It has been claimed that the Korean government should induce North Korea to join international financial institutions, bracing for possible changes in North Korea.
According to the financial industry on Jan. 5, the Korea Institute of Finance (KIF) has recently published “Studies on the Changes of Banking System and Transition in North Korea,” claiming such remarks.
In the study, the KIF stressed that the government should not only induce North Korea to join international financial institutions, but also consider cooperation methods with international financial institutions, allowing North Korea to get support from the international community when necessary in preparation for North Korea’s attempt to reform its banking systems.
The report also explained that it is impossible for North Korea to be provided development finances through the international financial market, since North Korea is isolated completely from the global financial system at the moment. Also, it said that pressures on the transformation of North Korea’s banking systems have been mounted so far, despite its government’s conservatism of economic policy, and it is highly unlikely to change. So, the possibility cannot be ruled out that the North Korean government will carry out banking system reform measures, it said.
The study also added that banking systems in North Korea will be transformed efficiently when the will of reform inside the regime combines with outside support. Accordingly, the government should lead North Korea to join international financial institutions including the International Monetary Fund, and make cooperation plans with international financial institutions enabling North Korea to get international aid if needed.
It suggested that the government can consider a plan to establish international financial institutions including the Northeast Asian Development Bank, which is the specialized institution for the development of North Korea, along with advanced countries. However, North Korea needs to redeem its undue foreign loans to western countries first, which the regime suspended payments on unilaterally, in order to return to the international financial market.
Moreover, the report claimed that due to the fact that huge investments in important infrastructure including power grid, traffic network, and banks are needed to normalize North Korean economy, it is important for the Korean government to foster policy financial institutions to provide such investments. It also said that the government should strengthen research on unification finance and cultivate specialists.