| A Study on Cooperation Policies to Attract Agricultural Investment into North Korea in the Future Reform and Opening Period of North Korea (Year 2 of 2) | |||
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| Author | Choi, Yongho | ||
| Views | 55148 | Publication Date | 2018.02.14 |
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Background and Purpose of Research Kim Jung-eun has repeatedly emphasized 'improving people's livelihood' through innovation in the agricultural sector in order to maintain the system after his inauguration in 2012. Today, however, agricultural production quantities and food consumption circumstances in North Korea are still very poor. This is why many residents still suffer from malnutrition and disease. Therefore, the development of North Korean agriculture is very important, at the very least, in order to secure social stability through solving the humanitarian problems, and furthermore to prepare a foothold for the economic take-off through enhancing the self-sustainability of North Korea. North Korea's agricultural development requires capital supply and institutional reform. First of all, the institutional basis should be established, such as giving appropriate motivation and autonomy to the farmers. Under the normal operation of the institution, then, the production infrastructure should be maintained and expanded, and the production factors must be supplied. However, the partial reform measures of the agricultural production sector have not succeeded in achieving the desired outcomes due to the lack of capital. Besides the efforts to attract foreign capital for agricultural development have been limited due to the lack of institutional reform. The current situation around the Korean Peninsula is a crisis, but it is so uncertain and variable that there is the possibility that a new phase develops. Therefore, we should use the present time as an opportunity to establish a new paradigm for inter-Korean agricultural cooperation with the progress of inter-Korean relations in mind. To do so, based on the implications from both the past cases of transition countries to attract agricultural investment and the past examples of North Korea's agricultural investment cooperation, this research aims to establish an agricultural investment cooperation model for North Korea and propose our cooperation plan in view of the expected agricultural conditions in the future reform and opening process of North Korea. Method of Research This is the second year report of the two-year collaborative research with domestic and international experts, entitled ‘A Study on Cooperation Policies to Attract Agricultural Investment into North Korea in the Future Reform and Opening Period of North Korea.’ It is led by the Korea Rural Economic Institute (KREI) and sponsored by the Korea Council of Economic and Social Research Institute. Ewha Womans University has analyzed the most realistic reform and opening scenarios according to the recent economic situation in North Korea. Incheon National University has participated in the survey and analysis of the agriculture investment inducement cases for the Eastern European transition countries such as Romania and Eastern Germany. Finally, the research and analysis of China's agricultural investment case into North Korea was conducted jointly with a North Korean expert at Yanbian University. The researchers basically have collected and summarized a vast amount of domestic and overseas previous research for discussions on the international developmental cooperation and past agricultural investment cooperation with North Korea. The researchers have gathered individual case data on China's agricultural investment into North Korea and conducted interviews with related researchers, companies and policy makers. In addition, we conducted interviews with the related companies and organizations, such as CJ and KOICA, to investigate the case of attracting agricultural investment cooperation in Vietnam. In order to forecast the circumstances of attracting foreign agricultural investment into North Korea, the researchers have had several advisory meetings using an external expert network. And we conducted a SWOT analysis to derive the strategy for North Korea to attract agricultural investment. The researchers attended various seminars held in Korea on the topic of North Korea's economy and agriculture, and listened to various information and opinions, and made reference during the preparation of the report. Research Results and Implications During the gradual reform and opening, conditions for attracting investment in North Korean agriculture are summarized as follows. The strengths of North Korean agriculture are the clean environment, high geographical features, abundant labor force, agricultural domestic demand potential, and agricultural promotion policy and gradual opening policy. Weaknesses in North Korean agriculture are weak infrastructure, lack of human resources with a mindset of market economy, lack of agricultural skills, inefficiency of price and distribution systems and financial systems, and poor finances of North Korean authorities. Opportunity factors include the presence of high-income overseas markets, increased access to Northeast Asian markets, and improved relations with major nations. The threat factors include increased dependence on international trust, insufficient information on North Korean agriculture, and increased risks from macroeconomic instability. Our future investment cooperation for North Korean agriculture should be pursued under clear goals and principles. The objectives of the agricultural investment into North Korea are as follows: First, establishing the independence of North Korean farms through agricultural investment cooperation with North Korea; second, seeking stabilization of the market economy system in North Korea by promoting progressive agricultural investment cooperation with North Korea; finally, creating economic performance and sharing benefits for all participants through complementary win-win agricultural investment cooperation. The principles of investment cooperation for North Korean agriculture are as follows: (1) the coincidence between the business plan of investors and the policy of North Korea; (2) encouraging enthusiastic participation of the North Korean people; (3) the transparency of investment management; (4) strengthening cooperation among various participating entities; (5) strengthening information, research, analysis and evaluation and pursuing substantial performance; and (6) securing flexibility of business by giving appropriate authority to the personnel. Under the goals and principles discussed above, we have established the 'Private-public Cooperation Model for Agricultural Investment into North Korea'. The proposed model has the following characteristics. First, it is a comprehensive agricultural investment cooperation program composed of several projects including value chain construction, agricultural infrastructure construction, and rural environment improvement. Second, it is a long-term program, not an one-time project. Third, it is a program in which the public sector and private partners of the two Koreas participate at the same time. We propose the following cooperation plan with North Korea for the promotion of the model. First, given a gradual reform and opening pattern of North Korea, we need to plan a program with the cooperative farms behind the SEZs (special economic zones) such as Kaesong, Geumgangsan, Pyongyang, Rason, and Sinuiju. Second, the program should have a system that facilitates communication not only in negotiation but also in business process. Third, we need to strengthen the cooperation system so that interactions between government ministries and between government and private partners can be done smoothly. Fourth, the key point of this program is that the active involvement of North Korean farmers is closely linked to an increase in their income. To this end, we must develop a mechanism to provide incentives for participants. Fifth, another focus of the program should be placed on strengthening human capacity so that market economy order can be settled in North Korea. Sixth, depending on North Korea's capacity, agricultural cooperation with North Korea should be promoted in the order of assistance, development cooperation, and investment cooperation. Through this approach, we must prepare thoroughly to reduce trial and error and to find successful models. Seventh, the South Korean government should actively assist North Korea in joining the international financial institutions and cooperating with international organizations in order to secure more resources and utilize the expertise and capabilities of the international community. Researchers: Yongho Choi, Younghoon Kim, Yoonjung Lee,Chehwan Lim, and Kabseok Ko Research period: 2017. 1. ~ 2017. 12. E-mail address: yonghochoi@krei.re.kr |
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