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Noland and Dong See Little Hope in New SEZs

Chris Green  |  2011-07-01 14:34
[imText1]Marcus Noland, an economist with the Peterson Institute in Washington, D.C. and author of a number of books on the North, does not believe that Pyongyang has any intention of using recently launched Sino-North Korean economic projects as the launching point for wider economic reform, instead believing that Kim Jong Il only sees such projects as a way to earn foreign currency.

Speaking with Samsung Economic Research Institute economist Dr. Dong Young Seung in a debate convened by The Daily NK in Seoul on the afternoon of the 29th, Noland asserted that projects such as those at Hwangeumpyeong near Shinuiju and further north at Rasun appear to be examples of the North Korean regime promoting trade and investment through entities under their direct political control.

Dong agreed with Noland on the isolated trade projects, portraying them as of little benefit to wider North Korean society and pointing out, North Korea's own way of reform is being done at just the four points (Kaesong, Mt. Geumgang, Shinuiju and Rasun). The North Korean regime uses the benefits earned from these four corners to placate the rest of the regions. With these reforms, it blocks reformist waves in other areas of domestic society.

The route toward what Dong calls North Koreas own way of reform is being followed mostly due to a fear of unpredictable consequences, Noland added, explaining that in a new paper he has co-authored with partner Stephan Haggard for release next month, a survey of 300 Chinese enterprise managers doing business in or with North Korea reveals that most business done in recent years has been on commercial terms outside the explicit control of Pyongyang.

Therefore, he says that Pyongyang appears to be trying to bring more of the activity, and the benefits, under its direct control by opening up Hwanggeumpyeong and attempting to revitalize Rasun.

Elsewhere, Noland drew on another of his and Haggards recent papers, Engaging North Korea; The Role of Economic Statecraft to reassert his belief that, with the exception of interdictions to try and halt North Koreas trade in weapons and proliferation of missile and nuclear technology, sanctions have very little effect on North Korea and are unlikely to be sufficient to alter its behavior, especially where key national interests such as its possession of nuclear weapons are concerned.

As the two experts state in the recent paper, North Koreas political economy and its external relations render it remarkably insensitive to either sanctions or inducements. Instead, its behavior appears driven to a significant extent by domestic political considerations and a preoccupation with regime survival.

He also commented on the ongoing debate about food aid, suggesting that rising relative domestic corn prices could indicate that food security conditions are getting worse, with people turning to cheaper foods in order to survive, while adding that he is concerned about a further contraction in the fall harvest due to the lateness of planting this spring and the lack of available fertilizer.

Dong was quick to clarify the point, however, saying that North Korean people can be classified into three groups according to their standard of food consumption: one class where people receive and have always received stable food distribution; another class of people who receive almost no distribution and purchase food in the markets; and another class which is excluded from both systems. He said he believes the current situation is not one of absolute lack of food, instead, The reason why the North Korean authorities have asked for food from the international community is that there might be certain problems with distribution to the first class, in which people regularly receive food.

In particular, he added, Kim Jong Eun is pursuing the construction of 100,000 homes in Pyongyang and they need to supply food to feed the soldiers who are the ones carrying out the critical project, but now even supplying this food has ended in failure.

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