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By P. Ferdinand

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With the exception of work teams of the August 3rd Production Drive, most of those who have engaged in manufacturing are definitely illegal according to the North Korean legal system. It is presumed that the top authorities tacitly approve the private entrepreneurs for the time being, looking for a way to benefit from their energy. Since the ownership of stateowned and collective enterprises has remained intact, it is impossible for the local authorities to legalize the ownership of the facilities that have been used or de facto owned by private entrepreneurs.

40 In North Korea, it is presumed that such collusion does not occur because of the solidarity of the party hierarchy in the grip of Kim Jong Il. In other words, even though the centre-region tie has been weakened, the party hierarchy continues in general to dominate authority relations among organizations. In sum, private entrepreneurs have mushroomed in fluid circumstances lacking stable institutional arrangements. That is, the spread has been due to increasingly effective local leeway, whereas their activities and practices are not institutionalized because of the absence of provisions for legalizing them.

It also mitigated in part the difficulties surrounding asset valuation. For local investors—and particularly enterprise managers—who did not have sufficient capital to acquire the company outright, the leasing and hire purchase forms of divestment were also an attractive proposition. Put another way, if the leasing format had not been adopted, it is likely that the pace of privatization in Laos would have been markedly slower, as in Vietnam, which has not pursued leasing agreements as part of its ‘equitization’ programme.

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