North Korean authorities recently announced that a revised Enterprise Act was adopted during the 11th Plenary Meeting of the 14th Presidium of the Supreme People’s Assembly, but they have yet to reveal the details. A Daily NK investigation determined that the revised law focuses on putting private entrepreneurs under the management of the Workers’ Party and Cabinet, and on strengthening control by the authorities over private businesses.
A copy of the revised Enterprise Act provided by a Daily NK source in Pyongyang on Friday calls for the economy to be managed through a “New Dae-An Work System.”
The Dae-An Work System has had a major influence on North Korea’s economic system since the 1960s. Under the system, which was implemented by Kim Il Sung, all factories and enterprises receive “party guidance” and high-tier levels of the party are responsible for helping low-tier party organizations to achieve production quotas.
Originally, the Dae-An Work System calls for on-site demands and circumstances to be reflected in planning; however, in practice, the focus is on enterprises receiving “integrated party management” so that the actual conditions can be ascertained.
A 2010 amendment to the Enterprise Act made no mention of the Dae-An Work System, leading to speculation that North Korea was expanding the managerial autonomy of businesses and preparing the legal basis to move towards an open economy.
Moreover, North Korea erased the word “Dae-An Work System” in a 2019 revision to the nation’s constitution, replacing it with the term “socialist system of responsible business operation in economic management.” However, the term “New Dae-An Work System” has returned in the Enterprise Act, leading some to wonder if North Korea is returning to the “era of Kim Il Sung.”
However, a Daily NK source in the country explained that the “new” Dae-An Work System differs from the past in that it goes beyond the party simply setting goals. It has strengthened the integrated guidance of the party by calling on party cadres to participate in the production process and report the results to the party.
In particular, the gist of the revised Enterprise Act is that it transfers the affiliation of each “kiji” to the jurisdiction of the state.
A kiji is a small private business organization of about seven people that is nominally attached to a trading company.
“It seems party and Cabinet management will grow stronger,” said the source. “In fact, the law does away with the kiji heads and affiliates all kiji with enterprises.”
Under the existing system, kiji were organized as nominal affiliates of institutions such as trading companies, but, in fact, they do not come under state tax inspections or evaluation. Because of this, while each kiji had been obliged to pay foreign currency or goods to the institution to which they are affiliated, how much income they are actually making had not been precisely calculated.
However, the revised Enterprise Act does not recognize separate kiji, even if they are over seven people. It says administratively they must be affiliates of institutions and participate in inspections and evaluations in accordance with the institution’s party guidance.
North Korea’s official Korea Central News Agency (KCNA) reported on Nov. 5 that the 11th Plenary Meeting of the 14th Presidium of the Supreme People’s Assembly adopted the revised Enterprise Act, saying the revised law stipulates “contents of making enterprises labor-, energy-, cost-, and land-saving ones” and refers to “issues which all the units must observe when organizing new enterprises or when their affiliations change.” The report also said the law “stipulates that the production and business management must be done under the unified guidance and strategic control of the state and on socialist principles.”
The “issues which all the units must observe when organizing new enterprises or when their affiliations change” mentioned by the KCNA is believed to refer to the virtual abolishing of the kiji chief system and the transfer of affiliations to the control of institutions and enterprises.
The revised law also stipulates that each kiji should include three party members and receive guidance from party cells or party committees. To put this another way, even small, privately run kiji making foreign currency will come under party and Cabinet management, and the particulars of their income will get accurately calculated.
The existing kiji chiefs reportedly have been quite taken back by the newly revised Enterprise Act. “If this is what’s going to happen, even private boat owners will have to formally register, and mining operators, mine owners and privately operated buses now cannot operate kiji,” said the source. “From the position of the kiji chiefs, more restrictions have been placed on their activities.”
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