The “July 1st Economy Management Improvement Measures” and Five Years of the New Regime

|Korean Peninsula

On July 1st this year (2003), it will be exactly a year1 since the implementation of measures aimed at improving the economic management system in the DPRK (hereafter referred to as the July 1st Measures), which were epitomized by price and wage reforms. In addition, July will mark the passing of five years since the inauguration of the 10th Supreme People’s Assembly, so its term of office will soon draw to a close. During this time, the main impression of the country has been of incidents and unlawful acts relating to military tension, such as the launch of the “Paektusan” multi-stage rocket five years ago, which I mentioned in my last article, and its admission last year that it was developing nuclear weapons. However, the last five years have been a period in which changes that cannot possibly be ignored have been accomplished in the fields of economic reconstruction and the improvement of diplomatic relations.

Recently, I have begun to spot articles that are related to the fifth anniversaries of various things appearing in the Rodong Sinmun, something that may have been timed to coincide with the fifth anniversary of the inauguration of the 10th Supreme People’s Assembly. These include a political argument2 on the occasion of the fifth anniversary of Kim Jong Il’s provision of “on-the-spot guidance” to the Songjin Steel Complex, which lit the beacon for “the second grand march of Chollima”* (in other words, a great leap forward) and a lengthy column3 looking back at the five years since the beginning of the land consolidation project in Kangwon Province.

The reason why I have focused here on the figure of “five years” is that the idea has occurred to me that, rather than embarking upon economic reforms by means of the July 1st Measures, these measures have perhaps been included in measures implemented over five years, with the aim of achieving economic recovery. The 1st Session of the 10th Supreme People’s Assembly ended without any announcement of the new regime’s administrative policies, but with hindsight, it is conceivable that the joint article carried soon afterwards in the Rodong Sinmun and Kulloja4, entitled “Let us adhere to the line of building an independent national economy till the last” (September 17th), held great importance and should have been described as the administrative policy for the economy.

The issues set out in this joint article boil down to the following two points: i) taking the standpoint of relying substantially on the country’s economic base; and ii) actual profit should be pursued in undertaking economic ventures. This was the first time “materialism” had appeared in an important publication. Let us pick up on a few expressions that have caught my eye.

  • “It is no good resorting to bluster in economic ventures.”
  • “Planning and developing economic ventures in a flexible manner, in response to a changed environment and conditions, is also one way of achieving actual profit. Economic activities will not be realized through subjectivity and wishes alone.”
  • “The best way of activating our economy at an early date is to…crevitaliz[e] the economy one sector after another, as ants gnaw a piece of bone.”

These are rather abstract quotes, but one can understand that they display the mentality that forms the basis for the measures enacted in recent years.

After the joint article, while energies were being devoted to such priority sectors as electric power, coal, metals and railways, moves began to emerge that were seen as implying the consolidation of factories in response to the supply capacity of these sectors. These moves include the dismantling and reorganization (between 1999 and 2001) of industrial complexes. With regard to this, it was stated in a special feature in one newspaper5 that, “one further change can be seen in the fact that the country has embarked upon structural adjustments to the industrial complex system (industrial groupings formed through sectoral, regional and industrial collaboration), which was introduced in full in July 1985″ and the analysis in the feature was that the measures ” set as their goal the efficient management of businesses and sought to realize production.”

Furthermore, during the 2nd Session of the 10th Supreme People’s Assembly (April 1999), the “Law on the Plan for the National Economy” was adopted; in line with this, the authority to make planning proposals was transferred to bodies further down the hierarchy and methods of making planning proposals were revised, while systematic conditions were prepared that would allow realistic planning. It was also reported that the managers of businesses were chosen by means of a vote by the workers.

The country has even set to work on dealing with its dilapidated facilities, an issue that has been a longstanding cause for concern, and has begun to press forward with the renewal and modernization of facilities, albeit gradually, under its “Ants gnawing a piece of bone strategy”, which adheres to the order of priorities set out in the “Five-Year Plan for Scientific and Technological Development (1998-2002)”.

In an interview with a DPRK-affiliated newspaper6, Choe Hong Gyu, Director of the Department for Planning Methodology of the State Planning Commission, touched upon the fact that the “Three-Year Plan for Fuel and Energy (exact name unknown)” began this year and said that, “We asked ourselves ‘How much metal and chemical fertilizer would it be possible to produce if we reached our target levels for the provision of fuel and energy over three years?’ and set our targets for the economic sector by looking at the situation in this kind of manner.”

Thus, it is thought likely that the July 1st Measures, which have at their heart the application of a business evaluation system and a distribution system based on actual performance, were pushed through after putting in place the minimum conditions necessary to rectify production, such as creating realistic plans within the scope of the country’s energy supply capacity, adjusting production capacity and ensuring facilities are in an operable state, and supplementing the resource procurement system (establishing commodity exchange markets). The July 1st Measures were, so to speak, the highlight of the economic measures implemented by the Hong Sung Nam Cabinet in the five years since the shift to the new state regime. During its term of office, this cabinet was able to boast achievements with regard to the issues of establishing diplomatic relations with major countries in Europe and elsewhere7, and engaged in active economic diplomacy. Moreover, it conducted the first issue of government bonds (People’s Life Bonds) in 50 years. Looking back once again on the last five years, one feels that perhaps one could even go so far as to describe this cabinet as “the cabinet of the economy”.

Can the next cabinet dedicate itself even more to economic issues? The answer to this will soon emerge, as a consequence of conflict with unilateralists. I hope that common sense will prevail.

[Translated by ERINA]

1 Evaluations of the July 1st Measures include on the one hand the view that the reforms have failed due to hyperinflation resulting from extreme shortages of commodities, and on the other, that they have demonstrated the effectiveness of the process of stabilizing economic activities. However, this author evaluates them as having more advantages by far than if the reforms had not been enacted. Moreover, the July 1st Measures were almost inevitable and I believe that they should be promoted consistently, even if they do have some irregularities.
2 An article carried in the March 9th, 2003 edition of the Rodong Sinmun, entitled “The Molten Steel of Victory is Boiling”. In the DPRK, the word for articles that make heavy use of emotional expressions is transliterated using characters that mean “political argument” (or perhaps “sentimental argument” should be used?)
* A fabled Korean horse
3 An article carried in the May 4th, 2003 edition of the Rodong Sinmun, entitled “Great Changes in the Military-First Era”. The land consolidation project in Kangwon Province that was the subject of the article was initiated on July 22nd, 1998 by means of Directive No. 0031 of the National Defense Committee. The article described the measures taken five years ago to strengthen the powers of the National Defense Committee as “the legal guarantee securing military-first politics”, and as “building a system for the state apparatus” for the implementation of military-first politics.
4 Magazine of political theory published by the Korean Workers’ Party.
5 Special feature in the December 22nd, 2000 internet edition of the ROK’s influential newspaper, the JoongAng Daily, entitled “Kim Jong-Il’s ‘North Korea’ Is Currently Changing”.
6 An article in Korean carried in the April 1st, 2003 edition of the Choson Sinbo, entitled “The Three-Year Plan our Country will Conduct From This Year to Solve our Fuel and Energy Problems”.
7 Diplomatic relations were established with Italy and the UK in 2000, and with the Netherlands, Belgium, Canada, Spain, Germany, Luxembourg, Brazil, New Zealand, Kuwait, Bahrain and Turkey in 2001. The decision was also taken in 2001 to establish diplomatic links with the EU.