In 2015 Korean government selected Myanmar as a new Priority ODA Partner Country. As western countries has eased the economic sanctions, Myanmar has opened its economy and made important reforms, including FX system. In addition to its strategic geopolitical location, Myanmar has abundant resources and young population which are important factors for future development.
Since Myanmar is newly selected, it is necessary to prepare Country Partnership Strategy(CPS). This study aims to provide the background information about Myanmar. As Myanmar is politically in the transition period, it is very important to understand the governance structure of Myanmar, including ODA implementing system. It is expected that National League for Democracy(NLD) will take over the political power next year. Economic liberalization is likely to be pursued more rapidly under NLD regime. Economic cooperation and investment from the western countries will increase, which will bring both more competition and more chance. Despite the political changes, the direction of economic policies is likely to be maintained.
This research has reviewed the Myanmar’s national economic development plans and economic indicators in order to figure out the ‘needs’ of Myanmar. Since the official documents occasionally do not reflect the true needs of Myanmar, the authors interviewed many local professionals, including Myanmar’s related ministries, donor agencies and local implementing institution. Basically, Myanmar’s Country Partnership Strategy should adhere to the rules and the framework that differentiates Korea’s ODA. The comparative advantage of Korea needs to be reflected. Also, the international norms, such as ownership, alignment, harmonization, mutual accountability, and managing for results should be considered. CPS should be compact and follow the guideline of International Development Cooperation Committee of Korea which emphasizes the priority areas of each CPS.
Korea needs to take the role as a ladder builder in ODA. Myanmar also wants to benchmark Korea’s economic development. However, successful experiences of Korea’s economic development should not be interpreted in a narrow sense. It does not mean just economic growth, rather it contains institutional capacity, education, and social cohesion.
The authors recommend the following as the priority areas: ①development of agriculture and rural sector, ②technical vocational education training (TVET), ③economic infrastructure, such as electricity, transportation, telecommunication, ④ capacity building of public sector. Even though the political leading party changes, the direction of Myanmar’s ODA policy is not likely to change. Union, inclusiveness, and industrialization would remain as key factors of Myanmar’s ODA. In that sense the above priority ares of Korea are still valid.  

From 2002 to 2011 China has maintained an average annual growth of over 9%, and North Korea as a result enjoyed economic stability benefiting from China’s growth. In the 2000s North Korea goes beyond overcoming economic difficulties in the 1990s through anthracite and iron ore export, and begins to utilize its economic cooperation with China as a tool for its economic growth.
Its dependency on Chinese economy quickly intensified due to the internal motivation for North Korea’s aspiration of economic growth through expansion of resource exports to China as well as external motivational factor of intranational economic sanctions. However, beginning from 2010, North Korea and China’s economic cooperation faced a turning―point. China’s economic slowdown induced a structural change in North Korea―China trade since 2012 and led to a new pattern of North Korea―China relations.
This research aims to analyze the effect that recently facilitated North Korea and China’s economic relations have on North Korean economy and find the implications this has on inter―Korean economic integration and the development of Northeast Asian economic community. For thorough analysis of the economic cooperation between North Korea and China, we defined what exactly international economic cooperation stands for, theorized various factors that create and facilitate this cooperation, and analyzed how changes in trade environment and China’s economic policy towards North Korea due to China’s economic slowdown impacts these various factors in terms of North Korea China trade and economic cooperation projects.
The originality of this research is in the data and methodology it adapts. The Chinese customs data from 2010 to 2014, consisted of 8 digit HS code product level list by year, country, import and export, custom districts, as well as customs regime categories enabled us to analyze the qualitative change in North Korea―China trade from simple trade to higher shares of process trade and intermediate goods trade. As for the methodology, we have provided a theoretical framework analyzing the division of labor between countries and fieldwork results. Our theoretical framework delineates the sectors and incentives where international economic cooperation occurs which is used in our analysis of the North Korea―China economic cooperation. As for the fieldwork, we tried to enhance the quality of the research by interviewing people who are indirectly and directly involved in trade and business with North Korea in the Chinese border region. In chapter 2, we analyzed the intensification and the developing process of economic cooperation between North Korea and China. The background of North Korea’s resource extraction export structure has a lot to do with China’s high level economic growth of over 9% from 2002 to 2011, serving as the world’s manufacturing base, vacuuming raw materials to feed its demand. This in turn fueled North Korea’s raw material export to China. This led to a steep increase of North Korea’s trade with China, and bilateral sanctions initiated by Japan in 2006 and by South Korea in 2010 also played a role in this increase. China’s share in North Korea’s total trade exceeded 50% in 2005 and reached 90.1% in 2014, and its share of North Korea’s total incoming net FDI exceeded 90% after 2008. Such statistics is an indication of the consolidation of economic cooperation between the two countries.
We assume that economic cooperation between countries is created when the cost of production or consumption domestically is more expensive than the cost of production or consumption out―sourced, using another country’s resources, coupled with gradual reduction of border regulations that prohibit cross―border movement of various resources such as labor, capital, merchandise, and technology through international conventions. In this research, we concluded that North Korea and China’s economic cooperation through trade is in its mature stage, and direct economic cooperation through business interactions is in the creation stage in the four stages of economic cooperation―formative stage, creation stage, mature stage, and declining stage.
In chapter 3, we explored determining factors that would facilitate North Korea and China’s trade in the future. First of all, recently North Korea’s exports of anthracite and iron ore to China which were the major export items has shown either stagnant or decreasing trends. Such changes in the previously major items of exports to China is predicted to bring about fundamental changes in North Korea and China’s economic cooperation.
Along with this trend, China’s shift of its economic development methods to domestic―centered policies, businesses’ costs are increasing due to increasing wages and social security costs. Specifically, the outflow of young labor in the Northeast China bordering North Korea is occurring in critical levels. In such situation the number of North Korean laborers that are dispatched to the Chinese border and engage in productive activities is predicted to increase.
Moreover, China’s Northeast region’s small and medium cities are actively engaging in economic cooperative projects with North Korea involving opening up of North Korea’s economy as a part of its own economic development policies. Especially, newly implemented projects such as the construction of the new Yalu river bridge, establishment of China―North Korea civilian border mutual trade market, implementation of outbound trade are leading the China―North Korea division of labor.
In the case of North Korea, despite its policy to enhance the livelihood of the people in order to maintain legitimacy, the difficulty of the so―called “self―reliant” economy led individual economic actors to rely more on trade with China. Also, North Korea is also putting effort into attracting foreign investment through development and usage rights of its natural resources in order to establish production infrastructure as well as expanding trade with China through its rich natural resources. However, underdeveloped investment infrastructure as well as political risks has been obstacles to foreign investment in production infrastructures that need big―scale investment. Therefore we predict that China’s investment will be focused in out―sourced processing trade which does not require a large scale investment.
Also, North Korea is showing active policy underpinnings to expand border area tourism as well as dispatch of its labor in China in order to earn foreign currency. Border area tourism is not a zero sum game and therefore is expected to increase and intensify economic cooperation between the two countries. However, labor dispatch can be a threat to the labor market stability of the two countries as well as to the maintenance of the North Korean regime which makes it difficult to forecast its future trend.
In chapter 4, we investigated economic cooperation in production, economic cooperation in consumption, economic cooperation in terms of provinces and comparative advantage items in North Korea China trade based on China customs data. We found that indeed there was a structural economic cooperation in production and consumption between the two countries. First of all, in terms of customs regimes, during the last 5 years ordinary trade and border trade in both exports and imports continuously increased and decreased a little in 2014. Processing trade continuously increased. In terms of North Korea’s import from China, trade for consumption, which are ordinary trade and border trade had the biggest shares and in shares of bonded trade and processing trade, which are consisted of transit trades and raw material trade for processing were bigger in terms of North Korea’s exports than imports. This indicates that the purposes of North Korea’s imports from and exports to China are different.
In terms of the economic cooperation in consumption, the main items of both countries were being traded, showing a stable trend. In North Korea’s import from China, industrial raw materials, construction materials, food products in ordinary trade, grains and household necessities under the category of border trade were mainly traded. Economic cooperation in the production side through processing and assembling trade was also conducted at a regular basis. main products that were imported from China by North Korea under the processing trade category included materials and energy sources required in production such as patroleum oil, rubber, plastic, special fabric, and main products that were exported to China from North Korea included nut products, fish, and clothing. Clothes were not traded as a major product for trade for consumption, but it was one of the main traded item for trade for production categories.
By customs districts, more than 70% North Korea’s imports from China goes through Dalian customs district (which includes Dandong). North Korea’s exports to China show less concentration in a single channel of entry. This shows that North Korea’s imports are mostly executed by land in small amounts while exports mostly by sea in bigger amounts. By analyzing revealed comparative advantage(RCA) between North Korea and the two Northeast Chinese Provinces we were able to find a clear patter of economic cooperation. Dalian’s RCA vis―a―vis North Korea was high in raw materials for clothing manufacturing or other fabric materials, as well as nonmetal materials, industrial raw materials and capital goods. North Korea’s RCA vis―a―vis Dalian was high in finished clothing, which indicated a production sharing network in clothing manufacturing in which Dalian supplies North Korea with raw materials and North Korea supplies Dalian with completed clothing products. North Korea’s RCA vis―a―vis Changchun was high in raw materials that are used in manufacturing apparel and other daily necessities, daily necessities, food products whereas Changchun’s RCA vis―a―vis North Korea was high in local specialties such as Ginseng, vegetables and fruits, and other food products as well as clothing. This indicates a similar production sharing network as in the Dalian case.
In chapter 5, we provide analysis based on in―depth interviews with people who engage in businesses related to economic cooperation with North Korea at the North Korea―China border. First, most interviewees agreed that there exists an economic cooperation relationship between the two countries. Specifically, interviewees that were more deeply involved in this cooperation had an easier time understanding and assenting to the concept of international economic cooperation. Meanwhile, there were some differences in perspectives among interviewees regarding the China factor as a determinant of the economic cooperation which we discussed in chapter 3. This was due to regional disparities, as well as different businesses the interviewees were engaged in. However, most of them agreed that the economic cooperation will expand due to North Korea’s cheap and reliable supply of labor to China.
In chapter 6, we analyzed the effect the intensification of North Korea and China’s economic cooperation has on North Korea’s economy. Positive effects included facilitation of North Korea’s marketization, reform and opening up, resolving North Korea’s economic difficulty, and economic development. Negative effects were China’s preemptive monopolization of North Korea’s economic resources, and setbacks to inter―Korean economic cooperation. To maximize the positive effects and minimize the negative effects of North Korea and China economic cooperation, we suggested policy recommendations for tripartite cooperative projects among South and North Korea and China, such as IT industrial cooperation, participation in China’s Rajin port development plan, entering the North Korea―China civilian border mutual trade market, inducing North Korea’s rejoining of GTI. For inter―Korean economic cooperation, we suggested that there needs to be more research on exchange rates between South and North Korea currencies as well as on plans for gradual removal of the 5.24 measures. 

