By Kim Sue-young
Staff Reporter
North Korea's currency revaluation appears to have weakened the Kim Jong-il regime as the abrupt change made last year faces failure, a scholar said Thursday.
Baek Seung-joo, director at the Center for Security and Strategy under the Korea Institute for Defense Analyses (KIDA), claimed that the currency reform was likely to fail because the secretive state was not fully prepared for the change.
"The North has maintained its regime based on people's absolute loyalty to their leader and the ruling Workers' Party," he said in a seminar hosted by Rep. Song Young-sun of the governing Grand National Party (GNP) in Seoul. "As the currency reform turns out to be a failure, the loyalty is likely to plummet."
Last November, the secretive state dropped two zeros from the nominal value of its currency in an apparent bid to fight inflation and black marketeering.
But the effort is driving markets in the North into chaos and Pak Nam-ki, who led the re-denomination, might have been fired over the malfunction, according to reports.
The director said that the currency revamp is falling through as Pyongyang appears not to have been fully prepared.
"In order to raise the nominal value of the new currency, the North should have fully furnished supplies to its people. But it seems not to have prepared enough," he said.
"Besides, the currency revaluation should have aimed to satisfy all the people but only the privileged class benefited from it," he added.
Meanwhile, Cho Myung-chul, director at the Center for International Development Cooperation under the Korea Institute for International Economic Policy, said that North Korea cannot recover its economy without help from outside its borders.
"Challenges facing North Korea ― such as its economic predicament and shortage of food, energy, electricity, daily necessaries, foreign currency and raw materials ― cut domestic production," he said. "Those triggered decreased savings and investment."
He continued, "This proves that the North Korean economy has fallen into the trap of poverty, where capital consistently decreases and cannot be restored without help from the outside world."
Cho said that the North is required to resolve the nuclear issue and improve relations with neighboring countries, including South Korea and the United States, in order to escape from the predicament and gain support from them.