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Shim Jae Hoon

How Far Can Kim Go on Reform?

SHIM Jae Hoon

May 6, 2005

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Three years after announcement of a price reform, it's still unclear how far North Korea is prepared to go to overhaul its broken economy.

Policy modification so far made in the agricultural sector has resulted in significantly boosting food production, according to South Korean experts. They also say more international trade is taking place with China through the once-tightly sealed border.

But these improvements amount to marginal changes, unfit to be called a systematic reform program. And it's yet premature to say the North is mending its bad old habit of managing the economy through central planning and topdown commandism through Stalinist control over every aspect of the economy. Indeed, there's sufficient ground to doubt if North Korean dictator Kim Jong Il is now ready to replace his personal grip on power with party control. The prospects of the North Korean economy ever recovering from its moribund state depends on his relinquishing control, at least over the economic management. That requires readiness to relax political control, perhaps at the risk of liberalizing his regime.

According to figures available in Seoul, the North's food production has risen from 3.95 million tons in 2001 to 4.31 million tons in 2004, thanks to a series of policy initiatives undertaken to rehabilitate the farming sector. These include giving more autonomy to collective farms over what crops to plant and how much to harvest. The annual quota on rice production remains inflexible, but farmers can now decide what they can do with other crops: such as whether or not they should go on planting more corn than potatoes as ordered by the party despite the fact that corn is more vulnerable to climate change.

Making other concessions, the government has increased the size of private plots that individual families or organizations can farm to supplement their meager food supply, and even sell on the free market produce in excess of their own consumption. The size of this privately cultivated farmland or field has grown from 50 pyong (one pyong equals 3.3 square meters) per family or unit to 400 pyong.

Even the size of the work unit on the collective farm has been scaled back from 10 to 25 people each to a much-smaller, family-based unit of seven to eight people. But changes like these are much too inadequate to turn the tide as the economy, under Kim's mismanagement, has shrunken to half of its size in the last ten years. The North still needs 2 million tons of food aid each year to prevent another horrendous famine, such as the one that killed up to 2 million people between 1995 and 2000. It is asking for half a million tons of chemical fertilizer aid from the South.

Other modifications have been made to deal with a pervasive shortage of everything from food to clothing. The regime now authorizes a limited number of free market activity through licensing of shops or market stalls at designated area, depending on the population of each city. Thus a medium-sized city with over than 70,000 people may have up to 2,000 such stalls set up within the marketplace. A smaller city of 60,000 people may get 900 stalls.

The free-market licensing has been necessitated by hyperinflation that set in after the price reform of July 2002. Prices for everything from food to wages have literally skyrocketed - a kilogram of rice has jumped 550 times to 44 Korean People's Won (US$1 is equivalent to KP Won 153 under official rate, but it's as high as 2,500 KP Won on the black market); the price of pork has risen 26 times to 7 KP Won per kilogram. By contrast, an average worker's salary has risen to about 5,000 KP Won, at the higher end of wage scale. That average people have tough time making ends meet is indicated by the rising number of crimes (such as burglary and prostitution) reported all over the North.

The problem with these policy modifications is that they come in fits and starts without a clearly set road-map. If Kim appears determined to avoid another catastrophic famine, that's understandable. What's unclear is how strongly he's committed to fundamentally reforming the economy, along models pursued by China and Vietnam through systematic openings and restructurings. Four years after his sensational visit to Shanghai to sample the fruits of China's modernization, we see no evidence he is seeking, in the words of late Deng Xiaoping, "truth from facts." So far, there are no signs either the Workers Party or the Supreme People's Assembly - nominally the North's two ruling power institutions - is debating policy change.

Kim alone decides what changes to bring and when, apparently making sure whatever modifications he approves should not have the effect of undermining his grip on power. Thus you see in the official media that every step he takes on relaxation of control is made out as a mark of his genius, not a result of the party's changing policy. He doesn't lead his nation; he rules it with an iron fist. Any party decision overturning the past policy makes the Kim dynasty look fallible and is therefore unacceptable.

This is where the North's reform differs from China or Vietnam . Any reform effort that clashes with Kim's dynastic control has scant chance of adoption. North Korea isn't run by a party; it's run by Kim through the party.

The North's structural problems are too serious to be handled by an inexperienced team with a haphazard solution. They require a carefully crafted policy program empowering the party and well-trained technocrats who can at least think and make independent decisions at the level of their counterparts in China and Vietnam. But that appears inconceivable so long as Kim refuses to share power with technocrats.

Shim Jae Hoon is a Seoul-based columnist and political commentator. The views expressed are his own and do not represent the views of the publications that carry his columns.
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