This report suggests policy implications to enhance employment of youth, women and the elderly by researching and analysing the European Union (EU) and its member countries’ employment related policies. Currently, Korea is facing problems with employment, as the European countries did during the 1990s and 2000s. In response to the situation, the European countries enforced various policies to reduce unemployment and to increase employment rate.
At present, the employment rate of the EU is at around 69%, which is higher level than that of Korea. By implementing labour reforms and policies, several European countries have been successful in improving their employment rates beyond initial expectations.
The unemployment rate in Korea is 3.7%, which is the second lowest amongst the OECD member countries after Norway. It is also lower than the half level of the OECD’s average unemployment rate. On the other hand, employment rate in Korea is approximately 65.3%, which is slightly lower than the OECD average, and compared to those of developed countries the gap becomes even wider. Another issue is to improve employment rate of the vulnerable groups, such as youth, women, and the elderly. Accordingly, the Korean government is planning to boost employment rate to 70% by 2017 through the “Roadmap for 70% Employment Rate, 2014-2017” and the “Three year Economic Reform Plan.” In a related move, the Korean government aims to increase the number of jobs by 2.4 million through part time work, or so called flexible employment.
To this end, the government is planning to create approximately 930,000 part time jobs. Moreover, the Korean government is emphasising work life balance through child care leave and increased child care services, while improving the employment level of women by expanding social awareness on gender equality.
Then, what features do the EU’s strategies and policies have to lift employment rate, particularly considering youth, women and the elderly? The deepening of the EU integration has enhanced the role of the EU. In this sense, EU’s policies and strategies for employment became an important guideline to project the future direction of the EU member countries’ policies.
Based on research and interviews with the experts, the key features of employment in the EU are Active Labour Market Policy (ALMP), Vocational Education and Training (VET), and Apprenticeship. First of all, ALMP is an important method with respect to reducing the burden of employers and employees during the period of low economic growth. At the same time, it encourages the unemployed to return to the labour market as soon as possible.
In particular, social policies and employment policies are implemented complementarily. Services related to job offering, such as EURES, have been strengthened so that the EU could minimize the job mismatch between the jobseekers and the employers. VET is one of the key policy areas that the EU is focusing on to improve the employment conditions of the disadvantaged groups. However, we can further improve youth employment by implementing VET and Apprenticeship simultaneously. Moreover, it is important for the employers to show willingness to educate the employees. The possibility of an employee changing jobs within the same field would hamper the investment in apprenticeship by the employers, even though the effectiveness of apprenticeship has been fully recognised. Finally, in order to improve employment of the disadvantaged groups, social understanding should be made that a simple employment policy cannot act alone.
In other words, regarding the complexity of different social systems, economic structures, and legal systems, it is important to analyse the respective domestic situations comprehensively when formulating employment policies. Young people are more vulnerable to unemployment given their lack of professional experience, barriers to job markets and temporary employment position. OECD countries in general, youth unemployment rate is more than twice the level of overall unemployment rate and more sensitive to economic cycles, particularly during economic downturns. In addition to the business cycle, youth employment is affected by the level of protection for permanent/temporary workers, education level of youth, and the effectiveness of vocational/professional education. This study conducts several empirical analyses, taking youth employment rate, unemployment rate, and the ratio between youth and overall unemployment rate as dependent variables.
Economic cycle, labour protection level for both permanent and temporary workers, level of human resources, economic structure and education related indicators are considered as explanatory variables. The result shows that youth employment rate is positively correlated to overall education level and that of dual education based on apprenticeship. In particular, the share of apprenticeship in the overall education period shows high explanatory power on all dependent variables considered. This suggests that apprenticeship facilitates the transitional process from school to job, consequently contributing to higher employment rate of youth. Dual education can contribute to reduction of mismatches between education and professional qualification, and help young people to acquire skills and knowledge required for the jobs in the field.
Northern European countries have the highest rate of female employment. Germany and the Netherlands show higher female employment rates than the OECD average. The Northern European countries are the most exemplary in terms of narrowing the gap between employment rate for females compared to males, followed by Germany and France. However, unlike the Northern European countries, the increase in female employment in part time jobs in Germany and France actually led to a wider gender gap with respect to full time employment. According to previous studies, the determinants for the female employment rate depend on appropriate policy tools or policy combinations for different situations; in order for each society to achieve both the policy goals of female employment rate and birth rate, of which can run parallel to each other. However, most of the countries acknowledge that the services for childcare and child raising support are considered as effective policy tools to satisfy both policy goals. The policies for raising female employment rate in the respective European countries can be divided into the Northern European type, which executes active policy for work family balance, and the British type, which raises female employment rate by introducing flexibility in the labour market. Continental European countries, such as Germany and France, show a mixture of both. Part time employment in Sweden, which is actually a permanent position with flexible working hours, can be differentiated from part time employment in other European countries. In the German case, flexible labour market enabled the females, who had left the labour market due to the burden of childcare, to return. However, it also showed that the quality of employment has dropped while instability related to employment has risen. Although the increase of part time employment of females in France has led to instability in employment and degeneration of the working environment, the gender gap in terms of wage income has become narrower than that of other OECD countries, including Germany. In order to achieve the policy goals it is important to conduct in-depth analysis on the constraints.
When there are many differences in the background, such as in the family welfare system, the structure of the labour market, and the downward inelasticity of wages, the same means of policy may occur different consequences. As the average life expectancy increased in the EU, the burden related to the elderly has been increasing. Although the participation rate in the workforce of older people in the EU in general is showing an upward trend, as older workers’ unemployment has a higher chance of evolving into a long term unemployment. The factors that can affect the employment of the older people include obligatory retirement age, pension schemes, and working environment, as well as perceptions toward older workers. In the cases of Finland and the United Kingdom (UK), since these above mentioned factors can complicate the situation and prompt older workers to stop working, policies need to be managed more carefully. The employment of older workers in Finland is showing following characteristics. The government makes careful policy planning and execution with external assessment on the process, which later on spreads out to the whole economy. Various campaigns to reinforce positive image of older people and to recognise the necessity of older people remaining in the workforce allowed the effective functioning of other programmes to prepare for the ageing society. Moreover, programmes such as hygiene management among the workforce, as well as amelioration of education and communications are to improve overall working conditions. UK adopted policies that cover all age levels before adopting programmes specifically designed for the older workers. They are trying to minimise trial and error by being cautious with the policy, implementing new policies nationwide only when measures for the sample group turns out to be successful. Moreover, the changes in retirement and pension schemes aim for rejecting early retirement as well as campaigns to improve positive recognition on older coworkers. Both Finland and UK are raising the retirement age, providing incentives to remain in the labour market instead of choosing early retirement, and initiating campaigns to positively change the attitudes toward older workers. Among incentives to make the older workers remain in the labour market, the Finnish government are providing additional pension amount for the additional working hours and in the UK they are providing subsidies or tax benefit for the companies hiring older people.
Moreover, other cases such as the Finnish government’s active PR campaign to pull the older workers back to the labour market and the UK government’s campaign, providing information material on research that the productiveness of the older workers are not low, are recognisable as well.
This study provides implications for policies on youth, women and elderly employment. The implications for youth employment are as follows. First, it is necessary to develop active measures to reduce mismatch between education provided and the demand from the labour market. It is often mentioned that the high rate of university admission among Korean youth is one of reasons that youth employment rate in Korea is low. However, it is difficult to find empirical evidence from comparative analysis with OECD countries. It is a fact that the job market entry age for Korean youth is becoming progressively late. This is partly due to the fact that the job market requires increasingly high professional qualifications from the young job seekers, of which the schools, including universities, are unable to provide. Second, creating an apprentice system in accordance with the current situation in Korea is highly recommended.
Countries with well developed dual education system clearly show high employment rate as well as low unemployment rate of the youth. It is noteworthy that less than 10% of young people in Germany are jobless within 3 years of completion of dual education. Third, it is necessary to improve the situation regarding the dual labour market, in which temporary or irregular workers are not properly protected and have difficulty securing regular employment contracts. A number of studies insist that dualism in the labour market is a cause of high unemployment rate among youth. In Korea, the number of temporary or irregular workers among youth is higher than that of the middle aged groups. In this context, it is recommendable to improve working conditions for irregular workers, while taking measures to increase flexibility in the labour market for regular workers.
The implications in this study regarding employment of women are as follows. First, in general, European countries have pursued dual policy objectives, namely simultaneous increase of employment of women as well as the birth rate. Expansion of childcare services is one of the policies to facilitate employment of women and to increase childbirth. Second, increasing the share of part time workers can contribute to increased employment of women, however, cautious approach is required as it has been criticised for lowering the quality of employment. It is notable that flexible working hours in Sweden was widely introduced in order to achieve work family balance. Third, it is necessary to provide assistance to women who had their careers interrupted or discontinued due to childcare and invite them back to the labour market.
This study also provides implications for elderly employment. First, it is necessary to change the perceptions towards the elderly in the workplace and take active measures. The Finnish case is noteworthy in that the government of Finland began implementing measures in the 1990s, starting with analysis and assessment of working conditions of the older workers, followed by public promotions. Its government has continued to provide support programs and improved them through ex poste assessment. In the case of the United Kingdom, its government was less supportive in terms of fiscal spending in old age work than Finland, but its efforts have been concentrated in providing legal framework for old age employment, as well as creating favourable environment for the recruitment of and equal conditions for older workers. Second, it is recommended to develop a legal framework in order to increase retirement age. This is all the more necessary, because Korean society has been ageing rapidly and the gap between legally pensionable age and the actual retirement age from the workplace is widening. Third, it is necessary to develop incentives for old age employment both to workers and employers. The incentives can be designed to take various form such as education and public health services in the work place, as well as financial forms. Last but not least, active PR campaigns will be necessary to boost employment of elderly workers. In particular, it should be emphasised that increased employment of old workers do not reduce job opportunities for the younger generation.  

