PYONGYANG — Even at the Koryo Hotel, one of the most luxurious accommodations for foreign visitors in Pyongyang, the energy shortage was apparent.

Chandeliers in coffee shops and restaurants hung dark, and dim hallways added to the gloomy atmosphere despite the flood of Japanese reporters who came to cover the landmark summit between Prime Minister Junichiro Koizumi and North Korean leader Kim Jong Il on Tuesday.

Outside the hotel, many of the shops and restaurants were closed. At night, the town was almost pitch dark, and people walking the street became visible only when they were spotlighted by the occasional passing car.

In a bid to salvage its anemic economy, North Korea has been taking bold economic reform steps since this summer. It stands at a crossroads leading either to a China-style transition into a market economy or toward chaotic inflation and a possible collapse of Kim’s regime.

According to statistics made available to the Chinese press about North Korea’s economic reforms, Pyongyang abolished the rationing system except for grain, raised the price of rice to 40 North Korean won per kilogram from 0.6 won, while devaluating the currency with the exchange rate of 150 won to the dollar from 2.15 won.

Workers’ salaries have risen by 15 to 20 times.

“The prices have gone up, but my salary also went up, so it does not make much difference,” said a female store clerk at the hotel who asked not be named. “But in general, my life is better now than before (the economic reform), thanks to the kind consideration of the honorable general.”

The “honorable general” or “dear leader” North Koreans refer to is Kim, expressing their unquestioned admiration for and submission to him.

“I believe the reform is good, but we do not think much about money,” another female clerk said through an interpreter. “I don’t want to take advantage of the reform for my own good because the honorable general will take care of us.”

But the country, suffering from serious food shortages after severe droughts and cuts in aid from Russia and China after the end of the Cold War, is already showing signs that Kim’s tight grip may not last long.

The number of North Korean defectors to China seeking asylum in South Korea or other countries due to economic hardship has risen in recent years. This year, news of North Korean asylum seekers dashing into foreign embassies came out almost weekly, including the high-profile case at the Japanese Consulate General in Shenyang.

The World Food Program announced in August that North Korea would have a food shortage of 100,000 tons by the end of the year.

“People were buying food and daily necessities on the black market because there were no goods at the state-run stores,” said Pyon Jin Il, editor in chief of Korea Report, a magazine specializing on Korean issues published in Japan.

Farmers have hidden their crops to sell them on the black market, where they can get much higher prices, according to Pyon.

The latest reform aims to raise official prices to the level of effective market prices, but it would be difficult to sustain such a sudden inflation without foreign assistance.

In his landmark meeting with Koizumi, Kim accepted Japan’s proposal to settle North Korea’s long-held demand for compensation over the 1910-1945 Japanese colonial rule of the Korean Peninsula through economic assistance in such forms as grants and low-interest loans.

Behind Kim’s concession was his urgent need for a massive inflow of capital.

“The economic reform is a gamble for Kim Jong Il,” Pyon said.

If North Korea opens its market to foreign capital, foreign people and information will also come in, which may make North Korean citizens realize that their lives are not as good as they have been led to believe, he said.

“But once he started it, he has to continue,” Pyon said. “No one knows whether the economic reform will lead to a soft landing, but it is clear that he needs money for reform now, and that’s why he met Koizumi.”

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.