’Clear NK view takes a year’

The Korea Development Institute (KDI) predicts delayed positive effects from the death of North Korean leader Kim Jong-il on the impoverished Stalinist country’s economy.

In a report prepared by Lee Seok, a researcher at the staterun research agency, uncertainty is expected to remain for about a year, which is nothing out of the ordinary for any unexpected power transition.

Uncertainty-increasing factors include a protracted mourning period, which, in the case of the death of Kim Il-sung, Kim Jongil’s father, lasted three years; a general fear about security and safety felt by traders in China, the North’s sole ally, and the North Korean population in general.

“North Koreans are likely to take a wait-and see attitude about positive market-oriented activities, even though they are quite limited in the first place,” Lee said in his report that is the first by the state research organization to be aimed at vetting the aftermath of the North Korean leader’s death and ascension by his son, the 29-year-old Kim Jong-un.

Additionally, Lee pointed out that the strengthened border controls with China, the source of goods, legal and illegal, will also put a damper on the North Korea-China trade for a certain period, meaning a drop in the country’s general level of economic activity.

But from a medium and longterm perspective, the situation can be different, Lee said.

The KDI researcher takes a look at the situation from three points of view — neutral, negative and positive. Key factors include the new North Korean leader’s attitude on the deceased leader’s platform of governance based on a “strong, big country” and an aptitude on openness, the new leader’s stronghold on power, China’s support and the inter-Korean relationship.

In the neutral scenario, Lee sees that the new leadership will be able to strengthen its hold on power, giving an equal emphasis on the economic development and the “strong, big country” goal set out by Kim Jong-il. So far, the North has repeatedly made it clear that it will not deviate from the Kim Jong-il policy, a move widely seen to eliminate any confusion and disruption in the process by which Kim Jongun is taking over.

Under this scenario, the new leader may be more flexible in foreign exchange and a more robust market system, which will be boosted by China’s support.

“If things go as expected in this scenario, North Korea would adopt a more active market system on the 101st anniversary of North Korean founder Kim Ilsung’s birth next year,” Lee said.

The positive scenario has it that the restoration of inter-Korean ties to the level seen during the liberal rule by Kim Dae-jung and Roh Moo-hyun will bring in investments from Korea and the United States on top of China.

The negative scenario is focused on political instability that will cause Pyongyang and its new leadership to become more isolated.

“The worst-case scenario is not likely because of China factors,” Lee said, adding that Beijing wants a status quo — a stable North Korea that relies on it as lifeline but is trying to imitate its economic model for a greater self-reliance.

“For our government, offers of humanitarian support can be help,” he added.