The Restructuring of North Korea’s Food Production and Distribution System

Under Kim Jong Un, North Korea has seen significant changes across the economy. While the state dominates the lives of its people, the economy has been increasingly marketized since the 1990s. Building on some of the tentative, furtive efforts of his father, Kim Jong Un allowed his economic advisers to develop a more market-oriented agenda for the country’s state industrial and agricultural sectors.

In industry, this meant that factory managers were given rights to develop new products, to have greater flexibility in price setting and allocating workers and managers to task, to contract with suppliers, and to exercise more influence in enterprise-level planning. It also initially included increased access to foreign markets for trade and investment, though these were later partially rescinded according to the country’s Trade Act (amended in 2018).

This new system was called the Socialist Enterprise Responsibility Management System (SERMS), and was codified in the country’s Enterprise Act of 2014. This points to the importance of North Korean laws as a channel through which the North Korean government sets forth important changes in how systems are supposed to work and defines its policy priorities.

Obviously, the government has a free hand to amend these laws; there are no meaningful checks and balances in the North Korean system. But laws still provide a valuable and unique view into how different institutions inside the North Korean state are supposed to interact, cooperate, monitor and supervise one another.

New laws obtained by 38 North paint a picture of a food system that is undergoing significant changes. In particular, two laws are noteworthy: the Farms Act, last amended in 2023, and the Food Administration Act, last amended in 2022. The first law offers hints of more control over the harvest being given directly to North Korea’s farmers, rather than the managers who run their farms. The second law offers hints of greater autonomy for farm managers when it comes to operations and investment decisions, with the government mandating less how they make decisions. There are also signs that the government may be taking a less top-down approach to grain procurement.

Farms Act

In 2012-2014, the North Korean government created a new system in agriculture called the Field Responsibility System (FRS), which shrunk the size of the sub-work team, the smallest production unit on farms, to address the issue of free riding—some farmers not working hard but getting the same rewards as their teammates—and began paying farmers a fixed percentage of the harvest for their work.

This was followed by the creation of the Farms Responsibility Management System (FRMS), which essentially was the SERMS framework for industry, giving farm managers greater freedom to develop their lands and farm new crops and livestock. Farms still had to produce grain for their state-set procurement plans, however, but they would have greater flexibility to use lands not given over to grain production in ways that could generate profits for the farm.

This system was the operating framework since then, although there has been talk of dramatic changes since 2020, including new individual-based farming incentive systems, the de facto abolition of collective farms, and their replacement with autonomous corporate farms. These measures, along with other reports, seemed to indicate a new centralization of farm management was planned.

These reports are not reflected in the amended 2023 Farms Act. But the law itself includes several important measures designed to strengthen the position of farmers and their incentives under the FRS. Article 59 of the new law makes it clear to FRS administrators that farmers must be given all the grain they produce in excess of their planned quotas:

The previous law (from 2021) provided no such guarantee. Rather, it included a range of provisions allowing the farm and its management to determine how excess grain was allocated or otherwise used. This implies that some power has been decentralized below the level of farm management, to the farmers themselves. In other words, whereas in 2021, farm management had control over the portion of the grain harvest not taken by the state, now it appears to be the farmers who have this control.

Some statutory requirements about how grain production plans are set have also been loosened, such as Article 55, which concerns state grain procurement plans. First, the 2023 variant of the law no longer speaks of “mandatory” grain procurement plans, implying that the government may be utilizing both compulsory and voluntary procurement schemes.

Second, the 2021 variant of the law included references to “mobilizational” planning, i.e., the government mobilizing farms to do its bidding. This term has been deleted from the new law, implying greater scope for autonomous action in grain procurement. That said, once plans are set, the government still does not allow farms or farmers to amend them.

Article 55 from the 2023 variant of the law, with 2021 parts struck out in square brackets is as follows:

Most of the rest of the law is largely unchanged, but these two articles point to ways that farm-level and farmer-level governance of the agricultural sector is shifting.

The procurement system is also undergoing changes evident from the Food Administration Act as discussed further below.

Food Administration Act

Procurement of North Korean farms’ grain output is handled by the country’s food administrative institutions. This is currently handled by the Ministry of Grain Management, which had previously been known as the Ministry of Food Administrative Procurement in Korean.

The name change implied a shift away from procurement and toward other forms of food supply management, and this is, at least to some extent implied in the most recently revised version of the Food Administration Act, issued in 2022.

Across multiple articles, the law sets out two forms of procurement. The first is mandatory procurement, but the second has gone through multiple iterations, previously known as “contracted procurement,” it is now known as “sales procurement,” implying that farms are to sell to the state. The article below is presented with old text from the 2021 iteration crossed out and its replacement text underlined.

Three features of the textual changes stand out. First, the financial obligations of farms, with respect to investment in land, irrigation, and spending on electricity inter alia are no longer stipulated in law, apparently giving farms greater flexibility in how they allocate financial resources. Second, the new and strong emphasis on sales rather than contracting is probably not a simple rebranding.

One reason for this presumption is that Daily NK and other outlets have been reporting on the proliferation of grain sales outlets selling grain at rates closer to market prices since at least 2021. The government has created a legal basis for this, and a bifurcated system of mandatory procurement for ration provision and sales-based procurement for further sale to North Korean consumers at prices closer to market rates may continue into the future.

Outlook

These two laws imply significant changes in how the state is seeking to govern and control the grain production part of the economy with farmers apparently having their legal rights strengthened, and farms perhaps also being more corporatized and independent. The relative status of farms seems to hinge on whether sales imply more autonomy than contracting, which is still unclear.

The use of grain sales outlets and the sale of grain at prices closer to market prices does provide the state with the opportunity to compensate farms and farmers with additional cash funds generated. It remains unclear, however, just where this is ultimately leading. Reporting from some outlets indicates that the state is rolling back reforms, while other outlets suggest that individual-based farming—more radical than current measures spelt out in the law—is actually being implemented.