The aim of the research is to suggest policy implications for expansion of bilateral cooperation between Korea and Israel through examination of Israel's hightech startup promotion policies and international R&D cooperation.
Israel's hightech startup policies have been developed with the Office of the Chief Scientist (OCS). OCS is the core organization for startup policies of Israel, responsible for managing the Israeli government's R&D-related policies including raising of R&D funds, promoting programs for startup support, and international R&D cooperation. Technological Incubators and the Yozma fund, which are representative programs of the OCS, form the basis of Israel's startup policies. After the start-up system was firmly established and private sector participation increased, the OCS transferred the operation of these programs to the private sector to avoid the inefficiency and slow decision-making characteristic of the public sector.
In light of the inherent risks that accompany development of innovative technologies, products and services, Israeli government operates exclusive organizations and promotes R&D development through bilateral and multilateral cooperation with various countries. In particular, Israel established bi-national foundations with the U.S., Singapore, Korea and Canada to provide R&D projects with financial support including conditional grants of up to 50% of R&D expenses for joint projects. Moreover, bi-national funds provide an incentive for companies in both countries to participate in joint R&D projects by waiving repayments when the projects fall short in terms of commercialization. Israeli companies can also utilize European partners' networks through Europe's R&D cooperation programs when they attempt to enter the global market.
Israel, as a non-European associate member country, participates in the EU Framework Program (FP), the main R&D project in Europe. Israel is also engaged in bilateral agreements with various European countries in addition to EUREKA, an intergovernmental cooperation program involving nearly all European countries.
Based on diverse international cooperation programs, Israel has been able to create a global network and Israeli companies, which benefit from the programs, stand as some of the world's leading corporations. Moreover, these successes create a virtuous cycle by concentrating venture capital on Israeli companies.
For expansion of cooperation between Korea and Israel in hightech startups and the R&D sector, implications for government policy should be considered as follows. First, technology transfer from Israel to Korea should be activated through bilateral cooperation in the R&D sector. Collecting original technologies of Israeli universities or companies and transferring their technologies to Korea after evaluating the possibility of commercialization will contribute to development of innovative technologies in Korea.
Second, creating a manpower pool of evaluators like Israel will ensure fairness in the evaluation system. In order to implement this plan, retirees with extensive experiences and expertise or entrepreneurs who succeeded in the global market can be included in the manpower pool.
Third, efforts for entry into the global market should be strengthened for development of hightech startups in Korea. Toward this end, network platform for Korean startup companies should be constructed in Tel Aviv first, to network with Israeli accelerators and facilitate infusion of venture capital. In addition, organizing a joint Korean-Israel start-up festival can also be considered. 

