Manufacturing « North Korean Economy Watch

Archive for the ‘Manufacturing’ Category

Vietnam recalls traditional North Korean medicine

Friday, August 29th, 2014

Pictured above: The Mannyon Pharmaceutical Factory in North Korea which produced the banned medicine.

The Bureau of Food Safety of the Ministry of Health on Wednesday decided to take Angunguhwanghwan (안궁우황환), a functional food produced by North Korea, off the market. It will also destroy all of the products, which contained high concentrations of mercury, arsenic and lead.

Test results of this product revealed that it contained mercury and arsenic exceeding the allowed limits. The Central Institute of Drug Testing collected the samples from the LC Tacy Red Ginseng Showroom in Hanoi.

The bureau has asked the firm to stop circulation, revoke and destroy the Angunguhwanghwan product and report the results to the department before August 29.

The product, produced by the Korea General Mannyon Health Corporation Chongryu No2, North Korea, was imported by Mannyon Vietnam. The product was licensed by the Bureau of Food Safety in July 2013.

As reported by the importer, it imported 30 boxes of this product in June 2014, with the purpose of introducing it to the local market. Four of the boxes were tested.

Here is a photo of the product:

Read the full story here:
N. Korean functional-food item taken off market
Vietnamnet Bridge
Le Ha
2014-8-29

Posted in International trade, Manufacturing, Vietnam | Comments Closed

North Korea increases production of consumer goods according to consumer demands and preferences

Monday, August 25th, 2014

Institute for Far Eastern Studies (IFES)
2014-8-25

Due to the strengthening of capitalism and competition in North Korean society, it appears that the status of consumers has risen considerably.

In the North Korean economy — which has clung to a supply-oriented, planned economic model — it is extremely rare to see production change in response to consumer demands and preferences.

The Rodong Sinmun, the official newspaper of the Central Committee of the Workers’ Party of Korea, published an editorial on August 3, 2014, calling for the “Brisk Opening of the August Third Consumer Goods Production Movement.” This editorial encourages the public by assuring that the consumer products will be made according to the needs and demands of the people.

“A socialist society cannot think about the production of consumer goods that are above the reaches of the people,” the editorial emphasizes, and that “the peoples’ demands and interests are [the Party’s] absolute top priority, and it is the noble duty of the Party to create these desired consumer goods for the people to enjoy.”

Through the use of various media, North Korea has propagandized the “consumer-focused” policy, claiming to have spurred competition and the increase in quality of products and services throughout the nation.

Joguk (Motherland), a media outlet of the pro-North Korean General Association of Korean Residents in Japan, published an article in their August 2014 issue entitled, “The Standard of Competition Is Determined by the People.” The article emphasizes production tailored to consumer demands, saying that “Product evaluation is something which can be done only by those who demand and directly use the product; it can only be done by the general public.”

The article further states that “Products popular among the general public and used by the masses are evaluated accordingly for their high quality.” It also mentions the cosmetic brands “Eunhasu” and “Pomhyanggi” as examples.

In a July 30, 2014 article, the Choson Sinbo introduced the Potong River Shoe Factory, which is responsible for the production of popular products such as the so-called “kill heel” high-heeled shoes, wedge-heeled shoes, and pointed stilettos. By working together with a department store and periodically reviewing customers’ feedback, the Potong River Shoe Factory can produce shoes to cater to shoppers’ preferences.

This method of setting the focus on consumer evaluation can also be found in North Korea’s education system.

On August 7, 2014, the Rodong Sinmun introduced the “bottom-up evaluation” system at Kim Jong Suk Middle School. This process, touted as one of the successes of educational reform, allows students to evaluate their teachers once per semester. By creating competition among educators, this system is expected to have effects all across the nation.

These types of changes are said to have close relations to the Kim Jong Un regime’s policy focusing on light industry, which also accounts for the improvement of standards of living for the people.

It appears that unlike the heavy chemical industry previously emphasized by the Kim Il Sung and Kim Jong Il regimes, light industry must consider not only production amounts, but the quality of the products as well. This inevitably leads to the emphasis being put on consumer product reviews.

Through consumer reviews, competition arises and productivity is increased, leading to the production of consumer goods with higher added value. Despite being called a “Socialist Competition,” in reality this system may not be so different from capitalism.

