Kim Young-hwan, the South Korean representative of nonprofit PrepFuture, said the socialist system collapsed "a long time ago" and has spurred Kim to take on economic reform, Daily NK reported.
"The three pillars of socialism, the planned economy and distribution, the proletarian [communist] dictatorship, and state ownership have actually collapsed," Kim Young-hwan said, adding socialist factors in North Korea have significantly lost influence in society.
The North Korean leader said he has learned from his father Kim Jong Il's example and is ruling out a return to the planned economic environment, the South Korean activist said.
"Kim Jong Il has realized the socialist system cannot be rehabilitated, having seen Kim Jong Il's failure several times," Kim Young-hwan said. "The possibility of making a foolish choice is very unlikely."
North Korea officially claims it is a socialist state -- but the reality is different, the South Korean activist said.
Pyongyang has placed priority on "protecting the markets" and has encouraged self-employment and small business liberalization.
"In the last seven to eight years, the authenticity of the reforms in North Korea policy is high," Kim Young-hwan said.
Kim Young-hwan is a well-known activist who was tortured by his own government for pro-North Korea views in the '80s. After a change of heart, he has worked to build a pro-democracy movement in the North, a move that has triggered death threats from Pyongyang.
South Korean President Moon Jae-in has hailed new relations with the North in recent months, but others remain critical of the military agreements between Seoul and Pyongyang.
Former U.S. 8th Army Commander Lt. Gen. Bernard S. Champoux told Voice of America this week the military agreements do not include mentions of North Korea long-range artillery.
Seoul, the South Korean capital, remains vulnerable to attack because of the retention of North Korea artillery, Champoux said.