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Is North Korea Opening for Business?

SEOUL – North Korea’s system is failing. The country is facing severe energy constraints, and its economy has been stagnating since 1990, with annual per capita income, estimated at $1,800, amounting to slightly more than 5% of South Korea’s. Meanwhile, a food shortage has left 24 million North Koreans suffering from starvation, and more than 25 of every 1,000 infants die each year, compared to four in South Korea. In order to survive, the world’s most centralized and closed economy will have to open up.

A more dynamic and prosperous North Korea – together with peace and stability on the Korean Peninsula – would serve the interests not only of North Korea itself, but also of neighboring countries and the broader international community. After all, North Korea’s sudden collapse or a military conflict on the peninsula would undermine regional security, while burdening neighboring countries with millions of refugees and hundreds of billions of dollars in reconstruction costs.

This should spur international institutions and North Korea’s neighbors to provide the food aid, technical assistance, and direct investment that the country needs to escape its current predicament and make the transition to a market economy. But there remain significant obstacles to such cooperation – not least the North’s obscure and often-unpredictable politics, exemplified by the recent execution of its leader Kim Jong-un’s once-powerful uncle, Jang Song-thaek.

The good news is that North Korea’s leadership seems to understand that its current troubles stem from its grossly inefficient economic system. In recent speeches, Kim has emphasized the need for economic reform and opening up to develop agriculture and labor-intensive manufacturing industries.