North Korea Struggles with 'High-Cost Exploitative Economy'... Consideration Needed for Inter-Korean CEPA 추진

<대외경제硏> Analysis Report on North Korea's Economy and New Inter-Korean Cooperation after Sanctions

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[Asia Economy Reporter Moon Chaeseok] The Korea Institute for International Economic Policy (KIEP), a government-funded research institute, suggested that South Korea should consider signing a Comprehensive Economic Partnership Agreement (CEPA) with North Korea, which is currently struggling with a 'high-cost economic structure.'

On the 4th, KIEP stated this in an analysis report titled "Changes in the North Korean Economy and New Inter-Korean Cooperation Directions after the 2016 Sanctions on North Korea."

KIEP diagnosed that although North Korean Supreme Leader Kim Jong-un is attempting structural reforms by shifting from the "economic and nuclear parallel development line" to the "socialist economic construction all-out concentration line," North Korea has been facing difficulties since the strengthening of sanctions in 2016.

It is estimated that North Korea's production capacity has weakened due to a lack of ability to independently manufacture products banned from import, such as electronic products, machinery equipment, and transportation means.

Moreover, since Kim's rise to power, dependence on Pyongyang has increased, exacerbating regional economic polarization, and this trend is expected to accelerate due to foreign sanctions.

As sanctions intensify, North Korea is trying to maintain its current economic scale, resulting not in increased production efficiency but in a high-cost structure that endures sanctions.

Since the "high-cost exploitative economy" form is expected to weaken North Korea's growth engine, securing overseas funding is urgent, but apart from opening up to the outside world, it seems difficult to find a sharp solution.

KIEP suggested that signing a CEPA between South and North Korea could play a role in promoting North Korea's reform and opening-up policies.

Choi Jang-ho, a research fellow at KIEP, explained, "If inter-Korean economic cooperation resumes, it is necessary to create conditions where stakeholders are guaranteed stable laws and systems, and signing a CEPA between South and North Korea is one of the alternatives."

Additionally, KIEP called for ▲ establishing a division of labor system where technology and capital come from South Korea and labor-intensive processes from North Korea ▲ entering the Fourth Industrial Revolution fields by utilizing North Korea's low regulations ▲ actively attracting foreign investment to gain international support for North Korea's economic development and inter-Korean economic integration ▲ inducing North Korean development through multilateral cooperation to reduce incentives for military provocations ▲ and South Korea leading donor country meetings of international organizations for aid to North Korea during its reform and opening process.

This content was produced with the assistance of AI translation services.