
Since the founding of the country, it is a well known fact that North Korea has consistently sought to develop an independent economic system based on the fundamental ideas of the socialist economy. As a result, North Korea’s economic exchanges with other countries have been limited to acquiring resources required for production that cannot be obtained domestically. This kind of economic management, involving enormous amounts of state-con- trol, demonstrates that North Korea still intends to pursue the goal of creating a socialist state. However, it can also support the con- clusion that the leaders of North Korea have determined that this independent economic system is the most valid method of pre- serving the survival of the North Korean state.
Assessments of North Korea’s open-door reform policies and the surrounding policy environment are fairly pessimistic from an international perspective. First of all, North Korea is not only the most reclusive state in the world but it is also the only state to reject the adoption of a market-based economic system. As a result, there are not many countries and international companies that actively cooperate or willingly participate in developing North Korea’s economy based on the economic factors alone. Since the end of the Cold War many former socialist states have tried to convert their economic systems, these changes have led to the concentration of remaining global investment capabilities in the newly developing states of Eastern Europe, as well as China and Russia. Due to the investment of resources elsewhere, successful pursuit of open- door reform policies for North Korea has not occurred, especially because the country does not possess any particular investment advantages or opportunities, even if it might have been able to promote them under normal circumstances. Furthermore, though
North Korea may have gained the interest of the international soci- ety through its alleged nuclear weapons program, it has been unable to overcome the economic difficulties it has faced by not being actively engaged in foreign exchange.
Meanwhile, North Korea is surrounded by neighboring coun- tries that are growing and developing at an extremely rapid pace.
South Korea has achieved levels of economic growth unprece- dented in the history of the world, China has also surfaced as one of the world’s strongest economic powers based on its astonishing economic growth from the 1990s, and Russia, after converting its economic identity, is gaining economic power by utilizing its rich natural resources. The economic growth in Northeast Asia over the last 20 years and the subsequent development of stronger economies in the region is, to some extent, providing numerous opportunities for North Korea to revitalize its stagnant economy.
However, because it is refusing to adopt a full-scale open-door policy based on the principle of marketization, North Korea is missing the opportunity to engage in international economic coop- eration fostered by the collapse of the socialist bloc.
Another issue that we should consider, along with the state of international affairs, is the fact that over the last 10 years South Korea has played a chief role in North Korea’s economic revival by supporting and funding several economic cooperation projects. In the last 20 years since South Korea first expressed its intent to cooperate with the North Korean economy, as outlined in the
‘Special Declaration on National Self-esteem, Unification and Pros- perity (the 7.7 declaration)’ of July 7, 1988, South Korea has consis- tently expressed a desire to contribute to the revitalization of North Korea’s economy as well as to promote and execute large scale economic cooperation projects. Cooperation among the two states has been on the rise, regardless of the fact that the inter-
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Korean economic cooperation projects of the 1990’s encountered many problems due to numerous non-economic factors. In the early 21st century, considerable results were produced by promot- ing the development of large projects such as the Mt. Geumgang tours and the Kaesong industrial complex. Taking into account these facts, South Korea should be considered the most important partner for the revitalization of the North Korean economy.
First and foremost, this paper will analyze the direction of development for North Korea’s open-door reform policies by con- centrating on the possibilities of bilateral and multilateral coopera- tion. Second, based on this analysis, this paper will introduce a new model for engaging in international cooperation with North Korea. Finally, this paper will address the possible role South Korea might play in promoting such international cooperation and reform policies. To achieve these goals, we must execute a compre- hensive evaluation of the foreign economic reform policies in rela- tion to various factors including the situations in South and North Korea, as well as the international society. However, because these aspects have been thoroughly analyzed in other studies, this paper will briefly cover the more important issues on the matter. First by examining the North Korean desire to pursue open-door reform policies, which is the most important factor, it can be said that North Korea is not too keen on engaging in foreign trade. This is because North Korea prioritizes the preservation of its system, and fears that opening its doors to the outside world might endanger the system and will force an unwilling North Korea to promote a full-scale reform. Resolve to pursue economic reform policies for North Korea is quite firm in South Korea, however, it can also be said that a national consensus on ways to pursue this goal remains difficult to achieve. This is due in part to the controversial ‘Initia- tive for Denuclearization, Openness and 3000’ that was introduced
at the start of a new administration under president Lee Myong- bak. In other words, during the last 10 years of progressive-mind- ed governmental rule, policies prioritized an increase in the amount of inter-Korean cooperation, with the understanding that inter-Korean cooperation could be achieved through various routes. However, the new Lee administration is trying to achieve a more open North Korean system by relying on the premise that inter-Korean cooperation must first help achieve denuclearization on the Korean peninsula. This would result in improved inter- Korean relations that would exert a positive effect on the lives of North Koreans. Consequentially, it is yet to be seen what kind of change this policy will bring about in North Korea since the coun- try is still not willing to open its doors. As for the international perspective, if North Korea declares that it will open its doors to other nations through domestic economic reforms, many countries including the four surrounding powerhouses, the United States, Japan, China, and Russia, will promote economic cooperation with North Korea. Even in this case, however, the amount of progress achieved in the Six Party Talks on North Korea’s nuclear weapons program will likely determine the magnitude and level of econom- ic cooperation. Also, the willingness of other countries to engage in economic cooperation with North Korea and the activities of various working groups that have been agreed upon in the Six Party Talks will be factors determining the overall progress of eco- nomic cooperation. Furthermore, considering the influence that the United States has over several international organizations that provide economic assistance to North Korea, multilateral coopera- tion will depend on how fast relations between North Korea and the United States can be normalized. The following part of the paper will analyze the foreign exchange policies of North Korea in reference to these comprehensive conditions for policy making.