[INTERVIEW] 'North Korea needs economic reform to survive'
North's economy suffers worst performance in 20 years
By Kim Jae-kyoung
North Korean leader Kim Jong-un should pursue economic reforms to rehabilitate the isolated country's moribund economy, according to William Brown, a Washington-based North Korea expert, Sunday.
He believes that without proper reforms, the North won't be able to get its economy back on track even if it gets sanctions relief for giving up its nuclear weapons.
"For Kim to realize his prosperity, much more than ending sanctions will be required," Brown, adjunct professor at Georgetown School of Foreign Service, said in a recent interview.
"Economic reforms are clearly the only answer. I would say Chinese-style economic reforms need to get started and Trump can help that very positive process along."
In a highly visible way Kim has promised his people economic progress in the face of severely damaging sanctions.?
Brown's advice came as the Bank of Korea (BOK) announced Friday that the North's gross domestic product (GDP), the total value of all the goods and services produced in a country within a year, contracted 3.5 percent in 2017, a dramatic setback from the previous year's 3.1 percent growth.
It was the worst performance in 20 years since its economy shrank by 6.5 percent in 1997 when the currency crisis shook Asia.
The North cites the sanctions as the cause of their poverty but the poverty long predates the sanctions.
"Even if sanctions are lifted, because of its socialist prices, North Korea's foreign trade will remain pitifully small, and its legacy of bankruptcy and unwillingness to pay debts make investments there foolhardy," he said.
The reason why Brown is stressing economic reforms is based on his belief in the North's strong potential.
"The country has a pretty good stock of physical capital, excellent human capital conditions, and a great geographical location with lots of natural resources. It should be a fairly rich country," he said.
"Instead, because of its incredibly inefficient command or socialist economic system, now broken, its resources and labor are used extremely poorly. I would say by far the worst in the world."
From his perspective, economic reforms that encourage privatization will very quickly make better use of those resources and boost the country's output and living standards.
However, Brown said that given its persistent problems with money and debt, help would be needed to set up a new monetary system that can accommodate a vibrant market economy, as well as a legal system that protects investments and private property.
"The U.S. and South Korea could help create such a sound monetary system, and offer markets for North Korean exports, once Kim agrees irrevocably to denuclearize and reform," he said.
"I would say that in those circumstances, the U.S. could even sponsor North Korea's entry into the WTO, so that it can trade normally with the rest of the world. And South Korea could help a lot with proper institution building."
Brown, a former U.S. intelligence officer, said that in ongoing and future negotiations, Washington should focus on reaching agreements with Pyongyang to stop production of fissile material.
"I hope that very soon an arrangement can be made to at least stop producing or separating fissile material, highly enriched uranium and plutonium, at previously declared and secret facilities," he said.
"That production is a continuing provocation that has gone on unanswered for the better part of a decade and needs to stop, immediately."
Trade war and North Korea
Brown voiced concerns that deepening trade confrontations between the U.S. and China could weaken the two nations' joint efforts toward the North's denuclearization.
"It is very important that the U.S. and China remain in sync with respect to North Korea so the so-called trade war is worrisome," he said.
He warned that it would be a mistake for China to use North Korea sanctions as a bargaining chip to tip the trade battle in its favor.
"Too early removal of sanctions could well lead to more maximum pressure by the U.S. which would be terrible for China," he said.
He said that the key culprit behind the U.S.-China imbalance is too much savings in China and too little in the U.S., not trade.
"I mostly blame China's bad capital markets and weak returns on investment for that situation, not trade, which pushes Chinese savings and investment to the U.S. in huge amounts, lowering our interest rates and discouraging our savings," he said.
"We can't demand changes in Chinese monetary policy but we can utilize tariffs, selectively, to make the same points."
By Kim Jae-kyoung
North Korean leader Kim Jong-un should pursue economic reforms to rehabilitate the isolated country's moribund economy, according to William Brown, a Washington-based North Korea expert, Sunday.
He believes that without proper reforms, the North won't be able to get its economy back on track even if it gets sanctions relief for giving up its nuclear weapons.
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| William Brown |
"Economic reforms are clearly the only answer. I would say Chinese-style economic reforms need to get started and Trump can help that very positive process along."
In a highly visible way Kim has promised his people economic progress in the face of severely damaging sanctions.?
Brown's advice came as the Bank of Korea (BOK) announced Friday that the North's gross domestic product (GDP), the total value of all the goods and services produced in a country within a year, contracted 3.5 percent in 2017, a dramatic setback from the previous year's 3.1 percent growth.
It was the worst performance in 20 years since its economy shrank by 6.5 percent in 1997 when the currency crisis shook Asia.
The North cites the sanctions as the cause of their poverty but the poverty long predates the sanctions.
"Even if sanctions are lifted, because of its socialist prices, North Korea's foreign trade will remain pitifully small, and its legacy of bankruptcy and unwillingness to pay debts make investments there foolhardy," he said.
The reason why Brown is stressing economic reforms is based on his belief in the North's strong potential.
"The country has a pretty good stock of physical capital, excellent human capital conditions, and a great geographical location with lots of natural resources. It should be a fairly rich country," he said.
"Instead, because of its incredibly inefficient command or socialist economic system, now broken, its resources and labor are used extremely poorly. I would say by far the worst in the world."
From his perspective, economic reforms that encourage privatization will very quickly make better use of those resources and boost the country's output and living standards.
However, Brown said that given its persistent problems with money and debt, help would be needed to set up a new monetary system that can accommodate a vibrant market economy, as well as a legal system that protects investments and private property.
"The U.S. and South Korea could help create such a sound monetary system, and offer markets for North Korean exports, once Kim agrees irrevocably to denuclearize and reform," he said.
"I would say that in those circumstances, the U.S. could even sponsor North Korea's entry into the WTO, so that it can trade normally with the rest of the world. And South Korea could help a lot with proper institution building."
Brown, a former U.S. intelligence officer, said that in ongoing and future negotiations, Washington should focus on reaching agreements with Pyongyang to stop production of fissile material.
"I hope that very soon an arrangement can be made to at least stop producing or separating fissile material, highly enriched uranium and plutonium, at previously declared and secret facilities," he said.
"That production is a continuing provocation that has gone on unanswered for the better part of a decade and needs to stop, immediately."
Trade war and North Korea
Brown voiced concerns that deepening trade confrontations between the U.S. and China could weaken the two nations' joint efforts toward the North's denuclearization.
"It is very important that the U.S. and China remain in sync with respect to North Korea so the so-called trade war is worrisome," he said.
He warned that it would be a mistake for China to use North Korea sanctions as a bargaining chip to tip the trade battle in its favor.
"Too early removal of sanctions could well lead to more maximum pressure by the U.S. which would be terrible for China," he said.
He said that the key culprit behind the U.S.-China imbalance is too much savings in China and too little in the U.S., not trade.
"I mostly blame China's bad capital markets and weak returns on investment for that situation, not trade, which pushes Chinese savings and investment to the U.S. in huge amounts, lowering our interest rates and discouraging our savings," he said.
"We can't demand changes in Chinese monetary policy but we can utilize tariffs, selectively, to make the same points."
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