insulators, economic
Insulators at the Gyongsong Insulator Factory in North Hamgyong Province. (Rodong Sinmun)

North Korea’s economic hardship in the 1990s, known as the Arduous March, led to countless starvation deaths. North Korea has worked for 80 years to build a “strong and prosperous nation” during three generations of the ruling Kim clan, but it cannot escape the quagmire of economic hardship. North Koreans still bear the title of citizens of the world’s poorest nation. Although the ruling Workers’ Party of Korea emphasizes the normalization of production, North Korean businesses instead face the reality of shrinking production.

Now, at the height of the agricultural season, fertilizer production is reportedly shrinking. According to a source in North Hamgyong Province earlier this month, the manager and several other officials of the July 7 Chemical Factory in Undok County were punished for failing to meet this year’s fertilizer quota. The source said the failure was due to a lack of basic inputs such as electricity and coal, but the state is simply using them as scapegoats.

The July 7 Chemical Factory, also known as the Undok Chemical Factory or the July 7 Union Enterprise, produces ammonia, methanol, bicarbonate ammonia and nitrogen fertilizer. Established during the Japanese colonial era as a plant that produced methanol and synthetic oil from bituminous coal, the facility began producing methanol after it was restored in 1959. It later expanded into bicarbonate ammonia production, and by 1990 it was producing 65,000 tons of ammonia, 200,000 tons of bicarbonate ammonium fertilizer, and 200,000 tons of nitrogen fertilizer per year. However, 30 years later, its production capacity has been cut in half. Why is this?

We must not overlook the fact that despite the formation of markets, the ruling party continues to influence the management of enterprises. A recent editorial in the Rodong Sinmun stressed that a “solemn task of the times” has been placed on “all economic sectors, unitary workers and the working class” who are trying to achieve the “12 great goals set by the party,” a task for which the party will eventually judge them on the basis of their “urgent efforts and continued struggle.”

When we look at the reality facing North Korean enterprises, it is clear that the Workers’ Party imposes quotas on them without ensuring their autonomy. Resources are scarce, while demands to meet quotas increase. Managers who rationally read and think about the market are undermined, forced out, or disappear.

In North Korean society, business managers who are recognized as “loyal elements” of the party are puppets who simply do what the party tells them instead of working hard. It is easier to survive that way. Thus, essential business management – such as production and sales – becomes loose and unfocused as managers get caught up in party politics full of social tasks that have little to do with profit.

The ability to read and respond to the marketplace declines significantly, as does the ability to maintain production, as managers focus on showing loyalty to the party. Ultimately, this phenomenon proves fatal to the management of North Korean enterprises.

The economy must grow to improve the lives of the North Korean people, and for the economy to grow, businesses must grow. For this to happen, North Korean business managers must be able to read market trends rather than focus on loyalty to the party. The business managers the ruling party likes are people who only implement things that have nothing to do with profit. This is because they have been trained to be interested only in what the party says.

The quickest way to remedy this is for the ruling party to transfer its authority over personnel decisions to the cabinet. North Korean leader Kim Jong Un and the Workers’ Party must remember that this is the way to “people’s happiness.”

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