Posted in Domestic publication, Economic reform, Education, Light Industry, Manufacturing | Comments Closed

8.3 movement evolves in DPRK

Tuesday, August 5th, 2014

According to the Daily NK:

The meaning of August 3rd has changed since the creation of the 8.3 Movement in the 1980s, taking on connotations of areas of previously unavailable liberty, at least in the workplace.

“The term ‘8.3’ used to just mean products that were not manufactured in factories,” a source in North Pyongan Province told Daily NK on August 4th. “Say it now, though, and a lot of people will interpret it as a sign of market influence.”

The 8.3 Movement was a state-led attempt to increase provision of consumer goods by having factories and enterprises source their own inputs, and production facilities produce commodities beyond the remit of central planners. The movement was named after the date Kim Jong Il ordered it, August 3rd, and goods manufactured under its rubric came to be known as “8.3 consumer goods.”

Consumers could not purchase 8.3 consumer goods in subsidised state shops; rather, they were sold directly at market prices. As the movement grew in scale and state-run enterprises pushed to increase productivity, so 8.3 Workers and even 8.3 Work Units were formed.

As factory production slumped in the 1990s, a situation that persisted into the 2000s, workers took to dodging their work duties and mass mobilization orders so as to engage in cottage industries: making their own goods to sell. A portion of their income went back to the state, a de facto tax, and this became known as 8.3 Money.

“As recently as a few years ago, the 8.3 Work Unit in a cement factory in South Pyongan Province would produce roof tiles and slates and sell them to construction firms at market prices,” the source said. “But now, doing private business to make 8.3 Money is getting to be more popular than working in the designated 8.3 Work Unit.”

According to the source, payments of 8.3 Money can be as little as 20,000 KPW per calendar month all the way up to 200,000 KPW, the equivalent of paying for 40kg of rice in a public market.

“8.3 Money sucks up about 5-10% of the earnings of a person working that way,” the source explained. “This means they could be earning up to 2,000,000 KPW per month.” People in this upper earnings bracket do things like trade bicycles or motorcycles, or sell hand-crafted furniture, she said.

Even organs of citizen control and regulation are influenced by 8.3 Money. The Korean Democratic Women’s Union [KDWU] is one such example. An organization dealing with family matters, the organization technically demands that all women over 30 be members; however, participation can be waived in exchange for a share of 8.3 Money.

“There are three tiers of 8.3 money contributors, dependent on their financial capabilities,” the source explained. “The ones that have complete freedom and are exempt from all duties pay the most. Then there are some who only participate in monthly studies and others who are only exempt from mobilization.”

This complete freedom comes at a price ranging from 240,000-480,000 KPW per quarter, but is seen as a worthwhile outlay. In effect, 8.3 Money marks out a certain type of class stratification.

“Workers who pay a lot of 8.3 money receive protection from [the Party] despite skipping mandatory self-criticism meetings. Those who don’t pay much have to attend all study sessions and mandatory meetings,” the source said.

“Factories are in competition to get the greatest amount of funds possible from workers, but workers want to move to factories where they have to pay the least 8.3 Money,” he added.

A North Korean friend once told me an 8.3 joke. If someone was “low-quality” they were personally referred to as “August 3rd” person. I wonder if 8.3 goods are still perceived as low-quality.

Read the full story here:
Culture of August 3rd Changing with the Times
Daily NK
Seol Song Ah
2014-8-5

Posted in DPRK Policies, Economic reform, Light Industry, Manufacturing | Comments Closed

High-tech development zones: The core of building a powerful knowledge economy nation

Thursday, June 5th, 2014

Institute for Far Eastern Studies (IFES)
2014-6-5

It appears that the Kim Jong Un regime’s core slogan of “constructing a powerful knowledge economy nation” is being propelled by the development of high-tech development zones.

The need to switch to a knowledge economy is emphasized in the newest issue of the quarterly North Korean academic journal Kyongje Yongu (published April 30, 2014). According to a thesis included in this quarter’s issue (entitled “The Creation of High-Tech Development Zone is Necessary Step in the Knowledge Economy Era”), “Using high-tech development zones as a model, the establishment of a high-tech industry and the shifting of the entire economy towards a knowledge economy is both a Party initiative and legal demands to the construction of a knowledge economy.”

