DPRK on the economic reform path

The Democratic People's Republic of Korea has once again grabbed the headlines, this time for two different reasons. The first is the detention (and release on Dec 7) of Merrill E. Newman, an 85-year old American who took part in the Korean War, during his visit to the DPRK. The second is the signing of a decree by Russian President Vladimir Putin on Dec 2 imposing sanctions on the DPRK in compliance with UN Security Council Resolution 2094 of March 7, 2013.

The decree signed by Putin bars Russian citizens and organizations from doing business to help or in any way provide financial aid for Pyongyang's nuclear and missile programs. According to the decree, all DPRK ships now have to undergo inspection before entering a Russian port and Russian authorities will "increase vigilance" on DPRK diplomats.

By imposing sanctions, Moscow is expected to help prevent Pyongyang from acquiring nuclear and missile technology, and force it to abandon its nuclear weapons and long-range ballistic missile development programs. The move is aimed at preventing a nuclear crisis, which could harm Russia's interests.

After conducting its third nuclear test, the DPRK announced a new strategy of carrying out economic reform and strengthening its nuclear program simultaneously, saying it had the right to develop nuclear weapons.

If the DPRK succeeds in its nuclear weapons' program, it could have a domino effect in East Asia, with countries such as Japan and the Republic of Korea joining the nuclear race and turning the region into a tinder box.

Besides, the volatile security situation, thanks to the DPRK's nuclear program, has prompted the United States to expedite the implementation of its "pivot to Asia" strategic policy and consolidate its military alliance with Japan and the ROK, which is also expected to act as deterrent against Russia.

Using Pyongyang's military threat as an excuse, Tokyo, too, has accelerated its military buildup, which again is not good news for Moscow that has a territorial dispute with Tokyo over the Southern Kurils. So Putin signed the decree to impose sanctions on the DPRK not only to prevent a nuclear arms race in East Asia, but also to better defend Russia's national interests.

The fact is, amid this hullabaloo the DPRK's new economic policy has failed to get enough press. On Nov 21, the Presidium of the Supreme People's Assembly of the DPRK issued a decree to set up 14 additional economic development zones (EDZs) apparently to attract more foreign investment. Different from the four existing central special economic zones, the new EDZs will be smaller, less than 4-square-kilometer each.

A plenary session of the Workers' Party Central Committee in March had already urged regional governments to create special economic zones that suited their conditions. Later, the SPA Presidium passed a law on establishing, developing and managing EDZs, saying they would provide investors with favorable conditions for economic activities in terms of land use, hiring of labor and taxation. And on Oct 16, the SPA Presidium upgraded the General Bureau for State Economic Development to the State Economic Development Commission, in charge of promoting investment in EDZs.

These new developments show that Pyongyang attaches great importance to economic development, especially to the setting up of EDZs. Pyongyang also encourages private businesses to cooperate with foreign enterprises to attract more foreign investment and plans to set up larger central-level EDZs.

Every DPRK province is preparing to set up an EDZ, with hundreds of foreign-invested enterprises engaged in the industrial sector including machinery, electronics, light industry, aquaculture, pharmaceuticals, construction materials and food processing, as well as the service sector including communications, transportation, banking and catering.

The new initiatives taken by the DPRK in the economic field is the result of the combined effects of various factors. The country has for long been trying to develop its economy. And the results of some of its efforts have been remarkable.

The UN Security Council imposed further sanctions on the DPRK after it conducted its third nuclear test, which dealt a severe blow to its already floundering economy.

Perhaps the Security Council move made the DPRK realize that only economic reform could help it tide over the crisis. It is now trying to modernize its tourism facilities in North Pyongan and Kangwon provinces to attract more foreign tourists in order to earn foreign exchange to help overcome its economic woes.

There are signs that economic reform is quietly unfolding in the DPRK. But whether or not economic reform will become the DPRK's top priority depends on the determination and sincerity of the country's leadership, as well as on how its relations with the Republic of Korea and the US develop. The international community, too, has a role to play in keeping Pyongyang on the right track of economic reform.

A self-sufficient DPRK, moving toward opening up its economy to the outside world will play a crucial role in maintaining peace and stability on the Korean Peninsula. And this is the direction that all countries should help the DPRK take.

The author is an associate researcher at the Center for Northeast Asian Studies, a research institute in Jilin province.