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Wed, Apr 09, 2003 - Page 12 News List

N Korean economy may have already collapsed

REUTERS , SEOUL

A prominent US expert on North Korea said yesterday the communist country's economy is not collapsing but has already collapsed, and Seoul needs to do more to prepare for the debt burden it will inevitably have to bear.

Many experts have long said the North Korean economy was on the verge of collapse, hampered by decades of rigid central planning and hit by floods and drought in the 1990s.

But speaking at a conference on South Korea's aim to become a business hub for Northeast Asia, Stephen Bosworth said North Korea's economic plight was greater now than when he started his assignment as US ambassador to Seoul in 1997.

"The North Korean economy is not collapsing," said Bosworth, who was ambassador until 2001 and is dean of the Fletcher School of Law and Diplomacy in the US.

"The North Korean economy has collapsed. It is no longer performing in any fashion which can be described as approaching that of a modern economy."

He said industrial production was at best 30 percent of what it was in 1992 and energy production was probably less than that.

The North says it has restarted a nuclear reactor at the heart of suspected atomic arms plans to produce electricity now Washington and its allies have halted heavy fuel oil shipments.

Washington says the reactor is too small to help energy consumption in a country of 23 million people. It halted the shipments after US officials said Pyongyang had admitted having a covert nuclear plan, something the North denies acknowledging.

"Not only can they not produce electricity in anything approaching the scale that they need, but they have almost no ability to transport electricity," Bosworth said. "The national grid has basically collapsed."

Bosworth said the grim picture north of the heavily fortified Demilitarised Zone that bisects the peninsula meant North Korea would continue to be a burden on South Korea's economy, which he said had recovered strongly from the 1997-1998 financial crisis.

"One way or another -- either as a result of sudden reunification or as a result of a long gradual process of engagement -- South Korea will be transferring substantial amounts of economic resources to the North," he said.

He said Seoul should plan economic policy and borrowing with North Korea in mind rather than just South Korean modernisation.

"Because the one thing that North Korea is going to need above everything else is capital. Either suddenly and abruptly or over a long period of time," he said.

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