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N. Korea’s Economic Situation

2021-11-04

ⓒ YONHAP News

It’s been almost a year since North Korea announced a five-year economic development plan at the eighth congress of the Workers’ Party in January this year. Local media agencies are now pressuring the public to show some results. They highlight leader Kim Jong-un’s previous speeches to stress the competitions among provinces and among counties and to urge the people to achieve their goals through ideological unity. But analysts say that the media hype only shows how difficult it is to resolve the country’s economic difficulties. 


Let’s hear from Cho Han-bum, senior researcher at the Korea Institute for National Unification. 


At the seventh party congress in 2016, North Korea established a five-year economic development plan. But leader Kim Jong-un himself admitted that the plan had failed. The country announced a new five-year plan advocating self-reliance at the eighth party congress early this year. Based on the failed policy line of self-reliance, the new plan was not feasible from the beginning. With international sanctions biting against North Korea still in place, the pandemic-induced border closure has deteriorated the local economy even further. Only less than a month after the announcement of the new plan this year, the North Korean leader severely criticized those who failed to set goals properly. Afterwards, the North has held various conventions to encourage the public to implement the plan appropriately. In reality, however, all areas have fallen far short of their target for now. 


According to a report by the Korea Trade-Investment Promotion Agency, North Korea has made an all-out effort to resolve its food shortage but huge price spikes for grains are considered pretty serious. Recent prices of rice and corn jumped 1.7 times and 2.4 times, respectively, compared to early this year. As a growing number of local residents fail to get food, many are said to be exposed to malnutrition. 


North Korea faces a severe food shortage. In June, Kim Jong-un said that the food situation was getting tense, touching on the food problem for the first time. The leader even issued a special order to improve people’s livelihood. In North Korea, it rained a lot this past spring and the country got far less sunlight, compared to previous years. Rice production managed to maintain a level similar to last year’s, but the potato and corn crop yield is in bad shape. North Korean trade workers in the Chinese border city of Dandong have been ordered to secure food by all means. Prices of rice and corn showed signs of stabilizing in the past week, but they remained extremely high for the last five months, indicating that the country suffers from a worsening food shortage. 


Moreover, North Korea suffers the worst shortage of goods including daily necessities, due to the drawn-out border controls. There are reports that the country ran out of imported paper and ink so it was temporarily printing money coupons with domestic paper. Also, it seems that the explosion of a local fertilizer factory in August is attributed to the lack of properly enforced safety measures. 


The North Korean economy relies on private markets or jangmadang. A considerable part of goods supplied to the jangmadang are imported ones. In particular, flour, sugar, soybean oil and seasoning, which are entirely imported from China, are out of stock now, as the North Korea-China border has been closed for nearly two years. It is said that prices of the imported refills for ball-point pens increased almost 100 times in some regions. Furthermore, North Korea has long been subject to international sanctions that restrict more than 90 percent of its trade. It seems the North Korean economy has been pushed to a breaking point. This is not a normal situation. 


Amid the worsening economic difficulties, North Korea appears to be expanding trade little by little, though in a limited way. Data from the Chinese customs authorities show that China imported 35-thousand megawatts of electricity from North Korea in September, up more than 60 percent year-on-year. It seems North Korea exported electricity generated from its Supung Dam on the Yalu River to China. 


Also, some humanitarian aid goods and medical supplies have reportedly entered North Korea lately through marine transport, raising speculation that the country may reopen its borders sooner or later. 


While most of land routes leading to North Korea have remain closed, cargo ships travel between North Korea’s Nampo port and the Chinese port of Dalian occasionally. The United Nations Children’s Fund and the World Health Organization have confirmed that medical supplies departed from Dalian and arrived in Nampo. 


When a ship arrives in Nampo, it is isolated at the outer port of Nampo for 14 days. The ship then moves to the inner port, where goods are unloaded and quarantined again for a certain period. In this way, trade is being carried out, though only in part. Chinese customs statistics show that the quantity of goods transported between China and North Korea rose sharply in September. In late October, South Korea’s National Intelligence Service reported to lawmakers that North Korea may resume train operations across the border with China and Russia as early as in November. 


Meanwhile, on October 29, the standing committee of North Korea’s Supreme People’s Assembly convened at the Mansudae Assembly Hall in Pyongyang to adopt new laws concerning international trade fairs, electronic transactions, financial record keeping and more. Analysts explain that North Korea is preparing to digitalize the economy and finance domestically and to expand economic activities internationally. 


In line with the proliferation of the jangmadang, North Korea is bracing for transparent transactions and a digital society. From a political standpoint, the country is supplementing the shortcomings of a planned economy through the jangmadang. But tax is not collected properly from the black market, and North Korea seeks to strengthen control over the market by introducing electronic transactions and receipts. At present, North Korean authorities suffer from a serious financial pinch. By absorbing the jangmadang into the official state economy, the North tries to collect more tax and secure financial resources. 


It seems North Korea has been strengthening the personality cult of leader Kim Jong-un lately. Kim advocated the so-called “people-first politics” as the basic political doctrine of socialism at the eighth party congress early this year. He also underlined “people” during his lecture marking the 76th anniversary of the foundation of the Workers’ Party in October. Local media outlets have also stressed “people” repeatedly as of late and focused on praising the top leader. It appears that the move has to do with the country’s economic difficulties. 


In fact, Kim Jong-un’s authority is being questioned. The main reason is, of course, the deteriorating economy. Worse yet, it is unlikely to improve anytime soon. Also, the leader has yet to keep all his promises to the people. Now, he has to solidify his power by employing stronger measures such as ideological control over the public and a law rejecting reactionary ideology and culture. In his tenth year in office, his regime is in crisis and he is making diverse efforts to keep his authority intact. The recent personality cult surrounding the leader can be understood in this context. 


For now, there is no clear solution to North Korea’s economic problems. As the country has yet to begin administering vaccines, it cannot shift to any “with-COVID-19” policy. It is impossible for international sanctions to be eased or lifted in a short period of time. Even if North Korea reopens its borders, it will take a considerable amount of time until border trade becomes as brisk as before. Therefore, North Korea’s economic difficulties are unlikely to be resolved soon and the ongoing crisis will only deepen. Without North Korea’s unexpected decision to receive vaccines or its dramatic change of attitude toward denuclearization talks, the economic crisis will likely continue for quite a long time.


North Korea continues to develop nuclear and ballistic missile technology, despite its serious economic difficulties stemming from international sanctions, border shutdown and natural disasters. Attention turns to how long North Korean citizens can endure the food shortage and economic hardships. 

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