PIIE Blog | North Korea: Witness to Transformation
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
Subscribe to North Korea: Witness to Transformation Search
North Korea: Witness to Transformation

The Treasure of the Sierra Madre in Our Own Style

by | June 25th, 2012 | 05:40 am
|

In Kim Jong-un’s recent speech on land management he bemoaned “developing underground resources at random or creating disorder in their development.” According to GoodFriends, the government is following through, “because some powerful government entities – e.g., security departments, law enforcement agencies, Prosecutor’s office and Armed Forces – had ownership but, in its judgment, failed to make a tangible contribution to the economy as they attracted uncoordinated investments for foreign exchange revenue.” The source quotes an unnamed Party official to the effect that “The government will compensate foreign investors and take full control” in problem cases “to allow for more systematic development.”  According to the story, this process of auditing, restructuring, and possibly re-assigning property rights is not limited to mines, but applies to other assets as well.

As with nearly everything North Korean there are multiple ways of interpreting this putative policy. As depicted in the report, it could be a way of imposing order on a lawless situation in which special interests simply seized state assets for their parochial benefit. Or it could simply be a way of reallocating rents from one set of special interests to another. Or it could be a way of ripping off the foreigners—“you signed an improper contract with an unauthorized party.” Fear of expropriation is a major concern that we found in our survey of Chinese investors.