Alongside the national goals of becoming both an economic superpower as well as an athletically powerful nation, the Kim Jong Un regime has also established the national goal of becoming a leader among knowledge economy countries. In order to establish a foothold for building the country’s knowledge economy, the regime has proposed the construction of high-tech development zones.

After attracting foreign investments to fund economic development zones (EDZ) last year, North Korea has begun pushing forward for the construction of a high-tech development zone in the city of Pyongsong, located in South Pyongan province. The high-tech development zone will be built in the same area as the Unjong Science and Technology Zone and will share a similar locale with the National Academy of Sciences, both of which are located in the South Pyongan Province.

According to the thesis, high-tech development zones will “act as regional bases that bring technology and production closer together, unifying the research-development-production-export process.” The thesis also explains the characteristics of the high-tech development zone, calling it a “new type of development region with a high concentration of information, technology, and talented individuals” and “a place where education, scientific research, and production are brought together to become one.”

Furthermore, the thesis continues, “Through the improvement of the high-tech development zone, existing businesses have begun to change to information-related businesses,” and noted that, “Just as the foundation of the high-tech development zone is important to the construction of a powerful knowledge economy, it is also important to provide support from the state and the Party.”

In November of 2013, North Korea formed an international consortium of foreign companies to initiate the building of the Kaesong High-Tech Development Zone; however, construction has reportedly been suspended.

North Korea is currently pressing for construction of a type of cooperative complex to be built in the high-tech development zone where research and development, as well as production itself can take place in order to produce technologically-intensive products with high added value. However, due to sanctions imposed by the international community, North Korea is unable to acquire the advanced machinery it needs to construct the high-tech zone, and for now has only drawn out a rough sketch of the framework.

On the other hand, North Korea has also spurred progress in light industry in other regions by rewarding exemplary factories. This is seen as an attempt to increase the standard of living for the locals living in those regions, who have taken it upon themselves to improve light industry to best suit their situations.

Companies in Hoeryong, North Hamgyong Province, Wonsan, Kangwon Province, Chinchon [?], Chagang Province, and other regions have become recognized in North Korean media for their “innovations.” In Hoeryong, a chemical commodities factory developed fuel additives for lignite that increase its burning ability and efficiency, and was commended for its contribution in solving its citizens’ fuel problems. Other factories that were chosen to receive rewards include a glass bottle factory in Wonsan, and a wooden commodities factory in Chinchon[?] for increasing the production quality of their respective goods.

In a situation where the central authorities are in a vulnerable situation financially, North Korea has been encouraging regional businesses to grow and develop on their own. This not only increases the standard of living for the people, but encourages balanced regional development as well. Another thesis appearing in the most recent issue of Kyongje Yongu argues, “The comprehensive development of the regional economies has greatly reduced the state’s burden by allowing households to take it upon themselves to meet their needs according to their own situation.

Furthermore, regarding the growth of regional light industry, the thesis says, “general consumer goods are now being mass-produced, and are able to fulfill the region’s supply and demand needs,” emphasizing the use of “small quantity batch production.” Other light industry factories are also being built across the nation as part of the efforts to revitalize North Korea’s local economies.

Recently, construction of the Haeju Unjong Beer Factory was finished. Operations have commenced in Southern Hwanghae Province, and construction of the Musanryong Spring Water Factory was completed in late 2013. While North Korea’s plan to develop its local economies is not exactly breaking news, advances are slowly being made toward achieving the Kim Jong Un regime’s national goals.

* NKeconWatch: I have no idea why this article references a place in Jagang Province called “Chinchon”. Maybe they mean Huichon?

Posted in Economic Development Zones (2013), Light Industry, Manufacturing, Special Economic Zones | Comments Closed

Economic Management Improvement Measures – changes after one year

Friday, April 11th, 2014

Institute for Far Eastern Studies (IFES)
2014-4-11

The Choson Sinbo, a Japan-based pro-North Korean newspaper, reported on April 2, 2014 that since March of last year all production facilities across North Korea have begun to take measures that will allow them to operate more autonomously. The article is currently garnering attention due to its explanation of the changes and improvements to economic management and by introducing factories where these measures have been successful.

