Policy follows the people when it comes to private economy in NK

By
Daily NK
-

While North
Korea’s state production levels have seen no improvements since Kim Jong Un’s ascension to power, the country’s
markets have steadily expanded their territory. Following the rapid disintegration of
the state rationing system in the mid- to late-90s, the country’s private
economy, centering on the jangmadang (markets, official or otherwise),
has seen slow but unwavering growth. 

Daily NK’s sources within the North all
agree that the markets are the lifeline of not only most members of the public
but mid- to high-level cadres as well. Cadres use their power to get involved in
market activities either directly or indirectly and receive bribes, a cut
from profits, or both. This is why some believe North Korea’s economy is now more an
amalgamation of underlying interests between the public and private economy.

Unable to provide food and daily
necessities for its people the North has no choice but to allow private sales
in the markets, sources point out. Moreover, the private economy continues to open up new revenue streams for the state: mobile phone sales, stall fees vendors pay to hawk their wares at the markets, fees for business permits, etc. It stands to reason then that the ‘second economy’ will continue to grow this year.

“In
the past, officials would suddenly close the markets or restrict selling hours,
but after Kim Jong Un came into power there has been almost none of this,” a
source from South Pyongan Province told Daily NK in a telephone conversation.
“Some people say market activities can no longer be restricted, likening personal economic pursuits to a ‘wagon on the move that can’t be stopped.'” 

Another source in Yanggang Province said,
“Based on the fact that rice prices have remained stable for quite some time,
you can tell that individual vendors are active in the market.” Even if the state tries to crack down on the markets at this point, she added, they would continue to boom as people simply moved their stalls outside of the
physical marketplace. 

Kim Jong Un’s New Year’s Address, which
placed great emphasis on ‘improving people’s livelihoods’ by way of a more
proactive implementation of the country’s ‘new economic management system (June
28 Measures)’, also gives people more reason to believe the state will not
clamp down on market movements. 

This newly found freedom has also given
birth to an array of new businesses made possible through collaboration between
donju [new affluent middle class] and state enterprises. 

“Restaurants, transportation trucks, and
other forms of services have already carved out a spot for themselves in the
market, and now, donju are even getting involved with state factories,” a
source from South Pyongan Province said. “Donju have from long ago invested in
state enterprises for snacks, bread, and rice cake manufacturing and other
forms of production.” 

In the past, such donju operations were run
under the borrowed name of state enterprises, but more recently, donju have
been able to independently receive permission from the provincial people’s
committee and run their own businesses. Donju have been entering new fields of
business “as long as there is money to be made,” and state agencies are also
opening new deals with these individuals to earn in more funds for operation,
according to the source. 

“State factory cadres and donju are deeply
intertwined when it comes to drawing up business plans now,” the source said.
“Those who oversee factories are even getting involved in invisible battles to
win over donju with more assets.” 

“It’s becoming more of a trend for donju to hire their own employees,” asserted a source from South Hamgyong Province, adding that in the
case of restaurants, the idea that “ownership lies with individuals not the
state” is also gaining more traction.

Along with this expansion of the private
economy, other areas considered in the past to be strictly state owned such as
the housing market and manpower are also inching towards greater degrees of
marketization and privatization. 

“Apartments are being built mainly around
the Sinuiju area and since people are now able to buy these homes, the housing
market has started to take off,” a source from North Pyongan Province explained.
“Since no one is responsible for the interior design elements, homeowners get
materials from South Korea through brokers, leading to bustling imports on that
front.” 

There also people who fix parts of the
house, and this has led to daily workers in that field as well. Some people
also borrow funds from moneylenders to buy their homes, according to the
source. 

Having put the socialist system at the very
forefront, the larger this privatization swells, the greater burden it is
likely to place on Kim Jong Un. This is because the expansion could very well
become an impetus of change. As such, authorities may move to create some form
of institutionalization to better manage the growing presence of the private
economy. 

“This privatization movement is not
something driven by the state. Instead, the state is actually following this
trend,” the source from South Hamgyong said. “This doesn’t mean it is fully
recognizing private ownership, but it does signal that it has no choice but to
acknowledge it to some extent.” 

Donju already have most law enforcement
agencies “in their pockets,” the source went on to explain, and they believe
that unless Kim Jong Un hands down orders directly, “no one will be able to
touch their assets.” 

Experts believe Kim Jong Un will likely
overlook the growth of privatization in the future and use it to maintain the
state economy. The economy led by donju will be seen as an alternative to the conventional
manufacturing sector that has mostly been run into the ground. 

“When I look at the North these days, I get
the impression that it’s mostly defunct planned economy and market economy
coexist and this is leading to development,” Professor Lim Eul Chul from The
Institute of Far Eastern Studies [IFES] said. “By giving people more autonomy,
they are slowly reinstating public enterprises and developing things so the
profits can be shared,” he added.  

Lim went on to speculate Pyongyang will
still keep a watchful eye on the private economy, as it will want to maintain
the overall socialist framework for the country. “With the international
sanctions, it has no choice, so it is allowing these changes in the private
sector, but it will want to push forward policies that keep things in check and
gradually put restraints on privatization,” the professor said.   

Professor Jeong Eun Ei from Gyeongsang
National University said, “For the North, since trade with China didn’t kick
off in the way that it wanted it to because of falling global commodity prices, it has no choice but to revitalize
domestic consumption.” She added this is why traders with money are turning
their eyes inward to look for niche money-making opportunities at home, in domains like transportation and manufacturing, rather than heading to China. 

“The state doesn’t see the growth of the
private economy as being a threat yet, so it’s turning a blind eye. But at any
point it could unleash strict restrictions,” Jeong said. The professor also urged the South Korean government to study and meticulously analyze these
economic changes within the North to establish relevant inter-Korean policies and strategies.

RELATED ARTICLESMORE FROM AUTHOR