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RUEHMO/AMEMBASSY MOSCOW 7487
RUEHKO/AMEMBASSY TOKYO 1246
RUEHUM/AMEMBASSY ULAANBAATAR 1335
RHMFIUU/COMUSKOREA J5 SEOUL KOR
RHHMUNA/CDR USPACOM HONOLULU HI
RHMFIUU/COMUSKOREA J2 SEOUL KOR
RHMFIUU/COMUSKOREA SCJS SEOUL KOR

UNCLAS SEOUL 003028 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PREL KN
SUBJECT: NORTH KOREAN ECONOMIST ON "ABNORMAL" DPRK ECONOMY 
 
¶1.  (SBU) SUMMARY:  Cho Myungchul, Head of the 
International Cooperation Team for Korean Unification at 
the Korea Institute for International Economic Policy in 
Seoul, who defected from the DPRK in 1994 and is a 
prominent commentator on the DPRK, said that the DPRK 
economic situation is very dangerous because the DPRK 
government realizes that further openness and reform are 
needed to increase output, but is deadset against any such 
moves because they could threaten regime security.  In this 
"abnormal" economy, increasing productivity in industry and 
manufacturing does not translate into an improved standard 
of living for average North Koreans, and there are no 
reliable statistics with which to accurately gauge economic 
conditions.  END SUMMARY. 
 
POVERTY HOLE 
------------ 
 
¶2. (SBU) At an August 29 meeting in his office in the 
Korea Institute of International Economic Policy (KIEP), 
Cho Myungchul said that North Korea was in a 
"poverty hole," because it did not have the resources or 
know-how to improve economic output.  He said that the DPRK 
government realized further reforms (beyond those enacted 
in 2002) were needed, but balked because it perceived 
further openness and reform as a threat to regime security, 
which remained paramount.  The resulting difficulty facing 
North Koreans trying to get by was "difficult to describe 
in words."  Asked what he thought about trends in economic 
conditions facing ordinary North Koreans, Cho said that 
economic reforms that the DPRK put in place in mid-2002 -- 
such as allowing for market-determined prices, some private 
income-producing activities, and plant-level production 
decisions -- had led to increased output and improved 
productivity for some sectors.  But because of the DPRK's 
"abnormal" economy, it was not certain that these gains 
translated into gains for workers or ordinary North 
Koreans. 
 
¶3. (SBU) Ordinary North Koreans, facing severe privation, 
had four alternatives, Cho said:  to try to change the 
government; to persuade the government to open the economy 
further; to conduct informal trade or hold extra jobs to 
get by; or, to flee North Korea.  Most opted for what they 
saw as the easiest alternative.  Many who lived near the 
border had fled to China.  Those farther from the border 
relied on informal trade or extra work.  It was now 
considered legitimate to have an extra part-time job, 
something that was taboo earlier.  Changing the government, 
or changing government policy, was seen as next to 
impossible.  Such an effort would amount to "giving up your 
life."  Cho said the conditions in the DPRK were similar to 
those that Chinese peasants faced until China enacted 
economic reforms.  He also cited leaders' decisions as 
being crucial to reform and system collapse in Eastern 
Europe, but saw no such prospects in North Korea. 
 
NO RELIABLE NUMBERS 
------------------- 
 
¶4. (SBU) Cho said that his best estimate was that the DPRK 
experienced negative economic growth from 1991-1998 but 
that since 1998 there had been some real expansion of the 
economy.  Given the lack of any reliable statistics (even 
about that growth pattern), Cho said that it was impossible 
to tell whether output was increasing because of reforms or 
because of increased foreign aid, especially from China. 
Shaking his head, Cho said that his biggest challenge was 
to gather reliable statistics on North Korea's economy. 
His best sources were Chinese and Russian trade data, as 
well as conversations with Chinese businesspeople who have 
dealings in the DPRK.  He suggested that the USG cooperate 
with the ROKG to gather reliable economic data about the 
DPRK, suggesting that U.S. satellite imagery could cast 
light on agricultural conditions, for example. 
 
¶5. (SBU) Cho said he had no direct information about July 
floods in the DPRK, suggesting that the most reliable 
documentation of the damage would come from the DPRK's 
insurance claim to a UK insurance company (not specified). 
 
ROLE OF ACADEMICS 
----------------- 
 
¶6. (SBU) Noting that our hour-long session with him was 
interrupted ten times as he briefly fielded telephone 
calls, we asked how his advisory role in Seoul compared 
with his previous experience as an economics professor in 
Pyongyang's Kim Il Sung University.  Cho answered that in 
South Korea he gets about four calls a day from government 
ministries asking for input.  In Pyongyang he got about two 
such calls a year, and the DPRK government only 
consulted academics to solicit justification for its 
policies. 
STANTON