What to Make of North Korea’s Forward-looking Economic Strategy and Prospects

Kim Jong Un ended 2023 sounding confident, both about his positioning of North Korea’s military security and the prospects for economic recovery after extended border closure period due to the COVID-19 pandemic. At the December meeting of the Central Committee, according to KCNA, Kim:

…defined 2023 as a year of great turn and great change, lauding progress in all areas including the military, economy, science and public health despite some deviations, and presented a detailed report involving indices of the overall national economy which is clearly proving that the comprehensive development of socialist construction is being pushed forward in real earnest.

While his statements about redefining the inter-Korean relationship and ending a commitment to peaceful unification caught the attention of the international community, his upbeat assessment of the developments in 2023 in the domestic economy and progress in implementing the current five-year plan received little attention. He noted significantly better agricultural harvest than recent years, progress in housing in Pyongyang and in rural areas, improvements in production of priority sectors, and implementation of economic management improvements which have been focused on Party-led mobilization efforts, all contributing to this positive outlook.

Kim Jong Un’s aspirations for improving the livelihoods of people throughout the country, coupled with his focus on regional development and investments in innovative science and technology for productivity, are commendable. However, realizing these ambitions demands a significant economic transformation in external economic relations. While increased trade with China and the re-establishment of trade with Russia provide Kim with both political wins as the country opens back up, and lay the foundation for increased sanctions evasion and expanded trade, North Korea’s needs for capital investment and trade are much larger than is likely to be satisfied by these developments. Challenges facing both the Chinese and Russian economies and ongoing geopolitical rivalries make overdependence on these economic relationships a risky bet for the medium- and longer-term.

Kim’s Assessment of the Current Economic Situation and Priorities

The Central Committee meeting formed the underlying context for a mid-January meeting of the Supreme People’s Assembly. While Kim Jong Un’s speech on January 15 made international headlines, again, the international press focused primarily on Kim’s comments on upgrading military capabilities for national security, the reconfiguration of inter-Korean relations, and proposals to amend the Constitution and remove the Monument to the Three Charters for National Reunification in Pyongyang to reflect the new orientation of reunification policy. Most of his speech, however, focused on the economic realities the country is facing and the strategy to guide economic development going forward.

Kim was blunt in his assessment of the current economic situation and priorities for the Party to follow. While he highlighted an “upturn in the national economy” and work to “put the overall economy of the country on the track of stable and sustainable development,” he also noted several shortcomings related to stabilizing and improving “the people’s living standard” and the necessity of improving “the overall regional economy” to “tackle differences between the capital city and provinces and the imbalance between regions.”:

A substantial portion of Kim’s speech was devoted to detailed comments on high-priority industrial sectors in the state-directed economy, recognizing the reality of incomplete projects and need to foster more enterprise-level independence and modernization. He focused on metallurgical and chemical industries, electricity production, coal and mining, machine-building to support various industrial sectors, housing and infrastructure construction, cement, and upgrading of rail transport. He emphasized the role of continuing innovations in science and technology to support these development goals, and also commented on agricultural development priorities, including expansion of wheat production and processing capacity, tideland reclamation, mechanization, and simultaneous development of vegetable, fruit, stockbreeding, and industrial farming.

However, a hallmark of the speech was his endorsement of an ambitious new strategy for regional industry development in 20 counties over 10 years, now labeled the “regional development 20×10 policy.” This is intended to be implemented in parallel with the ongoing rural housing construction program.

Kim’s Expectations for Regional Development

The endorsement of the new regional development policy was followed by a two-day meeting on January 23 and 24 by the 19th Enlarged Meeting of the Political Bureau of the 8th Central Committee of the WPK to clarify the goals and an action plan for implementation of the policy. Kim Jong Un framed the expectations for this meeting as such:[2]

In consideration of the economic situation of the country and the implementation of this enormous task, some policy leadership departments of the Party and economic bodies were paying lip service while failing to find out realistic and revolutionary possibilities. And even at the recent plenary meeting they took passive attitude by proposing to build regional industry factories in only a few cities and counties where conditions are favorable and to step up preparations for the future construction in the remaining cities and counties…

…At present, it is a very urgent immediate task for leveling up the material and cultural living standards of the regional people to adopt a revolutionary strategy and take all measures to make it possible to develop regional industry in a comprehensive and balanced way by most effectively creating and using the economic resources and raw materials of cities and counties and to promote the peculiar development of each regional economy and expand the scope of investment in it while creating a climate of competition in order to accelerate diversified growth. And this is a very important, responsible and timely option and determination in the future-oriented aspect of our Party’s policy on socialist regional development.

Today, failure to satisfactorily provide the people in local areas with basic living necessities including condiments, foodstuff and consumption goods has arisen as a serious political issue that our Party and government can never sidestep.”

This framing presents a political-economic challenge that Kim acknowledges in relying on Party-led initiative and leadership at both central and local levels to accomplish policy priorities that have consequences not only for achievement of socio-economic objectives, but also the political support of the people for the legitimacy of relying on the Party to meet societal needs and expectations.