Executive Summary

Chapter Ⅰ. Introduction

1. Background to the Research
A. Overview of Regional Development in Northern Vietnam
B. Collectivization and De-collectivization in Vietnam
C. Gender Relations in Ethnic Minority Groups in the Regional Development Process
D. Justification for the Research
2. Research Objectives
3. Theoretical and Conceptual Framework
A. Main Research Questions
B. Theoretical Framework
C. Research Design
4. Scientific Contributions and Innovative Aspects
5. Scope and Limitation

Chapter Ⅱ. Overview of Korea’s ODA to Vietnam

1. Current Status of Korea’s ODA to Vietnam
A. Bilateral Grants
B. Bilateral Concessional Loans
C. Effect of Korea’s ODA on FDI
2. Performance of Korea’s ODA to Vietnam under the CPS
A. An Introduction of the Country Partnership Strategy for Vietnam
B. Achievements
C. Limitations and Experiences
3. The Importance of Korea’s CPS in the Context of Regional Development in Northern Vietnam

Chapter Ⅲ. Literature Review

1. The Nature of Intra-household Gender Relations
A. Households
B. Factors of Intra-household Differences
2. Existing Economic Conceptualizations of Intra-household Gender Relations
A. Neoclassical Models of Intra-household Distribution: Unitary Models
B. Bargaining (Power) Models: Non-unitary Models
3. Empirical Views of Intra-household Relations and the Role of Women in Decision-making Process

Chapter Ⅳ. Methodology and Data

1. Research Design
A. Rural De-collectivization, Economic Integration and Ethnic Minority Groups in the Northern Uplands of Vietnam
B. Research Approach
C. Research Model
2. Selection of Sample
3. Data Collection
4. Data Analysis
A. Descriptive Statistics
B. Econometric Analysis

Chapter Ⅴ. Impacts of Rural De-collectivization and Economic Integration on Intra-household Gender Relations in Northern Vietnam

1. General Background of the Respondents
2. Comparison Analysis of Differences in Decision-making
A. Analysis of Differences in Decision-making: Household Gender
B. Analysis of Differences in Decision-making: Geography
C. Analysis of Differences in Decision-making: Ethnic Group
3. Factors Affecting Household Decision-making
A. Results of the Model
B. Analyzing the Results
4. Discussions

