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N. Korea considers economic reforms

Proposals would ease state control, but analysts in South are skeptical

Poverty and food shortages have been widespread for decades in North Korea Poverty and food shortages have been widespread for decades in North Korea
  • Stephen Hong, Seoul
  • Korea
  • August 10, 2012
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North Korea is considering steps to scrap its centralized economic model and embrace a freer market, according to a news report. The proposals come amid growing disquiet over food shortages and widespread poverty.

Citing sources in the North, Radio Free Asia (RFA) reported yesterday that in June leader Kim Jong-un called for a new economic model that eases existing state controls on production and distribution of goods, as well as on food rationing and heavy regulation of the agricultural sector.

The new model would give greater autonomy to state corporations, allowing them to decide production, pricing and marketing methods, while allowing farmers to keep up to 30 percent of their harvest.

Currently the state dictates agricultural output and claims all harvests.

Food rationing is also thought to be on the way out, except for public servants and employees of education and medical institutions, according to the sources. The government was reported to have slashed rationing by as much as two thirds last Fall.

However, analysts in the South remain skeptical that the North will ultimately abandon their rigid socialist system.

Lim Kang-taeg, a senior researcher at the Korea Institute for National Unification, told ucanews.com today that North Korea, whose economy has been teetering on the brink of collapse since the mid-1990s, has previously floated “similar reform measures including the scrapping of state rationing in 2002 but they failed due to a lack of political will.”

Lim said the North revived rationing in 2005, fearing that the state’s authority was threatened, and reports of a new model are tantamount to the previous attempt to craft a more liberal economic system.

“The state rationing system has already proven ineffective because [it] is not carried out well even in Pyongyang, the capital,” Lim said.

He added that the new measures seem to be “an attempt to reduce the state’s financial burden by abandoning rationing," and that it would take time to determine how serious the North was about reform.

Dong Yong-seung, a researcher at the Samsung Economic Research Institute, said the new reform measures do not go far enough to constitute a scrapping of the North’s planned economy.

It is just a “desperate countermeasure” to solve the serious economic difficulty, rather than an abandonment of the socialist system, he said.

It is unclear when the proposed reforms would be implemented, according to the report, which suggests that concern over unexpected inflation and other side-effects could prove to be substantial obstacles to change.

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