North Korean authorities are focusing on restoring an economy rushing headlong into disaster by, among other measures, implementing a revised version of the country’s Enterprise Act.
Daily NK’s reporting thus far has shown that North Korean authorities plan to expand opportunities for private individuals to participate in economic activity while strengthening administrative control over small-scale trading kiji. The plan is to kill two birds with one stone by strengthening political control over private businesses while reinvigorating the economy.
However, North Korean economy experts Daily NK spoke to point out that since the act includes elements that contradict one another, the revisions may not lead to economic recovery.
Seoul National University Professor Kim Byung-yeon told Daily NK on Thursday that if North Korea’s Enterprise Act works to strengthen state control while simultaneously granting businesses autonomy, it would have “both positive and negative effects.”
“The economic effect will depend on whether or not the [overall impact] is more positive or negative, but viewed as a whole, it probably won’t go solely in the direction of boosting the country’s economic growth rate,” he said.
He suggested that expanding the allotment of waku (trade certificates) to Class 5 enterprises and encouraging private businesses to engage in trade is the right direction to reinvigorate the economy, but putting individual or small-scale groups under Workers’ Party or Cabinet control will only shrink economic activity in the country.
Meanwhile, Professor Cho Yeong-gi of Kookmin University’s Graduate School of Politics and Leadership told Daily NK, “The stronger the political control over the economy, the more difficult it is to boost the economy.”
North Korean authorities already tried folding private trading activity – previously conducted autonomously in the country’s provinces – into provincial trading companies when they launched their “New Trade System” in the early 1990s. Cho pointed out that North Korea is retrying a policy that has already failed.
In regards to North Korea’s move to expand the waku allotment, Cho the measure aims to do more than just encourage private business or trade. “If you think about it the other way around, what it does is make it possible [for the government] to punish those smuggling without an official trade license much more severely than before.”
However, some experts said that if the revisions to the Enterprise Act mean that more individuals can engage in business or trade, it could create a structure that generates profits through competition.
“From the perspective of the North Korean authorities, the Workers’ Party is getting directly involved in managing the economy because the Cabinet has insufficient executive power in the economic sector,” Professor Lim Eul-Chul of Kyungnam University’s Institute for Far Eastern Studies told Daily NK. “[North Korea] may be innovating in its own way because [the revisions to the Enterprise Act] legislatively support business activities.
“Going forward, the state could lend wholehearted support to capable kiji,” Lim continued, adding, “The intention is to create a structure of competition between small and medium-sized kiji through incentives and for the state to maximize profits while managing the competition.”
In Lim’s view, North Korea implemented the revisions of the Enterprise Act as a continuation of its efforts to “unify” the economic system while enshrining in law a structure that will “strategically generate profits.”
In fact, during the Fifth Plenary Meeting of the Seventh Central Committee late last year, North Korean leader Kim Jong Un said that “[t]he problem that should be solved before anything else is to put the economic work system and order on a reasonable track” and “[t]he Cabinet should strengthen the state’s finances by making effective use of the existing economic foundations and undertake economic planning properly and scrupulously command the economic activities so that the production units could be revitalized as well.”
Accordingly, the revision of the Enterprise Act could be seen as a measure to achieve “unified management” and a reinvigoration of the business entities Kim emphasized last year.
Experts Daily NK spoke to, however, agree that even if the direction Kim is intending to take North Korea economically is achieved through revisions of the Enterprise Act, the revisions alone will do little to improve the difficult economic situation in the country.
“Revising the Enterprise Act is just like fine tuning [the economy],” Kim, the Seoul National University professor, told Daily NK. “They are doing all this work on a policy that will have no effect.”
Essentially, Kim argued that given there are predictions that North Korea’s economic growth rate could dip by -5% to -10% next year, simple revisions to the law may not lead to immediate economic recovery.
“Basically, the key to bringing economic recovery to North Korea is to change the structure of the economy, such as conducting reforms and opening,” said Cho, the professor at Kookmin University. “It’s meaningless to go forth with a new measure in an inefficient system.”