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North Korea May Take Action to Jolt Economy, Analysts Say

SEOUL, South Korea — North Korea said Wednesday that it would convene its Parliament this month, an unusual session that South Korean analysts said might officially introduce a program by the country’s leader, Kim Jong-un, to revitalize the nation’s moribund economy.

Since taking over the leadership after the death of his father, Kim Jong-il, in December, the younger Mr. Kim has repeatedly emphasized the need to improve the living standards of his impoverished people. He said in April, during his first speech, that he would ensure that North Koreans would “never have to tighten their belts again.”

Since July, various news reports in South Korea have quoted anonymous sources in the North as saying that Mr. Kim planned to give factories and collective farms incentives aimed at increasing productivity. The state would let farmers keep 30 percent of their yield, the reports said; until now, it is believed that they could sell only a surplus beyond a government-set quota, which was rarely met. Factories would choose what to produce and how to market their wares, splitting any profits with the state and paying their own workers.

The changes, tested as pilot projects in selected farms and factories, will eventually be extended to the rest of North Korea and replace the country’s dysfunctional state ration system, these reports said.

Such changes, if confirmed, would be the North’s latest — and perhaps boldest — effort to overhaul its economy. A similar effort failed a decade ago.

“The coming parliamentary session will be a bellwether on where Kim Jong-un is taking his country’s economy,” said Koh Yu-hwan, a North Korea specialist at Dongguk University in Seoul.

The announcement by the North’s official Korean Central News Agency that the Supreme People’s Assembly would meet Sept. 25 gave no details as to its agenda. It is rare for the rubber-stamp Parliament to meet more than once a year. It last assembled in April, when legislators elected Mr. Kim to succeed his father as chairman of the National Defense Commission, the North’s top state agency, the last of the top military, party and state titles he inherited.

Besides passing legislation and appointing top government officials, the North Korean legislature also announces important domestic and foreign policies. In 2003, it declared that the country would expand its nuclear weapons program.

On Friday, the North Korean Foreign Ministry vowed to expand the country’s nuclear arsenal “beyond imagination.” The threat came as the International Atomic Energy Agency warned that North Korea was making significant progress in building a new nuclear reactor widely seen as a means to enrich uranium and make weapons-grade plutonium. On Wednesday, the Foreign Ministry said its nuclear program was no longer for “peaceful purposes only” and the country acquired nuclear weapons to cope with the “persistent hostile policy” of the United States.

North Korea watchers in the South said that Mr. Kim, who South Korean officials believe to be 28, may retire some of the North’s aging leaders, like Prime Minister Choe Yong-rim and Kim Yong-nam, the president of Parliament, both in their 80s, to put his own stamp on the leadership hierarchy and promote younger technocrats to drive his economic revitalization efforts.

The South Korean news reports on Mr. Kim’s economic changes cited North Korean party officials who attended briefings on Mr. Kim’s economic program. They varied in details while agreeing on a rough outline.

“The gist is to expand incentives for factories, individuals and collective farms to boost productivity,” said Yoo Ho-yeol, a North Korea specialist at Korea University in Seoul.

Within collective farms, groups of four to six workers will be allowed to work as units to encourage competition, according to the Seoul bureau of Radio Free Asia, based in Washington, as well as Web sites in Seoul, which use sources in the North to collect news. Meanwhile, Jang Song-thaek, Mr. Kim’s uncle and key policy adviser, visited China last month and won Beijing’s commitment to help North Korea build two free economic zones on its border.

On Tuesday, a senior government official in Seoul, speaking on the condition of anonymity to a group of reporters, confirmed one element of the reported plans. He said the North was taking the lucrative trading rights from its powerful military and returning them to the cabinet. In April, Mr. Kim vowed to make the cabinet “the economic command.” Analysts say that the North’s former army chief, Vice Marshal Ri Yong-ho, who lost all his jobs in July, was fired for resisting an effort by Mr. Kim and Mr. Jang to curtail the military’s economic rights.

Analysts in South Korea remained divided over whether Mr. Kim was trying to achieve genuine economic change, of the kind his country’s main ally, China, has pursued, or seeking more productivity only to make up for his dwindling state coffers. The government has found it increasingly hard to earn hard currency in recent years as United Nations sanctions tightened and outside aid dwindled.

In a commentary published on the Web site of Sejong Institute of South Korea, Oh Gyeong-seop, an analyst, credited Mr. Kim with “reform within the system,” rather than a shift toward a market economy. His program, as reported so far, “still adheres to the state ownership of properties and bans individuals from establishing their own business enterprises,” he said.

Mr. Kim said in April that North Korea should stick to “socialist economic principles” while bolstering production. In July, his government even scoffed at reports of economic changes in North Korea, calling them a “hallucination,” like “expecting the sun to rise from the west.” In August, its main party newspaper, Rodong Sinmun, said North Korea might change “tactics” but would never abandon its “strategy” of building a “powerful socialist country.”

In 2002, North Korea experimented with similar incentives, but it quickly backtracked when the markets and trading activities boomed and the government saw them as a threat to its near-totalitarian control on the population. In 2009, North Korea again cracked down on markets. Such interference set off runaway inflation and occasional outbursts of protest.

Pak Pong-ju, the former North Korean prime minister who was banished for pushing changes too far in 2002, returned to the center of economic policy in 2010. He is supported by Mr. Kim’s aunt and Mr. Jang’s wife, Kim Kyong-hee, whose influence has increased under the young Mr. Kim, according to analysts and officials here.

Meanwhile, word of a new round of economic change has created uncertainty among North Koreans, already fueling inflation. The price of rice has doubled since early June, Daily NK reported last week.

“Here people think that economic measures mean rising prices,” it quoted a North Korean as saying.

http://www.nytimes.com/2012/09/06/world/asia/north-korea-may-be-preparing-economic-reforms.html?_r=1