Public sector management and the transition to a more open economy: Cautious reform in the Democratic People's Republic of Korea (DPRK)

Abstract

AbstractThe article assesses the efforts of the DPRK—a country which has experienced significant industrial development under central planning—to develop a more open economy, having probably reached the limits of inward‐looking growth ('Juche') and having recently experienced a dramatic change in its traditional trading partnerships. It describes the nature of the DPRK state management system and the growing dissatisfaction with its performance in recent years. From its relatively isolated position, the DPRK is taking advantage of UNDP technical assistance to implement its change strategy in three areas: diversification of international trade, foreign investment promotion through joint ventures with state enterprises and modernization of industrial management. Implementation of the UNDP programme has thrown into relief some of the institutional obstacles to the internationalization of the economy inherent in the central planning system. Against a background of relative lack of foreign investor interest—recent legislation notwithstanding—the article describes remedial efforts being undertaken. On the trade front, the government has made modest successes in diversification, but these will need to be reinforced by multilateral assistance with trade information, marketing and other skills needs of trade officials. The article concludes with a review of the DPRK's prospects in the context of the Korean unification issue, other regional cooperation such as the Tumen River Project and international debates over regime survival in the DPRK. Prospects for spreading management change through technical assistance in the DPRK are conditioned by a number of factors, including the extent to which a new management culture can be disseminated from pilot enterprises to the economy as a whole and whether the enclave approach to investment promotion in enterprise zones is also helpful in this regard. Though the DPRK political economy is robust and resourceful, the question that remains is whether the cautious or reluctant government strategy for change can bring results in time.