Archive for the ‘DPRK Policies’ Category

North Korean economic history snippet: Kim Il-sung on the food supply system, 1962

Tuesday, May 24th, 2016

By Benjamin Katzeff Silberstein

Despite the rise of the markets in post-1990s North Korea, the public distribution system (PDS) retains an important function in supplying grain inside the country.

However, in the early 1960s, Kim Il-sung considered doing away with the official system for food distribution (식량공급제도). It is not clear how firmly such ideas were considered, but in a speech in Pyongyang in 1962 – or so his collected works from 2000 claim – Kim said he thought of abolishing it in favor of letting people purchase food freely.

Interestingly, in this speech, Kim cites relatively pragmatic reasons for sticking with central distribution of food. The issue, Kim says, would be that big families would fare comparatively worse if they had to depend on cash income for their food purchases. If food was bought and sold freely, a difference in living standards would arise (생활수준에서 차이가 생기게 됩니다).

Source: Kim Il-sung, Ch’ŏnjib (전집), vol. 29. Pyongyang, Korean Workers’ Party Publishing House, 2000.

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Pak Pong-ju promoted

Monday, May 23rd, 2016

Bloomberg reports on the story, but I made some title corrections in the blurb below:

Kim this month named [Premier] Pak Pong Ju, 77, to the [Presidium of the Political Bureau of the Central Committee of the WPK], making him the highest-ranking official to lead a new five-year economic plan. The regime’s leader announced the blueprint at the first full party congress in 36 years, held as he seeks to tighten his grip on power.

Pak has had a rocky past, sacked as premier by Kim’s father, Kim Jong Il, about a decade ago and demoted to supervisor of a chemical factory. His policy of encouraging free enterprise while increasing wages and consumer prices to help the country cope with the rise of unofficial markets had unnerved die-hard socialists.

Pak also serves on the Central Military Commission. More analysis here.

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Nit-picking coverage of the five-year plan

Thursday, May 19th, 2016

Numerous reports have claimed that the five year plan announced at the seventh party congress was the first since the 1980s. I did not think this was accurate, but was too busy to actually look the facts up. Fortunately someone else did it for me.

Here is a blurb from the recently released  report “North Korea’s Troubled Economy: The Real Challenges” by Ryo Hinata-Yamaguchi and Yeongseob Lee:

North Korea’s recent track record of economic plans have been far from effective nor consistent. Pyongyang’s Third Seven-Year Plan from 1987 failed to remedy the ailing economy, and the plan itself virtually disappeared during the so called “arduous march” of the mid-1990s. Moreover, in 2011, Pyongyang announced the “Ten-Year State Strategy Plan for Economic Development”, but there was very little follow-up from the regime on the progress.

The new Five-Year Economic Development Strategy announced at the recent Workers’ Party of Korea (WPK) Congress is therefore an attempt by the Kim Jong-un regime to politically reinvigorate the government’s uri-sik (our style) economic development strategy focusing on the energy and food crisis. While little details were disclosed, given the myriad constraints in capacity and resources, the prospects of genuine revival and development are questionable.

So the last plan was announced in 2011, not 1987.

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Electricity and the five year plan

Tuesday, May 17th, 2016

According to Yonhap:

A pro-North Korean newspaper based in Japan said Tuesday that easing electric power shortages will be a prerequisite for North Korea to implement its new five-year plan for economic growth.

Without spelling out details, North Korean leader Kim Jong-un laid out a five-year strategy aimed at boosting the country’s moribund economy at the party congress which concluded its four-day run on May 9.

Kim stressed that resolving the shortage of electric power is critical to carrying out his vision for economic growth, saying that nuclear power generation needs to increase.

The Chosun Sinbo hailed the North’s economic plan, saying that if realized, the move will pave the way to improve the livelihood of people and boost balanced growth.

“North Korea is likely to focus on developing the defense industry…and to make efforts to tweak its advanced technology on the military and space programs to be applied into the improvement of North Koreans’ livelihood,” the newspaper said.

At the party congress, the North’s leader made it clear that he will “permanently” defend the pursuit of his signature policy of developing nuclear weapons in tandem with boosting the country’s moribund economy, commonly known as the “byeongjin” policy.

The newspaper said that the communist country is expected to lay out measures to back up the “dual-track” policy at the party level.

“As Pyongyang raised the issue of power shortages, the country is likely to focus on uses of nuclear power,” said Chang Yong-seok, a researcher at Seoul National University’s Institute for Peace and Unification Studies.

Kim’s vision for economic growth came after the U.N. Security Council slapped its toughest sanctions to date on North Korea for its fourth nuclear test in January and long-range rocket launch the following month.