Chapter Ⅵ. Conclusions and Policy Implications

1. Conclusions
2. Policy Implications

References

Appendices 

Ethnic minorities are concentrated in upland and mountainous areas in Vietnam where access to infrastructure, health, and educational facilities is limited. Being physically, economically, and culturally isolated from the rest of the nation, these groups are the most neglected and benefit the least from the development process of Vietnam brought about by the reform program. Among them, women were the poorest and most disadvantaged.
In the period of collectivization, the traditional norms on gender relations were challenged both in ideology and in practice. Women were mobilized to contribute to the war against America by stepping up production and handling family affairs, and show devotion to their responsibility for national defense. In the period of 1980s and onward, the intra-household gender relations were changed through a combination of traditional gender norms, residual legacies of socialism, and new socio-economic reform policies. The roles of social expectation on men’s and women’s “proper” sphere have been redefined and provide ideological grounds for a solution.
It is against the background delineated above that this study investigates the impact of rural de-collectivization and economic integration on intra-household gender relations in the Northern Uplands of Vietnam. This study examines relatively unexplored questions on gender and development in comparative regional studies: How have intra-household gender norms and relations in the cultures of ethnic minority groups been redefined in the period of rural de-collectivization and economic integration? To what extent can changes in intra-household gender relations among ethnic minority groups influence the development of household economies in the Northern Uplands of Vietnam? What are the determinants of household decision-making for ethnic minorities in the Northern Uplands of Vietnam?
In order to answer to research questions above, this paper first reviews the rural de-collectivization and economic integration in Vietnam and their effect on gender relations among ethnic minorities in Northern Vietnam. We also develop a theoretical framework to measure factors affecting the intra-household gender relations in ethnic minority groups in the Northern Mountainous Area of Vietnam.
Based on this theoretical framework, we estimate the important factors that affect women’s decision-making within households. The household survey of 480 households living in Thai Nguyen and Son La provinces is uniquely designed to measure the intra-household gender relations. The survey includes questions that measure household decision-making, such as making of decisions related to healthcare, household purchases, childcare etc., and other individual and household characteristics. The regression analysis tell us that women’s decision-making in the household is affected by factors such as women’s years of schooling, income contribution to the household, assets given when getting married, and whether there is a male family member working far from home.
These factors are also positively related to the economic integration and de-composition in Vietnam. The results of multiple regression analyses also indicate that husband’s years of schooling, gender of household head, the household’s current assets and the husband’s granted asset as major factors deterring women’s autonomy in Northern households.
With focus on gender relations within ethnic minorities in Northern Vietnam, there are several policy implications for both local authorities as well as the policy makers: (i) In order to increase ethnic women’s autonomy in decision-making in Northern Vietnam, it is necessary to organize professional training courses for ethnic minority women to enhance labor participation of women. (ii) Besides, local authorities should create favorable environments for ethnic minority women to actively participate in projects and/or programs which help to increase their income. (iii) Strengthening the cooperation between many organizations, individuals and communities to improve gender equality in remote areas, especially in areas where ethnic minorities live. (iv) Diversifying resource mobilization from the State, enterprises, communities, and donor countries to implement the plan, in which the local authorities will prioritize the allocation of state budgets for implementation of national targets on gender equality. 

Since the Global Financial Crisis, there is a clear trend that the implementation of non-tariff measures has become more prevalent, implying the possibility of countries’ usage of non-tariff measures to protect their domestic economy. The three Northeast Asian countries, China, Japan and Korea (CJK) are not an exception, where firm survey results identify TBT and SPS measures as major obstacles to trade. Although many non-tariff measures have legitimate, non-economic objectives such as human health, safety and environment, some non-tariff measures create unnecessary obstacles to trade where these non-tariff measures are called “non-tariff barriers.” Hence, it is important for these three countries to build a cooperative system to identify TBT and SPS measures which unnecessarily impede trade. In this report, we analyze the pattern of international trade and non-tariff measures of CJK, and devise an effective counterplan for these three countries to cooperate in order to identify and lower non-tariff barriers.
To examine the trade patterns of CJK, we looked at the World Input-Output Tables (WIOT), along with the gross trade statistics which has been generally used in the literature. The rationale behind this owes to the fact that the region has been one of the areas actively forming global value chains (GVCs). By calculating the three countries’ value added trade based on the WIOT, we reveal a deepening of GVC ？ all three nations experienced an increase in the foreign value added embodied in goods with decreasing domestic value added. By looking at CJK’s tariff and non-tariff measures, we observe a drastic increase in the three measures (particularly TBT and SPS-related measures), while average tariff rates have decreased for each country. This highlights the importance of non-tariff measures ？ specifically TBT and SPS ？ in facilitating intra-regional trade among CJK.
With both theoretical and empirical analysis, we attempt to study the effects of non-tariff measures on intra-regional trade. Theoretically, non-tariff measures can facilitate trade by alleviating the problem of incomplete information; in the meantime, compliance with TBT or SPS measures may increase costs and adversely affect trade. Thus, the net effect of implementing either TBT or SPS measures on trade depends on the two opposing effects. To examine the effect of TBT and SPS measures on trade of CJK, we first calculate the coverage ratio (share of import value exposed to non-tariff measures) and frequency index (share of the number of import products exposed to non-tariff measures) by year and by industry for CJK. For all three countries, we find a clear pattern where the coverage ratio and frequency index of both TBT and SPS measures have increased since the Global Financial Crisis. Also, food and agricultural imports of the countries exhibit higher coverage ratio and frequency index than imports of other ries. The coverage ratio and frequency index however does not tell us in which direction and how much TBT or SPS affects trade. To examine this, we conduct an empirical study based on the calculated coverage ratio and frequency index. The empirical result tells us that TBT measures of CJK negatively affect manufacturing trade from the world to CJK, while SPS adversely affects food and agricultural trade. Restricting the analysis to intra-regional trade, we find that only SPS measures decrease the trade flow of food and agricultural products between countries. The effect of TBT measures on trade is insignificant, possibly due to the fact that trade between the three countries mostly consists of intermediate goods trade which is less likely to be affected by TBT or SPS measures. Next, we complement our quantitative analysis with qualitative analysis on TBT and SPS measures of CJK. In addition to the explanation on certification procedures and systems of TBT and SPS measures in the three countries, we compare the TBT and SPS provisions in the commonly agreed FTAs of the three countries. For TBT agreement in these FTAs, China seems to have more or less conservative tendency towards International Standards and Transparency. With respect to the provisions of Conformity Assessment Procedures within the TBT agreement, both China and Japan have stricter criteria in acceptance of mutual recognition of results and procedure of Conformity Assessment than Korea does.
In terms of SPS provisions, China’s FTA included the most detailed, concrete provisions in terms of depth and scope, while South Korea and Japan were reluctant to include provisions other than the WTO SPS Agreement. The only provisions in common that all three countries included were the cooperation provisions (which includes information exchange) and the SPS committee provisions. Meanwhile, CJK seek mutual cooperation to promote protection of the health of their citizens, animals, and plants as well as to facilitate safe trade not only at the multilateral level but also at the bilateral level.
Despite its well-known restrictiveness on trade, CJK lacks a mechanism to regularly discuss and cooperate on non-tariff barrier issues between the three countries. Thus, in this report, we suggest the three countries to utilize the Pan-Yellow Sea Rim Economy and Technology Exchange Meeting. Within the meeting, harmonization of standards, mutual recognition of conformity assessment and enhancement of transparency can be discussed to lower non-tariff barriers to trade relevant to TBT and SPS measures. Regarding the first issue, for instance, we argue for creating a sustainable network system which includes annual experts` meeting on Korean-Sino food standards to build mutual understanding among the three countries. In a long-term perspective, the three countries can consider creating a common food regulation standing committee of CJK, benchmarking the Food Standards Australia and New Zealand (FSANZ), to promote food standards harmonization among the three countries. With respect to the second issue regarding the mutual recognition of conformity assessment, three methods are worth a consideration; ① an introduction and expansion of SDoC(Suppliers Declaration of Conformity) product list ② a delegation of authority to the assessment bodies located in the partner country ③ an establishment and management of a foreign-owned certification authority in domestic country, in addition to an extension of MRA within regional cross-border or a mutual recognition of the result on test certification between conformity assessment bodies.
Lastly, to enhance transparency, we propose to create a common website on TBT and SPS measures of CJK which alerts stakeholders about the changed or introduced TBT/SPS measures and provides information about cases of failure in complying with customs regulations.  

