The 2022 Session of the North Korean Legislature: Strengthening Import Substitution and State Control While the Economy Stagnates
North Korea’s legislative body, the Supreme People’s Assembly (SPA), met in Pyongyang for its annual meeting from February 6-7, 2022. Leader Kim Jong Un did not attend. Instead, Choe Ryong Hae chaired the meeting in his capacity as chairman of the Standing Committee, the SPA’s top governing body.
The SPA passed new laws on childcare and the protection of overseas Koreans. No further details were provided in the Rodong Sinmun report, except that the SPA passes such laws according to the DPRK constitution. This is a reminder that the SPA, which is often referred to in international media as a “rubberstamp parliament,” has the capacity to be a very active and powerful player in North Korean politics under the right circumstances.
But for now, the main value of the SPA sessions from an analytical point of view is their regular and standardized reporting on the state and outlook of the North Korean economy. Each year, the premier of the Cabinet reports on the broader picture, and the minister of finance supplies rare numbers.
The key points in the 2022 reports can be summarized as follows:
- Sanctions and the global health crisis are identified as major problems.
- The line of strengthening the state’s control over the economy has been confirmed.
- Efforts at import substitution continue.
- Rural development is a key strategy, drawing on inputs from various sectors.
- An allegedly new separate position for agriculture has been created to support this new strategic line of rural development.
- Foreign trade is to be recentralized, taking back the autonomy granted to enterprises in the earlier years of Kim Jong Un’s rule.
- Main economic indicators, such as revenue and expenditure, were stagnate at low levels in 2021 and are expected to remain so in 2022.
- A mysterious new item called “income from money collection” (집금수입) was introduced, with a remarkable reported increase of 680 percent.
- Pandemic-related expenses are listed as a separate budget item and will increase by one-third compared to 2021.
- Critical remarks on revenue generation are not included in the English version of Rodong Sinmun.
The Premier’s Report
The report was delivered by Kim Tok Hun in his capacity as premier of the Cabinet. In keeping with the kinds of public statements issued by North Korean officials, including Kim Jong Un, Kim Tok Hun mentioned difficulties and problems in the country’s economy, and identified sanctions and the global health crisis as the main reasons.
In accordance with main strategic events, such as the Eighth Party Congress in January 2021 and the Fourth Plenum in December 2021, Kim Tok Hun emphasized the Cabinet’s focus on strengthening the state’s unified guidance and control over the economy. Many of the details of his report also hint at a more aggressive pursuit of the country’s long-standing strategy of import substitution.
The status of the national economy is seen by the North Korean state as a strategic area, and, thus, official data needs to be taken with a grain of salt. Compared to the previous year, when most figures suggested an economic decline, the 2022 report created the impression of stagnation. However, it also included a few hints at stronger growth in some areas. For example, according to the premier, the industrial output plan of 2021 was fulfilled at 148 percent. Cement production has grown nine percent stronger than expected, which has been touted as an important achievement because it is part of Kim Jong Un’s newly announced focus on rural development.
Other noteworthy details from the premier’s report include a focus on metal and chemical industries, and the continued effort to establish a C1 chemical industry. If successful, the latter would be a key part of the country’s import substitution strategy, especially for crude oil. In a similar vein, energy production is going to come mainly from hydropower, for which the mountainous country has favorable conditions as long as reservoirs can balance the very uneven rainfall during the year. Thermopower is going to be developed and expanded in parallel and will mainly rely on high-quality domestic coal. Kim Tok Hun also mentioned efforts to reduce the transmission loss of electricity, which is indeed a key structural problem of North Korea with its aged power grid that requires substantial investment and modernization. Moreover, North Korea will continue to explore for natural gas. No details were provided, but previous efforts have included offshore reserves along the country’s east coast.
For years, North Korea has been under international scrutiny for cyber activities. In this context, it is interesting to note that the premier described three main tasks for the country’s IT industry in 2022. These included: further developing the telecommunications infrastructure, expanding the domestic production of electronic goods and putting government affairs on an IT basis. The latter could mean anything, including paperless office and video conferencing, both of which had been promoted before. No further details were provided.
A potentially significant sentence in the premier’s report concerned foreign trade. In the early years of Kim Jong Un’s rule, there were economic policy changes that had the potential to develop into actual reforms. Among them were decentralization and a higher autonomy for North Korean enterprises. Under certain conditions, they could directly trade with their foreign partners without having to go through a central ministry, which was standard in state socialist countries of the former Eastern bloc. Kim Tok Hun’s remark that: “the external economic sector will keep pushing forward the work to recover the unitary trade system of the state (국가의 유일무역제도)” is an indicator that such changes are being undone.
A somewhat odd but quite telling detail in the premier’s report was the inclusion of both the biological virus (COVID-19) and an ideological one in the same sentence: “Lots of achievements were also made in the emergency epidemic prevention work to check the inroads and spread of the vicious virus (악성비루스) sweeping the world and in the endeavor to sweep away anti-socialist and non-socialist practices.” Obviously, North Korea is very concerned about an ideological “infection” and is willing to take all necessary measures to prevent it, which does not bode well for its human rights situation.