The news also reported that North Korean factories have to diverge from the national economic plan and produce and sell products at their own discretion. Furthermore, workers’ compensation and benefits packages are being adjusted according to each individual factory’s economic situation.

One year after the implementation of the economic management improvement measures, the concept of “business know-how” has begun to settle in each factory. Factories that have been achieving successful results all share similar developments in worker enthusiasm, sense of responsibility, originality and creativity. Promoting the growth of these qualities in factory workers became the key to the successful economic management and growth during this period.

Specifically, the newspaper reported that the North Korean factory workers are seeing returns on their increased profits, and that their enthusiasm is the driving force of the nation’s economic growth.

In the article, Pyongyang Electric Cable Factory 326 was introduced as the first factory to be labeled as a “leading unit” and is considered as an ideal factory workplace for many job seekers in Pyongyang.

At this factory, monthly wages have steadily risen in increments that allow workers to meet the rising costs of living and maintain healthy lives. Workers at Pyongyang Electric Cable Factory 326 are now earning dozens of times more than the national average every month, and the highest record for wages soaring to over 100 times the average was observed this past year.

Alongside slogans and posters that inspire the workers’ will to work, competition charts are also posted at various locations around the factory. This has created a sort of “Socialist production competition.” Factories that submit detailed reports of their business performance receive gifts, and the unit that receives first place is rewarded with a special congratulatory dinner.

Another reason why job seekers are choosing this factory as their ideal workplace is because of housing security. Factory 326 solves its workers’ housing problems by constructing residence complex for the employees and workers become eligible to receive housing after working three to four years.

According to the article, the recent measures taken to improve economic management have been effective in creating a sense of attachment between worker and factory and increasing workers’ desire to succeed. This, combined with the introduction of new scientific technology has allowed factories across North Korea to attain a 10 percent increase in production over the last year. While overall production has in fact increased, it can be concluded that the boost to worker morale is the biggest and most important part of the changes seen in the economy since the implementation of the management improvement measures.

On March 31 of last year, the Central Committee of the Workers’ Party of Korea held a plenary meeting where the “Byungjin line” or parallel policy that supports both economic and nuclear development, was adopted, and where Pak Pong Ju was elected to the Politburo — and later Premier (formerly First Deputy Director of the Central Committee of the Workers’ Party) — in an unprecedented move. From this point forward, North Korea began to officially advance its plans for economic management measures.

Posted in Economic reform, Joint Ventures, Labor conditions/wages, Light Industry, Manufacturing, Price liberalization | Comments Closed

The December 7 Factory: Producer of maxi pads and naval stealth technology

Wednesday, April 9th, 2014

This is my first article with Joseph Bermudez. The subject–the December 7 Facotry aka Korean People’s Army Unit 1501.

The detective work used in this article was a lot of fun.

You can read it here on 38 North.

Posted in Light Industry, Manufacturing, Military | Comments Closed

DPRK factories take up sharecropping

Saturday, March 22nd, 2014

According to the Daily NK:

This spring has brought a noticeable increase in the number of North Korean factories and enterprises leasing out parcels of farmland to private individuals, it has emerged.

A source from North Pyongan Province reported the news to Daily NK on the 21st. She explained, “The trend recently has been towards factories leasing out parcels of their farmland. On average they agree to divide up production 70/30, but in cases where lessees have already shown the ability to generate good returns on their own private plots it can be as high as 50/50.”

North Korean factories and firms use land given to them by the state to grow supplementary foodstuffs for employees, such as vegetables for use in side dishes like kimchi. Large ones have dedicated units that manage their farmland full-time, while smaller ones do so on an ad hoc basis.

The lease agreements are being concluded according to not only the capacity of the farmer to generate returns, but also upon which side is to provide inputs such as vinyl coverings and fertilizer, the source went on to reveal. If the majority of the inputs are to come from the factory then the harvest is likely to be divided 70/30 in favor of the factory. If the farmer is making the majority of the investment personally, the division can be as high as 50/50.

“Obviously, anyone who has money is going to prefer a 50/50 split, and people who don’t are going to get 70/30,” the source said. “Factories generally like the 50/50 split more because it means they do not to have to concern themselves with the farming process itself.”

