Wither goes North Korea after the people’s meeting?

The world is waiting to see how North Korea will enact its most recent attempt at economic reforms; however, the most recent Supreme People’s Assembly (SPA) meeting produced no discussion on agrarian and retail reforms.

Instead, education reform legislation were announced, enforcing 12 years of mandatory schooling for North Korean children (from 11 years).

This sudden silence has brought many to doubt Pyongyang’s intent to carry out the reforms. Professor Aidan Foster-Carter noted that “it is not clear that the state will be able to requisition enough to feed what is still a mostly urban society. The difference between North Korea and China and Vietnam is that it [North Korea] does not have many people left on the land.”

Indeed, the great anomaly of the famines in the 1990s was that the DPRK was an urbanized-industrial-literate society – according to Foster-Carter, around 60 percent of the population lives in the cities and the state’s policies have catered to the needs of this group. Thus it is unlikely that this reform will go through without the state being absolutely certain of its capacity to feed the urban population.

However, other analysts such as Dan Pinkston, North Korea specialist at the International Crisis Group in Seoul, hypothesized that the government’s official announcement may not have covered all the things discussed in the meeting. Pinkston commented that to have not discussed agrarian reforms “would seem to undermine the whole purpose of having the session.”

Although we cannot truly know until some action is taken, Pyongyang would be hard pressed to simply let things continue the way it is. Instability in both the exchange rate and rice prices are taking a toll on the population and the new government has rhetorically staked its legitimacy on the welfare of the people. The goal of establishing a prosperous and powerful state may be accomplished in Pyongyang, but the rest of the country lags behind in consumption and development.

A North Hamkyung Province source told Daily NK that the state may be seeking to control the rampant inflation by setting the price of rice at 4000 won and corn at 2000. However, market prices are difficult to control when different parts of the country struggle with different rates of inflation and exchange rates, which we know for a fact is the case in North Korea. In addition,  price controls have been repeatedly introduced in the past and so far have been unsuccessful in stabilizing food prices.

The state has apparently also promised rise in wages by ten fold. But that kind of sudden injection of capital into the market, if it happens at all, will lead to hyperinflation.

Meanwhile, country is still hemorrhaging people, in particular areas like Hyesan where price fluctuations have been most unstable.

At the sametime, foreign investors are dissatisfied with how business conditions in North Korea have not improved. There are increasing complaints about how there is “no way to trust a contract.”

North Korea is stuck in a difficult place. The country must change in order to survive in the world, but the necessary reforms carry too many unknown risks for the state. It is the classic dilemma between political necessities. We will know soon enough where Kim Jong-un stands on all this.

More to come.


About Yong Kwon

I develop trade advocacy strategies for a DC-based consulting firm. Studied economic history at the London School of Economics, and can be found on twitter at @ykwon88
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One Response to Wither goes North Korea after the people’s meeting?

  1. Pingback: Is there or Is there not reform in the DPRK? And some recommendations | DPRK Food Policy Blog

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