To meet these challenges of practical implementation, Kim Jong Un emphasized the responsibility of Party officials at all levels to engage actively in meeting the program’s goals, including Central Committee members taking on responsibility for a city or province in their jurisdiction. He also underlined the need for coordinating the work of planning, construction and implementing units for new factories to ensure all pertinent considerations are taken into account for specific industrial projects. Troops from the Korea People’s Army have been authorized to be mobilized to support the construction activities, and one priority for regional officials is to produce consumer goods needed for the local population and encouragement of the younger generation, such as school uniforms.

Assessing Kim Jong Un’s Economic Confidence and Ambitions

Tightened sanctions imposed on the general economy since 2016, the failure to reach a breakthrough agreement with the United States at the Hanoi Summit in 2019, and the pandemic lockdowns and border closure in 2020, all contributed to a trade shock and sharp decline in production in North Korea, reminiscent of the early 1990s. These developments shaped Kim’s decision to reinforce state-led management of the domestic economy and rely on sanctions evasion and cryptocurrency theft to finance his WMD programs and core economic interests of the state. Both have been implemented without significant benefit for the North Korean people.

The reversion to mass mobilization and reliance on science and technology for productivity improvements in the domestic economy was a step back to former classic socialist policies adopted by his father and grandfather when under duress. Forced isolation and collapse of trade took the oxygen out of a growing market share of the economy and the efficiencies of productivity growth being made through private initiative and tolerance of a rising entrepreneurial class, also referred to as the donju. The people were told that they would have to tighten their belts again and by and large have endured without widespread complaint the hardships induced by the external developments and shifts in the government’s economic management.

Kim Jong Un’s confidence in the economy at the end of 2023 reflects both good luck with the weather for agriculture last year, some progress on the housing construction program, and an undercurrent of popular hope and optimism that the gradual relaxation of border controls will enable more essential imports for the domestic economy to spur domestic economic activity. Nevertheless, he seems acutely aware of the failure to provide even basic needs for the rural population and the risk of growing political disenchantment with the way the Party is managing the economy. His acknowledgement of the gaps between the living standards of Pyongyang and the countryside, and of disparities within and between regions is a sign that he is acutely aware that economic security is as important as military security for sustainable security of the regime and the social contract between the state and the people.

He is also aware that in 2025, the Korean Workers’ Party will hold its 9th Party Congress, where progress made on the economic development strategy adopted at the Eighth Party Congress will be assessed and new directions set for the coming period. Demonstrating positive progress on the agenda adopted in the recent Party meetings would help set the stage for the Party Congress and the balance that must be struck to fulfill his economic ambitions.

Challenges to Come

Kim Jong Un faces several major challenges in achieving his economic development ambitions, which he has been addressing forcefully in the recent meetings. One pressing issue is the apathy and/or incompetence of Party officials to provide the leadership and support for the ambitions regional level development efforts and especially the new regional industry initiative. Part of their challenge is how to mobilize the capital for investments needed in infrastructure and equipment, as well as required raw materials and working capital, for new factories and expanded farming activities. The current system of reliance on sanctions evasion and cryptocurrency theft is ill-suited to meeting the needs of the domestic economy and regional development, even if it is essential for the military weapons programs and consumption needs of the elite in Pyongyang.

Prospects for increased trade with China and Russia also pose challenges for local governments and the regional development agenda. While imports from China increased by 82% in 2023 in relation to pre-COVID 2019, the growth has been modest compared with the period before the sanctions were imposed since 2016, and the value of exports remains a fraction of imports. This means either the Chinese are financing the imports or North Korea’s meager foreign exchange reserves are being depleted. Russia’s emerging economic relationship, based on what has been made public so far, is mainly linked to the military economy and science cooperation and is likely to be affected by future developments in the war with Ukraine.

Kim Jong Un recognizes that the economy needs to be put on a path of long-term sustainability. While aspirational and well-intentioned, Kim’s priorities for the domestic industrial economy and new regional development initiatives seem unlikely to achieve that goal without a significant change in external economic relations with both foreign trade and investment needed for economic stability and growth that is distributed widely in the country. The turn to state-led economic management guided by the Party and relying on mass mobilization programs is also unlikely to fulfill Kim’s needs and ambitions in the medium-to long-term. An important question is whether decentralization for regional development will be accompanied by tolerance for more private initiative as in the pre-2019 era.

While there is uncertainty about how Kim Jong Un’s path for sustainable economic development will progress, it does provide a clear indication of his commitment to widespread regional development and his concrete ideas for how to move forward. If geopolitical conditions evolve to the point where some initial meaningful economic engagement becomes possible for the US and South Korea, Kim’s domestic agenda offers important benchmarks for collaboration and support that should be a starting point for helping him achieve success on improvements in the lives of the North Korean people.

1. [1]

   “General Secretary Kim Jong Un makes policy speech at 10th Session of 14th SPA,” Pyongyang Times, January 16, 2024.

2. [2]

   “Report on 19th Enlarged Meeting of the Political Bureau of 8th C.C., WPK,” KCNA, January 25, 2024.