by
Mitsuru Mizuno
[Mitsuru Mizuno]
posted September 16, 2005
|
|
|
|
|
 Preface : |
|
|
|
|
|
|
|
Article : |
Qualifying for Japan's ODA
The key to North Korea's economic reconstruction is the introduction
of funds from foreign countries and technical cooperation. As it
is located in Japan's priority region and its per capita GDP is low,
North Korea is qualified to obtain Japan's official development
assistance (ODA), provided that diplomatic relations are established.
In September 2002, Prime Minister Koizumi made an unprecedented visit
to North Korea, which produced the "Japan-DPRK Pyongyang
Declaration." In the declaration, Japan promised economic
cooperation after normalization of DRPK-Japan relations, which would
include, over a period of time deemed appropriate by both sides, grant
aids, long-term loans with low interest rates, and humanitarian
assistance through international organizations. It further
promised to provide other loans and credits from financial
institutions (such as the Japan Bank for International Cooperation)
with a view to supporting private economic activities.
It has been estimated by various sources that the magnitude of funds
for economic cooperation would amount to 50 to 100 billion dollars.
This figure is based on Japan's economic cooperation with South Korea,
to whom Japan provided 300 million dollars in the form of grants and
200 million dollars in concessinal loans over 10 years from 1966 to
1975. Additional grant aid and low interest loans in the amount of
345 million dollars were provided for the construction of schools,
technical cooperation, and other purposes. Japan's ODA induced
private sector loans to and direct investments in South Korea, which
played a key role in the country's infrastructure development and
industrialization.
North Korea's Development Issues
North Korea has to address a number of issues in order to reconstruct
the economy. The country's economic issues can be summarized as
follows: shortage of energy resources and electricity;
underdevelopped infrastructure; decrepit equipment stemming from
low investment in fixed capital and low manufacturing technology;
poor quality control; backward high technology; lack of modern
management system; and chronically poor agricultural production.
These problems confronting North Korea now are the boottlenecks to
economic recovery and susutainable growth. Low productivity in
practically every sphere of the economic sector and poor performance
in export can be attributed to these problems. What is required is
economic cooperation to remove these hindrenances, and second,
consideration to develop promising new industries, inter alia,
export industries.
Areas of Economic Cooperation
Taking into account the above, Japan's economic cooperation to North
Korea should include the following areas: development and
improvement of infrastructure such as electric power, railway,
harbor, telecommunication, and water supply and sewerage;
rehabilitation of existing industries and development of new
industries; promotion of export industries; strengthening of
information technology and industry; reform of the agricultural
sector; environment protection and disaster prevention; and various
technical cooperation essential for economic reconstruction.
As the allocation of Japan's funds to areas and sectors has to be
discussed and negotiated with North Korea, specific amounts for areas
and sectors are hard to determine. However, it is reasonable to
suggest that roughly 50 percent of the funds be allocated for
infrastructure development; 30 percent for rehabilitation of
existing industries and development of new industries, promotion of
export industries, and strengthening of information technology and
industry; and the remaining 20 percent for reform of the agricultural
sector, environmental protection and disaster prevention, and
various technical cooperation essential for economic reconstruction.
In the programming of economic assistance, Japan must also fully
coodinate its efforts with other bilateral sources, as well as
international organizations, so as to avoid wasteful overlap.
Infrastructure Improvement Vital
The improvement of infrastructure is vital to sustain economic growth.
It would also induce badly needed foreign direct investment.
Improvement of both the transport and telecommunication sector is
a prerequisite to the enhancement of economic efficiency. In the
electric power sector, due cosideration has to be given not only to
the rehabilitation of power generation, but also to transmission and
distribution and power management system itself so as to efficiently
run the entire system.
On rehabilitation of existing industries and development of new
industries, strict cost-benefit analysis has to be undertaken in
order to arrive at a priority list. Generally speaking, return from
a rehabilitation project is high; however, if the facilities are
conspicuously obsolete, then it might be better to invest in new
facilities to obtain other benefits. Nurturing export industries
is a high priority for North Korea as it brings in scarce foreign
currency.
North Korea, therefore, has to consider strategically nurturing its
export industries by taking into account its comparative advantage.
For example, light industries, machinery, non-ferrous metal, cement,
and shipbuilding/repair deserve consideration. Though lagging, it
is essential to promote the IT industry considering its impact upon
other industries. In the agriculture sector, improvement of both
"hard" (e.g., irrigation system, fertilizer and its use, etc.) and
"soft" elements (e.g., introduction of modern agricultural
management system, processing technology, etc.) has to be addressed.
Technical Cooperation Important
Technical cooperation is another extremely important component of
economic reconstruction, of which there are typically three patterns
that Japan can pursue with North Korea. The first is to provide
technical training in Japan by inviting government officials,
managers, and technical personnel. A second is to set up technical
training centers in North Korea and send Japanese experts. A third
option is to send Japanese experts to North Korea to transfer
technical skill. Ultimately, a combination of the three should be
utilized to maximize benefits.
North Korea's economy, burdened with a plethora of difficulties, is
incapable of rehabilitaion by self-reliance alone. The initiatives
North Korean authorities have taken to revive the DPRK economy have
so far not produced the intended results. Revival requires
cooperation. Thus working to resolve outstanding issues that would
allow the DPRK to establish diplomatic relations with Japan and access
ODA from its Japanese neighbor should be a priority.
- 1 -
|
|
|
|
|
|
|
|
|
|
|
|
|
