North Korea reforms may languish amid leader transition

By Elaine Kurtenbach

Associated Press

Published: Thursday, Dec. 22 2011 9:05 a.m. MST

Workers at the Chollima Steel Mill Complex stand in front of a large mosaic of the late North Korean leader Kim Jong Il on the western outskirts of Pyongyang on Thursday Dec. 22, 2011. (AP Photo)

The Associated Press

SHANGHAI — Tentative economic reforms in North Korea may languish as its next leader focuses on consolidating support in the wake of Kim Jong Il's death, experts said.

North Koreans are turning inward as they observe an 11-day mourning period following Kim's death Saturday, with business and commerce largely at a standstill, according to reports from Pyongyang. The transition to a new era of leadership under son and successor Kim Jong Un could last longer if he extends his official period of mourning as his father did when his father, North Korea founder Kim Il Sung, died in 1994.

North Korea has inched toward reform in recent years, particularly since making the economy a priority in 2009 as part of a goal to build a "great and prosperous nation" befitting the April 2012 centenary of Kim Il Sung's birth.

One sign of a shift in economic policy came in 2008 with a surprising decision to allow 3G cellphones in a deal with Egyptian telecoms company Orascom, which claims 809,000 subscribers in North Korea.

In other positive signs, a Chinese state-run company, Shangdi Guanqun Investment Co., agreed to invest $2 billion in building infrastructure, power plants and oil refining facilities in the Rason Free Trade Zone, near the border with China and Russia. China and the North also agreed to jointly develop Hwanggumphyong, an island along their border, into a tourism, logistics and manufacturing center.

If not derailed by Kim's death, a proposed gas pipeline between Russia and the Korean peninsula would help form the basis for significant infrastructure development, says Kenneth S. Courtis, a former Goldman Sachs vice chairman who visited Pyongyang in May to assess business opportunities for clients of his private investment company.

The project, to pipe natural gas from Siberia to South Korea via the North, had stalled over the nuclear issue but regained momentum earlier this year, with Russian President Dmitry Medvedev reportedly saying, following a visit by Kim Jong Il, that the North would agree to a deal in exchange for receiving $100 million a year in transit fees.

"Around this pipeline, North Korea could start to rebuild its industrial base, and chemical and particularly fertilizer plants," said Courtis. He said he found North Korean officials "seem to want to engage."

However, experts said the situation in the North, always unpredictable, has grown even more uncertain with Kim Jong Il's sudden death.

His son, who is in his 20s, emerged as his father's choice as successor only 15 months ago.

The leadership may want to continue or accelerate reforms started by Kim Jong Il but progress could be delayed, said Cai Jian, a deputy director of Korea Research Center under the Institute of International Studies in Fudan University.

Kim Jong Il observed a three-year period of mourning after his father died before formally taking control.

"It will be difficult for North Korea to focus on the economy in the short term, as they are in the midst of a transition. It will be almost impossible to have many dealings with other countries for at least several months," said Cai.

Kim's death came as the government was seeking to attract more foreign investment from China, Europe, Southeast Asia and the Middle East.

North Korea has struggled with decades of economic mismanagement, outdated farming methods and little arable land. Its determination to keep developing its nuclear and missile programs has also meant a loss of foreign aid from the West, South Korea and Japan, as well as strengthened sanctions.

Its per capita gross domestic product is $1,800, according to the U.S. State Department, compared with $4,400 in China and about $23,000 in democratic, capitalist South Korea — though the two Koreas were on a par for two decades after their 1950-53 war.

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