Analysts said that Kim’s five-year economic development vision is too short on detail, especially when compared with his grandfather Kim Il-sung’s blueprint for economic growth which was unveiled at the party congress held in October 1980.

The North’s founder unveiled the 10-point plan to build a socialist country by setting special targets in economic sectors.

Here is a link to the Choson Sinbo article.

Read the full story here:
Easing power shortage critical for N.K.’s new economy plan: report
Yonhap
2016-5-17

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North Korea’s natural resource risks: Kim Jong-il’s own take

Thursday, April 14th, 2016

By Benjamin Katzeff Silberstein

As North Korea debates and experiments in economic strategies, it’s always interesting to go back and look at older debates of a similar nature. While reading vol. 14 of Kim Jong-il’s Collected Works (Sonjib) I stumbled upon an interesting speech attributed to Kim from 1995.* Whether it was foresight or just common logic of political economy, Kim actually warned of the risks of North Korea becoming a mere natural resource exporter to other countries, without reaping the full benefits of trade. Recall that one of the charges against Jang Song-taek was selling out the country’s natural resources for his own benefit. The issue itself, of course, is much older.

In the speech, given to an audience of Central Committee functionaries, Kim attacks cadres that have a faulty understanding of foreign trade under socialism, and think only about how their own “units” (단위) can make foreign currency profits (p. 8). He also emphasizes the need to calculate all the costs involved with foreign trade, including production costs at home, to calculate actual profit.

The most interesting part, in my opinion, however, is where Kim gets to the natural resource question. Kim states that natural resources shouldn’t just be sold to other countries, but processed (가공) domestically to the greatest extent possible (p. 10). He says that “now, capitalists are buying natural resources at a cheap price from our country, processing them and selling them to a higher price.”

Kim complains that it’s a grave crime that capitalists are pocketing their own wallets by selling off North Korea’s own resources by processing them, and that North Korea could become mere suppliers to monopoly capitalism if it doesn’t start processing their natural resources itself. He also states that those who just sell off natural resources without processing are just like slaves to foreign countries.

Kim also warns people about thinking that foreign currency can be earned “for free.” “The imperialists and capitalists never give anything to anyone for free,” Kim states, and says that if capitalists say they have anything to give, it is because they have their own desires” (p. 11).

This speech is a reminder that North Korea has grappled with how to handle its natural resources for a long time, and it suggests that controversies abounded in the 1990s as well.

*These works are sometimes edited after the fact, sometimes several times over, but this edition is from 2000, published by the Worker’s Party Publisher (N’odongd’ang chulpan’sa). All translations are my own, and if anyone has any corrections to offer, please get in touch.

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North Korea assesses three years of Byungjin Policy

Thursday, April 14th, 2016

Institute for Far Eastern Studies (IFES):

Commemorating the third anniversary of Kim Jong Un’s announcement of the byungjin line — the parallel pursuit of nuclear weapons development and economic growth — North Korea emphasized the policy as a “milestone to the ultimate victory.”

On March 30, 2016 the North Korean state media Korean Central News Agency (KCNA) self-evaluated the country’s three years of byungjin policy, claiming that it has “raised the DPRK to a prosperous country of the people with almighty nuclear power.”

The media then listed recent weapons-related tests — such as that of a hydrogen bomb (forth nuclear test), submarine launched ballistic missile (SLBM), new-type large-caliber multiple launch rocket system (MLRS), simulation of an atmospheric re-entry of a ballistic missile, and solid-fueled engine that boosts the power of ballistic missiles — saying that the country “has both nominally and virtually shown its status as a world nuclear power.”

In regards to progress on the economic front, the media mentioned Wisong Scientists Residential District, Unha Scientists’ Street, Yonphung Scientists Rest Home, Mirae Scientists Street, Sci-Tech Complex, Munsu Water Park, and Masikryong Ski Resort, among others, claiming that “the plan has achieved three consecutive years of economic development and surprised the world.”

The report also emphasized that “the party’s byungjin line is not a temporary policy to confront the current stern situation, but the party’s revolutionary strategy and milestone to the ultimate victory, which will provide the greatest advantages in the revolution and the bright future for our nation.”

The media also noted that “the bright future awaits us upon our strong military and economic development by the nuclear program,” saying that “with the speed of Choson we will move forward to reach the top of strong prosperity.”

At the Party’s Central Committee plenary meeting on March 31, 2013, leader Kim Jong Un stated that “against the imperialists and their worshippers’ indiscreet nuclear threats and possible invasion talks, the party’s byungjin line will enable us to hold the nuclear power to build an economically strong country.”

