reverse some of these policies by forbidding private sales of grains
and reinstituting a centralized food rationing system. By December
2005, the government terminated most international humanitarian
assistance operations in North Korea (calling instead for
developmental assistance only) and restricted the activities of
remaining international and non-governmental aid organizations such
as the World Food Program. External food aid now comes primarily
from China and South Korea in the form of grants and long-term
concessional loans. During the October 2007 summit, South Korea also
agreed to develop some of North Korea's infrastructure and natural
resources and light industry. Firm political control remains the
Communist government's overriding concern, which will likely inhibit
the loosening of economic regulations.
Korea, South
Since the 1960s, South Korea has achieved an incredible
record of growth and integration into the high-tech modern world
economy. Four decades ago, GDP per capita was comparable with levels
in the poorer countries of Africa and Asia. In 2004, South Korea
joined the trillion dollar club of world economies. Today its GDP
per capita is roughly the same as that of Greece and Spain. This
success was achieved by a system of close government/business ties
including directed credit, import restrictions, sponsorship of
specific industries, and a strong labor effort. The government
promoted the import of raw materials and technology at the expense
of consumer goods and encouraged savings and investment over
consumption. The Asian financial crisis of 1997-98 exposed
longstanding weaknesses in South Korea's development model including
high debt/equity ratios, massive foreign borrowing, and an
undisciplined financial sector. GDP plunged by 6.9% in 1998, then
recovered by 9.5% in 1999 and 8.5% in 2000. Growth fell back to 3.3%
in 2001 because of the slowing global economy, falling exports, and
the perception that much-needed corporate and financial reforms had
stalled. Led by consumer spending and exports, growth in 2002 was an
impressive 7%, despite anemic global growth. Between 2003 and 2007,
growth moderated to about 4-5% annually. A downturn in consumer
spending was offset by rapid export growth. Moderate inflation, low
unemployment, and an export surplus in 2007 characterize this solid
economy, but inflation and unemployment are
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