Lessees are in some cases able to secure access to farmland via bribery or human networking, but the source emphasized that the ability to generate a good harvest is what usually matters. “We’ve had private farm plots here for the better part of 20 years now,” she pointed out, “so we know very well who has lots of farming experience and who is hard-working.”

Sources explain that people who are officially registered as members of cooperative farms cannot farm land owned by factories in this way. In general, the ones taking out the leases are either factory workers who know how to farm effectively, or failed traders who have turned to farming other people’s private plots for them.

Importantly, the leasing of land in this way appears to have become official policy. This marks a shift in approach: although cases of similar deals between factories and private individuals started to appear at the beginning of the 2000s, these were illegal which limited their spread. Conversely, the authorities have been focusing heavily on improving the efficiency of the agricultural system for the last 2-3 years, and instances of land rental are now more widespread than ever before.

In an interview with the pro-North Korea publication Choson Sinbo last May, Kim Myong Ho, a 52-year old director in the North Korean Ministry of Light Industry, explained that the government had decided to grant factory and enterprise managers greater authority in order to improve industrial production.

Authority over land owned by individual factories and enterprises rests with factory managers, who decree what is grown, in what quantities, and by whom. Therefore, in the event that managers stipulate that their land is being leased in order to increase production, the leases are acceptable to the state.

“The state directive was that we have to improve production and the management of state firms,” the source commented. “They don’t mind whether this is done by farming the land directly or by leasing it to other people to farm.”

Read the full story here:
Farm Deals Abound as State Pushes for Production
Daily NK
2014-3-22

Posted in Agriculture, Economic reform, Labor conditions/wages, Manufacturing | Comments Closed

North Korea promoting localization of raw materials for light industry and construction sectors

Monday, January 20th, 2014

Institute for Far Eastern Studies (IFES)
2014-1-20

North Korea is encouraging “localization” of raw materials in light industry and construction from this year to improve the lives of the North Korean people.

On January 7, RodongSinmun reported that various cabinet organizations were espousing the New Year’s address of Kim Jong Un. It reported that the Ministry of Light Industry’s executives and employees are engaging in discussions to explore ways to increase localization of raw materials in light industry factories.

A rally was held in Pyongyang earlier this month at Kim Il Sung Square where people pledged to accomplish the national tasks put forward by Kim Jong Un. Tong Jong Ho, Minister of Construction and Building-Materials Industry,delivered a speech that vowed to “make an unprecedented leap in localization of building materials (cement, glass, metals, and other construction materials),” by repairing building materials factories in all provinces.

The Choson Sinbo, pro-North Korean newspaper in Japan,reported on January 2 that at the New Year meeting at the Pyongyang Socks Factory, the plant manager, Lee Sung Hui, made a speech and promised to “raise the level of socks production and localization of raw materials to a higher level in Vinalon and PP fibers (synthetic) this year.”

North Korea is promoting light industry and construction as the key sectors to improve the living standards of the people and asserting localization of raw materials as a priority to make advancements in these fields.

In his New Year message, Kim Jong Un emphasized that lighting industry must play a “major part in improving the people’s standard of living” and that the construction sector is “an important front for solidifying the foundations of a thriving country and creating bases for the people’s happy life.” He called for modernization of factories in light industry and normalization of production, placing importance on increasing the proportion of locally-available raw materials.

Many experts analyze this year’s rising emphasis on the localization of raw materials as reflecting the intentions of the North Korean authorities to focus on pragmatically achievable policy goals first. Of course, increasing the proportion of locally-available raw materials requires the construction of domestic production base, which remains complicated because of international sanctions and lack of foreign currency — issues that cannot be easily resolved– among other limitations.

From 2012, North Korea’s launch of a long-range rocket and third nuclear test was accompanied with rising emphasis on the importance of localization. On December 3, 2013, Rodong Sinmun carried an article entitled, “Localization and National Pride,” that reported on the onsite inspection visits by Kim Jong Un to various economic sectors where he underscored the importance of “equipment, materials, and elements of localization” and “our strengths and technology.”

North Korea acclaimed that the launch of the long-range rocket in December 2012 was a “successful launch of a satellite based on 100 percent domestic science and technology.” Then in February last year, immediately following the nuclear test, it boasted that “Thrilling clap of independent nuclear thunder broke out based on 100 percent of our own wisdom and technology.”

