NK can unlock economic potential with capital inflows

By Zhang Huizhi Source:Global Times Published: 2018/6/12 22:18:40

Illustration: Luo Xuan/GT


Leaders of the US and North Korea met in Singapore on Tuesday as the development policies and financial potential of North Korea made international headlines.

In reality, limited by stereotypes about North Korea, the West and the international media are inclined to ignore the country's economic advantages.

North Korea uses a planned economic system and has established a relatively complete industrial system since its founding. Although suffering from long-term sanctions, abundant mineral resources have enabled the country to keep up industrial output.

In particular, with the corporate manager responsibility system being employed to promote industrial automation and modernization, the level of light industry production has greatly increased. Production of cement and fertilizers has also risen.

North Korea also has high-quality cheap labor. The country attaches great importance to investment in education as well as science and technology. Because the country mandates 12 years of compulsory education, workers are generally well-educated and quick to learn.

The rapid development of North Korea's information technology sector has increased the speed and level of industrialization. Large investment has led to remarkable results. North Korea believes that economic success starts with science and technology.

North Korea hopes its efforts to develop the IT industry can speed up its overall transformation, as the IT industry features a relatively short life cycle, rapid development and wide application.

In many areas, North Korea has learned from China's experience of economic policy. It's not hard to discern the impact of China's reform and opening-up on North Korea's promotion of a mechanism that holds a production team responsible for a particular field in agriculture reform, the management responsibility system and the construction of economic development zones and special economic zones.

North Korea has improved its economic policies based on its national conditions. The country will achieve socialist economic construction with North Korean characteristics.

North Korea may leverage policy measures and the experience of countries like China, Vietnam, Germany and other economies in their early development stages for its own economic development, which surely needs to be refashioned to fit into its own needs.

Certainly, as a developing country that follows its own economic path under severe international sanctions, North Korea still has some shortcomings.

First, the country has a labor shortage. Although North Korea has a population of more than 24 million, most men are required to perform military service, and the adult labor force can hardly meet demand.

The first issue to address is to increase labor supplies if North Korea opts for an opening-up approach to develop its economy, especially if it wants to develop export-processing industries. This may require North Korea to release its labor force into the economic construction field gradually.

Domestic purchasing power and market demand are also relatively small, given North Korea's relatively small population.

Second, although the market economy factor is growing, North Korea still insists on a planned economic system. The construction of a socialist economy is still being promoted by the country.

North Korea does recognize the development brought about by the market economy, but it also cares about the resulting shock to thought and also the impact on domestic political and economic stability. In terms of the economic policy of North Korea, North Korea might not go beyond a continued push toward "limited opening-up."

Third, huge capital investment is required for economic development, given North Korea's backward infrastructure and lack of funds, technology, and management experience.

Relying only on itself, North Korea may find it too difficult to achieve rapid economic growth in the short term.

Attracting external financial support is of particular importance.

At different stages, North Korea has always come up with its own economic construction priorities, but there may be three major areas of economic emphasis for North Korea in the future.

With weak infrastructure such as roads, railways and ports, it will be difficult for North Korea to attract external investment.

Also, North Korea lacks oil and natural gas, and it also has electricity shortages. In solving the North Korea nuclear issue, the country will strongly demand the right to retain the peaceful use of nuclear energy.

Although North Korea has a basic industrial system, it remains relatively backward. It is necessary to introduce foreign capital to promote the development of various industries, especially heavy industry.

More policy action and more effort involving North Korea's economic development will inject unprecedented vitality into the whole region.

The author is the vice dean of the Northeast Asian Studies College at Jilin University. bizopinion@globaltimes.com.cn



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