Posted January. 04, 2007 03:00,
The financial sanctions by the U.S. are bringing cascading effects to North Korea. North Koreas economy is affected more by the Macao financial sanction than the official sanctions put forth by the UN.
A senior fellow at the Institute for International Economics in the U.S., Marcus Norland, prognosticated that continued financial sanctions would have considerable influence on North Koreas economy.
North Korea is showing a more hostile reaction to the freezing of its accounts at Banco Delta Asia (BDA) in Macao than to the official sanctions by the UN. The UN sanctions are moderate and have loopholes in them, whereas the BDA measure brings about cascading effects on the external economic trade of North Korea. Moreover, financial institutions of many countries that are reluctant to be implicated in the illegal conducts of North Korea have begun to stop trade with North Korea. As a result, North Korea is facing an increasing amount of difficulties in international finance trade. This is also shown by the depreciation of the North Korean won in the black market.
―Do you think it possible that North Korea will be stricken by another economic disaster like the Great Famine in the 1990s?
The North Korean government banned private trades of rice last year, attempted to revive the distribution system, and appropriated crops from farmers. Such indiscriminating actions have raised the possibility that a severe food shortage will arise, especially in the provinces around Pyongyang and the northeast part of North Korea. In addition, because this happened even before the full beginning of economic sanctions, the situation might have degraded more since. But I dont think a famine resembling the case in the 1990s will recur. In my view, should any disaster in a humanistic level arise in North Korea, the international society and South Korea in particular will act swiftly.
―How will South Korea be affected in case the North Korean economy collapses in your view?
If the collapse of the North Korean regime and economy takes the same route as what took place in Germany, South Koreas economy will definitely receive a blow, but I think that will be overcome. The economic growth of South Korea will slow down (though that of the Korean Peninsula as a whole will accelerate), and a phenomenon will arise in which the income shifts from the labor group to the capitalist group, and within the labor group it will shift from less-trained workers to more-trained workers. If the government does not compensate, the imbalance of income and wealth will worsen.
―In case North Koreas nuclear issue is solved through negotiations, will the North Korean economy take steps of reform and opening?
In the economic aspect, North Korea takes on the traits of Rumania or Belarus than those of China or Vietnam in their inchoate stages of reforms in many points. When China and Vietnam launched their reforms, more than 70 percent of their labor were allotted in the agriculture sector, but in North Korea the rate is only half of that. Nevertheless, if North Korea begins its reform, the roles of foreigners will expand through international trade and investment as in China and Vietnam. The question is whether North Koreas leaders can accept such changes and whether they would not construe the increased influence of foreign states as huge threats to the maintenance of their power. Reflecting on experiences over the past years, it is hard to be sanguine about this point. Whenever the North Korean leaders thought the harvest had turned favorable, it returned to past policies. The aid and support from South Korea can result in negative effects rather than precipitate North Koreas reform. These can help North Korea stick to impromptu measures and maintain its unique system.