A unified Korean Peninsula is something we all dream about. But what kind of reunified Korea is envisioned by experts in this area? It’s time for “Unification Table Talk” where we interview experts on this topic.
In his 2015 New Year’s Address, Kim Jong Un
stated that “we should make maximum use of the existing foundations and all
potentials of the self-supporting economy, so as to bring about a turn in improving
the people’s living standards and building an economic giant.” The first half
of 2015 has now passed; do North Koreans think that their living standards have
improved?
To answer this question, we need to evaluate Kim’s economic policies.
Today we have Kwon Tae Jin with us, who is an expert in North Korean agriculture and the
director of the North Korea, Northeast Asia Research Center at the GS&J Institute.
1. Director, let’s examine the current economic situation in North Korea. The price of rice
is a reliable indicator of the trends of prices of consumer goods. Despite the
spring lean season, the price of rice has stayed relatively stable. What is the
reason?
As you mentioned, a kilogram of rice is
being sold for around 5000 KPW [0.61 USD]. This is a very stable price despite the time of
year. The stable prices can be largely attributed to the fact that last year’s
grain harvest, including rice, was a very good one.
Rice prices are also affected by foreign
currency exchange rates. The current stability in exchange rates has also
contributed to the stability in the price of rice. Altogether, the sufficient
supply of rice and the stability in exchange rates have brought stability to
the price of rice.
1-1. Until when will this period of
economic stability last?
Last year’s harvest is still presently being
distributed. The first harvest from this year’s double cropping will begin around
the end of June. The outcome of this harvest will have a large effect on the
economy. It is estimated that the harvest will not be very good, so that the
price of all grains, including rice, will be volatile until the harvest’s end.
2. The UN expects that the seriousness of
the current drought will impair this year’s harvest. What is your opinion? Will
the drought reduce the grain harvest?
The entire peninsula is experiencing a
drought, although North Korea’s situation is more serious. This year’s precipitation so
far has been less than average, and although the amount of April’s
precipitation was above average, May’s amount of rainfall has been less than
half of the average. Even though the North has reservoirs, the drought has reduced it,
so that the rice-planting has been delayed.
The rice planting is still in its early
stages. Although later recovery is possible, a lot of damage has already been
done. Therefore, it is safe to expect that the current drought will also affect
the autumn harvest.
3. Will the result of the harvest have a
substantial effect on the economy?
Certainly. Agriculture makes up 20-25% of the North
Korean economy. Past experience shows that as agriculture goes, so does the
economy. If the harvest indeed does turn out to be bad, then the whole economy
will also be detrimentally affected.
4. Kim has repeatedly mentioned infusing
science and modern techniques into agriculture. The Rodong Sinmun has been
doing the same as well. Do you think that the modernization of agriculture is proceeding
well?
Actually, there is a lot of talk about
modernization for the country as a whole, and not just in agriculture. As to
agriculture, there has been a lot of talk about developing new techniques,
breeds, etc. But it has so far been all talk and no action. Modernization
requires a substantial amount of investment, and its results do not materialize
overnight. There hasn’t been much investment and hence not much results.
4-1. What kind of investment and effort are
required for concrete results to appear?
To have modern agriculture requires the
development of new techniques. North Korea insists that Juche agriculture is a form of scientific
agriculture, but it soon becomes apparent that it is not so when you look at
the discrepancy in agricultural productivity between the two countries, where North Korea’s agriculture sector is only 50-60% as productive as that of SK.
Scientific agriculture also requires
equipment and scientific knowledge, areas where North Korea is also very behind. As
mentioned, there has been a lot of talk and slogans and no real results.
5. Let’s talk also about Kim’s policy on
the marketplaces. Kim has so far refrained from imposing any regulations upon
the marketplaces. In fact, one researcher at the US-Korea Institute at the John
Hopkins University examined satellite images and found that the number of
markets has increased by 200 since 2010. What function does the marketplace have
in the wider economy?
To say that “the marketplaces are sustaining
the economy” is not an overstatement. The central economy continues to stagnate,
and this has forced the Kim regime to
loosen the restrictions on the markets. This has the effect of making citizens
less dependent on the state and more proactive in finding their own solutions
to problems. Accordingly, the number of markets has increased.
Over the past few years, the North Korean economy has
minutely grown. The growth can probably be attributed to the markets. In this
current situation, where the economy and the state distribution system have
cratered, people’s livelihoods cannot be sustained if they do not turn to the
markets. The marketplaces are not only sustaining the economy, but people’s
livelihoods as well.
6. Do you think that the number of markets
will further increase?
The previous regime recurrently tightened
and eased restrictions on the markets. There was a fear that if the markets
were left alone for too long, this would destabilize the regime. In contrast,
the current regime has been in place for 3 years, but has not cracked down on
the markets, and do not seem to be all too eager to do it either. If the
current regime thinks that the markets will have a destabilizing effect on the
regime, then the possibility of restriction in the future is certainly present.
Hence, the markets will probably continue to grow, but not endlessly.
7. As marketization grows, more of the
donjuLiterally "masters of money," donju refers to people who hav... More ( money masters, or newly affluent middle class) are cropping up, which
is creating a capitalist milieu. Will the presence of the donjuLiterally "masters of money," donju refers to people who hav... More lead to further
marketization, and even sustained growth for North Korea’s economy?