Cross-border transactions of intangible goods/services and information are rapidly increasing, and raise new issues in terms of both domestic and international rules. This study defines digital trade and identifies issues of cross-border digital trade and its economic potentials. Especially we focus on three major issues of cross-border digital trade: cross-border data transfer, IPRs and taxation issues.
Chapter 2 defines digital trade and categorizes the relevant issues by examining international debates, economic theories, and empirical literature. Digital trade is commercial transactions conducted over internet by methods designed for receiving or placing of orders. Payment and delivery do not have to be conducted over internet. Subjects of digital trade consist of goods, services(digitally deliverable services), digital products that cannot be categorized neither goods nor services(e.g. music downloaded from internet) and diverse kind of information such as private information transferred over internet. Cross-border flows of digitized information generate novel issues.
In a broad sense, we classify issues of international digital trade as follow: ① issues related to cross-border data flows: barriers to international data flows, regulations on privacy protection, localization of computing facilities, etc., ② protection of digital IPRs, ③ taxation on internet services providers located in foreign territories, ④ consumer protection and convenience: payment system, dispute resolution, redress, privacy protection, etc., ⑤ border measures: tariffs, delivery costs, etc.
Korea recently witnesses its e-commerce market growing fast, and has potentials in internet platforms and digital content such as online games. Korean firms now spur development of new internet service businesses such as cloud computing, big data analysis, etc. The rapid growth of East Asian market, especially China, is an opportunity factor. In this sense, Korea need to actively participate in international fora to build global norms of cross-border digital trade. More importantly, Korea has to establish comprehensive, flexible policy making system and upgrade its domestic regulatory system consistently.
Chapter 3 covers issues on cross-border data flows and its implications. It is essential to balance between freer data flows and personal information protection. Countries has introduced different policy measures to regulate data flows across borders and data protection. Emergence of hyper-connected ICT industries such as cloud computing, IoT and big data lead to consider new approach to deal with cross-border data flows and data protection and thus to examine effectiveness of existing regulations and policy measures.
Korea’s policy measures regarding cross-border transfer of personal information should focus on secure use of data. In this context, comprehensive review and improvement of existing regulations, particularly those in contradiction to hyper-connected industries, is necessary. Also, with lessons learned from EU and Japan’s cases, Korea should introduce diverse measures besides prior consent system in order to guarantee freer and safer cross-border transfer of personal information. Korea also should actively take part in international and regional cooperation to harmonize regulatory approaches and enhance interoperatability. Accountability of data processors is a basic condition to secure free and safe flows of personal information.
Chapter 4 examines the trend of international discussions as well as major issues of digital IPRs, where debates arise along with the development of internet technology. In general, due to the characteristics of digital products as public goods, there is a high possibility of market failure, and it is difficult to protect rights with the existing IPR regulations. Main issues of digital IPRs can be divided into ① an issue on whether to strengthen protection of rights on digital products through patent protection, ② an issue on expansion of property rights to items that have not been protected so far like the sui generis database right, and ③ an issue related to reducing internet piracy.
It is necessary to establish multiple IPR protection system including software-related patents and trade secret protection rights(especially related to source codes) as well as copyrights. Also, sui generis database right should be designed not to contradict the protection of personal information. Additionally, Korea has to actively participate in multilateral patent-integration and cooperate to prevent internet piracy.
Chapter 5 draws core taxation issues of international digital trade, and examines them in the context of Korea. Major issues are permanent establishment rule(direct tax), effective VAT collection(indirect tax), and characterization of taxation scope. Korea’s regulation system is not clearly established regarding permanent establishment in cross-border digital trade and destination principle of VAT. Regarding characterization of taxation scope, international discussion begins lately.
Above all, it is necessary to revise tax regulations(VAT and Corporate tax) by reflecting new permanent establishment rule and destination principle. New permanent establishment rule in digital trade should be reflected in tax treaty with key countries like US, China, and Japan. Also, institutional framework like mini One-stop Shop of EU needs to be established for effective VAT collection on cross-border digital trade. In the case of characterization of taxation scope, policies should focus on revising tax regulation by reflecting characteristics of new business, and actively participating in international discussions.
In terms of international trade policy, TPP(Trans-Pacific Partnership)'s Electronic Commerce chapter suggests new rules on global digital trade. In general, Korea has conditions to occupy a strong position to major issues such as privacy protection, cross-border information transfer, location of computing facilities, and requirement of softwares' source codes. Nevertheless, it is necessary to improve domestic regulations and establish a strategy to build up core ICT industries' competitiveness. 

