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Regional trading companies in North Korea are merging with one another amid emphasis by the country’s authorities about the significance of the “Cabinet-centered System” in foreign trade, a source in the country recently reported. 

Samhwa Trading Company, which had been attached to South Pyongan Province’s department of land management, was ordered last month to merge under the Ministry of Land and Environment Protection, the source, who is based in the province, told Daily NK on Tuesday. The trading company is currently going through procedures to finalize the change in affiliation. 

Moreover, the source told Daily NK that the trade management bureau in the province’s people’s committee is managing the merging of multiple trading companies attached to the municipal and county-level trade departments in the province. During this process, the provincial bureau is forcing regional branches or companies that have failed to produce “results” to close down.

These efforts to integrate trading companies appear to be an attempt by the North Korean authorities to enact centralized management of foreign trade on the basis of the Cabinet-centered System, thus preventing money from flowing into the pockets of private individuals or agencies with special privileges, including the Workers’ Party of Korea, the Korean People’s Army, the Ministry of State Security, and the Ministry of Social Security.

In other words, authorities are on guard against so-called “work unit specialization,” which refers to powerful agencies using their special status to privatize wealth.

The merging of trade companies also suggests that the state is establishing a system by which the government can control all imports and exports, as well as profits from trade, amid urgent efforts to revert to North Korea’s past system of state-controlled trade.

Merges are an essential element of economic activity. Nonetheless, North Korea should not abandon the principle that states that the division of labor and specialization are the basic conditions for economic development. The North Korean economy has indeed experienced failure in the past under a unitary and rigid economic system that restricted any economic decentralization or freedom in trade.

The global economy has developed through independent economic activity that allows individuals and companies to plan on their own and for markets and prices to adjust by themselves. In addition, the core of a free economy is an “exchange economy” that is made up of companies.

We have seen the success of a liberal model that emphasizes individual freedom and self-responsibility, private property, minimum social welfare that protects the law and prizes performance, free entrepreneurship combined with the state, and the value of competition.

There is thus an imperative that a social balance be achieved through market freedom and state intervention to ensure the healthy economic activity of North Koreans.It is also necessary to establish an economic order that is independent and productive, and also conforms to social justice.

In this respect, guaranteeing the autonomy of individual activities in foreign trade is an indispensable element for the creation of wealth at the national level and the protection of individuals’ right to freedom.

The North Korean Cabinet must not overlook the fact that market activity intensifies under a system in which the supply and demand for goods are determined by the market itself, and the fact that such economic conditions are the prerequisite for ensuring the “happiness of the people.”

Translated by Youngheon Kim

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