Designing Economic

Reforms: The case of

North Korea and

Vietnam

Presented by Group 5

Agenda

Introduction

Current North Korean economic developments

North Korea and Vietnam’s Doi Moi

North Korea looks to Southeast Asia

Comparing economic reforms in North Korea and Vietnam

Conclusion

Introduction

North Korea

Two tests of Kwangmyongsong rocket in 2012

Nuclear test in February 2013

Rhetorical vitriol against the U.S and ROK leaders

Adopting a new style of

economic reform

Relations towards the ASEAN

Vietnam

Successful Doi Moi economic model

since late 1980s

Shared same background

Current North Korean Economic

Development (1)

Early 1990s: famine and Pyongyang’s isolation

1994-1996: emphasized light industry

1997: emphasis on heavy industries with military applications: coal, steel production, electricity and railways

2000-2001: positive references to China’s economic modernization.

Economic reform (parts of):

Rajin-Sonbong Special

Economic Zone (SEZ)

Mount Kumgang Tourism

Project

Kaesong Industrial

Complex (under Sunshine Policy)

Current North Korean Economic

Development (2)

2001～: concentrated on internal reforms

Extreme diplomatic isolation

2002: ‘July First’ phase of economic reforms

Incentive system for improving agricultural output to overcome food

shortages

1998-2008: Inter-Korean economic

cooperation (until Lee Myung Bak’s)

2009: economic chaos

Drastic devaluation of the DPRK Won

Execution of Pak Nam-gi,

Director of the Planning and Finance Dept.

Current North Korean Economic

Development (3)

2012, April: Adoption of Byongjin (Parallel Track)

Economic reform

Development of a nuclear weapons program

2012: ‘June 28’ Policy – intentions to avoid over-reliance on

external influences

Autonomy for factories and cooperative farms in production decisions

While remaining under the supervision of the central government

Allowing the usage of foreign currency

Different economic rules in the SEZ

‘Communist Party rule, plus coexistence of a plan and market, plus

state-ownership of means of production’

North Korea and Vietnam’s Doi Moi

NK’s desire to reduce dependence on China or ROK explore

new economic relations to SeA countries.

Vietnam’s Doi Moi model has the most potential for adaptation

Before Doi Moi:

Hanoi had imposed Stalinist-style centralized economic planning based

on collective farms in order to integrate the country

Result was food shortages and severe economic deterioration

Historical legacy of antagonism and rivalry between China and Vietnam

Virtual absence of foreign support as well as investments and aid

North Korea and Vietnam’s Doi Moi

Vietnam’s Doi Moi:

“Socialist-oriented free market economy

Allotting small plots of land to households

Decentralization of the decision-making process

Incentive-based system for rewarding productivity

Ensuring that political authority of central government was not affected

Gradual introduction of free market forces

Doi Moi’s

alleviating food shortages

Removal of ideological constraints of economic development

Utilization of free market forces

Encouragement of foreign direct investment

North Korea looks to Southeast Asia

North Korean leadership’s obsession with

regime survival

Achieve spectacular economic growth

In spite of severe diplomatic isolation

Retain firm authoritarian control the country

Previous attempts to borrow elements from

the Chinese model of economic reform

Good relations with ASEAN members

Vietnam: no trade yet

Shared communist background

Efforts in fostering bilateral economic

cooperation

Conclusion

DoiMoi’s adaption: possible framework but hard to undertake

Vietnamese leadership is one that has generally been guided by

pragmatism, rather than ideology

Long-term program of economic reform:

Denuclearization – foundation to international relations & foreign

investment

The opening up of

the North Korea economy