Go to contents

NK Finance Official Fired Over Currency Debacle

Posted February. 04, 2010 05:18,   


North Korea has fired a top finance official over the economic debacle caused by its currency revaluation last year, a South Korean government source said yesterday.

Pak Nam Ki, finance and planning director of the ruling Workers’ Party, had taken the initiative in Pyongyang’s attempt to restore its planned socialist economy through a strong crackdown on market activities.

The source said, “It is almost certain Pak was dismissed.”

Last year, the official almost always accompanied North Korean leader Kim Jong Il on visits to places of economic significance. This year, however, Pak has not been seen with Kim since Jan. 4 this year, when they visited the construction site of a power plant in Huichon, Chagang Province.

Experts say Pak was fired to assume responsibility for the worse-than-expected aftermath of the North’s introduction of a new currency and revaluation and controls on the market and foreign currency.

He is apparently the North’s scapegoat for the country’s sharp inflation, food shortages and social disturbances.

Sources familiar with North Korea said the price of rice, which was 20 North Korean won per kilogram shortly after the currency revaluation in November last year, skyrocketed to around 600 won late last month.

The North Korean won-dollar exchange rate jumped from 30 in early December to 530 won late last month. With North Koreans realizing that dollars or products are more valuable than the North’s new currency, merchants are not selling products and people have hoarded them.

Pak’s dismissal could signal Pyongyang’s admission of failure in its “fight against the market.” The North Korean leadership including Kim implemented extreme measures to restore their planned socialist economy.

To expand national finance, the measures were implemented to suppress the market, which has grown since the North’s economic difficulty began in the 1990s, and to take away the private wealth of North Koreans.

Market forces have apparently triumphed over the measures, however.

Pyongyang’s policy failure is hardly surprising. In his report on the North’s gradual switch to a market economy, Lim Gang-taek, senior research at the (South) Korea Institute for National Unification, said North Korea has adopted market economics in several sectors ranging from consumer goods and labor to producer goods, real estate and finance.

Lim said the markets have replaced the North’s state-planned economy, adding, "Without the markets, North Korea’s official economic system does not work. Many North Koreans have also relied on the markets to make a living."

The North last year closed its largest unofficial capitalistic venue Pyongsong Market, but merchants continued to sell stuff near there.

The communist regime might have also belatedly recognized that its anti-market policies have hindered its desperate attempt to lure foreign investment.

A government source in Seoul said, “If North Korea sticks to its anti-market policies and suppresses markets and merchants via extreme measures such as currency revaluation, foreign investors will continue hesitating to invest in the North.”

Pak had led North Korea’s conservative economic policies since the second half of 2005. His dismissal has raised speculation over whether the regime will partially allow markets.

Cho Bong-hyun, a research fellow at IBK Economic Research Institute, said, “North Korea is likely to return to its pre-currency revaluation policies under which market activities were allowed.”

Experts also predict that Jang Sung Taek, Kim’s maternal uncle who has led the North’s conservative policies along with Pak, will see his status weaken.

Yang Mun-soo, a professor at the University of North Korean Studies in Seoul, said, “North Korean leaders could be deeply worried over their policies. They might hold a daily emergency meeting on whether to change their market control policies. They won’t strengthen their grip on the market for a while but are unlikely to ease the policies.”