Recent trends demonstrate the importance of
donjuLiterally "masters of money," donju refers to people who hav... More in the economy. The capital from donjuLiterally "masters of money," donju refers to people who hav... More is entering the markets, and this,
combined with government funds in the markets, are the cause behind increased
economic activity, which is sustaining the economy.
The role of the donjuLiterally "masters of money," donju refers to people who hav... More will likely expand.
The natural function of the donjuLiterally "masters of money," donju refers to people who hav... More is in finances and banking. The banks and the
government will take time to enter this area, and until then, the donjuLiterally "masters of money," donju refers to people who hav... More will have
a predominant role in the markets.
However, the regime will inevitably place restrictions
on the market as well as the donjuLiterally "masters of money," donju refers to people who hav... More. Thus, the donjuLiterally "masters of money," donju refers to people who hav... More will have an important role
in the markets, but albeit within limits. Until the economic system changes,
the donjuLiterally "masters of money," donju refers to people who hav... More can only function within the regime’s parameters.
7-1. How will marketization influence the North’s
planned economy?
North Korea’s economic system is often described as
a planned economy, as well as a planned economy with socialist markets. The
role of the markets in North Korea is to fill in the gaps left by the central planners,
not as the drivers of the economy as in capitalist economies.
The markets in North Korea will eventually begin to
drive the economy, thereby slightly marginalizing the planners. Eventually, the
planned economy and the market will eventually reach an equilibrium, but
whether planning will disappear completely is too early for debate. It is safe
to say that the planned economy will slowly retreat.
8. Some suggest that North Korea’s marketization is
not hastening liberalization, but helping the regime to sustain itself through
corruption. What are your thoughts?
In the short term, this might be true. It
is not only the citizens, but also officials and the regime itself, who are
riding the current wave of marketization. The demand for greater marketization
will eventually require government regulation of the markets, which in turn
will enable the regime to make some money through corrupt practices. The flow
of money through corrupt channels might sustain the regime in the short term.
But in the long term, the markets will destabilize the regime. Even if the
regime realizes that the markets are not amenable to itself, the regime will
find it difficult to stem further marketization. To avoid further
destabilization, the regime will then turn to liberalization and internal
reforms.
9. Let’s also evaluate Kim’s political
policies. Kim introduced new economic reform measures such as the June 28th
Measures or the May 30th Measures. How are these measures being carried out?
The June 28th and May 30th Measures are
meant to encourage small businesses and agricultural cooperatives to be more
autonomous and self-responsible in making decisions. The aim of the measures is
to increase productivity in both factories and agriculture, and thereby grow
the economy. The focus on autonomy and self-responsibility is borne out from
past failed attempts at inducing economic growth. The measures in the May 30th
Measures will probably further evolve, by making economic entities more
autonomous, and giving more power to individuals and not groups.
10. This year’s drought is very bad, but so
was last year’s. Nonetheless, last year’s harvest was not a disaster compared
to the previous years. There is some suggestion that bunjo [cooperative farm
production unit] system is responsible for the increase in productivity. What
is your opinion?
The view in the North is that the new management
system, and therefore the Kim regime, is responsible for the increase. However,
it is too early to say indeed whether the new system has produced this increase.
When Kim first came to power, he said that he’d focus on raising the living
standards through the farming and light industry. And Kim has indeed given more
priority and resources to agriculture and light industry in the last three
years.
For instance, the drought was very bad last
summer and the summer before that. The one resource that North Korea has is manpower. To
save the harvest, the government recruited not only the farmers but all
available citizens to carry water to the fields. This is how they improved the
yields despite the drought.
Moreover, after the drought ended, the
weather became very good, especially before harvest time. These factors make it
difficult to pronounce whether the increase in productivity can indeed be
attributed to the new management system.
Nonetheless, it would not be amiss to say
that the new management system has had a positive influence.
11. Let’s also evaluate North Korea’s
effort to ride out the current economic hardship by saving foreign currency. One
way that North Korea is trying to attract foreign currency is through foreign
investment. In theory, special economic zones (SEZs) would attract foreign
currency, but in reality, it hasn’t been very effective. Why?
Currently, North Korea has 5 central special
districts, and 19 special economic zones. Although these zones have been
introduced some time ago, they haven’t produced significant results. North Korea initially anticipated that a lot of currency from SK, China, and elsewhere
would flow in. The reality is that the SEZs have slightly, but not
fundamentally, better conditions for investment than non-SEZs.
The unstable political conditions raise
reasonable doubts for prospective investors as to whether they could reap the
benefits of their investment. Although the North’s regime is more progressive than prior,
the large degree of government control over investment makes investors
reluctant to enter the North Korean market.
12. Considering altogether Kim’s
willingness to liberalize, North Korea’s economic situation, and its relations with the outside
world, is economic growth for NK possible?
So far, the regime has been more liberal
than its predecessors, and the internal conditions in North Korea are not very bad.
However, North Korea is still receiving aid from the UN, and the continuing development of
nuclear arms and missile capability is not helping its relations with the
outside world. Achieving sustained economic growth without sorting out its
foreign relations will be impossible, despite the liberalness of internal
reforms and improved internal conditions.
On today’s “Unification Table Talk,” we
evaluated Kim’s current economic plans, and what is necessary to ensure the
growth of North Korea’s economy. Thank you for being with us today, Director.
