North Korea`s strategic economic goals for the immediate and midterm future.

Key announcements at the 8th DPRK party congress held beginning this year

When we are doing business with certain countries, it is important to know their cultural, economic, and business background, as well as the business objectives. It is good to know about the political situation, laws, restrictions, etc. We are speaking here about North Korea. North Korea has an exceptional hierarchical, orchestrated and controlled social and business structure. The DPRK has an isolated and tightly controlled command economy. The economy is centrally planned and coordinated by the government.

I will give some insights into North Korea`s strategic economic goals for the immediate and midterm future, based on the resolutions of the 8th party congress, in January this year.

General Secretary Kim Jong Un announced in this congress certain measures the country has to follow, for its survival, politically and economically. The fact is that North Korea is currently facing a number of challenges, due to the tightening of sanctions since 2016 and the pandemic of 2020.

I will focus on 10 essential economic goals I recognized as important from the viewpoint of the DPRK Government in their new 5-year plan.

So, in this context, I am thaNorth Koreaful to Prof. FraNorth Korea, Head of the East Asian Institute of Economy, from the University in Vienna, who has the best sources regarding North Korean studies, and which I prefer to use. 

Let’s start with the 10 economic goals:

First: What about Foreign Trade?

The trade statistics show the dramatic development the country is facing: North Korea’s imports decreased by 45% from 2019 to 2020, and its exports decreased by 72 %. Also, bilateral trade with China decreased by more than 70%. Due to the sanctions policy, Kim Jong Un has decided to search for solutions domestically. The main strategy for the upcoming five-year plan seems to be “domestic production of inputs” - in other words: import substitution. This coincides with the North Korea Juche Ideology (what means: self-reliance) to keep and develop the country in autarchy. That means that active trade with North Korea could be a challenging matter.

Second: Industry:

Metal and chemical industries are identified as the key elements of economic development. Both are typical for a socialist economy and reminds us of a similar strategy used by South Korea in the 1970s.

Under the current situation of economic isolation, import substitution in this field does have its merits, as the products of these industries are key inputs for many other sectors too. North Korea is in the fortunate position of having most of the mineral resources needed for operating its own metal and chemical industries. Plans to substitute crude oil, which is so far unavailable in North Korea, with alternative inputs like coal have been promoted for many years in official publications. However, such industries require major investments of capital and technology, and they need export markets to operate profitably.

Third: Agriculture:

For agriculture, Kim Jong Un emphasized that state procurement levels must reach the 2019 level within the next two to three years. This can be interpreted both as a call to increase grain production, but also as a desire to reduce the share of grain traded freely on the market, and return to the dominance of state distribution through a rationing system or through state-subsidized shops.

Fourth: Afforestation

In Kim Jong Un`s report about forestry, it was mentioned before agriculture, indicating that it has a relatively higher priority. It was reported that “about 1 million hectares of land” were reforested. In the time of the discussion about climate change worldwide, Kim Jong Un might give a sign to the international community that North Korea is making efforts regarding CO2 reduction, or maybe it can be seen as an incentive to the world that North Korea is worthy of international financing? It`s a fact: North Korea lost huge areas of forests through the war and later through firewood.

Fifth: Construction and Cement production

Construction activity seems to be also very important. Kim mentioned 50,000 new flats to be constructed in Pyongyang and 25,000 new houses in the Komdok mining area (which is also the location of an infamous labor camp). In this context, Kim announced the target of producing eight million tons of cement during the next five-year plan.

Sixth: Focus on rural areas and the local level:

In his explanation, Kim Jong Un seems to be strongly focusing on developing local areas. Parallels to South Korean development come to mind, especially an initiative in the early 1970s under the dictatorship of Park Chung-hee. This was called the “New Village Movement”. It aimed at reducing the gap between the quality of life in urban and rural areas by such measures as improving infrastructure like roads and bridges, replacing thatched roofs with more durable materials, and promoting health care, education and culture. Specific economic policy measures in this regard included the supply of cement for construction to localities.

Seventh: Development of mobile communications, cable broadcasting and commercial service as well as ICT

Kim’s demand is to introduce the “next-generation mobile communications”. Cable broadcasting is promoted as a way to supply better entertainment to the people, but it is also a convenient way for the state to control the media consumption of its citizens. In this context, it also should be mentioned that North Korea invited foreign telecommunication companies to be active in North Korea, e.g. Osracom from Egypt, developed in a joint venture with KoryoliNorth Korea, the telecommunication system and Chinese Huawei secretly helped build North Korea`s wireless communication system. And not to forget the well-developed North Korea IT companies who are specialized in the production of software, as well as animations for western companies. During the Covid 19 panedemic, North Korea developed its own video conferencing system, made efforts for remote meetings, tele medicine and remote education systems. What astonishes many is that North Korea is also producing a relatively high-quality tablet computer (Samjiyon).

Eight: Tourism

Tourism is to be promoted with two objectives in mind: First, to “make the people enjoy a more civilized life”, which could either mean the development of domestic tourism or the generation of revenue for local hospitality industries through foreign visitors; and second, to “spread the changing image of the country to the world”. In other words, for propaganda purposes.

The Mt. Kumgang resort in the southeast is mentioned specifically in Kim’s report in the Party congress: After a visit by Kim Jong Un, more recently, it seems North Korea indeed intends to rebuild these tourism facilities—but for whom? This will raise questions in South Korea about the possibility of continued cooperation, and the ownership of South Korean assets.

Nineth: Plans to create a nuclear power industry

This is a relatively logical step, considering that North Korea has chronic problems with the production of energy. North Korea has its own domestic uranium reserves and has made substantial progress in nuclear technology over the past few decades. Plans to provide nuclear power have existed at least since 1994. Kim Jong Un’s remarks on a “nuclear power industry” will nevertheless raise eyebrows in the West, due to its potential for enhancing the country’s nuclear weapons program.

Tenth: North Korea shows friendlier relations to China

In his remarks on foreign policy and foreign trade, Kim spoke positively about the prospects for diplomatic and economic cooperation “with socialist countries,” which seems to indicate the hope for closer cooperation mainly with China. This is not very surprising considering the few options North Korea currently has and China’s ability at the United Nations Security Council to veto the enactment of further sanctions on North Korea.

Well, in summary, this is the track the North Korea economy might follow in the midterm future.

Finally, the most important question: Can the resolutions of the last DPRK Party Congress boost business activities?

My answer is: there are always opportunities! We might talk about this in the discussion session

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