The report on the execution of the 2021 budget and the plans for 2022 was delivered by Minister of Finance Ko Jong Bom. As usual since 2002, no absolute figures were provided. Rodong Sinmun only published an eclectic combination of percentages and growth rates, using their own and not always consistent terminology. A list of key Korean terms and their official English translation in the 2022 report has been compiled below to allow for more continuous tracking. The list also includes items that were explicitly mentioned in the 2022 report.
Glossary of Terms and Positions in the 2022 State Budget Report
|국가기업리득금||State-run enterprises’ income|
|협동단체리득금||Profits of cooperative institutions|
|부동산사용료||Real estate tax|
|사회보험료||Social insurance (premium)|
|재산판매 및 가격편차수입||Income from property sales and price fluctuation|
|집금수입||Income from money collection|
|특수경제지대수입||Income from special economic zones|
|중앙예산수입||Central budgetary revenue|
|국가예산지출||State budgetary expenditure|
|경제건설에 대한 투자||Investment in economic construction|
|과학기술부문||Investment in the sci-tech field|
|국가방위력강화||Bolstering national defense capabilities|
The actual numbers as reported by the minister of finance largely show stagnation, with achieved and expected growth rates being in the range of one percent or less. The graph below shows that North Korea’s economy was far from making a recovery in 2021. If the state budget figures are used as a rough proxy for growth rates of the overall economy, it would appear that the country’s leadership does not expect this to change in 2022.
Graph 1. Official Annual Growth Rates (in%) of the North Korean State Budget (2000-2022)
Four items from the finance minister’s report deserve a closer look.
First, there is the remarkable increase of 680 percent (or 6.8 times, as written in the Korean version) of an item that has not appeared in reporting on the state budget during the last years: “income from money collection” (집금수입). It can only be speculated as to what this means, but it is certainly not just a euphemism for regular taxes, as these are listed separately and would not allow for such a massive increase. It is known that the North Korean state has repeatedly asked its citizens for “voluntary” contributions for patriotic reasons, which brings the gold collection drive in South Korea during the Asian Financial Crisis of 1997/1998 to mind. Anecdotal reports also indicate that some unusual monetary measures were taken in North Korea in 2021; most notably the introduction of a money substitute called donp’yo (money ticket). Keeping this in mind and considering the newly strengthened focus on the domestic economy and state control, catalyzed by the pandemic and the resulting collapse of North Korea’s foreign trade, such unusual measures need to be taken seriously. These could be temporary coping measures or new, long-term structural approaches, but regardless, they indicate a certain sense of urgency or even crisis.
The second item that stands out in the 2022 budget report is at least partly connected to the pandemic, which is not surprising. The amount to be spent on “emergency epidemic prevention” is to be increased by 33.3 percent in 2022 compared to the previous year. However, no actual amount has been published, and the text of this report suggests that the fight against the pandemic has become a separate budget item. This is supported by the fact that expenses for “public health” will only grow by 0.7 percent in total.
A third noteworthy issue is an, allegedly, “exclusive item for agriculture” that was added to the budget. This is in line with the newly announced strategic line of promoting rural development but is, in fact, a questionable claim since “agriculture” was listed as a separate item in budget reports until 2017 when it was supposed to grow by 4.4 percent. For 2022, no growth rate in agriculture has been projected.
Last but not least, when comparing the English and the Korean versions of Rodong Sinmun’s reporting on the budget, there are more differences than usual. In particular, a few paragraphs of criticism have been omitted from the English version of the Finance Minister’s report. These include when Ko spoke at length about deficiencies (결함) in executing the state budget in 2021, the failure of “some units” in showing the necessary resolve to collect revenue as planned, and officials focusing on their own units while lacking a sense of responsibility for the national economy as a whole.
In conclusion, the results of the 2022 SPA session were largely as expected. It confirmed some of the key strategies that had been announced at major party events in 2021, such as strengthening the state’s control over the economy, expanding import substitution, and putting a strategic focus on rural development.
“The Sixteenth Session of the 14th Supreme People’s Assembly of the Democratic People’s Republic of Korea,” Rodong Sinmun, February 8, 2022.
The case of the East German Volkskammer in the brief but decisive period between the peaceful revolution of October 1989 and German unification one year later can serve as one example of this. In fact, Article 91 of the DPRK Constitution stipulates that the SPA “elects or recalls the Chairman of the State Affairs Commission,” which is Kim Jong Un’s official position as the leader of North Korea.
“조선민주주의인민공화국 내각의 주체１１０(２０２１)년 사업정형과 주체１１１(２０２２)년 과업에 대하여,” Rodong Sinmun, February 8, 2020.
The one-carbon (C1) process converts carbon compounds into other useful products, such as “high-value-added chemicals,” fuel and fertilizer.
“조선민주주의인민공화국 내각의 주체１１０(２０２１)년 사업정형과 주체１１１(２０２２)년 과업에 대하여,” Rodong Sinmun.
Compiled by Ruediger Frank. Source: Ibid.