|
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads |  |
MARCH 1, 2004
Pyongyang: Will Its Recovery Speed A Deal? The bustling, 500-stall private market on Pyongyang's Tong Il Street seems a world away from the talks in Beijing starting Feb. 25 over the fate of North Korea's nuclear weapons. But such private markets, where North Koreans can now buy everything from food to pirated videocassettes of South Korean soap operas, represent a stark economic change -- one that could alter how Washington and Pyongyang play their diplomatic cards. Energized Economy Indeed, it caused a stir in Washington when several American experts on Asia returned from a visit to the North in January and reported that a surprisingly vibrant small-business sector was helping to energize the long-battered economy. Contrary to many experts' opinions, economic reforms seem to be having an effect. To provide an incentive for higher production, the government hiked official prices for food and basic necessities by up to 55-fold and wages by an average 18 times in July 2002. Since then, prices in private markets have more than tripled, while the supply of goods has improved. Aided by good weather and legal changes that permit larger private farm plots, grain production is up by 7.6% since 2001 -- though still a million tons short of Pyongyang's needs. Private restaurants and bakeries are popping up. "We saw a market economy beginning to emerge. This is not a regime that's going to implode," says John W. Lewis, a Stanford University Asia expert who led the U.S. delegation. Analysts now think the North's tentative rebound could prove a major factor in shaping the nuclear talks. Some believe Pyongyang will refuse to bow to U.S. demands to dismantle its nuclear program because the country isn't as economically desperate as it was a few years ago. But many other North Korea watchers argue that the changing economic dynamics increase the chances for a breakthrough. For starters, an improving North Korean economy undermines the position of Bush Administration hard-liners, who were convinced the North would collapse if the U.S. stonewalled long enough. Just as important, experts believe that officials in Pyongyang -- perhaps including strongman Kim Jong Il -- are more interested than ever in improving the economy by reaching out. The government wants to establish four economic zones and a legal framework to protect foreign investors in industries such as mining. Pyongyang seems to recognize that its reform drive will stall without outside investment and that nukes are an obstacle. Kim also has political reasons for defusing the crisis -- as long as he gets something in return. This year marks his 40th year as a Workers' Party member and his 10th anniversary as leader. "This is a year when North Korea needs a breakthrough for the economy and security," says Paik Hak Soon, a North Korea expert at Sejong Institute, a think tank near Seoul. "The key is resolution to the nuclear problem." If there is a breakthrough, what form might it take? Should North Korea follow Libya's example and pledge to dismantle its nuclear program and allow inspections, Washington -- together with South Korea, Japan, and China -- could take serious steps to help solve the North's energy problems. One idea: financing a pipeline to bring in Russian natural gas. With luck, the hope of prosperity may prove more effective than threats in ending this crisis.  By Stan Crock in Washington and Moon Ihlwan in Seoul, with Dexter Roberts in Beijing Edited by Rose Brady
BW MALL
SPONSORED LINKS
Get BusinessWeek directly on your desktop with our RSS feeds.
Buy a link now! Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2004, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version
