DPRK Looking forward

Below is an excerpt from the Economist Intelligence Unit Views Wire 11/1/2008 (h/t Oliver): 

INTERNATIONAL RELATIONS: The immediate outlook for North Korea’s foreign relations is positive. The country’s removal in October from the US State Department’s list of states regarded as sponsoring terrorism signals that the nuclear six-party talks (SPT, also involving China, the US, Russia, Japan and South Korea) are back on track, at least for now. The delisting also clears the way for North Korea, if it so desired, to apply to join the World Bank and the IMF, which the US was previously bound to oppose. However, the rollercoaster of the past three months, and the fact that the SPT are now in their sixth year, counsels caution as to the depth or irreversibility of any progress.

POLICY TRENDS: The omens for progress on economic reform are not propitious. Six years on from the “special measures” (the word “reform” remains discouragingly taboo) of July 2002, it is clear that these have not galvanised GDP growth, which was negative during 2006 and 2007, according to the Bank of Korea (the South’s central bank). Nor have they been a harbinger of wider or deeper institutional reform. Even though the North Korean state can no longer provide and most of its citizens must scrape a living from markets, the regime still seems perversely determined to keep markets in check.

ECONOMIC GROWTH: A reportedly better autumn harvest may bring some respite, but will not alter the fundamental plight of most North Koreans, who must scrabble to ensure even a meagre amount of food. Meanwhile, heavy industry, outmoded and worn out, has no potential to recover, and infrastructure remains in a parlous state. Transforming all of this would require two as yet unmet conditions: large-scale capital investment, which can only come from abroad, and the will to pursue genuine market reforms. The paltry energy aid and other assistance offered via the SPT is no substitute for the major investment needed, the precondition of which is complete denuclearisation.


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