While foreign policy and security concerns have trumped past efforts to reform the North Korean economy, Pyongyang is implementing important economic reforms despite renewed tensions with the United States. This is in response to a leadership debate - between ‘reformers’ and ‘conservatives’ over whether Pyongyang's military industrial complex should be scaled back to help ensure the success of reforms – that is fundamentally transforming the country.
The direction of these developments reflects strong pro-reform forces in the leadership and could have profound implications for the future of national security policy. Pyongyang may decide that a more favourable external security environment is key to securing access to international assistance for its reform measures and, ultimately, downsizing its military. It could launch a policy of engagement that would include greater flexibility in the Beijing Six Party Talks. But internal struggle over reform could lead to indecision on security and foreign policy issues, including at the nuclear talks. Progress in reform may, paradoxically, strengthen conservatives, fuelling hopes in Pyongyang that the economy can be improved while maintaining a large, powerful military. Whether Washington can influence the debate is unclear, but a US policy of engagement could enhance the chances of success for North Korean advocates of reform.