North Korea reforming economy while denying change


Pyongyang - On the side streets of Pyongyang, small traders sell vegetables from impromptu stalls. At markets, dealers offer imported household goods - even Coca-Cola - and in state-owned department stores hard currency is openly exchanged at black-market rates.

Officially, North Korea denies it is reforming and declares it remains guided by the Juche, or self-reliance, philosophy of founder Kim Il-Sung whose 105th birth anniversary is being marked this weekend.

But under his grandson Kim Jong-Un - the third generation of the dynasty - economic change is quietly happening in the impoverished, nuclear-armed country, analysts say.

The North was once better off than the South, but decades of mismanagement saw it descend into stagnation and food shortages, while its neighbour propelled itself into the OECD group of leading economies.

Pyongyang remains almost entirely devoid of commercial advertising, its wide avenues instead lined with propaganda posters of heroic soldiers and striving workers, or slogans such as "Let us follow the decisions of the 7th Congress of the Workers' Party of Korea".

"We are a socialist country so we stick to our socialist principle economically," said Ri Sun-Chol, chief of the economic research institute of the North's Academy of Social Sciences. "We do not push for national reforms adopting a market economy." But a series of rulings under Kim Jong-Un is taking the North in exactly that direction, say diplomats and researchers.

Many agricultural collectives have been effectively dismantled and farmland management distributed between individual households referred to as "family-based work units", sending food production climbing.

Beyond what they must produce for the state, under what Pyongyang calls the Socialist Corporate Responsible Management System, factory managers have been given freedoms to find suppliers and customers of their own.

Kwon Yong-Chol, chief engineer of the Song Do Won General Foodstuffs Factory in Wonsan, explained that as well as manufacturing goods according to government instructions, "there is also a commercial network of vendors we use to sign our own contracts." 

'Filthy wind'

Officials have been told not to interfere with private businesses, even while many remain technically illegal.

Enterprises are often still set up under state entities to ensure political protection, but analysts estimate that the private sector, broadly defined, could be responsible for anything from a quarter to half of the North's gross domestic product.

All such figures are riven with uncertainty, as Pyongyang does not publish meaningful economic statistics. Last year, major South Korean think tanks were unable to even agree whether its economy grew or shrank in 2015.

"My rule of thumb is to never trust a datum about the North Korean economy that comes with a decimal point attached," said Marcus Noland, director of studies at the Peterson Institute for International Economics in Washington.

The changes are similar to the first stages of China's "reform and opening" under Deng Xiaoping in the early 1980s, which laid the ground for the decades-long boom that turned the Asian giant into the world's second-largest economy.

Beijing, Pyongyang's sole ally and main provider of trade and aid, has long urged its wayward neighbour - which is subject to multiple UN sanctions over its nuclear and ballistic missile programmes - to follow its example.

But in a speech to the party congress last year, Kim Jong-Un dismissed such concepts as "the filthy wind of bourgeois liberty", and professor Ri was adamant there was no connection.

"The reform was fit for China's situation and was something desired by the Chinese people and if that helped with China's economic development, we are very happy," he said. "Our country will follow the socialist path." 

The Kim dynasty: North Korea's secretive rulers

  • Following a successful missile test and the murder of his half-brother in Kuala Lumpur, North Korean leader Kim Jung Un has been thrust back into the headlines. Here's a look at the hermit state's ruling dynasty.
  • Known as "The Eternal President", Kim Il Sung established the North Korean dictatorship after World War II. With the help of the Soviets who installed him, he purged political enemies and laid the foundations for the regime we see today.
  • Kim Il Sung had three children; Kim Man Il, Kim Kyung Hee and his successor Kim Jong Il. Kim Jong Il ran the country after his father's death in 1994.
  • State media announced the death of "The Dear Leader" on December 19, 2011. He is thought to have had at least four female partners.
  • Kim Jong Il had an affair with actress Song Hye-rim, before marrying his first wife Kim Yong Suk (not pictured). The pair had a son, Kim Jong-nam.
  • Kim Jong-nam was raised in secrecy and tipped to take the North Korean crown after his father's death, but fell out of favor after being caught trying to travel to Disneyland. He was allegedly murdered in Kuala Lumpur on Feb 13, 2017.
  • Another one of Kim Jong Il's lovers. Ko Yong Hui was working as a dancer before becoming his partner and bore him two sons and a daughter. One of the sons is Kim Jong-Un, the country's current leader. She died in 2004.
  • The supreme leader of the Democratic People's Republic of Korea (DPRK), lLittle is known for sure about Kim Jong Un. Even his birth date is uncertain but he is believed to be around 33 years old.
  • Before taking power, he had barely been seen in public, and many of the activities of both Kim and his government remain shrouded in secrecy.
  • The oldest son of Kim Jong Il but passed over for the top job by his younger brother Kim Jong Un, Kim Jong Chul was initially seen as the successor but a book written by a chef to the family suggested he was viewed as too soft for the job.
  • Mystery also surrounds Kim Yo Chong, the younger sister of Kim Yong Un. Born in 1987, she reportedly attended the International School of Berne in Switzerland.
  • The International Business Times reported that in October 2014 she possibly took over state duties for her brother while he underwent medical treatment.

'Unparallelled geniuses'

Andrei Lankov, director of specialist service NK News and professor at Kookmin University in Seoul, retorted: "Of course they are copying China, because China was so damn successful.

"They never admit that they are learning from anybody," he said, but Kim Jong-Un "understands very well" that market economy systems have produced stunning growth in multiple East Asian countries over the past half-century.

"The current North Korean leader is absolutely free of ideological sympathy towards the state socialist model," he told AFP.

Pyongyang's reluctance to talk openly about economic changes gives it room to manoeuvre while preserving its political foundations, according to analysts.

"As long as much of this activity remains technically illegal, and in many cases subject to the death penalty, the state can always reverse course if it sees fit," said Noland.

Formal reforms could "put the state on a slippery slope where its fundamental difference with capitalist South Korea is eroded, and the regime's whole raison d'etre is called into question", he added.

Avoiding undermining the authorities' claim to legitimacy was crucial, agreed Lankov.

"The idea is that they are run by a family of unparallelled geniuses and of course the current leader and his father and his grandfather and his family are always right." Alluding to Deng's supposed assessment of Communist China's founding father Mao Zedong as "70 per cent right, 30 per cent wrong", he said: "Kim Jong-Un cannot say that his father, his grandfather was even one per cent wrong.

"He has no choice but to maintain the illusion of ideological continuity, even when he is making a U-turn. Which is very smart."

More about