Posted in Domestic publication, Kim's New Year Address (Joint editorials), Light Industry, Manufacturing, Ministry of Light Industry | Comments Closed

North Korea promoting localization of raw materials for light and construction industries

Monday, January 20th, 2014

Institute for Far Eastern Studies (IFES)
2014-1-20

North Korea is encouraging “localization” of raw materials in light and construction industries from this year to improve the lives of the North Korean people.

On January 7, Rodong Sinmun introduced that various Cabinet organizations were espousing the New Year’s address of Kim Jong Un. It reported, “The Ministry of Light Industry’s executives and employees are engaging in discussions to explore ways to increase localization of raw materials in light industry factories.”

Pyongyang City rally was held earlier this month at the Kim Il Sung Square pledging to accomplish national tasks put forward by Kim Jong Un. Tong Jong Ho, Minister of Construction and Building-Materials Industry delivered a speech that vowed to “make an unprecedented leap in localization of building materials (cement, glass, metals, and other construction materials),” by repairing building materials factories in all provinces.

The Choson Sinbo, pro-North Korean newspaper in Japan reported on January 2 that at the New Year Meeting at the Pyongyang Socks Factory, the plant manager, Lee Sung Hui made a speech and promised to “raise the level of socks production and localization of raw materials to a higher level in Vinalon and PP fibers (synthetic) this year.”

North Korea is promoting light and construction industries as the key sectors to improve the living standards of the people and asserting localization of raw materials should take precedence to make advancement in these fields.

In his New Year message, Kim Jong Un emphasized that the lighting industry had a “significant role in improving people’s lives,” and the construction sector was “at the frontline to providing a place of happiness for the people.”

In particular, he encouraged modernization of factories in light industry and directed normalization of production and placed great importance on localization of raw materials.

Many experts analyze the rising emphasis on the localization of raw materials this year reflect the intentions of the North Korean authorities to achieve realistic and achievable policy goals first. However, localization of facilities entail construction of domestic production base but this is met with limitations such as international sanctions and lack of foreign currency which is not an easy issue that can be resolved in a short period.

From 2012, North Korea’s launch of a long-range rocket and third nuclear test was accompanied with rising weight on the importance of localization of equipment and technology. On December 3, 2013, Rodong Sinmun carried an article entitled, “Localization and National Pride,” that reported on the onsite inspection visits by Kim Jong Un to various economic sectors where he underscored the importance of “equipment, materials, and elements of localization” and “our strengths and technology” on many occasions.

North Korea acclaimed the launch of long-range rocket in December 2012 was a “successful launch of a satellite based on 100 percent domestic science and technology.” Then in February last year immediately following the nuclear test, it boasted, “Thrilling clap of independent nuclear thunder broke out based on 100 percent of our own wisdom and technology.”

Posted in Cabinet, Construction, Economic reform, Light Industry, Manufacturing | Comments Closed

North Korea’s ‘New Economic Management System’: Main Features and Problems

Wednesday, January 8th, 2014

Korea Focus
Park Hyeong-jung
Senior Research Fellow
Korea Institute for National Unification

Here is the summary/assessment:

The objective of the New Economic Management System in North Korea is the building of an “unplanned socialist economy,” or something similar to the “socialist commodity economy” China implemented between 1984 and 1992. Agricultural, industrial and financial measures that North Korea is trying to introduce along with the installation and expansion of special development zones under the New Economic Management System are mutually connected and therefore need to be simultaneously implemented.

North Korea has the conceptual blueprints for each economic measure and its leadership includes individuals who are interested in promoting the areas where they are specialized. However, the country apparently lacks the capabilities to create the proper economic and political conditions for these measures. Against this backdrop, production increase and overall economic growth cannot be expected and confusion would intensify.

North Korea had not made sufficient preparations economically and politically before the introduction of the New Economic Management System. Introduction of new measures inevitably affects the interests of those who had been active under the old system. Transitional imbalance may arise in the process of putting the new system into practice. Reserve resources are necessary to address such problems.

