Economic performance and legitimacy in the DPRK

Geoffrey See and Andray Abrahamian (both representatives of Choson Exchange) wrote an article in the Harvard International Review which asserts that economic successes are becoming more important to the political narratives that reinforce the DPRK leadership’s claims to legitimacy. Below is an excerpt from their article:

North Korea’s most important domestic policy statement comes each New Year, when the major newspapers publish a joint editorial. The editorial often signals where government priorities will be in the coming year. In 2010 the newspapers spoke of “Bring[ing] about a decisive change in the people’s lives by accelerating once again light industry and agriculture.” Similar themes were echoed in 2011. This is opposed to the joint editorials of the past few years, which have focused on the more traditional themes of military strength, revolution, and socialism.

Another public sign of a shift towards focusing on economic issues is the type of official visits and inspections carried out by Kim Jong Il. Following in the footsteps of his father, Kim uses these visits to signal emphasis or encouragement of specific industries, activities, and policies. According to a report by the Institute for Far Eastern Studies, the first six months of 2011 have seen Kim exceptionally busy, participating in 63 official activities. Unlike previous years, however, the number of military visitations has dropped off: only 14 visits were military related, the lowest number ever recorded. By contrast, 28 visits were economic related.

In terms of policy, North Korea has been haltingly experimenting with Special Economic Zones (SEZ) since the mid-nineties, but has recently built a bit more momentum in this area. Rason, an SEZ in the far northeast, is finally seeing some basic infrastructure upgrades that were long talked about but always delayed. Government investment bodies have started to promote the idea that Rason will be the “next Singapore,” an ambitious marketing claim to anyone who has been to Rason. With both Russia and China leasing port space, it seems more likely to be transformed into a regional transportation hub. Meanwhile, along the Chinese border in the northwest, the Hwanggumpyong SEZ recently held a groundbreaking ceremony, attended by high-ranking North Korean officials and Wang Qishan, China’s commerce minister.

Senior politicians in North Korea are increasingly judged by their ability to bring in foreign direct investments. These efforts appear to be competitive rather than coordinated. North Korean leaders associated with the National Defense Commission, the highest level policy body, have been meeting with visiting foreign investors. In 2009, the Daepung International Investment Group was re-purposed along the lines of a holding company model as a vehicle for attracting foreign direct investment l with “27 joint ventures planned and to be managed by the Group.” Daepung Group is backed by specific high-level individuals. Jon Il-Chun, reportedly the Director of Office 39, a murky international trade and finance organ, is definitely involved with the Daepung Group. Media reports also indicate that Kim Yang Gon, Director of an organization tasked with managing contacts with South Korea, the United Front Department of the Workers’ Party, is also behind the group.

In July of the same year, the Joint Venture & Investment Commission (JVIC) was established. Instead of a holding company model, JVIC is a government institution modeled as a “one-stop shop” for investors – that is, JVIC is meant to “seek out investments and assist investors in setting up operations in North Korea.” While multiple institutions claiming to hold such authority have always existed in North Korea, many of these institutions have been merged into JVIC and long-time investors have been directed to liaise with JVIC as their primary government contact. JVIC’s nominal and public head is Ri Chol, a high-ranking North Korean government official.

In August of 2010, we received credible reports that foreign investors were approached to help set up a group similar to Daepung that would be backed by another member of the National Defense Commission. Given this proposed initiative’s similarities to Daepung, the prior establishment of JVIC, and that all three groups do not appear to communicate with each other, we surmise that these various groups have a competitive relationship with the support of different patrons. Investment officials with whom our teammates have met confirm that the relationship between the agencies is “very competitive.” If this is the case, it is a signal that influential groups in Pyongyang sense that future power bases will require the ability to attract and deploy capital.

The full article is worth reading here:
Harvard International Review
Geoffrey K. See and Andray Abrahamian
August 23, 2011

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