Name of Researcher
Yen- Kyun Wang

Organization & Title
United Nations University / Institute of Advanced studies., Professor

Title of Research
Economic Reforms, Performance and the Environment of North Korea

Purpose of Research
The economy and the environment of North Korea have been in serious condition since
early 1990s. Poor economic performance and environmental degradation are closely linked.
External diseconomies of them are many: growing number of refugees from the North,increasing amounts of fake money, drug trafficking, selling of mass destruction weapons,trans-boundary pollution, and threats. Some effects of persisting famine and poverty, and ofenvironmental degradation are irreversible or very costly to cure in later days. Many things
can be done to prevent catastrophic situation in Northeast Asia as well as in North Korea.
After the successful completion of current six-party talks on the nuclear weapons programof North Korea, major countries of the world and international organizations will need tocollect detailed information, analyze economic and environmental situations and designs foreconomic reconstruction and environmental restoration in North Korea. This paper aims atanalyzing the economy and the environment of North Korea, and suggesting economic
policies for transition to a market economy.

Content/Methodology of ResearchContent:
1. Overview
2. Evolution of planning system and reform efforts in 1980s and1990s: industry, agriculture,commerce
3. Reforms since July 2002: price, wage exchange rate and rationing. Business
management and farm reform, special economic zones, comprehensive markets, issuanceof state bonds
4. Economic performance: overview, economic growthand industrial structure, publicfinance, finance and inflation, international trade, food and famine, social overhead capita(energy, railroad)
5.

Inter-Korean economic relations: trade, investments, other economic cooperation

6. International economic cooperation
7. Environmental degradation: air, soil and water pollution, deforestation, interaction ofpoverty and environment
8.

Economic policies for transition to a market economy

9.

Summary and policy implications

Methodology:
Collection of data and data analysis, literature survey, analysis of economic andenvironmental situations, suggestions of economic policies for transition to a market
economy and international economic cooperation

Conclusion/Observation:North Korea is not likely to collapse while Kim Jung-Il is alive due to the extreme kind of
personal cult, strong control of the populace by the state and large aid from China and South
Korea.
A high percentage of the population is suffering from famine, malnutrition, disease anddo not have minimum necessities such as shoes. After the severe famine period of 1994 to1997, North Korea seems to have survived due to large and increasing foreign aid and net
imports, issuance of fake money, drug trafficking and selling of missiles since 1998.
Famine, poverty and environmental degradation are closely linked. Trees are scarce on
the mountains and hills. Pollution of air in the mining and manufacturing areas, pollution ofsoil and rivers, and trans-boundary pollution are serious. Some effects of famine andenvironmental degradation are irreversible. Environmental contamination is very costly to becleared.

Thus humanitarian aid such as food and fertilizer should continue. International

cooperation needs be taken for environmental restoration in North Korea as soon as
possible even before conclusion of the six-party talks. The environment can not improvesignificantly without economic reform and opening. Development aid, however, should beprovided, matching the pace of economic opening and reform after the successful
completion of the six-party talks.
After July 2002 reform, North Korea is suffering more from hyperinflation than before.
Some workers cannot receive wages. An export-oriented development strategy should betaken as soon as possible, and many free economic zones need to be established to attract
foreign direct investments especially from South Korea, China and Japan. In order to induce
inflows of large foreign direct investments, it is required that economic reforms and opening
take place, and North Korea abides by global standards and market principles. Economic
reform should start with far-reaching deregulation of prices of goods and services,
liberalization of trade and enterprises, and foreign exchange rate. For economic stabilization,industries and firms should be restructured, and subsidies such as price, trade andenterprise subsidies should be abolished, and military industries and expenditures should
be curtailed substantially. At the same time privatization should be launched, starting fromsmall businesses and farms.
Countries in the northeast Asia need to start cooperation in the areas of energy,transportation and environment for North Korea and the northeast Asian region.