Evaluation of the North Korean July 2002 Economic Reform

IntroductionOn July 1, 2002, Korea carried out an all-out of its economic system in order to manage its economy better. Given the drastic changes in the economic management prescribed by the government in the internal document sent to state bodies at all levels on June 1, 2002, the North Korean style economic reform is expected to have an enormous impact on not only the economy but also the regime itself. The comprehensive initiative toward practical and decentralized policies for economic recovery was indeed a historic decision for the socialist country, which had adhered to its inflexible centrally planned economic policies despite the worst economic crises ever in food, foreign currency and energy in the years following 1995. Thus, it can provide important insights into the regime's future changes and direction. In addition, the will be a determining factor when judging whether the will follow in the footsteps of Chinese reform, Eastern European or the market socialism of northern Europe. Another possibility is that the will adopt its own path to in its own style. The recent moves, however, could bring about unexpected results due to gaps between political intentions under the plan and unintended market-oriented results.Between 2003 and 2004, the economic started to partly take shape as an economic reform. Upon the official announcement of the action, however, efforts were focused to define the reform. There were continuous debates over whether it was a starting point for an earnest market-oriented economy or merely a temporary measure to raise the effectiveness of the socialist system.A few years have passed since the execution of the economic reform, but it may still be too early to make an assessment of the policy. However, analysts believe that the series of recent policies are somewhere between limited transformation into a market economy and an increase in the effectiveness of the socialist system. For the former, more fundamental measures, such as of the ownership should have followed the economic reform. For the latter, there should not have been drastic market-oriented changes, such as the state-led development of the general markets.It is not yet clear whether Korea will reap results from its efforts to bring the private sectors under government control by setting up general markets such as the product markets. Nor is it clear that it will shift from state control over the economy to further reforms. What is true at the present time is that the Korea has taken the first step to reform, even though progress has not been as fast as expected by analysts in the early stages of the reform.The Implications of the July 2002 Economic ReformThe Economic Reform's Policies and PurposesThe basic principle of Korea's economic is to pursue practical interests within the framework of the command economy, which is the centerpiece of socialism. To ensure the principle of practicalities, the economic includes three major policies. First, on the assumption that fair pricing is based on the principle that the cost and value of the products will prove profitable, prices and wages should be brought up to a realistic level. Second, when the regime evaluates the performance of factories and enterprises under the self-supporting and independent account system, the primary consideration is net profit. Third, a performance-based has been introduced, for which distribution will be commensurate with the work amount and gains. Under these policies, the action's priority for enterprises is to secure sufficient basic necessities for citizens, and to weaken the black markets by narrowing the price gap between the state sector and the private sector.However, the introduction of the incentive system and the family-based sub-team operation of the special collective farm can be clearly distinguished from the previous economic policies, possibly enough to bring about fundamental changes to the command economy. …