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Kim to reform N. Korea economy after purge: source

BEIJING -- Impoverished North Korea is gearing up to experiment with agricultural and economic reforms after young leader Kim Jong Un and his powerful uncle purged the country's top general for opposing change, a source with ties to both Pyongyang and Beijing said.

The source added that the cabinet had created a special bureau to take control of the decaying economy from the military — one of the world's largest — which under Kim's father was given pride of place in running the country.

The downfall of Vice Marshal Ri Yong Ho and his allies gives the untested new leader and his uncle Jang Song Thaek, who married into the Kim family dynasty and is widely seen as the real power behind the throne, the mandate to try to save the battered economy and prevent the secretive regime's collapse.

The source has correctly predicted events in the past, including North Korea's first nuclear test in 2006 days before it was conducted as well as the ascension of Jang.

The changes could herald the most significant reforms by the North in decades. Previous attempts at a more market driven economy have floundered, most recently a drastic currency redenomination in late 2009 which triggered outrage and is widely believed to have resulted in the execution of its chief proponent.

“Ri Yong Ho was the most ardent supporter of Kim Jong Il's 'military first' policy,” the source told Reuters, referring to Kim Jong Un's late father who plunged the North deeper into isolation over its nuclear ambitions, abject poverty and political repression.

The biggest problem was that he opposed the government taking over control of the economy from the military, the source said, requesting anonymity to avoid repercussions.

If the reforms do take root, North Korea would be the next Asian pariah state to open up after Myanmar, whose change last year to quasi-civilian government has suddenly started to bring it out from years of seclusion under harsh military rule.

North Korea's state news agency KCNA had cited illness for the surprise decision to relieve Ri of all his posts, including the powerful role of vice chairman of the ruling party's Central Military Commission, though in recent video footage he had appeared in good health.

Ri was very close to Kim Jong Il and had been a leading figure in the military. Ri's father fought against the Japanese alongside Kim Jong Il's late father Kim Il Sung, who founded North Korea and is still revered as its eternal president.

The revelation by the source was an indication of a power struggle in the secretive state in which Kim Jong Un and Jang look to have further consolidated political and military power.

Kim Jong Un was named Marshal of the republic this week in a move that adds to his glittering array of titles and cements his position following the death of his father in December. He already heads the Workers' Party of Korea and is first chairman of the National Defense Commission.

The North Korean Embassy in Beijing, reached by telephone, declined to comment.

North Korea's cabinet has created a “political bureau” which will wrest power from the 1.2 million-strong military to run the economy which has been in shambles after a crippling famine in the 1990s, the source said.

“In the past, the cabinet was empty with no say in the economy. The military controlled the economy, but that will now change,” the source said.

Kim Jong Un has set up an “economic reform group” in the ruling Workers' Party to look at agricultural and economic reforms, the source said, adding that North Korea will learn from its giant neighbor and solitary benefactor, China.

It was unclear who will head the cabinet's “political bureau” and the party's “economic reform group,” but change was inevitable, the source said.

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