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Implications of the Transitional Outcomes of Southeast Asian Countries CLMV for North Korea Economic development , Economic reform

Author Jangho Choi , Yoojeong Choi , and Halin Han Series 20-07 Language Korean Date 2020.12.30

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This study is conducted under the premise that the transition of the regimes of Cambodia, Myanmar, Laos, and Vietnam (hereinafter referred to as CLMV countries), which have gone through transitions, can serve as a lighthouse for North Korea with uncertainties surrounding on how North Korea will open its economy. The study intends to derive the implications for the North Korea out of the CLMV country’s experience. To this end, two types of transition indicators are defined and the EBRD transition indicators are rearranged and restructured. The outcome out of it is the ‘Transition Indicator Ⅰ’, which is the basis of ‘Transition Indicators Ⅱ’ to evaluate the transition in the nature of state capitalism. Based on the two indices, the transition process and performance of the countries the Southeast Asia were evaluated, followed by the identification of the characteristics of the transition of the CLMV countries in Southeast Asia from perspectives of both market capitalism and state capitalism, and the similarities and differences were identified. Finally, we analyzed the implications of the CLMV country’s transition to North Korea in Southeast Asia, and also derived implications for future inter-Korean economic integration.
   In Chapter 2, the definition and goals of transition are clarified and the differences between the concept of transition in East Asia and that of Eastern Europe and are examined. It sheds a light on which perspective the authors are supposed to take when it comes to investigating the transition of Southeast Asia. The traditional concept of regime change and the recent ones between China and Southeast Asia have different goals and policy goals. Therefore, it seems necessary to consider in terms of the Chinese-influenced economic development model along with the transition based on the Washington consensus when discussing the one in North Korea.
   Chapter 3 illustrates the methodology for evaluating a series of processes at the beginning and after the transition to the market economy system in Southeast Asian CLMV countries. First, the transition indicators used by the European Bank for Reconstruction and Development (EBRD) were investigated, followed by its pitfalls. Based on what was presented, an adjusted transition indicators as well as 5-point evaluation scale are presented to evaluate Southeast Asian CLMV countries. Finally, for the purpose of comparing the relationship between transition process and economic performance in Southeast Asian CLMV countries, the chapter wraps up by clarifying the relationship between these two through the lens of EBRD.
   In Chapter 4, the of the CLMV state’s transition were evaluated from the perspectives of Washington Consensus and Chinese-influenced state capitalism. First, the period and brief history of transition by country were examined. Next, the reorganized EBRD regime conversion index(hereinafter referred to as the Transition Indicator I) was used to quantitatively evaluate the regime conversion of CLMV countries. Finally, by grafting the characteristics of Chinese-style state capitalism to the Transition Indicator I, we examined how the outcome of CLMV’s transition differs from the perspective of state capitalism.
   First, Cambodia has been at a rapid pace since 1995. As mentioned above, the aftereffects of the long war aggravated political and economic turmoil. However, with the withdrawal of Vietnamese troops in 1989 and the help of the United Nations, Cambodia pushed for a series of reforms towards a market economy. Since then, since 1995, it has shown speedy transition, and the value of the 2015 Transition Indicator I, which is the most recent of the analysis period, exceeds 2.5, so it can be evaluated as the transition is in progress and some achievements are being made.
   Laos’ transition began to take place steadily from 1990. This is because, as mentioned above, the 4th Party Congress in 1986 declared the introduction of a market-oriented new economy (NEM) and laid the foundation for basic policy and legal systems. Laos’ transition in 2015, the most recent of the analysis period, has a general score of 2.6 points, which is currently ongoing, and it can be comprehensively evaluated as a situation where achievements have been made in some areas.
   Myanmar’s transition supposedly began in earnest only after 2010. This is because, as described above, although the transition to a market economy was declared in 1988, the military dominated the regime until 2010, and the civilian government was launched for the first time until 2011. Between 2010 and 2015, Myanmar’s rate of transition was sharply faster than before, but the absolute level is still low. As of 2015, the transition in Myanmar can be assessed as “the situation in which transition is in progress and some achievements have been delivered (the value of the Transition Indicator I is 2.3 or higher).”
   Lastly, the transition of Vietnam was promoted in earnest from 1995, and in 2010, a certain section was completed. It can be assessed that the transition was in earnest in the 4th stage of transition.
   According to the evaluation results based on the Transition Indicators Ⅱ, which reflects the evaluation criteria of Chinese-infulenced state capitalism, all CLMV countries received higher scores than those under the EBRD standard. It was also confirmed that as time passed, the CLMV’s transition was closer to the Chinese model than the Eastern European countries. On the other hand, there was a relatively strong positive correlation between the performance of the transition process and the economic performance within the country, but different results were drawn in the comparison between countries. This stemmed from the differences in internal and external surroundings they are facing such as political stability and economic sanctions.
   Chapter 5 derives the lessons from the experiences of Southeast Asian countries in transition for North Korea. Countries in transition in the Southeast Asia can be evaluated as export- and foreign-direct-investment-driven economy since 1985. Vietnam and Laos are cases where its transition led to positive economic outcomes whereas Cambodia and Myanmar are the ones that failed to do so. When there was political stability and the restoration of the relationship with the United States settled, the economic performance was notable while the transition was still on-going.
   The implications of the transition in the Southeast Asian regime for North Korea are as follows. First, political stability within the country and repairing the relationship with the United States are prerequisites for North Korea’s successful transition. Second, it is more efficient to prioritize the systemic change of certain areas first rather than to change the whole system one by one. If the goal is the rapid economic growth and development, it is appropriate to prioritize the transition to an export-oriented foreign-investment-driven system, and to create the fundamentals for economic growth and development later. Estimating the time to transition of North Korea is expected to take at least 10 to 15 years for foreign companies to start businesses within the country and generate economic outcomes after the announcement of transition.
   It is believed that the results of this study can be used as basic data to establish the direction of North Korea’s transition in the future and to select tasks to be pursued at each stage. In particular, this study differs from previous studies in that it has developed an analysis framework that can quantitatively compare the level of transition in Cambodia, Laos, Myanmar, and Vietnam with North Korea by quantitatively evaluating the level of transition. In addition, quantitative analysis of the transition in Southeast Asia from the perspective of state capitalism has never been attempted in previous studies, and it can positively contribute to broadening the horizons of transition case studies.

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