The sub-unit management system in the agricultural sector showed how the reform effort can be stymied. This new system spurs independent efforts of farmers and stimulates their motivation for production increase but it invited the resistance of agricultural bureaucrats. When the state and farmers begin to share products by a ratio of 7:3 instead of the previous ratio of 9:1, imbalance will emerge somewhere in the distribution of farm products. Reserve resources are necessary for such a sudden change. The same is expected of the industrial management system. Factory enterprises were given autonomous operation rights but the new system did not result in production increase. Reserve resources are needed here, too.

The new policy under the Kim Jong-un rule lacked consistency and often exposed zigzagging directions. Officials responsible for the implementation of the new policy were unable to win over dissenters and failed to secure reserve resources needed to overcome the material imbalance in the transition period.

Eventually, the management reform at factory enterprises and experiments with sub-units in farming areas were virtually abandoned. The sub-unit management failed because of resistance from agricultural bureaucrats, the authorities` unease about relaxation of peasant control and uncertainty about the food security for the privileged class. The sub-unit management system most seriously threatened the stockpiling of food grain for the military and the power elite. It is certain that the military was the biggest opponent to the new agricultural management system.

The New Economic Management System accompanied policies that reduced the privileged role of the military in the economy. Similar problems were certainly exposed in the reform of industrial and financial management, such as non-cooperation from the privileged group, concerns about loosening control of workers and managers, and lack of guarantees for special interests.

Yet, the sub-unit management in farms and increased autonomy of factory enterprises were not entirely meaningless. Interestingly, some in North Korea`s leadership believed that the sub-unit system with incentives to individual farmers was necessary despite many problems attached to the farmers` self-interests. Although it was not successfully implemented, it did help farmers gain more independence from state control.

The unavoidable trend of changes in the North calls for systemic reforms like the sub-unit management just as youths grow up to become adults and then to the middle age. The problem is how to operate the changed system to achieve production increase. To be successful, those in the North Korean leadership who advocate the New Economic Management System should be able to politically suppress those opposing it or win them over economically by assuring them of the distribution of surplus. What has happened to date shows that the new system has failed to make much progress in that direction.

Concerning the projects of building special economic development zones, similar problems have been detected. The Workers` Party Central Committee decided in a plenary meeting in March 2013 to take measures to diversify foreign trade, develop new tourist zones, and build special economic zones suitable for the specific conditions of each province. The Economic Zones Development Act was enacted in May and, as of October 2013, each province is boosting efforts to attract foreign investment and create new economic development zones.

The concept of special economic development zone can be defined as conforming to the “unplanned socialist economy” or the “socialist commodity economy.” But the success of special economic zones needs the three steps that were required to tackle the problems faced by the sub-unit farm management and the autonomous operations of factory enterprises as observed above.

MY NOTES:

This paper is the most comprehensive assessment of the origination and implementation of the DPRK’s “June 28” policies.

The author classifies the June 28 policies as an attempt to transform the DPRK from a system composed of KWP rule + decentralized reform + state ownership of production means to KWP rule + coexistence of market and planned economies + state ownership of production means. This state is called “socialist commodity economy” or “unplanned socialist economy”. The transition involves moving management to enterprises and farms where production is carried out on the basis of contract and state planning.

The plan was carried out by a group under the cabinet led by Ro Tu-chol.

ENTERPRISE SECTOR:
* No more production quotas/Enterprises make own plans and profit distribution
* Raw materials are traded firm to firm via “direct supply centers” (intended to provide nominal state oversight of firm-to-firm transactions)
* Enterprise officials appointed/fired by KWP
*30% profit tax

AGRICULTURE SECTOR
*70/30 split of output (previously state took fixed share regardless of output)
*Smaller collective farm sub ubits
*Smaller private plots and kitchen gardens.

FOOD MANAGEMENT:
*PDS do be abolished but increased control of markets
*Government employees (teachers/doctors) to buy food at “food supply centers” (where all food producers sell supplies).
*military personnel are to buy food at subsidized/fixed price
*”Independent accounting enterprises” (August 3rd?) employees are to be paid in cash and buy food. Enterprises still controlled by state to get rations.

Stephan Haggard wrote about the paper here and here.

All posts on the June 28 policy can be found here.

Posted in 2002 Economic reforms, 6.28 Policy on Agriculture (June 28), Agriculture, Black markets, DPRK Policies, Economic reform, Labor conditions/wages, Light Industry, Manufacturing | Comments Closed

North Korean Economy Watch