North Korea quietly reformed under Kim Jong-un

North Korean President Kim Jong-un and the first lady during an inspection tour of the Sinuiju cosmetics factory last year.

The director of North Korea’s Sinuiju cosmetics factory clenched his fists and punched each other when asked about his rival factory in Pyongyang, according to AFP.

`We always compete with each other,` Kim Hye Yong affirmed.

In the factory, workers wear masks, white protective suits, gloves, and neat hairnets when operating machinery to produce shampoo, cream, facial cleanser and other products.

Many products are extracted from ginseng, a famous Korean crop, with packaging similar to Western brands such as Pantene or Head&Shoulders.

`There are definitely many people who like our products,` Kim said.

Before the second summit with North Korean President Kim Jong-un, US President Donald Trump declared that if North Korea gave up its nuclear weapons, the country `could quickly become one of the leading economic powers`.

The reality is much more difficult and distant than the US President said, but North Korea is making its own efforts to develop its economy.

That’s a clear reference to China, where the liberation of the market economy under the name `socialism with Chinese characteristics` has turned the country into the world’s second-largest economy.

Although North Korean state media regularly publish articles criticizing the evils of capitalism and predicting its collapse, in reality, Mr. Kim has been quietly reforming the economy in this direction over the past few years.

The state loosens control, allowing traders to operate in informal sectors, creating flexible space for state-owned enterprises and `opening the door` for private companies to operate, encouraging factories

Visiting the Sinuiju factory with his wife Ri Sol-ju in June 2018, the North Korean President praised the factory’s initiative to innovate and attract consumers.

`Because our products meet their needs, it brings consumers and manufacturers closer,` said Kim, 54, a factory manager.

The effects of reform are most evident in Pyongyang, where the capital’s middle class increasingly frequents cafes, gyms and uses smartphones.

However, commercial advertising and street branding, such as placing signs advertising store names, are still rare and the capital’s residents cannot represent the entire country.

Despite reform efforts, due to international sanctions, North Korea’s economy still declined by 3.5% in 2017, the latest data according to the South Korean central bank.

After the 1950-1953 Korean War, North Korea was richer than South Korea for a period of time, but the situation reversed when the Soviet Union disintegrated.

Beijing, Pyongyang’s important diplomatic ally and main trading partner, has long urged North Korea to follow its economic path.

Sinuiju itself, a North Korean border city on the south bank of the Yalu River, presents a clear contrast with China.

Geographic factors make North Korea’s economy always closely linked to China.

But Pyongyang has always had a strong national spirit, with the ideology of `juche` (self-reliance).

What North Korean diplomats are most interested in is the example of Vietnam, the country hosting the summit, where the government led by the Communist Party has brought the country to development thanks to opening up to the market economy.

Last year, Mr. Kim declared that North Korea’s nuclear weapons development program had completed its mission and placed a new priority on `building a socialist economy.`

He mentioned a lot of economic development in his New Year’s speech, although analysts say that in recent months there will be very few reforms introduced, while Pyongyang is focusing on negotiations with Washington.

Kim `is not only committed to continuing leadership, but also really cares about the state of North Korea’s economy and is a very realistic person,` said Andray Abrahamian, a North Korea researcher at Stanford University.

However, even without sanctions, foreign investment in North Korea is still very difficult, because of outdated infrastructure, unstable electricity supply, underdeveloped transportation network, and lack of legal framework.

Egyptian telecommunications company Orascom poured hundreds of millions of dollars into establishing the first mobile phone network in North Korea called Koryolink, but the establishment created a competitor and Orascom could not withdraw the money.

Analysts warn that even if Trump and Kim reach an agreement that causes North Korea to dismantle its nuclear weapons, it will not have much immediate effect on stimulating business.

`A nuclear-armed North Korea, even if sanctions are lifted, cannot attract private investment because of its fragile peaceful relationship with neighboring countries,` Paul Choi, CLSA banking expert

Hong Hanh