The Economic Aspects of Kim Jong Un’s New Year Address

 CE Volunteers visit the DPRK and lead breakout discussions on innovation and startups. 

CE Volunteers visit the DPRK and lead breakout discussions on innovation and startups. 

Every new year day, the DPRK or North Korea publishes a New Year’s Address from Kim Jong Un that sets the focus for the year ahead. Much has been said on two aspects: Kim Jong Un’s “nuclear button”, a deterrence message (“I will launch my weapons at a notice if you threaten me”) and the rapprochement messaging to South Korea. Some consider the suggested North Korean attendance at Pyeongchang an off-ramp now that North Korea has achieved a deterrence capability threshold, while others consider it a peace offensive meant to split the US-South Korea-Japan alliance.

Much less ink has been spilled about the economic aspects of the speech, an area we are most interested in as we bring volunteers to North Korea to teach entrepreneurship, business and economic policies to budding startups and policymakers. The economic aspects tend to be vague in the speeches, and are most useful when read in the context of what is happening on the ground or policies that are being experimented with.

Don’t just rely on people telling you the headlines! You can read his full speech here.

Here are the economic highlights we found interesting:

 

All officials, Party members and other working people should launch an all-people general offensive to frustrate the challenges of the hostile forces who are making last-ditch efforts and raise the overall strength of our Republic to a new stage of development…

This is an indirect reference to the impact of sanctions pursued in the aftermath of ICBM and nuclear tests by North Korea.

 

A breakthrough should be made in re-energizing the overall economic front this year, the third year of implementing the five-year strategy for national economic development.

This five year plan was never revealed in full detail publicly. But officials on the ground reference it, and there is a fair amount of bureaucratic activity around its implementation. Furthermore, this 5 year plan was the first plan since the 80s, indicating a seriousness in restoring some degree of economic direction in a business environment much changed from the planned economy during the last plan.

 

The central task facing socialist economic construction this year is to enhance the independence and Chuch’e character of the national economy...

“Independence and Chuch’e character of the national economy” refers to import substitution policies in place in the last 6-7 years. Kim Jong Un has personally complained about the large number of imports. The leadership has been trying to tame the power of the trading companies, and shift from importing consumer and industrial goods to domestic manufacture. Ironically, this goal have benefited somewhat from enhanced sanctions., and will continue to do so until sanctions hit the supporting trade in needed inputs for domestic manufacture. We have also seen more small-scale manufacturing startups (mostly consumer goods) turn up at workshops our volunteers lead.

 

The electric-power industry should maintain and reinforce the self-supporting power generation bases, and direct a great deal of efforts to developing new power sources…. The metallurgical industry should further improve the Chuch’e-oriented iron- and steel-making technologies, increase the iron production capacity and drastically raise the quality of metallic materials in order to satisfy the needs of the national economy for iron and steel...

Continuity from the announcement of the five year plan. Still a focus on heavy industry and electricity generation to support the industry. Coal policy used to be contentious domestically, with some groups favoring exporting to generate hard currency, and others preferring usage domestically to lower electricity costs to support an industrial revival. The execution of Jang Sung Taek and sanctions on coal exports might have swung this debate in the latter direction.

 

The chemical industry should step up the establishment of the C1 chemical industry...and perfect the sodium carbonate production line whose starting material is glauberite.

Ok. I learned what glauberite is. This: Na2Ca(SO4)2.

 

A turn should be brought about this year in improving the people’s standard of living.
Light-industry factories need to transform their equipment and production lines into labor- and electricity-saving ones and produce and supply more diversified and quality consumer goods with domestic raw and other materials, and provinces, cities and counties should develop the local economy in a characteristic way by relying on their own raw material resources.

Particularly important is the last part exhorting provinces, cities and counties to develop based on local characteristics on their own resources. This is also in line with the Special Economic Zone (SEZ) policies we have written much about. Basically, the government is granting more autonomy (but not necessarily resources) to the local level to make economic decisions. There is still a constant tug of war between the provinces and the central government on things like who has the authority to give licenses or register new companies. As in China, some provinces have found workarounds to get things going without central approvals after realizing how bureaucratic the whole process is.

 

This year the service personnel and people should join efforts to complete the construction of the Wo’nsan-Kalma coastal tourist area in the shortest period of time...

This is a long-running national project. While nothing new, its mention could be linked to hopes of a breakthrough in relationship with South Korea, as this project’s most direct customers would be South Korea and Japan.

 

A shortcut to developing the self-sufficient economy is to give precedence to science and technology and make innovations in economic planning and guidance.

Innovations in economic planning and guidance could refer to the economic policy experimentations taking place in the last few years. Could be a lot of things but nice to see a change in approach mentioned, not just a focus on sectors and exhortations, even if short on details. This could mean a lot of things including more local decision-making autonomy, more autonomy to enterprises and increasing ease of establishing enterprises, change in farming policy (but not mentioned), changes in credit industries, etc.

 

Every sector and every unit of the national economy should make a contribution to achieving production growth by intensifying the dissemination of science and technology and waging a brisk technological innovation drive.

Someone has been studying Solow’s growth model. In China and Vietnam, emphasizing science and technology were also used to allay opposition to and encompass changes in economic policy and systems.

 

The Cabinet and other economic guidance organs should work out a realistic operational plan to carry out the national economic plan for this year and push forward the work for its implementation responsibly and persistently. Positive measures should be taken by the state to ensure that the socialist system of responsible business operation proves its worth in factories, enterprises and cooperative organizations.

The Cabinet is still in-charge of the economy, although a mention was made earlier to the economic plan being approved at a Party Conference. Pak Pong Ju looks stable in his position and this is a good thing. The last time he disappeared in 2006, economic policy swung to an extremely conservative position. Finally, “...socialist system of responsible business operation...” could refer to the greater autonomy of enterprises and their need to prioritize profitability over fitting into plans in today’s North Korea.

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