As Sustainable Development Goals (SGDs) were adopted in New York in September 2015, attentions on fragile states, where most of people under the poverty line have lived in, have been increased. Because SDGs will more focus on marginalized people in terms of economic and social perspective, it is important to address issues related to fragility in fragile and conflict-affected countries.
Major donors have recognized importance of supporting fragile states since 1990 and they have established separate strategies and reflected it into country assistance strategy. They especially emphasized on supporting fragile states in order to achieve Millennium Development Goals (MDGs). However, 43% of the world’s poor now live in countries and economies on the 2015 OECD fragile states list, by 2030, poverty could become increasingly concentrated in fragile states.
Therefore, it requires much more effort to reduce poverty and development issues in fragile states such as peace-building, state-building, and humanitarian aid.
Prime Minister’s Office of Korea released 24 priority partner countries for 2016-2020 in early 2015. Among them, 8 countries are categorized as a fragile state and 5 out of 8 belong to Asia. Korea plans to establish new Country Partnership Strategy (CPS) for priority partner countries. Because proportion of fragile states among priority partner countries is high, it is necessary to have cooperation strategy for them before establishing CPS.
This study will analyze definition, standard, major categorizations and characteristics of fragile states as well as discussions on assistance to fragile states. Especially this research chooses Myanmar and Nepal, which were least developed countries (LDCs) as well as fragile states, for case study to figure out how donors and Korea support them in perspective of fragile states.
This study is organized as follows: Chapter 1 describes the objectives, ranges and structure of the research. In Chapter 2, it explains recent trends and issues about fragile states in the international community and analyzes major characteristics of fragile states by reviewing definitions and standards and classification and its criteria. Especially it covers discussions and issues under the OECD Development Assistance Committee (DAC), International Network on Conflict and Fragility (INCAF), and Post-2015 framework. Chapter 3 gives general description on development and characteristics of fragile states in Asia.
Especially it selects Myanmar and Nepal as objects of case study and draws implications for establishing Korea’s new CPS by analyzing their recent development conditions and needs and international communities’ support on them in perspective of fragile states. Nepal’s fragility is studied in terms of violence, justice, institutions, and economic foundation as well as environmental fragility caused by earthquake in early 2015. Also it looks into how major donors, such as the UK and Asian Development Bank (ADB) support Nepal as a fragile states. In case of Myanmar, the study focuses on fragility related to violence, institutions, justice, and conflicts caused by ethnic minority issues and also review how Japan and EU assist Myanmar to reduce fragility under CPS. In Chapter 4, it analyzes current status and policy how Korea has supported fragile states in Asia based and derives policy implications on how Korea should prepare a strategy for supporting fragile states and improve CPS by incorporating characteristics of fragile states into it.
Korea’s policy for supporting fragile states has concentrated on emergency relief and humanitarian aid to recover and reconstruct the country after conflicts or disasters including peacebuilding activities. In order to help fragile states to reduce its fragility and reduce poverty, however, Korea should establish systematic strategy for assisting fragile states beyond refined supports such as emergency relief or humanitarian aid.
First, Korea should clearly set up definition of fragile states, select the proper target country for development aid, and then establish CPS along with the characteristics of fragility each country has. Because every fragile state has different ranges of fragility, it is necessary to strengthen the country-specific approach when establishing and operating CPS. Therefore, it should take precedence to implement comprehensive analysis on how and why fragility could affect development environment and implementation of ODA programs in the country by studying fragile situations, politics, economic situation, and social and cultural aspects.
Furthermore, when establishing CPS, it is need to provide performance objectives and indicators. If objectives and indicators related to fragility are suggested in the CPS, the effectiveness of operation of CPS could be improved by regular and systematic monitoring and evaluation. Due to incorporation of performance objectives and indicators in the CPS, connection between the strategy and each ODA projects could be strengthened and clear direction of the project could be secured when conducting aid programs to fragile states. As studied in Chapter 3, Korea could refer to the cases of major donors who emphasize concrete action plan and evaluation frameworks established through detailed preliminary analysis.
Lastly, comprehensive connected ODA programs under the CPS should be provided in order to improve the effectiveness of development cooperation in fragile states. It is crucial to establish comprehensive strategy considering fragility into the CPS and implement proper ODA programs based on the CPS. In order for that, it is necessary to figure out the way to effectively link grants and concessional loans. In addition, when providing aid to fragile states, it is important to consider to division of labor and harmonization among donors. Therefore, Korea should reinforce basis for cooperation with other donors by pursuing country program-based approach, such as budget support or pooed funding. 

