N. Korea's new leader faces ruinous inheritance

Ready or not, North Korea's youthful new leader will inherit an economy in ruins, a malnourished population -- and a political system that effectively rules out life-saving reform. Kim Jong-Un, the 20-something "great successor" to his late father Kim Jong-Il, had no known military or administrative experience until singled out as heir apparent around three years ago. "This is hardly a country that can be ruled by a novice leader," said Wednesday's Korea Herald in Seoul. Describing the North's "wretchedness", it cited food and energy shortages, meagre foreign investment, corruption, repression, military privileges and "a false sense of pride" in being a nuclear power. The communist North in the 1960s grew faster than capitalist rival South Korea. But the loss of crucial aid as the Soviet Union disintegrated accelerated a downward spiral in the 1990s. Per capita gross domestic product, by most estimates, is now 1/19th the size of the South. "The massive economic development gap ... reflects the abject failure of North Korea's centrally planned economy since 1945," said Rajiv Biswas, Asia-Pacific chief economist for IHS Global Insight, in a commentary. The North's economy shrank in 2010 for the second straight year as it faced sluggish agricultural production and tougher international sanctions, South Korea's central bank has estimated. Factories grapple with serious shortages of electricity and raw materials. The country has potentially vast resources of coal and other minerals, estimated by South Korea at $6.3 trillion. But analysts say it is increasingly ceding exploration rights to Chinese companies as it desperately seeks hard currency. Outside the showpiece capital Pyongyang, millions face a daily struggle just to feed themselves and their families. Famine which began in the mid-1990s killed hundreds of thousands and severe food shortages persist. UN aid chief Valerie Amos has urged the world to reduce "terrible" levels of malnutrition. Amos, who visited North Korea in October, said six million people urgently need food aid. UN agencies say they have monitoring in place to ensure food reaches the neediest and not the army. But donations to UN programmes have dwindled because of irritation at Pyongyang's missile and nuclear ambitions. China, the North's sole major ally and economic prop, has urged its neighbour to adopt Chinese-style free-market reforms. Private markets sprang up in the North after the state food distribution system largely collapsed during the famine years. Kim Jong-Il experimented with limited market reforms in 2002 but rolled them back in 2005, apparently for fear of losing control over the economy. Despite official opposition to them, including a disastrous currency revaluation in 2009, the markets persist. But several analysts say full-scale economic liberalisation would threaten the very raison d'etre of a regime which theoretically provides its people's needs from cradle to grave. US academic and researcher Stephan Haggard says he has found that North Koreans involved in the market have more negative perceptions of the regime than their peers. Biswas described the North's economy as a "basket case" amid a sea of rising East Asian prosperity. "The pursuit of Stalinist economic policies has inflicted devastating suffering on the North Korean population," he wrote. Biswas said the likeliest future policy was maintaining the status quo, meaning little chance of significant economic progress. Should the country move gradually towards economic liberalisation and detente, "significant improvements" in living standards could be achieved by 2020.