Economic Reform in North Korea had been introduced in 2002. The reform measures taken by the North Korean government are discussed below.
Monetization of Economy: The government allowed the demand and supply system to fix the prices instead of coupon system for rations. The level of wages had been increased for some sectors so that the government could meet the hike in prices. The government started to develop the small scale markets over the country and public distribution system had been abolished.
Depreciation of the Currency value: To offer export incentives to the domestic firms the government depreciated the value of the North Korean currency, Won, from 2.2 :1 US dollar to 150:1 US dollar. This step also helped the government to attract foreign investors.
Decentralization of the Economic Decisions: The government of North Korea decentralized its economic decisions by reducing the subsidies and allowing the local units to take the managerial decisions in the agriculture and industrial sectors instead of the central government. The companies had to bear their own expenses and the managers were bound to face tough budget constraints.
Formation of Special Economic Zones: The government of North Korea started to form some industrial and administrative zones so that it could pave the way for foreign investment. The Kaesong Industrial District had been identified by the government as a special economic zone for small and medium scale business and the Kumgang Mountain site was spotted for tourism.
Effects of Reform:
In North Korea, through economic reforms the prices and wages had been liberalized
The production level of the country increased a lot which encouraged market competition.
The government was able to provide incentives for the state enterprises so that they could reach their production targets
The government secured loans for the managerial enterprises in case there was any shortfall in the cash flow.
Last Updated on : 26th June 2013