Similar Policies, Different Outcomes: Two Decades of Economic Reforms in North Korea and Cuba | KEI | Korea Economic Institute
This article is aimed at analyzing, in a comparative perspective, the economic reforms undertaken by Democratic People’s Republic of Korea (DPRK, or North Korea) and Cuba since the demise of the Soviet bloc in the late 1980s and the early 1990s. The comparison seems pertinent inasmuch as both the DPRK and Cuba are relatively small countries that managed to survive the collapse of real socialism. Although the geographic areas of both countries are roughly the same, the North Korean population is more than double Cuba’s; by contrast, the Cuban GDP per capita is four times bigger than the DPRK’s individual income. Both countries have been ruled by single parties and have undertaken successful dynastic successions, and both countries have tried to maintain, with increasing tribulations, economic systems that advocate central planning and state property.
With different intensities and styles, in the early 1990s the DPRK and Cuba launched partial liberalizations of agricultural markets, gradual reforms of the management of state enterprises, and policies aimed at attracting increasing amounts of foreign direct investment (FDI). Both Cuba and the DPRK started their respective reforms in 1990–91: the former implemented changes that allowed joint ventures in tourism, while the latter allowed the establishment of a special economic zone (SEZ) in Rajin-Sonbong (also known as Rason). Cuba undertook additional changes to allow larger, but still small, portions of markets in 1993 and 2008. North Korea, in turn, announced a package of economic changes in 2002; since the late 1990s, though, Pyongyang has been courting major South Korean investments in tourism and the industrial sector. In both cases, the patterns of economic change have zigzagged, with the intention of carrying out the bare minimum of reforms for ensuring regime’s survival.
In spite of the above similarities, economic reforms have had different outcomes in the DPRK and Cuba. Although both countries feature a stop-go pattern, the Cuban economy has achieved a swifter recovery. Cuba managed to overcome theeffects of the crisis caused by the end of support by the former Soviet Union and began growing in the mid-1990s, achieving double-digit rates of growth in the second half of the 2000s. In contrast, by the end of 2009 the North Korean economy was still smaller than two decades before.
My hypothesis is that the main difference in how the DPRK and Cuba handled the demise of their socialist systems of support dwells in the greater constancy of Havana’s policies to acquire foreign currencies. Cuba engaged in, for example, the promotion of FDI, tourism, remittances, and selling of professional services to Venezuela. Although the North Korean government tried to attract East Asian investment in tourism projects and SEZs, geopolitical tensions in Northeast Asia have limited the potential scope of these and other ambitious projects.
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