The contents of this material do not necessarily represent the official position of the Ministry of National Defense. Army Major General Shin, Won-sik, Director General of Policy Planning Bureau, Ministry of National Defense, Republic of Korea 1/10
Agenda
- 1/12 - China The Olympics Held in Deng Xiaoping Revolution Joined WTO Beijing (Collective Leadership System) US-China Hong Kong US-China Treaty US-China Summit Returned of Amity Strategic Talks ’72 ’78 ’79 ’80 ’86 ’99 ’01 ’02 ’08 ’09 Deng Xiaoping (Led Reform and Opening) Mao Zedong Jiang Zemin Hu Jintao Xi Jinping? (Continuation) (Prosperous China) (Self-reliance) Hua Guofeng Hu Yaobang, Zhao Ziyang ’76 ’78 ’79 ’81 ’82 ’89 ’92 Hua lost power Tiananmen Massacre Mao died 4 Special Deng died Economic Zones Deng’s Southern Tour The People’s Commune 4 Modernizations / Proposal Dissolved (~’85) for Reform & Opening US-Vietnam Vietnam Joined WTO Treaty of Amity Constitutional 6 th Congress US-Vietnam Vietnam Reunified Revision (Adopted Doi Moi) US Lifted Trade Ban Trade Agreement ’75 ’80 ’86 ’93 ’94 ’95 ’98 ’00 ’06 New Doi Moi Phase 2 Doi Moi Phase 1 Doi Moi Phase 3 Economic ( Preparation for ( Multi-dimensional Economic Reform ) ( Establish Open Economy ) Market Economy ) Policy ’79 ’86 ’88 ’95 ’01 Limited Liberalism Allow Various Types Agriculture Economic State-owned Enterprises Law Policy and etc. of Ownerships Management Reform (Separation of Ownership from Management) Constitutional Revision (Socialist Market Economy)
- 2/12 - 2002 2005 2010.8 2012.8 Jul 1 Economic Failure of Jul 1 Measure Reform Preparation Management Re-implementation & Currency Reform Improvement Measure Taking blames for the failure Attempted to shape external Emphasized economic Co-existence of market * Jang Sung-taek purged(’04), environments (KJI’s visit to reform (Oct 3 statement) economy and planned Pak Pong-ju resigned (‘07) China, US-NK talks) economy Brakes on reform such as KJU reviewed economic KJI’s visit to China, inter- Market-oriented mind spread, regulating the general market management improvement Korean summit partial improvement of industry productivity Currency reform in Nov, 2009 Pak Pong-ju Jul 1 KJU Jun 28 plan KJI succession Return to October 3 Jun 18 Currency appointed succession announced measure distribution (‘98) statement statement reform as the Premier (’12.4) (’12.6) (‘02) system (’08) (‘01) (’09.11) (’03.9) (’05.10) Economic improvement measures taken by NK are similar to the initial phase of the Chinese reform, but not yet up to the mark
- 3/12 - Extended Dissolved Production by Household Household Massive lease the sub-work teams contract contract and Work period People’s production management contract labor group for land Commune (`79) (`80~`82) (`80~`84) (`84) (`85) Separated land Allowed ownership from End-product State farm/Co-op sales/inheritance/ contract system land use right mortgage/lease of land (Early 80’s) (`87 New Land (`81) (`93 Land Use Law) Law) Similar to Household Contract Production (China) and End- product Contract System (Vietnam) , but not yet up to the mark Household Contract Management, segregation of the right of land use means de-facto transition to privatization of land ※ In order to sustain productivity in the long run, necessary to grant long-term land use rights
- 4/12 - Separated Enterprise property Decentralization Introduced tax ownership from rights, stock system and improvement system management rights of incentive system (Law of Industrial ( 利改稅 ,`83~`84) (Law of Industrial Enterprises, `93~`99) (`78) Enterprises,`88) Separated ownership of Introduced self- Promoted independence state-owned enterprise supporting Equitization of and responsibility in accounting from management state-owned corporate management system (`95, State-owned enterprise (`96~) (`87~`89) (`79~`85) Enterprise Law) Attempts to give greater autonomy within the framework of planned economy in order to improve efficiency of corporate management For economic reform, necessary to allow full autonomy in management and to review the property rights
- 5/12 - Price Introduced market price and determined by Price adjustment Free pricing expanded its application the central (`79~`83) (`92~) (`84~`92) government Price Price Granted the rights to determine Free pricing determined by consultation the price of consumer goods to (`92~) the central (`88~`89) enterprises government Remaining at the phase of Price Adjustment in the Chinese case, significantly different from the radical free-pricing of Vietnam Free-pricing means surrendering direct control of economy, may result in rapid inflation - This is of concern, but necessary to decentralize the rights to determine price and expand applications of market price
