The perception of ownership in North Korea is changing. Although initially restricted to individual consumption, the changes in perspective are now spreading wider into economic activities related to production.
Individual ownership regulations as defined by North Korea’s civil law
Civil law normally places individual ownership regulations into one of two categories: property or inheritance. North Korea first announced personal ownership regulations in civil law on December 7, 1982, which were instituted by the Workers’ Party Central Committee on January 30, 1986. In 2007, the personal property and inheritance regulations were also systematized.
The distinction between personal property and inheritance is clearly articulated in these laws. The laws explicitly refer to the concept of ownership, as well as the different classifications, protection, and common ownership. They also discuss state ownership, cooperative unit ownership, and private ownership (which is further divided into personal and inheritance ownership).
Under the law, private ownership is limited to consumption, and there are restrictions to ownership via the production method. Nevertheless, within the North Korean system, it is possible to accumulate financial wealth despite the limitations.
Specifically, North Korea’s Civil Code Section 58 states, “Private ownership includes socialist distributions according to labor, additional national and societal benefits, products arising from one’s own private activities like raising a garden, purchased items, those inherited or gifted from another citizen, and other products that are otherwise acquired through legal means.”
Continuing on, North Korean Civil Code Section 59 states, “Items needed for a private home or family life, such as appliances, cultural products, and vehicles, are also permissible for ownership.”
It is possible to view the influx of foreign vehicles in Pyongyang – including BMWs, Mercedes Benz, and VWs – as a reflection of this change in language in the Civil Code.
North Korea’s Inheritance System
North Korea’s inheritance system is based on the exclusive right of all citizens to private property. North Korean Civil Code Section 60 states that “each individual has his personal property right, and he can own, use, or dispose of his personal property following socialist social regulations and consumer goals.” The important difference is that he must follow “socialist social regulations and consumer goals.”
In North Korea, individuals can transfer or inherit personal property if it is properly obtained within legal and institutional boundaries. The inheritance policy also states both inheritance by law and inheritance by will. In North Korean Civil Code Section 63, “the nation guarantees the inheritance right of personal property; a citizen can inherit personal property following inheritance law, and citizens can leave their personal property to any institution at will.”
Change in the perception of ownership following private economic activities
North Korean citizens’ personal property that can be protected by official means is limited to wealth gained from economic activities approved by the regime. However, official economic activities approved by the regime are often quite different to actual economic activities.
The flashpoint for the change in perception of ownership in North Korea can be traced back to 1984, when the regime passed laws permitting joint investment. This enabled Korean-Japanese citizens to enter the North Korean services market by establishing restaurants, for example. In nationally-owned enterprises, it was clear who owned the means of production, so individuals could not own or manage anything privately.
However, in service industries like restaurants, individuals were permitted to manage the businesses in a personal capacity. It was during this time that North Koreans began to see the possibility of entering the services market. Many Korean-Japanese citizens thrived in the services market by taking advantage of their special status as neither locals nor foreigners. Around this time, North Koreans started borrowing the names of institutions to enter the services market and also began operating businesses like restaurants.
This can also be read as the regulation of the general market. The North Korean regime is currently regulating the general market, and funding its national budget through taxes collected from individuals who conduct profit-making activities in the markets. In other words, individuals who engage in market activities can be considered part of the official economy because they pay taxes to the regime, and also pay a pre-arranged amount to the institution to which they belong. Such activities are ways for North Koreans to make money on the side and are considered acceptable because they fall within the boundaries of existing policies.
The relationship between the breakdown of state domains and ownership perceptions
In North Korea, the state domains are officially based on a planned economy directed by the State Planning Commission. Even if overestimated, less than half of industries in North Korea fall under state domains, and even that half is heading toward the direction of improving the rigidity of a planned economy.
In other words, most people do not work in their assigned workplaces, but engage in economic activities elsewhere. As more economic activities occur in unofficial domains, it becomes possible to personally own means of production under borrowed names. Because state enterprises and cooperative groups are generally not performing well, many individuals have turned to using borrowed enterprise names to conduct business.
Ramifications of changes in ownership perceptions
Personal property rights in North Korea can be limited to legal property with the purpose of consumption. However, unofficial economic or profit-making activities are now necessary for the survival of most North Koreans, excluding those who can make a living working in the official economy or those who have permission from the regime to work in official markets. In other words, activities in the unofficial domain fall under the civilian realm of production.
Because most economic activities occur this way, it is difficult for the regime to punish the North Korean people. North Koreans are engaged in various unofficial economic activities, including borrowing and paying for the use of an enterprise’s name, trademark, and space. Investing in bonds or securing shares is usually allowed only to foreigners or foreign enterprises, but these days, North Koreans are borrowing idle funds to use for such purposes.
Today, unofficial privatization is commonly taking place outside the official domains. The North Korean regime is belatedly creating laws and policies to respond to these changing realities. With increases in the official shares of foreign enterprises, recognition of personal property rights, and production means becoming personal property through the borrowing of names, the North Korean system is developing eerily rigid similarities to its southern counterpart.
*Views expressed in Guest Columns do not necessarily reflect those of Daily NK.
