Recently, North Korea has shown extensive changes in economic policy. One change is the July lst Economic Reform Measures that focus on internal reform, and another change is the designation of Shineuiju, Mt. Kumgang, and Kaesong as special zones. The...
Recently, North Korea has shown extensive changes in economic policy. One change is the July lst Economic Reform Measures that focus on internal reform, and another change is the designation of Shineuiju, Mt. Kumgang, and Kaesong as special zones. The selection of special zones is an imbalanced growth strategy aimed at developing certain areas outside of the capital of Pyongyang, and seems to be a pragmatic approach to promote political stability as well as economic recovery. In particular, the designation of Mt. Kumgang and Kaesong as special zones despite the continuing tension over North Korea``s nuclear weapons show the country``s strong intention to invigorate the economy by expanding economic cooperation with South Korea. It is significant that these changes have stemmed not only from the leadership of Kim Jong II, but also the experiments at partial reform and opening that have taken place due to political, military, and ideological stability. Having witnessed the limitations of a socialist planned economy and a strategy of independent economic revival, and to escape from the poverty trap, North Korea is undergoing a fundamental transformation, preparing to promote development through foreign investment and introducing an open capitalist market economy. The new special zones are different from North Korea``s former attempts in Rajin and Sonbong in several respects. First, the new zones give more development and management control to developers rather than the North Korean government. Second, each economic zone has a tailored opening scheme that considers the zone``s characteristics. A third positive aspect is that the new zones plan to offer comprehensive service, thus helping to assure business continuity and stability. Successful development of North Korea``s special zones would invigorate inter-Korean economic cooperation and help create a basis for a South-North economic community. It would also allow the South Korean economy, which is currently no different from an island economy, to link into the Asian continent and expand its growth potential. Success would be a win-win situation for both Koreas, helping the nation become an economic hub in Northeast Asia. By supporting the North Korean special zones, both Koreas can work to solve the inter-Korean problem and create a test case for large scale economic cooperation. It is hoped that this effort will help transform Kaesong and Mt. Kumkang, which are near the demilitarized zone, into areas of cooperation and reconciliation, as well as peace and prosperity.