The Possibility of Economic Reform in North Korea

This article argues that North Korea can achieve an economic catch-up after decades of economic isolation and stagnation by promoting an economic opening focused on foreign trade and investment in a sustained manner. An analogy is been made with the case of Fujian Province in China, which has accomplished economic catch-up, mainly due to Taiwanese investments. To realise its potential, it is argued that North Korea treats its foreign direct investment (FDI) from South Korea as intra-Korean investment. The article also discusses the diverse modes of engagement with foreign capital that are available for North Korea, considering its own capability (absorption or management capabilities), rivalry among possible foreign investors, implications for market structure (monopoly or more competition), the nature of target technologies or facilities, opportunity for learning and transfer, and so forth. Finally, the article discusses the economic and political preconditions for such and economic catch-up.