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Report Says Economic Reform Making Progress in North Korea

A new report says North Korea is making progress in market reforms, as it looks to China and elsewhere for economic expertise. The report says free market activity is increasing in North Korea, and along with it, so is Pyongyang's appetite for management expertise.

It says privately owned shops are emerging in greater numbers across the country, while in larger cities, wholesale outlets and 24-hour convenience stores are beginning to open. South Korea's Unification Ministry and the state-run Korean Institute of National Reunification, or KINU, released the report this week.

Kim Young-Yoon, head of the North Korean Economic Research Center at KINU, says he based the report on defector testimony, North Korean media reports, and interviews with Chinese and South Korean businessmen who travel to North Korea.

North Korea began experimenting with modest market reforms in the mid-1990s in hopes of alleviating severe food shortages, and introduced wider reforms in 2002. Limited access to the country and a lack of detailed economic surveys make it virtually impossible to quantify whether the reforms have succeeded.

Still, Professor Kim says the attitude of ordinary North Koreans is undergoing a major change. Mr. Kim says North Koreans now have a material incentive to work harder and compete in an open market, so they can improve their standard of living.

The report says North Korean authorities are looking to China and Russia for lessons in reforming their fragile, state-dominated economy, and hope to attract Chinese and Russian partners to open shopping centers.

The report says some students in the North are encountering free-market ideas in economic textbooks, while others are allowed to study management abroad.

Gradual transformation of North Korea is a central goal of the South Korean government's policy of engagement with Pyongyang. Ruling party officials, including President Roh Moo-hyun, say helping the North to reform will improve living conditions and make an eventual reunification less traumatic for the highly developed South Korean economy.

Researchers say there are still major challenges to North Korea's economic evolution. They point to inflation, income disparities, and corruption as inevitable by-products of economic reform.

They also say it is nearly impossible for Pyongyang to officially embrace capitalism after reviling it for more than half a century. However, many analysts say North Korea could come to resemble China - which has a Communist Party government although the economy has become largely market-driven.

Professor Kim of KINU agrees, saying the reform process will certainly move forward because of the change in public attitude. He describes the North's evolution to a market economy as "irreversible."