In a new North Korean book publication, Looking at Today’s Choson from 100 Questions 100 Answers (in Korean), the byungjin policy is described as follows: “by relying on the nuclear energy industry, it will develop the nuclear capability and solve the energy shortage as well, thus strengthening the defense capacity and build the economy to better the living standards of the people.”

Meanwhile, to commemorate and signify the importance of the byungjin policy, on March 31, 2016 various North Korean run websites released photos of Kim Jong Un giving on-site instruction at military and economic-related facilities.

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Friday fun with North Korea’s new slogans

Friday, February 19th, 2016

By Benjamin Katzeff Silberstein

What better way to start off the weekend than to go through North Korea’s latest batch of political slogans (“Joint calls/공동구호”)? These were issued collectively by the Central Committee and the Central Military Commission on Wednesday February 17th, and printed on the frontpage of Rodong Sinmunas part of the run-up to the 7th Party Congress to be held later this year.

Below I have gathered those that relate to the economy, and a few other interesting ones, with brief annotation:

The calls underlined the need to make hurrah for the WPK and socialism resound far more loudly this year when the Seventh Congress of the WPK is to be held by staging an all-out death-defying struggle for building a thriving nation and improving the people’s living standard.

The Byungjin line is alive and well.

Let’s dynamically wage this year’s general advance in the same spirit as shown in succeeding in the H-bomb test!

Let’s build an economic giant as early as possible with the strength and the spirit of Korea and at the Korean speed!

Send more satellites of Juche Korea into space!

As often before, the satellite launch and the hydrogen bomb test are tied into the theme of economic development: both are technological advancements, showing the overall progress of the economy.

Produce more new-generation electric locomotives and passenger cars!

A shout-out to the domestic car industry?

Put the manufacture of Korean-style world-class underground trains on a serial basis!

The domestically manufactured subway cars haven’t been forgotten. One wonders if people living outside Pyongyang feel as strongly about them.

Step up the modernization of the mining industry and keep the production of nonferrous metal and non-metallic minerals going at a high rate!

Provide more resources for building an economic giant by channeling effort into prospecting underground resources!

At least now Jang Song-taek can’t touch them anymore.

Make the foreign trade multilateral and diverse!

This is interesting, and a clear statement about an important rationale for the SEZs: North Korea will remain politically and economically vulnerable as long as China continues to be its single largest trading partner by a large margin.

Let’s greet the 7th Party Congress with proud achievements in the improvement of the people’s living standard!

The people “will never have to tighten their belts again”, as Kim Jong-un said in his first public speech in 2012.

Achieve a great victory on the front of agriculture this year!

Which the regime has already claimed it did last year. The UN doesn’t agree.

Let’s give a decisive solution to the problem of consumer goods!

Let’s produce more world-competitive famous products and goods!

North Korean media has highlighted strides in consumer goods production several times this year.

Make Wonsan area an icon of city layout and build it into a world-level tourist city!

A shout-out to the Wonsan tourist zone, presumably.

Establish Korean-style economic management method guided by the Juche idea in a comprehensive manner!

Sounds like the management reforms, with greater autonomy for enterprises, are still on the table.

Let the entire party and army and all the people turn out in the forest restoration campaign!

And make sure they “properly conduct fertilizer management“. This is the only reference among the slogans to the forestry campaign, where the regime has publically acknowledged some crucial and systemic problems, but is yet to find a credible solution.

Put an end to proclivity to import!

Does this tell us something about North Korea’s trade balance that the numbers aren’t showing?

The Korean People’s Internal Security Forces should sharpen the sword for defending their leader, system and people!

Note that “people” comes after both “leader” and “system”.

Let us thoroughly implement our Party’s policy of putting all the people under arms and turning the whole country into a fortress!

Enhance the fighting capacity of the Worker-Peasant Red Guards by intensifying their drills as the anti-Japanese guerillas did in Mt. Paektu!

Develop and produce a greater number of various means of military strike of our own style that are capable of overwhelming the enemy!

Enhance the fighting capacity of the Worker-Peasant Red Guards by intensifying their drills as the anti-Japanese guerillas did in Mt. Paektu!

These four slogans seem to be saying that the Four Military Guidelines, adopted in 1962 by the Central Committee, are still very much in play: 1) arming the population, 2) fortifying the country, 3) establishing a cadre-based army, and 4) modernizing military equipment. Mao would probably have been happy to know that his People’s War Doctrine lives on in North Korea.

The whole list of slogans is very long, and saying that policy areas need to improve, or that production in a certain area needs to go up, isn’t much of a policy line. Still, it’s interesting to see what areas are highlighted.