China and Vietnam have been the two fastest growing economies in the world in the past 25 years. Each started out as a planned economy in the model of the Soviet Union, and each achieved disappointing economic results. In each country there was a clear break with the past and a shift to a more market-oriented economic system, ratified by a decision of the Central Committee of the Communist Party. In China the key meeting was held in 1978 and launched gaige kaifang (reform and opening up). In Vietnam reform was launched a number of years later at a Party meeting in 1986 under the banner of doi moi (renovation).
In each country reform of the financial system was one important element of reform, an aspect that is difficult and prone to risks. It is useful to examine their record of financial reform, the similarities and differences, and to draw some lessons -- lessons that would be helpful for developing countries in general, and potentially for DPRK in particular. DPRK has some important similarities with China and Vietnam in the early stages of their reform. If DPRK were to pursue market-oriented reform, then the financial lessons of China and Vietnam could be quite relevant.
China and Vietnam both have to be judged as successful in transforming their financial systems from mono-banking to a more market-oriented system that supports a real economy that is also largely market based. A couple of general lessons can be taken from their experience. They have pursued reform gradually, over a period of decades. Second, some of the characteristics of their reform were dictated by country conditions. That said, there were considerable degrees of freedom in various choices and it is interesting that the two countries often made different choices. Some of the potential lessons from financial reform in China and Vietnam come from comparing their different choices and results. So, what are some of the potential lessons for DPRK?
In the area of commercial banking, both China and Vietnam separated commercial banking functions from the central bank and established several state-owned commercial banks. Much of their reform was then concentrated on making those banks operate efficiently, while remaining under state-majority ownership up until today. They both developed policy banks to take over the function of directing credit to particular sectors (agriculture, infrastructure, foreign trade). They both allowed a small amount of entry into and competition among banks. The interesting area of difference is how they treated foreign investment in commercial banking. Vietnam was more open to foreign banks setting up operation. This foreign entry provides healthy competition and stability to the sector. China up until 2015 has resisted foreign banks operating independently in China and has restricted them to about 1% of the market.
While China did not want foreign banks operating independently, it did, however, see the benefit of bringing in big international banks as strategic, minority partners of the four SOCBs. By taking off the balance sheets the non-performing loans, recapitalizing the banks, and bringing in the strategic partners, China was able to improve the performance of the SOCBs and lay the foundation for successful IPOs in Hong Kong. Vietnam was not willing to bring in foreign banks as strategic partners and as a result its domestic IPOs have not been successful.
In the area of monetary policy and inflation control, China provides better lessons than Vietnam. Both countries relied initially on quantitative controls, initially lending quotas for individual banks and later, required reserve ratios that could be raised or lowered to affect the amount of lending. Over time, interest rates have begun to play some role in managing monetary policy. China went through a learning period during which the growth rate of credit and money was too high, and inflation as measured by the GDP deflator, above 10%. But from 1997 until today, China generally kept the growth of M2 below 20% and inflation, in single digits. Vietnam was often trying to push the growth rate higher through faster growth of credit. In Vietnam the growth rate of M2 generally has been above 20% per year, often well above that rate. This has made Vietnam prone to boom-bust cycles in which real growth and inflation both accelerate, but inflation becomes dangerously high. Reining it in then leads to a sharp drop in the growth rate.
In the area of interest rates, the two countries took different paths and there is something to be said for finding a middle ground between the two. Vietnam did not have the option of severe financial repression because people simply would not put domestic currency deposits into banks at sharply negative real interest rates. Early in its reform Vietnam attempted a big bang liberalization of interest rates: it allowed all kinds of different economic entities to offer uncontrolled interest rates to the public. This short experiment ended in disaster because interest-rate liberalization in a poorly regulated environment led to abuses and failures of credit cooperatives. China was at the other extreme, keeping controlled interest rates quite negative in real terms and sticking with interest rate controls long past the point at which they were necessary.
This interest rate policy is one factor behind China’s highly investment-intensive growth model. There is much to be said for an interest rate policy that splits the difference between China and Vietnam. Control interest rates in the early stages of reform but ensure that they are at least moderately positive in real terms. Introduce greater flexibility and market-determination at a pace faster than China did, but probably not during the first decade of reform.
One of the most important monetary lessons from China, Vietnam, and the earlier East Asian industrializers (South Korea, Taiwan) is to not let the currency become over-valued, and preferably to keep it modestly under-valued. If a low-inflation environment can be achieved, such as in China, then pegging to a major currency such as the dollar has some appeal as an anchor, provided the pegged exchange rate makes the country highly competitive, as in China’s case after 1994. However, it is a fact of life that the dollar will vary in value against the Euro, Yen, and other currencies in an unpredictable way. It is a more reasonable policy to try to stabilize the real exchange rate and to allow some modest appreciation over time in order to account for productivity gains. In es sence this involves pegging to a basket and allowing some adjustment over time.
In the cases of China and Vietnam, they each made some mistakes in exchange rate management, in different directions. China, by sticking with its dollar peg in a period when the dollar was depreciating, let its currency become too under-valued resulting in large trade surpluses that complicated monetary policy and were not in the country’s interest. The authorities then had to allow fairly sharp appreciation in order to get back close to external balance. It would have been better to have smooth appreciation of the real effective exchange rate rather than the roller-coaster of devaluation from 1998 to 2005 followed by sharp appreciation after 2005. Vietnam allowed even larger swings in the real effective exchange rate, principally because of big shifts in capital flows (discussed below). Vietnam would have been better off either limiting capital inflows through capital controls or sterilizing inflows when they occurred.
In the area of capital markets, neither China nor Vietnam gets particularly high marks. Each country wanted to severely limit access of firms to the capital markets so that they could use the markets to partially privatize a few key state enterprises. The end result was thin markets, prone to bubbles. It only took a small amount of investor interest to push up prices quickly, leading to inevitable corrections.
Finally, in terms of opening the financial system to the global market there are two distinct issues. It makes sense first to open up financial services to direct foreign investment. Experienced international firms investing in commercial banking, insurance, and other sectors bring stability and competition to these markets. China has missed the opportunity to get these benefits, while Vietnam has been more open. The other issue of international finance concerns opening the capital account to inflows and outflows of portfolio capital. These flows, often referred to as “hot money,” can often be destabilizing and hard to manage at an early stage of development. China was smart to severely limit these flows. China sterilized even direct investment inflows. It may have gone over-board, particularly with the reserve accumulation during the years of severe currency under-valuation, but overall it provides interesting lessons on external management. Vietnam was more open to hot money flows. It is tempting to make use of these flows when foreign interest rates are low, but they do appreciate the real exchange rate and cause problems of volatility. One of the striking differences between China and Vietnam after decades of reform is that China is a big net creditor internationally whereas Vietnam is a big net debtor. The optimal policy for a developing country probably lies in between: making use of FDI but limiting other flows, and accumulating reserves as necessary to prevent large appreciations of the currency.
In summary, the main tasks of financial reformers in transition economies can be summarized in six “no’s”:
·No banking crisis
·No double-digit inflation
·No negative real interest rates
·No over-valued currency
·No stock market bubble
·No hot money inflows. 

Transition of North Korea to a capitalist market economy remains a probable though relatively distant possibility. The model of centrally planned economy based on government (public) ownership of all major economic assets and direct regulation of economic activities by authorized state bodies (usually termed “the Soviet model” by Russian economists) has revealed lack of efficiency and ability to adapt to changing conditions. For that reason it has been replaced with a capitalist economic model in all countries of the former Soviet bloc, as well as in China and other former “socialist countries” of Asia. This system has already led to degradation and actual crisis of official economy in North Korea and to its partial replacement with semi-legal quasi-market economy, which combines administrative distribution of major resources with private initiative and de-facto market distribution of an increasing number of products and services. As this has not led to official abandonment of communist ideology and legalization of private sector, the current quasi-market system includes wide-scale corruption as its vital integral part.
The likely pattern of future transformation of North Korean economic system into a full-fledged capitalist market model is likely to be determined by the present state and structure of North Korean economy. Theoretically speaking, the process of transformation may take the form of gradual evolution through adaptation (‘Chinese model’), or of acute crisis and abrupt replacement (‘Soviet model’). The first of these two options implies gradual and measured liberalisation that would allow keeping political, economic and social situation in the country under control of the top leadership. The second one means that the necessary adaptation is constantly delayed by the authorities according to “too little, too late” scenario, which makes inevitable the collapse of old economic and political system.
Comparison of the present economic situation and institutions in North Korea to that of China in the end of 1970’s and that of the USSR in mid-1980’s suggests that the future transformation of economic system in North Korea is more likely to follow the Soviet path. Commonalities include comparatively low share of rural economy, dominant position of military production in manufacturing industry, strong aversion of the leadership to the idea of private property, strong resistance to political change of any kind. Like in the case of the Soviet Union during last years of its existence, North Korean communist leaders demonstrate their inability to narrow the gap between changing realities and outdated ineffective institutions by implementing thoughtout reforms. Instead, they cover the gap with pretence and corruption, thus making eventual collapse of the old economic and political system inevitable in the long run.
That makes possible to use Russian experience of the Soviet-era crisis and the post?Soviet transformation to draw conclusions on the likely characteristics of future North Korean transformation and effectiveness of different policy options. Most important of them include 1) necessity to legalize market regulation and set up relevant institutions before surrendering rights of autonomy to industrial enterprises; 2) the need to set up a firm and clear distinction between private and public assets to prevent the latter being used for private gains; 3) key importance of choosing appropriate model for privatising government assets: 4) necessity to allow for new opportunities for every segment of society, including beneficiaries of the old system, to prevent stalemate or dangerous distortion of the transformation process as a result of powerful social unrest and resistance.
Another important lesson to be learnt from Soviet and post-Soviet experience is that the process of transforming and modernizing a centrally planned economy is not necessarily preconditioned by a transit to a Western model of political system. While economic democratization is a must if successful transition to a capitalist economy is to be secured, formation of a new political system may depend on specific circumstances and be a very conservative process.