Can North Korea’s prime min­is­ter re­form the econ­omy and keep his job?

Pak was al­most purged be­fore he was tapped to steer the econ­omy “How dan­ger­ous it is to be in charge of eco­nomic re­forms”

Bloomberg Businessweek (Europe) - - CONTENTS - Sam Kim

Kim Jong Un is look­ing to one of North Korea’s more ex­pe­ri­enced tech­nocrats— who once nar­rowly es­caped be­ing purged—to re­vive the econ­omy in the face of pun­ish­ing sanc­tions. At last month’s party con­gress, the first in 36 years, Kim named Prime Min­is­ter Pak Pong Ju , 77, to the coun­try’s top gov­ern­ing body: the five-man stand­ing com­mit­tee of the rul­ing Work­ers’ Party of Korea. That may give Pak the clout he needs to carry out re­form.

Pak had served as premier un­der Kim’s fa­ther, Kim Jong Il, who sacked him in 2007 be­cause his mar­ket-ori­ented re­forms un­nerved die-hard so­cial­ists. Pak spent three years work­ing as su­per­vi­sor of a chem­i­cal fac­tory in a pro­vin­cial town be­fore the cen­tral com­mit­tee of the Work­ers’ Party of Korea ap­pointed him to over­see light in­dus­tries.

Still, his re­ha­bil­i­ta­tion wasn’t com­plete un­til Kim Jong Un, who took over upon his fa­ther’s death in 2011, ap­pointed Pak prime min­is­ter in April 2013. He’s since kept the econ­omy grow­ing—if marginally. South Korea’s cen­tral bank es­ti­mates North Korea’s growth ranged from 0.8 per­cent to 1.3 per­cent in re­cent years. (Py­ongyang doesn’t re­lease data.) Among other things, Pak is cred­ited with us­ing in­cen­tives to coax more out­put from fac­to­ries and farms.

Pak is by no means a cap­i­tal­ist. But he un­der­stands that the regime must cre­ate some space for mar­ket-based en­ter­prise to keep the iso­lated econ­omy go­ing. In March the United Na­tions Se­cu­rity Coun­cil ap­proved harsh sanc­tions on North Korea in an at­tempt to starve the coun­try of re­sources de­voted to its nu­clear weapons pro­gram.

In his first pub­lic speech af­ter tak­ing of­fice, Kim promised the peo­ple of North Korea that they “would never have to tighten their belts again,” a ref­er­ence to chronic food short­ages and, in par­tic­u­lar, a famine in the 1990s in which hun­dreds of thou­sands of peo­ple are thought to have died. Keep­ing that pledge will be dif­fi­cult. North Korea’s food pro­duc­tion prob­a­bly fell last year for the first time since 2010, the U.N.’s Food and Agri­cul­ture Or­ga­ni­za­tion said in an April re­port, and the na­tion’s food se­cu­rity is ex­pected to worsen. “No one in North Korea un­der­stands the econ­omy bet­ter than Pak,” says Kim Young Hui, a North Korean de­fec­tor who now works at the Korea De­vel­op­ment Bank in Seoul. “Feed­ing the peo­ple has para­mount im­por­tance in Kim’s

“No one in North Korea un­der­stands the econ­omy bet­ter than Pak. Feed­ing the peo­ple has para­mount im­por­tance in Kim’s cam­paign to le­git­imize his power, and he is re­ly­ing on Pak to do that”

cam­paign to le­git­imize his power, and he is re­ly­ing on Pak to do that.”

Pak’s el­e­va­tion con­trasts with the fall of Jang Song Thaek, Kim’s un­cle and one­time deputy, whose bold­ness in open­ing North Korea’s econ­omy to China cre­ated ten­sion within the regime. Jang was ex­e­cuted in late 2013 on charges of graft and fac­tion­al­ism.

At the con­gress last month, Pak re­placed Jang as a mem­ber of the party’s Cen­tral Mil­i­tary Com­mis­sion over­see­ing the 1.2 mil­lion-strong Korean Peo­ple’s Army. This is sig­nif­i­cant, as the army has en­larged its role within the econ­omy to earn hard cur­rency by trad­ing in arms, il­le­gal drugs, and coun­ter­feit goods. “Pak Pong Ju’s pres­ence on the CMC cre­ates a chance that some nat­u­ral re­sources nor­mally sold abroad by KPA el­e­ments will be redi­rected and used in do­mes­tic eco­nomic de­vel­op­ment,” wrote Michael Mad­den, a long­time North Korea watcher on 38 North, a web­site that tracks de­vel­op­ment in the coun­try.

Should Pak fail to keep the econ­omy grow­ing or, per­haps worse, suc­ceed so well that the changes threaten the regime’s grip on power, he may risk the fate of other se­nior of­fi­cials. In 2010, South Korean me­dia re­ported that a North Korean fi­nance of­fi­cial was ex­e­cuted by a fir­ing squad af­ter he botched a cur­rency re­form and sparked pub­lic un­rest. “The fates of these top bu­reau­crats re­vealed how dan­ger­ous it is to be in charge of eco­nomic re­forms in North Korea,” Lee Su Seok, a se­nior re­search fel­low at South Korea’s gov­ern­ment-af­fil­i­ated In­sti­tute for Na­tional Se­cu­rity Strat­egy, said in a 2013 pa­per. “Kim Jong Il must have wanted to use Pak again and spared him from po­lit­i­cal purge.”

The bot­tom line North Korean dic­ta­tor Kim has given Prime Min­is­ter Pak, a once-dis­graced party of­fi­cial, the task of lead­ing eco­nomic pol­icy.

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