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Pyongyang Times: Tourism regulations in EDZ instituted

Monday, February 15th, 2016

According to the Pyongyang Times (2016-2-15):

Tourism regulations in EDZ instituted

The government has set new regulations to control tourism in the economic development zones.

Tourism regulations were adopted by decision No. 90 of the Presidium of the Supreme People’s Assembly on December 23 2015.

The regulations containing 32 articles in five chapters are applicable to EDZs established for tourism.

The DPRK citizens, overseas Koreans and foreigners can tour EDZs in various styles and methods including visit, sightseeing, vacation, amusement, sports, experiencing and medical treatment.

Personal safety, human rights and property of tourists in EDZs are protected by the law of the DPRK.

Management of tourism is undertaken by the managing authorities of EDZs.

The zones encourage planned development and protection of tourism resources such as scenic attractions, historic relics and remains and natural monuments.

Investors can invest, establish and run businesses in such fields of travel, lodging, restaurant, amusement, welfare services, production and sale of souvenirs and development of tourism resources in the zones with the approval of the management authorities of EDZs.

In case of establishing a travel company in the zones, license of the central tourism guidance organ should be gained through the management authorities. After receiving the license, the travel company should register its business with the management authorities and receive business registration certificate.

When an investor wants to set up and run a tourism service business in EDZs, he or she should obtain the approval of the management authorities following relevant regulations.

Tourists who want to travel EDZs should apply for tourism directly or via local and foreign travel companies outside relevant EDZs.

Anyone, who did any harm to personal safety, health and property of tourists, failed to provide proper service obliged by contracts, destroyed tourism resources or caused any damage to businesses and individuals, bears such civil liabilities as to restore them to their original state, or pay compensation, penalty and arrears.

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North Korea’s H-Bomb Test: The (Impossible) Economic Context

Thursday, January 7th, 2016

By Benjamin Katzeff Silberstein

Who decides what in Pyongyang? Do fierce political battles rage between hardliners and reformers, where the former group struggles to replace nuclear belligerence with liberal market economics and trade? Whenever a purge or suspicious death occurs in Pyongyang, speculations come alive about potential policy changes by the regime.

It is a fool’s errand to make guesses about how North Korea’s claimed (but unlikely) hydrogen bomb test fits into the speculative dichotomy of modernizers versus conservatives. After all, such simple divisions are rare in the political life of any country. But looking at the test in the context of the past year makes it clear that Pyongyang is pursuing a messy mix of policies that are mutually exclusive.

At the same time as one “hand” of the regime attempts to draw foreign investment, diversify its investor base to include other countries than China, and take its industrial zones from plans to reality, the other “hand” is actively working against economic progress by nuclear tests and diplomatic belligerence. Either the left hand doesn’t know what the right hand is doing, or it does, but just doesn’t want it to succeed.

Perhaps this is the way that Byungjin – Kim Jong-un’s strategy of parallel development of nuclear weapons and the economy – was intended to work. (If so, the regime seems to be dedicating much more resources and energy to the nuclear part, while the economic one still mostly consists of words.) In any case, Pyongyang is trying to achieve two goals at the same time, and it isn’t working.

For example, in 2013, the North Korean regime announced the creation of over ten special economic zones, with more added in both 2014 and 2015. Progress has been uneven. Still, the North Korean regime has continuously indicated that the zones are a priority and will continue to be improved. Just in November last year, new regulations were announced for the special economic zones. Visitors and analysts report that elite businesses have been doing better and better in North Korea, and that the economic environment has become increasingly freer.

Whatever the list of Pyongyang’s priorities may look like, January 6th was not a good day for those North Koreans tasked with planning, building and administering the country’s special economic zones and projects. North Korea is already an unlikely destination for most foreign investors. Many low-wage competitors already sit relatively close by the country, such as Vietnam and Cambodia. North Korea’s comparative advantages are really quite few. Things are already difficult and the claimed H-bomb test certainly won’t help.

The international sanctions are just one part of the problem. Even with knowledge of what the current sanctions regime permits investors to do, the test is a stark reminder that legal hurdles will keep being added as nuclear and missile tests continue. This should deter any investor without special connections, political motives or a financial death wish. Not to mention the terrible PR and public criticism that would follow any (at least western) company deciding to invest in North Korea.

And then, there is of course the China factor. Sure, Beijing doesn’t comply with sanctions the way it is obligated to do. Moreover, as the Choson Exchange blog points out, North Korean and Chinese businesses tend to find a way to get around the sanctions. Last but not least, to a large extent, Chinese investment and cooperation with North Korea is a regional issue, with much of it driven by the northeastern border regions that depend on trade and exchange with the country.

