North Korea's botched currency reform has shaken the reclusive communist regime to its core and may hasten its bankruptcy or force it to reach out to neighbouring nations, analysts said Wednesday. "The currency revaluation has shaken the foundations as North Korea continues to be penetrated by the forces of globalisation," said Scott Snyder, head of the San Francisco-based Asia Foundation's Center for US-Korea Policy.
He and other speakers at a forum on the North's economy described the November 30 revaluation as a failure that damaged Kim Jong-Il's regime. "Such an overt failure might be particularly divisive within North Korea," said Snyder, given that accomplishments over the past year were reportedly attributed to Kim's chosen successor and third son Jong-Un.
"The currency revaluation fiasco has surely hastened the day when North Korea begins to move in a direction that requires even greater integration with its neighbours," he said. The redenomination was widely seen as another attempt to curb a burgeoning free-market economy, but it backfired disastrously according to numerous reports.
North Koreans were forced to swap old banknotes for new ones at a rate of 100 to one, but the amount that could be exchanged was restricted. Savings were wiped out, prices soared and distribution networks were disrupted, aggravating hunger and unrest. The regime was forced to suspend its campaign to shut private markets, the prime minister made a rare apology and the North reportedly executed a top financial official, Park Nam-Ki, to try to quell public anger.
Professor Zhu Feng, at the Center for International and Strategic Studies at Peking University, said the currency reform had served to "push the North Korean economy closer toward bankruptcy". Both the government's price-setting system and the planned economy had "collapsed" and state restrictions on the prices of basic commodities had been a total failure, Zhu said.
"Apart from a few enterprises directly controlled by the entral government, it is possible that the socio-economic system may reach a state of paralysis," Zhu told the forum. Professor Kim Byung-Yeon of Seoul National University said the revaluation had advanced a possible "political implosion" of the communist state. South Korean Vice Unification Minister Um Jong-Sik said the North was now wooing foreign investment to minimise the fallout.