- 6/12 - Established foreign exchange Exchange rate Exchange rate Single exchange rate adjustment center, determined by the adjustment system official rate/center central government (`85) (`94) rate (`85~`93) Efficiency improved Control transferred Determined by under planned economy to the market the market Exchange rate Exchange rate Established foreign Failure determined by the adjustment exchange center central government (`88) (`91) Undergoing the price adjustment phase while maintaining the fixed exchange rate system (official/market dual exchange rate) In the future, important to take notice of possible transfer of control to the market through free foreign exchange trading
- 7/12 - Separation of central Building of financial Single banking Diversification of and commercial system / introduction system by PBC financial institutions banks of market mechanism (1979~1984) (1979) (1983) (1992~1999) * PBC: People’s Bank of China Single banking system by Separation of central and Vietnam National Bank commercial banks (1990) (~1988) Maintains single banking system by the Central Bank of DPRK Establishment of dual banking system and financial market mechanism is key to financial reform
- 8/12 - Special Economic Opened areas Near-seas open Full-scale Zone expanded to the city & open zone opening (Point-level entire east coast (`92~`99) (Line-level, `84~`87) opening, `79~`84) (Plane-level, `88~`91) Expanded incentives of Export Export Processing Lowered foreign Processing Zone to the entire Zone designated investment country (`87~`88) regulations (`90) (Mid 90’s~) Despite the designation of Special Economic Zone since 1991, limited to minimizing the regime’s risk and simply procuring foreign currency Decisions to full-scale opening are the core indicators measuring NK’s will to reform
- 9/12 - Normalization of diplomatic Joined US-China joint relations/ International Soviet response and relief Nixon’s visit Trade Financial supremacy to China of agreements Institute surfaced (`72) economic signed (`80~`86) sanctions (`79) Trade Unification Relations Sanctions Established agreements of Vietnam normalization relieved diplomatic signed (`75) roadmap (`91) (`94) relations (`95) (`00) NK-US talks in stalemate since the missile launch (April) Progress on the nuclear issue must be made in order to improve NK-US relations
- 10/12 - Conditions China Vietnam North Korea Socialist Planned Socialist Planned Socialist Planned System Economic Economy Economy Economy Large Closed Small Closed Small Closed Size Economy Economy Economy Key Agriculture Agriculture Manufacturing Industry Communist Party Communist Party System Dictatorship Non-economic System System Loose One-man Collective Strong One-man Leadership Ruling System Leadership Ruling System Few Few Multiple Foreign Regime- Regime- Regime-threatening Environment threatening threatening Factors Factors Factors NK is faced with more adverse conditions than China and Vietnam
- 11/12 - The key variable is the confidence in ideological and economic control Factors such as KJU’s statement of ‘under the grip of socialism’ (Jan. 28) limit the prospects of a dramatic reform The future NK economic measures should be measured against the key indicators for each area (refer to next slide)
- 12/12 - Area Indicator • Contract-based management (renunciation of state distribution) Agriculture • Separation of ownership and management • Introduction of tax system ㆍ Introduction of stocks system Enterprise • Separation of ownership and management • Decentralization of pricing authorities concerning most products Pricing • Substantial increase in number of products subject to market pricing system Foreign • Establishment of foreign exchange market Exchange • Liberalization of foreign exchange trade Financial System • Establishment of dual banking system • Establishment of financial market mechanism • Application of success cases of “Special Economic Zone” Opening throughout the whole territory • Expansion of open trade areas and full-scale opening • Progress in nuclear issues ㆍ Improvement of human rights U.S. Relations
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