But this doesn’t mean that Beijing won’t ever take concrete action felt by Pyongyang. China’s worries about North Korea’s nuclear tests are arguably more warranted than those of any other country. Residents in Yanji, a Chinese city on the North Korean border, even felt tremors from the bomb test, and teachers and students were reportedly evacuated from schools near the border. A trend is only a trend until it is no more. At the very least, events like the nuclear test don’t exactly make Chinese officials more prone to want to facilitate economic cooperation and infrastructure investments for North Korea.

It’s almost painful to think of all those hours spent in the North Korean administration, drawing up plans for new economic development zones and projects, new laws for investments and other institutional changes to improve the economy, only to see their colleagues in another part of government work in the opposite direction. If (and this is a big “if”) there are indeed policy factions in the government, with modernizers and conservatives, the latter have scored a victory on January 6th, at the expense of the former.

UPDATE 2015-01-07: James Pearson and Ju-Min Park at Reuters have done a very interesting overview (with Michael Madden of NK Leadership Watch) of the people behind North Korea’s nuclear program. It’s an important illustration of the fact that interest groups are not just a thing of business, but also of politics and ideas. Read it here.

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The limits of agriculture reform in North Korea

Friday, December 18th, 2015

By Benjamin Katzeff Silberstein 

Agricultural reforms in North Korea became a hot topic of discussion almost right away when Kim Jong-un took power in 2011. Only a number of months into his tenure, news began to come out of the country about attempts at agricultural reforms. It is unclear when (or even if) the June 28th Measures were finally extended to the whole country.

At the very least, three years in, it seems beyond reasonable doubt that North Korean agriculture has undergone major changes. These have been aimed at boosting production by creating better incentives for farmers to produce and sell more of their output to the state rather than diverting it to the market. The most important aspects of these reforms are the decreased size of work teams and new rules that let farmers keep 30 percent of their production plus any surplus above production targets, while the state takes the remaining 70.

These changes have been met with optimism among some. However, no one really knows exactly what impact these reforms have had. North Korean agriculture may be faring better than it used to – although this is also doubtful – but even so, it is too simplistic to assume that government reforms in agricultural management are doing all the work. As long as North Korea’s agriculture continues to be centrally planned by the state, there will be limits to how much better it can get no matter what reforms the state implements.

To see why, consider some of the news that have been coming out of North Korea in the past few months, as reported by Daily NK. In late November, the online daily reported that in despite by multilateral aid organizations, North Korea had seen relatively good harvests this year. However, the increased harvests, according to people inside the country, were not caused by changes in the agricultural management system of state-operated collective farms.

Rather, the North Koreans interviewed for the story claimed that private plot farmers had been better able to protect their crops from adverse weather impacts by using water pumps and other equipment. Even though trends like these alone probably have a limited impact, this shows that many circumstances other than state management matter.

A few weeks later, Daily NK published another interview carrying a similar message. According to sources inside the country, harvests from collective farms have declined, while private plot production has gone up (author’s emphasis added):

The amount of food harvested this year from the collective farms has “once again fallen short of expectations,” he said, adding that the farmers who work on them have criticized the orders coming down from the authorities, saying that “if we do things the way they want us to, it’s not going to work.”

Although the regime has forced people to mobilize, the source asserted that farm yields are not increasing. So, then, “the best thing to do would be to further divide the land up among individuals,” he posited.

Our source wondered if individual farms were not more successful because each person tending them personally grew and watered their plants. Currently, farmers must follow directives regarding the amount of water they can use on collective farms. He warned that if the system is not completely overhauled, crop yields will fail to improve.

In other words: as is so often the case, management orders from above often do not align with the reality on the ground.

One should be careful not to draw too many general conclusions based on individual interviews, but this is a well known general problem in all planned economies. Even with the best intentions, the state can never be fully informed about conditions and resources on the ground in an entire society.

This is one of the many reasons why economic central planning falters. We have seen this, too, with Kim Jong-un’s forestry policies. The state gives orders that have unintended consequences on the ground, because information is lacking. No central planning team can be fully informed about the reality prevailing throughout the system. The information problem becomes particularly dire in authoritarian dictatorships like North Korea, where people at the lower end of hierarchies often have strong incentives not to speak up about implementation problems when orders come from the top.

Ultimately, no matter what management reforms the North Korean regime implements, the country’s economic system remains the basic stumbling block. As long as central planning continues to be the ambition of economic and agricultural policies, there will be a limit to the success that agricultural policies can reach. We may expect to see agricultural reforms continuing, but as long as the system remains, they can hardly be revolutionary.

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